GEOI Georesources, Inc. (MM)

GeoResources, Inc., (NASDAQ:GEOI), today announced its financial results for the nine months and the quarter ended September 30, 2008, compared to the results for the same periods in 2007. For the three months ended September 30, 2008, the Company reported net income of $5.8 million, or $0.35 per share (diluted) compared to a net income of $1.4 million or $0.10 per share in 2007. Total revenue increased 174% to $23.6 million in the third quarter of 2008 compared to $8.6 million the same quarter in 2007. For the first nine months of 2008, net income was $17.8 million, or $1.14 per share (diluted), on revenue of $75.7 million versus a net income of $949,000, or $0.08 per share on revenue of $21.0 million in the first nine months of 2007. The foregoing information is summarized below in tabular form (in thousands, except per share information): � � Three Months Ended September 30, 2008 � 2007 � Total revenue $ 23,593 $ 8,635 Net income $ 5,799 $ 1,412 Earnings per share (diluted) $ 0.35 $ 0.10 EBITDAX (See below) $ 14,464 $ 4,099 � � � Nine Months Ended September 30, 2008 � 2007 � Total revenue $ 75,745 $ 21,037 Net income $ 17,813 $ 949 Earnings per share (diluted) $ 1.14 $ 0.08 EBITDAX (See below) $ 44,455 $ 8,707 Oil and natural gas production increased substantially in the third quarter 2008 compared to the same period in 2007. Natural gas production increased to 723 MMcf from 330 MMcf, an increase of 119%. Oil production for the third quarter increased to 167 MBbls from 88 MBbls in the prior year�s period, an increase of 90%. For the nine months ended September 30, 2008, natural gas sales totaled 2,251 MMcf or 155% greater than the 883 MMcf sold during the first nine months of 2007. Oil sales for the first nine months of 2008 increased 156% to 553 Mbbls from 216 Mbbls in the first nine months of 2007. The average realized price of natural gas was $9.12 per Mcf for the third quarter of 2008, 62% more than the third quarter of 2007. The average realized price of oil for the third quarter of 2008 was $90.60 per barrel or 41% more than the third quarter in the prior year. The average realized price of natural gas was $8.82 per Mcf for the first nine months of 2008 or 41% more than the first nine months of the prior year. The average realized price of oil was $89.50 per barrel or 53% more for the first nine months of 2008 than the first nine months in the prior year. Production and price information is shown below in tabular form: � PercentIncrease(Decrease) � Three Months EndedSeptember 30 2008 � 2007 � Gas Production (MMcf) 119 % 723 330 Oil Production (MBbls) 90 % 167 88 Barrel of oil equivalent (MBOE) 101 % 288 143 Average Price Gas before Hedge Settlements (per Mcf) 68 % $ 9.13 $ 5.45 Average Price Oil before Hedge Settlements (per Bbl) 64 % $ 116.01 $ 70.80 Average Price Gas after Hedge Settlements (per Mcf) 62 % $ 9.12 $ 5.63 Average Price Oil after Hedge Settlements (per Bbl) 41 % $ 90.60 $ 64.08 � � � PercentIncrease(Decrease) Nine Months EndedSeptember 30 2008 � 2007 � Gas Production (MMcf) 155 % 2,251 883 Oil Production (MBbls) 156 % 553 216 Barrel of oil equivalent (MBOE) 156 % 928 363 Average Price Gas before Hedge Settlements (per Mcf) 47 % $ 9.24 $ 6.29 Average Price Oil before Hedge Settlements (per Bbl) 71 % $ 109.81 $ 64.07 Average Price Gas after Hedge Settlements (per Mcf) 41 % $ 8.82 $ 6.26 Average Price Oil after Hedge Settlements (per Bbl) 53 % $ 89.50 $ 58.40 Earnings before interest, income taxes, depreciation, depletion and amortization, and exploration expense (�EBITDAX�) increased 253% to approximately $14.5 million for the third quarter 2008 compared to $4.1 million in the third quarter 2007. EBITDAX for the first nine months of 2008 increased 411% to approximately $44.5 million