GEOI Georesources, Inc. (MM)

GeoResources, Inc., (NASDAQ:GEOI), today announced its financial and operating results for the three and nine months ended September 30, 2009. The following tables summarize the results of operations as compared to similar periods in 2008.

            Three Months Ended September 30, (In thousands, except Earnings per share) 2009           2008           Total revenue $ 22,985 $ 23,593 Net income $ 3,428 $ 5,799 Earnings per share (diluted) $ 0.21 $ 0.35 EBITDAX (See below) $ 14,678 $ 13,574     Nine Months Ended September 30, (In thousands, except Earnings per share) 2009           2008   Total revenue $ 56,812 $ 75,745 Net income $ 7,404 $ 17,813 Earnings per share (diluted) $ 0.46 $ 1.14 EBITDAX (See below) $ 33,015 $ 44,502              

Percent

Increase

(Decrease)

       

Three Months Ended

September 30,

2009         2008   Gas Production (MMcf) 132 % 1,678 723 Oil Production (MBbls) 27 % 212 167 Barrel of oil equivalent (MBOE) 71 % 492 288 Average Price Gas before Hedge Settlements (per Mcf) -71 % $ 2.67 $ 9.13 Average Price Oil before Hedge Settlements (per Bbl) -47 % $ 61.65 $ 116.01 Average Price Gas after Hedge Settlements (per Mcf) -58 % $ 3.87 $ 9.12 Average Price Oil after Hedge Settlements (per Bbl) -30 % $ 63.55 $ 90.60      

Percent

Increase

(Decrease)

Nine Months Ended

September 30,

2009   2008   Gas Production (MMcf) 52 % 3,430 2,251 Oil Production (MBbls) 9 % 601 553 Barrel of oil equivalent (MBOE) 26 % 1,173 928 Average Price Gas before Hedge Settlements (per Mcf) -67 % $ 3.06 $ 9.24 Average Price Oil before Hedge Settlements (per Bbl) -53 % $ 51.45 $ 109.81 Average Price Gas after Hedge Settlements (per Mcf) -55 % $ 3.95 $ 8.82 Average Price Oil after Hedge Settlements (per Bbl) -34 % $ 59.23 $ 89.50  

For the three months ended September 30, 2009, the Company reported total revenues of $23.0 million and net income of $3.4 million, or $0.21 per basic and diluted common share. Oil and natural gas production increased substantially in the third quarter 2009 compared to the same period in 2008. Natural gas production increased to 1,678 MMcf from 723 MMcf, an increase of 132%. Oil production for the third quarter increased to 212 MBbls from 167 MBbls in the prior year’s period, an increase of 27%. The average realized price of natural gas after hedge settlements was $3.87 per Mcf for the third quarter of 2009, 58% less than the third quarter of 2008. The average realized price of oil after hedge settlements for the third quarter of 2009 was $63.55 per barrel or 30% less than the third quarter in the prior year.

For the first nine-months of 2009, revenues totaled $56.8 million and net income was $7.4 million or $0.46 per basic and diluted common share. For the nine months ended September 30, 2009, natural gas production totaled 3,430 MMcf or 52% greater than the 2,251 MMcf produced during the first nine months of 2008. Oil production for the first nine months of 2009 increased 9% to 601 Mbbls from 553 Mbbls in the first nine months of 2008. The average realized price of natural gas was $3.95 per Mcf for the first nine months of 2009 or 55% less than the first nine months of the prior year. The average realized price of oil was $59.23 per barrel or 34% less for the first nine months of 2009 than the first nine months in the prior year.

Earnings before interest, income taxes, depreciation, depletion and amortization, and exploration expense (“EBITDAX”) increased 8% to approximately $14.7 million for the third quarter 2009 compared $13.6 for the third quarter 2008. EBITDAX for the first nine months of 2009 decreased 26% to approximately $33.0 million compared to $44.5 million for the same period in 2008.

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

            Three Months Ended September 30, 2009       2008 EBITDAX (1)   Net income $ 3,428 $ 5,799 Add back: Interest expense 1,586 975 Income taxes: Current 356 1,679 Deferred 2,184 2,149 Depreciation, depletion and amortization 6,310 3,833 Hedge and derivative contracts 194 (890 ) Exploration and impairments   620     29   EBITDAX $ 14,678   $ 13,574       Nine Months Ended September 30, 2009 2008   Net income $ 7,404 $ 17,813 Add back: Interest expense 3,549 3,858

Income taxes:

Current (176 ) 4,438 Deferred 5,292 6,532 Depreciation, depletion and amortization 15,503 11,283 Hedge and derivative contracts 327 47 Exploration and impairments   1,116     531   EBITDAX $ 33,015   $ 44,502  

(1) As used herein, EBITDAX is calculated as earnings before interest, income taxes, depreciation, depletion and amortization, and exploration expense and further includes 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.

