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SMALL BUSINESS
Gateway Energy Reports Second Quarter 2009 Results
HOUSTON, Aug. 17 /PRNewswire-FirstCall/ -- Gateway Energy Corporation (OTC Bulletin Board: GNRG) today announced the financial results for the quarter ending June 30, 2009.
For the quarter the Company reported;
- Total revenues of $1,740,743, a decrease from the $4,385,600 for the same quarter of 2008.
- Revenues from onshore operations decreased to $993,002 from $3,775,130 for the quarter ended June 30, 2008. 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.
- Revenues from offshore operations increased to $762,091 from $610,470, due primarily to higher throughput volumes.
- Operating income from continuing operations for the quarter ended June 30, 2009 showed a loss of $92,467 as compared to income of $67,939 for the quarter ended June 30, 2008. This loss is due to reduced volumes transported through the onshore systems, increased insurance costs associated with the Shipwreck platform and one-time charges related to legal expenses.
- Net income attributable to controlling interest for the second quarter of 2009 was $191,805 as compared to $174,125 for the same period in 2008.
- Adjusted EBITDA for the second quarter of 2009 was $134,181 compared to $477,252 for the same quarter 2008. Adjusted EBITDA for the second quarter of 2009 excludes a $324,997 gain on sale.
- Total operating cost and expenses for the quarter were $1,833,210 as compared to $4,317,661 for the same quarter of 2008. The cost of natural gas purchased decreased from $3,321,047 for the second quarter of 2008 to $761,678 for the second quarter of 2009.
- Operation and maintenance costs for the second quarter of 2009 were $186,850 as compared to $204,969 for the second quarter of 2008.
- Depreciation, depletion and amortization costs decreased to $141,600 for the quarter ending June 30, 2009 as compared to $156,626 for the quarter ending June 30, 2008.
- General and administrative costs for the second quarter of 2009 were $743,082, as compared to $635,019 reported in the second quarter of 2008. This increase reflects increased insurance costs associated with the Shipwreck platform and one-time charges related to legal expenses.
For the six months the Company reported;
- Total revenues of $3,710,199, a decrease from the $7,833,591 for the same period of 2008. This decrease in total revenues reflects a decrease from onshore operations to $2,210,042 from $6,663,554 for the six months ended June 30, 2008 and an increase from offshore operations to $1,500,966 from $1,170,037.
- Operating income from continuing operations for the six months ending June 30, 2009 showed a loss of $165,766 as compared to a loss of $80,229 for the six months ended June 30, 2008. This loss is due to reduced volumes transported through the onshore systems, increased insurance costs associated with the Shipwreck platform and consulting fees related to recruiting.
- Net income attributable to controlling interest for the first six months of 2009 was $56,367 as compared to $83,575 for the same period in 2008.
- Adjusted EBITDA for the first six months of 2009 was $147,010 compared to $568,511 for the same period 2008. Adjusted EBITDA for the first quarter of 2009 excludes a $324,997 gain on sale.
- Total operating costs and expenses for the six months were $3,875,965 as compared to $7,913,820 for the same period of 2008. The cost of natural gas purchased decreased from $5,890,161 for the first six months of 2008 to $1,786,696 for the first half of 2009.
- Operation and maintenance costs for the first half of 2009 decreased slightly to $374,405 from $385,387 reported for the first half of 2008.
- Depreciation, depletion and amortization costs for the first half of 2009 were $302,652, as compared to $325,799 for the first six months of 2008.
- General and administrative costs for the first six months of 2009 were $1,412,212 as compared to $1,312,573 in the same period 2008. This increase reflects increased insurance costs associated with the Shipwreck platform and consulting fees related to recruiting.
Management Comments
Mr. Robert Panico, President and CEO of Gateway said, "There is no doubt that the current recession and the attendant declines in consumer demand, has impacted the financial performance of our Waxahachie system. "However," Mr. Panico continued, "we are seeing some promising developments at the Madisonville project, as the principal producer has successfully increased production on its first two completed wells, is exploring alternatives to increase production on the third completed well and planning to complete the fourth well which was drilled in 2007. We also expect to see cost reductions which should improve our financial performance as the Company benefits from the recent sales of the Crystal Beach terminal, Shipwreck platform and pipeline system and the Pirates' Beach gathering system."
