GEOI Georesources, Inc. (MM)

HOUSTON, Texas, Nov. 12 /PRNewswire-FirstCall/ -- GeoResources, Inc., (NASDAQ:GEOI), today announced its operating results for the three month and nine month periods ended September 30, 2007. The Company announced net income, for the third quarter, of $1,412,000, or $.10 per share, on revenue of $8,635,000. Earnings before interest, taxes, depreciation, depletion and amortization (EBITDA) for the quarter was $4,100,000. The operating results represent a significant increase over the second quarter of 2007. (Logo: http://www.newscom.com/cgi-bin/prnh/20051114/CGM073LOGO ) Management advises interested parties that the Company consummated a merger ("Merger") in April 2007 and current period earnings and related information contained in this release are not entirely comparable to corresponding periods in 2006 for several reasons including: (1) the financial statements presented for corresponding periods in 2006, in accordance with generally accepted accounting principles, are those of the largest party to the Merger, Southern Bay Oil & Gas LP ("Southern Bay"), which was a private partnership and not a taxable entity, therefore no income tax expense was reported in 2006, (2) Southern Bay's operating results in 2006 included significant non-recurring income and (3) the combined entity incurred significant charges related to the Merger in 2007, which management believes are largely non-recurring. For further clarification, management also advises that the results announced herein for the periods in 2007 do not include the recently announced acquisition of producing oil and gas properties, which effectively doubles the size of the Company in terms of reserves, production and cash flows. Accordingly, interested parties should review (1) the SEC Form 10-QSB for the period ended September 30, 2007, which discusses the Merger and the recent acquisition, (2) the press releases issued on October 18, 2007 and October 23, 2007 related to the aforementioned acquisitions and operations, respectively and (3) all related SEC filings. Subject to the above comments, GeoResources is reporting the results of operations for the three month and nine month periods ended September 30, 2007 and corresponding periods in the prior year. For the third quarter 2007 net income was $1,412,000, or $.10 per share, on revenue of $8,635,000. Third quarter 2006 net income was $1,945,000 on revenue of $4,927,000. Income before income taxes for the quarter was $2,346,000 in 2007 versus $1,945,000 in 2006. EBITDA for the third quarter of 2007 was $4,100,000. EBITDA was $2,814,000 for the third quarter of 2006. Net income for the nine months ended September 30, 2007 was $949,000 or $0.08 per share, on revenue of $21,038,000. Year to date net income was reduced by significant charges related to the Merger totaling $2,904,000. As shown in the table below, such charges include the actual costs of the Merger and non-cash charges related to equity based compensation and net deferred income taxes. Reported net income for the nine months ended September 30, 2006 was $4,688,000, on revenue of $13,191,000. Income before income taxes for the first nine months of 2007 was $3,738,000 and $ 4,688,000 for the similar period in 2006. Without any adjustments for the non-recurring charges shown below, EBITDA for the first nine months of 2007 was $8,707,000. EBITDA was $7,035,000 for the similar period in 2006. Without certain non-recurring charges associated with the Merger, as listed in the table below, EBITDA for the first nine months of 2007 would have been $10,056,000. See the table below for a reconciliation of actual net income to EBITDA for the respective periods. In the third quarter of 2007, natural gas sales totaled 330 MMcf and were 136 MMcf in the third quarter of 2006. Oil sales for the third quarter of 2007 totaled 88 Mbbls and were 47 Mbbls in the third quarter of 2006. The average realized price of natural gas was $5.63 per Mcf for the third quarter of 2007, or 12% less than the third quarter of the prior year. The average realized price of oil was $64.08 per barrel or 9% more than the third quarter in the prior year. For the nine months ended September 