DENVER, May 4 /PRNewswire-FirstCall/ -- Gasco Energy (NYSE Amex: GSX) today reported financial and operating results for the quarter ended March 31, 2009. Financial Results For the first quarter 2009, Gasco reported a net loss attributable to common shareholders of $43.9 million, or $0.41 per share, as compared to a net loss of $4.4 million, or $0.04 per share, for the same period in 2008. Included in the first quarter 2009 results are unrealized derivative gains of $0.7 million attributed to hedge effect. Also included in the first quarter 2009's operating expenses are a non-cash charge of $41.0 million related to an impairment of the carrying value of oil and gas properties and a $4.7 million cash payment to the Company's rig contractor for early termination of a rig contract. Before the impairment charge and the early termination payment, and excluding the effect of unrealized derivative gains, a non-GAAP measure, Gasco would have posted net income of $2.5 million or $0.02 per share. Included in the first quarter 2008 results are derivative losses of $6.4 million attributed to hedge effect, of which $5.9 million was unrealized. Excluding the effect of unrealized derivative losses, a non-GAAP measure, Gasco would have posted net income of $1.5 million, or $0.01 per share, for the first quarter of 2008. The Company did not incur an impairment charge in the first quarter of 2008. All per-share figures are presented on a basic and diluted basis. The Company reported oil and gas sales for the first quarter 2009 of $4.2 million, as compared to $8.5 million for the same period in 2008. The decrease in oil and gas sales during the first quarter 2009 is attributed to lower prices received for sales of the Company's natural gas and oil volumes offset in part by a 15.6% increase in oil and gas sales volumes during the first quarter 2009, as compared to the same period in 2008. Gathering revenues from Gasco's midstream assets were $0.9 million for the first quarter 2009, as compared to $0.9 million in the prior-year period. Total revenues for the first quarter were $5.4 million, as compared to $9.8 million in the first quarter 2008. Gasco's average realized gas price was $5.67 per thousand cubic feet of natural gas (Mcf) for the first quarter of 2009, including the effect of hedges, compared to $7.19 per Mcf for the first quarter of 2008, also including the effect of hedges. The Company's risk management activities increased its average gas price by $2.39 per Mcf during the first quarter of 2009. Prior to the impact of hedges, the Company's average price received for its natural gas production during the first quarter of 2009 was approximately $3.28 per Mcf as compared to $7.61 per Mcf in the prior-year period. The average realized oil price was $25.45 per barrel for the first quarter of 2009, as compared to $75.28 per barrel for the first quarter of 2008. Gasco does not hedge its crude oil volumes. Unit Cost Comparisons - LOE / DD&A / G&A Lease operating expense (LOE) for the first quarter 2009 was $0.7 million, as compared to $1.3 million in the same period in 2008. On a per-unit basis, LOE was $0.55 per thousand cubic feet of natural gas equivalent (Mcfe) in the first quarter 2009, as compared to $1.17 per Mcfe in the year-ago period. The quarter-over-quarter decrease in LOE is attributed to a reduction in operating expenses ($0.47 per Mcfe lower) and to lower production taxes ($0.15 per Mcfe lower). Specifically, the 53% decrease in LOE per Mcfe is attributed to a reduction in chemical treatment projects during 2009, a decrease in the costs that were incurred during 2008 to repair and bring older wells on to production, to the implementation of cost savings measures such as the elimination of over-time worked by Gasco employees and to the elimination of contractor services. Depletion, depreciation and amortization (DD&A) was $2.6 million for the first quarter 2009, as compared to $2.4 million for the same period in 2008. On a per-unit basis, DD&A for the first quarter 2009 was $2.06 per Mcfe, as compared to $2.26 per Mcfe in the 2008 reporting period. The Company reported general and administrative expense (G&A) of $1.9 million in the first quarter 2009, versus $2.2 million in the same period in 2008. On a per-unit basis, total G&A for first