Table of Contents

As filed with the Securities and Exchange Commission on May 6, 2011

Registration No. 333-            

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM S-3

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

GeoMet, Inc.

(Exact name of Registrant as specified in its charter)

 

 

 

Delaware		76-0662382
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

909 Fannin, Suite 1850

Houston, Texas 77010

(713) 659-3855

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

 

 

William C. Rankin

Chief Financial Officer

909 Fannin, Suite 1850

Houston, Texas 77010

(713) 659-3855

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copy to:

George G. Young III

Kendall Hollrah

Haynes and Boone, LLP

1221 McKinney, Suite 2100

Houston, Texas 77010

Telephone: (713) 547-2000

Fax: (713) 236-5699

 

 

Approximate date of commencement of proposed sale to the public: From time to time after the effective date of this Registration Statement.

If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box:   ¨

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box:   þ

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   ¨

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   ¨

If this Form is a registration statement pursuant to General Instruction I.D. or a post-effective amendment thereto that shall become effective upon filing with the Commission pursuant to Rule 462(e) under the Securities Act, check the following box.   ¨

If this Form is a post-effective amendment to a registration statement filed pursuant to General Instruction I.D. filed to register additional securities or additional classes of securities pursuant to Rule 413(b) under the Securities Act, check the following box.   ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer		¨		Accelerated filer		¨
Non-accelerated filer		¨  (Do not check if a smaller reporting company)		Smaller Reporting Company		þ

 

 

CALCULATION OF REGISTRATION FEE

 

Title of each Class of Securities to be Registered		Amount to be Registered (1)		Proposed Maximum Offering Price per Share (3)		Proposed Maximum Aggregate Offering Price (3)		Amount of Registration Fee
Series A Convertible Redeemable Preferred Stock, par value $0.001 per share		2,351,801		$12.00		$52,256,256		$6,066.95
Series A Convertible Redeemable Preferred Stock, par value $0.001 per share, issuable as dividends on the Series A Convertible Redeemable Preferred Stock, par value $0.001 per share		2,002,887		—		—		—
Common Stock, par value $0.001 per share, issuable upon conversion of the Series A Convertible Redeemable Preferred Stock, par value $0.001 per share		33,497,601 (2) (4)		—		—		—(5)

 

(1)

This registration statement relates to (a) the shares of Series A Convertible Redeemable Preferred Stock, (b) the shares of Series A Convertible Redeemable Preferred Stock issuable as dividends on shares of the Series A Convertible Redeemable Preferred Stock, and (c) the shares of Common Stock issuable upon conversion of the Series A Convertible Redeemable Preferred Stock (“Preferred Stock”).

(2)

There is being registered hereunder 33,497,601 shares of common stock as may be issuable upon conversion or redemption of the Preferred Stock registered hereunder. Pursuant to Rule 416, this registration statement also covers such indeterminate number of additional shares of common stock as may become issuable as a result of stock splits, stock dividends or similar transactions. In the event that the registrant is required, as a result of antidilution adjustments pursuant to the terms of the Preferred Stock that are not contemplated by Rule 416, to issue more shares of common stock than are registered hereunder, the registrant will file a new registration statement in respect of such additional shares of common stock.

(3)

Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c) under the Securities Act of 1933, as amended and based on the average of the high and low sales prices of our Preferred Stock reported on the NASDAQ Global Market on May 5, 2011. The proposed maximum offering price per unit will be determined from time to time in connection with the resale by the selling security holders of the securities registered hereunder. Calculated based on a maximum of 4,354,688 shares of Preferred Stock covered by this registration statement.

(4)

Represents an estimate of the maximum number of additional shares of Preferred Stock that potentially could be payable on outstanding shares of Preferred Stock. Included in this number is an estimate of the number shares of common stock that may be issuable upon conversion of the shares of Preferred Stock issuable as dividends on the Preferred Stock.

(5)	Pursuant to Rule 457(i), the registration fee is calculated on the basis of the proposed offering price of the convertible securities alone.

 

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 

---

Table of Contents

The information in this prospectus is not complete and may be changed. The selling security holders may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

SUBJECT TO COMPLETION, DATED MAY 6, 2011

PROSPECTUS

2,351,801 Shares of Series A Convertible Redeemable Preferred Stock

 

 

We are registering 2,351,801 shares of our Series A Convertible Redeemable Preferred Stock (“Preferred Stock”), and up to an additional 2,002,887 shares of Preferred Stock issuable as PIK dividends on the Preferred Stock. We are also registering up to 33,497,601 shares of our common stock that are issuable upon the conversion of shares of the Preferred Stock, based on the initial conversion price of the Preferred Stock.

All of the securities registered pursuant to this registration statement may be offered from time to time by the holders thereof identified under the heading “Selling Security Holders.” We originally issued 2,351,801 shares of the Preferred Stock to a selling security holder in a private transaction in connection with our recent rights offering. We will not receive any of the proceeds from the sales of Preferred Stock or common stock by the selling security holders.

The selling security holders may sell their shares at prevailing market prices or privately negotiated prices. Our Preferred Stock is listed on the NASDAQ Global Market under the symbol “GMETP.” Our common stock is listed on NASDAQ under the trading symbol “GMET.” As of May 5, 2011, the last reported sale prices of our Preferred Stock and common stock as reported on the NASDAQ Global Market was $12.00 per share and $1.44 per share, respectively.

 

 

Investing in our securities involves significant risks. You should carefully read the risk factors beginning on page 5 of this prospectus and in our periodic reports and other information filed with the Securities and Exchange Commission before investing in our securities.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

This prospectus is dated May     , 2011

 

 

---

Table of Contents

TABLE OF CONTENTS

 

		Page
ABOUT THIS PROSPECTUS			i
SUMMARY			1
RISK FACTORS			5
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS			5
USE OF PROCEEDS			7
SELLING SECURITY HOLDERS			7
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES			8
PLAN OF DISTRIBUTION			15
LEGAL MATTERS			16
EXPERTS			16
WHERE YOU CAN FIND MORE INFORMATION			16
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE			17

 

 

ABOUT THIS PROSPECTUS

This prospectus is part of a registration statement we filed with the Securities and Exchange Commission, or SEC, using the “shelf” registration process. Under the shelf registration process, the selling security holders may sell from time to time the securities described in this prospectus in one or more offerings. We may, to the extent necessary, provide a prospectus supplement that will contain specific information about the selling security holders and the terms of the offering. That prospectus supplement may include additional risk factors or other special considerations applicable to those securities or to us. Any prospectus supplement may also add to, update or change information contained in this prospectus and, accordingly, to the extent inconsistent, the information in this prospectus is superseded by the information in the prospectus supplement. You should read this prospectus, the applicable prospectus supplement and the additional information incorporated by reference in this prospectus described below under “Incorporation of Certain Information by Reference” and “Where You Can Find More Information” before making an investment in our Preferred Stock or common stock.

This prospectus contains summaries of certain provisions contained in some of the documents described herein, but reference is made to the actual documents for complete information. All of the summaries are qualified in their entirety by the actual documents. Copies of the documents referred to herein have been filed, or will be filed or incorporated by reference as exhibits to the registration statement of which this prospectus is a part, and you may obtain copies of those documents as described below under “Where You Can Find More Information.”

Neither the delivery of this prospectus nor any sale made under it implies that there has been no change in our affairs or that the information in this prospectus is correct as of any date after the date of this prospectus. You should not assume that the information in this prospectus, including any information incorporated in this prospectus by reference, the accompanying prospectus supplement or any free writing prospectus prepared by us, is accurate as of any date other than the date on the front of those documents. Our business, financial condition, results of operations and prospects may have changed since that date.

