HOUSTON, Aug. 14 /PRNewswire-FirstCall/ -- Gateway Energy Corporation (BULLETIN BOARD: GNRG) today announced the financial results for the quarter ending June 30, 2008.
For the quarter the Company reported;
-- A gain in revenues of 59% to $4,665,991 from $2,940,925 for the quarter ended June 30, 2008. This gain in total revenues reflects a gain of 45% from onshore operations to $3,775,130 from $2,595,205 for the quarter ended June 30, 2008 and a gain of 158% from offshore operations to $890,861 from $345,720. This gain in total revenue is primarily due to increased average natural gas prices and the acquisition of the Gulfshore assets during the third quarter of 2007.
-- Operating income for the quarter ending June 30, 2008 increased to $224,979 as compared to a loss of $11,188 for the same quarter the prior year.
-- Income from continuing operations for the second quarter of 2008 increased to $174,125 from $13,730 for the same quarter in 2007.
-- Net income declined from $1,223,497 in the second quarter of 2007 to $174,125 for the quarter ended June 30, 2008. The Company realized a gain on the disposal of discontinued operations of $1,256,934 in the second quarter of 2007 that made a significant contribution to the second quarter 2007 results.
-- Total expenses for the quarter were $4,441,012 as compared to $2,952,113 for the second quarter of 2007. The cost of natural gas purchased increased from $2,256,542 for the second quarter of 2007 to $3,321,047 for the second quarter of 2008. The Company buys natural gas for its Waxahachie system based on an index less a fixed amount and sells the gas on the same index plus a fixed amount and this increase reflects the increased price of natural gas for the quarter.
-- Operating and maintenance expense increased to $291,038 for the quarter ended June 30, 2008 from $113,483 for the quarter ended June 30, 2007. Most of this increase was due to operating and maintenance expenses associated with the Gulfshore assets, the majority of which are reimbursed by producers on the system.
-- Depreciation and amortization expense increased to $187,793 for the second quarter of 2008 from $92,537 for the second quarter of 2007 primarily due to the addition of the Gulfshore assets.
-- General and administrative costs increased to $635,019 for the quarter ended June 30, 2008 from $482,953 for the quarter ended June 30, 2007 as a result of increased staffing requirements. This includes a non-cash equity-based compensation expense of $88,018 for the second quarter of 2008 related to restricted stock grants and the amortization of common stock option grants as compared to $13,527 for such expense during the second quarter of 2007.
For the six months ended June 30, 2008, the Company reported;
-- Total revenues of $8,367,558, an increase of 63% over the $5,138,812 reported for the six months ended June 30, 2007. The increase in revenue reflects a gain of 51% from onshore operations to $6,663,554 from $4,406,768 for the six months ended June 30, 2007 and a gain of 133% for offshore operations to $1,704,004 from $732,044 for the six months ended June 30, 2007. This gain in revenues is due in part to the acquisition of the Gulfshore assets in the third quarter of 2007.
-- Operating income for the first half of 2008 increased to $224,788 from a loss of $51,491 for the first half of 2007.
-- Income from continuing operations for the first half of 2008 declined to $83,575 from $241,550 for the first half of 2007 due largely to the one-time gain from the sale of the license for the rights to the Company's nitrogen rejection unit technology in the amount of $286,579.
-- Net income for the first half of 2008 was $83,575 compared to $1,833,527 for the first half of 2007; the 2007 results were heavily influenced by a gain on the disposal of discontinued operations of $1,256,934.
-- Total expenses for the first half of 2008 increased to $8,142,770 from $5,190,303 for the first half of 2007. The cost of natural gas purchased increased to $5,890,161 from $3,747,039 for the first half of 2007. The Company buys natural gas for its Waxahachie system based on an index less a fixed amount and sells the gas on the same index plus a fixed amount and this increase reflects the increased price of natural gas.
-- Operation and maintenance costs for the first half of 2008 were $552,054 compared to $235,096 for the period ended June 30, 2007. Most of this increase was due to operating and maintenance expenses associated with the Gulfshore assets, the majority of which are reimbursed by producers on the system.
-- Depreciation and amortization expense for the first half of 2008 was $374,293 compared to $188,224 for the first half of 2007.
-- General and administrative costs for the first half of 2008 increased to $1,312,573 from $1,006,751 for the first half of 2007 due primarily to increased staffing requirements. This also includes a non-cash equity-based compensation expense of $113,353 for the first half of 2008 related to restricted stock grants and options as compared to $19,817 for such expenses during first half of 2007.
