NGAS RESOURCES, INC. 
By NGAS Resources, Inc. (Nasdaq: NGAS) today reported third quarter 2006 total revenue of $14.9 million, a 2 percent decline from the comparable quarter last year. Gas gathering and compression revenue rose 417 percent on increased fees for moving third-party gas through the open-access section of the Company's gathering system. Oil and gas production revenue increased 32 percent. A 44 percent increase in production volume was partially offset by a 13 percent decline in the average sales price for natural gas. Contract drilling revenue declined 27 percent as the Company took a larger interest in new wells.
Net income in third quarter 2006 was $135,959 versus $187,197 in third quarter 2005. Earnings per fully diluted share of $0.01 were flat with the comparable period in the prior year. Weighted average fully diluted shares outstanding were 22,858,854 compared to 19,597,136 in the third quarter of 2005.
Operational and Financial Highlights for 3Q 2006 versus 3Q 2005:
- Average daily production was 7,528 Mcfe versus 5,220 Mcfe
- Total production volume increased 44 percent to 692.6 Mmcfe
- 52 gross (18.25 net) wells drilled versus 34 gross (9.72 net)
- Average sales price for natural gas was $7.70/Mcf versus $8.82/Mcf
- Oil and gas revenue increased 32 percent to $5.6 million
- Gas gathering and compression revenue rose 417 percent to $1.6 million
- Discretionary cash flow was $2.9 million versus $1.9 million
- Capital expenditures totaled $8.1 million
- 32 miles of pipeline added to field-wide gathering systems
William S. Daugherty, President and CEO of NGAS Resources commented, ?In order to take advantage of strong long-term natural gas supply and demand fundamentals, we remain focused on delivering growth through the drill-bit. Our implementation of this strategy is concentrated in unconventional natural gas basins that support repeatable drilling opportunities. To sustain our growth, we will continue to expand our gas gathering infrastructure and increase our interest in new wells.? Mr. Daugherty added, ?With over 1,100 drilling locations and our gas gathering infrastructure, we are well positioned for future growth.?
Third Quarter 2006
During the quarter, the Company drilled 52 gross (18.25 net) wells. Contract drilling revenue decreased 27 percent from the prior year to $7.7 million as the Company took an increased interest in new wells. Contract drilling margins were 20 percent reflecting the transition from turnkey to cost-plus pricing for new drilling programs.
Selling, general and administrative expenses were $2.6 million, down 12 percent from the same quarter of 2005. This primarily reflects a reduction in marketing expenditures for drilling programs. As a percentage of revenue, SG&A costs were 18 percent, down from 20 percent in third quarter 2005.
Depreciation, depletion and amortization expenses were $1.9 million in third quarter 2006, compared to $1.0 million in third quarter of 2005. The increase in these charges reflects substantial additions to oil and gas properties, gas gathering systems and related equipment, including the NGAS Gathering system.
Interest expense in the quarter was $1.3 million, compared to $0.4 million in the same period last year. The increase was attributable to higher debt from the issuance of convertible notes at year-end 2005 as well as credit facility fundings for drilling and gas gathering activities.
Operational and Financial Highlights for Nine Months 2006 versus Nine Months 2005:
- Average daily production was 7,640 Mcfe versus 4,814 Mcfe
- Total production volumes were up 59 percent to 2.1 Bcfe
- 180 gross (48.63 net) wells drilled versus 118 gross (33.70 net)
- Average sales price for natural gas was $8.27 Mcf versus $8.05/Mcf
- Oil and gas revenue increased 67 percent to $17.7 million
- Discretionary cash flow doubled to $10.6 million
- Capital expenditures totaled $43.6 million
- 89 miles of pipeline added to field-wide gathering systems
- Gas gathering and compression fees totaling $1.8 million from NGAS Gathering system
Conference Call Information
A conference call will be held at 4:30 p.m. (Eastern) today to discuss 3Q 2006 results. The call in number is 800-289-0508 or 913-981-5550 (international). Conference ID number is 1000740. The conference call will be webcast and can be accessed by logging onto www.ngas.com or http://viavid.net/dce.aspx?sid=00003721. A PowerPoint presentation, which highlights management's discussion points, will be available on the Company's website. For those unable to listen to the live presentation, the webcast will be archived on the Company's website. A telephone replay will also be available for one week beginning at 7:30 p.m. (Eastern), November 9, 2006, and can be accessed by dialing 888-203-1112 or 719-457-0820 (international) and entering pin number 1000740.
