- Contract Drilling Revenue Increased 46%
- Sequential Production Increased 7%
LEXINGTON, Ky., Aug. 5, 2010 (GLOBE NEWSWIRE) -- NGAS Resources (Nasdaq:NGAS) today reported second quarter 2010 total revenue of $13.9 million, compared to $14.7 million for the comparable quarter in 2009. Results for the quarter reflect a 46% increase in contract drilling revenue offset by lower production, lower commodity prices and third-party ownership of the Appalachian gas gathering system. Production of 0.9 million cubic feet equivalents (Mmcfe) in the quarter was up 7% from first quarter 2010.
For the quarter, the company reported a net loss of $1.1 million, compared to a net loss of $1.9 million in second quarter 2009. Loss per share in the quarter was $0.03, compared with a $0.07 loss per share in second quarter 2009. Discretionary cash flow per share was $0.01 in second quarter 2010 compared to $0.11 in the same period of the prior year. (A reconciliation of this non-GAAP measure is provided at the end of this release.)
William S. Daugherty, President and CEO, commented, "We are encouraged by the response to our 2010 drilling partnership, which was launched in April and is significantly ahead of last year's partnership sales. Sponsoring drilling partnerships has been a successful initiative for our business as it enables us to increase the pace of drilling, diversify our well portfolio, share development costs and expand reserves." Added Mr. Daugherty, "The partnership will participate with us in drilling up to 57 horizontal wells on our Appalachian properties through the end of March 2011."
Operational and Financial Highlights for 2Q 2010 versus 2Q 2009
-
Average daily production was 9,462 Mcfe versus 11,009 Mcfe
-
Total production was 0.9 Bcfe compared to 1.0 Bcfe
- Average realized natural gas prices $5.47/Mcf versus $6.47
- Average realized price for Appalachian production was $5.98/Mcf
Second Quarter 2010 Expense Review
Depreciation, depletion and amortization expenses were $3.3 million in second quarter 2010 compared to $3.7 million in second quarter 2009. The decrease was attributable to the third quarter 2009 sale of the Appalachian gathering system, partially offset by asset base expansion.
Selling, general and administrative (SG&A) expenses in second quarter 2010 were $3.2 million, compared to $2.6 million in the same period in the prior year. This primarily reflects the timing and extent of marketing activities for sponsored drilling partnerships and the level of partnership sales, which generated a 46% increase in contract drilling revenue for the quarter. As a percentage of revenue, SG&A expenses were 23% in second quarter 2010 and 17% in the same period of the prior year.
Cash interest expense declined 30% in second quarter 2010 due to lower debt under the company's credit facility and convertible notes. Total interest expense in the quarter was $1.7 million, which included $0.7 million of non-cash interest. The non-cash interest expense reflects the application of the effective interest method for accretion of the debt discount on the company's convertible notes.
The company recognized a fair value gain on derivative financial instruments of $1.7 million under mark-to-market accounting for the embedded conversion features of the convertible notes and related warrants.
Operational and Financial Highlights for 1H 2010 versus 1H 2009
-
Average daily production was 9,209 Mcfe versus 11,271 Mcfe
-
Total production was 1.7 Bcfe compared to 2.0 Bcfe
- Average realized natural gas prices $6.09/Mcf versus $6.61
- Average realized price for Appalachian production was $6.61/Mcf
Conference Call Information
Management will host a conference call today at 4:30 p.m. (Eastern) to discuss the results. The conference call can be accessed by dialing 1-877-780-3381 for U.S. callers and 1-719-325-2431 for international callers. The passcode for the call is 6097341. The conference call will be webcast and can be accessed on the company's website at www.ngas.com. A replay will be available approximately two hours after the call's completion and will be available until 11:59 p.m. (Eastern) on August 12, 2010. The replay can be accessed by dialing 1-877-870-5176 for U.S. callers and 1-858-384-5517 for international callers. The passcode is 6097341. The webcast will be archived and available for a time on the company's website at www.ngas.com.
