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GASCO
ENERGY ANNOUNCES PRELIMINARY SECOND QUARTER 2006
FINANCIAL AND OPERATIONAL RESULTS
DENVER – August 1,
2006 – (PRNewswire) – Gasco Energy (AMEX:
GSX) today reported its preliminary financial and
operating results for the quarter ended June 30,
2006. The company expects to file its Form
10-Q for the second quarter 2006 on August 7, 2006.
Financial Results
For the second quarter 2006, Gasco reported a net loss
attributable to common shareholders of $53.0 million,
or $0.62 per share, as compared to a net loss for
the same period in 2005 of $1.0 million, or $0.01
per share. All per share figures are basic
and diluted. Included in the quarter’s
operating expenses is a non-cash charge of $51 million
related to an impairment of the carrying value of
oil and gas properties. Before the impairment charge,
Gasco would have posted a net loss of $2.0 million
or $0.02 per share.
The charge also results in a decrease in total assets. At
June 30, 2006 Gasco’s total assets were $153.4
million, as compared to $201.2 million at December
31, 2005.
The impairment is the result of applying what is commonly
known as a ceiling test under rules prescribed by the
U.S. Securities and Exchange Commission for exploration
and production companies such as Gasco that use the "full-cost" accounting
method. Under the ceiling test, the company compares
the present value of estimated future net revenues
computed by applying current prices of oil and natural
gas (with consideration of price changes only to the
extent provided by contractual arrangements) to estimated
future production of proved oil and gas reserves as
of the date of the latest balance sheet presented,
less estimated future expenditures (based on current
costs) to be incurred in developing and producing the
proved reserves computed using a discount factor of
ten percent and assuming continuation of existing economic
conditions. If the net capitalized costs exceed
this valuation, the company must record a non-cash
expense equal to the difference.
Commenting on the impairment, Gasco CEO and President
Mark Erickson said: “This is an accounting
requirement to which we must adhere as a full-cost
reporting company. The June 30, 2006 natural
gas price of $5.42 per Mcf we are required to use for
the impairment is not representative of the last fiscal
year, and we do not believe it to be representative
of gas prices going forward. The decline in value of
the reserves from 12/31/05 is due almost entirely to
the reduction in price offset by the addition of developed
reserves from our 2006 drilling program. The
impairment is by no means an indictment of our Riverbend
geology, nor of our operations, which continue to improve.”
Total revenues grew by 132% to $5.8 million, as compared
to $2.5 million in the second quarter 2005. The
growth in total revenue is attributed to increased
natural gas production offset by a lower natural gas
price deck.
Oil and gas sales for the
second quarter 2006 were $4.6 million as compared
to $1.9 million for the same period in 2005, an increase
of 142%. Gathering
revenues grew to $0.369 million from $0.322 million
in 2005. The revenue growth is attributed to
increased natural gas throughput.
Lease operating expense
for the quarter increased to $0.9 million (or $1.00
per Mcfe) from $0.2 million ($0.68 / Mcfe). The increase is attributed to
higher water hauling and disposal costs and to five
workovers that occurred during the second quarter of
2006. Gathering expense increased to $0.4 million
from $0.2 million in the same period in 2005 due to
the cost of installing additional compression to the
system. General and administrative expense increased
to $2.6 million from $1.4 million in the same period
in 2005 which is attributed to an increase in stock-based
compensation due to the adoption of FAS 123R.
Cash
and investments were $57.6 million as compared to
$33.6 million at June 30, 2005. Working capital
at June 30, 2006 was $60.7 million versus $35.6 million
at June 30, 2005. Net cash provided by operating
activities for the second quarter 2006 was a record
$3.2 million as compared to a deficit of $2.6 million
in the year-ago period.
Six-Month Period
The company reported a net loss for the six-months
ended June 30, 2006 of $53.2 million, or $0.62 per
share, as compared to a net loss for the second half
of 2005 of $2.7 million, or $0.04 per share. Included
in the quarter’s operating expenses is a one-time,
non-cash charge of $51 million related to an impairment
of the carrying value of oil and gas properties as
discussed above.
