NEWS RELEASE
FOR IMMEDIATE RELEASE
For:
GeoResources, Inc.
Contact:
Cathy Kruse
P. O. Box 1505
Telephone:
(701) 572-2020
Williston, ND 58802
ir@geoi.net
GEORESOURCES, INC. REPORTS SECOND QUARTER AND
SIX-MONTH RESULTS
Williston, ND August 12, 2005 – GeoResources, Inc., (Nasdaq: GEOI), today reported second quarter 2005 net income of $848,044, or $0.23 per share, on revenue of $1,853,399, compared to a second quarter 2004 net income of $233,656, or $0.06 per share, on revenue of $1,634,012. Earnings before interest, taxes, depreciation, depletion and amortization (EBITDA) for the second quarter of 2005 were $1,170,071, compared to $482,997 for the second quarter of 2004. 1
First-half 2005 net income was $1,121,399, or $0.30 per share, on revenue of $3,708,584, versus net income of $317,459, or $0.09 per share, on revenue of $2,785,573 in the first half of 2004. EBITDA for the first half 2005 was $1,687,765, compared to $748,053 the first half 2004. Higher commodity prices, which averaged $44.32 per barrel of oil equivalent (BOE) for the first half of the year, were the primary driver of the improved results.
GeoResources sold a total of 29,323 BOE, or 322 BOE per day, during the second quarter 2005, compared to 30,707 BOE, or 337 BOE per day, in the second quarter 2004.
The company received substantially higher average oil prices resulting in an increase in oil and gas sales of $296,000, or 29% for the quarter, and $558,000, or 29%, for the six-months ended June 30, 2005, compared to the same periods in 2004.
Leonardite sales generated $279,796 of revenue for the quarter and $772,780 for the first half of the year; however, the Leonardite business segment generated only $7,645 and $64,654 of gross margin for the three-month and six-month periods. For the quarter ended June 30, 2005, the Company recognized a Leonardite related gain of $497,743 consisting of an insurance claim receivable of $735,374 less associated costs of $23,487 and $213,144, the net book value of the facility before the fire. As previously announced, the Company is evaluating strategic alternatives for its Leonardite assets following a fire on May 17, 2005 that significantly damaged the facility.
GeoResources’ subsidiary, Western Star Drilling Company (WSDC), drilled two wells for third parties during the second quarter of 2005, generating drilling revenue of $256,890 and gross margin of $9,860 for the quarter. For the first six months of 2005 WSDC drilled four third party wells, generating $460,643 of revenue and a negative gross margin of $76,293. Repairs and maintenance on the rig during the first quarter produced the negative gross margin, which should be minimized as the rig utilization increases during the remainder of the year. WSDC has three contracts to drill four third party wells during the next two months and one contract to drill two wells for GeoResources. Before year-end, the Company plans to drill the Kramer prospect and a development location in the Leonard Field, both located in Bottineau County, North Dakota. The Company owns a 100% worki ng interest in each of these projects.
J.P. Vickers, President of GeoResources, said, “Activity in the Williston Basin is accelerating significantly and we expect improved results in our drilling operations as our rig utilization increases. We also expect the water injection initiated in the Landa West Madison Unit during the second quarter will increase reserves and production from that field. With the two additional wells we plan to drill before year-end we are seeking to stabilize our production to take advantage of current oil prices.”
1EBITDA is defined as earnings before interest, income taxes, depreciation 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 evaluating us. Our measure of EBITDA may not be the same as similar measures described by other companies. EBITDA is calculated as follows:
| | Quarter Ended | | Quarter Ended |
| | June 30, 2005 | | June 30, 2004 |
| | | | |
Net income | $ 848,044 | | $ 233,656 |
Add back | | | |
Interest expense | 23,459 | | 20,231 |
Income tax | 98,000 | | 23,000 |
Depreciation and amortization | 200,568 | | 206,110 |
EBITDA | $ 1,170,071 | | $ 482,997 |
| | | | |
| | | | |
| | Six Months Ended | | Six Months Ended |
| | June 30, 2005 | | June 30, 2004 |
| | | | |
Net Income. | $ 1,121,399 | | $ 317,459 |
Add back: | | | |
Interest expense | 47,706 | | 38,626 |
Income tax | 129,000 | | 29,000 |
Depreciation and amortization | 389,660 | | 362,968 |
EBITDA | $ 1,687,765 | | $ 748,053 |
| | | | |
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. In addition, 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, 2004, for meaningful cautionary language disclosure.
