GEOI Georesources, Inc. (MM)

GeoResources, Inc. (NASDAQ: GEOI), today announced its financial and operating results for the three and six month periods ended June 30, 2011. Highlights for the second quarter 2011 include:

• Initiated successful commercial production operations on its first three wells in its Eagle Ford project area in Fayette County, Texas
• Continued the successful development and de-risking of its Bakken operated project area in Williams County, North Dakota with the completion of the Muller 1-21-16H
• Generated Adjusted EBITDAX(1) (non-GAAP) of $20.1 million in the quarter, a 21% increase over the second quarter 2010 and a 11% increase over the first quarter 2011
• Generated Adjusted Net Income(1) (non-GAAP) of $7.9 million in the quarter, a 29% increase over the second quarter 2010 and a 9% increase over the first quarter 2011
• Generated Diluted Adjusted Earnings Per Share(1) (non-GAAP) of $0.31/share for the quarter
• Ended the quarter with $193 million in Liquidity(1) (non-GAAP)

(1) See calculation in section titled “Supplemental Non-GAAP Reconciliations and Measurements” in this release.

The following tables summarize the company’s financial results for the three and six month periods ending June 30, 2011 and June 30, 2010.

    ($ in thousands except per share amounts) Three Mos. Ended June 30,     Six Mos. Ended June 30, 2011     2010 2011     2010   Revenue $ 30,880 $ 26,406 $ 59,519 $ 52,982 Reported Net Income 8,779 4,443 15,092 10,517 Reported Earnings Per Share (diluted) 0.34 0.22 0.60 0.52 Adjusted Net Income (1) 7,891 6,106 15,119 11,939 Adjusted Earnings Per Share (diluted) 0.31 0.30 0.60 0.59 Adjusted EBITDAX (1) 20,143 16,612 38,371 34,085

(1) See calculation in section titled Supplemental Non-GAAP Reconciliations and Measurements in this release.

        Three Mos. Ended June 30, Six Mos. Ended June 30, 2011     2010 2011     2010   Oil Production (Mbbls) 265 255 515 504 Gas Production (MMcf) 1,004 1,300 2,015 2,580 Barrel of Equivalent Production (MBOE) 432 472 851 934 Avg. Oil Price Before Hedge Settlement (per Bbl) $ 101.78 $ 71.83 $ 97.53 $ 73.01 Avg. Oil Price After Hedge Settlement (per Bbl) 90.71 70.48 88.12 70.55 Avg. Gas Price Before Hedge Settlement (per Bbl) 4.08 3.76 4.06 4.29 Avg. Gas Price After Hedge Settlement (per Bbl) 5.24 4.90 5.22 5.25  

Operational Update

Eagle FordGeoResources recently completed its third well in its Eagle Ford project area, the Black Jack Springs #1H (44.1% working interest (“W.I.”)). This well was drilled with a 5,900 foot lateral and was completed with 16 frac stages. This well averaged 460 boe/d of production over an initial 10 day period while being produced on a restricted choke of 14/64” to 16/64”. The Black Jack Springs well is located further northeast in the Company’s acreage block and therefore further de-risks the Company’s Eagle Ford acreage. The table below summarizes the production data through early August from the Company’s first three Eagle Ford wells which are still flowing up the production casing.

                    Lateral # of Avg. Daily Production (Boe/d)(1) Current Length Frac First   Current Pressure (feet) Stages 30 Days Current Choke (PSI)   Flatonia E #1H 3,200 10 391 244 24/64" 225 Flatonia E #2H 4,800 14 465 413 14/64" 1,050 Black Jack Springs #1H 5,900 16 390

(2)

358 18/64" 650

(1) Excludes non-producing days and initial "flow-back" days when well was cleaning up and producing frac fluid.(2) Represents average daily rate for first 22 days of production.

GeoResources is currently preparing to drill its fourth Eagle Ford well in Fayette County, the Peebles Unit #1H (39.8% W.I.), which is anticipated to have an approximate 5,000 foot lateral. The Company has identified a second rig for its Eagle Ford project and this rig could begin drilling operations early in the fourth quarter.

Operated BakkenThe Company’s most recently completed well on its operated Bakken acreage block in Williams County, North Dakota, the Muller 1-21-16H (31.1% W.I.), had an initial 24 hour production rate of 682 bopd and 260 mcf/d on a 40/64” choke. This well is located in the northwest portion of the block and was completed in mid-July. This well was drilled with a vertical pilot hole that cored the Bakken and Three Forks formations and was put on production within 75 days. The table below summarizes the production data through early August from GeoResources’ first four wells in its operated Bakken project area. As of early August, the Carlson and Siirtola wells were on rod pump while the Anderson and Muller wells were still flowing.

