EXHIBIT 99.1
Gasco
- ------
Energy
For Immediate Release on Monday, August 4, 2008
Gasco Energy Announces Second Quarter 2008
Financial and Operational Results
o Record Cash Flow from Operations
o Oil & Gas Sales up 146% Quarter-over-Quarter
o Mancos Shale Operations Update Provided
DENVER, August 4 /PRNewswire-FirstCall/ -- Gasco Energy (Amex: GSX) today
reported financial and operating results for the second quarter ended June 30,
2008.
Second Quarter Financial Results
For the second quarter 2008, Gasco reported net loss attributable to common
shareholders of $0.8 million, or $0.01 per share, as compared to a net loss of
$66.3 million, or $0.70 per share, for the same period in 2007. All per-share
figures are basic and diluted. Included in the second quarter 2008 results are
derivative losses of $5.0 million attributed to hedge effect of which $3.6
million is unrealized. Excluding the effect of unrealized derivative losses, a
non-GAAP measure, Gasco would have posted net income of $2.8 million or $0.03
per share. The Company did not hedge its volumes in the comparable period in
2007.
Included in the second quarter 2007's operating expenses is a non-cash charge of
$64.3 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, for the second quarter 2007.
The Company reported record oil and gas sales for the second quarter 2008 of
$12.6 million, as compared to $5.1 million for the same period in 2007. The 146%
increase in oil and gas sales during the second quarter 2008 is primarily
attributed to both higher prices received for sales of the Company's natural gas
and oil volumes and a 16% increase in oil and gas sales volumes during the
quarter. Gathering and processing revenues from Gasco's midstream assets were
also a Company-record $1.1 million for the second quarter 2008, as compared to
$0.5 million in the prior-year period. Increased Riverbend natural gas
production contributed, along with higher prices for natural gas and natural gas
liquids, to the rise in gathering and processing revenue. Total revenues for the
second quarter were $9.1 million, as compared to $6.1 million in the second
quarter 2007.
Gasco's average realized gas price was $8.10 per thousand cubic feet of natural
gas (Mcf) for the second quarter of 2008, including the effect of hedges,
compared to $4.31 per Mcf for the second quarter of 2007. The Company's risk
management activities decreased its average gas price by $1.15 per Mcf during
the second quarter of 2008. Prior to the impact of hedges, the Company's average
price received for its natural gas production during the second quarter of 2008
was approximately $9.25 per Mcf, as compared to $4.31 per Mcf in the prior-year
period. The Company did not hedge its volumes in the comparable period in 2007.
The average realized oil price was $98.84 per barrel for the second quarter of
2008, up from $49.34 per barrel for the second quarter of 2007. Gasco does not
hedge its crude oil volumes.
1
Unit Cost Comparisons - LOE / DD&A / G&A
Lease operating expense (LOE) for the second quarter increased to $1.9 million
from $0.8 million in the same period in 2007. On a per-unit basis, LOE was $1.48
per thousand cubic feet of natural gas equivalent (Mcfe) in the second quarter
2008, as compared to $0.71 per Mcfe in the prior-year period. The increase in
LOE quarter-over-quarter is attributed to increased operating expenses ($0.57
per Mcfe higher) and production taxes ($0.20 per Mcfe higher) primarily due to
higher natural gas prices, increased production and to a greater number of
producing wells. An increase in repair and maintenance costs, increased chemical
treatment costs due both to increased cost of chemicals as well as increased
volume of chemicals used, higher fuel costs and an increase in water disposal
costs contributed to higher operating expenses during the quarter.
Depletion, depreciation and amortization (DD&A) was $3.2 million for the second
quarter 2008, as compared to $3.4 million for the same period in 2007. On a
per-unit basis, DD&A for the second quarter 2008 was $2.43 per Mcfe, as compared
to $3.00 in the 2007 period.