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PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
GEORESOURCES, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
| | June 30, | | December 31, |
| | 2005 | | 2004 |
ASSETS | | | |
CURRENT ASSETS: | | | |
Cash and equivalents | $ 923,414 | | $ 715,551 |
Trade receivables, net | 742,416 | | 1,030,716 |
Insurance claim receivable | 735,374 | | -- |
Inventories | 231,726 | | 235,405 |
Prepaid expenses | 116,869 | | 65,762 |
Total current assets | 2,749,799 | | 2,047,434 |
PROPERTY, PLANT AND EQUIPMENT, at cost: |
| |
|
Oil and gas properties, using the |
| |
|
full cost method of accounting: |
| |
|
Properties being amortized | 26,441,929 | | 25,997,466 |
Properties not subject to amortization | 215,089 | | 213,921 |
Drilling rig and equipment | 1,558,953 | | 1,533,838 |
Leonardite plant and equipment | 828,213 | | 3,284,466 |
Other | 753,009 | | 756,535 |
| | 29,797,193 | | 31,786,226 |
Less accumulated depreciation, depletion |
| |
|
amortization and impairment | (19,199,000) | | (21,113,489) |
Net property, plant and equipment | 10,598,193 | | 10,672,737 |
TOTAL ASSETS | $ 13,347,992 | | $ 12,720,171 |
| |
| |
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
| |
|
CURRENT LIABILITIES: |
| |
|
Accounts payable | $ 756,476 | | $ 996,624 |
Accrued expenses | 428,134 | | 382,693 |
Current portions of capital lease obligations | 49,888 | | 64,286 |
Current maturities of long-term debt | 527,057 | | 518,750 |
Total current liabilities | 1,761,555 | | 1,962,353 |
CAPITAL LEASE OBLIGATIONS, less current portions | 35,632 | | 54,847 |
LONG-TERM DEBT, less current maturities | 821,354 | | 1,205,729 |
ASSET RETIREMENT OBLIGATION | 1,939,080 | | 1,893,510 |
DEFERRED INCOME TAXES | 580,000 | | 524,000 |
Total liabilities | 5,137,621 | | 5,640,439 |
STOCKHOLDERS' EQUITY: |
| |
|
Common stock, par value $.01 per share; |
| |
|
authorized 10,000,000 shares; |
| |
|
issued and outstanding 3,727,977 |
| |
|
and 3,723,977 shares, respectively | 37,280 | | 37,240 |
Additional paid-in capital | 305,132 | | 295,932 |
Retained earnings | 7,867,959 | | 6,746,560 |
Total stockholders' equity | 8,210,371 | | 7,079,732 |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ 13,347,992 | | $ 12,720,171 |
| |
| |
|
See Notes to Consolidated Financial Statements. |
| |
|
GEORESOURCES, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| |
| | 2005 | | 2004 | | 2005 | | 2004 |
OPERATING REVENUES: | | | | | | | |
Oil and gas sales | $ 1,316,713 | | $ 1,020,635 | | $ 2,475,161 | | $ 1,916,960 |
Leonardite sales | 279,796 | | 295,296 | | 772,780 | | 550,532 |
Drilling revenue | 256,890 | | 318,081 | | 460,643 | | 318,081 |
| | | | | |
| |
|
| | 1,853,399 | | 1,634,012 | | 3,708,584 | | 2,785,573 |
| | | |
| |
| |
|
OPERATING COSTS AND EXPENSES: | | |
| |
| |
|
Oil and gas production | 507,258 | | 403,256 | | 944,042 | | 863,740 |
Cost of leonardite sold | 272,151 | | 245,297 | | 708,126 | | 503,431 |
Drilling costs | 247,030 | | 316,898 | | 536,936 | | 365,053 |
Depreciation and depletion | 200,568 | | 206,110 | | 389,660 | | 362,968 |
Selling, general and administrative | 170,003 | | 200,366 | | 348,247 | | 325,354 |
| | | | | |
| |
|
| | 1,397,010 | | 1,371,927 | | 2,927,011 | | 2,420,546 |
| | | | | |
| |
|
Operating income | 456,389 | | 262,085 | | 781,573 | | 365,027 |
| | | |
| |
| |
|
OTHER INCOME (EXPENSE): | | |
| |
| |
|
Interest expense | (23,459) | | (20,231) | | (47,706) | | (38,626) |
Interest income | 10,421 | | 9,852 | | 11,564 | | 10,158 |
Gain on involuntary conversion of Leonardite facility | 497,743 | | -- | | 497,743 | | -- |
Other income, net | 4,950 | | 4,950 | | 7,225 | | 9,900 |
| | | | |
| |
|
| | 489,655 | | (5,429) | | 468,826 | | (18,568) |
| | | | | |
| |
|
Income before income taxes | 946,044 | | 256,656 | | 1,250,399 | | 346,459 |
| | | | | |
| |
|
Income tax expense | (98,000) | | (23,000) | | (129,000) | | (29,000) |
| | | | | | | | |
Net income | $ 848,044 | | $ 233,656 | | $ 1,121,399 | | $ 317,459 |
| | | | | | | | |
EARNINGS PER SHARE:
| | | | | | | |
| | | | | | | | |
Basic | $ .23 | | $ .06 | | $ .30 | | $ .09 |
| | | | | | | | |
Diluted | $ .22 | | $ .06 | | $ .29 | | $ .09 |
| | | | | | | | |
| |
See Notes to Consolidated Financial Statements. |
