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The Company is engaged in the exploration, development, and production of natural gas from coal seams and gas marketing.
Based in Houstan, Texas, Geomet is a based energy company engaged in the exploration, development, and production of natural gas in the United States and Canada. The principal operations of the company are concentrated in Alabama, West Virginia and Virginia.As per DeGolyer and MacNaughton, a petroleum consulting firm, Geomet had proved reserves of 325.7 billion cubic feet, which indicates about 24% growth over the 2005-year end reserves. However, now the company has been has been exposed to a couple of crucial litigations, which could dampen their outlook for 2007.Company’s recent lawsuit against El Paso Production Company has turned to be unfavorable. Albeit, El Paso bought Geomet’s interests in Oak Creek properties, preferential purchase right excluded overriding royalty interests, to the tune of $10.5 million as a result of which management expects growth rate of coalbed methane gas in the range of 14% to 18% which denotes a sharp slide as compared to the growth rate in the current fiscal. About 59% of the company’s year-end 2006 proved reserves are in the Gurnee Field in Alabama and in 2007, lower production is expected in this region as a result of decline in development drilling activities. Additionally, dispute with CNX Gas Company over the property rights where Geomet plans to construct a pipeline from its Pond Creek natural gas field that accounts for about 60% of GeoMet's total gas production has not been quite positive. Although the company has received the permission to construct a pipeline, CNX may receive the compensation for the damages or partition of the property. Also, company entered in the natural gas marketing business in 2006 that now forms over 31% of the revenues and the likely rise in natural gas prices owing to surge in industrial and residential consumption could take its toll on company’s margins. Considering these elements, Geomet does not look a safe bet in the near future.
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