SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 2001.
( ) 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 small business issuer 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, ND 58801
(Address of principal executive offices)
Issuer's telephone number: (701) 572-2020
________________________________________
CHECK WHETHER THE ISSUER (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY
SECTION 13 OR 15(d) OF THE EXCHANGE ACT DURING THE PAST 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 _______.
________________________________________
State the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at October 15, 2001
Common Stock, par value $.01 per share 3,804,452 shares
____________________________________________________________
GEORESOURCES, INC.
INDEX
PAGE
NUMBER
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets 3
(September 30, 2001, and December 31, 2000)
Consolidated Statements of Operations 4
(Three months ended September 30, 2001, and 2000
and nine months ended September 30, 2001, and 2000)
Consolidated Statements of Cash Flows 5
(Nine months ended September 30, 2001, and 2000)
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II. OTHER INFORMATION 10
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
GEORESOURCES, INC., AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, December 31,
2001 2000
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 351,111 $ 315,191
Trade receivables, net 794,240 923,173
Inventories 188,737 248,505
Prepaid expenses 44,827 15,659
Total current assets 1,378,915 1,502,528
PROPERTY, PLANT AND EQUIPMENT, at cost:
Oil and gas properties, using the
full cost method of accounting:
Properties being amortized 21,254,295 20,647,855
Properties not subject to amortization 180,354 119,517
Drilling rig and equipment 475,247 --
Leonardite plant and equipment 3,244,605 3,242,105
Other 757,462 737,925
25,911,963 24,747,402
Less accumulated depreciation, depletion,
amortization and impairment (19,445,908) (18,945,190)
Net property, plant and equipment 6,466,055 5,802,212
OTHER ASSETS:
Mortgage loans receivable, related party -- 103,321
Other 51,069 42,225
Total other assets 51,069 145,546
TOTAL ASSETS $ 7,896,039 $ 7,450,286
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 596,813 $ 685,909
Income taxes payable -- 75,000
Accrued expenses 211,622 192,722
Current maturities of long-term debt 125,000 125,000
Total current liabilities 933,435 1,078,631
LONG-TERM DEBT, less current maturities 716,667 375,000
DEFERRED INCOME TAXES 338,000 284,000
Total liabilities 1,988,102 1,737,631
STOCKHOLDERS' EQUITY:
Common stock, par value $.01 per share;
authorized 10,000,000 shares;
issued and outstanding, 3,814,302
and 3,912,502 shares, respectively 38,143 39,125
Additional paid-in capital 427,805 612,571
Retained earnings 5,441,989 5,060,959
Total stockholders' equity 5,907,937 5,712,655
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 7,896,039 $ 7,450,286
See Notes to Consolidated Financial Statements.
GEORESOURCES, INC., AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2001 2000 2001 2000
OPERATING REVENUES:
Oil and gas sales $ 860,597 $ 1,247,542 $ 2,532,319 $ 3,372,872
Leonardite sales 191,190 162,350 744,565 480,995
1,051,787 1,409,892 3,276,884 3,853,867
OPERATING COSTS AND EXPENSES:
Oil and gas production 492,133 437,549 1,392,038 1,257,716
Cost of leonardite sold 149,204 138,259 606,414 418,522
Depreciation and depletion 182,306 185,640 500,718 504,004
Selling, general and
administrative 101,647 88,820 342,860 304,062
925,290 850,268 2,842,030 2,484,304
Operating income 126,497 559,624 434,854 1,369,563
OTHER INCOME (EXPENSE):
Interest expense (10,473) (37,955) (35,275) (122,343)
Interest income 12,626 6,502 19,726 19,138
Other income, net 5,074 5,325 15,725 15,175
7,227 (26,128) 176 (88,030)
Income before
income taxes 133,724 533,496 435,030 1,281,533
Income tax expense 17,000 49,000 54,000 117,000
Net income $ 116,724 $ 484,496 $ 381,030 $ 1,164,533
EARNINGS PER SHARE:
Net income,
basic and diluted $ .03 $ .12 $ .10 $ .29
See Notes to Consolidated Financial Statements.
