DENVER, Nov. 1 /PRNewswire-FirstCall/ -- Gasco Energy today reported its financial and operating results for the quarter ended September 30, 2007.
For the third quarter 2007, Gasco reported a net loss of $35.1 million, or $0.37 per share, as compared to a net loss for the same period in 2006 of $0.8 million, or $0.01 per share. All per share figures are basic and diluted. Included in the quarter's operating expenses is a non-cash charge of $32.8 million related to an impairment of the carrying value of oil and gas properties. Excluding the impairment, Gasco would have posted a net loss of $2.4 million or $0.03 per share.
Commenting on the quarter, Gasco CEO and President Mark Erickson said: "The quarter was difficult as natural gas prices at the Wyoming Pool were as low as $0.15 per million British Thermal Units (MMBtu). Gasco and other companies in the region are having drilling success which has created more supply than the pipelines can handle, forcing prices down. As previously indicated, we have delayed some initial completions and uphole recompletions in anticipation of stronger prices. We've accumulated an inventory of more than 38 completion projects which will allow us to accelerate our production, as prices improve. At the same time, we've continued our three rig drilling program, continued to improve the economics on our wells by drilling faster and prepared for what we believe will be an improved commodity market in 2008 when the Rockies Express pipeline is expected to be in service. We are already seeing stronger prices with recent Wyoming Pool spot prices above $3.00 per MMBtu and we expect higher prices as we move into the winter heating season. Consequently, we have scheduled continuous completion operations through the end of the year."
Third Quarter Results
Total revenues for the quarter were $4.0 million, as compared to $6.1 million in the third quarter 2006. Gas sales revenue declined 42% to $2.6 million as the average price dropped to $2.89 per Mcf from $5.00 per Mcf in the third quarter of 2006. Natural gas volumes were up slightly compared to the same period in 2006, although Gasco voluntarily shut-in an average of approximately 1.4 MMcf per day of production during the third quarter of 2007 due to the low prices. Oil sales revenue was up 64% on a 72% increase in oil sales volumes and gathering revenue declined 26%, to $0.4 million, primarily due to a decrease in the volume of non-equity gas resulting from curtailed production during the quarter. Gasco also recorded $0.4 million in rental income on its drilling rig which is contracted to a third party through April 2008.
Lease operating expense (LOE) for the quarter increased to $1.0 million from $0.8 million in the third quarter 2006 as the number of wells grew from 72 to 103. On a per unit basis LOE increased to $1.05 per Mcfe from $0.79 per Mcfe in the third quarter of 2006. The per unit increase may be partially attributed to the aforementioned curtailment of production, which spreads the fixed component of LOE over a smaller number of units. We also saw an increase in repairs and operating costs associated with returning our oil wells to production, increased charges on our outside operated wells and a substantial increase in the cost of contract pumpers. In an effort to control LOE as our well count grows, Gasco replaced contract pumpers with company pumpers at the beginning of October 2007. Gathering operations expense declined $0.6 million compared to the third quarter 2006 as a result of a change in the methodology for calculating the cost of compressor fuel implemented in the third quarter of 2006.
Depletion, depreciation and amortization (DD&A) was $2.1 million for the third quarter of 2007 as compared to $2.2 million for the same period in 2006. Gasco also recorded a non-cash impairment of its oil and gas properties of $32.8 million for the quarter. Under the full cost method of accounting the full cost pool, which consists of net capitalized oil and gas property costs, cannot exceed the ceiling value of the reserves, which is the present value discounted at 10%. Prices in effect at the end of the period are used to calculate the impairment; however, subsequent price increases, prior to the filing of the 10-Q, may be used to reduce the total impairment. The price on September 30, 2007 was $0.345 per Mcf. Had the price not improved subsequent to September 30, 2007, Gasco would have recorded an impairment of $65.6 million.
