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Gateway Energy Reports Third Quarter 2009 Results
HOUSTON, Nov. 12 /PRNewswire-FirstCall/ -- Gateway Energy Corporation (GNRG) today announced the financial results for the quarter ended September 30, 2009. For the quarter the Company reported;
For the nine months the Company reported;
Management Comments Mr. Robert Panico, President and CEO of Gateway said, "We continue to feel the effects of the economic downturn and the low cost of natural gas. In this environment, containing costs is critical and we are now realizing cost reductions from the sale of the Crystal Beach terminal, Shipwreck platform and pipeline system and the Pirates' Beach gathering system, including, a reduction in annual insurance costs of approximately $320,000 which began in the fourth quarter of 2009. Also during the first nine months of 2009, we have eliminated our bank debt and accumulated approximately $3.2 million of working capital. By focusing on containing costs and improving our balance sheet this year, we are now better positioned than ever to pursue our acquisition strategy." 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
September 30, December 31,
2009 2008
------------- ------------
ASSETS (unaudited) (reclassified)
Current Assets
Cash and cash equivalents $1,620,211 $1,789,029
Restricted cash 900,000 -
Accounts receivable trade, net 1,102,511 969,859
Notes receivable 295,638 -
Prepaid expenses and other assets 70,321 121,398
Current assets of discontinued
operations - 1,805,167
--- ---------
Total current assets 3,988,681 4,685,453
--------- ---------
Property and Equipment, at cost
Gas gathering, processing and
transportation 8,851,082 8,843,142
Net profits production interest 779,424 763,909
Office furniture and other
equipment 148,751 143,654
------- -------
9,779,257 9,750,705
Less accumulated depreciation and
amortization (2,674,708) (2,371,704)
----------- -----------
7,104,549 7,379,001
--------- ---------
Other Assets
Deferred tax assets, net 1,281,584 1,205,000
Intangible assets, net of
accumulated amortization of
$309,762 and $222,082 as of
September 30, 2009 and December
31, 2008, respectively 597,970 765,337
Other 18,652 136,657
Non-current assets of
discontinued operations - 2,519,253
--- ---------
1,898,206 4,626,247
--------- ---------
Total assets $12,991,436 $16,690,701
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $411,611 $776,519
Accrued expenses and other
liabilities 332,988 323,100
Insurance notes payable 2,783 -
Current maturities of long-term
debt - 1,062,000
Current maturities of capital
lease 14,540 20,235
------ ------
Total current liabilities 761,922 2,181,854
------- ---------
Long-term capital lease, less
current maturities - 9,187
Non-current liabilities of
discontinued operations - 2,318,315
--- ---------
Total liabilities $761,922 $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
September 30, 2009 and December
31, 2008, respectively 4,849,281 4,801,812
Additional paid-in capital 17,370,548 17,284,485
Accumulated deficit (9,990,315) (9,904,952)
----------- -----------
Total stockholders' equity 12,229,514 12,181,345
---------- ----------
Total liabilities and
stockholders' equity $12,991,436 $16,690,701
=========== ===========
GATEWAY ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
--------------- ----------------
2009 2008 2009 2008
---- ---- ---- ----
(reclassified) (reclassified)
Operating revenues
Sales of natural gas $917,957 $3,566,278 $3,004,101 $10,018,914
Transportation of
natural gas and
liquids 480,932 417,043 1,867,686 1,588,373
Treating and other 174,540 114,181 411,840 323,805
------- ------- ------- -------
1,573,429 4,097,502 5,283,627 11,931,092
--------- --------- --------- ----------
Operating costs and
expenses
Cost of natural gas
purchased 777,747 3,253,814 2,564,444 9,143,975
Operation and
maintenance 195,129 195,817 569,531 594,794
Depreciation,
depletion and
amortization 159,460 155,297 462,115 467,407
General and
administrative 574,946 583,848 1,987,162 1,896,421
------- ------- --------- ---------
1,707,282 4,188,776 5,583,252 12,102,597
--------- --------- --------- ----------
Operating income
(loss) (133,853) (91,274) (299,625) (171,505)
Other income (expense)
Interest income 10,839 6,767 22,363 23,378
Interest expense (30,211) (38,900) (114,042) (119,782)
Other income
(expense), net (53,597) (2,802) (11,852) (1,500)
-------- ------- -------- -------
Other expense (72,969) (34,935) (103,531) (97,904)
-------- -------- --------- --------
Income (loss) from
operations before
income taxes and
discontinued
operations (206,822) (126,209) (403,156) (269,409)
Income tax benefit
(expense) 53,622 50,285 132,718 93,589
------ ------ ------- ------
Income (loss) from
continuing operations (153,200) (75,924) (270,438) (175,820)
Discontinued
operations, net of
taxes
Income (loss) from
discontinued
operations, net of
taxes (4,504) 21,289 (155,897) 233,584
Gain on disposal of
assets, net of taxes 15,976 - 340,972 -
------ --- ------- ---
Income from
discontinued
operations 11,472 21,289 185,075 233,584
Net income (141,728) (54,635) (85,363) 57,764
Net income
attributable to
noncontrolling
interest - - - (28,824)
--- --- --- --------
