Gateway Energy Reports Year End 2007 Results

HOUSTON, March 18 /PRNewswire-FirstCall/ -- Gateway Energy Corporation (BULLETIN BOARD: GNRG) today announced full year 2007 financial results. For the year, the company posted income from continuing operations of $2.4 million, or $0.13 per diluted share, compared to $399,000, or $0.02 per diluted share, posted at year end 2006. Net income increased to $3.6 million, or $0.20 per diluted share for 2007, compared to $305,000, or $0.02 per diluted share, for 2006. Net income was favorably impacted by a $1.2 million one-time after tax gain on the sale of Fort Cobb Fuel Authority and a $1.7 million reversal of the allowance for deferred tax assets resulting in an income tax benefit.

Additionally, during 2007 Gateway had the following results:

-- Total revenue of $11.5 million, an increase of 40% over 2006.
-- Increased shareholder equity 82% to $11,124,000.
-- Operating income increased to $424,000 from $415,000.

Revenue from onshore operations increased 37% from $6.8 million in 2006 to $9.4 million in 2007, due primarily to increased sales volumes on Gateway's Waxahachie distribution system. Operating margins increased 9% from $1.12 million in 2006 to $1.22 million in 2007.

Revenue from the offshore operations increased 60% to $2.1 million for 2007 as compared to $1.3 million for 2006. Operating margins for offshore operations for the year ended December 31, 2007 increased $545,000 compared to 2006 due primarily to the acquisition of Gulfshore Midstream's offshore pipeline assets in August, 2007 as well as increased throughput volumes on Gateway's Bolivar pipeline system. This was offset by a slight decline in throughput volumes on the Pirates Beach pipeline system.

The outlook for 2008 is favorable. Gateway connected one new well to its offshore Bolivar pipeline system and added additional throughput volumes from several well recompletions in the first two months of 2008 and expects the pace of offshore drilling activity to remain strong in 2008 due to high commodity prices.

Gateway also expects additional revenue growth from the onshore assets in 2008 when the Madisonville gas treatment plant expansion is completed. The operator of the plant is currently validating a proposed system modification to address the removal of diamondoids. A diamondoid is a rare, naturally occurring compound that can separate out of the gas stream upon a decrease in temperature and pressure and as such, could cause operational problems for the nitrogen rejection portion of the new plant.

Gateway understands that the modifications should be completed within 60 to 90 days after the validation is completed. Based upon this information, Gateway believes that the modifications will most likely be completed before the end of the second quarter of 2008. While this is later than we had anticipated, Gateway remains optimistic that the Madisonville gas treatment plant expansion will significantly contribute to its onshore growth in 2008. In the meantime, the existing, older portion of the plant continues to treat approximately 15,000 Mcf per day of inlet gas.

Management Comments

Mr. Robert Panico, President and Chief Executive Officer of Gateway said, "I am very pleased with the results we were able to deliver for our shareholders in 2007. This strong showing validates our decision to divest underperforming assets and focus our efforts on what we do best, which is operating a profitable midstream company." Mr. Panico went on to say, "I am equally excited about the prospects for additional growth in 2008. The long awaited expansion of the Madisonville treatment plant should have a significant impact on revenues once it is fully operational, with no incremental capital expenditures. We are also aggressively seeking acquisition opportunities in the midstream sector."

Use of Non-GAAP Financial Measures

This news release and the accompanying schedules include the non-generally accepted accounting principles, or non-GAAP, financial measures of segment operating margin. The accompanying schedule provides a reconciliation of this non-GAAP financial measure to its most directly comparable financial measure calculated and presented in accordance with accounting principles generally accepted in the United States, or GAAP. Non-GAAP financial measures should not be considered as alternatives to GAAP measures such as net income, operating income, cash flows from operating activities or any other GAAP measure of liquidity or financial performance. Gateway uses non-GAAP financial measures as measures of its core profitability or to assess the financial performance of its assets. Gateway believes that investors benefit from having access to the same financial measures that its management uses in evaluating performance.

With respect to a Gateway operating segment, segment operating margin is defined as segment revenue less cost of purchased gas and operating and maintenance expenses. Such amounts are before general and administrative expense, depreciation and amortization expense, interest income or expense or income taxes. The Company views total segment operating margin as an important performance measure of the core profitability of its operations. This measure is a key component of internal financial reporting and is used by senior management in deciding how to allocate capital resources among operating segments. The GAAP measure most directly comparable to total segment gross margin is operating income.

About Gateway Energy

Gateway Energy Corporation is a growth-oriented midstream energy company providing natural gas gathering, transmission, processing and oil handling and storage services in Texas, Galveston Bay and the Gulf of Mexico.

