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 1st QUARTER 2006 EARNINGS
EPS DOUBLES ON 26% PRODUCTION INCREASE
Williston, ND, May 15, 2006 – GeoResources, Inc. (Nasdaq: GEOI) today reported first quarter 2006 net income of $527,688 or $0.14 per share on revenue of $2,172,523 compared to a 2005 first quarter net income of $273,355 or $0.07 per share on revenue of $1,855,185. Earnings before interest, taxes, depreciation, depletion and amortization (EBITDA) for the quarter was $811,394, a 57% increase from the same quarter of the prior year. 1
Oil and gas revenue during the first quarter was $1,646,149 generating gross profit of $1,018,633 versus revenue of $1,158,448 and gross profit of $721,664 for the same period in 2005. The improved results are attributable to a 26% increase in production and a 14% increase in the average oil and natural gas sales prices. GeoResources sold 33,500 barrels of oil equivalent (BOE) or 372 BOE per day during the first quarter 2006 compared to 26,519 BOE or 295 BOE per day in the first quarter 2005. The revenue and BOE increase was attributed to workovers performed in 2005 and new production from the Company’s 100% working interest in the Anderson 41-25 #3 well that began production in mid-January, 2006.
The Company reports that more workovers and remedial projects are in progress primarily targeted at returning shut-in wells to production. The largest project is returning nine small shut-in gas wells (9 gross, 9 net) in our Hammond Gas Field, Carter County, Montana to production on our 100% owned gathering and compression system during 2006.
GeoResources’ drilling subsidiary, Western Star Drilling Company, reported that drilling revenue during the first quarter was $518,246 generating gross profit of $43,911 for the first quarter of 2006 versus revenue of $203,753 and a loss of $86,153 for the same quarter in 2005. WSDC’s operations consisted of 46 operating days drilling three wells for other operators. Currently we have contracts for four wells, two for another operator and two for GeoResources.
Company President J. P. Vickers said, “We are very pleased to report an increase in production as a result of our successful work performed in 2005. We expect the recompletion work we are currently undertaking to add more gas production to our mix and these relatively low cost projects should payout quickly given to current price of natural gas. If commodity prices remain strong, our first quarter results should be the beginning of a very good year for GeoResources.”
As a result of a fire in the Company’s leonardite processing plant in the second quarter of 2005, production of finished leonardite products was suspended. Although insurance proceeds are available to rebuild the plant, the Company has not yet determined how it will do so, and sales have been of only a relatively small amount of leonardite mined since the fire. As a result, Leonardite revenue decreased 98% to $8,000 in the first quarter 2006 compared to $493,000 in the same period in 2005, resulting in a decrease in gross profit from leonardite operations of $57,000 for the first quarter of 2005 to a gross loss of $90,000 in the first quarter of 2006.
1) EBITDA 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 asfollows:
| | Quarter Ended |
| | |
| | March 31, 2006 | | March 31, 2005 |
| | | | |
Net Income | $ 527,688 | | $ 273,355 |
Add back: | | |
|
Interest expense | 12,945 |
| 24,247 |
Income tax | 55,000 |
| 31,000 |
Depreciation and amortization | 215,761 |
| 189,092 |
EBITDA | $ 811,394 | | $ 517,694 |
| | | | |
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, 2005, for meaningful cautionary language disclosure.
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CONSOLIDATED BALANCE SHEETS
(Unaudited)
| | March 31, | | December 31, |
| | 2006 | | 2005 |
ASSETS | | | |
CURRENT ASSETS: | | | |
Cash and equivalents | $ 1,525,598 | | $ 1,669,882 |
Trade receivables, net | 1,024,909 | | 1,109,202 |
Inventories | 270,058 | | 236,081 |
Prepaid expenses | 163,532 | | 38,738 |
Total current assets | 2,984,097 | | 3,053,903 |
PROPERTY, PLANT AND EQUIPMENT, at cost: |
| |
|
Oil and gas properties, using the |
| |
|
full cost method of accounting: |
| |
|
Properties being amortized | 28,251,086 | | 27,842,549 |
Properties not subject to amortization | 149,511 | | 202,257 |
Drilling rig and equipment | 1,634,437 | | 1,607,094 |
Leonardite plant and equipment | 882,092 | | 854,789 |
Other | 797,945 | | 790,100 |
| | 31,715,071 | | 31,296,789 |
Less accumulated depreciation, depletion |
| |
|
amortization and impairment | (19,878,836) | | (19,650,972) |
Net property, plant and equipment | 11,836,235 | | 11,645,817 |
TOTAL ASSETS | $ 14,820,332 | | $ 14,699,720 |
| |
| |
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
| |
|
CURRENT LIABILITIES: |
| |
|
Accounts payable | $ 1,001,678 | | $ 1,152,532 |
Accrued expenses | 224,741 | | 293,505 |
Income taxes payable | 82,000 | | 64,000 |
Current portions of capital lease obligations | 41,549 | | 41,549 |
Current maturities of long-term debt | 446,947 | | 523,941 |
Total current liabilities | 1,796,915 | | 2,075,527 |
CAPITAL LEASE OBLIGATIONS, less current portions | 3,152 | | 13,298 |
LONG-TERM DEBT, less current maturities | -- | | 177,638 |
ASSET RETIREMENT OBLIGATION | 2,352,390 | | 2,324,690 |
DEFERRED INCOME TAXES | 780,000 | | 753,000 |
Total liabilities | 4,932,457 | | 5,344,153 |
STOCKHOLDERS' EQUITY: |
| |
|
Common stock, par value $.01 per share; |
| |
|
authorized 10,000,000 shares; |
| |
|
issued and outstanding, 3,767,269 |
| |
|
and 3,765,269 shares, respectively | 37,673 | | 37,653 |
Additional paid-in capital | 396,481 | | 391,881 |
Retained earnings | 9,453,721 | | 8,926,033 |
Total stockholders' equity | 9,887,875 | | 9,355,567 |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ 14,820,332 | | $ 14,699,720 |
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| |
|
| |
| |
|
GEORESOURCES, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| | Three Months Ended March 31, |
| |
| | 2006 | | 2005 |
OPERATING REVENUES: |
| |
|
Oil and gas sales | $ 1,646,149 | | $ 1,158,448 |
Leonardite sales | 8,128 | | 492,984 |
Drilling revenue | 518,246 | | 203,753 |
| |
| |
|
| | 2,172,523 | | 1,855,185 |
| |
| |
|
OPERATING COSTS AND EXPENSES: |
| |
|
Oil and gas production | 627,516 | | 436,784 |
Leonardite operations | 98,188 | | 435,975 |
Drilling costs | 474,335 | | 289,906 |
Depreciation and depletion | 215,761 | | 189,092 |
Selling, general and administrative | 170,801 | | 178,244 |
| |
| |
|
| | 1,586,601 | | 1,530,001 |
| |
| |
|
Operating income | 585,922 | | 325,184 |
| |
| |
|
OTHER INCOME (EXPENSE): |
| |
|
Interest expense | (12,945) | | (24,247) |
Interest income | 4,321 | | 1,143 |
Other income, net | 5,390 | | 2,275 |
|
| |
|
| | (3,234) | | (20,829) |
| |
| |
|
Income before income taxes | 582,688 | | 304,355 |
| |
| |
|
Income tax expense | (55,000) | | (31,000) |
| |
| |
|
Net income | $ 527,688 | | $ 273,355 |
| |
| |
|
EARNINGS PER SHARE:
|
| |
|
| |
| |
|
Net income, basic and diluted | $ .14 | | $ .07 |
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