Exhibit 99.1
Gasco
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Energy
For Release at 8:00 AM EST on Thursday, February 5, 2009
Gasco Energy Announces 2008 Year-End Proved Reserves and Revised CAPEX;
Updates Gate Canyon Progress
DENVER - February 5, 2009 - Gasco Energy, Inc. (NYSE Alternext US: GSX) today
announced 2008 year-end total proved reserves of 53.1 billion cubic feet of
natural gas equivalent (Bcfe), comprised of 50.9 Bcf of natural gas and 361,000
barrels of liquids. The Company's reserve mix is 96% natural gas and 4% liquid
hydrocarbons, including condensate volumes. At year-end 2008, 100% of the
Company's reserves were classified as proved developed. By comparison, Gasco's
total proved reserves at year-end 2007 were 110.7 Bcfe, approximately 50% of
which were classified as proved developed and 50% were proved undeveloped.
Reserves Summary at December 31, 2008
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2007
2008 Proved
% of Proved Reserves %
Category Reserves Reserves (Mcfe) (Mcfe) Chg.
-------- -------- -------------- ------ ----
Proved Developed
Producing 79% 41,940,000 38,709,212 7.7%
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Proved Developed Non-
Producing 21% 11,135,000 16,281,525 (31.6%)
- ----------------------- ----------- --------------- --------------- -----------
Proved Undeveloped 0% 0 55,772,413 (100%)
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Total 100% 53,075,000 110,763,150 (52.1%)
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Reserve Reconciliation Gas Oil Equivalents
Mcf Bbl Mcfe
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Balance, December 31, 2007 104,338,338 1,070,802 110,763,150
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Extensions and discoveries 2,400,000 17,000 2,502,000
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Revisions of previous estimates (42,740,310) (646,257) (46,617,852)
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Sales of reserves in place (8,506,000) (38,000) (8,734,000)
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Production (4,583,028) (42,545) (4,838,298)
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Balance, December 31, 2008 50,909,000 361,000 53,075,000
========== ======== ==========
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Proved Developed Reserves 50,909,000 361,000 53,075,000
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In accordance with SEC requirements, Gasco's proved reserves at December 31,
2008 were computed using unescalated year-end 2008 commodity prices (based on
Rocky Mountain regional prices) of $23.60 per barrel for black wax, $14.33 per
barrel for condensate and $4.63 per million British thermal units for natural
gas including necessary adjustments for quality and location to arrive at the
net price received by the Company as of December 31, 2008. The average price net
to Gasco in the reserve report is $15.34 per barrel for liquids and $4.63 per
Mcf for natural gas. Based on these prices the estimated discounted net present
value of Gasco's proved reserves, before projected income taxes, using a 10% per
annum discount rate ("PV-10") was $69.5 million at December 31, 2008. For
December 31, 2007, the SEC PV-10 number was $161.8 million and used net year-end
commodity prices of $6.53 per Mcf of natural gas and $73.95 per barrel of crude
oil.
All of the reserves valued in the report are located in Gasco's Riverbend
Project area in Carbon, Duchesne, and Uintah Counties in Utah's Uinta Basin.
Reserve estimates are engineered by independent reservoir engineering
consultants, Netherland, Sewell & Associates, Inc. and conform to the definition
as set forth in the SEC Regulation S-X Part 210.4-10 (a) as clarified by
subsequent Commission Staff Accounting bulletins. The proved reserves are also
in accordance with Financial Accounting Standards Board Statement No. 69
requirements. In accordance with SEC guidelines, reserve estimates do not
include any probable or possible reserves which may exist for Gasco's
properties.
While the Company has not completed its December 31, 2008 financial statements
including its valuation of unproved properties, management does not believe that
the Company will record an impairment charge of the carrying value of its proved
oil and gas properties for the fourth quarter 2008.
Definition - Reserves
Important definitions pertaining to oil and gas reserves may be found in the
"Glossary of Natural Gas and Oil Terms" in the Company's annual Filing on Form
10-K.
2009 Initial Capital Expenditure Budget
Gasco also today announced that its Board of Directors has approved a revised
initial 2009 capital expenditure budget (CAPEX) of $10 million. From the
preliminary budget presented in a November 4, 2008 news release, the Company has
reduced its CAPEX budget for 2009 by $20 million. The change in plan is a direct
result of further weakening in commodity prices, high service costs for drilling
and completing wells and limited capital markets. The revised program includes
completing the Gate Canyon State #23-16, the drilling and completion of
approximately two gross (0.84 net) wells and 12 recompletions (4 net) of up-hole
zones on Gasco's Riverbend Project located in the Uinta Basin of Utah. The wells
in the program will be drilled to develop the natural-gas-bearing upper Mancos
shale intervals and associated up-hole pay zones in each wellbore. The CAPEX
budget does not include possible acquisitions, but may include installation of
pipeline infrastructure, distribution facilities and certain geophysical
operations.
The Company intends to fund its budget entirely through cash flow from
operations. Consequently, the Company will monitor spending and cash flow
throughout the year and may accelerate or delay investment depending on
commodity prices and cash flow expectations. The Company currently operates a
single rig. This rig will be released after it completes drilling operations on
the well it is currently drilling. It is scheduled to reach total depth (TD) in
late February 2009. At rig release, the Company is obligated to pay the rig
contractor approximately $4.6 million for early termination of the drilling
contract (as calculated at $12,000/day from rig release through March 15, 2010,
the expiration date of the contract).
