GeoResources, Inc. Reports Second Quarter and Six-Month Financial Results
Reports six-month earnings of $4.0 million and EBITDAX of $18.2 million. Also reports increased production and significant severance tax credits
Houston, Texas August 6, 2009 – GeoResources, Inc., (NASDAQ:GEOI), today announced its financial results for the three and six months ended June 30, 2009.
For the three months ended June 30, 2009, the Company reported total revenues of $19.3 million and net income of $3.5 million, or $0.22 per diluted common share. Oil production totaled 212 MBbls for the second quarter of 2009, an increase of 15% over the second quarter of 2008. Natural gas production totaled 1,087 MMcf in the second quarter of 2009, an increase of 51% over the comparable period in 2008. The production increases were a result of the Company’s acquisition and drilling activities; prior year production included fields that were sold as part of the Company’s divestiture strategy. The average realized price of oil, net of hedges, for the second quarter of 2009 was $59.28 per barrel compared to $97.66 per barrel in the second quarter of 2008, a decrease of 39%. The average realized price of natural gas, net of hedges, was $3.89 per Mcf for the second quarter of 2009, compared to $9.74 per Mcf or 60% less than the second quarter of 2008. For the second quarter of 2008, revenues totaled $28.2 million and net income was $7.8 million, or $0.50 per diluted common share.
For the first half of 2009, revenues totaled $33.8 million and net income was $4.0 million or $0.24 per diluted common share. Oil production totaled 389 MBbls, an increase of 1% over the 385 MBbls produced for the first half of 2008. Natural gas production totaled 1,752 MMcf in the first half of 2009, an increase of 15% over the comparable period in 2008. The production increases were a result of the Company’s acquisition and drilling activities; prior year production included fields that were sold as part of the Company’s divestiture strategy. The average realized price of oil, net of hedges, was $56.87 per barrel for the first half of 2009 or 36% less than the first half of the prior year. The average realized price of natural gas was $4.01 per Mcf or 54% less than the first half of 2008. For the first half of 2008, revenues totaled $52.2 million and net income was $12.0 million, or $0.79 per diluted common share.
Earnings before interest, income taxes, depreciation, depletion and amortization, and exploration expense and impairments (“EBITDAX”) totaled $12.0 million for the second quarter, 2009 compared to $17.7 million in the prior year’s similar quarter, representing a decrease of 32%. EBITDAX for the first six months of 2009 totaled $18.2 million compared to $30.0 million in the prior year’s first half, representing a decrease of 39%. The following table reconciles reported net income to EBITDAX for the periods indicated (in thousands, except per share information):
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Earnings before interest, income taxes, depreciation, depletion and amortization, and exploration expense and impairments. 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.
Severance Taxes
The reported earnings include the impacts of severance tax credits related to the Company’s Austin Chalk drilling program. During the second quarter of 2009, the Company received certain tax exemptions from the State of Texas. As a result, we qualify for significant refunds; future production from qualified wells will be exempt from severance taxes for up to ten years. The second quarter earnings reflect an amount of $599,000 shown as a reduction of severance tax expense and $1.3 million reported as partnership income representing our share of partnership tax refunds. In addition, the Company recorded an additional $2.5 million as a reduction to the acquisition price of recent property acquisitions closed in May.
Comments
Frank Lodzinski, CEO and President commented, “Our results for the second quarter are in line with our expectations and begin to reflect the earnings and cash flows of our continued drilling and development programs and significant acquisitions closed during May. We realized substantial net income and EBITDAX, for the second quarter, in the amounts of $3.5 million and $12.0 million, respectively. Despite divestitures, which are an important ingredient of our business strategy to high-grade our portfolio, production for both the three and six month periods ended June 30, 2009 increased over the prior year. The State of Texas severance tax exemptions are significant in that they will further enhance the economics of our drilling programs and result in future positive earnings impacts. Excluding the non-recurring portion of the severance tax refunds, our second quarter earnings and EBITDAX would have been $2.3 million and $10.0 million, respectively. We expect our future earnings to benefit from natural gas hedges, and lower per-unit lease operating expenses. The Company hedged a total of 3,420,000 Mmbtu of natural gas at $5.16 and $5.20 per Mmbtu over an 18 month period commencing July 1, 2009. In addition, lease operating costs are declining on a unit-of-production basis. This reduction not only reflects declines in costs of services and supplies but is also a direct result of our field re-engineering and development drilling activities. We will continue to focus on cash flow and our bottom line while we pursue our business plan.”
Lodzinski further commented, “On July 13, 2009, the Company increased its first secured credit facility to $250 million with a term extending to October 16, 2012 and a borrowing base of $135 million. The participating banks include, Wachovia Bank, Comerica Bank, BBVA Compass, U.S. Bank, Frost National Bank, Bank of Texas and Natixis. Our strong cash flows, working capital and liquidity, in our debt capacity, position us favorably to continue our growth.”
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/A for the year ended December 31, 2008 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).
Copyright (C) 2009, GeoResources, Inc . All right reserved.
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