compared to $8.7 million for the same period in 2007. The following tables reconcile reported net income to EBITDAX for the periods indicated (in thousands): � � Three Months Ended September 30, 2008 � 2007 EBITDAX (1) � � Net income $ 5,799 $ 1,412 Add back: Interest expense 975 25 Income taxes : Current 1,679 553 Deferred 2,149 381 Depreciation, depletion and amortization 3,833 1,728 Exploration � 29 � � - EBITDAX $ 14,464 � $ 4,099 � � � � � � � Nine Months Ended September 30, 2008 � 2007 � Net income $ 17,813 $ 949 Add back: Interest expense 3,858 381 Income taxes : Current 4,438 649 Deferred 6,532 2,139 Depreciation, depletion and amortization 11,283 4,589 Exploration � 531 � � - EBITDAX $ 44,455 � $ 8,707 (1) EBITDAX is defined as earnings before interest, income taxes, depreciation, depletion and amortization, and exploration expense. EBITDAX 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. Comments Mr. Frank Lodzinski, CEO and president, commented �We are pleased with our reported earnings and cash flows. We achieved quarterly earnings of $5.8 million, or $0.35 per fully diluted share, in spite of falling prices and production that was shut-in due to hurricanes. This shut-in production has been phased back in and is expected to be fully restored by early December. We have built this Company with �staying power� to withstand downturns in the industry and the economy. Our balance sheet is strong and we have significant cash flows and low cost borrowing capacity. Our borrowing base actually increased in the fourth quarter. We believe that we can continue to generate net earnings and significant cash flows in 2009, even with commodity prices considerably below current levels.� About GeoResources, Inc. GeoResources, Inc. is an independent oil and gas company engaged in the acquisition and development of oil and gas reserves through an active and diversified program which includes purchases of reserves, re-engineering, and development and exploration activities, currently focused in the Southwest and Gulf Coast, Williston Basin and Rocky Mountains. For more information, visit our website at www.georesourcesinc.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, readers are encouraged to read our Annual Report on Form 10-KSB/A for the year ended December 31, 2007, and any and all other documents filed with the SEC regarding information about GeoResources for meaningful cautionary language in respect of the forward-looking statements herein. Interested persons are able to obtain free copies of filings containing information about GeoResources, without charge, at the SEC�s Internet site (http://www.sec.gov). GEORESOURCES, INC. and SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share amounts) � � September 30, � December 31, 2008 2007 (unaudited) ASSETS Current assets: Cash $ 26,187 $ 24,430 Accounts receivable: Oil and gas revenues 19,681 20,365 Joint interest billings and other 3,715 3,913 Affiliated partnerships 4,397 3,360 Notes receivable 120 600 Refundable income taxes - - Prepaid expenses and other � 3,276 � � 1,430 � Total current assets � 57,376 � � 54,098 � � Oil and gas properties, successful efforts method: Proved properties 207,273 187,641 Unproved properties 4,697 5,140 Office and other equipment 1,013 996 Land � 96 � � 96 � 213,079 193,873 Less accumulated depreciation, depletion and amortization � (21,888 ) � (12,430 ) Net property and equipment � 191,191 � � 181,443 � Other assets: Equity in oil and gas limited partnerships 3,328 1,880 Notes receivable and other � 2,473 � � 2,937 � $ 254,368 � $ 240,358 � LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 7,589 $ 11,374 Accounts payable to affiliated partnerships 17,861 9,538 Revenues and royalties payable 15,425 14,567 Drilling advances 212 