quarter 2009 was $1.48 per Mcfe, as compared to $2.02 per Mcfe for the same period in 2008. G&A expense for the first quarter 2009 includes $0.5 million of non-cash, stock-based compensation expense, or, on a per-unit basis, $0.40 per Mcfe, as compared to the prior-period total of $0.7 million, or $0.67 per Mcfe. Gathering operations expense was unchanged quarter-over-quarter at $0.7 million. Gasco's total assets as of March 31, 2009 were $119.6 million, as compared to $153.9 million at year-end 2008. The decrease in total assets at March 31, 2009 is attributed primarily to the aforementioned non-cash charge of $41.0 million related to an impairment of the carrying value of oil and gas properties. Net cash provided by operating activities for the first quarter 2009 was $2.4 million, as compared to $4.8 million in the same period in 2008. Cash and investments were $9.1 million at March 31, 2009. Also at March 31, 2009, the Company had $44.0 million drawn on its $250.0 million reserve-based revolving credit facility, of which $1.0 million is currently available for future borrowing. Further discussion of the Company's revolving credit facility, including the pending borrowing base determination, is included below in the section entitled "Liquidity and Outlook - Reduced Commodity Prices Could Impact the Borrowing Base under Gasco's Credit Agreement." Reclassifications Advances from joint interest owners net in 2008 have been reclassified to investing activities in the accompanying consolidated statement of cash flows. Derivative gains (losses) and interest income in 2008 have been reclassified from revenues to other income (expense) and interest expense has been reclassified from operating expenses to other income (expense) to be consistent with the 2009 presentation. Quarterly Production Cumulative net production for the quarter ended March 31, 2009 was 1,255 million cubic feet of natural gas equivalents (MMcfe), an increase of 15.6% from the prior-quarter net production of 1,085 MMcfe. Risk Management Subsequent to the end of the first quarter of 2009, Gasco entered into an additional swap agreement for a portion of its 2010 and 2011 natural gas production. At recent production levels, approximately 65% of Gasco's net production volumes were hedged through the following instruments: Gasco 2009-2011 Swap Agreements Floating Agreement Remaining Index Price Gasco Type Term Quantity Price (a) Payer (a) Swap 4/09 - 12/09 3,000 MMBtu per day $7.025 / MMBtu NW Rockies Swap 4/09 - 12/09 3,000 MMBtu per day $7.015 / MMBtu NW Rockies Swap 1/10 - 3/11 3,000 MMBtu per day $4.825 / MMBtu NW Rockies Gasco 2009 Costless Collar Agreements Call Price Put Price Agreement Remaining Index Counterparty Gasco Type Term Quantity Price (a) Buyer Buyer Costless Collar 4/09 - 12/09 3,000 MMBtu NW $7.50 / MMBtu $6.50 / MMBtu per day Rockies (a) Northwest Pipeline Rocky Mountains - Inside FERC first-of-month index price Operations As previously reported, the Company ceased drilling operations during February 2009 and temporarily halted completion operations. During the quarter, Gasco conducted no initial completion operations and re-entered three gross wells (0.92 net) to complete behind-pipe pay zones. During the quarter, Gasco invested $3.5 million in oil and gas activities in the Riverbend Project. At March 31, 2009, Gasco operated 130 gross wells. The Company currently has an inventory of 32 operated wells with up-hole recompletions and four Upper Mancos wells awaiting initial completion activities. Due to low gas prices in the Rockies, the Company is selectively recompleting up-hole pay. Gate Canyon State #23-16 The Gate Canyon State #23-16 well, which has been producing for 80 days, came on at an initial production rate of 5.7 million cubic feet of natural gas per day (MMcf/d) flowing up 5 1/2" casing while cleaning up frac fluid. The well averaged 3.2 MMcf/d and 2.6 MMcf/d for the first 30 and 60 days, respectively. The well is currently producing approximately 1.6 MMcf/d from multiple fracture-stimulated intervals within the Mancos and lower Blackhawk formations. Liquidity and Outlook Impact of Current Credit Markets and Commodity Prices The credit markets and the financial services industry have been experiencing a period of upheaval characterized by the