You should rely only on the information contained in or incorporated by reference in this prospectus or a prospectus supplement. We have not authorized anyone to provide any information other than that contained or incorporated by reference in this prospectus or in any free writing prospectus prepared by or on behalf of us or to which we have referred you. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We are not making an offer to sell securities in any jurisdiction where the offer or sale of such securities is not permitted.

Unless the context requires otherwise or unless otherwise noted, all references in this prospectus or any prospectus supplement to “GeoMet” and to the “Company,” “we,” “us” or “our” are to GeoMet, Inc. and its subsidiaries.

 

i

---

Table of Contents

 

1

---

Table of Contents

 

2

---

Table of Contents

 

3

---

Table of Contents

 

4

---

Table of Contents

RISK FACTORS

Investing in our securities involves risk. Prior to making a decision about investing in our securities, you should carefully consider the risks described in the section entitled “Risk Factors” in any prospectus supplement and the risks described in our most recent Annual Report on Form 10-K, which are incorporated by reference into this prospectus and in each case as these risk factors are amended or supplemented by subsequent Quarterly Reports on Form 10-Q and incorporated by reference into this prospectus. The occurrence of any of these risks could materially adversely affect our business, operating results and financial condition.

The risks and uncertainties we have described are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations. Any adverse effect on our business, financial condition or operating results could result in a decline in the value of the securities and the loss of all or part of your investment.

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

Included and incorporated by reference in this prospectus are certain forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). All statements, other than statements of historical facts, included or incorporated by reference in this prospectus that address activities, events or developments that we expect or anticipate will or may occur in the future are forward-looking statements, including statements regarding our planned capital expenditures, increases in gas production, the number of anticipated wells to be drilled after the date hereof, future cash flows and borrowings, our financial position, business strategy and other plans and objectives for future operations. We use the words “may,” “will,” “expect,” “anticipate,” “estimate,” “believe,” “continue,” “intend,” “plan,” “budget” and other similar words to identify forward-looking statements. You should read statements that contain these words carefully and should not place undue reliance on these statements. Although we believe that the expectations reflected in these forward-looking statements are reasonable, they do involve certain assumptions, risks and uncertainties. Our results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, among others:

 

•

our business strategy;

 

•

our financial position, including our cash flow and liquidity;

 

•

the effects of our indebtedness, which could adversely restrict our ability to operate, could make us vulnerable to general adverse economic and industry conditions, could place us at a competitive disadvantage compared to our competitors that have less debt, and could have other adverse consequences;

 

•

volatility in the international and domestic capital and credit markets, including fluctuations in interest rates and availability of capital;

 

•

general economic conditions may be less favorable than expected, including the possibility that the reduced level of economic growth in the United States will be prolonged or a new economic recession may develop, which could adversely affect the demand for gas and make it difficult, if not impossible, to access financial markets;

 

•

the continued oversupply of natural gas in the US markets, which depresses the price we receive for our gas production;

 

•

further declines in the prices we receive for our gas affecting our operating results, cash flows and credit capacity;

 

•

uncertainties in estimating our gas reserves;

 

•

our ability to replace our gas reserves;

 

•

uncertainties in exploring for and producing gas;

 

•

new gas development projects and exploration for gas in areas where we have little or no proven gas reserves;

 

•

our ability to acquire water supplies needed for drilling, or our ability to dispose of water used or removed from strata at a reasonable cost and within applicable environmental rules;

 

•

other persons could have ownership rights in our advanced gas extraction techniques which could force us to cease using those techniques or pay royalties;

 

•

availability of drilling and production equipment and field service providers;

 

5

---

Table of Contents

•

disruptions, capacity constraints in, or other limitations on the pipeline systems that deliver our gas;

 

•

our need to use unproven technologies to extract coalbed methane in some properties;

 

•

our ability to retain key members of our senior management and key technical employees;

 

•

the outcomes of legal proceedings in which we may become involved;

 

•

the possibility that the industry may be subject to future regulatory or legislative actions (including changes to existing tax rules and regulations and changes in environmental regulation);

 

•

the effects of government regulation and permitting and other legal requirements;

 

•

other economic, competitive, governmental, legislative, regulatory, geopolitical and technological factors may negatively impact our businesses, operations or pricing; and

 

•

our ability to operate effectively in a state or jurisdiction where land ownership and coalbed methane rights are complicated or unresolved.

Finally, our future results will depend upon various other risks and uncertainties, including, but not limited to, those detailed in our filings with the SEC that are incorporated by reference herein and in the section entitled “Risk Factors” included elsewhere in this prospectus. For additional information regarding risks and uncertainties, please read our filings with the SEC under the Exchange Act and the Securities Act, including our latest annual report on Form 10-K and our subsequently filed quarterly reports on Form 10-Q. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements in this paragraph and elsewhere in this prospectus and in the documents incorporated herein by reference. Other than as required under securities laws, we do not assume a duty to update these forward-looking statements, whether as a result of new information, subsequent events or circumstances, changes in expectations or otherwise.

 

6

---

Table of Contents

USE OF PROCEEDS

The selling security holders will receive all of the proceeds from sales of Preferred Stock and common stock under this prospectus and we will not receive any of such proceeds. The selling security holders named in this prospectus will pay any underwriting fees, discounts and commissions, along with any fees and expenses of underwriter’s counsel and certain of the selling security holders’ out-of-pocket expenses, incurred in connection with their sale of Preferred Stock and common stock registered under this prospectus. We will bear all other costs, fees and expenses incurred by us, or by the selling security holders, in effecting the registration, offer and sale of the Preferred Stock and common stock covered by this prospectus.

SELLING SECURITY HOLDERS

The following table shows for the selling security holders:

 

•

the number of shares of Preferred Stock beneficially owned by each selling security holder,

 

•

the number of shares of Preferred Stock (or common stock issuable upon conversion of the Preferred Stock) covered by this prospectus, and

 

•

the number of shares of common stock to be retained after this offering, if any, assuming the selling security holders sell the maximum number of shares (and percentage of outstanding shares of common stock owned after this offering, if more than 1%).

The selling security holders are not required, and may choose not, to sell any of their shares of Preferred Stock or common stock.

 

Name of Beneficial Owner		Shares of Preferred Stock Beneficially Owned Before Offering				Shares of Preferred Stock to Be Sold in Offering (2)				Shares of Common Stock to Be Sold in Offering (3)				Shares of Common Stock Beneficially Owned After Offering (4)				Percentage of Common Stock Beneficially Owned After Offering  (4)
Sherwood Energy, LLC (1)			2,341,801				4,336,186				33,355,278				—				—
Gary Weber			10,000				18,502				142,323				—				—
Totals			2,351,801				4,354,688				33,497,601				—				—

 

(1)

All information in the table with respect to Sherwood is based on the Schedule 13D filed with the SEC on September 23, 2010 and information provided to us by Sherwood. Paul McDermott and Bruce Rothstein, as controlling persons of Sherwood, have shared voting power and investment power over the shares of Preferred Stock (or common stock issuable upon conversion of the Preferred Stock). Sherwood is not a registered broker-dealer or an affiliate of a registered broker-dealer.

(2)

Sherwood acquired the shares of Preferred Stock to be sold in this offering in a private placement as the backstop purchaser in our rights offering that closed on September 14, 2010. Mr. Weber acquired 10,000 shares of Preferred Stock on December 8, 2010 from Sherwood for $10.00 per share. The total of 4,354,688 shares of our Preferred Stock, includes up to 2,002,887 shares of Preferred Stock issuable as PIK dividends to the holders of the Preferred Stock.

(3)	The 33,497,601 shares of common stock are issuable upon the conversion of shares of the Preferred Stock at the initial conversion price. This includes shares of common stock that may be issuable upon conversion of the shares of Preferred Stock issuable as dividends on the Preferred Stock.

