GeoResources, Inc. Reports Second Quarter and
 Six-Month Financial Results

Reports Significant Year-Over-Year Growth

Year to Date Earnings of $10.5 Million and EBITDAX of $35.6 million.

Houston, Texas August 5, 2010 – GeoResources, Inc., (NASDAQ:GEOI), today announced its financial and operating results for the three and six months ended June 30, 2010. The following tables summarize the results of operations as compared to similar periods in 2009.

 Three Months Ended June 30, 
(In thousands, except Earnings per share)
2010 2009
Total revenue $26,406 $19,861
Net income $4,443 $3,499
Earnings per share (basic) $0.23 $0.22
EBITDAX (See below)  $17,652 $12,429
 Six Months Ended June 30,
(In thousands, except Earnings per share) 
2010 2009
Total revenue $52,982 $34,426
Net income $10,517 $3,976
Earnings per share (basic) $0.53 $0.24
EBITDAX (See below) $35,570 $18,998

 

Percent Increase (Decrease) Three Months Ended 
June 30,
2010   2009
Gas Production (MMcf) 20% 1,300 1,087
Oil Production (MBbls) 20% 255 212
Barrel of oil equivalent (MBOE) 20% 472 393
Average Price Gas before Hedge Settlements (per Mcf) 16% $3.76 $3.24
Average Price Oil before Hedge Settlements (per Bbl) 35% $71.83 $53.40
Average Price Gas after Hedge Settlements (per Mcf) 24% $4.90 $3.95
Average Price Oil after Hedge Settlements (per Bbl) 19% $70.48 $59.28

 

Percent Increase (Decrease) Six Months Ended 
June 30,
2010   2009
Gas Production (MMcf) 47% 2,580 1,752
Oil Production (MBbls) 30% 504 389
Barrel of oil equivalent (MBOE) 37% 934 681
Average Price Gas before Hedge Settlements (per Mcf) 25% $4.29 $3.43
Average Price Oil before Hedge Settlements (per Bbl) 59% $73.01 $45.88
Average Price Gas after Hedge Settlements (per Mcf) 31% $5.25 $4.01
Average Price Oil after Hedge Settlements (per Bbl) 24% $70.55 $56.87

Our 2010 reported earnings are net of a $2.7 million non-cash charge for impairments. The majority of the non-cash charge was a direct result of natural gas price reductions.  Forward gas prices used in the calculation of impairments, declined by 16% over the next 18 months and oil prices declined 7% over the same time frame as compared to the year-end prices. 
EBITDAX (see definition below) increased 42% to approximately $17.7 million for the second quarter of 2010 compared to $12.4 million for the second quarter of 2009.  EBITDAX for the first six months of 2010 totaled $35.6 million compared to $19.0 million in the prior year’s first half, representing an increase of 87%. 

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

 Three Months Ended June 30, 
2010 2009
EBITDAX (1)
Net income $4 ,443 $3,499
Add back:
Interest expense 1,285 1,144
Income taxes:
   Current 912 202
   Deferred 1,973 2,014
Depreciation, depletion and amortization 5,962 4,725
Hedge and derivative contracts (78) 32
Non-cash compensation 273 397
Exploration and impairments 2,882 416
EBITDAX $17,652 $12,429

 

 Six Months Ended June 30, 
2010 2009
Net income $10,517 $3,976
Add back:
Interest expense 2,558 1,963
Income taxes :
   Current 1,865 (532)
   Deferred 4,797 3,108
Depreciation, depletion and amortization 12,313 9,193
Hedge and derivative contracts (320) 133
Non-cash compensation 494 661
Exploration and impairments 3,346 496
EBITDAX $35,570 $18,998

 

  1. As used herein, EBITDAX is calculated as earnings before interest, income taxes, depreciation, depletion and amortization, and exploration expense and further excludes non-cash compensation, 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.

See attached financial statements for additional details related to our results of operations, cash flows and financial position.

Comments

Frank A. Lodzinski, CEO and President, commented, “Our results for the second quarter and year-to-date periods ending June 30, 2010 reflect our significant year over year growth. Comparatively, we benefited from both increased production and from improved oil and gas prices. In addition, on unit-of-production basis, we have lowered our overall operating expenses by 18%.  Reduced expenses are a result of our re-engineering and development drilling activities.  We always focus on our costs but with service costs increasing in the industry, controlling and reducing expenses where feasible takes on additional importance. Our increased production was a direct result of our successful drilling programs in the Bakken Shale and Austin Chalk and strategic acquisitions we have made in these core areas.”

