Gateway Energy Reports Year End 2009 Results
HOUSTON, March 24 /PRNewswire-FirstCall/ -- Gateway Energy Corporation (OTC Bulletin Board: GNRG) today announced the financial results for the year ending December 31, 2009.
For 2009 the Company reported:
- Total revenues of $6,707,974, a decrease from the $13,882,476 for 2008.
- Revenues from onshore operations decreased to $4,419,676 from $12,373,321 for the year ended December 31, 2009. The Company buys natural gas for its onshore Waxahachie system based on an index less a fixed amount and sells the gas on the same index plus a fixed amount and the decrease in revenues reflects the drop in the price of natural gas along with the drop in industrial demand for natural gas due to prevailing economic conditions. The Hickory Creek gathering system was acquired effective November 1, 2009, however, due to accounting rules revenue earned prior to the closing date of January 7, 2010 were not treated as revenue but as a reduction in the purchase price of the asset.
- Revenues from offshore operations increased to $2,293,928 from $1,504,155, due primarily to higher throughput volumes.
- Operating results from continuing operations for the year ended December 31, 2009 showed a loss of $275,875 as compared to a loss of $575,534 for the same period of 2008. This loss is due to reduced volumes transported through the onshore systems offset by a reduction in operating and maintenance expenses and general and administrative expenses.
- Net loss for 2009 was $219,484 as compared to net income of $817,541 for the same period in 2008. 2008 was positively impacted by a $1.75 million insurance claim for the damage at the Crystal Beach Terminal suffered during September 2008.
- Adjusted EBITDA for the twelve months ended December 31, 2009 was $656,775 compared to $2,374,421 for 2008. The 2008 adjusted EBITDA was also impacted by the $1.75 million insurance claim.
- Total operating cost and expenses for 2009 were $3,970,055 as compared to $11,412,713 for 2008. The cost of natural gas purchased decreased from $10,979,136 in 2008 to $3,586,046 in 2009.
- Operation and maintenance costs for 2009 were $384,009 as compared to $433,577 for 2008.
- Depreciation, depletion and amortization costs decreased to $608,394 for the year ending December 31, 2009 as compared to $621,252 for the year ending December 31, 2008.
- General and administrative costs for the twelve months ended December 31, 2009 were $2,405,400, as compared to $2,424,045 for the twelve months ended December 31, 2008. Approximately one-third ($800,000) of the general and administrative costs for 2009 were largely related to the company being public and includes auditing and tax services, legal, SOX consulting, investor relations, independent Board of Director fees as well as director and officer insurance. The following summarizes general and administrative expenses for 2008 and 2009:
Year Ended December 31, |
|||
2009 |
2008 |
||
Salaries and employee related costs |
$ 810,148 |
$ 889,731 |
|
Accounting, tax, and legal costs |
411,960 |
321,383 |
|
Insurance costs |
389,347 |
432,685 |
|
Investor relation costs |
145,590 |
174,167 |
|
Other general and administrative costs |
648,355 |
606,079 |
|
Total general and administrative costs |
$ 2,405,400 |
$ 2,424,045 |
|
Management Comments
Mr. Robert Panico, President and CEO of Gateway said, "The Company accomplished several major objectives during 2009 including the sale of the Crystal Beach Terminal, Shipwreck Platform, and Shipwreck and Pirates' Beach gathering systems, entered into a new credit facility and the acquisition of the Hickory Creek gathering system located in the core of the Barnett Shale, which closed in early January 2010." Mr. Panico continued, "The sale of the Shipwreck Platform and Crystal Beach Terminal is expected to reduce what we will incur in 2010 for insurance costs by approximately $320,000 and eliminated an estimated $3.4 million in future abandonment obligations. This cost reduction, along with other initiatives, are expected to reduce general and administrative costs in 2010 by approximately 20%. In addition to these accomplishments, the Company repaid the entire principal balance of its former credit facility of approximately $650,000 and still maintained a healthy cash balance of almost $3 million."
