Gasco Energy Announces Third Quarter 2006 Financial and Operational Results

DENVER, Nov. 7 /PRNewswire-FirstCall/ -- Gasco Energy today reported its financial and operating results for the quarter and nine-month period ended September 30, 2006.

Financial Results

For the third quarter 2006, Gasco reported a net loss attributable to common shareholders of $0.8 million, or $0.01 per share, as compared to net income for the same period in 2005 of $0.6 million, or $0.01 per share. All per share figures are basic and diluted.

Total revenues grew by 30% to $6.1 million, as compared to $4.7 million in the third quarter 2005. The growth in total revenue is attributed to increased natural gas production offset in part by a lower natural gas price deck.

Oil and gas sales for the third quarter 2006 were $4.9 million as compared to $4.0 million for the same period in 2005, an increase of 22.5%. Gathering revenues were unchanged at $0.5 million.

Lease operating expense for the quarter increased to $0.7 million, or $0.79 per thousand cubic feet of natural gas equivalents (Mcfe), from $0.2 million, or $0.48 per Mcfe. The increase is attributed to higher water hauling and disposal costs and to five workovers that occurred during the third quarter of 2006. Depletion and impairment expense decreased to $2.33 per Mcfe from $2.47 per Mcfe in the year-ago period. Gathering expense increased to $1.1 million from $0.3 million in the same period in 2005 due to the cost of installing additional compression to the system and the revision of the methodology in calculating charges for compressor fuel. General and administrative expense increased to $1.8 million from $1.3 million in the same period in 2005 which is attributed to expenses incurred in the quarter for stock-based compensation due to the adoption of FAS 123R.

At September 30, 2006, cash and investments were $41.0 million as compared to $22.7 million at September 30, 2005. Working capital at September 30, 2006 was $39.0 million versus $21.6 million at September 30, 2005.

Nine-month Period

The company reported a net loss for the nine-months ended September 30, 2006 of $54.0 million, or $0.63 per share, as compared to a net loss for the first nine months of 2005 of $2.1 million, or $0.03 per share. Included in the nine-month period's operating expenses is non-cash charge of $51.0 million related to an impairment of the carrying value of oil and gas properties incurred in the second quarter of 2006. Before the impairment charge, Gasco would have posted a net loss of $3.0 million or $0.04 per share. The charge also results in a decrease in total assets. At September 30, 2006, total assets were $160.0 million as compared to total assets of $201.2 million at December 31, 2005.

Total revenues grew by 125% to $19.1 million, as compared to $8.5 million in the same period in 2005. The growth in revenue is attributed in part to increased natural gas production partially offset by lower gas realized gas prices. In addition, improved gathering system revenues and an increase in

interest income, accounted for $1.4 million and $2.3 million in respective total revenues.

Lease operating expense for the nine-month period increased to $2.1 million, or $0.79 per Mcfe, from $0.6 million, or $0.64 per Mcfe. The increase is attributed to higher water hauling and disposal costs and to 10 workovers that occurred during the first nine months of 2006. Depletion and impairment expense increased to $21.76 per Mcfe from $2.51 per Mcfe in the year-ago period.

Oil and gas sales for the first nine months of 2006 increased 133% to $15.4 million as compared to $6.6 million for the same period in 2005. Net cash provided by operating activities for the nine-month period was a record $9.1 million as compared to $2.2 million in the year-ago period.

Operations Production

Gasco posted record quarterly production of 946.8 million cubic feet of natural gas equivalents (MMcfe) versus 489.3 MMcfe for the third quarter 2005, a 94% increase. The average price received for sales of Gasco's natural gas and liquids was $5.00 per Mcf and $59.36 per barrel of liquid hydrocarbons for the third quarter 2006. This compares to $8.02 per Mcf and $62.40 per barrel for the same period in 2005. Net production increases are attributed to the completion of new wells and behind-pipe recompletions partially offset by normal production declines in existing wells.