(4)	Assumes all shares of Preferred Stock (or common stock issuable upon conversion of the Preferred Stock) offered hereby are sold. Based upon 4,278,124 shares of Preferred Stock outstanding and 39,974,554 shares of common stock outstanding as of May 1, 2011.

 

7

---

Table of Contents

MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES

The following is a summary of the material United States federal income tax considerations, and in the case of a non-United States holder (as defined below), United States federal estate tax considerations, of the Preferred Stock to purchasers that hold such stock as a capital asset (generally, property held for investment) for federal income tax purposes. The following discussion is based upon the provisions of the Internal Revenue Code of 1986, as amended (the “Code”), the applicable Treasury Regulations promulgated and proposed thereunder, judicial authority and current administrative rulings and practice now in effect, all of which are subject to different interpretations and all of which are subject to change, possibly with retroactive effect.

This discussion does not purport to deal with all aspects of United States federal income taxation that might be relevant to particular holders in light of their personal investment circumstances or status, nor does it discuss the United States federal income tax considerations applicable to holders subject to special treatment under the United States federal income tax laws, such as (without limitation):

 

•

certain expatriates or former long-term residents of the United States (including foreign corporations treated as domestic corporations under the Code);

 

•

stockholders that hold the shares as part of a straddle, appreciated financial position, synthetic security, hedge, conversion transaction or other integrated investment or risk reduction transaction;

 

•

stockholders who hold the shares as a result of a constructive sale;

 

•

stockholders whose functional currency is not the United States dollar;

 

•

stockholders who acquired the shares through the exercise of employee stock options or otherwise as compensation or through a tax-qualified retirement plan;

 

•

stockholders that are partnerships (or other entities or arrangements treated as partnerships for United States federal income tax purposes) or other pass-through entities or owners thereof;

 

•

financial institutions;

 

•

insurance companies;

 

•

tax-exempt entities;

 

•

regulated investment companies;

 

•

real estate investment trusts;

 

•

dealers in securities or foreign currencies;

 

•

foreign governments or international organizations;

 

•

traders in securities that mark-to-market; and

 

•

stockholders liable for alternative minimum tax.

If a partnership (or other entity or arrangement treated as a partnership for United States federal income tax purposes) holds our stock, the tax treatment of a partner in the partnership (or a member of another entity or arrangement treated as a partnership for United States federal income tax purposes) will generally depend upon the status of the partner (or member) and the activities of the partnership (or other entity or arrangement treated as a partnership for United States federal income tax purposes). If a holder is a partner of a partnership (or a member of another entity or arrangement treated as a partnership for United States federal income tax purposes) holding our stock, the holder should consult its own tax advisor.

We have not sought, and will not seek, an opinion of counsel or a ruling from the Internal Revenue Service regarding the United States federal income tax consequences of the sale of the Preferred Stock by the selling security holders. The following summary does not address the tax consequences of the Preferred Stock sale under foreign, state, local or other tax laws. ACCORDINGLY, EACH PURCHASER OF OUR PREFERRED STOCK OR COMMON STOCK SHOULD CONSULT ITS TAX ADVISOR WITH RESPECT TO THE PARTICULAR TAX CONSEQUENCES OF ACQUIRING, HOLDING, AND DISPOSING OF SUCH SECURITIES.

Definition of United States Holders and Non-United States Holders

As used in this discussion, a “United States holder” refers to a beneficial owner of our stock who or which, for United States federal income tax purposes, is:

 

8

---

Table of Contents

•

an individual who is a citizen or resident of the United States, including an alien individual who is a lawful permanent resident of the United States or who meets the “substantial presence” test under Section 7701(b) of the Code;

 

•

a corporation, or other entity taxable as a corporation for United States federal income tax purposes, that was created or organized in or under the laws of the United States, any state thereof or the District of Columbia;

 

•

an estate whose income is subject to United States federal income taxation regardless of its source; or

 

•

a trust (i) if it is subject to the primary supervision of a court within the United States and one or more “United States persons” (as defined in the Code) have the authority to control all substantial decisions of the trust or (ii) if it has a valid election in effect under applicable United States Treasury Regulations to be treated as a “United States person.”

The term “non-United States holder” refers to any beneficial owner of our stock who or which is neither a United States holder nor a partnership (or other entity or arrangement treated as a partnership for United States federal tax purposes).

United States Holders

The following is a summary of the material United States federal income tax consequences that will apply to a United States holder of our Preferred Stock.

Series A Convertible Redeemable Preferred Stock

Distributions on the Preferred Stock. Distributions on our Preferred Stock will be dividends for United States federal income tax purposes to the extent of our current or accumulated earnings and profits, as determined for United States federal income tax purposes, and will be taxable as ordinary income, although possibly at reduced rates as discussed below. To the extent that the amount of any distribution paid with respect to the Preferred Stock exceeds our current and accumulated earnings and profits, the excess will be treated as a nontaxable return of capital to the extent of the United States holder’s adjusted tax basis in the Preferred Stock and will reduce the United States holder’s adjusted tax basis in the Preferred Stock. Any amount in excess of the United States holder’s adjusted tax basis will be treated as capital gain. A reduction in tax basis could result in increased capital gain, or decreased capital loss, upon a subsequent sale, redemption or other disposition of the Preferred Stock.

If we make a distribution on the Preferred Stock in the form of additional shares of our Preferred Stock, such distribution generally will be tax-free under Section 305 of the Code. Such a stock distribution will not be tax-free if one or more of the following exceptions apply: (1) at the election of any stockholder, the dividend can be paid in property instead of stock; (2) the result of the distribution is that some stockholders receive property while other stockholders increase their interest in the earnings or assets of the corporation; (3) as a result of the distribution, some common stockholders receive common stock and other common stockholders receive Preferred Stock; (4) the dividend is a distribution on Preferred Stock; or (5) the dividend is payable in convertible Preferred Stock, unless we can establish that the dividend will not have the effect listed exception (2). Exception (4) for distributions on Preferred Stock does not apply to “participating Preferred Stock.” Participating Preferred Stock is stock that participates in corporate growth to any significant extent (disregarding conversion privileges). A right to participate in corporate growth that lacks substance (that is, as to which it is reasonable to anticipate at the time of the distribution that there is little or no likelihood of participating beyond a fixed preferential return) will not be respected. Generally, stock which enjoys a priority as to dividends and on liquidation and is entitled to participate, over and above such priority, with another less privileged class of stock in earnings and profits and upon liquidation, would be treated as participating Preferred Stock for purposes of Section 305. Our Preferred Stock has a priority as to dividends and has the right to participate, over and above its preference amount, in any liquidation proceeds (but not any dividends) along with our common stock on an as-if converted basis (see “Series A Convertible Redeemable Preferred Stock—Principal Terms of the Preferred Stock—Liquidation”). Based on the foregoing, we currently intend to treat the Preferred Stock as participating Preferred Stock for purposes of Section 305. There is no assurance, however, that the IRS or the courts will not take a contrary position. In general, each holder is bound by our determination, unless the holder explicitly discloses that it is taking a contrary position in a statement attached to its timely filed tax return for the taxable year in which it acquires the stock.

If our Preferred Stock is treated as participating Preferred Stock and no other exceptions apply at the time of the stock distribution, the stock distribution will be tax-free to the United States holder. A United States holder’s tax basis in the shares will be allocated between the Preferred Stock and the additional Preferred Stock distributed based on their relative fair market values on the date of distribution. Such United States holder’s holding period for such additional Preferred Stock generally will include the period during which the Preferred Stock was held prior to the stock distribution.