bankruptcy, failure, collapse or sale of various financial institutions and an unprecedented level of intervention from the United States federal government. During the fourth quarter of 2008 and the first quarter of 2009, the severe disruptions in the credit markets and reductions in global economic activity had significant adverse impacts on stock markets and oil and gas-related commodity prices, which contributed to a significant decline in Gasco's stock price and are expected to negatively impact Gasco's future liquidity. The following discussion outlines the potential impacts that the current credit markets and commodity prices could have on the Company's business, financial condition and results of operations. Reduced Commodity Prices Could Impact the Borrowing Base under Gasco's Credit Agreement Gasco's Credit Agreement limits its borrowings to the borrowing base less the Company's total outstanding letters of credit issued there under. Currently, Gasco's borrowing base is $45.0 million and its outstanding letter of credit sublimit is $10.0 million. The Company currently has loans of $44.0 million outstanding under its $250.0 million Credit Agreement (the "Credit Agreement"). Under the terms of the Company's Credit Agreement, its borrowing base is subject to semi-annual redetermination by the Company's lenders based on their valuation of Gasco's proved reserves and their internal criteria. In addition to such semi-annual determinations, the Company's lenders may request one additional borrowing base redetermination between each semi-annual calculation. Gasco expects to be notified of the results from the April 2009 borrowing base redetermination in May 2009 and, based on the decline in commodity prices, the Company believes that it will be reduced. If Gasco's borrowing base is reduced as a result of a redetermination to a level below its then current outstanding borrowings, the Company will be required to repay the amount by which outstanding borrowings exceed the borrowing base within 60 days of notification by the lenders, and it will have less or no access to borrowed capital going forward. If the Company does not have sufficient funds on hand for repayment, it will be required to seek a wavier or amendment from its lenders, refinance its Credit Agreement or sell assets or additional shares of common stock. Gasco may not be able to refinance or complete such transactions on terms acceptable to the Company, or at all. In the event that Gasco is unable to repay the amount owed within 60 days, it will be in default under the Credit Agreement, and as such the lenders party thereto will have the right to terminate their aggregate commitment under the Credit Agreement and declare Gasco's outstanding borrowings immediately due and payable in whole. An acceleration of the outstanding indebtedness under the Credit Agreement in this manner would additionally constitute an event of default under the indenture governing the Company's 5.50% Convertible Senior Notes (the "Convertible Notes"). Should an event of default occur and continue under the indenture governing the Convertible Notes, the Convertible Notes may be declared immediately due and payable at their principal amount together with accrued interest and liquidated damages, if any. As such, should Gasco anticipate that it will not be able to repay all amounts owed under the Credit Agreement as a result of the anticipated borrowing base redetermination, it will consider, along with previously discussed refinancing and sales, a sale of the Company or its assets as well as a voluntary reorganization in bankruptcy. Additionally, if Gasco is unable to repay amounts owed under the Credit Agreement, it may be forced into an involuntary reorganization in bankruptcy. Reduced Cash Flows from Operations Could Impact Gasco's Ability to Fund Capital Expenditures and Meet Working Capital Needs Oil and gas prices have declined significantly since historic highs in July 2008 and continue to decline through April of 2009. Further, the decline in commodity prices has outpaced the decline in the prices of goods and services that the Company uses to drill, complete and operate its wells, reducing the Company's cash flow from operations. To mitigate the impact of lower commodity prices on the Company's