About NGAS Resources
NGAS Resources is an independent exploration and production company focused on unconventional natural gas basins in the United States that support repeatable drilling opportunities, principally in the southern portion of the Appalachian Basin. Additional information, including the Company's annual report on Form 10-K for 2005 and its quarterly report on Form 10-Q for the third quarter of 2006, can be accessed on its website at www.ngas.com.
This release includes forward-looking statements within the meaning of the Private Litigation Reform Act of 1995 relating to matters such as anticipated operating and financial performance and prospects. Actual performance and prospects may differ materially from anticipated results due to economic conditions and other risks, uncertainties and circumstances partly or totally outside the control of the Company, including risks of production variances from expectations, volatility of product prices, and the level of capital expenditures required to fund drilling and the ability of the Company to implement its business strategy. These and other risks are described in the Company's periodic reports filed with the United States Securities and Exchange Commission.
NGAS RESOURCES, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) | ||||||||||||
| Three Months Ended | Nine months Ended | |||||||||||
| September 30, | September 30, | |||||||||||
| 2006 | 2005 | 2006 | 2005 | |||||||||
| REVENUE | ||||||||||||
| Contract drilling | $ | 7,726,332 | $ | 10,581,000 | $ | 39,167,106 | $ | 34,897,000 | ||||
| Oil and gas production | 5,560,470 | 4,199,754 | 17,700,437 | 10,583,245 | ||||||||
| Gas gathering and compression | 1,564,662 | 302,694 | 3,642,818 | 1,049,168 | ||||||||
| Total revenue | 14,851,464 | 15,083,448 | 60,510,361 | 46,529,413 | ||||||||
| DIRECT EXPENSES | ||||||||||||
| Contract drilling | 6,180,299 | 8,361,324 | 30,723,788 | 27,349,389 | ||||||||
| Oil and gas production | 1,517,471 | 1,192,036 | 4,500,879 | 2,841,551 | ||||||||
| Gas gathering and compression | 532,650 | 252,743 | 1,706,948 | 880,611 | ||||||||
| Total direct expenses | 8,230,420 | 9,806,103 | 36,931,615 | 31,071,551 | ||||||||
| OTHER EXPENSES (INCOME) | ||||||||||||
| Selling, general and administrative | 2,635,522 | 3,000,577 | 10,274,430 | 9,019,312 | ||||||||
| Options, warrants and deferred compensation | 363,167 | 362,290 | 1,211,701 | 853,988 | ||||||||
| Depreciation, depletion and amortization | 1,935,318 | 991,278 | 5,437,808 | 3,039,366 | ||||||||
| Interest expense | 1,299,635 | 360,605 | 2,989,088 | 1,424,359 | ||||||||
| Interest income | (68,881) | (79,546) | (288,765) | (165,672) | ||||||||
| Other, net | (159,553) | 69,626 | (32,165) | (95,290) | ||||||||
| Total other expenses | 6,005,208 | 4,704,830 | 19,592,097 | 14,076,063 | ||||||||
| INCOME BEFORE INCOME TAXES | 615,836 | 572,515 | 3,986,649 | 1,381,799 | ||||||||
| FUTURE INCOME TAX EXPENSE | 479,877 | 385,318 | 2,502,000 | 993,188 | ||||||||
| NET INCOME | $ | 135,959 | $ | 187,197 | $ | 1,484,649 | $ | 388,611 | ||||
| NET INCOME PER SHARE | ||||||||||||
| Basic | $ | 0.01 | $ | 0.01 | $ | 0.07 | $ | 0.02 | ||||
| Diluted | $ | 0.01 | $ | 0.01 | $ | 0.06 | $ | 0.02 | ||||
| WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: | ||||||||||||
| Basic | 21,552,294 | 17,583,061 | 21,462,856 | 16,432,965 | ||||||||