Gasco has a $250 million reserve-based revolving line of credit facility with a
borrowing base of $45 million, of which $31 million was drawn at December 31,
2008.
Interim Gate Canyon Area Update
The GCS #23-16 (25% working interest, Gasco operated), a Dakota and full Mancos
shale interval test, reached TD of 16,610 feet on June 13, 2008. As previously
announced, the well was completed in the Morrison and Dakota formations with
four frac stages, where it encountered mechanical issues.
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After setting a bridge plug above the Dakota to isolate production from the
lower intervals, completion operations have subsequently moved up-hole to target
Mancos Shale and Blackhawk pay. Gasco has now successfully completed two
additional frac stages, the fifth and sixth stages in the wellbore. The initial
two lower Mancos stages (five and six) were initially tested at combined rates
of up to 4.2 million cubic feet of natural gas per day (MMcf/d), with a flowing
casing pressure of 7,700 psi on a 12/64" choke. During a 12-hour test, the well
averaged a combined flow-rate of 2.5 MMcf/d on a 12/64" choke with a flowing
casing pressure of 4,900 psi. All production rates were observed while the well
was cleaning up and flowing back frac fluid. Gasco is currently moving up-hole
to complete seven additional Mancos / Blackhawk frac stages. At that point,
production testing will resume before completing and testing additional
Blackhawk, Mesaverde and Wasatch pay zones located further up-hole.
Management Comment
Gasco's President and CEO Mark Erickson said: "The high flow rates observed
during the early stages of our Gate Canyon well are encouraging initial signs of
the GCS #23-16 productive potential. There remains additional up-hole pay to
complete in the well, which should allow us to learn more from the completions
and further production testing. The results are early, but indicate a
gas-charged system at least in this part of Gate Canyon. We have focused the
majority of our historical drilling program and CAPEX in the eastern part of the
Riverbend project and have limited drilling and completion data and results
to-date from the Gate Canyon Unit located to the extreme west of our leasehold.
The well should give us a good look at reservoir characteristics and other
important data to help us better understand the Gate Canyon area.
"With respect to reserves, the drop in commodity prices along with high services
costs did not allow us to clearly demonstrate the critical improvements we
continue to achieve on our Riverbend Project. Our revisions of 46.6 Bcfe are
attributed to lower prices received and higher well costs during 2008 which
resulted in the booking of no proved undeveloped (PUD) locations. We also
experienced a write down of 290,000 barrels, or 88% of our Black Wax production,
attributed again to the sharply lower price at December 31, 2008. It is
interesting to note that during 2008 the Company drilled and completed six wells
that were previously booked as PUD locations in 2007. The proved developed
producing reserves resulting from this drilling yielded an average of 2.52 Bcfe
per well versus the previously PUD assigned reserves averaging 1.75 Bcfe, or a
44% increase over the PUD estimates.
Erickson concluded: "Now, in 2009, we are experiencing softening of services
costs which should benefit our planned 2009 program. During 2008, all wells
drilled penetrated the Mancos which expanded our core producing area to nearly
one full township. We continued to work diligently to reduce drilling days while
constantly improving tight gas sands and shale completion techniques. Production
analysis indicates that we are often draining less than an estimated five acres
within the Mancos. We are greatly benefitted by our thick Mancos section and
additional up-hole pay zones that can be commingled with the Mancos. The play is
clearly ready for the implementation of new technology, including horizontal
drilling which has proven successful in other shale plays in North America."
About Gasco Energy
Denver-based Gasco Energy, Inc. is a natural gas and petroleum exploitation,
development and production company engaged in locating and developing
hydrocarbon resources, primarily in the Rocky Mountain region. Gasco's principal
business is the acquisition of leasehold interests in petroleum and natural gas
rights, either directly or indirectly, and the exploitation and development of
properties subject to these leases. Gasco currently focuses its drilling efforts
in the Riverbend Project located in the Uinta Basin of northeastern Utah,
targeting the Wasatch, Mesaverde, Blackhawk, Mancos, Dakota and Morrison
formations. 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
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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;
fluctuations in natural gas and oil prices; pipeline constraints; overall demand
for natural gas and oil in the United States; changes in general economic
conditions in the United States; our ability to manage interest rate and
commodity price exposure; changes in the Company's borrowing arrangements; the
condition of credit and capital markets in the United States; 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
Reports on Form 10-Q for the quarters ended June 30, 2008 and September 30, 2008
filed with the Securities and Exchange Commission on August 4, 2008 and November
4, 2008, respectively.
Any of these factors could cause our actual results to differ materially from
the results implied by these or any other forward-looking statements made by us
or on our behalf. We cannot assure you that our future results will meet our
expectations. When you consider these forward-looking statements, you should
keep in mind these factors. All subsequent written and oral forward-looking
statements attributable to the Company, or persons acting on its behalf, are
expressly qualified in their entirety by these factors. Our forward-looking
statements speak only as of the date made. The Company assumes no duty to update
or revise its forward-looking statements based on changes in internal estimates
or expectations or otherwise.
Contact for Gasco Energy, Inc.: Investor Relations: 303-483-0044
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