Stock Preacher

Gasco Energy Inc. (AMEX: GSX)

Gasco Energy Inc. (GSX) is in the business of development and exploration of natural gas and crude petroleum primarily in the Rocky Mountain area of the United States, which represent the largest untapped, drillable potential for natural gas supply in North America.

The Company also holds exploration leasehold in California and Nevada. GSX’s principal business is the acquisition of leasehold interests in petroleum and natural gas rights, either directly or indirectly, and the exploitation and development of properties subject to these leases.

The Company’s drilling efforts are focused in the Riverbend Project located in the Uinta Basin of northeastern Utah, which targets the Wasatch, Mesaverde Blackhawk, Mancos, Dakota and Morrison formations. As of December 31, 2008, the Company held interests in 330,923 gross acres (214,483 net acres) located in Utah, Wyoming, California and Nevada. As of December 31, 2008, the Company held an interest in 126 gross producing wells (7.73 wells, net to its interest) and five shut-in wells (5 net) located on these properties.

Source: Reuters.com,

Financial Summary

Operating against the backdrop of declining oil and gas-related commodity prices, GSX reported a net loss of $3.9 million, or $0.04 per share, for the second quarter 2009, as compared to a net loss of $0.8 million, or $0.01 per share, for the same period in 2008. Included in the second quarter 2009 results are derivative losses of $1.2 million attributed to hedge effect, which are comprised of an unrealized loss of $10.1 million partially offset by a realized gain of $8.9 million.

Total revenue for the first six months of 2009 was $9.8 million, as compared to $23.8 million in the same period in 2008. For the first half of 2009, gathering system revenues accounted for $1.8 million as compared $2.0 million during 2008.

At June 30, 2009, cash and equivalents were $9.6 million as compared to $1.1 million at December 31, 2008.

Financial Strength

Source: Reuters.com

Analyst Consensus

No analyst rates GSX at this time.

Investment Highlights

GSX is a natural gas and petroleum exploitation, development and production company engaged in locating and developing hydrocarbon prospects primarily in the Rocky Mountain area of the United States. The Company’s primary project is in the prolific hydrocarbon-bearing Uinta Basin of Utah, which SEC-defined proved reserves at December 31, 2008, were 53 Bcfe, 100% of which were in Utah, 96% were natural gas, and 100% were proved developed. GSX’s commodity products are primarily sold to natural gas transmission pipeline companies, private industrial companies, refining companies and utilities.

The Company’s Riverbend Project in the Uinta Basin targets the Wasatch, Mesaverde Blackhawk, Mancos, Dakota and Morrison formations. GSX also owns or controls leasehold in the Greater Green River Basin of Wyoming, San Joaquin Basin in California and in exploratory areas of Nevada. The Company’s principal business is the acquisition of leasehold interests in petroleum and natural gas rights, either directly or indirectly, and the exploitation and development of properties subject to these leases.

As of December 31, 2008, the Company held interests in 330,923 gross acres (214,483 net acres) located in Utah, Wyoming, California and Nevada. As of December 31, 2008, the Company held an interest in 126 gross producing wells (7.73 wells, net to its interest) and five shut-in wells (5 net) located on these properties.

GSX’s properties are located near major pipelines in the Rocky Mountains (the Rockies), which represent the largest untapped, drillable potential for natural gas supply in North America. According to estimates by the Potential Gas Committee (PGC), the ultimate recovery of total gas reserves in the Rockies is at 230 trillion cubic feet, excluding coalbed methane. It is also estimated that the greatest potential for non-associated natural gas in the Rocky Mountain region is concentrated in southwestern and south-central Wyoming, adjacent northwestern Colorado and northeastern Utah, of which the Uinta Basin is included.

GSX currently operates in a challenging environment where a slowdown in global economy is affecting credit markets and commodity prices. In July, Baker Hughes reported that rig counts, which reflect the oil and gas industry’s health, as well as the overall economy, reportedly dropped by more than 50% over the year ended mid-July 2009, from 1,928 to 920. Prior to the start of the first quarter of 2009, a report at First Research already forecast the output of U.S. natural gas extraction and crude petroleum production to decline at an annual compounded rate of 4% between 2008 and 2013.

In the natural gas sector, the combination of tightening access to credit and sliding prices forced many producers to scale back drilling operations, posing a concern for the supply-demand balance. In May, GSX mentioned in its 10-Q that the reduced commodity prices could impact the borrowing base under its credit agreement.

Operating against a backdrop of declining prices, GSX reported oil and gas sales for the second quarter 2009 of $3.4 million, in contrast to $12.6 million sales it posted for the same period in 2008. The Company cited a 72% decrease in prices received for sales of its natural gas and a 55% decrease in prices received for oil volumes, combined with a 9% decrease in production quarter-over-quarter. For the first half of 2009, oil and gas sales were $7.6 million, as compared to $21.1 million for the same period in 2008, primarily attributed to a 65% decrease in prices received for sales of the Company’s natural gas and a 60% decrease in prices received for oil volumes, partially offset by a 2% increase in oil and gas production. Meanwhile, GSX’s EBITDA for its quarter ended June 30, 2009, as reported by EbitdaEXTRA, was $723,720, a 92% decrease over the year-ago quarter when it generated $8,759,673 in EBITDA.

GSX mentioned in its most recent 10-Q that it has entered into commodity derivative instruments for 2009 through the first quarter of 2011 to mitigate the impact of lower commodity prices on its cash flows. The Company stated that in the event that commodity prices stay depressed or decline further, its cash flows from operations would be reduced even taking into account its commodity derivative instruments for 2009, 2010 and 2011 and may not be sufficient when coupled with available capacity under its Credit Agreement to meet its working capital needs or fund its initial 2009 capital expenditure budget, causing the Company to alter its business plans, including further reduction in its exploration and development plans.

Having anticipated the decline in commodity prices and the slowdown in global economy for this year, the GSX board of directors has approved a revised capital budget of $10 million on January 22, 2009.

GSX’s next earnings announcement is expected on November 2, 2009.

Technical Analysis

Source: http://stockcharts.com/h-sc/ui

As of last close on September 10, 2009, GSX closed at $0.52, 188.89% above the 52 week low of $0.18 set March 2, 2009.

Currently, the MACD for GSX indicates a strong bullish signal for two reasons. First, the MACD is above the signal line, a 9-day moving average. Second, the MACD is above 0, which implies that the underlying moving averages are trending higher.

The stock’s Bollinger Bands indicate greater than normal volatility as reflected by an increase in distance between the upper and lower bands. Trading near its upper Bollinger Band, the stock suggests high price relative to its recent price action.

With share prices currently above the stock’s 13-day moving average, a bullish trend is indicated. Also, a rising moving average signals that there has been buying interest in this stock.

Comparative Analysis

GSX has a negative Return on Assets of -23.23%, compared with an industry average of 5.42%; and Return on Equity of -27.50%, compared with an industry average of 6.87%; and Return on Equity of -278.34%, compared with an industry average of 7.04%.

Source: Yahoo! Finance, Analyst Estimates.

Insider Trading Activity

NET SHARE PURCHASE ACTIVITY

Data provided by Thomson Financial

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