GreenHunter Resources, Inc. (NYSE MKT: GRH)(NYSE MKT:GRH.PRC), a diversified water resource, waste management and environmental services company specializing in the unconventional oil and natural gas shale resource plays, announced today financial and operating results for the fourth quarter and fiscal year ended December 31, 2013.

OPERATIONAL RESULTS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2013

Highlights from the Company’s financial and operating results include the following:

  • During 2013, GreenHunter Resources’ wholly-owned subsidiary, GreenHunter Water, experienced substantial growth by continuing to build out its Total Water Management Solutions™ portfolio of shale water products and services in the unconventional resource plays. The Company further strengthened its dominant position as an owner and operator of commercial salt water disposal (SWD) wells in the Marcellus and Utica Shale plays in Appalachia where it exited the year with over 13,900 barrels per day (BBL/D) of operating permitted disposal capacity and operated a fleet of 57 vacuum trucks capable of transporting brine and condensate. Total disposal volumes increased approximately 120% in 2013 to 4.740 million barrels as compared to 2.155 million barrels disposed in 2012. The company continues to develop barge transloading and bulk storage facilities for oilfield brine and condensate in the Appalachia region along the Ohio River with operations anticipated to begin this year.
  • In late 2013, Management committed to concentrate its future operations exclusively in the Utica Shale and Marcellus Shale formations which are located mainly in Ohio, Pennsylvania, and West Virginia as these areas represent our best opportunities for the profitable growth of our business. In connection with this commitment, we are discontinuing operations in the Eagle Ford Shale in South Texas and the Mississippian Shale in Oklahoma. All fixed assets in these areas are classified as held for sale at December 31, 2013. The financial results of these regions are reported as discontinued operations for the year ending December 31, 2013.
  • Operating revenues from continuing operations were $25.7 million during 2013 compared to $16.9 million for 2012, an increase of 52%. Our loss for 2013 from continuing operations was $2.5 million for fiscal year 2013 compared to a loss of $20.4 million for 2012. Our net loss per share from continuing operations for 2013 was ($.21) per share, basic and diluted, compared to a loss of ($.83) for 2012. Our loss on discontinued operations for 2013 was $7.4 million (a loss of ($.22) per common share, basic and diluted), compared to income from discontinued operations of $2.8 million (income of $.10 per share, basic and diluted) for 2012. Our net loss per share for both continuing operations and discontinued operations, basic and diluted, was ($.43) compared to ($.73) for the years 2013 and 2012, respectively.
  • The Company sold its first MAG Tank™ in 2013 and had 2013 revenue of $1.9 million related to this new product line. In late 2013, the Company raised $1.5 from a private unsecured debt placement and subsequently raised an additional $1.1 million in February 2014 for a second unsecured private debt placement with the purpose of using these funds to finance the production of MAG Tank™ inventory. The Company had contracted with two different manufacturers at year-end to fabricate MAG Tank™ panels. Management continues to see significant interest in both the purchase and rental of this new product for our energy industry customers.
  • Our Form 10-K to be filed today with the SEC will report that all previously identified material weaknesses in internal controls over financial reporting were remediated as of December 31, 2013.

RECENT EVENTS

In the first quarter of 2014, the Company has sold two of its disposal wells and one permit in South Texas to two separate buyers for an aggregate purchase price of $7.3 million that included $2 million in cash and $5.3 million in notes receivable. The Company has a contract to sell the third South Texas well for $4.7 million in cash that also includes a provision to pay off $2.9 million of existing debt related to one of the wells sold earlier in the first quarter. Total cash proceeds due at the time of this closing, anticipated in mid-April, will be approximately $7.3 million. We are currently in negotiations to sell our wells and facilities located in Oklahoma and anticipate that sale to close sometime in the second quarter of 2014. We have relocated some of our remaining South Texas assets, mainly transportation related assets, to our Appalachian region. We have sold some of the South Texas transportation and construction related assets in the first quarter of 2014 and expect to sell the remaining assets in the second quarter of 2014. Once all of the assets in South Texas and Oklahoma are sold, we intent to cease operations in each of these areas.

MANAGEMENT COMMENTS

Commenting on GreenHunter Resources financial and operating results released today, Mr. Kirk J. Trosclair, Executive Vice President and COO, stated, “Calendar 2013 was a year of transition for GreenHunter Resources. Management made the decision to concentrate 100% of our efforts to growing our Appalachian division where we continue to receive the highest margins and greatest growth opportunities. Management has identified up to nine specific SWD projects for potential growth opportunities in 2014 for the Appalachian division. By aggressively divesting of our assets located in South Texas and Oklahoma, we are significantly improving our balance sheet and at the same time eliminating the losses we were incurring from these sub-par and underutilized assets.

