Houston, Texas October 18, 2007
– GeoResources, Inc., (Nasdaq:GEOI), today announced
that it has acquired all of the limited partner interest in
an affiliated partnership, from an undisclosed financial institution,
for $91.1 million. This acquisition effectively doubles the
reserves and production base of the Company and includes oil
and gas properties located in Louisiana, the Gulf Coast, South
Texas, the Permian Basin and the Black Warrior Basin. As of
October 1, 2007, the acquired proved reserves are estimated,
by the Company, at 16.3 Bcf and 4.9 MMBLS or 7.6 MMBOE and
current production from the properties is 5,194 Mcfd and 1,096
BOPD or 1,962 BOEPD. The Company was the general partner of
the affiliated partnership and operator of a majority of the
properties, and accordingly, no additional staffing is required
to operate the properties. The Company intends to dissolve
the partnership in the normal course of business. In addition,
the Company expects to divest certain existing and acquired
non-core properties.
In connection with the transaction, the Company paid approximately
$12.95 million to unwind certain commodity price hedges and,
in addition, the Company assumed certain natural gas hedges
with an estimated current unwind cost of approximately $4.8
million. The majority of those hedges apply to 2009 and the
Company will consider replacing those hedges. Further, in
order to attract its financing and maintain predictable cash
flows, the Company entered into new commodity price hedges,
for four years commencing January 1, 2008, for approximately
77% of projected production, from currently producing reserves
excluding expected divestitures. The Company entered into
fixed price swaps for oil and costless collars for natural
gas as follows:
The net cost of the oil & gas reserves acquired was approximately
$97.4 million and was funded with cash and borrowings of $96.0
million from an amendment and restatement of the Company’s
Senior Secured Revolving Credit Facility (“Facility”),
which was underwritten by Wachovia Capital Markets, LLC, as
sole lead arranger and sole book runner. The increased $200
million Facility, has an initial available borrowing base
of $110 million.
Frank A. Lodzinski, Chief Executive Officer of GeoResources,
said, “This acquisition is immediately accretive and
doubles the size of the Company in terms of reserves, production,
revenues and cash flow. Importantly, it can be operated without
additional staffing. Further, the acquisition has been financed
entirely with reasonable levels of senior secured debt under
our increased Facility, at favorable interest rates. We have
also entered into commodity price hedges to take advantage
of high oil prices and to negotiate favorable financing terms.
We expect to sell or trade certain properties to reduce debt,
streamline operations and to focus our personnel on the upside
in our portfolio and generate additional opportunities for
growth.”
“Fiscal 2007 has been truly a transitional and defining
year for the Company,” Lodzinski added. “We closed
a significant merger and two property acquisitions, expanded
our drilling inventory and implemented our drilling and development
programs - actions consistent with our business strategy.
Now, having built our reserve and cash flow foundation, we
can turn our attention to our capital expenditure program
and generation of additional drilling opportunities. We will
continue to search for accretive acquisitions and mergers.
We believe our diversified approach will allow the Company
to continue to grow profitably.”
About GeoResources, Inc.
On April 17, 2007, the Company completed its mergers with
Southern Bay Oil & Gas L.P. and Chandler Energy, LLC.
The management of Southern Bay and Chandler became the principal
management of the combined entity. Corporate headquarters
are located in Houston, Texas. 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 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, particularly its Form 10-KSB for the Fiscal
Year Ended December 31, 2006, for meaningful cautionary language
disclosure.
SOURCE GeoResources, Inc.
CONTACT: Cathy Kruse of GeoResources, Inc.,
+1-701-572-2020, ext. 113
cathyk@geoi.net
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