If, contrary to our position, our Preferred Stock is treated as non-participating Preferred Stock or another exception to tax-free treatment applies, a distribution in the form of additional shares of our Preferred Stock will be taxable for United States federal income tax purposes in the same manner as distributions described in the first paragraph above. The amount of such distribution will be equal to the fair market value of the additional Preferred Stock on the date of the distribution. A United States holder’s tax basis in such additional Preferred Stock will equal the fair market value of the additional Preferred

 

9

---

Table of Contents

Stock on the distribution date, and such United States holder’s holding period for such additional Preferred Stock will begin on the day following the distribution date.

Dividends on the Preferred Stock taxable as dividends received by corporate United States holders generally will be eligible for the dividends received deduction, subject to various customary conditions and limitations. The Code disallows the dividends received deduction in its entirety if our Preferred Stock with respect to which the dividend is paid is held by such United States holder for less than 46 days during the 91-day period beginning on the date which is 45 days before the date on which our Preferred Stock becomes ex-dividend with respect to such dividend. A 91-day minimum holding period applies to any dividends on our Preferred Stock that are attributable to periods in excess of 366 days. The benefits of the dividends received deduction to a corporate United States holder may be reduced or eliminated by many exceptions and restrictions, including restrictions relating to the corporate United States holder’s taxable income and debt financing.

Subject to certain exceptions for short-term and hedged positions and provided that certain holding period and other requirements are met, distributions constituting “qualified dividend income” received by non-corporate United States holders in respect of the Preferred Stock generally are subject to a reduced maximum tax rate of 15% for taxable years beginning before January 1, 2011. For taxable years beginning on or after January 1, 2011, the maximum tax rate applicable to dividends is scheduled to return to the tax rate generally applicable to ordinary income. The rate reduction does not apply to dividends received to the extent that United States holders elect to treat the dividends as “investment income” for purposes of the rules relating to the limitation on the deductibility of investment-related interest, which may be offset by investment expense. Furthermore, the rate reduction also will not apply to dividends that are paid to such holders with respect to our Preferred Stock that is held by the holder for less than 61 days during the 121-day period beginning on the date which is 60 days before the date on which our Preferred Stock becomes ex-dividend with respect to such dividend. A 91-day minimum holding period applies to any dividends on our Preferred Stock that are attributable to periods in excess of 366 days.

In general, for purposes of meeting the holding period requirements for both the dividends received deduction and the reduced maximum tax rate on dividends described above, United States holders may not count towards their holding period any period in which they (a) have the option to sell, are under a contractual obligation to sell, or have made (and not closed) a short sale of our Preferred Stock or substantially identical stock or securities; (b) are the grantor of an option to buy our Preferred Stock or substantially identical stock or securities; or (c) otherwise have diminished their risk of loss on our Preferred Stock by holding one or more other positions with respect to substantially similar or related property. The United States Treasury Regulations provide that a taxpayer has diminished its risk of loss on stock by holding a position in substantially similar or related property if the taxpayer is the beneficiary of a guarantee, surety agreement, or similar arrangement that provides for payments that will substantially offset decreases in the fair market value of the stock. In addition, the Code disallows the dividends received deduction as well as the reduced maximum tax rate on dividends if the recipient of a dividend is obligated to make related payments with respect to positions in substantially similar or related property. This disallowance applies even if the minimum holding period has been met.

United States holders that are corporations should consider the effect of Section 246A of the Code, which reduces the dividends received deduction allowed with respect to “debt-financed portfolio stock.” The Code also imposes a 20% alternative minimum tax on corporations. In some circumstances, the portion of dividends subject to the dividends received deduction will serve to increase a corporation’s minimum tax base for purposes of the alternative minimum tax. In addition, a dividend that exceeds certain thresholds in relation to a United States holder’s tax basis in the Preferred Stock could be characterized as an “extraordinary dividend” (as defined in Section 1059 of the Code). Generally, a corporate United States holder that receives an extraordinary dividend is required to reduce its stock basis (but not below zero) by the portion of such dividend that is not taxed because of the dividends received deduction. If the amount of the reduction exceeds such United States holder’s tax basis in the Preferred Stock, the excess is treated as taxable gain for the taxable year in which such extraordinary dividend is received. Non-corporate United States holders who receive an extraordinary dividend would be required to treat any loss on the sale of the Preferred Stock as long-term capital loss to the extent of the dividends received by them that qualify for the reduced dividend tax rate for qualified dividend income.

United States holders should consult their own tax advisors regarding the availability of the reduced dividend tax rate or the dividends received deduction and the potential applicability of the debt-financed portfolio stock, corporate alternative minimum tax and extraordinary dividend rules in light of their particular circumstances.

Conversion of the Preferred Stock into Common Stock. A United States holder generally will not recognize gain or loss on the receipt of common stock upon the conversion of the Preferred Stock. However, if the conversion takes place when there is a dividend arrearage on the Preferred Stock and the fair market value of the common stock exceeds the issue price of the Preferred Stock, the common stock received in respect of such dividend arrearage may be treated as a dividend distribution as described above under “—Distributions on the Preferred Stock.” In addition, if the conversion is pursuant to a plan to periodically increase the holder’s proportionate interest in our assets or earnings and profits, a portion of the common stock received may be treated as a dividend distribution as described above under “—Distributions on the Preferred Stock.” Assuming the conversion is not pursuant to any such plan and no dividend arrearage exists, the United States holder’s tax basis

 

10

---

Table of Contents

in the common stock received upon conversion will equal such United States holder’s tax basis in the Preferred Stock converted. The holding period of the common stock received upon conversion generally will include the period during which the Preferred Stock converted was held prior to conversion.

Cash received in lieu of a fractional share of common stock generally will be treated as a payment in a taxable exchange for such fractional share, and gain or loss will be recognized on the receipt of cash in an amount equal to the difference between the amount of cash received and the amount of adjusted tax basis allocable to the fractional share.

Adjustment of the Conversion Price. Under Treasury Regulations promulgated under Section 305 of the Code, an adjustment to the conversion price of convertible Preferred Stock generally results in a constructive stock distribution (includable in income in the manner described above under “—Distributions on the Preferred Stock”) with respect to such Preferred Stock to the extent such adjustment increases the proportionate interest of the holders of such stock in the issuer’s earnings and profits. For example, an increase in the conversion ratio to reflect a taxable dividend to holders of common stock generally will give rise to a deemed taxable dividend to the holders of Preferred Stock to the extent of the issuer’s current or accumulated earnings and profits. However, adjustments to the conversion price made pursuant to a bona fide reasonable adjustment formula that has the effect of preventing dilution in the interest of a holder of the Preferred Stock generally will not be considered to result in a constructive distribution.

The conversion price of the Preferred Stock is subject to adjustment under certain circumstances (see “Series A Convertible Redeemable Preferred Stock—Principal Terms of the Preferred Stock—Conversion; Conversion Price”). Such circumstances generally should constitute bona fide reasonable anti-dilution provisions and generally should not result in constructive distributions. However, certain of the possible adjustments (including adjustments for cash distributions on our common stock) will not qualify as being pursuant to a bona fide reasonable adjustment formula. If such adjustments were made, United States holders of Preferred Stock will be deemed to have received constructive distributions taxable in the manner described above under “—Distributions on the Preferred Stock.”

In addition, a failure to make an adjustment to the conversion price of our Preferred Stock to reflect a stock dividend or similar event that increases the proportionate interest of the holders of our common stock could in some circumstances give rise to constructive distributions to such holders.

Thus, under certain circumstances, United States holders may recognize income in the event of a constructive distribution even though they may not receive any cash or property.

