Gateway Announces Acquisition of a Natural Gas Pipeline
HOUSTON, March 1, 2012 /PRNewswire/ -- Gateway Energy Corporation (OTCBB: GNRG) today announced that it has closed the acquisition of a natural gas pipeline from Commerce Pipeline, L.P. ("Commerce") for an undisclosed purchase price.
The pipeline is located in Commerce, Texas and delivers natural gas into an aluminum smelting plant owned by Hydro Aluminum Metal Products North America ("Hydro Aluminum"). In connection with the acquisition, Gateway will acquire a long-term contract with Hydro Aluminum to provide transportation capacity at a fixed monthly charge. Gateway financed the acquisition through a combination of cash on hand and bank debt.
Mr. Pevow commented, "The Commerce transaction completes another important milestone. Since the implementation of our strategic plan in June 2010 to transform Gateway, we have accomplished the following:
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Reduced general and administrative expenses |
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We have reduced general and administrative expenses from $2,353,287 for the 2009 calendar year prior to our arrival to less than $1,400,000 for the 2011 calendar year, a savings of nearly $1.0 million per year. |
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Increased cash flow |
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We expect to generate Adjusted EBITDA(i) in excess of $650,000 for the 2011 calendar year without a full year's contribution from the pipeline we acquired in Delmar, New York in September 2011. By way of comparison, Adjusted EBITDA was $544,444 in the 2009 calendar year prior to our arrival and would have been negative in 2009 had it not been for a contribution of $1,435,177 from the temporary use of one of our offshore pipelines. Adjusted EBITDA for the 4th quarter of 2011 will mark our fourth consecutive quarterly increase. |
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Expanded our natural gas distribution and transmission business |
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We expect our natural gas distribution and transmission pipelines to generate approximately $1.1 - $1.2 million in operating margin(ii) in the 12 months following the Commerce transaction. All of these pipelines(iii) serve industrial end users of natural gas pursuant to long-term, fee-based or back to back purchase and sale contracts. We believe expanding this business increases the stability and visibility of our cash flow. |
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Efficiently utilized capital |
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We have acquired six pipelines in the past 16 months. We spent approximately $2.35 million in total for these pipelines and expect the combined acquisitions to contribute approximately $500,000 - $550,000 in operating margin in the 12 months following the Commerce transaction. In order to fund the acquisitions, we raised approximately $1.0 million in equity in a private placement completed in October 2010 and financed the remainder through a combination of bank debt and cash on hand. |
"We will continue to aggressively pursue our strategy of acquiring pipelines to serve industrial users. In 2012, we anticipate closing more Delmar and Commerce-type acquisitions," said Mr. Pevow.
About Gateway Energy
Gateway Energy Corporation owns and operates natural gas distribution, transportation, and gathering systems onshore in the continental United States and in federal and state waters of the Gulf of Mexico.
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 (including, without limitation, the future revenue from the assets acquired, our ability to manage the new assets without a material increase in general and administrative expense and Gateway's financing plans), 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.
Non-GAAP Financial Measures
To supplement our financial information presented in accordance with GAAP, we use additional measures that are known as "non-GAAP financial measures" in our evaluation of financial and operating performance. These measures include Adjusted EBITDA and Operating Margin.
We believe that the presentation of such additional financial measures provides useful information regarding our performance and results of operations because these measures, when used in conjunction with related GAAP financial measures, (i) provide additional information about our core operating performance, (ii) provide investors with the financial analytical framework upon which management bases financial, operational, compensation and planning decisions and (iii) present measurements that investors and debt holders have indicated are useful in assessing us and our results of operations.
These measures may exclude, for example, charges for obligations that are expected to be settled with the issuance of equity instruments, items that are not indicative of our core operating results and business outlook, and/or other items that we believe should be excluded in understanding our core operating performance. Such measures may affect direct comparability between periods or the statement of prior periods. These additional financial measures are reconciled from the most directly comparable measures as reported in accordance with GAAP, and should be viewed in addition to, and not in lieu of, our consolidated financial statements and footnotes.
Operating Margin
We define operating margin as revenues less cost of purchased gas, operating and maintenance expenses and reimbursable costs. Such amounts are before general and administrative expense, depreciation, depletion and amortization expense, interest income or expense, other income or expense, or income taxes. A reconciliation of operating margin to net loss, which is its nearest comparable GAAP financial measure, for the three and six months ended September 30, 2011 and 2010, is included in the table on the following page.
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For the Three Months Ended |
For the Nine Months Ended |
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2011 |
2010 |
2011 |
2010 |
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| Operating Margin |
$ 475,868 |
461,336 |
$ 1,488,229 |
1,492,534 |
| Less: |
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| Asset Impairment |
3,365,168 |
- |
3,365,168 |
- |
| Depreciation, depletion and amortization |
163,431 |
181,188 |
501,497 |
547,477 |
| General administration expenses |
329,544 |
372,907 |
1,077,202 |
1,180,664 |
| Acquisition costs |
19,490 |
3,570 |
67,357 |
47,023 |
| Consent solicitation severance costs |
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7,669 |
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1,550,631 |
| Interest expense |
44,035 |
42,764 |
129,051 |
126,025 |
| Plus: |
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| Interest Income |
356 |
564 |
1,391 |
11,056 |
| Other Income net |
(856) |
(4,027) |
4,199 |
37,287 |
| Income tax benefits |
1,167,675 |
109,514 |
1,225,878 |
678,828 |
| Net Income |
$ (2,278,635) |
(40,711) |
$ (2,415,578) |
(1,232,115) |
Adjusted EBITDA
We define adjusted EBITDA as operating margin less certain general and administrative expenses. Such amounts are before general and administrative expense not considered in the preceding sentence, including charges for obligations that are expected to be settled with the issuance of equity instruments, depreciation, depletion and amortization expense, interest income or expense, other income or expense, or income taxes. A reconciliation of adjusted EBITDA to operating margin, for the three and six months ended September 30, 2011 and 2010, is included in the table below.
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For the Three Months Ended September 30, |
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For the Nine Months Ended September 30, |
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2011 |
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2010 |
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2011 |
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2010 |
| Operating Margin |
$475,868 |
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$461,336 |
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$1,488,229 |
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$1,492,534 |
| Less: General and administrative |
329,544 |
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372,907 |
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1,072,202 |
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1,180,664 |
| Plus: Stock based compensation expense |
31,781 |
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20,769 |
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56,514 |
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(9,231) |
| Adjusted EBITDA |
$178,105 |
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$109,198 |
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$472,541 |
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$ 302,639 |
(i) Adjusted EBITDA is a non-GAAP financial measure. Please see the note at the end of this press release for important information regarding this non-GAAP financial measure.
(ii) Operating margin is a non-GAAP financial measure. Please see the note at the end of this press release for important information regarding this non-GAAP financial measure.
(iii) Pipelines located in Center, TX, Commerce, TX, Seguin, TX, Waxahachie, TX, Texarkana, AR, Sedalia, MO, and Delmar, NY.
SOURCE Gateway Energy Corporation
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