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GeoMet Inc. (GMET): Exploring for Natural Gas in Unique Ways

GeoMet (GMET) is an independent energy company, engaged in the exploration, development and production of natural gas from coalbed methane and non-conventional shallow gas. As of the end of last year, GeoMet controlled 266,000 acres of coalbed methane, and oil and natural gas development rights, primarily in Alabama, West Virginia, Virginia, Louisiana, Colorado, and British Columbia. GeoMet is at the forefront of exploration of natural gas from coalbed methane, which has only been a widely-used practice for about 20 years. It is estimated that there are over 1 trillion cubic feet of recoverable natural gas in US coalbed methane reserves.

GeoMet’s holdings included approximately 44,000 net acres in the Gurnee field in the Cahaba Basin in Alabama; approximately 51,000 net acres in the Garden City prospect in Alabama; approximately 35,000 net acres in the Pond Creek field in the central Appalachian Basin; approximately 17,000 net acres in the Lasher field in the central Appalachian Basin; and approximately 25,000 net acres in the Peace River field in British Columbia. The Texas-based company also has 350.2 billion cubic feet of proven natural gas reserves.

GeoMet’s primary competitors include CNX Gas Corp., St. Mary Land & Exploration Co. and the privately held Belden & Blake Corp. Last month, GeoMet won a court ruling in a pipeline dispute against CNX. GeoMet had contended that CNX didn’t have exclusive rights to transport natural gas on land in Virginia owned by the Pocahontas Mining Limited Liability Company. The Virginia Supreme Court agreed and as a result GeoMet said it expects to increase capital spending in 2009 to its highest levels since 2006.

For the second quarter ended June 30, the company reported a loss of $3.2 million, or 8 cents per share, compared with a profit of $3 million, or 8 cents per share, in the same period last year. GeoMet attributed the losses to derivatives contracts. Excluding the derivatives losses, profit was $5.5 million, or 14 cents per share. Revenue rose 55 percent to $20.7 million from $13.4 million a year earlier as natural gas prices surged.

Five analysts follow the firm, two with a “strong buy” rating, two with a “buy” rating, and one with a “hold” rating. Insiders own 45 percent of GeoMet shares, while 67 institutions own another 46 percent. Mutual fund owners include Aberdeen and T. Rowe Price.

GeoMet shares closed at $5.32 on Wednesday and have traded between $4.06 and $10.12 over the past 52 weeks. The company has a market value of $208.9 million.

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