            Initial Production Data Avg. Daily Production (Boe/d)(1) Spacing Daily Rate           Unit Oil Only Choke 30 60 90 (Acres) (Bbl/d) Size Days Days Days   Carlson 1-11H 640 685 29/64" 235 236 224 Siirtola 1-28-33H 1,280 840 26/64" 341 266 254 Anderson 1-24-14H 1,280 905 24/64" 363 302 NA Muller 1-21-16H 1,280 682 40/64" 275

(2)

NA NA

(1) Excludes non-producing days and initial "flow-back" days when well was cleaning up and producing frac fluid.(2) Represents average daily rate for first 12 days of production.

Earlier this summer, the Company contracted a second dedicated drilling rig in this play, which recently completed drilling the Rasmussen 1-21-16H (30.9% W.I.). GeoResources also recently completed drilling the Rasmussen 1-25-36H (39.5% W.I.) and is preparing to frac both of these Rasmussen wells in late August with production expected to commence in September. One rig is preparing to move to the Peterson Trust 1-5-8H (31.6% W.I.), while the other rig has been moved to Montana to complete drilling operations on the Olson 1-21-16H well (27.0% W.I.). After drilling the Olson well, this rig is expected to move back to Williams County at which time the Company will have two rigs running in Williams County for the remainder of 2011 and into 2012. The Company is also planning to add additional rigs to accelerate development of its Bakken acreage position in 2012.

Other Drilling ActivityIn relation to the Company’s previously announced discovery well at Quarantine Bay, Louisiana (22.0% non-op working interest), GeoResources’ partner is finalizing pipeline right-of-way and facility enhancements. This well is anticipated to be on production in late August. GeoResources also completed drilling the West Cannon Unit #1H Austin Chalk well in the Giddings field in early August in which it has a 48.5% working interest. We expect this well to begin producing by mid-August.

