GeoMet (GMET) Closes $79M Acquisition of CBM
GeoMet, Inc. (Nasdaq: GMET) has closed the previously announced coalbed methane ("CBM") asset acquisition and the related new bank credit agreement.
The adjusted purchase price at closing was approximately $79 million. The transaction is consistent with the Company's strategy to acquire gas reserves at a time that such assets are generally out of favor. The transaction provides the following benefits to the Company:
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The adjusted purchase price at closing was approximately $79 million. The transaction is consistent with the Company's strategy to acquire gas reserves at a time that such assets are generally out of favor. The transaction provides the following benefits to the Company:
- An addition of approximately 50 Bcf of estimated proved reserves as of the July 1, 2011 effective date which were prepared internally in accordance with Securities and Exchange Commission rules and regulations; an increase of approximately 23% as compared to the Company's estimated proved reserves at December 31, 2010.
- Adjusted EBITDA is expected to more than double with the closing of this transaction. Since the Company does not expect to add material additional general and administrative expense as a result of this acquisition, adjusted EBITDA from the acquired properties will be additive to the Company's existing adjusted EBITDA.
- Net natural gas sales volumes are expected to double from the Company's current level of approximately 22 MMcf per day to approximately 44 MMcf per day.
- The transaction is expected to allow the Company to achieve economies of scale by leveraging its existing organizational structure, spreading existing fixed operating and administrative costs over much larger gas sales volumes, lowering per unit costs, and increasing margins and operating cash flows.
- The Company's reserves-to-production ratio ("R/P") is expected to be reduced from approximately 26:1 to approximately 16:1. This reduced R/P ratio is more in the fairway of R/Ps for comparable companies. GeoMet's reserves, production and cash flow metrics will be more easily benchmarked to other oil and gas companies.
- The transaction is expected to provide significant free cash flow that we anticipate using to both reduce debt and accelerate future development opportunities, including opportunities to develop additional CBM reserves in West Virginia and Virginia using the Z-pinnate horizontal drilling technology.
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