Management Comments
Mr. Robert Panico, President and CEO of Gateway said, "We are very pleased with the results of operations for the second quarter of this year. We have generated a significant increase in operating margins from both the onshore and offshore divisions that we believe will continue throughout the year. The recently renegotiated sales and purchase contracts related to the Waxahachie system have increased our gross margins by approximately 30% for that segment of operations." Mr. Panico continued, "We will continue to pursue growth opportunities through additional acquisitions and are optimistic about the prospects to expand our operational footprint in 2008. Until then, we will remain focused on maximizing the income and efficiencies of our current assets."
Complete financials can be found at the end of this release. About Gateway Energy
Gateway Energy Corporation owns and operates natural gas gathering, transportation and distribution systems in Texas, Texas state waters and in federal waters of the Gulf of Mexico off the Texas and Louisiana coasts. Gateway gathers offshore wellhead natural gas production and liquid hydrocarbons from producers, and then aggregates this production for processing and transportation to other pipelines. Gateway also transports gas through its mainline systems for non-affiliated shippers and through its affiliated distribution system and makes sales of natural gas to end users.
Safe Harbor Statement
Certain of the statements included in this press release, which express a belief, expectation or intention, as well as those regarding future financial performance or results, or which are not historical facts, are "forward-looking" statements as that term is defined in the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. The words "expect", "plan", "believe", "anticipate", "project", "estimate", and similar expressions are intended to identify forward-looking statements. These forward-looking statements are not guarantees of future performance or events and such statements involve a number of risks, uncertainties and assumptions, including but not limited to industry conditions, prices of crude oil and natural gas, regulatory changes, general economic conditions, interest rates, competition, and other factors. Should one or more of these risks or uncertainties materialize or should the underlying assumptions prove incorrect, actual results and outcomes may differ materially from those indicated in the forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to republish revised forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
GATEWAY ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) June 30, December 31, 2008 2007 ASSETS Current Assets Cash and cash equivalents $1,217,933 $1,807,224 Restricted cash 605,425 - Accounts receivable trade, net 2,471,230 1,852,849 Prepaid expenses and other assets 268,939 41,812 Total current assets 4,563,527 3,701,885 Property and Equipment, at cost Gas gathering, processing and transportation 11,152,214 11,120,558 Office furniture and other equipment 134,984 229,298 11,287,198 11,349,856 Less accumulated depreciation and amortization (3,590,791) (3,390,634) 7,696,407 7,959,222 Other Assets Deferred tax assets, net 1,654,323 1,668,743 Intangible assets, net of accumulated amortization of $143,680 and $65,278 as of June 30, 2008 and December 31, 2007, respectively 843,739 922,142 Other 201,488 269,601 2,699,550 2,860,486 Total assets $14,959,484 $14,521,593 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable $1,362,602 $1,138,653 Accrued expenses and other liabilities 200,450 251,368 Trade notes payable 223,594 - Current maturities of capital lease 18,748 17,371 Total current liabilities 1,805,394 1,407,392 Future asset retirement obligations 408,329 394,640 Long-term debt 600,000 750,000 Long-term capital lease, less current maturities 19,691 29,422 Minority interest 805,225 816,222 Commitments and contingencies - - Stockholders' Equity Preferred stock - $1.00 par value; 10,000 shares authorized; no shares issued and outstanding - - Common stock - $0.25 par value; 35,000,000 shares authorized; 19,107,249 and 19,026,665 shares issued and outstanding at June 30, 2008 and December 31, 2007, respectively 4,776,812 4,756,665 Additional paid-in capital 17,182,950 17,089,744 Accumulated deficit (10,638,917) (10,722,492) Total stockholders' equity 11,320,845 11,123,917 Total liabilities and stockholders' equity $14,959,484 $14,521,593 GATEWAY ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended Six Months Ended June 30, June 30, 2008 2007 2008 2007 Operating revenues Sales of natural gas $3,679,554 $2,458,289 $6,452,636 $4,139,399 Transportation of natural gas and liquids 816,070 441,641 1,596,231 914,432 Treating and other 170,367 40,995 318,691 84,981 4,665,991 2,940,925 8,367,558 5,138,812 Operating costs and expenses Cost of natural gas purchased 3,321,047 2,256,542 5,890,161 3,747,039 