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.
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