GeoResources, Inc. Reports Fourth Quarter and Full Year 2008 Financial Results

For 2008 reports $13.5 million of net income on revenues of $94.7 million

Houston, Texas, March 25, 2009 – GeoResources, Inc., (NASDAQ:GEOI), today announced net income of $13.5 million or $0.86 per diluted common share on revenue of $94.7 million for the year ended December 31, 2008, versus net income of $3.1 million or $0.25 per diluted common share on revenue of $40.1 million for 2007.  GeoResources’ results include a non-cash impairment of the carrying value of certain oil and gas properties, required under generally accepted accounting principles, in the amount of $8.3 million, before tax ($5.2 million, after tax) which resulted from lower oil and gas prices prevailing at year-end 2008. 

The Company reported a fourth quarter 2008 net loss of $4.3 million or $0.26 per diluted common share on revenue of $18.9 million versus net income of $2.1 million or $0.14 per diluted common share on revenue of $19.1 million for the fourth quarter of  2007.  The fourth quarter loss was primarily due to the non-cash impairment discussed above and increased depletion and depreciation. The foregoing information is summarized below in tabular form (in thousands, except per share information):

For the year ended December 31, 2008, oil sales increased 90% to 743 Mbbls from 392 Mbbls for 2007, while natural gas sales totaled 2,962 MMcf or 80% greater than the 1,648 MMcf sold during 2007.  These totals reflect production increases resulting from acquisitions and drilling and development operations offset by divestitures and normal field declines.

For the fourth quarter of 2008, oil sales increased to 190 MBbls from 176 MBbls in the prior year’s period, an increase of 8%, while natural gas sales decreased to 711 MMcf from 766 MMcf, a decrease of 7%.  Production in the 4th quarter of 2008 reflected the sale of a number of properties acquired in 2007.  In 2008, consistent with the business strategy of high-grading its asset portfolio, the Company sold a number of fields which had sizable daily production rates, but limited upside potential and significant plugging and abandonment obligations. These properties produced approximately 316 BOPD and 742 MCFD at the time of their sale or approximately 40,000 BOE per quarter.  Proceeds from divestitures were used to fund capital expenditures and reduce debt.

For the year ended December 31, 2008, the average realized price of natural gas was $8.12 per Mcf or 31% greater than the prior year, while the average realized price of oil was $82.42 per barrel or 23% more than the prior year. The average realized price of natural gas was $5.91 per Mcf for the fourth quarter of 2008, 3% less than the fourth quarter of 2007, while the average realized price of oil for the fourth quarter of 2008 was $61.78 per barrel or 21% less than the fourth quarter of the prior year.  Production and price information is shown below in tabular form:

Earnings before interest, income taxes, depreciation, depletion and amortization, and exploration expense (“EBITDAX”) for 2008 increased 203% to approximately $53.0 million compared to $17.5 million for 2007.  For the fourth quarter of 2008, EBITDAX decreased 2% to approximately $8.6 million compared to $8.8 million for fourth quarter 2007. 

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

(1) EBITDAX is defined as earnings before interest, income taxes, depreciation, depletion and amortization, impairment of oil and gas properties and exploration expense.  It is specifically advised that 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.

RESERVES

Under the SEC reserve reporting guidelines using year-end prices, the Company's third-party engineering firm has estimated proved reserves at December 31, 2008 of 8.8 Million barrels of oil and 34.8 Billion Cubic Feet of gas and natural gas liquids for a total of 14.6 Million barrels of oil equivalent (“MMBOE”).  The reserves are approximately 60% oil and 40% gas and are about 80% proved developed.  Under the SEC guidelines, the discounted present value at 10% is approximately $150.6 million, before tax and $120.6 million after tax.

In addition, the Company has interests in two affiliated partnerships for which it is the general partner and operator.  Under the SEC reserve reporting guidelines using year-end prices, estimated proved partnership reserves, net to the Company’s interest at December 31, 2008, total 2.9 MMBOE with a discounted present value at 10% of approximately $30.3 million, before tax and $17.9 million after tax.  At December 31, 2008, the Company’s investment in such partnerships using the equity method of accounting, was $3.3 million.  

Comments

Mr. Frank Lodzinski, CEO and President, commented, “We have reported significant earnings and cash flows for the year ended December 31, 2008.  Our revenues and net income totaled $94.7 million and $13.5 million, respectively, both significantly exceeding prior year results.  As a result of non-cash impairments of oil and gas properties and incremental depletion and depreciation expense, we recognized a loss in the fourth quarter of $4.3 million. Like most in the industry, we have recognized certain impairments of oil and gas properties. However, our calculated impairments are small in relation to our peers.  Another significant and favorable difference from our peers is our debt level. While we have never been over-leveraged, we significantly reduced our debt during 2008 from $96.0 million at the beginning of the year to $40.0 million at year end.  Execution of our business strategy in 2008 has put us in a favorable position to effectively face the challenges of 2009 and hopefully, take advantage of attractive acquisition opportunities and reduced drilling costs.”    

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 the SEC reports of the Company, our Annual Report on Form 10-K for the year ended December 31, 2008, 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).

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