Forward Looking Statements

Transcription

1 Global Hunter Securities Conference Global Hunter Securities Conference July 18, 2011

2 Forward Looking Statements This presentation contains forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Except for statements of historical facts, all statements included in the document, including those preceded by, followed by or that otherwise include the words believe, expects, anticipates, intends, estimates, projects, target, goal, plans, objective, should orsimilarexpressionsor variations on such words are forward looking statements. These forward looking statements are subject to certain risks, ik trends and uncertainties i that could cause actual results to differ materially ill from those projected. Among those risks, trends and uncertainties are volatility of future natural gas prices, which have been depressed recently, 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 titi involved in estimating quantities of proved 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 shouldbegiventocautionarystatementsmadeinthevariousreportsthecompanyhasfiledwiththe SEC. GeoMet undertakes no duty to update or revise these forward looking statements. 2

3 Company in Crisis Multiple Factors Collapse of natural gas prices (100% natural gas) Gamechangingevents increditand financialmarkets Costly, time consuming litigation inhibited development of major field Failure of Gurnee Field to meet performance expectations 3

4 Turnaround Tactics Realigned cost structure to profit in low gas price environment Focused efforts on core opportunities to create value within constrained capital availability Settled litigation on favorable terms Rights offering of $40 million of new preferred equity to: reduce indebtedness provide capital for growth facilitate extension of bank credit agreement 4

5 Value Creation Drivers Industry leading expertise in coalbed methane and shallow gas Significant proved reserves and additional unproved resource base Long lived reserves, shallow decline production characteristics Low risk, multi year production growth 5

6 CBM/Shallow Gas Experts Developer and operator of coalbed methane properties since 1985 Technical staff has developed 5 large scale CBM projects in four separate basins (Black Warrior, Raton, Central Appalachia and Cahaba Basins) Technical, professional and project management team averages approximately 20 years of CBM experience Skilled in low pressure shallow gas operations Operation of low pressure gathering systems Pumping, collection, treatment and disposal of produced water Efficientoperation of compression to maintain low wellhead pressure Focus on cost control 6

7 Significant Reserve / Resource Base SEC Proved reserves of 216 Bf Bcf at (229 Bf Bcf using sensitivity pricing*) ii 100% Operated 76% Developed Non proved reserves and unrisked resource of an additional ~ 650 Bcf Approximately 120,000 net undeveloped acres at 3/31/11; significant additional open acreage for follow on success 1000 Proved Probable Unrisked Resource Bcf * Sensitivity pricing based on NYMEX natural gas forward curve adjusted for the Company s current hedge position and historical location differentials. NYMEX prices utilized averaged $5.31 per Mcf for the first 5 years, $6.26 per Mcf for the second 5 years and $6.66 per Mcf thereafter. 7

8 Long lived Reserves, Shallow Decline Rates Current net gas sales volumes of 21 MMcf/day R/P ratio of 28 years Very shallow annual decline rate Pond Creek Field Gurnee Field Monthly Production by Drilling Program Monthly Production by Drilling Program Mcf/Well/Day Mcf/Well/Day Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jan 0 Mar 0 May 0 Jul 0 Sep 0 Nov 0 Jan 0 Mar 0 May 0 Jul 0 Sep 0 Nov 0 Jan 0 Mar 0 May 0 Jul 0 Sep 0 Nov 0 Jan 0 Mar 0 May 0 Jul 0 Sep 0 Nov 0 Jan 0 Mar 0 May 0 Jul 0 Sep 0 Nov 0 Jan Mar 0 09 May 0 09 Jul 0 09 Sep 09 Nov 09 Jan 10 Mar 10 May 10 Jul 10 Sep 10 Nov 10 Jan 11 Mar 11 May

9 Pond Creek Field Low Risk Multiyear Production Growth Litigation settlement provided access to approximately 80 drilling locations in Virginia portion of Pond Creek Field 20 new wells drilled in wells planned for 2011 similar plans through 2013 Wells drilled to date currently producing at average production rates above current field wide average and are expected to continue to incline to higher peak rates Virginiai i development alone projected to yield ildmodest production growth forfourormoreyears 9

10 Gurnee Field High Potential Growth Opportunity Underperformance to date at Gurnee Field is our most significant setback, but also represents our most significant upside potential New frac technique has yielded encouraging results when applied to shallow, behind pipe zones and new wellbores Involves fracing adjacent rock strata using a shale like frac technique 10