The Company reported general and administrative expense (G&A) of $1.9 million in the third quarter of 2007 versus $1.8 million in the same period in 2006. G&A expense includes $0.6 million of non-cash, stock-based compensation expense. On a per-unit basis, G&A for the third quarter 2007 was $1.91 per Mcfe as compared to $1.87 per Mcfe for the same period in 2006.
Nine-Month Period
Gasco reported a net loss attributable to common shareholders for the nine-months ended September 30, 2007 of $101.6 million, or $1.11 per share, as compared to a net loss for the first nine months of 2006 of $54.0 million, or $0.63 per share. Included in both periods' operating expenses are the non- cash charges of $97.1 million and $51.0 million, respectively, related to the impairment of the carrying value of oil and gas properties.
Total revenues decreased 13% to $12.6 million for the first nine months of 2007, as compared to $14.6 million in the same period in 2006. Year-to-date gathering system revenues and rental income accounted for $1.3 million and $0.7 million, respectively. Interest income was $0.4 million for the nine months.
Natural gas sales for the nine months were $12.6 million with an average sales price of $4.26 per Mcf versus sales of $14.6 million and an average price of $5.56 per Mcf during the same period in 2006. Oil sales for the first nine months were $1.5 million at an average price of $50.67 per barrel compared to $0.9 million and $58.74 per barrel during the same period last year. LOE for the first nine months of 2007 was $2.4 million ($0.77 per Mcfe) compared to $2.1 million ($0.79 per Mcfe) for the same period in 2006. G&A expense was $6.4 million ($2.03 per Mcfe) compared to $7.0 million ($2.60 per Mcfe) in the first nine months of 2006. Net cash provided by operating activities for the first nine months of 2007 was $17.6 million as compared to $9.1 million for the same period in 2006.
At September 30, 2007, cash and investments were $9.2 million as compared to $22.5 million at December 31, 2006.
Long-term debt, exclusive of convertible notes, was $3 million at September 30, 2007 as compared to zero at December 31, 2006. The Company currently has a $250 million credit facility with JPMorgan, of which $40 million is available for borrowing capacity and $3.0 million is drawn.
Production Volumes
For the third quarter of 2007, Gasco produced 975 million cubic feet of natural gas equivalents (MMcfe) and curtailed an estimated 130 MMcfe. This compares to 947 MMcfe produced during the third quarter 2006 when the Company was not curtailing any production. For the nine months ended September 30, 2007 Gasco produced 3,149 MMcfe versus 2,711 MMcfe for the comparable period in 2006, a 16% increase. Curtailed volumes were approximately 230 MMcfe during the first nine months in 2007 and zero during 2006.
Subsequent Events * Mancos Update. Since the end of the quarter, Gasco completed two Mancos wells. The Federal 32-20-9-19 was completed in the upper 300 feet of the Mancos and the Federal 21-19-9-19 was completed in the upper 1,950 feet of the Mancos. Both wells are cleaning up and flowing gas. Based on preliminary results, the flowrates and pressures are similar to the Company's first Mancos test, the Federal 14-31. Gasco has also drilled the State 21-32b-9-19 into approximately the upper 1,900 feet of the upper Mancos and is awaiting completion. This well encountered similar geologic characteristics as the Company's previous three Mancos penetrations. Gasco spudded two more Mancos tests in October and expects to reach total depth on both wells during November. The Company is now drilling upper Mancos tests in less than 20 days from the bottom of surface casing, the same amount of time as the shallower Spring Canyon wells. The Company's fastest Mancos test was drilled in 16 days to a depth of 14,250 feet. * Seismic Update. All of the Company's high resolution 2-D seismic has been shot and processed. The data is currently being brought in-house to begin working. Teleconference
A conference call with investors, analysts and other interested parties is scheduled for 10:30 a.m. EDT on Friday, November 2, 2007 to discuss third quarter 2007 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: Friday, November 2, 2007 Time: 10:30 a.m. EDT 9:30 a.m. CDT 8:30 a.m. MDT 7:30 a.m. PDT Call: (866) 392-4171 (US/Canada) and (706) 634-6345 (International), passcode 19415722 Internet: Live and rebroadcast over the Internet: log on to http://www.gascoenergy.com/ Replay: Available through Sunday, November 4, 2007 at (800) 642-1687 (US/Canada) and (706) 645-9291 (International) using passcode 19415722 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 1, 2007. About Gasco Energy
Gasco Energy, Inc. is a Denver-based natural gas and petroleum exploitation and development and production company engaged in locating and developing hydrocarbons resources, primarily in the Rocky Mountain region. 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 Item 1. of the Company's 2006 amended Form 10-K filed with the Securities and Exchange Commission on April 5, 2007.
