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Houston, Texas November
12, 2007 – 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.
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:
(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.
(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 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).
SOURCE GeoResources, Inc.
CONTACT: Cathy Kruse of GeoResources, Inc.,
+1-701-572-2020, ext. 113
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