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 as amended by our 10-K/A for the year ended December 31, 2009 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)
June 30,   December 31,
2010 2009
ASSETS (unaudited)
Current assets:
Cash  $15,899  $12,660
Accounts receivable:
Oil and gas revenues 16,261 14,860
Joint interest billings and other 4,149 13,734
Affiliated partnerships 1,062 933
Notes receivable 120 120
Derivative financial instruments 4,703 764
Income taxes receivable 327 2,077
Prepaid expenses and other 2,659 2,297
Total current assets 45,180 47,445
Oil and gas properties, successful efforts method:
Proved properties 302,331 285,363
Unproved properties 19,314 10,281
Office and other equipment 956 828
Land 96 96
322,697 296,568
Less accumulated depreciation,
depletion and amortization		 (60,495) (48,182)
Net property and equipment 262,20 248,386
Equity in oil and gas limited partnerships 2,673 3,532
Derivative financial instruments 2,284 1,360
Deferred financing costs and other 3,819 3,574
 $316,158  $304,297

 

GEORESOURCES, INC and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
June 30, December 31,
2010 2009
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable  

$5,337

 

  

$6,452

Accounts payable to affiliated partnerships         

3,389

 

         

8,361

Revenue and royalties payable       

11,441

 

       

13,928

Drilling advances              

53

 

            

390

Accrued expenses         

1,862

 

         

1,574

Derivative financial instruments         

1,522

 

         

4,794

 

 

 
Total current liabilities       

23,604

 

       

35,499

 

 

 
Long-term debt       

69,000

 

       

69,000

 

 

 
Deferred income taxes       

24,522

 

       

15,778

 

 

 
Asset retirement obligations         

6,353

 

         

6,110

 

 

 
Derivative financial instruments            

804

 

         

3,233

Stockholders' equity:
Common stock, par value $0.01 per share;
authorized 100,000,000
shares issued and
outstanding:
19,723,916
in 2010 and		 197 197
19,705,362
in 2009
Additional paid-in capital 147,552 146,966
Accumulated other
comprehensive income		 2,807 (3,288)
Retained earnings 41,319 30,802
Total stockholders
equity		 191,875 174,677
 $316,158  $304,297

 

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,
2010 2009 2010 2009
Revenue:
Oil and gas revenues  $24,343  $16,829  $49,072  $29,129
Partnership management fees 140 398 299 696
Property operating
income		 393 456 784 914
Gain on sale
of property
and equipment		 -   89 145 1,488
Partnership income 488 1,455 1,342 1,460
Interest and other 1,042 634 1,340 739
Total revenue 26,406 19,861 52,982 34,426
Expenses:
Lease operating
expense		 5,193 4,417 10,217 8,807
Severance taxes 1,540 1,167 3,323 1,961
Re-engineering
and workovers		 255 315 508 1,296
Exploration expense 139 288 603 368
Impairment of oil
and gas properties		 2,743 128 2,743 128
General and
administrative expense		 2,039 1,930 3,858 4,025
Depreciation,
depletion
and amortization		 5,962 4,725 12,313 9,193
Hedge
ineffectiveness		                (61)                 26              (316) 75
(Gain) / Loss on
derivative contracts		 (17) 6 (4) 58
Interest 1,285 1,144 2,558 1,963
Total expense 19,078 14,146 35,803 27,874
Income before income taxes 7,328 5,715 17,179 6,552
Income tax expense (benefit):
Current 912 202 1,865 (532)
Deferred 1,973 2,014 4,797 3,108
2,885 2,216 6,662 2,576
Net income 4,443 3,499 10,517 3,976
Net income per share (basic) 0.23 0.22 0.53 0.24
Net income per share (diluted) 0.22 0.22 0.52 0.24
Weighted average shares outstanding:
Basic $19,723,916 $16,241,717 $19,716,722 $16,241,717
Diluted $20,113,189 $16,241,717 $20,073,598 $16,241,717

 

GEORESOURCES, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
Six Months Ended June 30,
Cash flows from operating activities: 2010 2009
Net income  $10,517  $3,976
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation, depletion
and amortization		              12,313                9,193
Proved property impairments                2,743                   128
Gain on sale of property
and equipment		                  (145)               (1,488)
Accretion of asset
retirement obligations		                   200                   177
Unrealized gain on
derivative contracts		                  (205)                  (119)
Amortization of loss on
canceled hedge contract		                      -                     243
Hedge ineffectiveness (gain) loss                  (316)                     75
Partnership income               (1,342)               (1,460)
Partnership distributions                2,201                1,284
Deferred income taxes                4,797                3,108
Non-cash compensation                   494                   661
Changes in assets and liabilities:
Decrease (increase) in
accounts receivable		                9,805               (7,070)
(Increase) decrease in prepaid
expense and other		                  (607)                1,077
Decrease in accounts
payable and accrued expense		               (8,623)               (5,855)
Net cash (used in) provided
by operating activities		              31,832                3,930
Cash flows from investing activities:
Proceeds from sale of
property and equipment		                   425                1,991
Additions to property and equipment,
net of cost recoveries
of $18,529,000 in 2010 and
none in 2009		             (29,110)             (70,218)
Net cash used in investing activities             (28,685)             (68,227)
Cash flows from financing activities:
Proceeds from stock options exercised                     92                      -  
Issuance of long-term debt                      -                58,000
Net cash provided by
financing activities		                     92              58,000
Net increase (decrease) in cash and cash equivalents                3,239               (6,297)
Cash and cash equivalents at beginning of period              12,660              13,967
Cash and cash equivalents at end of period  $15,899  $7,670
Supplementary information:
Interest paid  $2,025  $1,650
Income taxes paid  $115  $478

 

 

 
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