The Company reported general and administrative (G&A) expense of $2.5 million in
the second quarter 2008, versus $2.2 million in the same period in 2007. On a
per-unit basis, total G&A expense for second quarter 2008 was $1.91 per Mcfe, as
compared to $1.97 per Mcfe for the same period in 2007. G&A expense for the
second quarter 2008 includes $0.8 million of non-cash, stock-based compensation
expense, or, on a per-unit basis, $0.62 per Mcfe, as compared to the
prior-period total of $0.9 million, or $0.78 per Mcfe. Gathering operations
expense increased to $1.0 million from $0.5 million in the second quarter 2007.
Six-Month Period
Gasco reported a net loss attributable to common shareholders for the six-months
ended June 30, 2008 of $5.2 million, or $0.05 per share, as compared to a net
loss for the second half of 2007 of $66.5 million, or $0.74 per share. Included
in the 2008 results are derivative losses of $11.4 million, of which $9.5
million is unrealized, attributed to hedge effect. Excluding the effect of
unrealized derivative losses, a non-GAAP measure, Gasco would have posted net
income of $4.3 million or $0.04 per share. The Company did not hedge its volumes
in the comparable period in 2007. Included in the 2007 periods' operating
expenses are non-cash charges of $64.3 million related to the impairment of the
carrying value of oil and gas properties.
Oil and gas sales for the first half of 2008 were a Company-record $21.1
million, as compared to $11.0 million for the same period in 2007.
Derivative losses during the first six months of 2008 contributed to flat total
revenues of $12.5 million for the first half of 2008, as compared to $12.5
million in the same period in 2007. For the first half of 2008, gathering system
revenues accounted for $2.0 million as compared $0.960 million during 2007.
At June 30, 2008, cash and investments were $4.4 million as compared to $1.8
million at December 31, 2007.
Long-term debt was $14 million at June 30, 2008 as compared to $9 million at
December 31, 2007. The Company currently has a $250 million credit facility with
JPMorgan, of which $45 million is available for borrowing capacity and $19
million is drawn. The facility is undergoing a customary mid-year
redetermination.
Gasco's total assets at June 30, 2008 were $137.7 million, as compared to $122.5
million at year-end 2007. Net cash provided by operating activities for the
first half of 2008 was $15.9 million as compared to $4.7 million for the same
period in 2007.
2
Quarterly Production
Cumulative net production for the quarter ended June 30, 2008 was a
Company-record 1,305 MMcfe, an increase of 16% from the prior-year net
production of 1,124 MMcfe. For the first half of 2008, Gasco produced a
Company-record 2,390 MMcfe, as compared to 2,175 MMcfe in the year-ago six-month
period, representing a 10% increase for comparable six-month periods.
Operations Update & Subsequent Events
Mancos/Dakota Update
In its Mancos/Dakota program, Gasco has drilled two wells through the Dakota
Formation, of which one is a full Mancos producer and the other is awaiting
completion in the Dakota. The Company has drilled 11 wells to the Upper Mancos.
This does not include the Federal 32-20 that was only drilled 300' into the
Upper Mancos. Of these 11 wells, eight are currently producing, one is being
completed, and two are awaiting completion. Two additional Upper Mancos wells
are drilling ahead.