cash flows, Gasco has entered into commodity derivative instruments for 2009 through the first quarter of 2011. In the event that commodity prices stay depressed or decline further, the Company's cash flows from operations would be reduced even taking into account the Company's commodity derivative instruments for 2009, 2010 and 2011 and may not be sufficient when coupled with available capacity under the Credit Agreement to meet the Company's working capital needs or fund its initial 2009 capital expenditure budget. This could cause Gasco to alter its business plans, including further reducing its exploration and development plans. Given the decline in commodity prices and the weak global economic projections for 2009, Gasco's Board of Directors approved a revised capital budget of $10.0 million on January 22, 2009. Based on current expectations, the Company intends to fund its budget entirely through cash flow from operations. Consequently, management will monitor spending and cash flow throughout the year and may accelerate or delay investment depending on commodity prices, cash flow expectations and changes in the Company's borrowing capacity. At year end, Gasco was operating a single drilling rig. This rig was released in late February 2009, which significantly reduced the Company's fixed commitments in 2009 and in subsequent periods. At rig release, the Company was obligated to pay the rig contractor approximately $4.7 million for early termination of the drilling contract (as calculated at $12,000/day from rig release through March 15, 2010, the expiration date of the contract). If the Company needs additional liquidity for future activities, including paying amounts owed in connection with a borrowing base reduction, if any, Gasco may be required to consider several options for raising additional funds, such as selling securities, selling assets or farm-outs or similar arrangements, but the Company may be unable to complete any of these transactions on terms acceptable to the Company or at all. Any financing obtained through the sale of the Company's equity will likely result in substantial dilution to Gasco's stockholders. Conference Call A conference call with investors, analysts and other interested parties is scheduled for 11:00 a.m. EDT on Tuesday, May 5, 2009 to discuss first quarter 2009 financial and operating results. You are invited to listen to the call which will be broadcast live over the Internet at http://www.gascoenergy.com/. Date: Tuesday, May 5, 2009 Time: 11:00 a.m. EDT 10:00 a.m. CDT 9:00 a.m. MDT 8:00 a.m. PDT Call: (866) 392-4171 (US/Canada) and (706) 634-6345 (International), Passcode: 95653002 Internet: Live and rebroadcast over the Internet: log on to http://www.gascoenergy.com/ or to http://www.videonewswire.com/event.asp?id=57957 Replay: Available through Sunday, May 10, 2009 at (800) 642-1687 (US/Canada) and (706) 645-9291 (International) using passcode 95653002 and for 30 days at http://www.gascoenergy.com/ About Gasco Energy Denver-based Gasco Energy, Inc. is natural gas and petroleum exploitation, development and production company engaged in locating and developing hydrocarbon resources, primarily in the Rocky Mountain region. Gasco's principal business is the acquisition of leasehold interests in petroleum and natural gas rights, either directly or indirectly, and the exploitation and development of properties subject to these leases. Gasco currently focuses its drilling efforts in the Riverbend Project located in the Uinta Basin of northeastern Utah, targeting the Wasatch, Mesaverde, Blackhawk, Mancos, Dakota and Morrison formations. To learn more, visit http://www.gascoenergy.com/. Forward-looking Statements Certain statements set forth in this press release relate to management's future plans, objectives and expectations. Such statements are forwardlooking within the meanings of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts included in this press release, including, without limitation, statements regarding Gasco's future financial position, potential resources, business strategy, budgets, projected costs and plans and objectives of management for future operations, are forward-looking statements. In addition, forwardlooking statements generally can be identified by the use of forward-looking