11 Gurnee Field - High Potential Growth Opportunity Shallow Behind Pipe Completions Results from shallow coal seams in six existing wells are encouraging 120 Avg Mcf/Day/Well Avg Mcf/day Number of Wells Avg Mcf Per Well Well Count Days Producing Six completions average 5 Mcf/Day per foot of coal completed Results ranged from 3 times to 12 times field wide average production rate per foot of coal completed Only ~ 20% of coals in wellbore exposed to treatment Results, if extrapolated to full wellbore, would yield production rates of 100 to 400 Mcf/day (average ~250 Mcf/Day) 5 additional shallow behind pipe completions scheduled for

12 Gurnee Field - High Potential Growth Opportunity New Wellbore Fracs Application of new frac technique on three newly drilled full wellbores 160 Avg Mcf/Day/Well Avg Mcf/day Number of Wells Avg Mcf Per Well Well Count Days Producing 0 Results are comparable to projected results from shallow completions Two additional i new wells to be dill drilledd and completed using new frac technique in Q3 12

13 Gurnee Field - High Potential Growth Opportunity Refrac Using Resin Coated Sand Recent new re fracusing resincoated sandinanexistingcompletion 200 RGGS Gas Production /1/ /18/2008 7/6/2009 1/22/2010 8/10/2010 2/26/2011 9/14/2011 Refrac increased production 13 Mcf/Day per foot of coal refraced, or 17 times the field wide average production rate per foot of coal completed If extrapolated to full wellbore would yield a production rate of over 600 Mcf/day Two additional refracs scheduled for

14 Gurnee Field - High Potential Growth Opportunity Summary Reallocated $2 million of planned 2011 capital expenditures to Gurnee Plan to drill 2 additional new wells and to complete 5 new fracs and 2 refracs in existing wellbores Approximately 750 Bcf of estimated gas in place (high confidence) Approximately 40,000 net acres in project, 44% developed Potential increase in reserves from improved recovery factor: From25% to 50% yields~ 200 Bcf in additional reserves From 25% to 75% yields ~ 350 Bcf in additional reserves 14

15 History of Growth Annual Sales Volumes (Bcf) Adjusted EBITDA (in 000 s) $45,000 $40,000 $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $ $15,000 $13,000 Adjusted Net Income (in 000 s) Proved Reserves (Bcf) $11, $9, $7,000 $5,000 $3,000 $1,000 $1,000 $3, Bcf Proved Reserves at 12/31/2000 Approximately 400% Production Replacement 15

16 Areas of Operation Pond Creek (Virginia & West Virginia) Lasher (West Virginia) Gurnee (Alabama) Houston, Texas (Corporate Headquarters) Birmingham, Alabama (Technical Headquarters) Production and Development Area 16

17 Pond Creek Field Operator GeoMet 100% WI 30,000 net acres at 12/31/10 (56% developed) West Virginia ~ 475 MMcf average net EUR / well W Vi i i Virginia Average cost per well ~ $500,000 (fully allocated) Proved reserves at 12/31/10 (Sensitivity Case*): 135 Bcf (73% developed) Over 15.0 MMcf/day current net gas sales West Virginia 2011 Plan: Drill 16 wells in Virginia Dickinson Capex: $6.8 million Equitable Nora Resources Field OakwoodCNX Gas Field Virginia *Sensitivity pricing based on NYMEX natural gas forward curve adjusted for the Company s current hedge position and historical location differentials. NYMEX prices utilized averaged $5.31 per Mcf for the first 5 years, $6.26 per Mcf for the second 5 years and $6.66 per Mcf thereafter. GeoMet Operations Other Operations GeoMet Gathering Pipeline Jewell Ridge Pipeline ETNG Pipeline 17

18 Gurnee Field Operator GeoMet 100% WI 39,000 net acres at 12/31/10 (44% developed) 750 Bcf estimated gas in place Black Warrior B i Basin White Oak Creek Dominion Resources El Paso Proved reserves at 12/31/10 (Sensitivity Pricing*): Energen 86 Bcf (83% developed) Dominion Resources Unproved reserves and unrisked resource potential of ~350 Bcf ~ 5.0 MMcf/day current net gas sales 2011 Plan: El Paso Constellation Black Warrior Methane Cahaba River Black Warrior River Energen Drill & test 4 full wellbores (adjacent strata) Test behind pipe zones in 7 wells (adjacent strata) Refrac 3 wells usingg resin coated sand Capex $5.7 million Cahaba Basin Other CBM Projects Alabama *Sensitivity pricing based on NYMEX natural gas forward curve adjusted for the Company s current hedge position and historical location differentials. NYMEX Y X price i averaged d $5.31 $ 31 per Mcff for f the h first fi 5 years, $6.26 per Mcf for the second 5 years and $6.66 per Mcf thereafter. GeoMet High Pressure Pipeline GeoMet Projects Enbridge Pipeline Water Discharge Pipeline CDX Pipeline SONAT Bessemer Calera Pipeline SONAT Interstate Pipeline 18

