GEOI Georesources, Inc. (MM)

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

Nine Months Ended September 30, (In thousands, except earnings per share) 2010   2009   Total revenue $ 79,911 $ 57,411 Net income $ 18,153 $ 7,404 Earnings per share (diluted) $ 0.90 $ 0.46 EBITDAX $ 53,228 $ 34,079   Three Months Ended September 30, (In thousands, except earnings per share) 2010   2009   Total revenue $ 26,929 $ 22,985 Net income $ 7,636 $ 3,428 Earnings per share (diluted) $ 0.38 $ 0.21 EBITDAX $ 17,658 $ 15,081    

PercentIncrease(Decrease)

   

Nine Months EndedSeptember 30,

2010   2009   Oil Production (MBbls) 30 % 780 601 Gas Production (MMcf) 7 % 3,656 3,430 Barrel of oil equivalent (MBOE) 18 % 1,389 1,173 Average Price Oil before Hedge Settlements (per Bbl) 40 % $ 71.78 $ 51.45 Average Price Oil after Hedge Settlements (per Bbl) 19 % $ 70.51 $ 59.23 Average Price Gas before Hedge Settlements (per Mcf) 39 % $ 4.25 $ 3.06 Average Price Gas after Hedge Settlements (per Mcf) 36 % $ 5.39 $ 3.95      

PercentIncrease(Decrease)

Three Months EndedSeptember 30,

2010   2009   Oil Production (MBbls) 30 % 276 212 Gas Production (MMcf) -36 % 1,076 1,678 Barrel of oil equivalent (MBOE) -8 % 455 492 Average Price Oil before Hedge Settlements (per Bbl) 13 % $ 69.53 $ 61.65 Average Price Oil after Hedge Settlements (per Bbl) 11 % $ 70.43 $ 63.55 Average Price Gas before Hedge Settlements (per Mcf) 55 % $ 4.15 $ 2.67 Average Price Gas after Hedge Settlements (per Mcf) 48 % $ 5.74 $ 3.87  

EBITDAX (see definition below) for the first nine months of 2010 totaled $53.2 Million compared to $34.1 Million in the comparable prior year period, representing an increase of 56%. EBITDAX increased 17% to $17.7 Million for the third quarter of 2010 compared to $15.1 Million for the third quarter of 2009.

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

  Nine Months Ended September 30, (In thousands) 2010   2009   EBITDAX (1)   Net income $ 18,153 $ 7,404 Add back: Interest expense 3,949 3,549 Income taxes: Current 10,699 (176 ) Deferred (1,416 ) 5,292 Depreciation, depletion and amortization 18,517 15,503 Hedge and derivative contracts (976 ) 327 Non-cash compensation 793 1,064 Exploration and impairments   3,509     1,116   EBITDAX $ 53,228   $ 34,079         Three Months Ended September 30, (In thousands) 2010 2009     Net income $ 7,636 $ 3,428 Add back: Interest expense 1,391 1,586 Income taxes: Current 8,834 356 Deferred (6,213 ) 2,184 Depreciation, depletion and amortization 6,204 6,310 Hedge and derivative contracts (656 ) 194 Non-cash compensation 299 403 Exploration and impairments   163     620   EBITDAX $ 17,658   $ 15,081  

(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 comparative results for the nine months ending September 30, 2010 and 2009 reflect our continued year over year growth. We are on track for our first $100 million year (revenues). Comparatively, we benefited from both increased production and from improved oil and gas prices. Our increased production was a direct result of our successful drilling programs in the Williston Basin and strategic acquisitions, offset by the impact of suspending our natural gas drilling due to low prices. The impact of suspending gas drilling is quite evident when comparing the third quarter of this year to last year. High rate gas wells were brought on line in 2009 and production has declined, as anticipated. Although our oil production has increased significantly, the rate of growth is impacted by industry-wide delays between completion of drilling operations and commencement of production, due to the high demand for completion services and equipment. Nevertheless, we expect our overall production for 2010 to exceed 2009 totals.”