30, 2007, natural gas sales totaled 883 MMcf or 89% greater than the 467 MMcf sold during the first nine months of 2006. Oil sales for the first nine months of 2007 increased 61% to 216 Mbbls from 134 Mbbls in the first nine months of 2006. The average realized price of natural gas was $6.26 per Mcf for the first nine months of 2007 or 11 % less than the first nine months of the prior year. The average realized price of oil was $58.40 per barrel or 5% more for the first nine months of 2007 than the first nine months in the prior year. The significant increases in production in the three and nine months periods ended September 30, 2007 over the same periods of 2006, are a direct result of the Merger, certain producing property acquisitions and drilling activities , offset by production declines in Gulf Coast wells. Frank A. Lodzinski, President and Chief Executive Officer of GeoResources, Inc., said, "We are pleased to report that our earnings for the third quarter of 2007 increased over the second quarter. Our earnings and cash flows from continuing operations have increased as a direct result of our Merger, acquisition and drilling activities. We expect increased future earnings as a result of our recently announced producing property acquisition, which closed in October 2007. Fiscal 2007 has been a transitional and defining year for the Company. We now produce over 3,400 BOE per day. Having built our reserve and cash flow foundation, we can now focus our attention to our capital expenditure program and further expansion of our acreage and drilling inventory. In addition, we will continue to search for accretive acquisitions and mergers. We believe our diversified approach will provide continued profitable growth for the Company. The following tables reconcile our EBITDA to our reported net income for the periods indicated: Three Months Ended September 30, 2007 2006 EBITDA (1) Net income $ 1,412,091 $ 1,945,051 Add back: Interest expense 25,096 135,958 Income tax (2) 934,376 - Depreciation, depletion and amortization 1,728,336 732,656 EBITDA $ 4,099,899 $ 2,813,665 Nine Months Ended September 30, 2007 2006 Net income $949,466 $ 4,687,652 Add back: Interest expense 380,423 174,074 Income tax (2) 2,788,075 - Depreciation, depletion and amortization 4,589,243 2,172,856 EBITDA $ 8,707,207 $ 7,034,582 (1) EBITDA is defined as earnings before interest, income taxes, depreciation, depletion 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 evaluation of our operating performance. (2) Includes deferred income tax expense of $381,217 and $2,138,885 recognized in the quarter and year to date periods, respectively. The effect of Southern Bay becoming a taxable entity gave rise to a nonrecurring deferred tax of $1,555,000, which, as required under generally accepted accounting principles, was charged to expense in the second quarter. Non recurring charges: During the nine months ended September 30, 2007, the Company recognized certain significant charges which it believes are largely non-recurring. The table lists such costs. Nine Months Ended September 30, 2007 Non-cash equity based compensation (1) $523,598 Professional fees 467,472 NASDAQ Global Market entry fee 100,000 Merger related proxy costs 86,937 Western Star Drilling (2) 96,114 Other 75,000 Subtotal 1,349,121 Income taxes (3) 1,555,000 Total $2,904,121 (1) Represents non-cash required charge to expense resulting from acceleration of certain vesting requirements associated with Southern Bay's equity incentive plan which was eliminated pursuant to the Merger, and stock bonuses issued to employees of GeoResources. (2) Costs associated with sold operations. (3) Represents a nonrecurring charge, attributable to Southern Bay becoming a taxable entity. Generally accepted accounting principles require that when an entity's tax status changes from nontaxable to taxable, the deferred taxes related to differences in the accounting basis of net assets and their tax basis be recognized in the period of that change in status. 