Gasco posted record production of 2,711 MMcfe for the first nine months of 2006 versus 936.6 MMcfe for the same period in 2005, an increase of 189.4%. For the nine months ended September 30, 2006, the average price received for sales of Gasco's natural gas and liquids was $5.56 per Mcf and $58.74 per barrel of liquid hydrocarbons. This compares to $6.98 per Mcf and $55.93 per barrel for the same period in 2005. The company has no hedges in place.

Drilling and Completion

The Company's initial 2006 capital expenditure budget is set at $80 million for the drilling, completion and pipeline connection of 28 to 30 gross, or approximately 15 net wells. During the third quarter of 2006, Gasco spudded 12 gross wells (7.7 net), including three non-operated wells (.75 net), and reached total depth on nine gross wells (5.0 net). The Company is currently running four drilling rigs on its Riverbend project, having taken delivery of an additional rig in August 2006. Year-to-date in Utah, Gasco has spudded 22 gross wells (13.4 net) and reached total depth on 20 gross wells (11.7 net). Gasco will release one of the rigs after it completes operations on its current well and will await delivery of its new-build rig from Nabors scheduled to be delivered by the end of January 2007, at which time it will again have four rigs operating in Riverbend. A rig is drilling ahead on a one-well contract in Wyoming.

During the first nine months of 2006, Gasco conducted initial completion operations on 15 wells (8.9 net) and re-entered 14 wells (7.3 net) to complete behind-pipe pay zones. At September 30, 2006, Gasco operated 72 gross wells with five additional wells awaiting completion activities. Gross and net data provided for wells spudded and wells to total depth include three non-operated wells in Utah in which Gasco participated with a 25% working interest. Two of the wells spudded during the third quarter were in Gasco's Wyoming Projects.

Wyoming Update Daniel Anticline Prospect

Gasco also today provided additional details on its previously announced Cottonwood Ranch 24-21 (25% WI -- GSX operates). The well is permitted to test natural gas potential in the Lance, Mesaverde, Ericson, Rock Springs and Hilliard Shale formations to a proposed total depth of 16,500 feet. The well, drilled on fee land, is drilling through 10,300 feet and is not subject to winter stipulations for oil and gas activity in Wyoming.

Muddy Creek Prospect

Due to winter stipulations restricting oil and gas activity on federal lands, Gasco elected to suspend drilling on the Billy Canyon 2-11 (100% WI). The well is permitted to test natural gas potential in the Lance, Mesaverde and Hilliard / Blair formations to a revised proposed total depth of 14,400 feet. Intermediate casing was set at 9,600 feet. Drilling operations on this well are expected to resume in July 2007.

Subsequent Events

Subsequent to the end of the third quarter 2006, Gasco increased its reserve-based revolving line of credit borrowing base to $25 million. The facility with JPMorgan is currently un-drawn and may be used to supplement available cash and cash flow from operations in order to fund the 2007 capital expenditure program which has yet to be announced.

Conference Call

A conference call with investors, analysts and other interested parties is scheduled for 8:30 a.m. EST on Wednesday, November 8, 2006 to discuss third quarter 2006 financial and operating results. You are invited to listen to the call which will be broadcast live over the Internet at http://www.gascoenergy.com/.

Date: Wednesday, November 8, 2006 Time: 10:30 a.m. EST 9:30 a.m. CST 8:30 a.m. MST 7:30 a.m. PST Call: [phone] (US/Canada) and [phone] (International), passcode 9292973 Internet: Live and rebroadcast over the Internet: log on to http://www.gascoenergy.com/ Replay: Available through Friday, November 10, 2006 at [phone] (US/Canada) and [phone] (International) using passcode 9292973 and for 30 days at http://www.gascoenergy.com/ [Financial and Operational Tables Accompany this News Release]

The notes accompanying the financial statements are an integral part of the

consolidated financial statements and can be found in Gasco's filing on Form 10-Q dated November 7, 2006. About Gasco Energy

Gasco Energy, Inc. is a Denver-based natural gas and oil exploitation and development company that focuses on natural-gas-rich prospects in the Rocky Mountain area of the United States. The Company currently is active in the Uinta Basin in Utah and controls acreage in the Greater Green River Basin of Wyoming. To learn more, visit http://www.gascoenergy.com/.

