Provides Operations and Corporate Update HOUSTON, Aug. 13
/PRNewswire-FirstCall/ -- GeoResources, Inc., (NASDAQ:GEOI), today
announced earnings for the three months and year to date periods
ended June 30, 2007. On April 17, 2007, the Company completed its
mergers (the "Merger") with Southern Bay Oil & Gas L.P. and
Chandler Energy, LLC. Although GeoResources is the acquirer for
legal purposes, under generally accepted accounting principles,
Southern Bay, being the largest party to the Merger, is deemed to
have acquired the Company and the other net assets contributed by
Chandler and its related parties. Accordingly, reported financial
information for the periods ended June 30, 2007 represent the
combined entities as compared to the prior periods which include
only Southern Bay. Therefore, the information is not entirely
comparable since Southern Bay's revenues include those of the
merged entities from April 18, 2007 through June 30, 2007. (Logo:
http://www.newscom.com/cgi-bin/prnh/20051114/CGM073LOGO) As a
result of the Merger and related significant non-recurring costs,
including non-cash charges to income related to equity based
compensation, and non-cash charges for net deferred income taxes,
the Company reported a net loss of $1,349,431 for the second
quarter of 2007 or $0.09 per share, on revenue of $8,284,688,
compared to the second quarter of 2006 net income of $1,137,962, or
$0.23 per share, on revenue of $4,096,356. The second quarter 2006
included a gain of $314,840 from the sale of certain oil and gas
properties. Earnings before interest, taxes, depreciation,
depletion and amortization (EBITDA) for the second quarter of 2007
were $2,631,580 compared to $1,944,134 for the second quarter of
2006. Adjusted for non-cash and non-recurring expenses associated
with the Merger, EBITDA was $3,821,839. See the table below. For
the first half of 2007, the net loss was $462,626, or $0.05 per
share, on revenue of $12,402,245, versus net income of $2,742,601,
or $0.56 per share, on revenue of $8,263,644 in the first half of
2006. EBITDA for the first half of 2007 was $4,607,307 compared to
$4,220,917 for the first half of 2006. Adjusted for non-cash and
non-recurring expenses associated with the Merger, EBITDA for the
first half of 2007 was $5,956,428. See the tables below. In the
second quarter of 2007 natural gas sales increased by 139% to 361
MMcf as compared to 151 MMcf in the second quarter of 2006. Oil
sales for the second quarter of 2007 increased 110% to 82 Mbbls
from 39 Mbbls in the second quarter of 2006. The average realized
price of natural gas was $6.91 per Mcf for the second quarter of
2007, or 2.1% more than the second quarter of the prior year. The
average realized price of oil was $55.95 per barrel or 1.1% less
that the second quarter in the prior year. For the six months ended
June 30, 2007, natural gas sales totaled 552 MMcf or 68% greater
than the 331 MMcf sold during the first half of 2006. Oil sales for
the first half of 2007 increased 48% to 127 Mbbls from 86 Mbbls in
the first half of 2006. The average realized price of natural gas
was $6.63 per Mcf for the first half of 2007 or 8.8 % less than the
first half of the prior year. The average realized price of oil was
$54.47 per barrel or 1.8% more for the first half of 2007 than the
first six months in the prior year. The significant increases in
production in the three and six months periods ended June 30, 2007
over the same periods of 2006, is a direct result of the Merger,
certain acquisitions made in February 2007 and subsequent drilling,
offset by production declines in Gulf Coast wells drilled in 2005
and prior periods. The Company also announced that it has
successfully completed the Ashorn Unit #1H in Grimes County, Texas.
