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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