Operation and maintenance 291,038 113,483 552,054 235,096 Depreciation and amortization 187,793 92,537 374,293 188,224 Accretion expense 6,115 6,598 13,689 13,193 General and administrative 635,019 482,953 1,312,573 1,006,751 4,441,012 2,952,113 8,142,770 5,190,303 Operating income (loss) 224,979 (11,188) 224,788 (51,491) Other income (expense) Interest income 5,305 26,828 16,611 40,390 Interest expense (37,194) (5,759) (80,882) (11,746) Gain on sale of intangible asset - - - 286,579 Other income (expense), net (3,649) 30,201 1,302 25,125 Minority interest (11,896) (26,352) (28,824) (47,307) Other income (expense), net (47,434) 24,918 (91,793) 293,041 Income from continuing operations before income taxes and discontinued operations 177,545 13,730 132,995 241,550 Income tax expense (3,420) - (49,420) - Income from continuing operations 174,125 13,730 83,575 241,550 Discontinued operations, net of taxes Income (loss) from discontinued operations, net of taxes - (47,167) - 335,043 Gain on disposal of discontinued operations, net of taxes - 1,256,934 - 1,256,934 Net income $174,125 $1,223,497 $83,575 $1,833,527 Basic and diluted income per common share Continuing operations $0.01 $- $- $0.02 Discontinued operations - 0.07 - 0.09 Net income $0.01 $0.07 $- $0.11 Weighted average number of common shares outstanding Basic 19,062,313 17,162,682 19,044,587 17,151,869 Diluted 19,240,228 17,690,704 19,184,029 17,616,297 GATEWAY ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Six Months Ended June 30, 2008 2007 Cash flows from operating activities - continuing operations Income from continuing operations $83,575 $241,550 Adjustments to reconcile income from continuing operations to net cash provided by operating activities: Depreciation and amortization 374,293 188,224 Stock based compensation expense 113,353 19,817 Minority interest 28,824 47,307 Deferred tax benefit 14,420 - Accretion expense 13,689 13,193 Amortization of deferred loan costs 76,143 15,100 Gain on sale of intangible asset - (286,579) Change in operating assets and liabilities: Accounts receivable trade (618,381) (135,197) Prepaid expenses and other assets 185,630 306,887 Accounts payable 223,949 256,902 Accrued expenses and other liabilities (63,003) 5,466 Net cash provided by operating activities 432,492 672,670 Cash flows from investing activities - continuing operations Capital expenditures (33,550) (39,798) Proceeds from collection of note receivable - 300,000 Restricted cash for asset acquisition (605,425) - Other 475 - Net cash provided by (used in) investing activities (638,500) 260,202 Cash flows from financing activities - continuing operations Payments on borrowings (943,462) (176,466) Proceeds from borrowings 600,000 - Proceeds from exercise of stock options - 76,501 Restricted cash for letter of credit, net - 23,464 Deferred financing costs - (28,500) Distributions to minority partner (39,821) (56,722) Net cash used in financing activities (383,283) (161,723) Net increase (decrease) in cash and cash equivalents from continuing operations (589,291) 771,149 Discontinued operations: Net cash provided by operating activities - 135,136 Net cash provided by investing activities - 2,721,501 Net cash used in financing activities - (547,338) Net increase in cash and cash equivalents from discontinued operations - 2,309,299 Cash and cash equivalents at beginning of period 1,807,224 1,060,823 Cash and cash equivalents at end of period $1,217,933 $4,141,271 Supplemental disclosures of cash flow information: Income taxes paid $46,000 $- Cash paid for interest 28,682 23,737 GATEWAY ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED (Unaudited) Six Months Ended June 30, 2008 2007 Supplemental schedule of noncash investing and financing activities: Trade note payable for insurance premiums $408,703 $438,878 Non-GAAP Financial Measures
The following table presents a reconciliation of the non-GAAP financial measures of total segment operating margin (which consists of the sum of individual segment operating margins and corporate) to the nearest comparable GAAP financial measure of operating income.
Three Months Ended Six Months Ended June 30, June 30, 2008 2007 2008 2007 Onshore Operations Revenues $3,775,130 $2,595,205 $6,663,554 $4,406,768 Cost of natural gas purchased 3,321,047 2,256,542 5,890,161 3,747,039 Operation and maintenance expense 57,705 51,430 129,052 106,797 Operating margin 396,378 287,233 644,341 552,932 General and administrative expense 181 170 231 251 Depreciation and amortization expense 49,115 53,500 98,102 109,723 Operating income $347,082 $233,563 $546,008 $442,958 Offshore Operations Revenues $890,861 $345,720 $1,704,004 $732,044 Operation and maintenance expense 233,333 62,053 423,002 128,299 Operating margin 657,528 283,667 1,281,002 603,745 Depreciation and amortization expense 137,500 38,139 273,815 76,661 Accretion expense 6,115 6,598 13,689 13,193 Operating income $513,913 $238,930 $993,498 $513,891
