SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
__X__ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the Quarter ended March 31, 2000.
_____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the transition period from _______ to _______.
Commission File Number - 0-8041
GeoResources, Inc.
(Exact name of Registrant as specified in its charter)
Colorado 84-0505444
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1407 West Dakota Parkway, Suite 1-B, Williston, North Dakota 58801
(Address of Principal executive offices) (Zip Code)
(Registrant's telephone number including area code) (701) 572-2020
________________________________________
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes __X__ No _____
________________________________________
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at April 27, 2000
Common Stock 3,967,352 shares
(par value $.01 per share)
GEORESOURCES, INC.
INDEX
PAGE
NUMBER
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets 3
(March 31, 2000 and December 31, 1999)
Consolidated Statements of Operations 4
(Three months ended March 31, 2000 and 1999)
Consolidated Statements of Cash Flows 5
(Three months ended March 31, 2000 and 1999)
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
Item 3. Quantitative and Qualitative Disclosure about Market Risks 10
PART II. OTHER INFORMATION 10
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
GEORESOURCES, INC., AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
March 31,
2000 December 31,
(unaudited) 1999
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 517,937 $ 423,361
Trade receivables, net 1,063,319 991,153
Inventories 301,665 297,029
Prepaid expenses 14,428 17,363
Total current assets 1,897,349 1,728,906
PROPERTY, PLANT AND EQUIPMENT, at cost:
Oil and gas properties, using the
full cost method of accounting:
Properties being amortized 19,787,685 19,664,222
Properties not subject to amortization 145,610 143,413
Leonardite plant and equipment 3,222,675 3,206,217
Other 721,625 709,443
23,877,595 23,723,295
Less accumulated depreciation, depletion
amortization and impairment (18,433,302) (18,271,169)
Net property, plant and equipment 5,444,293 5,452,126
OTHER ASSETS:
Mortgage loans receivable, related party 103,321 103,321
Other 43,921 44,487
Total other assets 147,242 147,808
TOTAL ASSETS $ 7,488,884 $ 7,328,840
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 620,576 $ 747,557
Current maturities of long-term debt 264,688 175,000
Accrued expenses 139,209 167,800
Total current liabilities 1,024,473 1,090,357
LONG-TERM DEBT, less current maturities 1,476,572 1,610,008
DEFERRED INCOME TAXES 200,000 166,000
Total liabilities 2,701,045 2,866,365
STOCKHOLDERS' EQUITY:
Common stock, par value $.01 per share;
authorized 10,000,000 shares;
issued and outstanding, 3,990,352
and 4,005,352 shares, at March 31,
2000 and December 31, 1999 39,904 40,054
Additional paid-in capital 759,001 776,259
Retained earnings 3,988,934 3,646,162
Total stockholders' equity 4,787,839 4,462,475
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 7,488,884 $ 7,328,840
See Notes to Consolidated Financial Statements.
GEORESOURCES, INC., AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
March 31,
2000 1999
OPERATING REVENUES:
Oil and gas sales $ 1,114,298 $ 333,722
Leonardite sales 126,920 95,133
1,241,218 428,855
OPERATING COSTS AND EXPENSES:
Oil and gas production 433,667 199,230
Cost of leonardite sold 136,173 125,396
Depreciation and depletion 162,132 145,367
Selling, general and administrative 100,813 72,247
832,785 542,240
Operating income (loss) 408,433 (113,385)
OTHER INCOME (EXPENSE):
Interest expense (41,457) (40,534)
Interest income 4,471 3,048
Other income, net 5,325 7,825
(31,661) (29,661)
Income (loss) before income taxes 376,772 (143,046)
Income tax (expense) benefit (34,000) 10,000
Net income (loss) $ 342,772 $ (133,046)
EARNINGS PER SHARE:
Net income (loss),
basic and diluted $ .09 $ (.03)
See Notes to Consolidated Financial Statements.
GEORESOURCES, INC., AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 342,772 $ (133,046)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and depletion 162,132 145,367
Deferred income taxes (benefit) 34,000 (10,000)
Other 566 (610)
Changes in assets and liabilities:
Decrease (increase) in:
Trade receivables (72,166) 65,031
Inventories (4,636) 28,607
Prepaid expenses and other 2,935 (918)
Investments -- (106,975)
Increase (decrease) in:
Accounts payable (24,480) 108,707
Accrued expenses (28,591) (8,897)
Net cash provided by
operating activities 412,532 87,266
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (256,800) (50,614)
Net cash used in investing activities (256,800) (50,614)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings -- 100,000
Principal payments on long-term debt (43,748) (91,749)
Purchase of treasury stock (17,408) --
Net cash provided by (used in)
financing activities (61,156) 8,251
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS 94,576 44,903
CASH AND EQUIVALENTS, beginning of period 423,361 40,673
CASH AND EQUIVALENTS, end of period $ 517,937 $ 85,576
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for:
Interest $ 41,457 $ 40,534
Income taxes -- 50
See Notes to Consolidated Financial Statements.