882 Accrued expenses 4,659 3,839 Derivative financial instruments � 12,630 � � 6,527 � Total current liabilities 58,376 46,727 Long-term debt 50,000 96,000 Deferred income taxes 12,976 6,476 Asset retirement obligations 5,282 7,827 Derivative financial instruments 22,004 15,296 Stockholders' equity: Common stock, par value $.01 per share; authorized 100,000,000 shares; issued and outstanding: 16,236,717 shares in 2008 and 14,703,383 shares in 2007 162 147 Additional paid-in capital 112,324 79,690 Accumulated other comprehensive income (loss) (32,074 ) (19,310 ) Retained earnings � 25,318 � � 7,505 � Total stockholders' equity � 105,730 � � 68,032 � $ 254,368 � $ 240,358 � GEORESOURCES, INC. and SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts) (unaudited) � � � � � Three Months EndedSeptember 30, Nine Months EndedSeptember 30, 2008 2007 2008 2007 � Revenue: Oil and gas revenues $ 21,763 $ 7,513 $ 69,344 $ 18,110 Partnership management fees 585 301 1,419 713 Property operating income 381 400 1,052 1,082 Gain on sale of property and equipment 308 - 2,269 (15 ) Partnership income 366 116 1,021 329 Interest and other � 190 � � 305 � 640 � 818 � Total revenue 23,593 8,635 75,745 21,037 � Expenses: Lease operating expense 5,594 2,368 17,174 5,683 Severance taxes 2,088 605 6,405 1,407 Re-engineering and workovers 649 302 2,331 734 Exploration and impairments 29 - 531 - General and administrative expense 1,688 1,258 5,333 4,506 Depreciation, depletion, and amortization 3,833 1,728 11,283 4,589 Hedge ineffectiveness (890 ) 3 47 - Interest � 975 � � 25 � 3,858 � 381 � Total expense � 13,966 � � 6,289 � 46,962 � 17,300 � � Income before income taxes 9,627 2,346 28,783 3,737 � Income taxes: Current 1,679 553 4,438 649 Deferred � 2,149 � � 381 � 6,532 � 2,139 � � 3,828 � � 934 � 10,970 � 2,788 � � Net income $ 5,799 � $ 1,412 $ 17,813 $ 949 � � Net income per share (basic) $ 0.36 � $ 0.10 $ 1.16 $ 0.08 � � Net income per share (diluted $ 0.35 � $ 0.10 $ 1.14 $ 0.08 � � Weighted average shares outstanding: Basic � 16,237 � � 14,703 � 15,385 � 11,639 � � Diluted � 16,441 � � 14,703 � 15,582 � 11,639 � GEORESOURCES, INC. and SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (unaudited) � � � � � � Nine Months Ended September 30 2008 2007 Cash flows from operating activities: Net income (loss) $ 17,813 $ 949 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization 11,283 4,589 Gain on sale of property and equipment (2,269 ) 15 Impairment of unproved properties 483 - Accretion of asset retirement obligations 304 79 Hedge ineffectiveness (gain) loss 47 - Partnership income (1,021 ) (329 ) Partnership distributions 551 122 Deferred income taxes 6,532 2,139 Non-cash compensation 462 422 Changes in assets and liabilities: Increase in accounts receivable (155 ) (11,046 ) Decrease in notes receivable 555 - Decrease (increase) in prepaid expense and other (1,499 ) 489 Increase (decrease) in accounts payable and accrued expenses � 5,514 � � 13,174 � Net cash provided by operating activities 38,600 10,603 � Cash flows from investing activities: Proceeds from sale of property and equipment 20,960 1,750 Additions to property and equipment (43,012 ) (12,277 ) Investment in oil and gas limited partnership � (978 ) � (1,632 ) Net cash used in investing activities (23,030 ) (12,159 ) � Cash flows from financing activities: Issuance of common stock 32,187 23,518 Distributions to stockholders - (4,007 ) Issuance of long-term debt - 3,000 Reduction of long-term debt � (46,000 ) � (9,800 ) Net cash provided by financing activities � (13,813 ) � 12,711 � � Net increase(decrease) in cash and cash equivalents 1,757 11,155 � Cash and cash equivalents at beginning of period � 24,430 � � 6,217 � � Cash and cash equivalents at end of period $ 26,187 � $ 17,372 