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, currently focused in Texas, Louisiana, North Dakota, Montana and Colorado. In April 2007, the Company completed its Merger with Southern Bay and Chandler Energy, LLC. The Company conducts its exploration development and production operations through wholly owned subsidiaries. Activities in the Southern Region are conducted through Southern Bay Energy, LLC, located in Houston, Texas and Northern Region operations are conducted through G3 Energy LLC, located in Denver, Colorado. The Company also maintains a regional office in Williston, North Dakota. For more information, visit our website at http://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 the SEC reports of the Company, Readers are encouraged to read the December 31, 2006 Annual Report on Form 10-KSB, the March 31, 2007 and the June 30, 2007 quarterly reports on Form 10-QSB, and the proxy statement dated February 23, 2007 and any and all other relevant 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 (unaudited) September 30, December 31, 2007 2006 ASSETS Current assets: Cash $ 17,372,026 $6,216,822 Accounts receivable: Oil and gas revenues 15,505,694 7,201,902 Joint interest billings and other 5,543,145 2,294,237 Accounts receivable from affiliated partnerships 3,484,948 1,742,174 Notes receivable 860,000 - Prepaid expenses and other 466,734 352,515 Total current assets 43,232,547 17,807,650 Oil and gas properties, successful efforts method: Proved properties 83,561,738 34,204,118 Unproved properties 4,369,539 1,643,041 Office and other equipment 996,574 292,297 Land 96,462 96,462 89,024,313 36,235,918 Less accumulated depreciation, depletion and amortization (9,596,338) (5,007,095) Net property and equipment 79,427,975 31,228,823 Other assets: Equity in oil and gas limited partnerships 3,356,493 1,517,430 Notes receivable and other 1,323,174 113,123 $127,340,189 $ 50,667,026 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $5,944,391 $5,225,291 Accounts payable to affiliated partnerships 5,934,142 2,201,141 Revenues and royalties payable 16,798,617 7,347,702 Drilling advances 2,888,180 2,120,770 Accrued expenses payable 1,754,204 915,445 Commodity hedges 941,987 1,685,938 Total current liabilities 34,261,521 19,496,287 Long-term debt - 5,000,000 Deferred income taxes 3,725,420 32,535 Asset retirement obligations 5,198,656 2,478,205 Stockholders' equity: Common stock, par value $.01 per share; authorized 100,000,000 shares; issued and outstanding: 14,703,383 shares in 2007 and 4,858,000 shares in 2006 147,034 48,580 Additional paid-in capital 79,558,527 16,848,643 Accumulated other comprehensive income (935,647) (1,679,388) Retained earnings 5,384,678 8,442,164 Total stockholders' equity 84,154,592 23,659,999 $127,340,189 $ 50,667,026 GEORESOURCES, INC. and SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2007 2006 2007 2006 Revenue: Oil and gas revenues $7,512,616 $3,661,985 $18,110,424 $10,687,455 Partnership management fees 300,915 63,651 712,735 247,189 Property operating income 399,803 368,090 1,082,093 766,560 Gain (loss) on sale of property and equipment - 20,454 (15,218) 335,294 Partnership income (loss) 115,856 36,320 329,203 116,619 Interest and other 306,205 776,408 818,403 1,037,435 Total revenue 8,635,395 4,926,908 21,037,640 13,190,552 Expenses: Lease operating expense 2,367,829 1,018,179 5,683,099 2,892,956 Severance taxes 604,758 349,711 1,407,499 831,760 Re-engineering and workovers 301,354 152,003 734,426 330,477 Exploration - 52,287 - 483,808 General and administrative expense 1,258,361 729,709 4,505,619 1,982,844 Depreciation, depletion, and amortization 1,728,336 732,656 4,589,243 2,172,856 Hedge ineffectiveness 3,194 (188,646) (210) (365,875) Interest 25,096 135,958 380,423 174,074 Total expense 6,288,928 2,981,857 17,300,099 8,502,900 Income before income taxes 2,346,467 1,945,051 3,737,541 4,687,652 Income taxes: Current 553,159 - 649,190 - Deferred 381,217 - 2,138,885 - 934,376 - 2,788,075 - Net income $1,412,091 $1,945,051 $949,466 $4,687,652 Net income per share (basic and diluted) $ 0.10 $0.40 $0.08 $0.96 Weighted average shares outstanding (basic and diluted) 14,703,383 4,858,000 11,638,567 4,858,000 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 ext. 113, Web site: http://www.georesourcesinc.com/

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