terminology such as "may," "will," "expect," "intend," "project," "estimate," "anticipate," "believe," or "continue" or the negative thereof or similar terminology. Although any forward-looking statements contained in this press release are to the knowledge or in the judgment of the officers and directors of Gasco, believed to be reasonable, there can be no assurances that any of these expectations will prove correct or that any of the actions that are planned will be taken. Forward-looking statements involve known and unknown risks and uncertainties that may cause Gasco's actual performance and financial results in future periods to differ materially from any projection, estimate or forecasted result. Some of the key factors that may cause actual results to vary from those Gasco expects include inherent uncertainties in interpreting engineering and reserve or production data; operating hazards; delays or cancellations of drilling operations because of weather and other natural and economic forces; fluctuations in oil and natural gas prices in response to changes in supply; competition from other companies with greater resources; environmental and other government regulations; defects in title to properties; increases in the Company's cost of borrowing or inability or unavailability of capital resources to fund capital expenditures; fluctuations in natural gas and oil prices; pipeline constraints; overall demand for natural gas and oil in the United States; changes in general economic conditions in the United States; our ability to manage interest rate and commodity price exposure; changes in the Company's borrowing arrangements; the condition of credit and capital markets in the United States; and other risks described under "Risk Factors" in Item 1 of the Company's Annual Report on Form 10-K for the year ended December 31, 2008 filed with the Securities and Exchange Commission on March 4, 2009. Any of these factors could cause our actual results to differ materially from the results implied by these or any other forward-looking statements made by us or on our behalf. We cannot assure you that our future results will meet our expectations. When you consider these forward-looking statements, you should keep in mind these factors. All subsequent written and oral forward-looking statements attributable to the Company, or persons acting on its behalf, are expressly qualified in their entirety by these factors. Our forward-looking statements speak only as of the date made. The Company assumes no duty to update or revise its forward-looking statements based on changes in internal estimates or expectations or otherwise. (Financial and Operational Tables Accompany this News Release) The notes accompanying the financial statements are an integral part of the consolidated financial statements and can be found in Gasco's filing on Form 10-Q dated May 4, 2009. GASCO ENERGY, INC. CONSOLIDATED BALANCE SHEETS (Unaudited) March 31, December 31, 2009 2008 ASSETS CURRENT ASSETS Cash and cash equivalents $9,127,511 $1,053,216 Accounts receivable Joint interest billings 3,974,810 5,436,636 Revenue 4,108,034 3,827,950 Inventory 2,384,659 4,177,967 Derivative instruments 9,544,763 8,855,947 Prepaid expenses 109,574 188,810 Total 29,249,351 23,540,526 PROPERTY, PLANT AND EQUIPMENT, at cost Oil and gas properties (full cost method) Proved properties 251,759,503 247,976,854 Unproved properties 39,678,648 39,314,406 Wells in progress - 644,688 Gathering assets 17,625,895 17,440,680 Facilities and equipment 8,596,580 8,549,928 Furniture, fixtures and other 371,605 371,605 Total 318,032,231 314,298,161 Less accumulated depletion, depreciation, amortization and impairment (229,200,491) (185,585,582) Total 88,831,740 128,712,579 OTHER ASSETS Deposit 139,500 139,500 Deferred financing costs 1,350,609 1,492,903 Total 1,490,109 1,632,403 TOTAL ASSETS $119,571,200 $153,885,508 The notes accompanying the financial statements are an integral part of the consolidated financial statements and can be found in Gasco's filing on Form 10-Q dated May 4, 2009. GASCO ENERGY, INC. CONSOLIDATED BALANCE SHEETS (continued) (Unaudited) March 31, December 31, 2009 2008 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $3,149,916 $5,879,150 Revenue payable 2,133,904 3,840,985 