Sale or Other Disposition. A sale, exchange, or other disposition of the Preferred Stock (other than a conversion into common stock or a redemption) generally will result in gain or loss equal to the difference between the amount realized upon the disposition (not including any proceeds attributable to declared and unpaid dividends, which will be taxable as described above to United States holders of record who have not previously included such dividends in income) and a United States holder’s adjusted tax basis in the Preferred Stock. The gain or loss will be long-term capital gain or loss if the United States holder held the Preferred Stock more than one year at the time of sale, exchange, or other disposition. Under current law, long-term capital gains of individuals, estates, and trusts generally are subject to a reduced maximum tax rate of 15% (which maximum tax rate currently is scheduled to increase to 20% for dispositions occurring during taxable years beginning on or after January 1, 2011). A United States holder’s ability to deduct capital losses is limited.

Redemption. In the event that we redeem the Preferred Stock (see “Series A Convertible Redeemable Preferred Stock—Principal Terms of the Preferred Stock—Redemption; Redemption Price”), the redemption proceeds generally will be treated as a sale or exchange if the United States holder does not own, actually or constructively, within the meaning of Section 318 of the Code, any of our stock other than the Preferred Stock redeemed. If a United States holder does own, actually or constructively, such other stock, a redemption of stock may be treated as a dividend to the extent of our current or accumulated earnings and profits. Such dividend treatment would not apply and the redemption would be treated as a sale or exchange if the redemption is “substantially disproportionate” with respect to the United States holder under Section 302(b)(2) of the Code or is “not essentially equivalent to a dividend” with respect to the United States holder under Section 302(b)(1) of the Code. A distribution to a United States holder will be “not essentially equivalent to a dividend” if it results in a “meaningful reduction” in the United States holder’s stock interest in the Company. A redemption of stock for cash that results in a reduction in the proportionate interest in the Company (taking into account any constructive ownership) of a United States holder whose relative stock interest in the Company is minimal and who exercises no control over corporate affairs may be regarded as a “meaningful reduction” in the United States holder’s stock interest in the Company. In all cases, amounts of cash received upon redemption of the shares which represent declared and unpaid dividends will be subject to taxation in the manner discussed above under “—Distributions on the Preferred Stock.”

If a redemption of Preferred Stock is treated as a distribution that is taxable as a dividend, the amount of the distribution will be measured by the amount received by the United States holder without being reduced by the United States holder’s adjusted tax basis in the Preferred Stock. The United States holder’s adjusted tax basis in the redeemed Preferred Stock will be

 

11

---

Table of Contents

transferred to the United States holder’s remaining stock holdings in the Company. If the United States holder does not retain any stock ownership in the Company, the holder may lose such basis entirely.

Upon a redemption of stock that is not treated as a distribution taxable as a dividend, the United States holder will recognize capital gain or loss as described under “—Sale or Other Disposition” above.

Information Reporting and Backup Withholding. Generally, information reporting will apply to dividends in respect of the Preferred Stock and the proceeds from the sale, exchange, redemption, or other disposition of the Preferred Stock. Backup withholding, currently at a rate equal to 28% (which rate currently is scheduled to increase to 31% for taxable years beginning on or after January 1, 2011), may apply to such payments made to a United States holder if the United States holder:

 

•

fails to furnish its taxpayer identification number on an IRS Form W-9 within a reasonable time after the Company or an appropriate intermediary request this information;

 

•

furnishes an incorrect taxpayer identification number;

 

•

is informed by the IRS that it failed to report properly any interest or dividends; or

 

•

fails, under certain circumstances, to provide a certified statement signed under penalty of perjury that it is a “United States person” (as defined in the Code), that the taxpayer identification number provided is its correct number, and that it is not subject to backup withholding.

Certain persons are exempt from information reporting and backup withholding, including corporations. United States holders of the Preferred Stock should consult their tax advisors as to their qualification for exemption and the procedure for obtaining such exemption.

Backup withholding is not an additional tax. The amount of any backup withholding imposed on a United States holder will be allowed a refund or a credit against the United States holder’s United States federal income tax liability if the required information or appropriate claim form is timely furnished to the IRS.

Non-United States Holders

The following is a summary of the material United States federal tax consequences that will apply to a non-United States holder of our Preferred Stock.

Series A Convertible Redeemable Preferred Stock

Distributions on the Preferred Stock. Any distributions on our Preferred Stock (including distributions in the form of our Preferred Stock taxable as dividends and, in certain circumstances, cash or shares of common stock treated as a dividend if a non-United States holder converts the Preferred Stock), paid to a non-United States holder ordinarily will be subject to withholding of United States federal income tax at a rate of 30% unless the non-United States holder provides us, prior to the payment of such dividends, with a properly executed:

 

•

IRS Form W-8BEN (or successor form) claiming an exemption from, or reduction in the rate of, withholding under the benefit of an applicable income tax treaty; or

 

•

IRS Form W-8ECI (or successor form) stating that the dividends are not subject to withholding tax because they are effectively connected with the non-United States holder’s conduct of a trade or business in the United States. (See “—Income or Gain Effectively Connected With a United States Trade or Business” below.)

Distributions in excess of our current and accumulated earnings and profits (as determined under United States federal income tax principles) will first constitute a return of capital that is applied against and reduces a non-United States holder’s adjusted tax basis in the Preferred Stock, and thereafter will be treated as gain realized on the sale or other disposition of the Preferred Stock and will be treated as described below under “—Sale or Other Disposition.”

Conversion of the Preferred Stock into Common Stock. The United States federal income tax consequences to non-United States holders with respect to the conversion of our Preferred Stock into common stock generally should be the same as described above under “United States Holders—Conversion of the Preferred Stock into Common Stock.” That is, non-United States holders generally will not recognize any gain or loss in respect of the receipt of common stock upon the conversion of the Preferred Stock. Additionally, non-United States holders that receive cash or common stock in respect of dividends in arrears on the shares will be treated as described above under “—Distributions on the Preferred Stock.”

Certain non-U.S. holders may be required to satisfy certain filing requirements with the IRS to avoid the recognition of gain upon the conversion. Non-U.S. holders should consult their tax advisors regarding whether they must satisfy such filing requirements upon a conversion of the Preferred Stock into common stock to avoid recognition of gain.

 

12

---

Table of Contents

Adjustment of the Conversion Price. As described above under “United States Holders—Adjustment of the Conversion Price,” adjustments in the conversion price (or failures to adjust the conversion price) that increase the proportionate interest of a non-United States holder in our earnings and profits could result in deemed distributions to the non-United States holder that are taxed as described above under “—Distributions on the Preferred Stock.” If we make an adjustment to the conversion rate and the adjustment gives rise to a constructive dividend, non-United States holders should expect additional U.S. withholding on subsequent distributions.

Sale or Other Disposition. Any gain or loss realized on the disposition of the Preferred Stock (excluding any amounts attributable to declared and unpaid dividends upon a redemption, which will be taxable to a non-United States holder of record as described above under “—Distributions on the Preferred Stock”) by a non-United States holder generally will not be subject to United States federal income tax unless:

 

•

the gain or loss is effectively connected with the conduct of a trade or business by the non-United States holder in the United States (and, if required by an applicable income tax treaty, is treated as attributable to a United States permanent establishment of the non-United States holder);

 

•

the non-United States holder is an individual who is present in the United States for 183 days or more in the taxable year of the disposition and certain other conditions are met; or

 

•

we are or have been a “United States real property holding corporation” (“USRPHC”) for United States federal income tax purposes at any time during the shorter of the five-year period preceding the date of the disposition or the non-United States holder’s holding period.

A non-United States holder who or which has gain that is described in the first bullet point above generally will be subject to tax on the net gain derived from the disposition under regular graduated United States federal income tax rates in the same manner as a United States holder (see “—Income or Gain Effectively Connected With a United States Trade or Business” below).

An individual non-United States holder described in the second bullet point above, except as otherwise provided by an applicable income tax treaty, will be subject to a flat 30% tax on the gain derived from the sale or other disposition, which may be offset by United States source capital losses, even though the individual is not considered a resident of the United States.