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
June 30, December 31,
2009 2008
-------- ------------
ASSETS (unaudited) (revised)
Current Assets
Cash and cash equivalents $1,649,519 $1,789,029
Restricted cash 1,750,000 -
Accounts receivable trade, net 953,152 969,859
Notes receivable 440,742 -
Prepaid expenses and other assets 309,255 121,398
Current assets of discontinued
operations - 1,805,167
--- ---------
Total current assets 5,102,668 4,685,453
--------- ---------
Property and Equipment, at cost
Gas gathering, processing and
transportation 8,849,969 8,843,142
Net profits production interest 779,424 763,909
Office furniture and other equipment 147,129 143,654
------- -------
9,776,522 9,750,705
Less accumulated depreciation and
amortization (2,552,144) (2,371,704)
----------- -----------
7,224,378 7,379,001
--------- ---------
Other Assets
Deferred tax assets, net 1,195,000 1,205,000
Intangible assets, net of
accumulated amortization of
$300,484 and $222,082 as of June
30, 2009 and December 31, 2008,
respectively 686,935 765,337
Other 44,472 136,657
Non-current assets of discontinued
operations - 2,519,253
--- ---------
1,926,407 4,626,247
--------- ---------
Total assets $14,253,453 $16,690,701
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $404,736 $776,519
Accrued expenses and other
liabilities 314,077 323,100
Insurance notes payable 206,984 -
Current maturities of long-term debt 962,000 1,062,000
Current maturities of capital lease 19,691 20,235
------ ------
Total current liabilities 1,907,488 2,181,854
--------- ---------
Long-term capital lease, less
current maturities - 9,187
Non-current liabilities of
discontinued operations - 2,318,315
--- ---------
Total liabilities $1,907,488 $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 June 30,
2009 and December 31, 2008,
respectively 4,849,281 4,801,812
Additional paid-in capital 17,345,269 17,284,485
Accumulated deficit (9,848,585) (9,904,952)
----------- -----------
Total stockholders' equity 12,345,965 12,181,345
---------- ----------
Total liabilities and stockholders'
equity $14,253,453 $16,690,701
=========== ===========
GATEWAY ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- --------------------------
2009 2008 2009 2008
---- ---- ---- ----
(revised) (revised)
Operating revenues
Sales of natural
gas $932,234 $3,679,554 $2,086,144 $6,452,636
Transportation
of natural gas
and liquids 711,606 603,433 1,386,755 1,171,331
Treating and
other 96,903 102,613 237,300 209,624
------ ------- ------- -------
1,740,743 4,385,600 3,710,199 7,833,591
--------- --------- --------- ---------
Operating costs
and expenses
Cost of natural
gas purchased 761,678 3,321,047 1,786,696 5,890,161
Operation and
maintenance 186,850 204,969 374,405 385,287
Depreciation,
depletion and
amortization 141,600 156,626 302,652 325,799
General and
administrative 743,082 635,019 1,412,212 1,312,573
------- ------- --------- ---------
1,833,210 4,317,661 3,875,965 7,913,820
--------- --------- --------- ---------
Operating income
(loss) (92,467) 67,939 (165,766) (80,229)
Other income
(expense)
Interest income 6,622 5,305 11,520 16,611
Interest
expense (43,407) (37,194) (83,831) (80,882)
Other income
(expense), net 32,401 (3,649) 41,744 1,302
------ ------- ------ -----
Other expense (4,384) (35,538) (30,567) (62,969)
------- -------- -------- --------
Income (loss) from
operations before
income taxes and
discontinued
operations (96,851) 32,401 (196,333) (143,198)
Income tax benefit
(expense) 2,914 (395) 79,096 63,922
----- ----- ------ ------
Income (loss) from
continuing
operations (93,937) 32,006 (117,237) (79,276)
Discontinued
operations, net
of taxes
Income (loss)
from
discontinued
operations,
net of taxes (39,255) 54,015 (151,393) 191,675
Gain on disposal
of assets, net
of taxes 324,997 - 324,997 -
------- --- ------- ---
Income from
discontinued
operations 285,742 154,015 173,604 191,675
Net income 191,805 186,021 56,367 112,399
Net income
attributable
to noncontrolling
interest - (11,896) - (28,824)
--- -------- --- --------
Net income
attributable
to controlling
interest $191,805 $174,125 $56,367 $83,575
======== ======== ======= =======
Basic and diluted
income per share:
Continuing
operations $- $- $(0.01) $(0.01)
Discontinued
operations 0.01 0.01 0.01 0.01
---- ---- ---- ----
Net income $0.01 $0.01 $- $-
===== ===== == ==
Weighted average
number of common
shares
