LEXINGTON, Ky., Aug. 4, 2009 (GLOBE NEWSWIRE) -- NGAS Resources, Inc. (Nasdaq:NGAS) today reported second quarter 2009 total revenue of $14.7 million compared to $21.3 million in the second quarter of 2008. Higher production volumes were offset by significantly lower commodity prices. This contributed to a net loss of $975,000 or $0.04 per share in the second quarter 2009 compared with net income of $1.5 million or $0.06 a year ago. Discretionary cash flow was $2.9 million or $0.11 per share in the second quarter of 2009. (A reconciliation of this non-GAAP measure is provided at the end of this release.)
William S. Daugherty, President and CEO of NGAS Resources, commented, "The operating environment remains challenging; demand is down, inventories are rising and natural gas prices remain depressed. We have addressed these challenges head on by monetizing our gathering system and reducing our drilling activities. Our year-over-year production growth reflects the success of our horizontal drilling program, while the sequential quarterly decline reflects our reduced drilling." Mr. Daugherty added, "Our increased liquidity from the recent sale of our gas gathering assets, coupled with our multi-faceted business model and existing hedge position, provide us with the flexibility to operate successfully in this environment."
Operational and Financial Highlights for 2Q 2009 versus 2Q 2008:
* Total production volumes were 1.0 Bcfe compared to 0.95 Bcfe * Average daily production was 11.0 Mmcfe versus 10.4 Mmcfe * Average natural gas price was $6.47/Mcf versus $9.88 -- Average price for the Appalachian gas portion was $7.68 * Gas transmission, compression and processing revenue rose 2.5 percent to $2.6 million * Discretionary cash flow was $2.9 million versus $6.7 million
Second Quarter 2009 Expense Review
Depreciation, depletion and amortization expenses were $3.7 million in the second quarter 2009 compared to $3.3 million in the second quarter of 2008. The increase was driven by asset base expansion.
Selling, general and administrative expenses were down 26 percent in the 2009 second quarter to $2.6 million from $3.4 million in the same quarter of 2008. This primarily reflects the timing and extent of marketing costs for sponsored drilling partnerships. As a percentage of revenue, SG&A costs were 17.4 percent compared to 16.1 percent in second quarter 2008.
Interest expense in the quarter was $1.5 million compared to $1.4 million in the same period last year, reflecting higher borrowings on the company's line of credit.
Subsequent to quarter's end, NGAS closed on the sale of a 50 percent interest in its Appalachian gas gathering system and utilized the entire proceeds of $28 million to reduce outstanding borrowings. As of August 4, 2009, the company's borrowings under its credit facility were $46 million.
Operational and Financial Highlights for First Half 2009 versus First Half 2008:
* Total production volumes were 2.0 Bcfe compared to 1.8 Bcfe
* Average daily production was 11.3 Mmcfe versus 10.1 Mmcfe
* Average natural gas price was $6.61 Mcf versus $9.21
-- Average price for the Appalachian gas portion was $7.89 in first
half of 2009
* Discretionary cash flow was $6.9 million versus $10.9 million
Conference Call Information
Management will host a conference call today at 4:30 p.m. (Eastern) to discuss the 2Q 2009 results. The call-in number is 888-663-2259 or 913-312-1489 (international). Conference ID number is 4365447. The conference call will be webcast and can be accessed by logging onto www.ngas.com. For those unable to listen to the live presentation, the webcast will be archived on the company's website. A telephone replay will also be available for one week beginning at 7:30 p.m. (Eastern), August 4, 2009, and can be accessed by dialing 888-203-1112 or 719-457-0820 (international) and entering pin number 4365447.
About NGAS Resources
NGAS Resources is an independent exploration and production company focused on unconventional natural gas basins in the United States that provide repeatable drilling opportunities, principally in the southern portion of the Appalachian Basin. Additional information, including the company's most recent periodic reports and proxy statement, can be accessed on its website at www.ngas.com.
Forward Looking Statements
This release includes 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 product prices, the level of capital expenditures required to fund drilling and the ability of the company to implement its business strategy. These and other risks are described in the company's periodic reports filed with the United States Securities and Exchange Commission.
