Gateway Energy Reports Year End 2008 Financial Results.

HOUSTON, March 30 /PRNewswire-FirstCall/ -- Gateway Energy Corporation (BULLETIN BOARD: GNRG) (the "Company") today announced full year 2008 financial results. For the year, the Company posted revenue of $14,987,541, an increase of 31% from the prior year. Gateway experienced an income from continuing operations of $817,541, or $0.04 per diluted share, a decrease from $2,126,110, or $0.13 per diluted share in 2007. Net income decreased to $817,541, or $0.04 per share, for 2008, compared to $3,616,875, or $0.20 per diluted share, for 2007. Net income was negatively impacted due primarily to reduced volumes flowing through the offshore assets due to hurricanes Gustav and Ike during September 2008. In addition, net income in 2008 was favorably impacted by a $1.7 million insurance recovery and net income in 2007 was favorably impacted by a $1.2 million one-time after tax gain on the sale of Fort Cobb Fuel Authority, LLC and a $1.7 million income tax benefit. Additionally during 2008 the Company had the following results:

  --  Adjusted EBITDA of $2.4 million, a 96% increase over 2007, which
      includes the $1.7 million insurance recovery, offset by the impact of
      hurricanes Gustav and Ike, and

  --  Increased shareholder equity to $12.2 million, or $0.63 per diluted
      share.

For onshore operations, total revenue increased 32% from $9,352,113 in 2007 to $12,373,321 in 2008 due primarily to increased sales volumes and gas prices on the Company's Waxahachie distribution system. Operating margin for the onshore assets decreased slightly to $1,148,036 in 2008 from $1,221,874 in 2007, due primarily to decreased throughput volumes in the Company's Madisonville pipeline system. The Company expects increased operating margins on its onshore assets as throughput volumes in the Madisonville system increase during 2009 due to the producer's announced intention to significantly increase production in the Madisonville field.

Revenue from the offshore operations increased to $2,609,220 for 2008 as compared to $2,102,398 for 2007. Operating margin for the year ended December 31, 2008 increased to $1,784,265 compared to $1,563,502 for 2007. This increase is due primarily to the recognition of a full year of revenue in 2008 from the acquisition of Gulfshore Midstream's assets in August, 2007 and increased throughput volumes on the Company's Bolivar pipeline system. These increases were offset by reduced volumes due to hurricanes Gustav and Ike beginning in September, 2008. The Company estimates it lost approximately $800,000 in operating margin due to the hurricanes.

General and administrative expenses increased from $2,044,342 for 2007 to $2,424,045 for 2008. This increase is due primarily to hiring of new personnel and increased non-cash stock compensation expenses, offset by decreased insurance and consulting expenses.

Management Comments

Mr. Robert Panico, President and CEO of Gateway Energy said, "2008 began with exceptionally strong oil and gas prices which prompted the industry to put a record number of drilling rigs to work both onshore and offshore which increased throughput volumes on our systems. During the last half of 2008, oil and gas prices plunged and the central Gulf Coast took direct hits from two major hurricanes. Many of the wells on our offshore pipeline systems in the Gulf of Mexico were shut-in, some for many months, as a result of the storms. A majority of the wells were back online by the end of 2008."

Mr. Panico continued, "Although it was a difficult year, we were able to make two important acquisitions in 2008, both involving the Madisonville project. With the first acquisition, we acquired all of the minority owner's interest in the Madisonville pipeline resulting in our ownership of 100% of the pipeline. The second acquisition involved the purchase of a 9.1% net profits interest in the principal producers interest in the Madisonville field. Leveraging our knowledge of the Madisonville project, we believe these two acquisitions will position us for accelerated revenue growth as natural gas production increases in the field."

Mr. Panico also noted "We are well positioned to pursue acquisitions in an environment we expect will improve in 2009 as valuations become more economically viable and opportunities are presented by companies repositioning their asset bases and seeking liquidity."

About Gateway Energy

Gateway Energy Corporation owns and operates natural gas gathering, transportation and distribution systems in Texas, Texas state waters and in federal waters of the Gulf of Mexico off the Texas and Louisiana coasts. Gateway gathers offshore wellhead natural gas production and liquid hydrocarbons from producers, and then aggregates this production for processing and transportation to other pipelines. Gateway also transports gas through its mainline systems for non-affiliated shippers and through its affiliated distribution system and makes sales of natural gas to end users.