- -----------------------------------------------------------------------------------------------------------------------
GSX Mancos Shale Well Data
- -----------------------------------------------------------------------------------------------------------------------
Initiated 24-hour Initial
Well Completion Flow Rate Comment
- ----------------------------- ----------------- ---------------- ------------------------------------------------------
Federal 14-31 6/25/07 1.132 MMcf Full Mancos; added BH and MV on 2/11/08, commingled
production
- ----------------------------- ----------------- ---------------- ------------------------------------------------------
Federal 21-19 10/23/07 1.764 MMcf Upper Mancos
- ----------------------------- ----------------- ---------------- ------------------------------------------------------
SW Federal 32-25 12/3/07 1.980 MMcf Upper Mancos / Spring Canyon commingled
- ----------------------------- ----------------- ---------------- ------------------------------------------------------
SW Federal 12-25 3/10/08 1.495 MMcf Upper Mancos
- ----------------------------- ----------------- ---------------- ------------------------------------------------------
Upper Mancos - 5/20/08 commingled
State 21-32b 3/25/08 0.934 MMcf Production
- ----------------------------- ----------------- ---------------- ------------------------------------------------------
State 21-32a 3/25/08 0.403 MMcf Upper Mancos / BH / MV commingled
- ----------------------------- ----------------- ---------------- ------------------------------------------------------
Federal 34-30* 5/13/08 1.755 MMcf Upper Mancos / Spring Canyon commingled
- ----------------------------- ----------------- ---------------- ------------------------------------------------------
SW Federal 23-26* 6/9/08 0.788 MMcf Upper Mancos / Spring Canyon commingled
- ----------------------------- ----------------- ---------------- ------------------------------------------------------
Federal 14-19* 7/15/08 1.375 MMcf Upper Mancos / Spring Canyon commingled
- ----------------------------- ----------------- ---------------- ------------------------------------------------------
Awaiting --
Federal 32-19* Completion Reached TD in Upper Mancos in 21 days
- ----------------------------- ----------------- ---------------- ------------------------------------------------------
Awaiting --
Lamb Trust 12-23 Completion Upper Mancos
- ----------------------------- ----------------- ---------------- ------------------------------------------------------
Awaiting --
GC State 23-16 Completion Mancos / Dakota test
- ----------------------------- ----------------- ---------------- ------------------------------------------------------
Awaiting --
Uteland Federal 34-2 Completion Reached TD in Upper Mancos in 16 days
- ----------------------------- ----------------- ---------------- ------------------------------------------------------
--
SW Federal 41-26 Drilling Proposed TD of 15,030'
- ----------------------------- ----------------- ---------------- ------------------------------------------------------
--
Uteland Federal 42-11 Drilling Proposed TD of 14,215'
- ----------------------------- ----------------- ---------------- ------------------------------------------------------
*Wells with new cost-saving dual-completion in Upper Mancos and Spring Canyon
member of Blackhawk.
3
Commenting on the Mancos results, Gasco CEO and President Mark Erickson said:
"With respect to the Mancos initial production rates, we are seeing good
pressures and expected rates in the new, cost-saving Mancos / Blackhawk dual
completions. What we are finding is that while we can complete the Blackhawk
during the first mobilization, the Mancos still has higher pressures and
somewhat suppresses the Blackhawk contribution. As observed from the Federal
34-30 and the Federal 41-19, it appears that as the Mancos pressures down, the
Blackhawk begins flowing and what we see are wells that actually have stable to
inclining production rates up to 60 days or more following the dual completion.
Later, we can return to recomplete up-hole in the upper Mesaverde and Wasatch."
Gate Canyon Area
The fracture stimulation program for the Dakota Formation in the Gate Canyon
23-16 is currently being designed. Based on drilling mud weights, Gasco
engineers are expecting very high pressures during completion operations. They
are taking extra time to properly design the initial completion to assure a safe
and effective test, as well as to procure the necessary high-pressure flowback
equipment. Consequently, Initial completion operations are scheduled for the end
of the third quarter 2008.
Other
Gasco's natural gas production is marketed to an un-affiliated third party under
an agreement whereby Gasco delivers into the Questar mainline and receives a
price based on NW Rockies. The agreement allows for sufficient natural gas sales
to handle the Company's estimated 2008 - 2009 estimated gross production
volumes. As Gasco's production grows and additional gas transportation system
projects are permitted and built, the Company anticipates being able to move its
gas through these systems.
Management Comment
Commenting on the second quarter operations and results, Erickson said: "We are
pleased with the results from what is our best quarter ever. Continued
operational improvements are helping keep well costs in check. Increasing the
productivity of recently completed wells is also benefiting per-well economics.
The improvements led in turn to strong cash flow and production growth.
"We have been fortunate to be able to continue to flow all of our natural gas
production due to our agreement with a third-party that provides for purchases
of up to 50,000 MMBtu per day thru 2009. The contract, we believe, will be
sufficient to handle our estimated gross production for that period. Our hedged
volumes for 2008 and 2009 should provide some protection against any downward
movement in price here in the Rockies should pipeline service dates and other
takeaway issues further erode the basis. Approximately 50% of our current daily
net production is hedged at prices between $6.00 and $6.91 per MMBtu."