NGAS RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ ------------------------
2009 2008 2009 2008
----------- ----------- ----------- -----------
REVENUE
Contract drilling $ 5,172,998 $ 7,625,356 $12,496,750 $14,227,474
Oil and gas
production 6,891,644 11,179,620 13,958,863 19,669,054
Gas transmission,
compression and
processing 2,599,229 2,536,560 5,404,211 5,094,652
----------- ----------- ----------- -----------
Total revenue 14,663,871 21,341,536 31,859,824 38,991,180
----------- ----------- ----------- -----------
DIRECT EXPENSES
Contract drilling 3,873,266 5,756,997 9,414,692 10,876,846
Oil and gas
production 2,614,094 3,107,095 4,939,059 5,872,050
Gas transmission,
compression and
processing 1,025,408 957,548 1,994,325 2,047,794
----------- ----------- ----------- -----------
Total direct
expenses 7,512,768 9,821,640 16,348,076 18,796,690
----------- ----------- ----------- -----------
OTHER EXPENSES
(INCOME)
Selling, general
and
administrative 2,552,740 3,442,094 5,803,005 6,730,577
Options, warrants
and deferred
compensation 319,192 234,803 737,465 372,482
Depreciation,
depletion and
amortization 3,687,621 3,261,192 7,306,491 6,132,952
Bad debt expense -- 59,000 -- 406,840
Interest expense 1,459,824 1,355,643 2,831,865 2,681,613
Interest income (6,194) (9,093) (15,010) (78,803)
Other, net 216,377 34,632 295,918 28,355
----------- ----------- ----------- -----------
Total other
expenses 8,229,560 8,378,271 16,959,734 16,274,016
----------- ----------- ----------- -----------
INCOME (LOSS)
BEFORE INCOME
TAXES (1,078,457) 3,141,625 (1,447,986) 3,920,474
----------- ----------- ----------- -----------
INCOME TAX EXPENSE
(BENEFIT) (103,921) 1,620,363 63,241 2,236,023
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ (974,536) $ 1,521,262 $(1,511,227) $ 1,684,451
=========== =========== =========== ===========
NET INCOME (LOSS)
PER SHARE
Basic $ (0.04) $ 0.06 $ (0.06) $ 0.06
=========== =========== =========== ===========
Diluted $ (0.04) $ 0.06 $ (0.06) $ 0.06
=========== =========== =========== ===========
NGAS RESOURCES, INC.
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
ASSETS 2009 2008
------------ ------------
Current assets: (Unaudited)
Cash $ 7,642,019 $ 981,899
Accounts receivable 5,684,160 10,450,173
Prepaid expenses and other
current assets 515,848 540,253
Loans to related parties 76,914 79,188
------------ ------------
Total current assets 13,918,941 12,051,513
Bonds and deposits 263,695 623,898
Oil and gas properties 179,603,725 229,218,344
Assets held for sale 47,216,714 --
Property and equipment 5,667,261 3,285,925
Loans to related parties 171,429 171,429
Deferred financing costs 1,645,985 1,689,580
Goodwill 313,177 313,177
------------ ------------
Total assets $248,800,927 $247,353,866
============ ============
LIABILITIES
Current liabilities:
Accounts payable $ 5,237,137 $ 12,362,092
Accrued liabilities 665,157 675,141
Deferred compensation 2,094,700 2,246,439
Customer drilling deposits 698,400 2,262,955
Long-term debt, current portion 87,703 24,000
------------ ------------
Total current liabilities 8,783,097 17,570,627
Deferred compensation 344,013 --
Deferred income taxes 13,012,717 12,949,476
Long-term debt 118,981,171 108,580,448
Other long-term liabilities 4,008,675 3,685,849
------------ ------------
Total liabilities 145,129,673 142,786,400
------------ ------------
SHAREHOLDERS' EQUITY
Capital stock
Authorized:
5,000,000 Preferred shares
100,000,000 Common shares
Issued:
26,968,646 Common shares
(2008 - 26,543,646) 110,988,162 110,626,912
21,100 Common shares held in
treasury, at cost (23,630) (23,630)
Paid-in capital - options
and warrants 4,204,791 3,774,600
Contributed surplus 513,944 690,370
To be issued:
9,185 Common shares (2008 - 9,185) 45,925 45,925
------------ ------------
115,729,192 115,114,177
Deficit (12,057,938) (10,546,711)
------------ ------------
Total shareholders' equity 103,671,254 104,567,466
------------ ------------
Total liabilities and shareholders'
equity $248,800,927 $247,353,866
============ ============
NGAS RESOURCES, INC.
CASH FLOW RECONCILIATION
Discretionary cash flow represents net income, as determined under 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 internally fund exploration and development activities and to service debt. This measure may also be used in the valuation, comparison, rating and investment recommendations for companies in the oil and gas exploration and production industry. Cash flow is not a measure of financial performance under GAAP and should not be considered as an alternative to cash flows from operating, investing, or financing activities or as an indicator of cash flows or measure of liquidity.
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ ------------------------
2009 2008 2009 2008
----------- ----------- ----------- -----------
Net income/(loss) $ (974,536) $ 1,521,262 $(1,511,227) $ 1,684,451
DD&A 3,687,621 3,261,192 7,306,491 6,132,952
Options, warrants
and deferred
compensation 319,192 234,803 1,098,715 404,052
Bad debt expense -- 59,000 -- 406,840
Deferred taxes (103,921) 1,620,363 63,241 2,236,023
----------- ----------- ----------- -----------
DISCRETIONARY CASH
FLOW $ 2,928,356 $ 6,696,620 $ 6,957,220 $10,864,318
=========== =========== =========== ===========
DISCRETIONARY CASH
FLOW PER SHARE $ 0.11 $ 0.24 $ 0.26 $ 0.40
=========== =========== =========== ===========