As to the third bullet point above, because of the oil and natural gas properties and other real property assets we own, we believe that we currently are, and expect to remain for the foreseeable future, a USRPHC for United States federal income tax purposes. Therefore, a non-United States holder generally will be subject to United States federal income tax in respect of any gain or loss recognized on a sale or other disposition of the Preferred Stock in the same manner as described above under “United States Holders—Sale or Other Disposition.” In addition, upon such disposition, the non-United States holder may be subject to a 10% withholding tax on the amount realized on such disposition unless the Preferred Stock is regularly traded on an established securities market or the non-United States holder otherwise qualifies for exemption from United States federal income tax with respect to the disposition. Any amount withheld under the preceding sentence may be credited against the non-United States holder’s United States federal income tax liability and any excess may be refundable if the proper information is timely furnished to the IRS.

A non-United States holder generally will not be subject to United States federal income tax on a disposition of our Preferred Stock or common stock if a class of our stock is regularly traded on an established securities market, unless such non-United States holder beneficially owns or owned more than 5% of our Preferred Stock or common stock (or, if the Preferred Stock is not regularly traded on an established securities market, the Preferred Stock beneficially owned, actually or constructively, by the non-United States holder on the date that such Preferred Stock was acquired (or on any subsequent date when Preferred Stock was acquired by the non-United States holder) had a fair market value greater than the fair market value on that date of 5% of our common stock into which the Preferred Stock is convertible) at any time during the shorter of the five-year period ending on the date of disposition or the non-United States holder’s holding period. A non-United States holder generally will not be subject to United States federal income tax withholding on a disposition of our Preferred Stock or common stock if a class of our stock is regularly traded on an established securities market. For this purpose, a class of interests that is traded on one or more established securities markets generally is considered to be regularly traded on such market or markets for any calendar quarter during which it is regularly quoted by brokers or dealers making a market in such interests. A broker or dealer makes a market in a class of interests only if the broker or dealer holds himself out to buy or sell interests in such class at the quoted prices.

Non-United States holders should consult their own tax advisors with respect to the application of the foregoing rules to their ownership and disposition of the Preferred Stock.

Income or Gain Effectively Connected with a United States Trade or Business. The preceding discussion of the tax consequences of the acquisition, ownership and disposition of the Preferred Stock by a non-United States holder generally assumes that the non-United States holder is not engaged in a United States trade or business. If any dividends with respect to

 

13

---

Table of Contents

the Preferred Stock or gain from the sale, exchange or other taxable disposition of the Preferred Stock are effectively connected with a United States trade or business conducted by the non-United States holder (and, if required by an applicable income tax treaty, is treated as attributable to a permanent establishment maintained by the non-United States holder in the United States), then the income or gain will be subject to United States federal income tax at regular graduated income tax rates. If the non-United States holder is a corporation, that portion of its earnings and profits that is effectively connected with its United States trade or business also may be subject to a “branch profits tax” at a 30% rate, unless an applicable income tax treaty provides for a lower rate. Even though effectively connected dividends are subject to United States federal income tax, and may be subject to the branch profits tax, they generally are not subject to withholding tax if the non-United States holder provides a properly executed IRS Form W-8ECI (or successor form) to us or our paying agent.

United States Federal Estate Tax. An individual who is not a citizen or a resident of the United States (as specially defined for United States federal estate tax purposes) and who is treated as the owner of, or has made certain lifetime transfers of, an interest in the Preferred Stock at the time of his or her death will be required to include the value of the Preferred Stock in the individual’s gross estate for United States federal estate tax purposes, and may be subject to United States federal estate tax, unless an applicable estate tax or other treaty provides otherwise.

Information Reporting and Backup Withholding. We must report annually to the IRS and to each non-United States holder the amount of dividends paid to such holder, the proceeds from a sale or other disposition of the Preferred Stock and the tax withheld, if any, with respect to those payments, regardless of whether withholding was required. Copies of the information returns reporting such dividends and any withholding may also be made available to the tax authorities in the country in which the non-United States holder resides under the provisions of an applicable income tax treaty or agreement.

Non-United States holders generally will not be subject to backup withholding with respect to payments of dividends made by us or our paying agent (in its capacity as such) to non-United States holders if we do not have actual knowledge or reason to know that the non-United States holder is a “United States person” (as defined in the Code) and the non-United States holder provides the requisite certification that such holder is not a “United States person” (as defined in the Code) on IRS Form W-8BEN, IRS Form W-8ECI or otherwise establishes an exemption from backup withholding.

If a non-United States holder receives payments of the proceeds of a sale of the Preferred Stock to or through a United States office of a broker, the payment is subject to both United States backup withholding at a rate of 28% (which rate currently is scheduled to increase to 31% for taxable years beginning on or after January 1, 2011) and information reporting unless the non-United States holder provides a Form W-8BEN certifying that the non-United States holder is not a “United States person” (as defined in the Code) or otherwise establishes an exemption. Generally, information reporting and backup withholding will not apply to a payment of disposition proceeds where the sale is effected outside the United States through a non-United States office of a non-United States broker unless (a) the proceeds are transferred to an account maintained by the holder in the United States; (b) the payment of proceeds or the confirmation of the sale is mailed to the holder at a United States address; or (c) the sale has some other specified connection with the United States as provided in applicable Treasury Regulations.

United States information reporting (but not backup withholding) will generally apply to a payment of disposition proceeds where the sale is effected outside the United States by or through an office outside the United States of a broker that fails to maintain documentary evidence that the holder is not a “United States person” (as defined in the Code) or that the holder otherwise is entitled to an exemption, and the broker is:

 

•

a “United States person” (as defined in the Code);

 

•

a foreign person that derives 50% or more of its gross income for defined periods from the conduct of a trade or business in the United States;

 

•

a “controlled foreign corporation” for United States federal income tax purposes; or

 

•

a foreign partnership if, at any time during its tax year: (1) more than 50% of its capital or profits interest is owned by “United States persons” (as defined in the Code) or (2) it is engaged in a United States trade or business.

Non-United States holders should consult their own tax advisors regarding application of backup withholding in their particular circumstances and the availability of and procedure for obtaining an exemption from backup withholding under applicable Treasury Regulations.

Backup withholding is not an additional tax. The amount of any backup withholding imposed on a payment to a non-United States holder of the Preferred Stock will be allowed as a refund or a credit against the non-United States holder’s United States federal income tax liability if the required information is timely furnished to the IRS.

New Legislation Relating to Foreign Accounts

 

14

---

Table of Contents

Newly enacted legislation may impose withholding taxes on certain types of payments made to “foreign financial institutions” and certain other non-United States entities. Under this legislation, the failure to comply with additional certification, information reporting and other specified requirements could result in withholding tax being imposed on payments of dividends and sales proceeds to foreign intermediaries and certain non-United States holders. The legislation imposes a 30% withholding tax on dividends on, or gross proceeds from the sale or other disposition of, our Preferred Stock or our common stock paid to a foreign financial institution or to a foreign non-financial entity, unless (i) the foreign financial institution undertakes certain diligence and reporting obligations or (ii) the foreign non-financial entity either certifies it does not have any substantial United States owners or furnishes identifying information regarding each substantial United States owner. If the payee is a foreign financial institution, it must enter into an agreement with the United States Treasury requiring, among other things, that it undertake to identify accounts held by certain United States persons or United States-owned foreign entities, annually report certain information about such accounts, and withhold 30% on payments to account holders whose actions prevent it from complying with these reporting and other requirements. Subject to a grandfathering provision which exempts payments on, and the gross proceeds from the disposition of, obligations which are outstanding on March 18, 2012, the legislation would apply to payments made after December 31, 2012. Prospective holders of the Preferred Stock should consult their tax advisors regarding this legislation and subsequent guidance provided by the IRS pertaining to such legislation.

