GEOI Georesources, Inc. (MM)

WILLISTON, N.D., Nov. 15 /PRNewswire-FirstCall/ -- GeoResources, Inc., (NASDAQ:GEOI), today reported third quarter 2006 net income of $523,415, or $0.14 per share, on revenue of $2,482,041, compared to third quarter 2005 net income of $575,927, or $0.15 per share, on revenue of $2,375,086. Operating income for the quarter was $758,472 in 2006 versus $709,726 in 2005. Earnings before interest, taxes, depreciation, depletion and amortization (EBITDA) for the third quarter of 2006 was $864,706 compared to $927,622 for the third quarter of 2005.(1) (Logo: http://www.newscom.com/cgi-bin/prnh/20051114/CGM073LOGO ) For the first nine months of 2006 net income was $1,905,228, or $0.50 per share, on revenue of $7,162,875 versus net income of $1,697,326, or $0.44 per share, on revenue of $6,083,670 during the first nine months of 2005. Operating income for the nine months increased 54% to $2,351,560. EBITDA for the first nine months was $2,916,184, compared to $2,615,387 during the same period in 2005. Increased production combined with higher commodity prices generated greater revenue. However, third quarter 2006 net income declined $53,000 as a result of $169,000 of costs associated with the previously announced merger agreement with Southern Bay Oil & Gas, L.P. and Chandler energy, LLC. GeoResources sold a total of 33,548 BOE during the third quarter 2006, a 12% increase compared to 29,978 BOE in the third quarter 2005. For the nine months ended September 30, 2006, GeoResources sold a total of 100,575 BOE a 17% increase over the 85,820 BOE sold during the same period in 2005. GeoResources' subsidiary, Western Star Drilling Company (WSDC), reported 45 operating days in the second quarter and 128 days in the first nine months of 2006. WSDC drilled three wells for third parties during the third quarter of 2006, generating drilling revenue of $523,555 compared to $694,452 in the third quarter 2005. For the first nine months, drilling revenue increased 36% to $1,565,200 in 2006 compared to $1,155,095 for same period in 2005. J.P. Vickers, President of GeoResources, said, "We are continuing to benefit from higher production volumes and strong commodity prices and we expect further gains in production in the fourth quarter when we will have production from the Hammond Field, Carter County, Montana which was brought out of shut-in status in late September. Also, we are drilling a shallow 3,400 foot exploratory well on our Kramer Prospect in Bottineau County, North Dakota and expect we will make an announcement of our findings in the near future." (1) EBITDA is defined as earnings before interest, income taxes, depreciation and amortization, EBITDA 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 evaluating us. Our measure of EBITDA may not be the same as similar measures described by other companies. EBITDA is calculated as follows: Quarter Ended Quarter Ended Sept. 30, 2006 Sept. 30, 2005 Net income $523,415 $575,927 Add back Interest expense 3,991 22,419 Income tax 74,095 110,000 Depreciation and amortization 263,205 219,276 EBITDA $864,706 $927,622 Nine Months Ended Nine Months Ended Sept. 30, 2006 Sept. 30, 2005 Net Income. $1,905,228 $1,697,326 Add back: Interest expense 25,571 70,125 Income tax 287,645 239,000 Depreciation and amortization 697,740 608,936 EBITDA $2,916,184 $2,615,387 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. In addition, 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 the SEC reports of the Company, particularly its Form 10-KSB for the Fiscal Year Ended December 31, 2005, for meaningful cautionary language disclosure. PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements GEORESOURCES, INC., AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS September 30, 2006 December 31, 2005 (Unaudited) ASSETS CURRENT ASSETS: Cash and equivalents $1,399,861 $1,669,882 Trade receivables, net 1,396,736 1,109,202 Inventories 429,762 236,081 Prepaid expenses 89,398 38,738 Total current assets 3,315,757 3,053,903 PROPERTY, PLANT AND EQUIPMENT, at cost: Oil and gas properties, using the full cost method of accounting: Properties being amortized 29,215,750 27,842,549 Properties not subject to amortization 196,999 202,257 Drilling rig and equipment 1,868,613 1,607,094 Leonardite plant and equipment 924,984 854,789 Other 798,745 790,100 