Forward-looking statements

Certain statements set forth in this press release relate to management's future plans, objectives and expectations. Such statements are forward- looking within the meanings of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts included in this press release, including, without limitation, statements regarding the Company's future financial position, potential resources, business strategy, budgets, projected costs and plans and objectives of management for future operations, are forward-looking statements. In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "will," "expect," "intend," "project," "estimate," "anticipate," "believe," or "continue" or the negative thereof or similar terminology. Although any forward-looking statements contained in this press release are to the knowledge or in the judgment of the officers and directors of the Company, believed to be reasonable, there can be no assurances that any of these expectations will prove correct or that any of the actions that are planned will be taken. Forward-looking statements involve known and unknown risks and uncertainties that may cause the Company's actual performance and financial results in future periods to differ materially from any projection, estimate or forecasted result. Some of the key factors that may cause actual results to vary from those the Company expects include inherent uncertainties in interpreting engineering and reserve or production data; operating hazards; delays or cancellations of drilling operations because of weather and other natural and economic forces; fluctuations in oil and natural gas prices in response to changes in supply; competition from other companies with greater resources; environmental and other government regulations; defects in title to properties; increases in the Company's cost of borrowing or inability or unavailability of capital resources to fund capital expenditures; and other risks described under "Risk Factors" in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 3, 2006.