About NGAS Resources
NGAS Resources is an independent exploration and production company focused on unconventional natural gas basins in the eastern United States, principally in the southern Appalachian Basin. Core assets include approximately 360,000 acres with interests in approximately 1,400 wells and an extensive inventory for future horizontal drilling. NGAS also operates the gas gathering facilities for its Appalachian properties, providing deliverability directly from the wellhead to the interstate pipeline. Additional information, including the company's annual report on Form 10-K for 2009 and 2010 proxy statement can be accessed on its website at www.ngas.com/" target="_top" rel="nofollow">www.ngas.com.
The NGAS Resources, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=7617
Forward Looking Statement
This release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act relating to matters such as anticipated operating and financial performance and prospects. Actual performance and prospects may differ materially from anticipated results due to economic conditions and other risks, uncertainties and circumstances partly or totally outside the control of the company, including risks of production variances from expectations, volatility of commodity prices, the level of capital expenditures to fund drilling and the ability of the company to implement its business strategy. These and other risks are described in the company's 2009 annual report on Form 10-K filed with the SEC.
|
NGAS Resources, Inc. |
|||
| CONSOLIDATED BALANCE SHEETS | |||
| ASSETS |
June 30, 2010 |
December 31, 2009 |
|
| Current assets: | (Unaudited) | ||
| Cash | $ 4,484,442 | $ 4,332,650 | |
| Accounts receivable | 5,573,732 | 7,277,311 | |
| Note receivable | 6,501,997 | 6,247,880 | |
| Prepaid expenses and other current assets | 427,914 | 633,884 | |
| Loans to related parties | 75,141 | 75,679 | |
| Total current assets | 17,063,226 | 18,567,404 | |
| Bonds and deposits | 258,695 | 258,695 | |
| Note receivable | 3,450,657 | 6,766,451 | |
| Oil and gas properties | 177,649,224 | 182,189,679 | |
| Property and equipment | 9,762,595 | 5,113,093 | |
| Loans to related parties | 171,429 | 171,429 | |
| Deferred financing costs | 1,023,393 | 1,235,705 | |
| Goodwill | 313,177 | 313,177 | |
| Total assets | $ 209,692,396 | $ 214,615,633 | |
| LIABILITIES | |||
| Current liabilities: | |||
| Accounts payable | $ 3,885,190 | $ 5,587,290 | |
| Accrued liabilities | 961,774 | 938,829 | |
| Long-term debt, current portion | 12,547,392 | 32,534,084 | |
| Fair value of derivative financial instruments | 202,579 | 111 | |
| Customer drilling deposits | 2,231,915 | 5,581,877 | |
| Total current liabilities | 19,828,850 | 44,642,191 | |
| Deferred compensation | 958,561 | 651,287 | |
| Deferred income taxes | 11,365,136 | 12,559,549 | |
| Long-term debt | 55,614,095 | 40,949,836 | |
| Fair value of derivative financial instruments | 399,013 | — | |
| Other long-term liabilities | 4,193,107 | 3,962,254 | |
| Total liabilities | 92,358,762 | 102,765,117 | |
| SHAREHOLDERS' EQUITY | |||
| Capital stock | |||
| Authorized: | |||
| 5,000,000 Preferred shares | |||
| 100,000,000 Common shares | |||
| Issued: | |||
| 38,597,217 Common shares (2009 – 30,484,361) | 128,323,885 | 117,142,639 | |
| 21,100 Common shares held in treasury, at cost | (23,630) | (23,630) | |
| Paid-in capital – options and warrants | 4,663,201 | 4,467,246 | |
| To be issued: | |||
| 9,185 Common shares | 45,925 | 45,925 | |
| 133,009,381 | 121,632,180 | ||
| Deficit | (15,675,747) | (9,781,664) | |
| Total shareholders' equity | 117,333,634 | 111,850,516 | |
| Total liabilities and shareholders' equity | $ 209,692,396 | $ 214,615,633 | |
|
NGAS Resources, Inc. |