This is the third horizontal development well drilled and completed
since the properties were acquired in February 2007. The well has
been produced at rates as high as 18 MMcfpd and is currently
producing 12 MMcfpd. The Company has also commenced drilling its
fourth well, the Tom Haynie #1H, which is expected to be completed
in September 2007. Two additional wells are being permitted which
will immediately follow the current drilling. Gross production has
averaged 33.4 MMcfepd equivalent in July which is a net 4.2 MMcfepd
increase over the December 2006 average daily rate. Based on
continued technical review and well performance, management
believes the Company will continue to spud a new well approximately
every 60 days for the next two or three years. The Company and its
affiliated partnership hold a 90% working interest. The Company is
the operator of the wells and, as general partner, manages the
affairs of the partnership. The Company holds a 7.2% direct working
interest and, in addition, has a 2% interest in the affiliated
partnership, which can increase to 35%, pending partnership payout
plus a specified rate of return. The Company also completed the
Fitzhugh Et. Al. #1 well located in the southeast Texas Hackberry
play in Orange County, Texas. The well has been completed for 120
BOPD, 500 Mcfd, and 60 BWPD. The Company will consider drilling
offset locations pending well performance and additional technical
review. The prospect was defined based on both sub-surface regional
mapping and 3-D seismic data. The Company is the operator and has a
10% working interest in the prospect and in 415 surrounding acres.
In Louisiana, the Company recently completed the S.L. 19041 #1 as a
Miocene gas producer in Jefferson Parish. The well is currently
shut-in waiting on facilities and pipeline hookup. Similar wells in
the vicinity have produced at rates up to 1,000 Mcfpd. This 1,800'
gas prospect was developed based on 3-D seismic. The Company is the
operator and has a 28% working interest, a 2% overriding royalty
interest and after payout, an additional reversionary working
interest. Pending the performance of this initial discovery,
another well could be drilled. In North Dakota, the SSMU B-102 in
the South Starbuck Madison Unit was drilled to a depth of 3,350
feet. The well was completed as an oil well in the Mississippian
Madison formation. The well is currently waiting on the
installation of a pumping unit. The initial production is expected
at 20 BOPD. In addition, the previously reported Donald Boll #1-34,
was placed on production in June and is consistently producing
approximately 15 BOPD from an interval above 3,380 feet. Based on
these results and performance, the Company has scheduled the
drilling of an additional well in early 2008. The Company has a
100% working interest in these wells. The Company is completing the
Huff #29-8 well, located in Decatur County, Kansas. This prospect
pre-existed the Merger and Kansas in not currently a focus area for
the Company. The well is located on the northeast flank of the
Lansing Kansas City producing Lester Field and was drilled to a
total depth of 3,660 feet. The offset well has produced over 50,000
barrels. Based on preliminary evaluation data including drill stem
tests, log analysis and seismic data, the Company believes this
discovery well may be located on a separate structure from the
producing field and could initially produce 50 - 100 BOPD. Pending
well performance, additional wells could be drilled. Frank A.
Lodzinski, Chief Executive Officer of GeoResources, said, "The
Merger has taken a great deal of our time and energy since we
entered into agreements in 2006. The significant costs of the
Merger as well as subsequent corporate restructuring are virtually
complete. We have implemented our business strategy and capital
development program and have committed approximately $22 million to
drilling and development in the next 18 months. Our continued
drilling success demonstrates the depth and capability of our
internal geological, engineering and operating staff. We expect to
continue to expand our inventory of drilling opportunities and to
transfer our horizontal drilling expertise to fields and prospects
in our Northern Region. Our drilling success supports and enhances
our business model, being a combination of acquisitions,
exploitation and exploration. We believe this diversified approach
will allow the Company to grow profitably. From a corporate
perspective, we have made significant progress in integrating the
technical, administrative and reporting systems of the three
businesses merged in April 2007. In addition, we are positioned to
share technical expertise Company-wide." Corporate Matters In
mid-July the Company completed the sale of 100,000 shares of its
common stock at $7.19 per share to three purchasers, two of whom
are Directors of the Company resulting in gross proceeds to the
Company of $719,000. Additionally, the Company acquired working
interests in oil and gas properties valued at approximately $1.0
million from certain officers and employees of the Company. The
consideration was approximately $856,000 in cash and 30,406 shares
of the Company's common stock, also priced at $7.19 per share. The
share price used in both transactions was determined by members of
the Board of Directors in consultation with the Chief Executive
Officer, all of whom had no personal interest in the transactions.
