GEOI Georesources, Inc. (MM)

GeoResources, Inc., (NASDAQ:GEOI), today announced its financial and operating results for the three and six months ended June 30, 2010. The following tables summarize the results of operations as compared to similar periods in 2009.

  Three Months Ended June 30,

(In thousands, except Earnings per share)

2010   2009   Total revenue $ 26,406 $ 19,861 Net income $ 4,443 $ 3,499 Earnings per share (basic) $ 0.23 $ 0.22 EBITDAX (See below) $ 17,652 $ 12,429     Six Months Ended June 30,

(In thousands, except Earnings per share)

2010   2009   Total revenue $ 52,982 $ 34,426 Net income $ 10,517 $ 3,976 Earnings per share (basic) $ 0.53 $ 0.24 EBITDAX (See below) $ 35,570 $ 18,998    

PercentIncrease(Decrease)

 

Three Months EndedJune 30,

2010   2009   Gas Production (MMcf) 20% 1,300 1,087 Oil Production (MBbls) 20% 255 212 Barrel of oil equivalent (MBOE) 20% 472 393 Average Price Gas before Hedge Settlements (per Mcf) 16% $ 3.76 $ 3.24 Average Price Oil before Hedge Settlements (per Bbl) 35% $ 71.83 $ 53.40 Average Price Gas after Hedge Settlements (per Mcf)

24%

$ 4.90 $ 3.95 Average Price Oil after Hedge Settlements (per Bbl) 19% $ 70.48 $ 59.28    

PercentIncrease(Decrease)

 

Six Months EndedJune 30,

2010   2009   Gas Production (MMcf) 47% 2,580 1,752 Oil Production (MBbls) 30% 504 389 Barrel of oil equivalent (MBOE) 37% 934 681 Average Price Gas before Hedge Settlements (per Mcf) 25% $ 4.29 $ 3.43 Average Price Oil before Hedge Settlements (per Bbl) 59% $ 73.01 $ 45.88 Average Price Gas after Hedge Settlements (per Mcf) 31% $ 5.25 $ 4.01 Average Price Oil after Hedge Settlements (per Bbl) 24% $ 70.55 $ 56.87  

Our 2010 reported earnings are net of a $2.7 million non-cash charge for impairments. The majority of the non-cash charge was a direct result of natural gas price reductions. Forward gas prices used in the calculation of impairments, declined by 16% over the next 18 months and oil prices declined 7% over the same time frame as compared to the year-end prices.

EBITDAX (see definition below) increased 42% to approximately $17.7 million for the second quarter of 2010 compared to $12.4 million for the second quarter of 2009. EBITDAX for the first six months of 2010 totaled $35.6 million compared to $19.0 million in the prior year’s first half, representing an increase of 87%.

The following tables reconcile reported net income to EBITDAX for the periods indicated (in thousands):

  Three Months Ended June 30, 2010   2009 EBITDAX (1)     Net income $ 4 ,443 $ 3,499 Add back: Interest expense 1,285 1,144 Income taxes: Current 912 202 Deferred 1,973 2,014 Depreciation, depletion and amortization 5,962 4,725 Hedge and derivative contracts (78 ) 32 Non-cash compensation 273 397 Exploration and impairments   2,882       416 EBITDAX $ 17,652     $ 12,429     Six Months Ended June 30, 2010   2009   Net income $ 10,517 $ 3,976 Add back: Interest expense 2,558 1,963 Income taxes : Current 1,865 (532 ) Deferred 4,797 3,108 Depreciation, depletion and amortization 12,313 9,193 Hedge and derivative contracts (320 ) 133 Non-cash compensation 494 661 Exploration and impairments   3,346       496   EBITDAX $ 35,570     $ 18,998     (1) As used herein, EBITDAX is calculated as earnings before interest, income taxes, depreciation, depletion and amortization, and exploration expense and further excludes non-cash compensation, impairments and hedge ineffectiveness and income or loss on derivative contracts. 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.  

See attached financial statements for additional details related to our results of operations, cash flows and financial position.

Comments

Frank A. Lodzinski, CEO and President, commented, “Our results for the second quarter and year-to-date periods ending June 30, 2010 reflect our significant year over year growth. Comparatively, we benefited from both increased production and from improved oil and gas prices. In addition, on unit-of-production basis, we have lowered our overall operating expenses by 18%. Reduced expenses are a result of our re-engineering and development drilling activities. We always focus on our costs but with service costs increasing in the industry, controlling and reducing expenses where feasible takes on additional importance. Our increased production was a direct result of our successful drilling programs in the Bakken Shale and Austin Chalk and strategic acquisitions we have made in these core areas.”