GEORESOURCES, INC., AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30,
2001 2000
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 381,030 $ 1,164,533
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and depletion 500,718 504,004
Deferred income taxes 54,000 85,000
Other 6,156 1,696
Changes in assets and liabilities:
Decrease (increase) in:
Trade receivables 128,933 (83,451)
Inventories 59,768 8,014
Prepaid expenses and other (29,168) (7,575)
Increase (decrease) in:
Accounts payable (108,653) (334,074)
Income taxes payable (75,000) --
Accrued expenses 18,900 40,836
Net cash provided by
operating activities 936,684 1,378,983
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (1,143,004) (471,560)
Collection of mortgage loans receivable 103,321 --
Net cash used in
investing activities (1,039,683) (471,560)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings 425,000 --
Principal payments on long-term debt (83,333) (885,008)
Debt issue costs (15,000) --
Cost to purchase common stock (187,748) (104,271)
Net cash provided by (used in)
financing activities 138,919 (989,279)
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS 35,920 (81,856)
CASH AND EQUIVALENTS, beginning of period 315,191 423,361
CASH AND EQUIVALENTS, end of period $ 351,111 $ 341,505
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for:
Interest $ 35,275 $ 122,343
Income taxes 73,973 1,320
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 September 30,
2001, and the results of operations and cash flows for the three
months and nine months ended September 30, 2001, and 2000.
The results of operations for the periods ended September 30, 2001,
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, it is
suggested that these financial statements 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,
2000.
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 September 30,
2001, and December 31, 2000:
2001 2000
Oil and gas $ 6,002,543 $ 5,333,322
Leonardite 1,039,219 1,195,744
General corporate activities 854,277 921,220
$ 7,896,039 $ 7,450,286
Presented below is information concerning our operating segments for
the three- and nine-month periods ended September 30, 2001, and 2000:
Three Months Ended Nine Months Ended
September 30, September 30,
2001 2000 2001 2000
Revenue:
Oil and gas $ 860,597 $ 1,247,542 $ 2,532,319 $ 3,372,872
Leonardite 191,190 162,350 744,565 480,995
$ 1,051,787 $ 1,409,892 $ 3,276,884 $ 3,853,867
Income (loss) before income taxes:
Oil and gas $ 218,087 $ 655,233 $ 734,485 $ 1,701,752
Leonardite 10,550 (5,983) 37,765 (29,103)
General corporate
activities (102,140) (89,626) (337,396) (303,086)
Other income and
expenses 7,227 (26,128) 176 (88,030)
$ 133,724 $ 533,496 $ 435,030 $ 1,281,533
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
herein. 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 our Annual Report on Form 10-K for the year ended
December 31, 2000, could affect our actual results and cause actual results
to differ materially from those discussed in forward-looking statements.
Results of Operations - Three Months and Nine Months Ended September 30,
2001, compared to Three Months and Nine Months Ended September 30, 2000.
Information concerning our oil and gas operations for the three
months and nine months ended September 30, 2001, is set forth in the table
below:
Oil and Gas Operations
% Increase % Increase
Three Months (Decrease) Nine Months (Decrease)
Ended From 2000 Ended From 2000
Sept. 30, 2001 Period Sept. 30, 2001 Period
Oil and gas production
sold (BOE) 41,144 (9%) 114,454 (11%)
Average price per BOE $ 20.92 (25%) $ 22.13 (16%)
Oil and gas revenue $ 860,597 (31%) $ 2,532,319 (25%)
Production costs $ 492,133 12% $ 1,392,038 11%
Average production cost
per BOE $ 11.96 23% $ 12.16 25%
Oil and gas production sold, expressed in barrels of oil equivalent
(BOE), declined 3,823 BOE or 9% and 14,303 BOE or 11% for the three- and
nine-month periods ended September 30, 2001, compared to the same periods
in 2000. These changes in the two periods between 2000 and 2001 reflect
the normal declines of our wells due to our reduced level of drilling in
recent years. As previously reported, the most recent factor hampering our
level of drilling has been a shortage of drilling rigs available in the
Williston Basin, particularly shallow hole rigs suited for the east flank
of the Williston Basin. During the third quarter 2001, we located a
drilling rig for sale in Canada that we purchased in early September. This
rig requires 60 to 90 days of retrofitting by rig rebuilding machinists to
ready it for actual drilling operations, which is in progress at this time.
Our intention, once the retrofitting is completed, is to make it available
to drill wells both for us and other operators. We believe that the rig
will be ready for service in December 2001.
The average oil price for the third quarter declined to $20.92,
falling $6.82 or 25% below the same period in 2000. The nine-month period
price average fell to $22.13, a drop of $4.07 or a 16%. Due in part to the
tragedies on September 11, 2001, oil values on world markets have declined
substantially. At this time we do not know how much effect these lower
prices will have on our future operations and financial position, but
protracted periods of lower oil values will have a material adverse effect
on our revenues. Oil and gas revenue for the three- and nine-month periods
ended September 30, 2001, followed closely the combination of diminished
oil prices and production declines discussed above. This resulted in
quarterly and nine-month oil and gas revenues of $861,000 and $2,532,000,
respectively.