33,005,091 31,296,789 Less accumulated depreciation, depletion amortization and impairment (20,375,729) (19,650,972) Net property, plant and equipment 12,629,362 11,645,817 TOTAL ASSETS $15,945,119 $14,699,720 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $967,939 $1,152,532 Accrued expenses 274,255 293,505 Income taxes payable 119,441 64,000 Current portions of capital lease obligations 23,929 41,549 Current maturities of long-term debt -- 523,941 Total current liabilities 1,385,564 2,075,527 CAPITAL LEASE OBLIGATIONS, less current portions -- 13,298 LONG-TERM DEBT, less current maturities -- 177,638 ASSET RETIREMENT OBLIGATION 2,409,070 2,324,690 DEFERRED INCOME TAXES 859,000 753,000 Total liabilities 4,653,634 5,344,153 STOCKHOLDERS' EQUITY: Common stock, par value $.01 per share; authorized 10,000,000 shares; issued and outstanding 3,778,269 and 3,765,269 shares, respectively 37,783 37,653 Additional paid-in capital 422,441 391,881 Retained earnings 10,831,261 8,926,033 Total stockholders' equity 11,291,485 9,355,567 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $15,945,119 $14,699,720 GEORESOURCES, INC., AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2006 2005 2006 2005 OPERATING REVENUES: Oil and gas sales $1,942,072 $1,654,831 $5,538,966 $4,129,992 Leonardite sales 16,414 25,803 58,709 798,583 Drilling revenue 523,555 694,452 1,565,200 1,155,095 2,482,041 2,375,086 7,162,875 6,083,670 OPERATING COSTS AND EXPENSES: Oil and gas production 701,798 693,882 2,021,672 1,637,924 Leonardite operations 55,962 76,421 194,023 744,143 Drilling costs 508,708 527,384 1,329,306 1,064,320 Depreciation and depletion 263,205 219,276 697,740 608,936 Selling, general and administrative 193,896 148,397 568,574 496,644 1,723,569 1,665,360 4,811,315 4,551,967 Operating income 758,472 709,726 2,351,560 1,531,703 OTHER INCOME (EXPENSE): Interest expense (3,991) (22,419) (25,571) (70,125) Interest income 6,803 2,979 20,251 14,543 Gain on involuntary conversion of Leonardite facility -- -- -- 497,743 Professional fees related to proposed merger (169,289) -- (169,289) -- Other, net 5,515 (4,359) 15,922 (37,538) (160,962) (23,799) (158,687) 404,623 Income before income taxes 597,510 685,927 2,192,873 1,936,326 Income tax expense 74,095 110,000 287,645 239,000 Net income $523,415 $575,927 $1,905,228 $1,697,326 EARNINGS PER SHARE: Basic $.14 $.15 $.50 $.45 Diluted $.14 $.15 $.50 $.44 GEORESOURCES, INC., AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended September 30, 2006 2005 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $1,905,228 $1,697,326 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and depletion 697,740 608,936 Accretion of asset retirement obligation 84,380 68,720 Deferred income taxes 106,000 88,000 Gain on involuntary conversion of Leonardite facility -- (497,743) Other 3,750 6,425 Changes in assets and liabilities: Decrease (increase) in: Trade receivables (287,534) 175,460 Inventories (193,681) (11,317) Prepaid expenses and other (50,660) (31,731) Increase (decrease) in: Accounts payable (196,572) (357,898) Accrued expenses (19,250) 6,739 Income taxes payable 55,441 151,000 Net cash provided by operating activities 2,104,842 1,903,917 CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property, plant and equipment (1,745,841) (855,797) Proceeds from insurance claim -- 694,151 Proceeds from sale of property, plant and equipment 2,785 26,946 Net cash used in investing activities (1,673,056) (134,700) CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on long-term capital lease obligations (30,918) (50,815) Proceeds from stock options exercised 30,690 96,363 Proceeds from long-term borrowings -- 10,006 Principal payments on long-term debt (701,579) (516,673) Net cash used in financing activities (701,807) (461,119) NET INCREASE IN CASH AND EQUIVALENTS (270,021) 1,308,098 CASH AND EQUIVALENTS, beginning of period 1,669,882 715,551 CASH AND EQUIVALENTS, end of period $1,399,861 $2,023,649 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for: Interest $25,271 $70,125 Income taxes 126,204 1,120 http://www.newscom.com/cgi-bin/prnh/20051114/CGM073LOGO http://photoarchive.ap.org/ DATASOURCE: GeoResources, Inc. CONTACT: Cathy Kruse of GeoResources, Inc., +1-701-572-2020, Web site: http://www.georesources.net/

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