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 primarily focused in three core areas – the Southwest, Gulf Coast, and the Williston Basin. 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 our 10-K as amended by our 10-K/A for the year ended December 31, 2009 and the other SEC reports of the Company 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 SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(In thousands, except share and per share amounts)     June 30,   December 31, 2010 2009 ASSETS (unaudited)   Current assets:   Cash $ 15,899 $ 12,660 Accounts receivable: Oil and gas revenues 16,261 14,860 Joint interest billings and other 4,149 13,734 Affiliated partnerships 1,062 933 Notes receivable 120 120 Derivative financial instruments 4,703 764 Income taxes receivable 327 2,077 Prepaid expenses and other   2,659     2,297   Total current assets   45,180     47,445     Oil and gas properties, successful efforts method: Proved properties 302,331 285,363 Unproved properties 19,314 10,281 Office and other equipment 956 828 Land   96     96   322,697 296,568   Less accumulated depreciation, depletion and amortization   (60,495 )   (48,182 ) Net property and equipment   262,202     248,386     Equity in oil and gas limited partnerships 2,673 3,532   Derivative financial instruments 2,284 1,360   Deferred financing costs and other   3,819     3,574     $ 316,158   $ 304,297     GEORESOURCES, INC and SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(In thousands, except share and per share amounts)     June 30,   December 31, 2010 2009 (unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY   Current liabilities:   Accounts payable $ 5,337 $ 6,452 Accounts payable to affiliated partnerships 3,389 8,361 Revenue and royalties payable 11,441 13,928 Drilling advances 53 390 Accrued expenses 1,862 1,574 Derivative financial instruments   1,522   4,794   Total current liabilities   23,604   35,499     Long-term debt 69,000 69,000   Deferred income taxes 24,522 15,778   Asset retirement obligations 6,353 6,110   Derivative financial instruments 804 3,233   Stockholders' equity:

Common stock, par value $0.01 per share; authorized 100,000,000 shares; issued and outstanding: 19,723,916 in 2010 and 19,705,362 in 2009

 

197

 

197

Additional paid-in capital 147,552 146,966 Accumulated other comprehensive income 2,807 (3,288 ) Retained earnings   41,319   30,802   Total stockholders' equity   191,875   174,677   $ 316,158 $ 304,297     GEORESOURCES, INC. and SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME(In thousands, except share and per share amounts)(unaudited)         Three Months Ended June 30, Six Months Ended June 30, 2010 2009 2010 2009   Revenue: Oil and gas revenues $ 24,343 $ 16,829 $ 49,072 $ 29,129 Partnership management fees 140 398 299 696 Property operating income 393 456 784 914 Gain on sale of property and equipment - 89 145 1,488 Partnership income 488 1,455 1,342 1,460 Interest and other   1,042     634   1,340     739     Total revenue 26,406 19,861 52,982 34,426   Expenses: Lease operating expense 5,193 4,417 10,217 8,807 Severance taxes 1,540 1,167 3,323 1,961 Re-engineering and workovers 255 315 508 1,296 Exploration expense 139 288 603 368 Impairment of oil and gas properties 2,743 128 2,743 128 General and administrative expense 2,039 1,930 3,858 4,025 Depreciation, depletion and amortization 5,962 4,725 12,313 9,193 Hedge ineffectiveness (61 ) 26 (316 ) 75 (Gain) / Loss on derivative contracts (17 ) 6 (4 ) 58 Interest   1,285     1,144   2,558     1,963     Total expense 19,078 14,146 35,803 27,874   Income before income taxes 7,328 5,715 17,179 6,552   Income tax expense (benefit): Current 912 202 1,865 (532 ) Deferred   1,973     2,014   4,797     3,108   2,885 2,216 6,662 2,576         Net income $ 4,443   $ 3,499 $ 10,517   $ 3,976     Net income per share (basic) $ 0.23   $ 0.22 $ 0.53   $ 0.24     Net income per share (diluted) $ 0.22   $ 0.22 $ 0.52   $ 0.24     Weighted average shares outstanding: Basic   19,723,916     16,241,717   19,716,722     16,241,717     Diluted   20,113,189     16,241,717   20,073,598     16,241,717     GEORESOURCES, INC. and SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands)(unaudited)     Six Months Ended June 30, Cash flows from operating activities: 2010 2009 Net income $ 10,517 $ 3,976

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation, depletion and amortization 12,313 9,193 Proved property impairments 2,743 128 Gain on sale of property and equipment (145 ) (1,488 ) Accretion of asset retirement obligations 200 177 Unrealized gain on derivative contracts (205 ) (119 ) Amortization of loss on canceled hedge contract - 243 Hedge ineffectiveness (gain) loss (316 ) 75 Partnership income (1,342 ) (1,460 ) Partnership distributions 2,201 1,284 Deferred income taxes 4,797 3,108 Non-cash compensation 494 661 Changes in assets and liabilities: Decrease (increase) in accounts receivable 9,805 (7,070 ) (Increase) decrease in prepaid expense and other (607 ) 1,077 Decrease in accounts payable and accrued expense   (8,623 )   (5,855 ) Net cash (used in) provided by operating activities 31,832 3,930   Cash flows from investing activities: Proceeds from sale of property and equipment 425 1,991

Additions to property and equipment, net of cost recoveries of $18,529,000 in 2010 and none in 2009

  (29,110 )   (70,218 ) Net cash used in investing activities (28,685 ) (68,227 )   Cash flows from financing activities: Proceeds from stock options exercised 92 - Issuance of long-term debt   -     58,000   Net cash provided by financing activities 92 58,000     Net increase (decrease) in cash and cash equivalents   3,239     (6,297 )   Cash and cash equivalents at beginning of period 12,660 13,967     Cash and cash equivalents at end of period $ 15,899   $ 7,670     Supplementary information: Interest paid $ 2,025 $ 1,650 Income taxes paid $ 115 $ 478