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 CONSOLIDATED BALANCE SHEETS |
|||
December 31, 2009 |
December 31, 2008 |
||
ASSETS |
(audited) |
(audited) |
|
Current Assets |
|||
Cash and cash equivalents |
$ 2,086,787 |
$ 1,789,029 |
|
Restricted cash |
900,000 |
- |
|
Accounts receivable trade, net |
1,101,100 |
969,859 |
|
Notes receivable |
148,088 |
- |
|
Prepaid expenses and other assets |
41,941 |
121,398 |
|
Current assets of discontinued operations |
- |
1,805,167 |
|
Total current assets |
4,277,916 |
4,685,453 |
|
Property and Equipment, at cost |
|||
Gas gathering, processing and transportation |
8,855,967 |
8,843,142 |
|
Net profits production interest |
701,482 |
763,909 |
|
Office furniture and other equipment |
150,500 |
143,654 |
|
9,707,949 |
9,750,705 |
||
Less accumulated depreciation and amortization |
(2,785,241) |
(2,371,704) |
|
6,922,708 |
7,379,001 |
||
Other Assets |
|||
Deferred tax assets, net |
1,295,455 |
1,205,000 |
|
Intangible assets, net of accumulated amortization of $345,567 and $222,082 as of December 31, 2009 and December 31, 2008, respectively |
563,032 |
765,337 |
|
Other |
36,803 |
136,657 |
|
Non-current assets of discontinued operations |
- |
2,519,253 |
|
1,895,290 |
4,626,247 |
||
Total assets |
$ 13,095,914 |
$ 16,690,701 |
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|||
Current Liabilities |
|||
Accounts payable |
$ 660,504 |
$ 776,519 |
|
Accrued expenses and other liabilities |
305,549 |
323,100 |
|
Current maturities of long-term debt |
- |
1,062,000 |
|
Current maturities of capital lease |
9,188 |
20,235 |
|
Total current liabilities |
975,241 |
2,181,854 |
|
Long-term capital lease, less current maturities |
- |
9,187 |
|
Non-current liabilities of discontinued operations |
- |
2,318,315 |
|
Total liabilities |
$ 975,241 |
$ 4,509,356 |
|
Commitments and contingencies |
- |
- |
|
Stockholders' Equity |
|||
Preferred stock – $1.00 par value; 10,000 shares authorized; no shares issued and outstanding |
- |
- |
|
Common stock – $0.25 par value; 35,000,000 shares authorized; 19,397,125 and 19,207,249 shares issued and outstanding at December 31, 2009 and 2008, respectively |
4,849,281 |
4,801,812 |
|
Additional paid-in capital |
17,395,828 |
17,284,485 |
|
Accumulated deficit |
(10,124,436) |
(9,904,952) |
|
Total stockholders' equity |
12,120,673 |
12,181,345 |
|
Total liabilities and stockholders' equity |
$ 13,095,914 |
$ 16,690,701 |
|
GATEWAY ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (audited) |
|||
Year Ended December 31, |
|||
2009 |
2008 |
||
Operating revenues |
|||
Sales of natural gas |
$ 4,183,830 |
$ 12,033,817 |
|
Transportation of natural gas and liquids |
2,342,479 |
1,788,070 |
|
Treating and other |
181,665 |
60,589 |
|
6,707,974 |
13,882,476 |
||
Operating costs and expenses |
|||
Cost of natural gas purchased |
3,586,046 |
10,979,136 |
|
Operation and maintenance |
384,009 |
433,577 |
|
General and administrative |
2,405,400 |
2,424,045 |
|
Depreciation, depletion, and amortization |
608,394 |
621,252 |
|
6,983,849 |
14,458,010 |
||
Operating (loss) |
(275,875) |
(575,534) |
|
Other income (expense) |
|||
Interest income |
30,408 |
29,119 |
|
Interest expense |
(116,699) |
(157,091) |
|
Other income (expense), net |
(178,758) |
1,731,155 |
|
Other income (expense) |
(265,049) |
1,603,183 |
|
Income (loss) from operations before income taxes and discontinued operations |
(540,924) |
1,027,649 |
|
Income tax expense (benefit) |
(159,157) |
375,764 |
|
Income (loss) from continuing operations |
(381,767) |
651,885 |
|
Net income attributable to noncontrolling interest |
- |
(28,824) |
|
Income (loss) from continuing operations attributable to controlling interest |
(381,767) |
623,061 |
|
Discontinued operations, net of taxes |
|||
Income (loss) from discontinued operations, net of taxes |
(155,897) |
194,480 |
|
Gain on disposal of assets, net of taxes |
318,180 |
- |
|
Income from discontinued operations |
162,283 |
194,480 |
|
Net income (loss) |
$ (219,484) |
$ 817,541 |
|
Basic and diluted income (loss) per share: |
|||
Continuing operations |
$ (0.02) |
$ 0.03 |
|
Discontinued operations |
0.01 |
0.01 |
|
Net income (loss) |
$ (0.01) |
$ 0.04 |
|
Weighted average number of common shares outstanding |
|||
Basic |
19,303,488 |
19,126,587 |
|
Diluted |
19,303,488 |
19,330,409 |
|
GATEWAY ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (audited) |
|||
Year Ended December 31, |
|||
