NGAS Resources reported fourth quarter 2009 total revenue of $14.8 million compared to $21.8 million for the comparable quarter in 2008. For the full year, total revenue was $57.8 million compared to $84.4 million for 2008. The results for the fourth quarter and full year reflect reduced drilling activity, lower commodity prices and the impact from the sale of gas gathering assets during third quarter 2009.
In the fourth quarter, the Company reported a net loss of $3.2 million compared to net income of $306,639 in the same period of 2008. The loss per share in the quarter was $0.11, compared to earnings per share of $0.01. For the full year, NGAS reported a loss per share of $0.27, compared to earnings per share of $0.11. Non-cash interest charges of $1.1 million in the quarter and $3.9 million for the year negatively impacted 2009 results. Discretionary cash flow per share was $0.02 in the fourth quarter compared to $0.15. For the full year, the Company reported discretionary cash flow of $11.6 million, or $0.41 per share compared to $21.1 million or $0.78 per share. (A reconciliation of this non-GAAP measure is provided at the end of this release.)
William S. Daugherty, President and CEO of NGAS Resources, commented, "We made significant progress to strengthen the balance sheet and improve liquidity. We reduced debt as we monetized our gas gathering assets, raised equity and restructured our convertible notes. Reflecting the difficult financial environment, we curtailed our drilling activity and returned to sponsored drilling partnerships allowing us to meet our drilling commitments with a reduced drilling budget." Mr. Daugherty added, "We have now completed 48 horizontal wells, and recently extended the laterals from 3,500 feet up to 4,500 feet, while increasing the frac stages. These extended lateral wells have significantly higher initial production rates and should have stronger reserves than our previous shorter lateral wells."
Operational and Financial Highlights for 4Q 2009 versus 4Q 2008:
Fourth Quarter and Full Year 2009 Expense Review
Depreciation, depletion and amortization (DD&A) expenses were $3.4 million in the fourth quarter 2009 compared to $3.0 million in the fourth quarter of 2008. For the full year, DD&A expenses were $14.0 million, up from $12.4 million in the prior year. The increase was attributable to additions to oil and gas properties partially offset by the sale of gas gathering assets.
Selling, general and administrative (SG&A) expenses in the fourth quarter of 2009 decreased 13% to $3.3 million from $3.7 million in the prior year. As a percentage of revenue, SG&A costs were 22% compared to 17% in fourth quarter 2008. For the full year, SG&A expenses were $11.7 million, down from $14.0 million in the prior year. The decrease largely reflects a reduction in the size of the Company's 2009 drilling partnerships.
Cash interest expense declined 23% in fourth quarter 2009 to $1.1 million and by 8% for full year 2009 to $5.1 million, reflecting the reduction in debt under the Company's credit facility. The increase in non-cash interest expense reflects the application of the effective interest method for accretion of the debt discount for the embedded conversion feature of the Company's 6% convertible notes. Total, cash and non-cash, interest expense was $2.2 million and $9.0 million in fourth quarter and full year 2009, respectively, compared to $1.4 million and $5.6 million in the comparable periods of the prior year.
Operational and Financial Highlights for Full Year 2009 versus Full Year 2008:
The Company's estimated proved reserves at year-end 2009 were 78.4 Bcfe, compared to 77.9 Bcfe at year-end 2008. Under the SEC's new 12-month average pricing model, commodity prices used in the 2009 reserve estimates were $4.25 per Mcf of natural gas, compared to $5.51 per Mcf at year-end 2008. Under the SEC's old method, utilizing 2009 year-end pricing, the Company would have reported proved reserves of 134.7 Bcfe, or 142.4 Bcfe based on 10-year strip prices.
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