||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
|
(Unaudited) |
||||
|
Three Months Ended June 30, |
Six Months Ended June 30, |
|||
| 2010 | 2009 | 2010 | 2009 | |
| REVENUE | ||||
| Contract drilling | $ 7,533,179 | $ 5,172,998 | $ 11,111,610 | $ 12,496,750 |
| Oil and gas production | 5,620,851 | 6,891,644 | 12,028,417 | 13,958,863 |
| Gas transmission, compression | ||||
| and processing | 771,448 | 2,599,229 | 2,050,577 | 5,404,211 |
| Total revenue | 13,925,478 | 14,663,871 | 25,190,604 | 31,859,824 |
| DIRECT EXPENSES | ||||
| Contract drilling | 5,688,487 | 3,873,266 | 8,377,406 | 9,414,692 |
| Oil and gas production | 3,703,633 | 2,614,094 | 7,018,700 | 4,939,059 |
| Gas transmission, compression | ||||
| and processing | 143,446 | 1,025,408 | 420,550 | 1,994,325 |
| Total direct expenses | 9,535,566 | 7,512,768 | 15,816,656 | 16,348,076 |
| OTHER EXPENSES (INCOME) | ||||
| Selling, general and administrative | 3,179,508 | 2,552,740 | 5,332,376 | 5,803,005 |
| Options, warrants and deferred compensation | 237,080 | 319,192 | 503,229 | 737,465 |
| Depreciation, depletion and amortization | 3,280,944 | 3,687,621 | 6,517,337 | 7,306,491 |
| Interest expense | 1,728,217 | 2,415,451 | 3,470,898 | 4,696,459 |
| Interest income | (221,836) | (6,194) | (476,256) | (15,010) |
| Fair value loss (gain) on | ||||
| derivative financial instruments | (1,736,538) | 4,995 | 696,593 | (9,324) |
| Refinancing costs | — | — | 625,344 | — |
| Other, net | (101,578) | 216,377 | (207,077) | 295,918 |
| Total other expenses | 6,365,797 | 9,190,182 | 16,462,444 | 18,815,004 |
| LOSS BEFORE INCOME TAXES | (1,975,885) | (2,039,079) | (7,088,496) | (3,303,256) |
| INCOME TAX EXPENSE (BENEFIT) | (911,518) | (103,921) | (1,194,413) | 63,241 |
| NET LOSS | $ (1,064,367) | $ (1,935,158) | $ (5,894,083) | $ (3,366,497) |
| NET LOSS PER SHARE | ||||
| Basic | $ (0.03) | $ (0.07) | $ (0.17) | $ (0.13) |
| Diluted | $ (0.03) | $ (0.07) | $ (0.17) | $ (0.13) |
| WEIGHTED AVERAGE COMMON | ||||
| SHARES OUTSTANDING: | ||||
| Basic | 35,847,569 | 26,968,646 | 34,506,388 | 26,820,718 |
| Diluted | 35,847,569 | 26,968,646 | 34,506,388 | 26,820,718 |
|
NGAS Resources, Inc. |
||||
|
DISCRETIONARY CASH FLOW RECONCILIATION |
||||
|
Discretionary cash flow represents net income, determined in accordance with generally accepted accounting principles (GAAP), with certain non-cash items added back. Although a non-GAAP measure, discretionary cash flow is widely accepted as a financial indicator of an oil and gas company's ability to generate cash that can be used to fund development activities and service debt internally. This measure may also be used in the valuation, comparison and rating of companies in the E&P and other industries. Cash flow is not a measure of financial performance under GAAP and should not be considered as an alternative to net cash flows from operating, investing or financing activities determined under GAAP. |
||||
| (Unaudited) | ||||
|
Three Months Ended June 30, |
Six Months Ended June 30, |
|||
| 2010 | 2009 | 2010 | 2009 | |
| Net income (loss) | $ (1,064,367) | $ (1,935,158) | $ (5,894,083) | $ (3,366,497) |
| Non-cash compensation | 237,080 | 319,192 | 503,229 | 1,098,715 |
| Depreciation, depletion and amortization | 3,280,944 | 3,687,621 | 6,517,337 | 7,306,491 |
| Non-cash interest expense | 705,210 | 955,627 | 1,452,461 | 1,864,594 |
| Fair value loss (gain) on derivative | ||||
| financial instruments | (1,736,538) | 4,995 | 696,593 | (9,324) |
| Income tax expense (benefit) | (911,518) | (103,921) | (1,194,413) | 63,241 |
| DISCRETIONARY Cash Flow | $ 510,811 | $ 2,928,356 | $ 2,081,124 | $ 6,957,220 |
| Discretionary Cash Flow/Per Share | $ 0.01 | $ 0.11 | $ 0.06 | $ 0.26 |