Total
revenues grew by 242% to $13.0 million, as compared
to $3.8 million in the same period in 2005. The
growth in revenue is attributed in part to increased
natural gas production and higher prices received for
sales of the company’s natural gas. In addition
improved gathering system revenues and an increase
in interest income, accounted for $852,000 and $1.6
million respectively.
Oil
and gas sales for the first half of 2006 were $10.5
million as compared to $2.7 million for the same
period in 2005.
Operations
Production
Gasco posted quarterly production of 862.7 million
cubic feet of natural gas equivalent (MMcfe) versus
300.2 MMcfe for the second quarter 2005, an increase
of 187%. The average price received for sales
of Gasco’s natural gas and liquids was $5.18
per thousand cubic feet of gas (Mcf) and $59.40 per
barrel of liquid hydrocarbons for the second quarter
2006. This compares to $6.12 per Mcf and $52.44
per barrel for the same period in 2005. Net production
increases are attributed to the completion of new wells
and behind-pipe recompletions partially offset by normal
production declines in existing wells. Net production
for the quarter was 6.4% higher than volumes of 810.4
million reported in the company’s operations
update dated July 11, 2006.
Gasco
posted record first-half production of 1,763.8 MMcfe
versus 447.3 MMcfe for the second half of 2005, a
294% increase. For the first-half 2006, the
average price received for sales of Gasco’s natural
gas and liquids was $5.86 per Mcf of gas and $58.36
per barrel of liquid hydrocarbons. This compares
to $5.82 per Mcf and $51.23 per barrel for the same
period in 2005. The company has no hedges in
place.
Drilling and Completion
The Company’s initial 2006 capital expenditure
budget is set at $80 million for the drilling, completion
and pipeline connection of 32 gross, or approximately
15 net wells. During the first six months of
2006, Gasco conducted initial completion operations
on 10 wells (6.4 net) and re-entered nine wells (4.1
net) to complete behind-pipe pay zones. At June
30, 2006, Gasco operated 51 gross wells with one additional
well awaiting completion activities. Currently, three
drilling rigs are operating in the Uinta Basin Riverbend
project area.
Rig Delivery
Gasco today reported that its fourth rig, a modern
1000 HP, SCR diesel-electric, is in the process of
delivery to the Riverbend Project. After a
10-day period of training and testing, Gasco expects
the rig to be in service by late August. The
previously announced fifth rig, a new-build, is expected
to be delivered by Nabors in December 2006 or January
2007.
Wyoming Update
Daniel Anticline Prospect
Gasco also today provided additional details on its
previously announced Cottonwood Ranch 24-21 (25% WI – GSX
operates). The well is permitted to test natural gas
potential in the Lance, Mesaverde, Ericson, Rock Springs
and Hilliard Shale formations to a proposed total depth
of 16,500 feet. Gasco and its partner have
secured Grey Wolf rig 511 and anticipate spudding the
well in the next 90 days. This rig is under a
one-well contract and is a modern diesel-electric rig
capable of drilling to depths of up to 20,000 feet.
The preliminary well-cost
estimate to drill and complete the well is $8.0 million
($2.0 million net to Gasco). The partners have established
an area of mutual interest (AMI) covering the prospect. The
AMI will allow both parties to jointly test the productive
potential in the core area and to later implement
a plan of development.
Muddy Creek Prospect
Gasco also permitted the Billy Canyon 2-11 (100% WI)
which is permitted to test natural gas potential in
the Lance and Mesaverde formations to a proposed total
depth of 9,600 feet. Estimated costs to drill
and complete the well are approximately $3.2 million. Gasco
has secured Nabors rig 267 on a one-well contract and
expects to spud the well in August.
Conference Call
A conference call with investors, analysts and other
interested parties is scheduled for 11:00 a.m. EDT
on Wednesday, August 2, 2006 to discuss second quarter
2006 financial and operating results. You are
invited to listen to the call which will be broadcast
live over the Internet at www.gascoenergy.com.
