HOUSTON, March 24 /PRNewswire-FirstCall/ -- Gateway Energy Corporation (BULLETIN BOARD: GNRG) today announced the financial results for the year ending December 31, 2009.
For 2009 the Company reported: -- Total revenues of $6,707,974, a decrease from the $13,882,476 for 2008. -- Revenues from onshore operations decreased to $4,419,676 from $12,373,321 for the year ended December 31, 2009. The Company buys natural gas for its onshore Waxahachie system based on an index less a fixed amount and sells the gas on the same index plus a fixed amount and the decrease in revenues reflects the drop in the price of natural gas along with the drop in industrial demand for natural gas due to prevailing economic conditions. The Hickory Creek gathering system was acquired effective November 1, 2009, however, due to accounting rules revenue earned prior to the closing date of January 7, 2010 were not treated as revenue but as a reduction in the purchase price of the asset. -- Revenues from offshore operations increased to $2,293,928 from $1,504,155, due primarily to higher throughput volumes. -- Operating results from continuing operations for the year ended December 31, 2009 showed a loss of $275,875 as compared to a loss of $575,534 for the same period of 2008. This loss is due to reduced volumes transported through the onshore systems offset by a reduction in operating and maintenance expenses and general and administrative expenses. -- Net loss for 2009 was $219,484 as compared to net income of $817,541 for the same period in 2008. 2008 was positively impacted by a $1.75 million insurance claim for the damage at the Crystal Beach Terminal suffered during September 2008. -- Adjusted EBITDA for the twelve months ended December 31, 2009 was $656,775 compared to $2,374,421 for 2008. The 2008 adjusted EBITDA was also impacted by the $1.75 million insurance claim. -- Total operating cost and expenses for 2009 were $3,970,055 as compared to $11,412,713 for 2008. The cost of natural gas purchased decreased from $10,979,136 in 2008 to $3,586,046 in 2009. -- Operation and maintenance costs for 2009 were $384,009 as compared to $433,577 for 2008. -- Depreciation, depletion and amortization costs decreased to $608,394 for the year ending December 31, 2009 as compared to $621,252 for the year ending December 31, 2008. -- General and administrative costs for the twelve months ended December 31, 2009 were $2,405,400, as compared to $2,424,045 for the twelve months ended December 31, 2008. Approximately one-third ($800,000) of the general and administrative costs for 2009 were largely related to the company being public and includes auditing and tax services, legal, SOX consulting, investor relations, independent Board of Director fees as well as director and officer insurance. The following summarizes general and administrative expenses for 2008 and 2009: Year Ended December 31, -------------------- 2009 2008 ---- ---- Salaries and employee related costs $810,148 $889,731 Accounting, tax, and legal costs 411,960 321,383 Insurance costs 389,347 432,685 Investor relation costs 145,590 174,167 Other general and administrative costs 648,355 606,079 Total general and administrative costs $2,405,400 $2,424,045 Management Comments
Mr. Robert Panico, President and CEO of Gateway said, "The Company accomplished several major objectives during 2009 including the sale of the Crystal Beach Terminal, Shipwreck Platform, and Shipwreck and Pirates' Beach gathering systems, entered into a new credit facility and the acquisition of the Hickory Creek gathering system located in the core of the Barnett Shale, which closed in early January 2010." Mr. Panico continued, "The sale of the Shipwreck Platform and Crystal Beach Terminal is expected to reduce what we will incur in 2010 for insurance costs by approximately $320,000 and eliminated an estimated $3.4 million in future abandonment obligations. This cost reduction, along with other initiatives, are expected to reduce general and administrative costs in 2010 by approximately 20%. In addition to these accomplishments, the Company repaid the entire principal balance of its former credit facility of approximately $650,000 and still maintained a healthy cash balance of almost $3 million."