19 Financial Presentation 19

20 Recapitalization $40 million preferred equity rights offering Net reduction in bank debt of $37.2 million New bank credit agreement 3 year term Current borrowing base of $90 million Current borrowings ~$ 80 million Market based covenants and pricing 20

21 Market Value Capital Structure & Debt Ratios Net Bank Debt at 3/31/11 $ 77,875 Market value of equity, including preferred $ 103,175 stock on an as converted basis * Total Market Capitalization $ 181,050 Debt / Market Capitalization 43% Trailing 12 Month EBITDA ** $ 22,881 Debt / EBITDA 3.40 * Based on market price of $1.27 per share (50 day moving average as of June 30, 2011) and on a conversion ratio of common shares per each preferred share ** Using definition in bank credit agreement w hich adds back non-recurring expenses 21

22 2011 Capital Plan Revised Capital Expenditure Plan ~ $14.0 million $1.3 $$0.2 Pond Creek $5.7 $6.8 Gurnee Other Non Cash 22

23 Hedging Summary As of March 31, 2011 Effective Floor Price $5.62 $5.50 $ ,000 20,000 15,000 Mcf/d 10,000 5,000 73% 56% 42% 9 Months Months 2013 Hedged Production Current Production 23

24 Operating Leverage Shallow production decline; 28 year R/P Low finding and development cost 2010 $ per Mcf Ten Year Average $1.60 Low asset intensity Less than 50% of EBITDA required to replace production Reduced cost structure 2010 total production costs of $2.12 per Mcf (approximately $1.60 per Mcf cash costs) High leverage to top line growth (production and/or price) 24

25 Enterprise Value per Mcf of Proved Reserves $3.50 $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 $ GMET GMXR CRK CHK RRC GDP HK PQ SWN GMET trades at 35% of group average 25

26 Enterprise Value per Mcf of Daily Production $25,000 $20,000 $15,000 $10,000 $5,000 $ PQ GMET CRK GMXR CHK GDP SWN HK RRC GMET trades at 68% of group average 26

27 Appendix 27

28 Summary Field Information As of 12/31/10 Appalachian Basin Cahaba Basin Pond Creek Lasher Gurnee (VA, WVA) WVA AL Operator GeoMet GeoMet GeoMet WI 100% 100% 100% Average Coal Depth (feet) 1,100-1, , ,400 Average Coal Thickness (feet) Average Gas Content (Scf / ton) Core Holes Gas Desorption Tests Net Acres 30,400 8,200 39,200 % Developed 56% 12% 44% Productive Wells Proved Reserves (Sensitivity Pricing*) % Developed 73% 59% 83% Proved PV10 (Sensitivity Pricing*) i $ $4.0 $51.11 *Sensitivity pricing based on NYMEX natural gas forward curve adjusted for the Company s current hedge position and historical location differentials. NYMEX prices utilized averaged $5.31 per Mcf for the first 5 years, $6.26 per Mcf for the second 5 years and $6.66 per Mcf thereafter. 28

29 Reconciliation of Non GAAP Measures Adjusted EBITDA (in 000 s) 3 Months 12 Months Net Income (Loss) $ 451 $ 6,027 $ 5,792 $ (167,134) Interest Expense 836 1,218 5,124 5,146 Other Expense (income) (5) Income Tax Expense (benefit) 5 4,354 5,407 (98,142) Asset Impairment ,288 DDA 1,633 1,645 6,296 12,030 EBITDA 2,920 13,262 22,653 9,189 Unrealized Hedging Losses (gains) 2,850 (7,642) (5,950) 3,995 Unrealized Loss from Change in fair value of derivative liability - Preferred Stock - - 2,164 - Stock Based Compensation 134 (10) Accretion Expense Adjusted EBITDA $ 6,039 $ 5,731 $ 19,762 $ 14,409 29

30 Reconciliation of Non GAAP Measures Adjusted Net Income (Loss) (in 000 s) 3 Months 12 Months Net Income (Loss) $ 451 $ 6,027 $ 5,792 $ (167,134) Asset timpairment , Unrealized Hedging Losses (Gains) 2,850 (7,642) (5,950) 3,995 Unrealized Loss from Change in fair value of derivative liability - Preferred Stock - - 2,164 - Accelerated Depreciation - Canada ,742 Terminated Transaction Costs - 1,403 Effect of Taxes (1,089) 2, (99,154) Adjusted Net Income (Loss) $ 2,212 $ 1,304 $ 4,319 $ (2,263) 30

31 J. Darby Seré Chairman, President t& CEO (713) William C. Rankin Executive Vice President t& CFO (713) Stephen M. Smith Treasurer (713)