Date: Wednesday, August 2, 2006
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 3278579
Internet: Live and rebroadcast over the Internet: log on to
www.gascoenergy.com
Replay: Available
through Friday, August 4 at (800) 642-1687
(US/Canada)
and (706) 645-9291 (International) using passcode
3278579
and for 30 days at www.gascoenergy.com
[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 August 7, 2006.
About Gasco Energy
Gasco
Energy, Inc. is a Denver-based natural gas and oil
exploitation and development company that focuses on
natural-gas-rich prospects in the Rocky Mountain area
of the United States. The Company currently
is active in the Uinta Basin in Utah and controls acreage
in the Greater Green River Basin of Wyoming. To
learn more, visit 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 forward-looking
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 the Company’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, forward-looking 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 the Company, 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 the Company’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 the Company 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; and
other risks described under “Risk Factors” in
the Company’s Annual Report on Form 10-K filed
with the Securities and Exchange Commission on March
3, 2006.
GASCO ENERGY, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, December 31,
2006 2005
ASSETS
CURRENT ASSETS
Cash and cash equivalents $27,566,885 $62,661,368
Restricted investment 3,575,000 10,139,000
Short-term investments 30,000,000 15,000,000
Accounts receivable
Joint interest billings 3,512,791 1,792,038
Revenue 1,831,123 3,115,154
Inventory 3,789,053 1,182,982
Prepaid expenses 487,483 645,554
Total 70,762,335 94,536,096
PROPERTY, PLANT AND EQUIPMENT, at cost
Oil and gas properties (full cost method)
Proved mineral interests 115,234,087 83,972,300
Unproved mineral interests 10,259,418 13,323,712
Wells in progress 2,260,377 --
Gathering assets 7,914,827 4,831,050
Equipment 5,947,947 5,148,388
Furniture, fixtures and other 232,086 175,607
Total 141,848,742 107,451,057
Less accumulated depletion, depreciation,
amortization and impairment (63,740,640) (6,986,662)
Total 78,108,102 100,464,395
OTHER ASSETS
Restricted investment 1,848,956 3,565,020
Deferred financing costs 2,633,675 2,634,461
Total 4,482,631 6,199,481
TOTAL ASSETS $153,353,068 $201,199,972
The notes
contained in Form 10-Q, anticipated to be filed on
August 7, 2006, are
an integral part of the consolidated financial statements.
GASCO ENERGY, INC.
CONSOLIDATED BALANCE SHEETS (continued)
(Unaudited)
June 30, December 31,
2006 2005
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $2,068,058 $907,772
Revenue payable 1,212,077 1,658,141
Advances from joint interest owners 2,964,377 2,476,080
Accrued interest 844,100 844,098
Accrued expenses 2,992,966 2,571,047
Total 10,081,578 8,457,138
NONCURRENT LIABILITIES
5.5% Convertible Senior Notes 65,000,000 65,000,000
Asset retirement obligation 365,083 223,947
Deferred rent expense 77,359 78,727
Total 65,442,442 65,302,674
STOCKHOLDERS' EQUITY
Series B Convertible Preferred stock -
$.001 par value; 20,000 shares
authorized; 763 shares issued and
outstanding with a liquidation
preference of $335,720 in 2005 -- 1
Common stock - $.0001 par value;
300,000,000 shares authorized;
85,968,502 shares issued and 85,894,802
outstanding in 2006 and 85,041,492
shares issued and 84,967,792 shares
outstanding in 2005 8,597 8,504
Additional paid-in capital 160,699,212 157,540,755
Deferred compensation -- (443,579)
Accumulated deficit (82,748,466) (29,535,226)
Less cost of treasury stock of 73,700
common shares (130,295) (130,295)
Total 77,829,048 127,440,160
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $153,353,068 $201,199,972
The notes
contained in Form 10-Q, anticipated to be filed on
August 7, 2006,
are an integral part of the
consolidated financial statements.