Advances from joint interest owners 352,877 612,222 Accrued interest 1,890,534 1,187,495 Accrued expenses 1,142,000 1,126,000 Total 8,669,231 12,645,852 NONCURRENT LIABILITIES 5.5% Convertible Senior Notes 65,000,000 65,000,000 Long-term debt 44,000,000 31,000,000 Asset retirement obligation 1,176,939 1,150,179 Deferred rent expense 40,080 46,589 Total 110,217,019 97,196,768 STOCKHOLDERS' EQUITY Series B Convertible Preferred stock - $0.001 par value; 20,000 shares authorized; zero shares outstanding - - Common stock - $.0001 par value; 300,000,000 shares authorized; 107,833,498 shares issued and 107,759,798 outstanding as of March 31, 2009 and 107,825,998 shares issued and 107,752,298 outstanding as of December 31, 2008 10,783 10,783 Additional paid-in capital 219,882,677 219,375,369 Accumulated deficit (219,078,215) (175,212,969) Less cost of treasury stock of 73,700 common shares (130,295) (130,295) Total 684,950 44,042,888 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $119,571,200 $153,885,508 The notes accompanying the financial statements are an integral part of the consolidated financial statements and can be found in Gasco's filing on Form 10-Q dated May 4, 2009. GASCO ENERGY, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended March 31, 2009 2008 REVENUES Gas $3,911,051 $7,897,480 Oil 260,971 587,637 Gathering 875,201 908,356 Rental income 366,399 362,250 Total 5,413,622 9,755,723 OPERATING EXPENSES Lease operating 691,937 1,266,727 Gathering operations 707,514 656,499 Depletion, depreciation, amortization and accretion 2,582,970 2,449,802 Impairment 41,000,000 - Inventory loss 121,000 - Contract termination fee 4,701,000 - General and administrative 1,860,046 2,188,033 Total 51,664,467 6,561,061 OTHER INCOME (EXPENSE) Interest expense (1,158,729) (1,247,549) Derivative gains (losses) 3,542,626 (6,372,452) Interest income 1,702 15,222 Total 2,385,599 (7,604,779) NET LOSS $(43,865,246) $(4,410,117) NET LOSS PER COMMON SHARE - BASIC AND DILUTED $(0.41) $(0.04) WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - BASIC AND DILUTED 107,519,292 106,903,548 The notes accompanying the financial statements are an integral part of the consolidated financial statements and can be found in Gasco's filing on Form 10-Q dated May 4, 2009. GASCO ENERGY, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ended March 31, 2009 2008 CASH FLOWS FROM OPERATING ACTIVITIES Net loss $(43,865,246) $(4,410,117) Adjustment to reconcile net loss to net cash provided by operating activities Depletion, depreciation, amortization and impairment expense 43,556,435 2,426,412 Accretion of asset retirement obligation 26,535 23,390 Stock-based compensation 505,317 721,260 Unrealized derivative (gain) loss (688,816) 5,933,182 Amortization of deferred rent expense (6,509) (3,755) Amortization of deferred financing costs 142,294 129,558 Inventory loss 121,000 - Changes in operating assets and liabilities: Accounts receivable 1,181,742 235,918 Inventory 1,672,308 (1,268,003) Prepaid expenses 79,236 107,931 Accounts payable 631,066 (1,269,339) Revenue payable (1,707,081) 1,379,604 Accrued interest 703,039 916,500 Accrued expenses 16,000 (96,000) Net cash provided by operating activities 2,367,320 4,826,541 CASH FLOWS FROM INVESTING ACTIVITIES Cash paid for furniture, fixtures and other - (10,473) Cash paid for acquisitions, development and exploration (7,033,680) (8,336,355) Advances from joint interest owners (259,345) 1,052,696 Net cash used in investing activities (7,293,025) (7,294,132) CASH FLOWS FROM FINANCING ACTIVITIES Borrowings under line of credit 13,000,000 12,000,000 Repayment of borrowings - (9,000,000) Exercise of options to purchase common stock - 36,498 Net cash provided by financing activities 13,000,000 3,036,498 NET INCREASE IN CASH AND CASH EQUIVALENTS 8,074,295 568,907 CASH AND CASH EQUIVALENTS: BEGINNING OF PERIOD 1,053,216 1,843,425 END OF PERIOD $9,127,511 $2,412,332 The notes accompanying the financial statements are an integral part of The consolidated financial statements and can be found in Gasco's filing on Form 10-Q dated May 4, 2009. DATASOURCE: Gasco Energy, Inc. CONTACT: Investor Relations of Gasco Energy, Inc., +1-303-483-0044 Web Site: http://www.gascoenergy.com/

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