GEORESOURCES, INC., AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. In our opinion, the accompanying unaudited financial statements
contain all adjustments (consisting of only normal recurring accruals)
necessary to present fairly our financial position as of March 31,
2000, and the results of operations and cash flows for the three month
periods ended March 31, 2000 and 1999.
The results of operations for the three-month period ended March 31,
2000, are not necessarily indicative of the results to be expected for
the full fiscal year.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. Therefore, these
financial statements should be read in connection with the audited
consolidated financial statements and the notes included in our Annual
Report on Form 10-K for the year ended December 31, 1999.
2. Certain accounts in the prior-year financial statements have been
reclassified for comparative purposes to conform with the presentation
in the current-year financial statements.
3. We assess performance and allocate resources based upon our products
and the nature of our production processes, which consist principally of
oil and gas exploration and production and the mining and processing of
leonardite. There are no sales or other transactions between these two
operating segments and all operations are conducted within the United
States. Certain corporate costs, assets and capital expenditures that are
considered to benefit the entire organization, are not allocated to our
operating segments. Interest income, interest expense and income taxes are
also not allocated to operating segments. There are no significant
accounting differences between internal segment reporting and consolidated
external reporting.
Presented below are our identifiable net assets as of March 31, 2000
and December 31, 1999:
2000 1999
Oil and gas $ 5,000,114 $ 4,894,495
Leonardite 1,369,854 1,417,100
General corporate activities 1,118,916 1,017,245
$ 7,488,884 $ 7,328,840
Presented below is information concerning our operating segments for
the quarters ended March 31, 2000 and 1999:
2000 1999
Revenue:
Oil and gas $ 1,114,298 $ 333,722
Leonardite 126,920 95,133
$ 1,241,218 $ 428,855
Income (loss) before income taxes:
Oil and gas $ 548,293 $ 18,354
Leonardite (38,902) (59,355)
General corporate activities (100,958) (72,384)
Other income and expenses (31,661) (29,661)
$ 376,772 $ (143,046)
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
This discussion and analysis of financial condition and results of
operations, and other sections of this report, contain forward-looking
statements within the meaning of the Private Securities Litigation Reform
Act of 1995, that are based on management's beliefs, assumptions, current
expectations, estimates and projections about the oil, gas and leonardite
industry, the economy and about us. Words such as "may," "will," "expect,"
"anticipate," "estimate" or "continue," or comparable words are intended to
identify forward-looking statements. These statements are not guarantees
of future performance and involve risks, uncertainties and assumptions that
are difficult to predict with regard to timing, extent, likelihood and
degree of occurrence. Therefore, our actual results and outcomes may
materially differ from what may be expressed or forecasted in our forward-
looking statements. Furthermore, we undertake no obligation to update,
amend or clarify forward-looking statements; whether as a result of new
information, future events or otherwise.
The following discussion should be read in conjunction with our
consolidated financial statements and related notes included elsewhere in
this report. Important factors that could cause actual results to differ
materially from the forward-looking statements include, but are not limited
to, changes in production volumes; worldwide supply and demand which affect
commodity prices for oil; the timing and extent of our success in
discovering, acquiring, developing and producing oil, natural gas and
leonardite reserves; risks inherent in the drilling and operation of oil
and natural gas wells and the mining and processing of leonardite products;
future production and development costs; the effect of existing and future
laws, governmental regulations and the political and economic climate of
the United States; and conditions in the capital markets.
We caution the reader that a number of important factors discussed
herein, and in other reports filed with the Securities and Exchange
Commission, particularly the Annual Report on Form 10-K for the Fiscal Year
Ended December 31, 1999, could affect our actual results and cause actual
results to differ materially from those discussed in forward-looking
statements.
Results of Operations - Three Months Ended March 31, 2000, compared to
Three Months Ended March 31, 1999
Information concerning our oil and gas operations for the three
months ended March 31, 2000, is set forth in the table below:
Oil and Gas Operations
Percent Increase
Three Months Ended (Decrease) from
March 31, 2000 1999 Period
Oil and gas production
sold (BOE) 43,566 12%
Average price per BOE $ 25.58 198%
Oil and gas revenue $ 1,114,298 234%
Production costs $ 433,667 118%
Average production cost $ 9.95 94%
per BOE
Oil and gas production sold during the first quarter 2000 increased
by 4,700 barrels of oil equivalent (BOE) or 12% compared to the same
quarter ended March 31, 1999. This increase in the volume of oil sold was
due to having essentially all of our wells in production during the first
quarter 2000 compared to having about 35 marginal wells "shut in" during the
first quarter 1999. In the first quarter of 1999, we had marginal wells
shut-in in order to control production costs in the face of drastically lower
oil prices that existed in that period.
Oil and gas revenue increased $781,000 or 234%. The revenue
increase was due primarily to a $16.99 increase or 198% in the average oil
price from $8.59 in the first quarter 1999 to $25.58 in the first quarter
2000. Revenue was further enhanced by the 12% higher volume of oil sold.
Oil and gas production costs increased $234,000 or 118% due to
several factors. The first of these is the costs associated with operating
the 35 additional wells, as discussed above. In addition, our production
costs are stated through the point of sale and therefore include production
taxes which increased proportionately with revenue. Lastly, as oil prices,
and hence cash flow, continued to increase, we dedicated more funds and
efforts to repairs and maintenance of existing wells and facilities. Due to
the foregoing factors, production costs on a per-equivalent-barrel basis for
the first quarter of 2000 increased $4.82 or 94% to $9.95 from $5.13 for the
first quarter 1999.