Contact for Gasco Energy, Inc.: Investor Relations: 303-483-0044 GASCO ENERGY, INC. CONSOLIDATED BALANCE SHEETS (Unaudited) September 30, December 31, 2007 2006 ASSETS CURRENT ASSETS Cash and cash equivalents $7,471,167 $12,876,879 Restricted investment 1,787,500 3,575,000 Short-term investments - 6,000,000 Accounts receivable Joint interest billings 2,448,648 5,955,186 Revenue 1,264,168 3,081,850 Inventory 999,182 1,297,498 Prepaid expenses 266,587 644,490 Total 14,237,252 33,430,903 PROPERTY, PLANT AND EQUIPMENT, at cost Oil and gas properties (full cost method) Proved mineral interests 204,554,713 159,407,481 Unproved mineral interests 12,465,419 12,538,067 Wells in progress 679,581 5,215,252 Gathering assets 14,514,568 12,703,346 Facilities and equipment 9,591,170 8,492,632 Furniture, fixtures and other 274,693 241,009 Total 242,080,144 198,597,787 Less accumulated depletion, depreciation, amortization and impairment (173,949,066) (68,945,779) Total 68,131,078 129,652,008 OTHER ASSETS Deposit 139,500 - Deferred financing costs 1,982,832 2,371,507 Total 2,122,332 2,371,507 TOTAL ASSETS $84,490,662 $165,454,418 The notes contained in Form 10-Q filed on November 1, 2007 are an integral part of the consolidated financial statements. GASCO ENERGY, INC. CONSOLIDATED BALANCE SHEETS (continued) (Unaudited) September 30, December 31, 2007 2006 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $4,102,641 $16,228,056 Revenue payable 1,502,490 1,678,427 Advances from joint interest owners 10,803,566 2,955,376 Accrued interest 1,750,595 844,102 Accrued expenses 327,000 595,000 Total 18,486,292 22,300,961 NONCURRENT LIABILITIES 5.5% Convertible Senior Notes 65,000,000 65,000,000 Long-term debt 3,000,000 - Asset retirement obligation 981,143 908,543 Deferred rent expense 64,348 72,993 Total 69,045,491 65,981,536 STOCKHOLDERS' EQUITY Common stock - $.0001 par value; 300,000,000 shares authorized; 96,150,959 shares issued and 96,077,259 outstanding as of June 30, 2007 and 86,173,715 shares issued and 86,100,015 outstanding as of December 31, 2006 9,639 8,617 Additional paid-in capital 184,050,069 162,646,592 Accumulated deficit (186,970,534) (85,352,993) Less cost of treasury stock of 73,700 common shares (130,295) (130,295) Total (3,041,121) 77,171,921 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $84,490,662 $165,454,418 The notes contained in Form 10-Q filed on November 1, 2007 are an integral part of the consolidated financial statements. GASCO ENERGY, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended September 30, 2007 2006 REVENUES Gas $2,642,799 $4,563,576 Oil 554,891 336,963 Gathering 374,127 511,360 Rental income 354,562 - Interest income 110,670 646,834 Total 4,037,049 6,058,733 OPERATING EXPENSES Lease operating 1,024,063 749,214 Gathering operations 458,241 1,065,658 Depletion, depreciation and amortization 2,082,408 2,206,328 Impairment 32,790,000 - General and administrative 1,858,566 1,768,788 Interest expense 970,496 1,055,504 Total 39,183,774 6,845,492 NET LOSS $(35,146,725) $(786,759) NET LOSS PER COMMON SHARE - BASIC AND DILUTED $(0.37) $(0.01) WEIGHTED AVERAGE COMMON SHARES OUTSTANDING- BASIC AND DILUTED 95,696,066 85,609,137 The notes contained in Form 10-Q