Long Call on Natural Gas 100% natural gas reserves Very long life, low decline reserves R/P 16 years Aggregate additional natural gas properties while out of favor Hedges mitigate short-term price risk 3
Natural Gas Out of Favor Comparatively low forward price curve (current gas to oil ratio 35:1 versus historical average of 8:1) Many producers need capital to pursue oil and liquids rich resource plays (monetizing dry gas…
Value Creation Drivers Industry leading expertise in coalbed methane and shallow gas Significant existing proved reserves with additional unproved resource base Long-lived, shallow decline reserves provide long window for gas…
CBM/Shallow Gas Experts Developer, acquirer 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…
Significant Reserve / Resource Base Estimated SEC Proved reserves of 198 Bcf at 12-31-11 88% Operated 95% Developed Additional unproved reserves and unrisked resource of 332 Bcf Approximately 180,000 net undeveloped acres at…
Long-lived Reserves, Shallow Decline Rates Current net gas sales volumes of 44 MMcf/day R/P ratio of 16 years Implied average annual decline rate of 12-13% initially, declining to a terminal decline rate of approximately 6% per…
High Potential Opportunities Gurnee Field - Alabama New frac technique at Gurnee Field in Alabama provides in significant upside potential New frac technique has yielded encouraging results when applied to shallow, behind pipe zones…
Gurnee Growth Opportunity 2011 activity with new frac technique: Five shallow behind pipe completions Five new infill wells Capital expended 4 million Results to date from new frac technique: Estimated incremental daily production…
Property Acquisition Acquired 50 Bcf of CBM reserves (SEC pricing) in Alabama and West Virginia for an adjusted purchase price of 68 million 78% proved producing Approximately 22 MMcf/day net gas sales rate Unique fit 100% CBM…
Property Acquisition Rationale Build mass Spread fixed operating and G&A costs over much larger production volumes Shorter production life complementary with existing long-life reserves Balance reserve, production and cash flow…
Property Acquisition Increased proved reserves 25% More than doubled Adjusted EBITDA (a non-GAAP financial measure) Net natural gas sales doubled to approximately 44 MMcf / day Economies of scale achieved by spreading existing…
Property Locations Areas of Operation Lasher Pond Creek West Virginia Acquisition Alabama Birmingham, Alabama Acquisition (Technical Headquarters) Gurnee Houston, Texas (Corporate Headquarters) Historic GeoMet…
Appalachian Location Map Existing GeoMet Production and Development Area Acquisition Properties Production and Development Area GeoMet Operates 82% WI GeoMet Operates 88% of Reserves and 68% of production GeoMet Operates…
Appalachian Properties Approximately 440 producing wells; 86% operated Approximately 91,000 net undeveloped acres Proved reserves estimated at 126 Bcf; 93% proved developed Approximately 240 potential net drilling locations 65 Net…
Appalachian Properties Z - Pinnate Drilling Technology System and Method for Surface-to-Inseam Drilling of Horizontal Multi-lateral Wells Two Wellbore Configuration (Dual-Well System) 19
Appalachian Properties Z - Pinnate Drilling Technology Well System with Pinnate Dual Seam Completion 20
Alabama Location Map Existing GeoMet Production and Development Area Acquisition Properties Production and Development Area Warrior North El Paso Operated White Oak Creek El Paso Operated GeoMet Technical Headquarters Other…
Alabama Properties Approximately 1,255 producing wells; 18% operated Approximately 56,000 net undeveloped acres Proved reserves estimated at 72 Bcf; 97% proved developed Approximately 150 potential drilling locations Unproved…
Financial Information 23
Financial Strategy Preserve liquidity (value creation rather than value destruction) Hedge forward prices Drive down costs Seek smaller acquisitions that enhance existing operations Seek larger transactions that provide growth…
Acquisition Financing Acquisition financed with 100% bank debt (no new equity) New bank credit agreement (concurrent with property acquisition) 4 year term Current borrowing base of 180 million Current borrowings 150 million…
Market Value Capital Structure & Debt Ratios ( in 000's) Net Bank Debt at 9/30/11 * 158,276 Market value of equity, including preferred 78,524 stock on an as converted basis ** Total Market Capitalization 236,800 Debt /…
2012 Capital Expenditures Most capital spending deferred until management has more visibility on future natural gas pricing Drilling activity unlikely until price curve improves Emphasize accumulation of reserves while costs to…
Hedging Summary As of March 1, 2012 Effective Floor Price 4.94 4.10 3.82 50,000 45,000 40,000 35,000 30,000 75% 25,000 Mcf/d 20,000 15,000 42% 36% 10,000 5,000 - 2012 2013 3 Months 2014 Hedged Production Current…
Operating Leverage Shallow production decline; 16 year R/P * Historically have replaced reserves and production with less than 50% of cash flow (low asset intensity) Significant portion of costs are fixed or semi-fixed - for…
Valuation Metrics Enterprise Value per Mcf Daily Production Enterprise Value per Mcf Proved Reserves 25,000 3.50 20,000 3.00 2.50 15,000 2.00 10,000 1.50 5,000 1.00 0.50 - CRK GMET PQ GMXR CHK PETD SWN GDP EQT RRC - GMET CRK…
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