 

CONSOLIDATED STATEMENT OF OPERATIONS

 
    For the Year Ended December 31,
2013     2012
REVENUES:
Water disposal revenue $ 11,595,059 $ 8,723,244
Transportation revenue 9,564,522

6,722,055

MAG Tank™ revenue 1,854,750 —
Storage rental revenue and other   2,723,126     1,492,673  
 
Total revenues   25,737,457     16,937,972  
 
OPERATING COSTS AND EXPENSES:
Cost of goods and services provided 18,725,258 9,421,990
Depreciation and accretion expense 2,884,286 1,741,737
Impairment of asset value, biomass project — 15,873,013
Stock based compensation 1,142,066 4,367,604
Selling, general and administrative   7,744,912     5,633,042  
 
Total costs and expenses   30,496,522     37,037,386  
 
OPERATING LOSS (4,759,065 ) (20,099,414 )
 
OTHER INCOME (EXPENSE):
Interest and other income 143,955 15,317
Interest, amortization and other expense (1,011,547 ) (973,262 )
Gain on sale of assets 2,205,047 3,000
Gain on settlements of payables 951,507 403,011
Gain on debt extinguishment — 204,501
Unrealized gain (loss) on convertible securities   —     23,857  
 
Total other expense   2,288,962     (323,576 )
 
Net loss before taxes (2,470,103 ) (20,422,990 )
 
Income tax expense   7,000     5,000  
 
Loss from continuing operations (2,477,103 ) (20,427,990 )
Income (loss) from discontinued operations   (7,445,397 )   (2,835,821 )
Preferred stock dividends (4,587,285 ) (1,926,723 )
Gain on Series A Preferred Stock conversion — 923,565
Deemed dividend on Series B Preferred Stock conversion   —     (2,573,025 )
 
Net loss to common stockholders $ (14,509,785 ) $ (21,168,352 )
 
Weighted average shares outstanding, basic and diluted   33,567,431     29,082,343  
 
Net loss per share from continuing operations, basic & diluted $ (0.21 ) $ (0.83 )
 
Net earnings (loss) per share from discontinued operations, basic & diluted $ (0.22 ) $ 0.10  
 
Net loss per share, basic & diluted $ (0.43 ) $ (0.73 )
 
SELECTED BALANCE SHEET DATA
 
    December 31, 2013
2013     2012
Cash and cash equivalents 1,302,857 1,765,642
Total current assets 10,907,674 8,457,532
Net fixed assets 36,992,348 41,410,231
Total assets 48,025,800 52,855,226
Total current liabilities 20,595,245 19,605,885
Total long-term liabilities 9,074,148 10,139,289
Total stockholders’ equity 18,356,407 23,110,052
 

The reconciliation of adjusted EBITDA from continuing operations as compared to GreenHunter Resources GAAP loss from continuing operations for fiscal year 2013 is as follows:

   
Year 2013
Loss From Continuing Operations (2,477,103)
Income Tax 7,000
Interest Expense 1,011,547
Depreciation Expense 2,884,286
Non-Cash Stock Comp 1,142,066
Other Non-Cash Gains (951,507)
EBITDA 1,616,289
 

About GreenHunter Water, LLC (a wholly owned subsidiary of GreenHunter Resources, Inc.)

GreenHunter Water, LLC provides Total Water Management Solutions™ in the oilfield. An understanding that there is no single solution to E&P fluids management shapes GreenHunter’s technology-agnostic approach to services. In addition to licensing of and joint ventures with manufacturers of mobile water treatment systems (Frac-CycleTM), GreenHunter Water is expanding capacity of salt water disposal facilities, next-generation modular above-ground storage tanks (MAG Tank™), advanced hauling and fresh water logistics services—including 21st Century tracking technologies (RAMCATTM) that allow Shale producers to optimize the efficiency of their water resource management and planning while complying with emerging regulations and reducing cost. For a visual animation of the Class II Salt Water Disposal well development and completion technique that is being utilized in GreenHunter Water’s Appalachia, Eagle Ford, Mississippian Lime and Bakken SWD program, navigate to the video by clicking on “Salt Water Disposal Animation” button on the Operations tab at GreenHunterEnergy.com or click here.

Additional information about GreenHunter Water may be found at www.GreenHunterWater.com

Forward-Looking Statements

Any statements in this press release about future expectations and prospects for GreenHunter Resources and its business and other statements containing the words "believes," "anticipates," "plans," "expects," "will" and similar expressions constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including the substantial capital expenditures required to fund its operations, the ability of the Company to implement its business plan, government regulation and competition. GreenHunter Resources undertakes no obligation to update these forward-looking statements in the future.

Non-GAAP Measures: Reconciliation to Standardized Measures

This release contains certain financial measures that are non-GAAP measures. We have provided reconciliations within this release of the non-GAAP financial measures to the most directly comparable GAAP financial measures. These non-GAAP financial measures should be considered in addition to, but not as a substitute for, measures for financial performance prepared in accordance with GAAP that are presented in this release. We believe adjusted EBITDA (as defined by period net loss as adjusted for income tax, interest expense, depreciation expense, impairment of asset value, non-cash stock based compensation and other non-cash gains) to be an important measure for evaluating the company’s operational progress and as useful information to investors because it is widely used by professional analysts and investors in evaluating companies in a state of high growth. However, adjusted EBITDA should not be considered as an alternative to the standardized measure as computed under GAAP.