outstanding
Basic 19,209,336 19,062,313 19,208,298 19,044,587
Diluted 19,219,611 19,240,228 19,223,033 19,184,029
GATEWAY ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended June 30,
-------------------------
2009 2008
---- ----
(revised)
Cash flows from operating activities -
continuing operations
Income from continuing operations $(117,237) $(79,276)
Adjustments to reconcile income from
continuing operations to net cash
provided by operating activities:
Depreciation, depletion and
amortization 302,652 325,799
Deferred tax benefit (90,000) 14,420
Stock based compensation expense 108,253 113,353
Net income attributable to
noncontrolling interests - 28,824
Amortization of deferred loan costs 67,813 76,143
Change in operating assets and
liabilities:
Accounts receivable trade 16,706 (618,381)
Prepaid expenses and other assets 201,527 130,520
Accounts payable (351,912) 223,949
Accrued expenses and other liabilities (52,037) (63,003)
-------- --------
Net cash provided by operating
activities 85,765 152,348
------ -------
Cash flows from investing activities -
continuing operations
Capital expenditures (25,817) (20,003)
Restricted cash for asset acquisition - (605,425)
Other - 475
--- ---
Net cash used in investing activities (25,817) (624,953)
-------- ---------
Cash flows from financing activities -
continuing operations
Payments on borrowings (231,684) (943,462)
Proceeds from borrowings - 600,000
Restricted cash on credit facility (1,750,000) -
Deferred financing costs (18,139) -
Distributions to minority partner - (39,821)
--- --------
Net cash used in financing activities (1,999,823) (383,283)
----------- ---------
Net decrease in cash and cash
equivalents from continuing operations (1,939,875) (855,888)
Discontinued operations:
Net cash provided by discontinued
operating activities 1,803,065 280,144
Net cash used in discontinued investing
activities (2,700) (13,547)
Net cash provided by discontinued
financing activities - -
--- ---
Net increase in cash and cash
equivalents from discontinued
operations 1,800,365 266,597
--------- -------
Net decrease in cash and cash
equivalents (139,510) (589,291)
Cash and cash equivalents at beginning
of period 1,789,029 1,807,224
--------- ---------
Cash and cash equivalents at end of
period $1,649,519 $1,217,933
========== ==========
Supplemental disclosures of cash flow
information:
Income taxes paid $33,000 $46,000
Cash paid for interest 36,172 28,682
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 Six Months Ended
June 30, June 30,
-------- --------
2009 2008 2009 2008
---- ---- ---- ----
Onshore Operations
Revenues $993,002 $3,775,130 $2,210,042 $6,663,554
Cost of natural gas
purchased 761,678 3,321,047 1,786,696 5,890,161
Operation and maintenance
expense 54,006 57,705 111,221 129,052
------ ------ ------- -------
Operating margin 177,318 396,378 312,125 644,341
General and administrative
expense - 181 - 231
Depreciation and
amortization expense 24,197 49,115 72,000 98,102
------ ------ ------ ------
Operating income 153,121 347,082 240,125 546,008
Offshore Operations
Revenues $762,091 $610,470 $1,500,966 $1,170,037
Operation and maintenance
expense 132,844 147,264 263,184 256,235
------- ------- ------- -------
Operating margin 629,247 463,206 1,237,782 913,802
Depreciation and
amortization expense 105,648 106,333 211,295 225,321
------- ------- ------- -------
Operating income 523,599 356,873 1,026,487 688,481
Net Profits Interest
Revenues (loss) $(14,350) $- $(809) $-
-------- --- ----- ---
Operating margin (loss) (14,350) - (809) -
Depletion expense 10,157 - 15,912 -
------ --- ------ ---
Operating loss (24,507) - (16,721) -
-------- --- -------- ---
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 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 Six Months Ended
June 30, June 30,
-------- --------
2009 2008 2009 2008
---- ---- ---- ----
Net income $191,805 $174,125 $56,367 $83,575
Net loss attributable to
noncontrolling interest - 11,896 - 28,824
Interest expense 43,407 37,194 83,831 80,882
Income taxes (2,914) 395 (79,096) (63,922)
Depreciation, depletion
and amortization expense 141,600 156,626 302,652 325,799
Non-cash stock
compensation 85,280 97,016 108,253 113,353
Gain on sale of assets,
net of tax (324,997) - (324,997) -
----------------------- -------- --- -------- ---
Adjusted EBITDA $134,181 $477,252 $147,010 $568,511
SOURCE Gateway Energy Corporation