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", "anticipate", "project", "estimate", 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, 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

                                                   December 31,
                                              2008              2007

                            ASSETS

  Current Assets
    Cash and cash equivalents              $1,789,029        $1,807,224
    Trade accounts receivable                 969,859         1,852,849
    Insurance receivable                    1,750,000                 -
    Prepaid expenses and other assets         176,565            41,812
        Total current assets                4,685,453         3,701,885

  Property and Equipment, at cost
    Gas gathering, processing and
     transportation                        12,796,424        11,120,558
    Net profits production interest           763,909                 -
    Office furniture and other equipment      143,654           229,298
                                           13,703,987        11,349,856

  Less accumulated depreciation,
   depletion and amortization              (3,805,733)       (3,390,634)
                                            9,898,254         7,959,222

  Other Assets
    Deferred tax assets                     1,205,000         1,668,743
    Intangible assets, net of accumulated
     amortization of $65,278 and $22,082,
     at 2008 and 2007, respectively           765,337           922,142
    Other                                     136,657           269,601
                                            2,106,994         2,860,486

        Total assets                      $16,690,701       $14,521,593

       LIABILITIES AND STOCKHOLDERS' EQUITY
  Current Liabilities
    Accounts payable                         $776,519        $1,138,653
    Accrued expenses and other liabilities    323,100           251,368
    Note payable                            1,062,000                 -
    Current maturities of capital lease        20,235            17,371
        Total current liabilities           2,181,854         1,407,392

  Future asset retirement obligations       2,318,315           394,640
  Long-term debt, less current maturities           -           750,000
  Long-term capital lease, less current
   maturities                                   9,187            29,422
        Total liabilities                   4,509,356         2,581,454

  Minority interest                                 -           816,222

  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;
     19,207,249 and 19,026,665 issued and
     outstanding in 2008 and 2007,
     respectively                           4,801,812         4,756,665
    Additional paid-in capital             17,284,485        17,089,744
    Accumulated deficit                    (9,904,952)      (10,722,492)
        Total stockholders' equity         12,181,345        11,123,917
        Total liabilities and
         stockholders' equity             $16,690,701       $14,521,593


                GATEWAY ENERGY CORPORATION AND SUBSIDIARIES

  CONSOLIDATED STATEMENTS OF OPERATIONS

                                              Year Ended December 31,
                                              2008              2007

  Operating revenues
    Sales of natural gas                  $12,033,817        $8,732,108
    Transportation of natural gas
     and liquids                            2,381,252         2,280,882
    Net profits income                          5,000                 -
    Treating and other                        567,472           441,521
                                           14,987,541        11,454,511

  Operating costs and expenses
    Cost of natural gas purchased          10,979,136         7,914,502
    Operation and maintenance               1,071,104           754,633
    General and administrative              2,424,045         2,044,342
    Depreciation, depletion and
     amortization                             745,411           523,586
    Accretion and changes in estimates         25,921            26,385
                                           15,245,617        11,263,448

  Operating income (loss)                    (258,076)          191,063


  Other income (expense)
    Interest income                            29,119           114,265
    Interest expense                         (157,091)          (95,599)
    Gain on sale of intangible assets               -           286,579
    Other income, net                       1,731,155            55,119
    Minority interest                         (28,824)          (94,060)
      Other income                          1,574,359           266,304


  Income from continuing operations
   before income taxes and
   discontinued operations                  1,316,283           457,367

  Provision for income taxes
      Current income tax expense               35,000                 -
      Deferred income tax expense
       (benefit)                              463,742        (1,668,743)
                                              498,742        (1,668,743)

  Income from continuing operations           817,541         2,126,110

  Discontinued operations, net of taxes
    Income from discontinued
     operations, net of taxes                       -           249,043
    Gain on disposal of discontinued
     operations, net of taxes                       -         1,241,722
  Net income                                 $817,541        $3,616,875


  Basic and diluted income per share:
    Continuing operations                       $0.04             $0.12
    Discontinued operations                         -              0.08
    Net income                                  $0.04             $0.20
  Weighted average number of common
   shares outstanding:
    Basic                                  19,126,587        17,781,059
    Diluted                                19,330,409        17,956,541


                   GATEWAY ENERGY CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                              Year Ended December 31,
                                               2008              2007

  Cash flows from operating activities
   - continuing operations:
    Income from continuing operations        $817,541        $2,126,110
    Adjustments to reconcile income from
     continuing operations to net cash
     provided by operating activities:
      Depreciation, depletion and
       amortization                           745,411           523,586
      Gain on sale of intangible assets             -          (286,579)
      Minority interest                        28,824            94,060
      Deferred tax expense (benefit)          463,742        (1,668,743)
      Stock based compensation expense        169,888            51,516
      Accretion expense                        25,921            26,385
      Amortization of deferred loan costs     124,835            62,646
      Gain on involuntary
       conversion/receivable               (1,698,658)                -
      Loss on disposal of assets                1,999                 -
      Net change in cash and cash
       equivalents
       resulting from changes in:
        Trade accounts receivable             882,990          (227,086)
        Prepaid expenses and other current
         assets                              (126,644)          549,686
        Accounts payable                     (362,134)          311,606
        Accrued expenses and other
         liabilities                           71,732           185,964
          Net cash provided by operating
           activities                       1,145,447         1,749,151