THE PRECEDING DISCUSSION OF UNITED STATES FEDERAL INCOME AND ESTATE TAX CONSIDERATIONS IS FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY, EACH HOLDER SHOULD CONSULT ITS OWN TAX ADVISOR AS TO THE PARTICULAR FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO IT OF ACQUIRING, OWNING AND DISPOSING OF THE SHARES, INCLUDING CONSEQUENCES OF ANY PROPOSED CHANGES IN APPLICABLE LAW.

PLAN OF DISTRIBUTION

As used in this prospectus, “selling security holders” includes any donees, pledgees, transferees or other successors in interest who will hold the selling security holders’ shares after the date of this prospectus. We are paying the costs, expenses and fees of registering the Preferred Stock (and common stock issuable upon conversion of the Preferred Stock), but the selling security holders will pay any underwriting or brokerage commissions and similar selling expenses relating to their sale of the Preferred Stock and common stock pursuant to this prospectus.

The selling security holders may sell, from time to time, any or all of their shares of our Preferred Stock and common stock on the NASDAQ Global Market or such other applicable stock exchange, market or trading facility on which our shares are then traded or in private transactions. The selling security holders may sell their shares at prevailing market prices or privately negotiated prices.

The selling security holders may sell some or all of their Preferred Stock (or common stock issuable upon conversion of the Preferred Stock) through:

 

•

ordinary brokers’ transactions which may include long or short sales;

 

•

transactions involving cross or block trades or otherwise;

 

•

purchases by brokers, dealers or underwriters as principal and resale by those purchasers for their own accounts under this prospectus;

 

•

market makers or into an existing market for our Preferred Stock or common stock;

 

•

other ways not involving market makers or established trading markets, including direct sales to purchasers or sales effected through agents;

 

•

transactions in options, swaps or other derivatives; or

 

•

any combination of the selling options described in this prospectus, or by any other legally available means.

The selling security holders may enter into hedging transactions with broker-dealers who may engage in short sales of our Preferred Stock and common stock in the course of hedging the positions they assume. The selling security holders also may enter into option or other transactions with broker-dealers that require the delivery of the Preferred Stock and common stock by those broker-dealers. Thereafter, the shares may be resold under this prospectus.

Broker-dealers or underwriters may receive compensation in the form of underwriting discounts or commissions and may receive commissions from purchasers of the securities for whom they may act as agents. If any broker-dealer purchases the securities as principal, it may effect resales of the securities from time to time to or through other broker-dealers, and other broker-dealers may receive compensation in the form of concessions or commissions from the purchasers of securities for whom they may act as agents.

 

15

---

Table of Contents

The selling security holders and any broker-dealers involved in the sale or resale of our common stock may qualify as “underwriters” within the meaning of Section 2(a)(11) of the Securities Act. In addition, a broker-dealers’ commissions, discounts or concessions may qualify as underwriters’ compensation under the Securities Act. If the selling security holders or any broker-dealer qualifies as an “underwriter,” such selling security holder will be subject to the prospectus delivery requirements of Rule 153 of the Securities Act, which may include delivery through the facilities of the NASD.

In conjunction with sales to or through brokers, dealers or agents, the selling security holders may agree to indemnify them against liabilities arising under the Securities Act. We know of no existing arrangements between the selling security holders, any other shareholder, broker, dealer, underwriter or agent relating to the sale or distribution of our Preferred Stock or common stock.

In addition to selling their shares of Preferred Stock (or common stock issuable upon conversion of the Preferred Stock) under this prospectus, the selling security holders may:

 

•

transfer their shares in other ways not involving market makers or established trading markets, including by gift, distribution, or other transfer; or

 

•

in some cases, sell their shares under Rule 144 of the Securities Act, if the transaction meets the requirements of Rule 144.

We have advised the selling security holders that during the time they are engaged in a distribution of the securities covered by this prospectus, it is required to comply with Regulation M promulgated under the Exchange Act. With certain exceptions, Regulation M precludes the selling security holders, any affiliated purchasers, and any broker-dealer or other person who participates in such distribution from bidding for or purchasing, or attempting to induce any person to bid for or purchase, any shares which are the subject of the distribution until the entire distribution is complete. Regulation M also prohibits any bids or purchases made in order to stabilize the price of our shares in connection with the distribution of our shares. We have further advised the selling security holders, which may be an “affiliated purchaser” of ours, that they must coordinate their sales under this prospectus with us for purposes of Regulation M. All of the foregoing may affect the marketability of the securities offered in this prospectus.

We will amend or supplement this prospectus as required by the Securities Act.

LEGAL MATTERS

The validity of the securities offered hereby will be passed upon for us by Haynes and Boone, LLP.

EXPERTS

The consolidated financial statements incorporated in this prospectus by reference from our Annual Report on Form 10-K for the year ended December 31, 2010, have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report (which report expresses an unqualified opinion and includes an explanatory paragraph relating to a change in 2009 of the accounting for natural gas reserves), which is incorporated herein by reference. Such financial statements have been so incorporated in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.    

Estimates of proved natural gas reserves for GeoMet, Inc. referred to and incorporated by reference herein were based upon reserve reports prepared by DeGolyer and MacNaughton, independent petroleum engineers. These estimates are included and incorporated herein in reliance on the authority of such firm as an expert in such matters.

WHERE YOU CAN FIND MORE INFORMATION

We are subject to the information reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and, in accordance with these requirements, we are required to file periodic reports and other information with the United States Securities and Exchange Commission (the “SEC”). The reports and other information filed by us with the SEC may be inspected and copied at the public reference facilities maintained by the SEC as described below.

You may copy and inspect any materials that we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. Please call the SEC at 1-800-SEC-0330 for further information about the operation of the public reference rooms. The SEC also maintains an internet website at http://www.sec.gov that contains our filed reports, proxy and information statements, and other information that we file electronically with the SEC. Additionally, we make these filings available, free of charge, on our website at www.geometinc.com as soon as reasonably practicable after we electronically file such materials with, or furnish them to, the SEC. The information on our website, other than these filings, is not, and should

 

16

---

Table of Contents

not be, considered part of this prospectus, is not incorporated by reference into this document, and should not be relied upon in connection with making any investment decision with respect to our securities.

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

We disclose important information to you by referring you to documents that we have previously filed with the SEC or documents that we will file with the SEC in the future. The information incorporated by reference is considered to be part of this prospectus and any future prospectus supplement. Information in documents that we file later with the SEC will automatically update and supersede information in this prospectus and any future prospectus supplement. We incorporate by reference into this prospectus the documents listed below, and any future filings made by us with the SEC under Section 13(a), 13(c), 14, or 15(d) of the Exchange Act until all of the securities offered hereby have been sold. We hereby incorporate by reference the following documents; provided, however, that we are not incorporating any information contained in any Current Report on Form 8-K that is furnished but not filed with the SEC:

 

•

Our Quarterly Report on Form 10-Q for the quarter ended March 31, 2011, filed with the SEC on May 6, 2011;

 

•

Our Annual Report on Form 10-K for the fiscal year ended December 31, 2010, filed with the SEC on April 6, 2011;

 

•

Our Current Reports on Form 8-K, filed with the SEC on January 31, 2011, March 31, 2011 and April 7, 2011; and

 

•

the description of our common stock in our Registrant Statement on Form 8-A, filed on July 28, 2006, and all amendments or reports filed for the purpose of updating such description.

 

•

the description of our Preferred Stock in our Registrant Statement on Form 8-A, filed on September 10, 2010, and all amendments or reports filed for the purpose of updating such description.