filed on November 1, 2007 are an integral part of the consolidated financial statements. GASCO ENERGY, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Nine Months Ended September 30, 2007 2006 REVENUES Gas $12,650,364 $14,573,596 Oil 1,524,238 866,692 Gathering 1,333,174 1,363,755 Rental income 698,437 - Interest income 382,037 2,298,540 Total 16,588,250 19,102,583 OPERATING EXPENSES Lease operating 2,423,037 2,145,978 Gathering operations 1,365,192 1,825,034 Depletion, depreciation and amortization 7,785,923 7,976,401 Impairment 97,090,000 51,000,000 General and administrative 6,405,221 7,041,831 Interest expense 3,136,418 3,113,338 Total 118,205,791 73,102,582 NET LOSS (101,617,541) (53,999,999) Preferred stock dividends - (1,393) NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS $(101,617,541) $(54,001,392) NET LOSS PER COMMON SHARE - BASIC AND DILUTED $(1.11) $(0.63) WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - BASIC AND DILUTED 91,901,998 85,384,515 The notes contained in Form 10-Q filed on November 1, 2007 are an integral part of the consolidated financial statements. GASCO ENERGY, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended September 30, 2007 2006 CASH FLOWS FROM OPERATING ACTIVITIES Net loss $(101,617,541) $(53,999,999) Adjustment to reconcile net loss to net cash used in operating activities Depletion, depreciation, amortization and impairment expense 104,809,828 58,941,433 Accretion of asset retirement obligation 66,095 34,968 Stock-based compensation 2,418,316 3,198,834 Amortization of deferred rent (8,645) (3,551) Amortization of deferred financing costs 388,675 373,658 Changes in operating assets and liabilities: Accounts receivable 5,324,220 (2,374,582) Inventory 298,316 (2,082,859) Prepaid expenses 238,403 320,788 Accounts payable (2,640,893) 2,119,670 Revenue payable (175,937) (58,374) Advances from joint interest owners 7,848,190 1,337,719 Accrued interest 906,493 893,753 Accrued expenses (268,000) 428,742 Net cash provided by operating activities 17,587,520 9,130,200 CASH FLOWS FROM INVESTING ACTIVITIES Cash paid for furniture, fixtures and other (33,684) (62,866) Cash paid for acquisitions, development and exploration (56,401,472) (55,109,912) Proceeds from property sales 3,475,153 - Increase in short-term investments - (6,000,000) Proceeds from sale of short-term investments 6,000,000 Cash designated as restricted - (100,612) Cash undesignated as restricted 1,787,500 8,351,500 Net cash used in investing activities (45,172,503) (52,921,890) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of common stock 19,300,000 - Borrowings under line of credit 12,000,000 - Repayment of borrowings (9,000,000) Cash paid for stock offering costs (120,729) - Preferred dividends - (1,393) Exercise of options to purchase common stock - 1,370,675 Cash paid for debt issuance costs - (240,262) Net cash provided by financing activities 22,179,271 1,129,020 NET DECREASE IN CASH AND CASH EQUIVALENTS (5,405,271) (42,662,670) CASH AND CASH EQUIVALENTS: BEGINNING OF PERIOD 12,876,879 62,661,368 END OF PERIOD $7,471,167 $19,998,698 The notes contained in Form 10-Q filed on November 1, 2007 are an integral part of the consolidated financial statements.
