GeoMet Shares Drop to New Low After A.G. Edwards Downgrades Stock Amid Disappointing Guidance

Shares of natural gas producer GeoMet Inc. dropped to a new low Monday, after A.G. Edwards downgraded its stock amid disappointing production guidance.

The Houston-based company’s stock fell $1.04, or 11.3 percent, to $8.20 in afternoon trading on the Nasdaq. Earlier in the session, shares dipped as low as $7.86, below their prior low of $7.87 set last week. GeoMet’s shares began trading in July, reaching as high as $12 in early August.

A.G. Edwards analyst Michael S. Scialla cut GeoMet to “Hold” from “Buy,” while also reducing his 2007 earnings expectations.

In a research report, Scialla said GeoMet’s stock appears inexpensive, compared with his year-end 2006 net asset value estimate. GeoMet also has hired Merrill Lynch to explore strategic alternatives, and a sale of the company could fetch more than its current stock price.

But GeoMet’s plans to reduce development drilling at its Gurnee Field in Alabama “cause us to question the underlying quality of the assets,” Scialla wrote.

GeoMet last week cut its guidance for production growth to between 14 percent and 18 percent, down from 40 percent, due to a significant reduction in development drilling at Gurnee, Scialla wrote.

It also reported year-end 2006 proved reserves of 325.7 billion cubic feet, or 3 percent below Scialla’s forecast. He trimmed his year-end net asset value estimate to $13 per share from $14.

Scialla now expects 2007 earnings per share of 38 cents, down from his prior projection of 53 cents. Analysts overall, on average, had been looking for 2007 earnings of 38 cents per share, according to a Thomson Financial poll.

Source: AP via biz.yahoo.com