Any statement contained in a document incorporated or deemed to be incorporated by reference in this prospectus is modified or superseded for purposes of the prospectus to the extent that a statement contained in this prospectus or in any other subsequently filed document that also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any statement so modified or superseded does not, except as so modified or superseded, constitute a part of this prospectus.

We will provide without charge to each person, including any beneficial owner, to whom this prospectus is delivered, upon written or oral request, a copy of any or all of the foregoing documents incorporated herein by reference (other than exhibits unless such exhibits are specifically incorporated by reference in such documents). Requests for such documents should be made to us at the following address or telephone number:

GeoMet, Inc.

909 Fannin, Suite 1850

Houston, Texas 77010

(713) 659-3855

Attention: Corporate Secretary

We also maintain a website at www.geometinc.com. However, the information on our website is not part of this prospectus.

 

17

---

Table of Contents

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 14. Other Expenses of Issuance and Distribution

The expenses of this offering (all of which are to be paid by the registrant) are estimated to be as follows:

 

SEC Registration Fee		$	6,066.95
Fees and Expenses of Legal Counsel			25,000
Accounting Fees and Expenses			25,000
Printing Expenses			3,000
Miscellaneous			2,000
Total		$	61,066.95

Item 15. Indemnification Of Officers And Directors

Our certificate of incorporation provides that a director will not be liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (1) for any breach of the director’s duty of loyalty to the corporation or its stockholders, (2) for acts or omissions not in good faith or which involved intentional misconduct or a knowing violation of the law, (3) under section 174 of the Delaware General Corporate Law (“DGCL”) for unlawful payment of dividends or improper redemption of stock or (4) for any transaction from which the director derived an improper personal benefit. In addition, if the DGCL is amended to authorize the further elimination or limitation of the liability of directors, then the liability of a director of the corporation, in addition to the limitation on personal liability provided for in our charter, will be limited to the fullest extent permitted by the amended DGCL. Our bylaws provide that the corporation will indemnify, and advance expenses to, any officer or director to the fullest extent authorized by the DGCL.

Section 145 of the DGCL provides that a corporation may indemnify directors and officers as well as other employees and individuals against expenses, including attorneys’ fees, judgments, fines and amounts paid in settlement in connection with specified actions, suits and proceedings whether civil, criminal, administrative, or investigative, other than a derivative action by or in the right of the corporation, if they acted in good faith and in a manner they reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe their conduct was unlawful. A similar standard is applicable in the case of derivative actions, except that indemnification extends only to expenses, including attorneys’ fees, incurred in connection with the defense or settlement of such action and the statute requires court approval before there can be any indemnification where the person seeking indemnification has been found liable to the corporation. The statute provides that it is not exclusive of other indemnification that may be granted by a corporation’s charter, bylaws, disinterested director vote, stockholder vote, agreement, or otherwise.

Our charter also contains indemnification rights for our directors and our officers. Specifically, the charter provides that we shall indemnify our officers and directors to the fullest extent authorized by the DGCL. Further, we may maintain insurance on behalf of our officers and directors against expense, liability or loss asserted incurred by them in their capacities as officers and directors.

We have obtained directors’ and officers’ insurance to cover our directors, officers and some of our employees for certain liabilities.

We have entered into written indemnification agreements with our directors and executive officers. Under these agreements, if an officer or director makes a claim of indemnification to us, either a majority of the independent directors or independent legal counsel selected by the independent directors must review the relevant facts and make a determination whether the officer or director has met the standards of conduct under Delaware law that would permit (under Delaware law) and require (under the indemnification agreement) us to indemnify the officer or director.

The registration rights agreement and purchase agreement we entered into in connection with our earlier financings provide for the indemnification by the investors in those financings of our officers and directors for certain liabilities.

 

II-1

---

Table of Contents

Item 16. Exhibits And Financial Statement Schedules

A list of exhibits filed herewith is contained in the Exhibit Index that immediately precedes such exhibits and is incorporated by reference herein.

Item 17. Undertakings.

(a) The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

(i) To include any prospectus required by section 10(a)(3) of the Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and

(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;

provided, however, that paragraphs (a)(1)(i), (a)(1)(ii) and (a)(1)(iii) do not apply if information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the SEC by the registrant pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement or is contained in a form of prospectus filed pursuant to Rule 424(b) that is part of the registration statement.

(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

(4) That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser:

(i) Each prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and

(ii) Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5) or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii) or (x) for the purpose of providing the information required by Section 10(a) of the Securities Act of 1933 shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which the prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately before such effective date.

(b) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933 each filing of the registrant’s annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 that is

 

II-2

---

Table of Contents

incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by either registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

 

II-3

---

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunder duly authorized, in the City of Houston, State of Texas on May 6, 2011.

 

Each person whose signature appears below authorizes J. Darby Seré and William C. Rankin, and each of them, each of whom may act without joinder of the other, to execute in the name of each such person who is then an officer or director of the company and to file any amendments to this registration statement necessary or advisable to enable the company to comply with the Securities Act of 1933, as amended, and any rules, regulations and requirements of the Securities and Exchange Commission in respect thereof, in connection with the registration of the securities which are the subject of this registration statement, which amendments may make such changes in the registration statement as such attorney may deem appropriate.

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the date indicated.

 

Signature		Title		Date
/s/    J. DARBY SERÉ         J. Darby Seré		Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer)		May 6, 2011
/s/    WILLIAM C. RANKIN         William C. Rankin		Executive Vice President and Chief Financial Officer (Principal Financial Officer)		May 6, 2011
/s/    TONY OVIEDO         Tony Oviedo		Vice President, Chief Accounting Officer and Controller		May 6, 2011
/s/    JAMES C. CRAIN         James C. Crain		Director		May 6, 2011
/s/    ROBERT E. CREAGER         Robert E. Creager		Director		May 6, 2011
/s/    STANLEY L. GRAVES         Stanley L. Graves		Director		May 6, 2011
/s/    CHARLES D. HAYNES         Charles D. Haynes		Director		May 6, 2011
/s/    W. HOWARD KEENAN, JR.       W. Howard Keenan, Jr.		Director		May 6, 2011

 

II-4

---

Table of Contents

Signature		Title		Date
/s/    PHILIP G. MALONE         Philip G. Malone		Director		May 6, 2011
/s/    MICHAEL Y. MCGOVERN         Michael Y. McGovern		Director		May 6, 2011
/s/    GARY S. WEBER         Gary S. Weber		Director		May 6, 2011

 

II-5

---

Table of Contents

Index to Exhibits

The following documents are filed as exhibits to this registration statement:

 

Exhibit No.		Description
3.1		Amended and Restated Certificate of Incorporation of GeoMet, Inc. (incorporated herein by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-1 filed on July 25, 2006 (Registration No. 333-131716)).
3.2		Series A Convertible Redeemable Preferred Stock Certificate of Designations (incorporated herein by reference to Appendix B to the Company’s Definitive Proxy Statement on Schedule 14A filed on June 24, 2010).
3.3		Certificate of Amendment to the Certificate of Designations of Series A Convertible Redeemable Preferred Stock, par value $0.001 per share, of GeoMet, Inc. (incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on December 28, 2010).
3.4		Amended and Restated Bylaws of GeoMet, Inc. (incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on September 20, 2010).
5.1*		Opinion of Haynes and Boone, LLP.
12.1*		Computation of Ratio of Earnings to Fixed Charges and Preferred Dividends.
23.1*		Consent of Deloitte & Touche LLP
23.2*		Consent of DeGoyler and MacNaughton
23.3*		Consent of Haynes and Boone, LLP (contained in Exhibit 5.1)
24.1*		Power of Attorney (included in the signature page of this Registration Statement)

 

*	Filed herewith

 

II-6