| Diluted | 22,858,854 | 19,597,136 | 22,981,498 | 17,722,030 | ||||||||
NGAS RESOURCES, INC. CONSOLIDATED BALANCE SHEETS (Unaudited) | ||||||
September 30, | December 31, | |||||
| ASSETS | 2006 | 2005 | ||||
| Current assets: | ||||||
| Cash | $ | 5,657,412 | $ | 23,944,252 | ||
| Accounts receivable | 14,475,482 | 6,883,700 | ||||
| Prepaid expenses and other current assets | 1,189,185 | 3,161,847 | ||||
| Loans to related parties | 7,147 | 26,235 | ||||
| Total current assets | 21,329,226 | 34,016,034 | ||||
| Bonds and deposits | 533,695 | 432,695 | ||||
| Oil and gas properties | 144,096,561 | 105,785,340 | ||||
| Property and equipment | 3,177,635 | 2,934,169 | ||||
| Loans to related parties | 259,251 | 264,377 | ||||
| Deferred financing costs | 2,403,315 | 2,377,791 | ||||
| Other non-current assets | 1,369,674 | 650,000 | ||||
| Goodwill | 313,177 | 313,177 | ||||
| Total assets | $ | 173,482,534 | $ | 146,773,583 | ||
| LIABILITIES | ||||||
| Current liabilities: | ||||||
| Accounts payable | $ | 7,147,859 | $ | 5,439,437 | ||
| Accrued liabilities | 5,920,257 | 5,788,554 | ||||
| Customers' drilling deposits | 3,095,574 | 23,627,975 | ||||
| Long term debt, current portion | 24,000 | 24,000 | ||||
| Total current liabilities | 16,187,690 | 34,879,966 | ||||
| Future income taxes | 6,383,735 | 3,881,755 | ||||
| Long term debt | 74,840,531 | 34,947,905 | ||||
| Deferred compensation | 1,273,974 | 836,568 | ||||
| Total liabilities | 98,685,930 | 74,546,194 | ||||
| SHAREHOLDERS' EQUITY | ||||||
| Common stock, no par value, 100,000,000 shares authorized, 21,635,215 shares issued (2005 - 21,357,628) | ||||||
| 83,592,086 | 82,371,189 | |||||
| 21,100 shares held in treasury, at cost | (23,630) | (23,630) | ||||
| Paid-in capital - options and warrants | 2,872,114 | 2,743,806 | ||||
| Contributed surplus | 1,484,287 | 1,748,926 | ||||
| 9,185 shares to be issued | 45,925 | 45,925 | ||||
| 87,970,782 | 86,886,216 | |||||
| Accumulated deficit | (13,174,178) | (14,658,827) | ||||
| Total shareholders' equity | 74,796,604 | 72,227,389 | ||||
| Total liabilities and shareholders' equity | $ | 173,482,534 | $ | 146,773,583 | ||
| NGAS RESOURCES, INC. | |||||||||||||||||||||||||||||||||
| CASH FLOW RECONCILIATION | |||||||||||||||||||||||||||||||||
Discretionary cash flow represents net income, as determined under generally accepted accounting principles (?GAAP?), with certain non-cash items added back. Although a non-GAAP measure, discretionary cash flow is widely accepted as a financial indicator of an oil and gas company's ability to generate cash that can be used to internally fund exploration and development activities and to service debt. This measure may also be used in the valuation, comparison, rating and investment recommendations for companies in the oil and gas exploration and production industry. Cash flow is not a measure of financial performance under GAAP and should not be considered as an alternative to cash flows from operating, investing, or financing activities or as an indicator of cash flows or measure of liquidity. | |||||||||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||||||
September 30, | September 30, | ||||||||||||||||||||||||||||||||
2 Share
© Business Wire - 2006
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