In the opinion of management, the working interests, which
represented incremental interests in existing fields owned and
controlled by the Company, were acquired at or below estimated
market prices. The Company also announced it recently filed a
Registration Statement with the Securities and Exchange Commission
on Form S-3 pursuant to Registration Rights Agreements associated
with the above transactions and the Company's recently completed
mergers covering the public offer and resale of 10,820,406 shares
of common stock acquired by purchasers of common stock in those
transactions. The following tables reconcile our EBITDA to our net
income (loss) for the periods indicated: Quarter Ended Quarter
Ended EBITDA (1) June 30, 2007 June 30, 2006 Net income (loss)
$(1,349,431) $1,137,962 Add back Interest expense 199,174 22,749
Income tax (2) 1,849,497 -- Depreciation, depletion and
amortization 1,932,340 783,423 EBITDA $2,631,580 $1,944,134 Six
Months Ended Six Months Ended June 30, 2007 June 30, 2006 Net
Income (loss) $(462,626) $2,742,601 Add back: Interest expense
355,326 38,116 Income tax (2) 1,853,699 -- Depreciation, depletion
and amortization 2,860,908 1,440,200 EBITDA $4,607,307 $4,220,917
(1) EBITDA is defined as earnings before interest, income taxes,
depreciation, depletion and amortization, EBITDA should not be
considered as an alternative to net income (as an indicator of
operating performance) or as an alternative to cash flow (as a
measure of liquidity or ability to service debt obligations) and is
not in accordance with, nor superior to, generally accepted
accounting principles, but provides additional information for
evaluation of our operating performance. (2) Non cash income tax
expense recognized in the quarter and year to date periods,
pursuant to generally accepted accounting principles. Certain
parties to the Merger were previously non-taxable entities.
Accordingly, deferred tax benefits and liabilities were calculated
with the net effect charged to expense in the second quarter. Non
recurring costs: During the three and six months ended June 30,
2007, the Company recognized certain significant costs which it
believes are largely non- recurring. Accordingly, the table below
provides an estimate of EBITDA as adjusted for those costs. Quarter
Ended Six Months Ended June 30, 2007 June 30, 2007 EBITDA (see
above) $2,631,580 $4,607,307 Add back Non-cash equity based
compensation (1) 419,531 523,598 Professional fees 437,677 467,472
Shareholder services 186,937 186,937 Western Star Drilling (2)
96,114 96,114 Other 50,000 75,000 Adjusted EBITDA $3,821,839
$5,956,428 (1) Represents non-cash required charge to expense
resulting from acceleration of certain vesting requirements
associated with Southern Bay's equity incentive plan which was
eliminated pursuant to the Merger, and stock bonuses issued to
employees of GeoResources. (2) Costs associated with sold
operations. About GeoResources, Inc. On April 17, 2007, the Company
completed its mergers with Southern Bay Oil & Gas L.P. and
Chandler Energy, LLC. The management of Southern Bay and Chandler
became the principal management of the combined entity. Corporate
headquarters have been relocated to Houston, Texas. The Company
conducts its exploration development and production operations
through wholly owned subsidiaries. Activities in the Southern
Region are conducted through Southern Bay Energy, LLC, located in
Houston, Texas and Northern Region operations are conducted through
G3 Energy LLC, located in Denver, Colorado. The Company also
maintains a regional office in Williston, North Dakota. For more
information, visit our websites at http://www.geoi.net/ and
http://www.southernbayenergy.com/ Forward-Looking Statements
Information herein contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995,
which can be identified by words such as "may," "will," "expect,"
"anticipate," "estimate" or "continue," or comparable words. All