Comments

Mr. Frank A. Lodzinski, CEO and president, commented “Our results for the third quarter reflect our continued profitable growth. The third quarter comparison to last year is particularly relevant, as it demonstrates our production growth excluding prior year divestitures and also demonstrates the considerable improvement in per unit lease operating expenses. On a unit-of-production basis, costs decreased by 54%. While part of this decrease is a result of general cost reductions within the industry, the greater impact is a direct result of our business strategy and reflects re-engineering projects, development drilling, acquisitions of properties with lower operating costs and divestitures of properties with higher operating costs. Increased production is a direct result of our successful drilling programs in the Bakken Shale of the Williston Basin and our Giddings Austin Chalk program and of the acquisitions we have made in these core areas. These programs are expected to continue to contribute to our growth through continuous drilling. To that end, our joint venture in the Bakken is currently running three rigs and a fourth rig may be added from time to time. In addition, we will spud our next Austin Chalk well this month after a suspension of drilling for the past several months. While our eastern Grimes County wells were predominately gas, our next several locations are located in western Grimes County and are expected to yield approximately 50% oil and natural gas liquids. We realized substantial net income and EBITDAX for the third quarter, in the amounts of $3.4 million and $14.7 million, respectively. We expect our future earnings to benefit from further increases in production and lower per-unit lease operating expenses. While reductions in the costs of materials and services favorably impacted lease operating expenses, the bulk of the reductions are a direct result of our field re-engineering and development drilling activities. We will continue to focus on cash flow and our bottom line while we pursue our business plan.”

Lodzinski further commented, “In July, we entered into our Second Amended and Restated Credit Agreement. The facility was increased to $250 million and extended to October 16, 2012. The initial borrowing base was set at $135 million and provided for interest rates of (a) LIBOR plus 2.25% to 3.00% or (b) the prime lending rate plus 1.25% to 2.00%, depending upon the amount borrowed. The increased and extended facility requires a redetermination of the borrowing base as of November 1 and May 1 of each year. Accordingly, our borrowing base redetermination is currently pending and we expect our borrowing base to, at least, be maintained until the next redetermination. The participating banks include, Wachovia Bank, Comerica Bank, BBVA Compass, U.S. Bank, Frost National Bank, Bank of Texas and Natixis. Our strong cash flows, working capital and liquidity, position us favorably to continue our growth.”

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/A for the year ended December 31, 2008 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, 2009 2008 ASSETS (unaudited)   Current assets:   Cash $ 11,936 $ 13,967 Accounts receivable Oil and gas revenues 11,131 11,439 Joint interest billings and other 14,298 7,172 Affiliated partnerships 289 2,905 Notes receivable 120 120 Derivative financial instruments 722 8,200 Income taxes receivable 2,962 2,165 Prepaid expenses and other 2,650 3,923     Total current assets   44,108     49,891     Oil and gas properties, successful efforts method:   Proved properties 279,240 204,536 Unproved properties 9,890 2,409 Office and other equipment 797 1,025 Land   96     96   290,023 208,066  

Less accumulated depreciation, depletion

and amortization

(41,277 ) (26,486 )     Net property and equipment   248,746     181,580       Equity in oil and gas limited partnerships 4,099 3,266   Derivative financial instruments 755 6,409   Deferred financing costs and other   3,768     2,388     $ 301,476   $ 243,534       GEORESOURCES, INC and SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share amounts)                   September 30, December 31, 2009 2008 (unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY   Current liabilities:   Accounts payable $ 4,066 $ 10,750 Accounts payable to affiliated partnerships 9,172 10,310 Revenues and royalties payable 13,898 11,701 Drilling advances 38 2,169 Accrued expenses 1,859 1,506 Derivative financial instruments 3,364 1,572     Total current liabilities   32,397     38,008   Long-term debt 104,000 40,000   Deferred income taxes 17,410 17,868   Asset retirement obligations 5,741 5,418   Derivative financial instruments 1,066 1,245   Stockholders' equity: Common stock, par value $0.01 per share; authorized 100,000,000 shares; issued and outstanding: 16,241,717 162 162 Additional paid-in capital 113,587 112,523 Accumulated other comprehensive (loss) income (1,318 ) 7,283 Retained earnings 28,431 21,027     Total stockholders' equity   140,862     140,995   $ 301,476   $ 243,534   CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands, except share and per share amounts) (unaudited)                     Nine Months Ended September 30, Cash flows from operating activities: 2009 2008 Net income $ 7,404 $ 17,813 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization 15,503 11,283 Unproved property impairments - 483 Proved property impairments 128 - Gain on sale of property and equipment (1,545 ) (2,269 ) Accretion of asset retirement obligations 271 304 Unrealized gain on derivative contracts (153 ) - Amortization of loss on canceled hedge contract 363 - Hedge ineffectiveness loss 186 47 Partnership income (3,834 ) (1,021 ) Partnership distributions 1,355 551 Deferred income taxes 5,292 6,532 Non-cash compensation 1,064 462 Changes in assets and liabilities: Increase in accounts receivable (5,593 ) (155 ) Decrease in notes receivable 245 555 Increase in prepaid expense and other (355 ) (1,499 ) Increase (decrease) in accounts payable and accrued expense   (7,403 )   5,514   Net cash provided by operating activities 12,928 38,600   Cash flows from investing activities: Proceeds from sale of property and equipment 2,660 20,960 Additions to property and equipment (81,619 ) (43,012 ) Investment in oil and gas limited partnership   -     (978 ) Net cash used in investing activities (78,959 ) (23,030 )   Cash flows from financing activities: Issuance of common stock - 32,187 Issuance of long-term debt 64,000 - Reduction of long-term debt   -     (46,000 ) Net cash provided by (used in) financing activities 64,000 (13,813 )     Net (decrease) increase in cash and cash equivalents   (2,031 )   1,757     Cash and cash equivalents at beginning of period 13,967 24,430     Cash and cash equivalents at end of period $ 11,936   $ 26,187     Supplementary information: Interest paid $ 2,938 $ 3,708 Income taxes paid $ 677 $ 4,210