Safe Harbor Statement

Certain of the statements included in this press release, which express a belief, expectation or intention, as well as those regarding future financial performance or results, or which are not historical facts, are "forward-looking" statements as that term is defined in the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. The words "expect," "plan," "believe," "may," "anticipate," "project," "estimate," "outlook" and similar expressions are intended to identify forward-looking statements. These forward-looking statements are not guarantees of future performance or events and such statements involve a number of risks, uncertainties and assumptions, including but not limited to industry conditions, prices of crude oil and natural gas, regulatory changes, general economic conditions, interest rates, competition, and other factors. Should one or more of these risks or uncertainties materialize or should the underlying assumptions prove incorrect, actual results and outcomes may differ materially from those indicated in the forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to republish revised forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

GATEWAY ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - UNAUDITED

December 31,
2007 2006
ASSETS
Current Assets
Cash and cash equivalents $1,807,224 $992,821
Restricted cash - 43,145
Trade accounts receivable 1,852,849 589,087
Prepaid expenses and other assets 41,812 101,927
Current assets of discontinued operations - 1,171,301
Total current assets 3,701,885 2,898,281

Property and Equipment, at cost
Gas gathering, processing and transportation 11,120,558 7,591,662
Office furniture and other equipment 229,298 206,991
11,349,856 7,798,653
Less accumulated depreciation and amortization (3,390,634) (3,303,485)
7,959,222 4,495,168
Other Assets
Deferred tax assets, net 1,668,743 - Intangible assets, net of accumulated
amortization of $65,278 in 2007 922,142 - Other 269,601 115,736
Non-current assets of discontinued operations - 1,466,833
2,860,486 1,582,569
Total assets $14,521,593 $8,976,018

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $1,138,653 $415,088
Accrued expenses and other liabilities 251,368 65,402
Current maturities of long-term debt - 79,146
Current maturities of capital lease 17,371 14,912
Current liabilities of discontinued operations - 950,850
Total current liabilities 1,407,392 1,525,398

Future asset retirement obligations 394,640 368,255
Long-term debt, less current maturities 750,000 - Long-term capital lease, less current maturities 29,422 47,102
Minority interest 816,222 838,363

Non-current liabilities of discontinued operations - 92,483
Commitments and contingencies - -
Stockholders' Equity
Preferred stock - $1.00 par value; 10,000 shares
authorized; no shares issued and outstanding - - Common stock - $0.25 par value; 35,000,000 shares
authorized; 19,026,665 and 17,140,937 issued and
outstanding in 2007 and 2006, respectively 4,756,665 4,285,232
Additional paid-in capital 17,089,744 16,158,552
Accumulated deficit (10,722,492)(14,339,367)
Total stockholders' equity 11,123,917 6,104,417
Total liabilities and stockholders' equity $14,521,593 $8,976,018

GATEWAY ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED

Year Ended December 31,
2007 2006
Operating revenues
Sales of natural gas $8,732,108 $6,288,869
Transportation of natural gas and liquids 2,280,882 1,697,789
Treating and other 441,521 174,913
11,454,511 8,161,571
Operating costs and expenses
Cost of natural gas purchased 7,914,502 5,495,770
Operation and maintenance 754,633 526,370
General and administrative 1,811,379 1,290,205
Depreciation and amortization 523,586 409,384
Accretion and changes in estimates 26,385 24,623
11,030,485 7,746,352
Operating income 424,026 415,219

Other income (expense)
Interest income 114,265 31,333
Interest expense (95,599) (10,609)
Gain on sale of intangible assets 286,579 - Other income, net 55,119 51,837
Minority interest (94,060) (88,951)
266,304 (16,390)
Income from continuing operations before income
taxes and discontinued operations 690,330 398,829
Provision for income tax benefit 1,668,743 - Income from continuing operations 2,359,073 398,829

Discontinued operations, net of taxes
Income from discontinued operations,
net of taxes 16,080 (93,638)
Gain on disposal of discontinued operations,
net of taxes 1,241,722 - Net income $3,616,875 $305,191

Basic and diluted income per share:
Continuing operations $0.13 $0.02
Discontinued operations 0.07 - Net income $0.20 $0.02

Weighted average number of common shares
outstanding:
Basic 17,781,059 17,131,485
Diluted 17,956,541 17,170,343

Non-GAAP Financial Measures

The following table presents a reconciliation of the non-GAAP financial measures of total segment operating margin (which consists of the sum of individual segment operating margins and corporate) to the nearest comparable GAAP financial measure of operating income.

Year Ended December 31,
2007 2006
Onshore Operations
Revenues $9,352,113 $6,844,264
Cost of natural gas purchased 7,914,502 5,495,770
Operation and maintenance expense 215,740 227,616
Operating margin 1,221,871 1,120,878
General and administrative expense 973,544 604,075
Depreciation and amortization expense 207,966 249,821
Operating income 40,361 266,982

Offshore Operations
Revenues 2,102,398 1,317,307
Operation and maintenance expense 538,893 298,754
Operating margin 1,563,505 1,018,553
General and administrative expense 831,459 457,628
Depreciation and amortization expense 311,168 151,713
Accretion expense 26,385 24,623
Operating income 394,493 384,589

First Call Analyst:
FCMN Contact:

Source: Gateway Energy Corporation

CONTACT: Brad Holmes, Investor Relations, +1-713-304-6962, or Chris
Rasmussen, CFO, +1-713-336-0844, both of Gateway Energy Corporation

Web site: http://www.gatewayenergy.com/

2008-03-18 17:42:44 0315655 PRNEWSWIRE