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 onshore 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 December 31, December 31, 2009 2008 ------------- ------------- ASSETS (audited) (audited) Current Assets Cash and cash equivalents $2,086,787 $1,789,029 Restricted cash 900,000 - Accounts receivable trade, net 1,101,100 969,859 Notes receivable 148,088 - Prepaid expenses and other assets 41,941 121,398 Current assets of discontinued operations - 1,805,167 --- --------- Total current assets 4,277,916 4,685,453 --------- --------- Property and Equipment, at cost Gas gathering, processing and transportation 8,855,967 8,843,142 Net profits production interest 701,482 763,909 Office furniture and other equipment 150,500 143,654 ------- ------- 9,707,949 9,750,705 Less accumulated depreciation and amortization (2,785,241) (2,371,704) ---------- ---------- 6,922,708 7,379,001 --------- --------- Other Assets Deferred tax assets, net 1,295,455 1,205,000 Intangible assets, net of accumulated amortization of $345,567 and $222,082 as of December 31, 2009 and December 31, 2008, respectively 563,032 765,337 Other 36,803 136,657 Non-current assets of discontinued operations - 2,519,253 --- --------- 1,895,290 4,626,247 ========= ========= Total assets $13,095,914 $16,690,701 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable $660,504 $776,519 Accrued expenses and other liabilities 305,549 323,100 Current maturities of long-term debt - 1,062,000 Current maturities of capital lease 9,188 20,235 ----- ------ Total current liabilities 975,241 2,181,854 ------- --------- Long-term capital lease, less current maturities - 9,187 Non-current liabilities of discontinued operations - 2,318,315 --- --------- Total liabilities $975,241 $4,509,356 -------- ---------- 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; 19,397,125 and 19,207,249 shares issued and outstanding at December 31, 2009 and 2008, respectively 4,849,281 4,801,812 Additional paid-in capital 17,395,828 17,284,485 Accumulated deficit (10,124,436) (9,904,952) ----------- ---------- Total stockholders' equity 12,120,673 12,181,345 ---------- ---------- Total liabilities and stockholders' equity $13,095,914 $16,690,701 =========== =========== GATEWAY ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (audited) Year Ended December 31, ----------------------- 2009 2008 ---- ---- Operating revenues Sales of natural gas $4,183,830 $12,033,817 Transportation of natural gas and liquids 2,342,479 1,788,070 Treating and other 181,665 60,589 ------- ------ 6,707,974 13,882,476 --------- ---------- Operating costs and expenses Cost of natural gas purchased 3,586,046 10,979,136 Operation and maintenance 384,009 433,577 General and administrative 2,405,400 2,424,045 Depreciation, depletion, and amortization 608,394 621,252 ------- ------- 6,983,849 14,458,010 --------- ---------- Operating (loss) (275,875) (575,534) Other income (expense) Interest income 30,408 29,119 Interest expense (116,699) (157,091) Other income (expense), net (178,758) 1,731,155 -------- --------- Other income (expense) (265,049) 1,603,183 -------- --------- Income (loss) from operations before income taxes and discontinued operations (540,924) 1,027,649 Income tax expense (benefit) (159,157) 375,764 -------- ------- Income (loss) from continuing operations (381,767) 651,885 Net income attributable to noncontrolling interest - (28,824) --- ------- Income (loss) from continuing operations attributable to controlling interest (381,767) 623,061 Discontinued operations, net of taxes Income (loss) from discontinued operations, net of taxes (155,897) 194,480 Gain on disposal of assets, net of taxes 318,180 - ------- --- Income from discontinued operations 162,283 194,480 Net income (loss) $(219,484) $817,541 ========= ======== Basic and diluted income (loss) per share: Continuing operations $(0.02) $0.03 Discontinued operations 0.01 0.01 ---- ---- Net income (loss) $(0.01) $0.04 ====== ===== Weighted average number of common shares outstanding Basic 19,303,488 19,126,587 Diluted 19,303,488 19,330,409 GATEWAY ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (audited) Year Ended December 31, ----------------------- 2009 2008 -- -- Cash flows from operating activities - continuing operations Income (loss) from continuing operations $(381,767) $651,885 Adjustments to reconcile income from continuing operations to net cash provided by operating activities: Depreciation, depletion and amortization 608,394 621,252 Deferred tax expense (benefit) (195,226) 340,764 Stock based compensation expense 158,812 169,888 Impairment of intangible assets 52,066 - Impairment of net profits interest 77,942 - Amortization of deferred loan costs 99,445 124,835 Change in operating assets and liabilities: Trade accounts receivable (131,241) 882,990 Prepaid expenses and other assets 390,189 (184,831) Accounts payable (96,144) (362,134) Accrued expenses and other liabilities (61,374) 71,732 ------- ------ Net cash provided by operating activities 521,096 2,316,381 ------- --------- Cash flows from investing activities - continuing operations Capital expenditures (35,186) (29,358) Acquisition of noncontrolling interest and net profits interest - (1,303,075) Property write-offs - 18,067 --- ------ Net cash used in investing activities (35,186) (1,314,366) ------- ---------- Cash flows from financing activities - continuing operations Proceeds on borrowings - 1,362,000 Payments on borrowings (1,082,233) (1,067,370) Restricted cash on credit facility (900,000) - Deferred financing costs (42,102) (39,820) ------- ------- Net cash provided by (used in) financing activities (2,024,335) 254,810 ---------- ------- Net increase (decrease) in cash and cash equivalents from continuing operations (1,538,425) 1,256,825 Discontinued operations: Net cash provided by (used in) discontinued operating activities 1,838,883 (1,170,934) Net cash used in discontinued investing activities (2,700) (104,086) ------ -------- Net increase in cash and cash equivalents from discontinued operations 1,836,183 (1,275,020) Cash and cash equivalents at beginning of period 1,789,029 1,807,224 --------- --------- Cash and cash equivalents at end of period $2,086,787 $1,789,029 ========== ========== Supplemental disclosures of cash flow information: Cash paid for interest - continuing operations $51,851 $51,025 Supplemental schedule of noncash investing and financing activities: Common stock issued for acquisition $- $70,000 Common stock issued for services - 9,000 GATEWAY ENERGY CORPORATION AND SUBSIDIARIES NON-GAAP FINANCIAL MEASURES Operating Margin
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 margin and corporate) to the nearest comparable GAAP financial measure of operating income.