Net income
attributable to
controlling interest $(141,728) $(54,635) $(85,363) $28,940
========= ======== ======== =======
Basic and diluted
income per share:
Continuing operations $(0.01) $- $(0.01) $(0.01)
Discontinued
operations - - 0.01 0.01
--- --- ---- ----
Net income $(0.01) $- $- $-
====== === === ===
Weighted average
number of common
shares outstanding
Basic 19,397,125 19,207,249 19,271,932 19,099,404
Diluted 19,397,125 19,207,249 19,271,932 19,099,404
GATEWAY ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended June 30,
----------------------------
2009 2008
---- ----
(reclassified)
Cash flows from operating
activities - continuing
operations
Loss from continuing operations $(270,438) $(175,820)
Adjustments to reconcile income
from continuing operations to
net cash provided by operating
activities:
Depreciation, depletion and
amortization 462,115 467,407
Impairment of intangible assets 52,066 -
Deferred tax benefit (126,082) (21,765)
Stock based compensation
expense 133,532 141,368
Net income attributable to
noncontrolling interests - 28,824
Amortization of deferred loan
costs 93,633 94,445
Change in operating assets and
liabilities:
Accounts receivable trade (132,652) 165,544
Prepaid expenses and other
assets 536,067 214,372
Accounts payable (345,037) (16,775)
Accrued expenses and other
liabilities (33,127) 30,492
-------- ------
Net cash provided by operating
activities 370,077 928,092
------- -------
Cash flows from investing
activities - continuing
operations
Capital expenditures (28,552) (23,968)
Restricted cash for asset
acquisition - (539,166)
Other - 475
--- ---
Net cash used in investing
activities (28,552) (562,659)
-------- ---------
Cash flows from financing
activities - continuing
operations
Payments on borrowings (1,403,036) (1,359,683)
Proceeds from borrowings - 600,000
Restricted cash on credit
facility (900,000) -
Deferred financing costs (18,139) -
Distributions to minority
partner - (39,821)
--- --------
Net cash used in financing
activities (2,321,175) (799,504)
----------- ---------
Net decrease in cash and cash
equivalents from continuing
operations (1,979,650) (434,071)
Discontinued operations:
Net cash provided by
discontinued operating
activities 1,813,532 383,580
Net cash used in discontinued
investing activities (2,700) (113,764)
------- ---------
Net increase in cash and cash
equivalents from discontinued
operations 1,810,832 269,816
--------- -------
Net decrease in cash and cash
equivalents (168,818) (164,255)
Cash and cash equivalents at
beginning of period 1,789,029 1,807,224
--------- ---------
Cash and cash equivalents at
end of period $1,620,211 $1,642,969
========== ==========
Supplemental disclosures of
cash flow information:
Income taxes paid $43,000 $46,000
Cash paid for interest 52,270 42,187
Supplemental schedule of
noncash investing and
financing activities:
Trade note payable for
insurance premiums $328,938 $408,703
======== ========
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.
Three Months Ended Nine Months Ended
September 30, September 30,
----------------- -----------------
2009 2008 2009 2008
---- ---- ---- ----
Onshore Operations
Revenues $977,602 $3,632,786 $3,187,643 $10,296,340
Cost of natural gas
purchased 777,747 3,253,814 2,564,444 9,143,975
Operation and maintenance
expense 51,359 59,051 162,577 188,103
------ ------ ------- -------
Operating margin 148,496 319,921 460,622 964,262
General and administrative
expense - (149) - 82
Depreciation and
amortization expense 44,428 49,143 116,431 147,246
------ ------ ------- -------
Operating income 104,068 270,927 344,191 816,934
Offshore Operations
Revenues $600,018 $464,716 $2,100,984 $1,634,752
Operation and maintenance
expense 143,770 136,766 406,954 406,691
------- ------- ------- -------
Operating margin 456,248 327,950 1,694,030 1,228,061
Depreciation and
amortization expense 102,947 104,805 314,243 316,436
------- ------- ------- -------
Operating income 353,301 223,145 1,379,757 911,625
Net Profits Interest
Revenues (loss) $(4,191) $- $(5,000) $-
------- --- ------- ---
Operating margin (loss) (4,191) - (5,000) -
Depletion expense 10,389 - 26,300 -
------ --- ------ ---
Operating loss (14,580) - (31,300) -
-------- --- -------- ---
Adjusted EBITDA Adjusted EBITDA is defined as pre-tax net income plus:
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 intend 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 have 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.
Three Months Ended Nine Months Ended
September 30, September 30,
----------------- -----------------
2009 2008 2009 2008
---- ---- ---- ----
Net (loss) income $(141,728) $(54,635) $(85,363) $28,940
Net loss attributable to
noncontrolling interest - - - 28,824
Interest expense 30,211 38,900 114,042 119,782
Income taxes (53,622) (50,285) (132,718) (93,589)
Depreciation, depletion
and amortization expense 159,460 155,297 462,115 467,407
Non-cash stock
compensation 25,279 28,015 133,532 141,368
Gain on sale of assets,
net of tax (15,976) - (340,972) -
----------------------- ------- --- -------- ---
Adjusted EBITDA $3,624 $117,292 $150,636 $692,732
SOURCE Gateway Energy Corporation
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