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 SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share amounts)     September 30,   December 31, 2010 2009 ASSETS (unaudited)   Current assets:   Cash $ 12,131 $ 12,660 Accounts receivable: Oil and gas revenues 15,759 14,860 Joint interest billings and other 24,702 13,734 Affiliated partnerships 702 933 Notes receivable 120 120 Derivative financial instruments 5,988 764 Income taxes receivable - 2,077 Prepaid expenses and other 2,100 2,297     Total current assets   61,502     47,445     Oil and gas properties, successful efforts method: Proved properties 325,315 285,363 Unproved properties 12,976 10,281 Office and other equipment 1,155 828 Land   96     96   339,542 296,568   Less accumulated depreciation, depletion and amortization (66,700 ) (48,182 )     Net property and equipment   272,842     248,386       Equity in oil and gas limited partnerships 2,383 3,532   Derivative financial instruments 1,885 1,360   Deferred financing costs and other   2,704     3,574     $ 341,316   $ 304,297     GEORESOURCES, INC and SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share amounts)     September 30,   December 31, 2010 2009 (unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY   Current liabilities:   Accounts payable $ 3,463 $ 6,452 Accounts payable to affiliated partnerships 3,037 8,361 Revenue and royalties payable 12,998 13,928 Income taxes payable 7,201 - Drilling advances - 390 Accrued expenses 2,270 1,574 Derivative financial instruments 2,721 4,794     Total current liabilities   31,690   35,499     Long-term debt 85,000 69,000   Deferred income taxes 17,848 15,778   Asset retirement obligations 6,761 6,110   Derivative financial instruments 962 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 147,862 146,966 Accumulated other comprehensive income 2,041 (3,288 ) Retained earnings 48,955 30,802     Total stockholders' equity   199,055   174,677     $ 341,316 $ 304,297     GEORESOURCES, INC. and SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In thousands, except share and per share amounts) (unaudited)           Three Months Ended September 30, Nine Months Ended September 30, 2010 2009 2010 2009   Revenue: Oil and gas revenues $ 25,612 $ 19,980 $ 74,684 $ 49,109 Partnership management fees 124 151 423 847 Property operating income 498 398 1,282 1,312 Gain on sale of property and equipment 243 57 388 1,545 Partnership income 429 2,374 1,771 3,834 Interest and other   23     25   1,363     764     Total revenue 26,929 22,985 79,911 57,411   Expenses: Lease operating expense 5,146 4,395 15,363 13,202 Severance taxes 1,520 1,200 4,843 3,161 Re-engineering and workovers 881 761 1,389 2,057 Exploration expense 163 620 766 988 Impairment of oil and gas properties - - 2,743 128 General and administrative expense 2,023 1,951 5,881 5,976 Depreciation, depletion and amortization 6,204 6,310 18,517 15,503 Hedge ineffectiveness (658 ) 111 (974 ) 186 (Gain) / loss on derivative contracts 2 83 (2 ) 141 Interest   1,391     1,586   3,949     3,549     Total expense 16,672 17,017 52,475 44,891   Income before income taxes 10,257 5,968 27,436 12,520   Income tax expense (benefit): Current 8,834 356 10,699 (176 ) Deferred   (6,213 )   2,184   (1,416 )   5,292   2,621 2,540 9,283 5,116         Net income $ 7,636   $ 3,428 $ 18,153   $ 7,404     Net income per share (basic) $ 0.39   $ 0.21 $ 0.92   $ 0.46     Net income per share (diluted) $ 0.38   $ 0.21 $ 0.90   $ 0.46     Weighted average shares outstanding: Basic   19,723,916     16,241,717   19,719,120     16,241,717     Diluted   20,080,670     16,323,353   20,076,472     16,241,717     GEORESOURCES, INC. and SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (unaudited)       Nine Months Ended September 30, Cash flows from operating activities: 2010 2009 Net income $ 18,153 $ 7,404

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

Depreciation, depletion and amortization 18,517 15,503 Proved property impairments 2,743 128 Gain on sale of property and equipment (388 ) (1,545 ) Accretion of asset retirement obligations 300 271 Unrealized gain on derivative contracts (305 ) (153 ) Amortization of loss on canceled hedge contract - 363 Hedge ineffectiveness (gain) loss (974 ) 186 Partnership income (1,771 ) (3,834 ) Partnership distributions 2,919 1,355 Deferred income taxes (1,416 ) 5,292 Non-cash compensation 793 1,064 Changes in assets and liabilities: Decrease (increase) in accounts receivable 10,285 (5,348 ) (Increase) decrease in prepaid expense and other 988 (355 ) Decrease in accounts payable and accrued expense   (1,734 )   (7,403 ) Net cash provided by operating activities 48,110 12,928   Cash flows from investing activities: Proceeds from sale of property and equipment 540 2,660

Additions to property and equipment, net of acreage cost recoveries of $20,230 in 2010 and none in 2009

  (65,282 )   (81,619 ) Net cash used in investing activities (64,742 ) (78,959 )   Cash flows from financing activities: Proceeds from stock options exercised 103 - Issuance of long-term debt   16,000     64,000   Net cash provided by financing activities 16,103 64,000     Net increase (decrease) in cash and cash equivalents   (529 )   (2,031 )   Cash and cash equivalents at beginning of period 12,660 13,967     Cash and cash equivalents at end of period $ 12,131   $ 11,936     Supplementary information: Interest paid $ 3,161 $ 2,938 Income taxes paid $ 2,629 $ 677 Non-cash investing activities Accounts receivable - acreage cost recoveries $ 20,000 $ -