2009 |
2008 |
||
Cash flows from operating activities – continuing operations |
|||
Income (loss) from continuing operations |
$ (381,767) |
$ 651,885 |
|
Adjustments to reconcile income from continuing operations to net cash provided by operating activities: |
|||
Depreciation, depletion and amortization |
608,394 |
621,252 |
|
Deferred tax expense (benefit) |
(195,226) |
340,764 |
|
Stock based compensation expense |
158,812 |
169,888 |
|
Impairment of intangible assets |
52,066 |
- |
|
Impairment of net profits interest |
77,942 |
- |
|
Amortization of deferred loan costs |
99,445 |
124,835 |
|
Change in operating assets and liabilities: |
|||
Trade accounts receivable |
(131,241) |
882,990 |
|
Prepaid expenses and other assets |
390,189 |
(184,831) |
|
Accounts payable |
(96,144) |
(362,134) |
|
Accrued expenses and other liabilities |
(61,374) |
71,732 |
|
Net cash provided by operating activities |
521,096 |
2,316,381 |
|
Cash flows from investing activities – continuing operations |
|||
Capital expenditures |
(35,186) |
(29,358) |
|
Acquisition of noncontrolling interest and net profits interest |
- |
(1,303,075) |
|
Property write-offs |
- |
18,067 |
|
Net cash used in investing activities |
(35,186) |
(1,314,366) |
|
Cash flows from financing activities – continuing operations |
|||
Proceeds on borrowings |
- |
1,362,000 |
|
Payments on borrowings |
(1,082,233) |
(1,067,370) |
|
Restricted cash on credit facility |
(900,000) |
- |
|
Deferred financing costs |
(42,102) |
(39,820) |
|
Net cash provided by (used in) financing activities |
(2,024,335) |
254,810 |
|
Net increase (decrease) in cash and cash equivalents from continuing operations |
(1,538,425) |
1,256,825 |
|
Discontinued operations: |
|||
Net cash provided by (used in) discontinued operating activities |
1,838,883 |
(1,170,934) |
|
Net cash used in discontinued investing activities |
(2,700) |
(104,086) |
|
Net increase in cash and cash equivalents from discontinued operations |
1,836,183 |
(1,275,020) |
|
Cash and cash equivalents at beginning of period |
1,789,029 |
1,807,224 |
|
Cash and cash equivalents at end of period |
$ 2,086,787 |
$ 1,789,029 |
|
Supplemental disclosures of cash flow information: |
|||
Cash paid for interest – continuing operations |
$ 51,851 |
$ 51,025 |
|
Supplemental schedule of noncash investing and financing activities: |
|||
Common stock issued for acquisition |
$ - |
$ 70,000 |
|
Common stock issued for services |
- |
9,000 |
|
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.
Year Ended December 31, |
|||
2009 |
2008 |
||
Onshore Operations |
|||
Revenues |
$ 4,419,676 |
$ 12,373,321 |
|
Cost of natural gas purchased |
3,586,046 |
10,979,136 |
|
Operation and maintenance expense |
211,424 |
246,149 |
|
Operating margin |
622,206 |
1,148,036 |
|
General and administrative expense |
729,370 |
993,997 |
|
Depreciation and amortization expense |
150,935 |
194,455 |
|
Operating loss |
(258,099) |
(40,416) |
|
Offshore Operations |
|||
Revenues |
$ 2,293,298 |
$ 1,504,387 |
|
Operation and maintenance expense |
172,585 |
187,660 |
|
Operating margin |
2,120,713 |
1,316,727 |
|
General and administrative expense |
1,560,773 |
1,416,921 |
|
Depreciation and amortization expense |
416,114 |
420,891 |
|
Operating income (loss) |
143,826 |
(521,085) |
|
Net Profits Interest |
|||
Revenues (loss) |
$ (5,000) |
$ 5,000 |
|
Operating margin (loss) |
(5,000) |
5,000 |
|
General and administrative expense |
109,967 |
1,638 |
|
Depletion expense |
34,462 |
783 |
|
Operating income (loss) |
(149,429) |
2,579 |
|
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 Company's overall costs. Because the Company uses capital assets, depreciation and amortization are also necessary elements of Company's overall costs. Because the Company has used, and intend 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 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.
Year Ended December 31, |
|||
2009 |
2008 |
||
Net income (loss) |
$ (219,484) |
$ 817,541 |
|
Net loss attributable to noncontrolling interest |
- |
28,824 |
|
Interest expense |
116,699 |
157,091 |
|
Income taxes |
(159,157) |
375,764 |
|
Depreciation, depletion and amortization expense |
608,394 |
621,252 |
|
Impairment of assets |
130,008 |
- |
|
Non-cash stock compensation |
158,812 |
169,888 |
|
Adjusted EBITDA |
$ 635,272 |
$ 2,170,360 |
|
SOURCE Gateway Energy Corporation
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