Unaudited Financial Statements

          GEORESOURCES, INC. and SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share amounts)   June 30,     December 31, 2011 2010 ASSETS (unaudited)   Current assets:   Cash $ 48,290 $ 9,370 Accounts receivable: Oil and gas revenues 21,096 17,017 Joint interest billings and other 34,450 16,631 Affiliated partnerships 794 969 Notes receivable 120 120 Derivative financial instruments 2,741 4,282 Income taxes receivable 2,147 222 Prepaid expenses and other 4,021 2,645     Total current assets $ 113,659   $ 51,256     Oil and gas properties, successful efforts method: Proved properties $ 363,696 $ 341,582 Unproved properties 51,885 32,403 Office and other equipment 1,326 1,140 Land   146     146   $ 417,053 $ 375,271   Less accumulated depreciation, depletion and amortization   (81,240 )   (72,380 ) Net property and equipment $ 335,813   $ 302,891     Equity in oil and gas limited partnerships $ 2,723 $ 2,272   Derivative financial instruments 464 851   Deferred financing costs and other   2,100     2,420   $ 454,759   $ 359,690       GEORESOURCES, INC. and SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share amounts)         June 30,     December 31, 2011 2010 (unaudited) LIABILITIES AND EQUITY   Current liabilities:   Accounts payable $ 20,915 $ 14,616 Accounts payable to affiliated partnerships 3,107 2,931 Revenue and royalties payable 15,620 12,450 Drilling advances 19,226 4,203 Accrued expenses 3,441 1,331 Derivative financial instruments 5,134 7,433     Total current liabilities $ 67,443   $ 42,964     Long-term debt - $ 87,000   Deferred income taxes $ 28,464 19,289   Asset retirement obligations 6,970 7,052   Derivative financial instruments 1,441 1,650   Equity: Common stock, par value $0.01 per share; authorized 100,000,000 shares; issued and outstanding: 25,462,930 in 2011 and 19,726,566 in 2010 $ 255 $ 197 Additional paid-in capital 278,557 148,172 Accumulated other comprehensive income (2,238 ) (3,000 ) Retained earnings 69,312 54,133     Total GeoResources, Inc. stockholders' equity $ 345,886 $ 199,502   Noncontrolling interest 4,555 2,233     Total equity $ 350,441   $ 201,735   $ 454,759   $ 359,690       GEORESOURCES, INC. and SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In thousands, except share and per share amounts) (unaudited)         Three Months Ended June 30, Six Months Ended June 30, 2011 2010 2011 2010   Revenue: Oil and gas revenues $ 29,292 $ 24,343 $ 55,906 $ 49,072 Partnership management fees 131 140 242 299 Property operating income 923 393 1,361 784 Gain on sale of property and equipment 1 - 737 145 Partnership income 505 488 915 1,342 Interest and other   28     1,042     358     1,340     Total revenue $ 30,880 $ 26,406 $ 59,519 $ 52,982   Expenses: Lease operating expense $ 5,747 $ 5,193 $ 10,766 $ 10,217 Severance taxes 1,898 1,540 3,519 3,323 Re-engineering and workovers 709 255 1,103 508 General and administrative expense 2,962 2,039 5,562 3,858 Exploration expense 124 139 356 603 Impairment of oil and gas properties - 2,743 - 2,743 Depreciation, depletion and amortization 6,348 5,962 11,928 12,313 Hedge ineffectiveness (1,561 ) (61 ) 641 (316 ) Loss on derivative contracts - (17 ) - (4 ) Interest   452     1,285     1,038     2,558     Total expense $ 16,679 $ 19,078 $ 34,913 $ 35,803   Income before income taxes $ 14,201 $ 7,328 $ 24,606 $ 17,179   Income tax expense (benefit): Current $ 641 $ 912 $ 798 $ 1,865 Deferred   4,781     1,973     8,716     4,797   $ 5,422 $ 2,885 $ 9,514 $ 6,662         Net income $ 8,779   $ 4,443   $ 15,092   $ 10,517     Less: Net loss attributable to noncontrolling interest $ (87 ) $ - $ (87 ) $ -         Net income attributable to GeoResources, Inc. $ 8,866   $ 4,443   $ 15,179   $ 10,517     Net income per share (basic) $ 0.35   $ 0.23   $ 0.61   $ 0.53   Net income per share (diluted) $ 0.34   $ 0.22   $ 0.60   $ 0.52     Weighted average shares outstanding: Basic   25,460,622     19,723,916     24,778,182     19,716,722   Diluted   25,861,849     20,113,189     25,271,578     20,073,598       GEORESOURCES, INC. and SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (unaudited)         Six Months Ended June 30, Cash flows from operating activities: 2011 2010 Net income $ 15,092 $ 10,517 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization 11,928 12,313 Proved property impairments - 2,743 Gain on sale of property and equipment (737 ) (145 ) Accretion of asset retirement obligations 224 200 Unrealized gain on derivative contracts - (205 ) Hedge ineffectiveness (gain) loss 641 (316 ) Partnership income (915 ) (1,342 ) Partnership distributions 465 2,201 Deferred income taxes 8,716 4,797 Non-cash compensation 810 494 Excess tax benefit from share-based compensation (2,125 ) - Changes in assets and liabilities: Decrease (increase) in accounts receivable (21,705 ) 9,805 (Increase) in prepaid expense and other (789 ) (607 ) Increase (decrease) in accounts payable and accrued expense   26,777     (8,623 ) Net cash provided by operating activities $ 38,382 $ 31,832   Cash flows from investing activities: Proceeds from sale of property and equipment $ 345 $ 425 Additions to property and equipment   (42,440 )   (29,110 ) Net cash used in investing activities $ (42,095 ) $ (28,685 )   Cash flows from financing activities: Proceeds from stock options exercised $ 5,022 $ 92 Excess tax benefit from share-based compensation 2,125 - Issuance of common stock 122,486 - Reduction of long-term debt   (87,000 )   -   Net cash provided by financing activities $ 42,633 $ 92     Net increase in cash and cash equivalents $ 38,920   $ 3,239     Cash and cash equivalents at beginning of period   9,370     12,660     Cash and cash equivalents at end of period $ 48,290   $ 15,899     Supplementary information: Interest paid $ 485 $ 2,025 Income taxes paid $ 627 $ 115  

Supplemental Non-GAAP Reconciliations and Measurements

Adjusted Net IncomeThe following tables reconcile reported net income to adjusted net income for the periods indicated (in thousands):

