LEXINGTON, Ky., May 6, 2010 (GLOBE NEWSWIRE) -- NGAS Resources (Nasdaq:NGAS) today reported first quarter 2010 total revenue of $11.3 million compared to $17.2 million for the comparable quarter in 2009. Results for the quarter reflect the impact of lower production, decreased partnership funding and third-party ownership of the Appalachian gas gathering system, partially offset by higher average realized prices.
For the quarter, the company reported a net loss of $4.8 million, compared to a net loss of $1.4 million in first quarter 2009. The loss in the current quarter included approximately $3.8 million in non-cash and one-time expenses related to the company's convertible notes exchange. Loss per share in the quarter was $0.15, which included $0.11 per share impact from the non-cash and one-time items. The loss per share in first quarter 2009 was $0.05. Discretionary cash flow per share was $0.05 in first quarter 2010 compared to $0.15 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, "A significant event in the first quarter was the restructuring of our convertible notes. Along with reducing the face amount by over $8 million, the main benefit was the financial flexibility it provided by extending the maturity date from later this year until May 2012. This far outweighed the accounting impact on earnings." Mr. Daugherty added, "Results from our Devonian Shale horizontal drilling continue to improve and we are now extending the lateral legs up to 4,500 feet. Initial results indicate much lower F&D costs and higher production rates than we have realized in previous horizontal wells."
Operational and Financial Highlights for 1Q 2010 versus 1Q 2009
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Average daily production was 9.0 Mmcfe versus 11.5 Mmcfe
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Total production was 0.8 Bcfe compared to 1.0 Bcfe
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2.6 net wells drilled
- Average realized natural gas prices $6.76/Mcf versus $6.74
- Average realized price for Appalachian production was $7.50/Mcf
First Quarter 2010 Expense Review
Depreciation, depletion and amortization expenses were $3.2 million in first quarter 2010 compared to $3.6 million in first quarter 2009. The decrease was driven by the sale of the Appalachian gathering system, partially offset by asset base expansion.
Selling, general and administrative (SG&A) expenses in first quarter 2010 were $2.2 million, down 34% from the same period in the prior year. This primarily reflects the timing and extent of marketing costs for sponsored drilling partnerships as well as cost containment efforts undertaken by the company. As a percentage of revenue, SG&A expenses were 19% in both periods.
Cash interest expense declined 27% in first quarter 2010 reflecting the reduction in debt under the company's credit facility. The non-cash interest expense reflects the application of the effective interest method for accretion of the debt discount on the company's amortizing convertible notes. Total interest expense in the quarter was $1.7 million, which included $0.7 million of non-cash interest.
In connection with the January 2010 convertible note exchange, the company recognized a fair value loss on derivative financial instruments of $2.4 million under mark-to-market accounting for the embedded conversion features of the 2010 notes and fair value of warrants issued in the transaction. The company also expensed related refinancing costs of $0.6 million in first quarter 2010.
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 1-877-741-4251 for U.S. callers and 1-719-325-4753 for international callers. The passcode for the call is 3338094. 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 May 13, 2010. The replay can be accessed by dialing 1-888-203-1112 for U.S. callers and 1-719-457-0820 for international callers. The passcode is 3338094. 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 portion of the Appalachian Basin. Core assets include over 400,000 acres of leases with interests in approximately 1,400 wells and an extensive inventory of potential horizontal drilling locations. NGAS operates the gas gathering facilities for its core Appalachian properties, providing deliverability directly from the well-head to the interstate pipeline. Additional information, including the company's annual report on Form 10-K for 2009 and its 2010 proxy, can be accessed on its website at www.ngas.com.
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 periodic reports filed with the SEC.
