Gateway Energy Reports First Quarter 2010 Results

HOUSTON, May 17 /PRNewswire-FirstCall/ -- Gateway Energy Corporation (OTC Bulletin Board: GNRG) today announced the financial results for the quarter ended March 31, 2010.  

For the quarter the Company reported:

• Total revenues for the first quarter 2010 were essentially flat, at $1,851,089, as compared to $1,877,433 for the same quarter of 2009.
  • Revenues from onshore operations increased to $1,673,156 from $1,217,040 for the quarter ended March 31, 2010.  The increase was primarily due to the acquisition of the Hickory Creek gathering system on January 7, 2010.  Revenues from offshore operations decreased to $177,933 from $646,852, due to production issues with a well on the Bolivar system currently being addressed by the producer and a loss of revenues received from a temporary transportation arrangement recognized in the first quarter of 2009.  Offshore revenues are increasing as the Company's High Island A-389 system was repaired and placed back in service and its East Cameron 359 and East Cameron 121 systems realized increased throughput volumes starting in late April 2010.
• Operating results for the quarter ended March 31, 2010 showed a loss of $319,759 as compared to a loss of $108,531 for the same period of 2009. This loss is due to reduced volumes transported through the offshore systems as well as costs related to the Hickory Creek acquisition ($43,453) and the Frederick Pevow consent solicitation process ($98,870), offset by a 30% reduction in general and administrative expenses.
• Net loss for the first quarter was $234,393 as compared to a net loss of $135,438 for the same period in 2009.  
• Adjusted EBITDA for the three months ended March 31, 2010 was $31,940 compared to $48,061 for 2009.  
• Total operating cost and expenses for the first quarter of 2010 was $1,364,145 as compared to $1,120,550 for 2009.  The cost of natural gas purchased increased from $1,025,018 in 2009 to $1,264,376 in 2010.  This increase was due to the higher natural gas prices in 2010 compared to 2009.
• Operation and maintenance costs for the quarter ended March 31, 2010 was $99,769 as compared to $95,532 for same period in 2009.
• Depreciation, depletion and amortization costs increased to $197,331 for the quarter ended March 31, 2010 as compared to $196,284 for the quarter ended March 31, 2009.
• General and administrative costs for the three months ended March 31, 2010 declined 30% to $467,049, as compared to $669,130 for the three months ended March 31, 2009.  The following summarizes general and administrative expenses for the first quarter of 2009 and 2010:

Management Comments

Mr. Robert Panico, President and CEO of Gateway said, "The Company's efforts to reduce general and administrative costs made concrete results, with a 30% decrease in costs from the same quarter in 2009.  While the offshore revenue decline in the first quarter of 2010 was the primary cause for our reduced net income and adjusted EBITDA, we are seeing positive developments, including recently added throughput due to the completion of repairs on our High Island A-389 pipeline, which were funded entirely by the producers."

Mr. Panico also stated, "The Company is very pleased with the results of the recently acquired Barnett Shale gathering system, which have exceeded our internal projections."

Complete financials can be found at the end of this release.

About Gateway Energy

Gateway Energy Corporation owns and operates natural gas gathering, transportation and distribution systems in Texas, Texas state waters and in federal waters of the Gulf of Mexico off the Texas and Louisiana coasts. Gateway gathers offshore wellhead natural gas production and liquid hydrocarbons from producers, and then aggregates this production for processing and transportation to other pipelines. Gateway also transports gas through its onshore systems for non-affiliated shippers and through its affiliated distribution system and makes sales of natural gas to end users.

Safe Harbor Statement

Certain of the statements included in this press release, which express a belief, expectation or intention, as well as those regarding future financial performance or results, or which are not historical facts, are "forward-looking" statements as that term is defined in the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. The words "expect", "plan", "believe", "anticipate", "project", "estimate", and similar expressions are intended to identify forward-looking statements. These forward-looking statements are not guarantees of future performance or events and such statements involve a number of risks, uncertainties and assumptions, including but not limited to industry conditions, prices of crude oil and natural gas, regulatory changes, general economic conditions, interest rates, competition, and other factors. Should one or more of these risks or uncertainties materialize or should the underlying assumptions prove incorrect, actual results and outcomes may differ materially from those indicated in the forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to republish revised forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

GATEWAY ENERGY CORPORATION AND SUBSIDIARIES

Non-GAAP Financial Measures

Operating Margin

The following table presents a reconciliation of the non-GAAP financial measures of total segment operating margin (which consists of the sum of individual segment operating margin and corporate) to the nearest comparable GAAP financial measure of operating income.

Adjusted EBITDA

Adjusted EBITDA is defined as pre-tax net income plus:

• interest expense;  
• depreciation, depletion and amortization expense;  
• non-recurring gain (loss) on sale of assets;  
• non-controlling interest;  
• accretion expense; and
• non-cash compensation expense.  

Adjusted EBITDA is a significant performance metric used by Company management, and by external users of Company's financial statements, such as investors, commercial banks, research analysts and others, including our principal lender.

Adjusted EBITDA should not be considered an alternative to, or more meaningful than, net income, operating income, cash flows from operating activities or any other measure of financial performance presented in accordance with GAAP as measures of operating performance, liquidity or ability to service debt obligations. Adjusted EBITDA does not include interest expense, income taxes, depreciation, depletion and amortization expense, non-recurring gain (loss) on sale of assets, minority interest, accretion expense or non-cash compensation expense. Because the Company has borrowed, and intends to borrow, money to finance their operations, interest expense is a necessary element of the Company's overall costs. Because the Company uses capital assets, depreciation and amortization are also necessary elements of the Company's overall costs. Because the Company has used, and intends to use, non-cash equity awards as part of their overall compensation package for executive officers and employees, non-cash compensation expense is a necessary element of the Company's overall costs.  Therefore, any measures that exclude these elements have material limitations. To compensate for these limitations, Company management believes that it is important to consider net income determined under GAAP, as well as Adjusted EBITDA, to evaluate Company's financial performance.

Management compensates for the limitations of Adjusted EBITDA as an analytical tool by reviewing the comparable GAAP measures, understanding the differences between the measures and incorporating this knowledge into management's decision-making processes.

SOURCE Gateway Energy Corporation