GeoMet, Inc. Announces
Estimated Proved Reserves of 320 Bcf, Replaced 296% of Production and Added 21 Bcf Proved Reserves Before Downward Revisions
Houston, Texas – February 12, 2009 - GeoMet, Inc. (NASDAQ: GMET) today announced that its proved natural gas reserves as of December 31, 2008 as estimated by DeGolyer and MacNaughton, an independent reservoir engineering firm, totaled approximately 320 billion cubic feet (Bcf), a decrease of 8.6% from the approximate 350 Bcf of proved natural gas reserves at year-end 2007. Proved reserve estimates for the current year were calculated using an unescalated natural gas price of $5.71 per million British thermal units (MMbtu), adjusted for regional price differentials, as compared to an unescalated natural gas price in the prior year of $7.46 per MMbtu.
The Company’s proved reserves were 100% from unconventional reservoirs, 99% from coalbed methane and 77% developed. The present value of proved reserves discounted at ten percent was approximately $352 million at December 31, 2008 as compared to $663 million at year-end 2007. Although reserves declined from year-end 2007, before downward revisions and a property conveyance the Company replaced approximately 296% of its production in 2008. Downward revisions totaled approximately 42 Bcf of which approximately 13 Bcf resulted from lower natural gas prices. The remaining downward revisions were primarily in the Gurnee field in Alabama, resulting from production performance issues in certain sectors of the field.
Approximately 57% of total year-end 2008 proved reserves are in the Gurnee field in Alabama and 41% are in the Pond Creek and Lasher fields in West Virginia and Virginia. The Peace River project is the first commercial coalbed methane project in British Columbia, Canada and there are no other similar producing analogies in the region. As a result, initial proved developed reserves of only 4 Bcf were booked in 2008. However, an additional 22 Bcf of probable reserves were estimated for the project by DeGolyer and MacNaughton. Similarly, our Garden City project it is the first commercial Chattanooga Shale project in Alabama, and only 2 Bcf of initial proved reserves were booked in 2008.
In addition to proved reserves, DeGolyer and MacNaughton estimated the Company had probable reserves of 177 Bcf at December 31, 2008, resulting in total proved and probable reserves of approximately 497 Bcf.
GeoMet accounts for its gas properties on the full cost method and is required to impair a full cost pool when the net capitalized costs in the pool exceed the discounted future net revenues of the proved reserves associated with the pool. Based upon the lower natural gas prices at December 31, 2008, the Company expects to report a non-cash impairment to its U.S. full cost pool. Due to limited initial proved reserve bookings in the Peace River project the Company also expects to report a non-cash impairment to its Canadian full cost pool. Using the natural gas price of $4.84 per MMBtu that existed on February 10, 2009, the total of these impairments would aggregate between $90 and $101 million (unaudited) net of taxes. The final amount of the impairment will be determined using the market price for natural gas on a date shortly before filing the Company’s Annual Report on Form 10-K. Non-cash impairment charges have no impact on covenants in our bank credit agreement.
The Securities and Exchange Commission (“SEC”) permits oil and gas companies, in filings made with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. GeoMet and the independent petroleum engineering firm that GeoMet engaged use the term “probable reserves” to describe volumes of reserves potentially recoverable through additional drilling that the SEC's guidelines strictly prohibit GeoMet from including in filings with the SEC. These estimates are by their nature more speculative than estimates of proved reserves. All estimates of probable reserves in this news release have been prepared by an independent petroleum engineering firm. GeoMet discloses probable reserves because of the unique characteristics of coalbed methane properties and because management believes that this is valuable information to its investors.
Forward-Looking Statements Notice
This press release may contain “forward-looking statements” within the meaning of Section27A of the Securities Act of 1933, as amended, and Section21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are subject to certain risks, trends and uncertainties that could cause actual results to differ materially from those projected. Among those risks, trends and uncertainties are our estimate of the sufficiency of our existing capital sources, our ability to raise additional capital to fund cash requirements for future operations, the uncertainties involved in estimating quantities of proved oil and natural gas reserves, in prospect development and property acquisitions and in projecting future rates of production, the timing of development expenditures and drilling of wells, and the operating hazards attendant to the oil and gas business. In particular, careful consideration should be given to cautionary statements made in the various reports the Company has filed with the SEC. GeoMet undertakes no duty to update or revise these forward-looking statements.
About GeoMet, Inc.
GeoMet, Inc. is an independent energy company primarily engaged in the exploration for and development and production of natural gas from coal seams (“coalbed methane”) and non-conventional shallow gas. Our principal operations and producing properties are located in the Cahaba Basin in Alabama and the Central Appalachian Basin in West Virginia and Virginia. We also control additional coalbed methane and oil and gas development rights, principally in Alabama, British Columbia, Virginia, and West Virginia.
For more information please contact Stephen M. Smith at (713)287-2251 (email@example.com); John Baldissers with BPC Financial at (800) 667-0938; or visit our website at www.geometinc.com.