Readers should be advised that the revenue and cost comparisons
between the first quarter 2000 to the first quarter 1999 are significantly
skewed due to diametrically opposed oil price environments. The 1999 period
was one of the lowest quarterly oil prices in many years, and the 2000
period was the highest. We do not believe either quarter represents a
stable mid-point, but does show the significant impact that widely fluctuating
oil prices has on our operations and financial performance.
Information concerning our leonardite operations for the three months
ended March 31, 2000, is set forth in the table below:
Leonardite Operations
Percent Increase
Three Months Ended (Decrease) from
March 31, 2000 1999 Period
Leonardite production
sold (tons) 1,516 29%
Average revenue per ton $ 83.72 4%
Leonardite revenue $ 126,920 33%
Cost of leonardite sold $ 136,173 9%
Average production cost $ 89.82 (16%)
per ton
Leonardite revenues increased $32,000 or 33% due to a 337 ton or 29%
increase in the number of tons sold and a 4% increase in average revenue
per ton. The higher demand for our leonardite products, we believe, is the
result of a gradual return in drilling activity compared to the
historically low levels of oil and gas drilling that existed in the first
quarter of 1999. The 4% increase in average revenue per ton was within the
normal range for sales of mostly basic products, which have lower selling
prices and processing costs. Cost of leonardite sold increased $11,000 or
9% due to the 29% increase in production; however, costs did not increase
as much as production, because the fixed costs remained relatively equal
between the first quarter 2000 and 1999. Average production costs per ton
decreased $16.54 or 16% due to there being little effect of higher production
volumes on the fixed costs as described above. Although leonardite operations
did not quite cash flow in the first quarter 2000, they were substantially
closer than last year's levels and we believe as domestic drilling increases in
response to higher oil prices, leonardite operations should reach positive
cash flow levels.
Consolidated Analysis
Total operating revenue increased $812,000 or 189% due principally to
the increase in the oil prices, previously discussed. Total operating expenses
increased $291,000 or 54% primarily because of the increased oil and gas
expenses discussed above. As a result of higher revenues, we achieved
operating income of $408,000 compared to operating loss of $113,000 for the
same period in 1999. After provisions for non-operating expenses and
income taxes, we achieved a net income for the first quarter 2000 of
$343,000 or $.09 per share compared to the first quarter 1999 net loss of
$133,000 or $.03 per share.
Liquidity and Capital Resources
At March 31, 2000, we had working capital of $873,000 compared to
working capital of $639,000 at December 31, 1999. Our current ratio was
1.85 to 1 at March 31, 2000, compared to 1.59 to 1 at year-end 1999.
Net cash provided by operating activities was $413,000 for the
quarter ended March 31, 2000, compared to $87,000 for the same period in
1999. Cash was utilized to make payments of $257,000 for additions to
property, plant and equipment, $44,000 for payment on long-term debt and
$17,000 for stock repurchases.
We believe our future cash requirements can be met by cash flows
from operations and, if necessary, borrowings on our existing $3,000,000
line-of-credit. Future cash requirements might also be provided by
possible forward sales of oil reserves or additional debt or equity
financing.
ITEM 3. Quantitative and Qualitative Disclosure about Market Risks
Because we qualify as a small business issuer, disclosure regarding
this item is not required.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
On May 12, 1989, we filed an action in Burleigh County District
Court, North Dakota, against MDU Resources Group, Inc., a Delaware
corporation, and Williston Basin Interstate Pipeline Company, a Delaware
corporation. The complaint related to, among other things, breaches of a
take or pay natural gas contract and attempts by the defendants to coerce
us into modifying the contract. The defendants answered the complaint on
June 1, 1989. Afterwards, no further materials were filed with the court,
but we believed that the case remained pending. We contacted the attorney
who filed the action to assess the status and request further prosecution
of the case. After several months of inaction regarding the case, we
contacted the court in September 1996 and were informed by the court that
the case had been dismissed in 1991. On January 15, 1997, we refiled our
action against MDU Resources Group, Inc. We cannot predict the outcome of
this action, although we intend to pursue its available remedies.
Other than the foregoing legal proceeding, we are not a party, nor
is any of our property subject to, any pending material legal proceedings.
We know of no legal proceedings contemplated or threatened against us.
Item 6. Exhibits and Reports on Form 8-K.
(a) We incorporate, by reference, our exhibits listed in Item 14(c) of
our Annual Report on Form 10K for the fiscal year ended December 31, 1999. A
financial data schedule (Exhibit 27 is attached hereto.)
(b) No reports on Form 8-K were filed by us during our fiscal quarter
ended March 31, 2000.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
GEORESOURCES, INC.
May 10, 2000
/S/ J. P. Vickers
J. P. Vickers
Chief Executive Officer
Chief Financial Officer