statements other than statements of historical facts that address
activities that the Company expects or anticipates will or may
occur in the future are forward-looking statements. Readers are
encouraged to read the SEC reports of the Company, particularly its
Form 10-KSB for the Fiscal Year Ended December 31, 2006, for
meaningful cautionary language disclosure. GEORESOURCES, INC. and
SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (unaudited) June 30,
December 31, 2007 2006 ASSETS Current assets: Cash $14,558,545
$6,216,822 Accounts receivable: Oil and gas revenues 14,764,216
7,201,902 Joint interest billings and other 4,866,720 2,294,237
Accounts receivable from affiliated partnerships 4,095,231
1,742,174 Notes receivable-current portion 860,000 - Prepaid
expenses and other 590,792 352,515 Total current assets 39,735,504
17,807,650 Oil and gas properties, successful efforts method:
Proved properties 81,731,445 34,204,118 Unproved properties
3,893,389 1,643,041 Office and other equipment 950,707 292,297 Land
96,462 96,462 86,672,003 36,235,918 Less accumulated depreciation,
depletion and amortization (7,868,002) (5,007,095) Net property and
equipment 78,804,001 31,228,823 Other assets: Equity in oil and gas
limited partnerships 3,362,637 1,517,430 Notes receivable and other
1,374,089 113,123 $123,276,231 $50,667,026 LIABILITIES AND
STOCKHOLDERS' EQUITY Current liabilities: Accounts payable
$7,134,643 $5,225,291 Accounts payable to affiliated partnerships
6,458,010 2,201,141 Revenues and royalties payable 16,200,746
7,347,702 Drilling advances 788,331 2,120,770 Accrued expenses
payable 1,432,302 915,445 Commodity hedges 995,045 1,685,938 Total
current liabilities 33,009,077 19,496,287 Long-term debt -
5,000,000 Deferred income taxes 3,344,203 32,535 Asset retirement
obligations 5,173,454 2,478,205 Stockholders' equity: Common stock,
par value $.01 per share; authorized 100,000,000 shares; issued and
outstanding: 14,572,977 shares in 2007 and 4,858,000 shares in 2006
145,730 48,580 Additional paid-in capital 78,622,213 16,848,643
Accumulated other comprehensive income (991,899) (1,679,388)
Retained earnings 3,973,453 8,442,164 Total stockholders' equity
81,749,497 23,659,999 $123,276,231 $50,667,026 GEORESOURCES, INC.
and SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
Three Months Ended June 30, Six Months Ended June 30, 2007 2006
2007 2006 Revenue: Oil and gas revenues $7,060,314 $3,254,445
$10,597,808 $7,025,470 Partnership management fees 256,184 92,354
411,820 183,538 Property operating income 444,532 204,227 682,290
398,470 Gain (loss) on sale of property and equipment (15,218)
314,840 (15,218) 314,840 Partnership income (loss) 153,601 71,944
213,347 80,299 Interest and other 385,275 158,546 512,198 261,027
Total revenue 8,284,688 4,096,356 12,402,245 8,263,644 Expenses:
Lease operating expense 2,254,861 910,701 3,315,270 1,874,777
Severance taxes 533,799 160,541 802,741 482,049 Re-engineering and
workovers 415,340 130,664 433,072 178,474 Exploration - 431,521 -
431,521 General and administrative expense 2,456,542 725,712
3,247,259 1,253,135 Depreciation, depletion, and amortization
1,932,340 783,423 2,860,908 1,440,200 Hedge ineffectiveness (7,434)
(206,917) (3,404) (177,229) Interest 199,174 22,749 355,326 38,116
Total expense 7,784,622 2,958,394 11,011,172 5,521,043 Income
before income taxes 500,066 1,137,962 1,391,073 2,742,601 Income
taxes: Current 94,169 - 96,031 - Deferred 1,755,328 - 1,757,668 -
1,849,497 - 1,853,699 - Net income (loss) $(1,349,431) $1,137,962
$(462,626) $2,742,601 Net income (loss) per share (basic and
diluted) $(0.09) $0.23 $(0.05) $0.56 Weighted average shares
outstanding 14,572,977 4,858,000 10,106,159 4,858,000
http://www.newscom.com/cgi-bin/prnh/20051114/CGM073LOGO
http://photoarchive.ap.org/ DATASOURCE: GeoResources, Inc. CONTACT:
Cathy Kruse of GeoResources, Inc., +1-701-572-2020, ext 113,
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