| NGAS Resources, Inc. | ||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||
| (Unaudited) | ||
| Three Months Ended | ||
| March 31, | ||
| 2010 | 2009 | |
| REVENUE | ||
| Contract drilling | $3,578,431 | $7,323,752 |
| Oil and gas production | 6,407,566 | 7,067,219 |
| Gas transmission, compression and processing | 1,279,129 | 2,804,982 |
| Total revenue | 11,265,126 | 17,195,953 |
| DIRECT EXPENSES | ||
| Contract drilling | 2,688,919 | 5,541,426 |
| Oil and gas production | 3,315,067 | 2,324,965 |
| Gas transmission, compression and processing | 277,104 | 968,917 |
| Total direct expenses | 6,281,090 | 8,835,308 |
| OTHER EXPENSES (INCOME) | ||
| Selling, general and administrative | 2,152,868 | 3,250,265 |
| Options, warrants and deferred compensation | 266,149 | 418,273 |
| Depreciation, depletion and amortization | 3,236,393 | 3,618,870 |
| Interest expense | 1,742,681 | 2,281,008 |
| Interest income | (254,420) | (8,816) |
| Fair value loss (gain) on derivative financial instruments | 2,433,131 | (14,319) |
| Refinancing costs | 625,344 | -- |
| Other, net | (105,499) | 79,541 |
| Total other expenses | 10,096,647 | 9,624,822 |
| LOSS BEFORE INCOME TAXES | (5,112,611) | (1,264,177) |
| INCOME TAX EXPENSE (BENEFIT) | (282,895) | 167,162 |
| NET LOSS | $(4,829,716) | $(1,431,339) |
| NET LOSS PER SHARE | ||
| Basic | $(0.15) | $(0.05) |
| Diluted | $(0.15) | $(0.05) |
|
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING |
||
| Basic | 33,150,305 | 26,671,146 |
| Diluted | 33,150,305 | 26,671,146 |
| NGAS Resources, Inc. | ||
| CONSOLIDATED BALANCE SHEETS | ||
| March 31, | December 31, | |
| ASSETS | 2010 | 2009 |
| Current assets: | (Unaudited) | |
| Cash | $448,567 | $4,332,650 |
| Accounts receivable | 7,188,977 | 7,277,311 |
| Note receivable | 6,373,673 | 6,247,880 |
| Prepaid expenses and other current assets | 498,643 | 633,884 |
| Loans to related parties | 75,169 | 75,679 |
| Total current assets | 14,585,029 | 18,567,404 |
| Bonds and deposits | 258,695 | 258,695 |
| Note receivable | 5,125,077 | 6,766,451 |
| Oil and gas properties | 181,734,206 | 182,189,679 |
| Property and equipment | 10,547,017 | 5,113,093 |
| Loans to related parties | 171,429 | 171,429 |
| Deferred financing costs | 1,206,978 | 1,235,705 |
| Goodwill | 313,177 | 313,177 |
| Total assets | $213,941,608 | $214,615,633 |
| LIABILITIES | ||
| Current liabilities: | ||
| Accounts payable | $6,111,606 | $5,587,290 |
| Accrued liabilities | 696,270 | 938,829 |
| Long-term debt, current portion | 9,952,515 | 32,534,084 |
| Fair value of derivative financial instruments | -- | 111 |
| Customer drilling deposits | 1,418,569 | 5,581,877 |
| Total current liabilities | 18,178,960 | 44,642,191 |
| Deferred compensation | 804,924 | 651,287 |
| Deferred income taxes | 12,276,654 | 12,559,549 |
| Long-term debt | 63,840,396 | 40,949,836 |
| Fair value of derivative financial instruments | 2,433,242 | -- |
| Other long-term liabilities | 4,085,788 | 3,962,254 |
| Total liabilities | 101,619,964 | 102,765,117 |
| SHAREHOLDERS' EQUITY | ||
| Capital stock | ||
| Authorized: | ||
| 5,000,000 Preferred shares | ||
| 100,000,000 Common shares | ||
| Issued: | ||
| 33,521,512 Common shares (2009 – 30,484,361) | 122,330,972 | 117,142,639 |
| 21,100 Common shares held in treasury, at cost | (23,630) | (23,630) |
| Paid-in capital – options and warrants | 4,579,757 | 4,467,246 |
| To be issued: | ||
| 9,185 Common shares | 45,925 | 45,925 |
| 126,933,024 | 121,632,180 | |
| Deficit | (14,611,380) | (9,781,664) |
| Total shareholders' equity | 112,321,644 | 111,850,516 |
| Total liabilities and shareholders' equity | $213,941,608 | $214,615,633 |
NGAS Resources, Inc.
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 | ||
| March 31, | ||
| 2010 | 2009 | |
| Net loss | $(4,829,716) | $(1,431,339) |
| Depreciation, depletion and amortization | 3,236,393 | 3,618,870 |
| Non-cash compensation | 266,149 | 779,523 |
| Non-cash interest expense | 747,251 | 908,967 |
|
Fair value loss (gain) on derivative financial instruments |
2,433,131 | (14,319) |
| Deferred income taxes (benefit) | (282,895) | 167,162 |
| DISCRETIONARY CASH FLOW | $1,570,313 | $4,028,864 |
| DISCRETIONARY CASH FLOW PER SHARE | $0.05 | $0.15 |