  Cash flows from investing activities
   - continuing operations
    Capital expenditures                     (133,444)          (57,234)
    Acquisition of minority interest and
     net profits interest                  (1,303,075)       (3,778,435)
    Property write-offs                        18,067                 -
    Proceeds from collection of notes
     receivable                                     -           300,000
          Net cash used in investing
           activities                      (1,418,452)       (3,535,669)

  Cash flows from financing activities
   - continuing operations
    Proceeds from borrowings                1,362,000         1,150,000
    Payments on borrowings                 (1,067,370)         (963,392)
    Proceeds from exercise of stock
     options                                        -            77,008
    Restricted cash for letter of credit,
     net                                            -            43,145
    Deferred financing costs                        -          (125,342)
    Distributions to minority partner         (39,820)         (116,200)
          Net cash provided by financing
           activities                         254,810            65,219

  Net decrease in cash and cash
   equivalents from continuing operations     (18,195)       (1,721,299)

  Discontinued operations:
    Net cash provided by discontinued
     operating activities                           -           203,143

    Net cash provided by discontinued
     investing activities                           -         2,706,289

    Net cash used in discontinued
     financing activities                           -          (373,730)


  Net increase (decrease) in cash
   and cash equivalents from
   discontinued operations                          -         2,535,702

  Cash and cash equivalents at
   beginning of year                        1,807,224           992,821
  Cash and cash equivalents at
   end of year                             $1,789,029        $1,807,224


                 GATEWAY ENERGY CORPORATION AND SUBSIDIARIES
                         Non-GAAP Financial Measures

  Operating Margin
  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 margin and corporate) to the nearest
  comparable GAAP financial measure of operating income.

                                              Year Ended December 31,
                                              2008              2007
           Onshore Operations
  Revenues                                $12,373,321        $9,352,113
  Cost of natural gas purchased            10,979,136         7,914,502
  Operation and maintenance expense           246,149           215,740
      Operating margin                      1,148,036         1,221,871
  General and administrative expense          993,997           973,544
  Depreciation, depletion and
   amortization expense                       194,455           207,966
      Operating income (loss)                 (40,416)           40,361

           Offshore Operations
  Revenues                                 $2,609,220        $2,102,398
  Operation and maintenance expense           824,955           538,893
      Operating margin                      1,784,265         1,563,505
  General and administrative expense        1,416,921         1,064,422
  Depreciation, depletion and
   amortization expense                       545,050           311,168
  Accretion expense                            25,921            26,385
      Operating income (loss)                (203,627)          161,530

          Net Profits Interest
  Revenues                                     $5,000               $ -
      Operating margin                          5,000                 -
  General and administrative expense            1,638                 -
  Depreciation, depletion and
   amortization expense                           783                 -
      Operating income                          2,579                 -


  Adjusted EBITDA

  Adjusted EBITDA is defined as pre-tax net income plus:

  --  interest expense;
  --  depreciation, depletion and amortization expense;
  --  non-recurring gain (loss) on sale of assets;
  --  minority interest;
  --  accretion expense; and

  --  non-cash compensation expense.

Adjusted EBITDA is a significant performance metric used by Company management, and by external users of Company's financial statements, such as investors, commercial banks, research analysts and others, including our principal lender.

Adjusted EBITDA should not be considered an alternative to, or more meaningful than, net income, operating income, cash flows from operating activities or any other measure of financial performance presented in accordance with GAAP as measures of operating performance, liquidity or ability to service debt obligations. Adjusted EBITDA does not include interest expense, income taxes, depreciation, depletion and amortization expense, non-recurring gain (loss) on sale of assets, minority interest, accretion expense or non-cash compensation expense. Because the Company has borrowed, and intend to borrow, money to finance their operations, interest expense is a necessary element of Company's overall costs. Because the Company uses capital assets, depreciation and amortization are also necessary elements of Company's overall costs. Because the Company have used, and intend to use, non-cash equity awards as part of their overall compensation package for executive officers and employees, non-cash compensation expense is a necessary element of Company's overall costs. Therefore, any measures that exclude these elements have material limitations. To compensate for these limitations, Company management believes that it is important to consider net income determined under GAAP, as well as Adjusted EBITDA, to evaluate Company's financial performance.

Management compensates for the limitations of Adjusted EBITDA as an analytical tool by reviewing the comparable GAAP measures, understanding the differences between the measures and incorporating this knowledge into management's decision-making processes.

                                                    Year Ended
                                                    December 31,
                                               2008              2007
  Net income (loss)                          $817,541        $3,616,875
  Minority interest                            28,824            94,060
  Interest expense                            157,091            95,599
  Income taxes                                498,742        (1,668,743)
  Depreciation, depletion, and
   amortization                               745,411           523,586
  Gain on sale of assets                            -        (1,528,301)
  Non-cash stock compensation                 100,891            51,516
  Accretion expense                            25,921            26,385
  Adjusted EBITDA                          $2,374,421        $1,210,977

CONTACT: Brad Holmes, Investor Relations, [phone] or Chris Rasmussen, CFO, [phone], both of Gateway Energy Corporation

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