    ($ in thousands except per share amounts) Three Mos. Ended June 30,     Six Mos. Ended June 30, 2011     2010 2011     2010   Net Income Attributable to GeoResources, Inc. $ 8,866 $ 4,443 $ 15,179 $ 10,517 Add Back: Unrealized (Gain)/Loss on Hedge and Derivative Contracts (1,561 ) (78 ) 641 (320 ) Impairments - 2,743 - 2,743 (Gain) / Loss on Sale of Properties (1 ) - (737 ) (145 ) Tax Impact(1)   587     (1,002 )   36     (856 ) Adjusted Net Income (2) $ 7,891 $ 6,106 $ 15,119 $ 11,939   Adjusted Net Income / Share (Basic) $ 0.31 $ 0.31 $ 0.61 $ 0.61 Adjusted Net Income / Share (Diluted) $ 0.31 $ 0.30 $ 0.60 $ 0.59   (1) Tax impact is estimated as 37.6% of the pre-tax adjustment amounts. (2)   As used herein, adjusted net income is calculated as net income attributable to GeoResources, Inc. excluding (gains) and losses on property sales, impairment of proved and unproved properties and an unrealized (gains) and losses related to hedge ineffectiveness and income or loss on derivative contracts. Adjusted net income 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.  

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

    ($ in thousands except per share amounts) Three Mos. Ended June 30,     Six Mos. Ended June 30, 2011     2010 2011     2010   Net Income Attributable to GeoResources, Inc. $ 8,866 $ 4,443 $ 15,179 $ 10,517 Adjustments: (Gain) on sale of property and equipment (1 ) - (737 ) (145 ) Interest and Other (28 ) (1,042 ) (358 ) (1,340 ) Interest Expense 452 1,285 1,038 2,558 Income Taxes: Current 641 912 798 1,865 Deferred 4,781 1,973 8,716 4,797 DD&A 6,348 5,962 11,928 12,313 Unrealized (Gain)/Loss on Hedge and Derivative Contracts (1,561 ) (78 ) 641 (320 ) Non-Cash Compensation 521 275 810 494 Exploration Expense 124 139 356 603 Impairments   -     2,743     -     2,743   Adjusted EBITDAX (1) $ 20,143 $ 16,612 $ 38,371 $ 34,085

(1) As used herein, Adjusted EBITDAX is calculated as net income attributable to GeoResources, Inc. before interest, income taxes, depreciation, depletion and amortization, and exploration expense and further excludes non-cash compensation, impairments, hedge ineffectiveness and income or loss on derivative contracts. Adjusted 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.

LiquidityLiquidity is calculated by adding the net funds available under our credit facility to our cash and cash equivalents. We use liquidity as an indicator, along with our ongoing cash flow, of our ability to satisfy our future capital expenditures.

The table below summarizes our liquidity position at June 30, 2011 and December 31, 2010.

        ($ in thousands) Liquidity at Liquidity at June 30, 2011 December 31, 2010   Borrowing base available on senior revolving credit facility $ 145,000 $ 145,000 Cash and cash equivalents 48,290 9,370 Amounts borrowed on Senior Revolving Credit Facility   -   (87,000 ) Liquidity (1) $ 193,290 $ 67,370

(1) Liquidity can vary from period to period for GeoResources, Inc. and can vary among companies as to what is or is not included in liquidity. This measurement 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.

About GeoResources, Inc.GeoResources, Inc. is an independent oil and gas company engaged in the development and acquisition of oil and gas reserves through an active and diversified program that includes the acquisition, drilling and development of undeveloped leases, purchases of reserves and exploration activities, currently focused in the Southwest, Gulf Coast, and the Williston Basin. For more information, visit our website at www.georesourcesinc.com.

Cautionary Note Regarding Forward-Looking StatementsThis release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which are subject to risks and uncertainties. The forward-looking statements, which address the GeoResources’ expected business and financial performance, among other matters, contain words such as “believe,” “expect,” “estimate,” “anticipate,” “optimistic,” “intend,” “plan,” “aim,” “will,” “may,” “should,” “could,” “would,” “likely,” “continue,” and similar expressions. Examples of forward-looking statements, include, but are not limited to: (i) changes in production volumes and prices, future production and development costs, (ii) projections of capital expenditures, revenues, income or loss, earnings or loss per share, capital structure, and other financial items, (iii) statements of our plans and objectives of our management or board of directors including those relating to planned development of our oil and gas properties, (iv) statements of future economic performance and (v) statements of assumptions underlying such statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. GeoResources undertakes no obligation to update or revise any forward-looking statements.

A further description of these uncertainties and other risks can be found in the GeoResources Annual Report on Form 10-K for the year ended December 31, 2010 and other reports filed by GeoResources with the SEC.