Conference Call
A conference call with investors, analysts and other interested parties is
scheduled for 11:00 a.m. EDT on Tuesday, August 5, 2008 to discuss second
quarter 2008 financial and operating results. You are invited to listen to the
call which will be broadcast live over the Internet.
Date: Tuesday, August 5, 2008
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: 55016431
Internet: Live and rebroadcast over the Internet: log on to
http://www.gascoenergy.com or
to http://www.videonewswire.com/event.asp?id=49718
Replay: Available through Sunday, August 10, 2008 at (800) 642-1687
(US/Canada) and (706) 645-9291 (International) using passcode
55016431 and for 30 days at http://www.gascoenergy.com
4
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 http://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 Gasco'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 Gasco, 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 Gasco'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 Gasco 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 each of Item 1 of the
Company's Annual Report on Form 10-K for the year ended December 31, 2007 filed
with the Securities and Exchange Commission on March 4, 2008 and in Item 1A of
the Company's Quarterly Report on Form 10-Q for the Quarter Ended June 30, 2008
filed with the Securities and Exchange Commission on August 4, 2008.
Contact for Gasco Energy, Inc.: Investor Relations: 303-483-0044
[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 4, 2008.
5
GASCO ENERGY, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, December 31,
2008 2007
ASSETS
CURRENT ASSETS
Cash and cash equivalents $4,410,691 $1,843,425
Accounts receivable
Joint interest billings 6,424,855 5,639,174
Revenue 5,929,128 3,872,959
Inventory 2,178,430 1,160,325
Prepaid expenses 193,784 327,030
----------- -----------
Total 19,136,888 12,842,913
----------- ----------
PROPERTY, PLANT AND EQUIPMENT, at cost
Oil and gas properties (full cost method)
Proved mineral interests 230,894,554 215,273,593
Unproved mineral interests 40,940,573 41,644,348
Wells in progress 513,524 1,058,727
Gathering assets 16,055,728 15,708,353
Facilities and equipment 9,767,991 9,680,010
Furniture, fixtures and other 320,837 284,791
----------- -------------
Total 298,493,207 283,649,822
Less accumulated depletion, depreciation, amortization and impairment 181,654,780) (175,973,720)
------------ -------------
Total 116,838,427 107,676,102
------------ -----------
OTHER ASSETS
Deposit 139,500 139,500
Deferred financing costs 1,594,158 1,853,274
------------ -------------
Total 1,733,658 1,992,774
------------ -------------
TOTAL ASSETS $137,708,973 $ 122,511,789
============ =============
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 4, 2008.
6
GASCO ENERGY, INC.
CONSOLIDATED BALANCE SHEETS (continued)
(Unaudited)
June 30, December 31,
2008 2007
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 9,619,052 $13,206,767
Revenue payable 4,973,939 1,477,268
Advances from joint interest owners 8,527,143 5,718,234
Derivative instruments 9,073,753 343,759
Accrued interest 902,541 844,094
Accrued expenses 816,000 583,000
----------- ----------
Total 33,912,428 22,173,122
----------- ----------
NONCURRENT LIABILITIES
5.5% Convertible Senior Notes 65,000,000 65,000,000
Long-term debt 14,000,000 9,000,000
Derivative instruments 802,351 -
Asset retirement obligation 1,094,147 1,030,283
Deferred rent expense 52,408 60,593
---------- ----------
Total 80,948,906 75,090,876
---------- ----------
STOCKHOLDERS' EQUITY
Series B Convertible Preferred stock - $0.001 par value; 20,000 shares
authorized; zero shares outstanding - -
Common stock - $.0001 par value; 300,000,000 shares authorized;
107,862,009 shares issued and 107,788,309 outstanding as of
June 30, 2008 and 107,290,471 shares issued and 107,216,771
outstanding as of December 31, 2007 10,786 10,729
Additional paid-in capital 217,892,787 215,094,271
Accumulated deficit (194,925,639) (189,726,914)
Less cost of treasury stock of 73,700 common shares (130,295) (130,295)
------------ ------------
Total 22,847,639 25,247,791
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 137,708,973 $ 122,511,789
============= =============
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 4, 2008.