GASCO ENERGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
June 30,
2006 2005
REVENUES
Gas $4,312,905 $1,760,425
Oil 297,167 111,441
Gathering 369,256 322,130
Interest income 805,000 354,904
Total 5,784,328 2,548,900
OPERATING EXPENSES
Lease operating 866,749 205,270
Gathering operations 371,583 191,781
Depletion, depreciation and amortization 2,943,531 767,470
Impairment 51,000,000 --
General and administrative 2,589,007 1,374,923
Interest expense 1,049,541 1,008,323
Total 58,820,411 3,547,767
NET LOSS (53,036,083) (998,867)
Preferred stock dividends -- (14,050)
NET LOSS ATTRIBUTABLE TO COMMON
STOCKHOLDERS $(53,036,083) $(1,012,917)
NET LOSS PER COMMON SHARE - BASIC AND DILUTED $(0.62) $(0.01)
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING - BASIC AND DILUTED 85,267,977 70,677,053
The notes
contained in Form 10-Q, anticipated to be filed on
August 7, 2006,
are an integral part of the
consolidated financial statements.
GASCO ENERGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Six Months Ended
June 30,
2006 2005
REVENUES
Gas $10,010,020 $2,475,157
Oil 529,729 188,236
Gathering 852,395 455,897
Interest income 1,651,706 714,957
Total 13,043,850 3,834,247
OPERATING EXPENSES
Lease operating 1,396,764 361,702
Gathering operations 759,376 416,528
Depletion, depreciation and amortization 5,770,073 1,139,706
Impairment 51,000,000 --
General and administrative 5,273,043 2,598,721
Interest expense 2,057,834 2,016,585
Total 66,257,090 6,533,242
NET LOSS (53,213,240) (2,698,995)
Preferred stock dividends (1,393) (21,212)
NET LOSS ATTRIBUTABLE TO COMMON
STOCKHOLDERS $(53,214,633) $(2,720,207)
NET LOSS PER COMMON SHARE - BASIC AND DILUTED $(0.62) $(0.04)
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING - BASIC AND DILUTED 85,630,039 70,128,560
The notes contained in Form 10-Q,
anticipated to be filed on August 7, 2006,
are an integral part of the consolidated financial
statements.
GASCO ENERGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
2006 2005
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(53,213,240) $(2,698,995)
Adjustment to reconcile net loss to net
cash provided by (used in) operating
activities
Depletion, depreciation, amortization
and impairment expense 56,756,570 1,133,707
Accretion of asset retirement obligation 13,503 5,999
Stock compensation 2,276,065 378,969
Amortization of deferred rent (1,368) 23,724
Amortization of deferred financing costs 241,048 229,084
Landlord incentive payment -- 30,000
Changes in operating assets and
liabilities:
Accounts receivable (436,722) (4,177,294)
Inventory (2,606,071) 443,474
Prepaid expenses 158,071 183,856
Accounts payable 1,160,286 (67,586)
Revenue payable (446,064) 446,366
Advances from joint interest owners 488,297 1,616,561
Accrued expenses (47,702) (716,180)
Net cash provided by (used in)
operating activities 4,342,673 (3,168,315)
CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid for furniture, fixtures and other (59,071) (68,948)
Cash paid for acquisitions, development
and exploration (33,692,479) (18,123,387)
Proceeds from property sales -- 828,102
Increase in short-term investments (15,000,000) --
Proceeds from sale of short-term
investments -- 14,000,000
Cash designated as restricted (71,436) (159,020)
Cash undesignated as restricted 8,351,500 1,638,542
Net cash used in investing
activities (40,471,486) (1,884,711)
CASH FLOWS FROM FINANCING ACTIVITIES
Preferred dividends (1,393) (21,212)
Exercise of options to purchase common
stock 1,275,985 --
Cash paid for debt issuance costs (240,262) --
Net cash provided by (used in) financing
activities 1,034,330 (21,212)
NET DECREASE IN CASH AND CASH EQUIVALENTS (35,094,483) (5,074,238)
CASH AND CASH EQUIVALENTS:
BEGINNING OF PERIOD 62,661,368 25,717,081
END OF PERIOD $27,566,885 $20,642,843
The notes contained in Form 10-Q,
anticipated to be filed on August 7, 2006,
are an integral part of the consolidated financial
statements.
Contact for Gasco Energy, Inc.:
Investor Relations: 303-483-0044 |