Year Ended December 31, -------------------- 2009 2008 ---- ---- Onshore Operations Revenues $4,419,676 $12,373,321 Cost of natural gas purchased 3,586,046 10,979,136 Operation and maintenance expense 211,424 246,149 ------- ------- Operating margin 622,206 1,148,036 General and administrative expense 729,370 993,997 Depreciation and amortization expense 150,935 194,455 ------- ------- Operating loss (258,099) (40,416) Offshore Operations Revenues $2,293,298 $1,504,387 Operation and maintenance expense 172,585 187,660 ------- ------- Operating margin 2,120,713 1,316,727 General and administrative expense 1,560,773 1,416,921 Depreciation and amortization expense 416,114 420,891 ------- ------- Operating income (loss) 143,826 (521,085) Net Profits Interest Revenues (loss) $(5,000) $5,000 ------- ------ Operating margin (loss) (5,000) 5,000 General and administrative expense 109,967 1,638 Depletion expense 34,462 783 ------ --- Operating income (loss) (149,429) 2,579 -------- ----- Adjusted EBITDA Adjusted EBITDA is defined as pre-tax net income plus: -- interest expense; -- depreciation, depletion and amortization expense; -- non-recurring gain (loss) on sale of assets; -- non-controlling interest; -- accretion expense; and -- non-cash compensation expense.
Adjusted EBITDA is a significant performance metric used by Company management, and by external users of Company's financial statements, such as investors, commercial banks, research analysts and others, including our principal lender.
Adjusted EBITDA should not be considered an alternative to, or more meaningful than, net income, operating income, cash flows from operating activities or any other measure of financial performance presented in accordance with GAAP as measures of operating performance, liquidity or ability to service debt obligations. Adjusted EBITDA does not include interest expense, income taxes, depreciation, depletion and amortization expense, non-recurring gain (loss) on sale of assets, minority interest, accretion expense or non-cash compensation expense. Because the Company has borrowed, and intends to borrow, money to finance their operations, interest expense is a necessary element of Company's overall costs. Because the Company uses capital assets, depreciation and amortization are also necessary elements of Company's overall costs. Because the Company has used, and intend to use, non-cash equity awards as part of their overall compensation package for executive officers and employees, non-cash compensation expense is a necessary element of Company's overall costs. Therefore, any measures that exclude these elements have material limitations. To compensate for these limitations, Company management believes that it is important to consider net income determined under GAAP, as well as Adjusted EBITDA, to evaluate Company's financial performance.
Management compensates for the limitations of Adjusted EBITDA as an analytical tool by reviewing the comparable GAAP measures, understanding the differences between the measures and incorporating this knowledge into management's decision-making processes.
Year Ended December 31, -------------------- 2009 2008 ---- ---- Net income (loss) $(219,484) $817,541 Net loss attributable to noncontrolling interest - 28,824 Interest expense 116,699 157,091 Income taxes (159,157) 375,764 Depreciation, depletion and amortization expense 608,394 621,252 Impairment of assets 130,008 - Non-cash stock compensation 158,812 169,888 Adjusted EBITDA $635,272 $2,170,360
Gateway Energy Corporation
CONTACT: Investor Relations, Brad Holmes, +1-713-654-4009, or Chris
Rasmussen, CFO, +1-713-336-0844, both of Gateway Energy Corporation
Web Site: http://www.gatewayenergy.com/