GASCO ENERGY, INC. CONSOLIDATED BALANCE SHEETS (Unaudited) September 30, December 31, 2006 2005 ASSETS CURRENT ASSETS Cash and cash equivalents $19,998,698 $62,661,368 Restricted investment 3,575,000 10,139,000 Short-term investments 21,000,000 15,000,000 Accounts receivable Joint interest billings 5,356,925 1,792,038 Revenue 1,924,849 3,115,154 Inventory 3,265,841 1,182,982 Prepaid expenses 324,766 645,554 Total 55,446,079 94,536,096 PROPERTY, PLANT AND EQUIPMENT, at cost Oil and gas properties (full cost method) Proved mineral interests 132,694,399 83,972,300 Unproved mineral interests 10,747,706 13,323,712 Wells in progress 3,631,845 -- Gathering assets 11,688,160 4,831,050 Facilities and equipment 7,069,119 5,148,388 Furniture, fixtures and other 235,880 175,607 Total 166,067,109 107,451,057 Less accumulated depletion, depreciation, amortization and impairment (65,925,502) (6,986,662) Total 100,141,607 100,464,395 OTHER ASSETS Restricted investment 1,878,132 3,565,020 Deferred financing costs 2,501,065 2,634,461 Total 4,379,197 6,199,481 TOTAL ASSETS $159,966,883 $201,199,972 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $3,027,442 $907,772 Revenue payable 1,599,767 1,658,141 Advances from joint interest owners 3,813,799 2,476,080 Accrued interest 1,737,851 844,098 Accrued expenses 6,238,520 2,571,047 Total 16,417,379 8,457,138 NONCURRENT LIABILITIES 5.5% Convertible Senior Notes 65,000,000 65,000,000 Asset retirement obligation 650,788 223,947 Deferred rent expense 75,176 78,727 Total 65,725,964 65,302,674 STOCKHOLDERS' EQUITY Series B Convertible Preferred stock - $.001 par value; 20,000 shares authorized; 763 shares issued and outstanding with a liquidation preference of $335,720 in 2005 -- 1 Common stock - $.0001 par value; 300,000,000 shares authorized; 85,941,965 shares issued and 85,868,265 outstanding in 2006 and 85,041,492 shares issued and 84,967,792 shares outstanding in 2005 8,594 8,504 Additional paid-in capital 161,480,466 157,540,755 Deferred compensation -- (443,579) Accumulated deficit (83,535,225) (29,535,226) Less cost of treasury stock of 73,700 common shares (130,295) (130,295) Total 77,823,540 127,440,160 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $159,966,883 $201,199,972 The notes contained in Form 10-Q to be filed on November 7, 2006 are an integral part of the consolidated financial statements. GASCO ENERGY, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended September 30, 2006 2005 REVENUES Gas $4,563,576 $3,793,771 Oil 336,963 166,727 Gathering 511,360 471,478 Interest income 646,834 264,751 Total 6,058,733 4,696,727 OPERATING EXPENSES Lease operating 749,214 236,413 Gathering operations 1,065,658 267,792 Depletion, depreciation and amortization 2,206,328 1,211,550 General and administrative 1,768,788 1,323,376 Interest expense 1,055,504 1,008,293 Total 6,845,492 4,047,424 NET INCOME (LOSS) (786,759) 649,303 Preferred stock dividends -- (6,212) NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS $(786,759) $643,091 NET INCOME (LOSS) PER COMMON SHARE BASIC $(0.01) $0.01 DILUTED $(0.01) $0.01 WEIGHTED AVERAGE COMMON SHARES OUTSTANDING BASIC 85,609,137 70,991,812 DILUTED 85,609,137 75,838,798 The notes contained in Form 10-Q to be filed on November 7, 2006 are an integral part of the consolidated financial statements. GASCO ENERGY, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Nine Months Ended September 30, 2006 2005 REVENUES Gas $14,573,596 $6,268,928 Oil 866,692 354,963 Gathering 1,363,755 927,375 Interest income 2,298,540 979,708 Total 19,102,583 8,530,974 OPERATING EXPENSES Lease operating 2,145,978 598,115 Gathering operations 1,825,034 684,320 Depletion, depreciation and amortization 7,976,401 2,351,256 Impairment 51,000,000 -- General and administrative 7,041,831 3,922,097 Interest expense 3,113,338 3,024,878 Total 73,102,582 10,580,666 NET LOSS (53,999,999) (2,049,692) Preferred stock dividends (1,393) (27,433) NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS $(54,001,392) $(2,077,125) NET LOSS PER COMMON SHARE - BASIC AND DILUTED $(0.63) $(0.03) WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - BASIC AND DILUTED 85,384,515 70,661,070 The notes contained in Form 10-Q to be filed on November 7, 2006 are an integral part of the consolidated financial statements. GASCO ENERGY, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended September 30, 2006 2005 CASH FLOWS FROM OPERATING ACTIVITIES Net loss $(53,999,999) $(2,049,692) Adjustment to reconcile net loss to net cash provided by (used in) operating activities Depletion, depreciation, amortization and impairment expense 58,941,433 2,341,819 Accretion of asset retirement obligation 34,968 9,437 Stock compensation 3,198,834 539,378 Amortization of deferred rent (3,551) 39,897 Amortization of deferred financing costs 373,658 343,626 Landlord incentive payment -- 30,000 Changes in operating assets and liabilities: Accounts receivable (2,374,582) (1,414,058) Inventory (2,082,859) (826,140) Prepaid expenses 320,788 207,136 Accounts payable 2,119,670 (988,953) Revenue payable (58,374) 1,006,120 Advances from joint interest owners 1,337,719 343,306 Accrued interest 893,753 1,042,710 Accrued expenses 428,742 1,545,737 Net cash provided by operating activities 9,130,200 2,170,323 CASH FLOWS FROM INVESTING ACTIVITIES Cash paid for furniture, fixtures and other (62,866) (85,388) Cash paid for acquisitions, development and exploration (55,109,912) (35,356,065) Proceeds from property sales -- 828,102 Increase in short-term investments (6,000,000) -- Proceeds from sale of short-term investments -- 17,000,000 Cash designated as restricted (100,612) (208,331) Cash undesignated as restricted 8,351,500 1,638,542 Net cash used in investing activities (52,921,890) (16,183,140) CASH FLOWS FROM FINANCING ACTIVITIES Preferred dividends (1,393) (21,501) Exercise of options to purchase common stock 1,370,675 968,239 Cash paid for debt issuance costs (240,262) -- Net cash provided by financing activities 1,129,020 946,738 NET DECREASE IN CASH AND CASH EQUIVALENTS (42,662,670) (13,066,079) CASH AND CASH EQUIVALENTS: BEGINNING OF PERIOD 62,661,368 25,717,081 END OF PERIOD $19,998,698 $12,651,002 The notes contained in Form 10-Q to be filed on November 7, 2006 are an integral part of the consolidated financial statements.