7
GASCO ENERGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
June 30,
-------------------------------------------
2008 2007
REVENUES
Gas $ 11,404,952 $ 4,535,627
Oil 1,187,898 588,580
Gathering 1,079,201 472,381
Rental income 420,875 343,875
Derivative losses (5,022,053) -
Interest income 5,589 171,007
---------- ---------
Total 9,076,462 6,111,470
---------- ---------
OPERATING EXPENSES
Lease operating 1,935,374 802,712
Gathering operations 1,040,844 552,231
Depletion, depreciation, amortization and accretion 3,170,997 3,367,397
Impairment - 64,300,000
General and administrative 2,486,593 2,220,578
Interest expense 1,231,262 1,163,194
--------- ------------
Total 9,865,070 72,406,112
--------- ------------
NET LOSS $(788,608) $(66,294,642)
========== =============
NET LOSS PER COMMON SHARE - BASIC AND DILUTED $ (0.01) $ (0.70)
========= ==========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING -
BASIC AND DILUTED 107,018,242 94,468,912
=========== ==========
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 4, 2008.
8
GASCO ENERGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Six Months Ended
June 30,
-------------------------------------------
2008 2007
REVENUES
Gas $ 19,302,432 $10,007,565
Oil 1,775,535 969,347
Gathering 1,987,557 959,047
Rental income 783,125 343,875
Derivative losses (11,394,505) -
Interest income 20,811 271,367
----------- ----------
Total 12,474,955 12,551,201
----------- ----------
OPERATING EXPENSES
Lease operating 3,202,101 1,398,974
Gathering operations 1,697,343 906,951
Depletion, depreciation, amortization and accretion 5,620,799 5,703,515
Impairment - 64,300,000
General and administrative 4,674,626 4,546,655
Interest expense 2,478,811 2,165,922
----------- ------------
Total 17,673,680 79,022,017
----------- ------------
NET LOSS $ (5,198,725) $ (66,470,816)
============= ==============
NET LOSS PER COMMON SHARE - BASIC AND DILUTED $ (0.05) $ (0.74)
============ ==========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING -
BASIC AND DILUTED 107,011,167 90,210,121
=========== ==========
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 4, 2008.
9
GASCO ENERGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
----------------------------------
2008 2007
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(5,198,725) $ (66,470,816)
Adjustment to reconcile net loss to net cash provided by
operating activities
Depletion, depreciation, amortization and impairment expense 5,573,235 69,959,073
Accretion of asset retirement obligation 47,564 44,442
Stock-based compensation 1,529,078 1,835,766
Unrealized derivative loss 9,532,345 -
Amortization of deferred rent (8,185) (4,890)
Amortization of deferred financing costs 259,116 259,117
Changes in operating assets and liabilities:
Accounts receivable (2,841,850) 3,499,558
Inventory (1,018,105) 122,007
Prepaid expenses 133,246 167,133
Accounts payable 1,278,041 (2,522,430)
Revenue payable 3,496,671 (81,924)
Advances from joint interest owners 2,808,909 (1,829,135)
Accrued interest 58,447 25,210
Accrued expenses 233,000 (305,000)
---------- ---------
Net cash provided by operating activities 15,882,787 4,698,111
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid for furniture, fixtures and other (36,046) (23,764)
Cash paid for acquisitions, development and exploration (19,435,759) (49,735,532)
Proceeds from sale of short-term investments - 4,000,000
Cash undesignated as restricted - 1,787,500
------------ ------------
Net cash used in investing activities (19,471,805) (43,971,796)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under line of credit 14,000,000 12,000,000
Repayment of borrowings (9,000,000) -
Proceeds from issuance of common stock - 19,300,000
Cash paid for debt issuance costs - (105,729)
Exercise of options to purchase common stock 1,156,284 -
----------- ----------
Net cash provided by financing activities 6,156,284 31,194,271
----------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 2,567,266 (8,079,414)
CASH AND CASH EQUIVALENTS:
BEGINNING OF PERIOD 1,843,425 12,876,879
--------- ----------
END OF PERIOD $4,410,691 $4,797,465
========== ==========
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 4, 2008.
10