Oil and gas production costs increased $55,000 or 12% and $134,000
or 11% for the three- and nine-month periods of 2001, respectively, when
compared to the same periods in 2000. The increase in both periods was
primarily due to higher repair, maintenance and workover costs as we
continued our efforts to maintain production from existing wells.
Production costs expressed on a per-equivalent-barrel basis were 23% higher
for the three-month period and 25% higher for the nine-month period of 2001
when compared to the same periods in 2000. These increases basically
reflect the same higher costs discussed above.
Information concerning our leonardite operations for the three months and
nine months ended September 30, 2001, is set forth in the table below:
Leonardite Operations
% Increase % Increase
Three Months (Decrease) Nine Months (Decrease)
Ended From 2000 Ended From 2000
Sept. 30, 2001 Period Sept. 30, 2001 Period
Leonardite production
sold (tons) 1,812 (1%) 7,929 44%
Average revenue per ton $ 105.51 18% $ 93.90 7%
Leonardite revenue $ 191,190 18% $ 744,565 55%
Cost of leonardite sold $ 149,204 8% $ 606,414 45%
Average production cost
per ton $ 82.34 9% $ 76.48 1%
Leonardite production sold for the three-month period ended
September 30, 2001, was virtually flat with the prior year; however, nine-
month 2001 production was 2,400 tons or 44% higher due to the strength of
sales in the first two quarters of this year. Although third quarter 2001
produced tonnage was essentially even with the prior year, the percentage
of specialty products was substantially higher in 2001. We are not aware
of any particular reason for this increase in specialty product orders by
customers.
Leonardite revenue increased $29,000, or 18% and $264,000 or 55%,
respectively, for the three and nine-month periods ended September 30,
2001, compared to the same periods in 2000. The change in revenue in the
three-month period was primarily due to almost twice the volume of
specialty products sold, compared to the same period a year earlier.
Average revenue per ton for the three months ended September 30, 2001, was
$105.51, which was up 18% and for the nine-month period, $93.90 which was
up 7%. This was again due to an overall increase of specialty product
sales, which have a higher profit margin. The increase of specialty
product sold was 92% for the three-month period compared to the same period
in 2000.
Cost of leonardite sold increased for both the three-and nine-month
periods ended September 30, 2001, compared to the same periods in 2000.
Average per ton production costs increased 9% and 1%, respectively, for the
three- and nine-month periods ended September 30, 2001, compared to the
same periods in 2000. The three-month increase was related primarily to
increased costs related to the specialty products sold.
Consolidated Analysis
Total operating revenues decreased $358,000 or 25% and $577,000 or
15%, respectively, for the three- and nine-month periods ended September
30, 2001, compared to the same periods in 2000. These decreases were due
to lower oil production and prices, which were partially offset by the
increased leonardite revenues. Total operating expenses increased
$75,000 or 9% and $358,000 or 14% for the three- and nine-month periods of
2001, respectively, compared to the same periods in 2000. These increases
were primarily due to increased leonardite and oil and gas expenses
discussed above. As a result of revenues and expenses, operating income
decreased to $126,000 and $435,000, respectively, for the three- and nine-
month periods ended September 30, 2001, compared to operating income of
$560,000 and $1,370,000 for the same periods in 2000.
Interest expense was significantly lower in both 2001 periods,
compared to 2000, due to paying down a substantial portion of our debt in
2000. After provisions for income taxes, the result of consolidated
operations yielded a net income of $134,000 or $.03 per share and $398,000
or $.10 per share for the three- and nine-month periods ended September 30,
2001, compared to a net income of $484,000 or $.12 per share and $1,165,000
or $.29 per share for the same periods in 2000.
Liquidity and Capital Resources
At September 30, 2001, we had working capital of $445,000 compared
to working capital of $424,000 at December 31, 2000. Our current ratio was
1.48 to 1 at September 30, 2001, compared to 1.39 to 1 at year-end 2000.
Net cash provided by operating activities was $937,000 for the nine
months ended September 30, 2001, compared to $1,379,000 for the same period
in 2000. Cash was utilized to make payments of $1,143,000 for additions to
property, plant and equipment, $83,000 for payments on long-term debt and
$188,000 for stock repurchases.
We believe our cash requirements can be met by cash flows from
operations and, if necessary, borrowings on our existing line-of-credit.
Future cash requirements might also be provided by possible forward sales
of oil reserves or additional debt or equity financing.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
We are not a party, nor are any of our properties subject, to any
pending material legal proceedings. We know of no legal proceedings
contemplated or threatened against us.
Item 2. Changes in Securities and Use of Proceeds.
None.
Item 3. Defaults upon Senior Securities.
None.
Item 4. Submissions of Matters to a Vote of Securities Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
None.
(b) Reports on Form 8-K.
None.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
GEORESOURCES, INC.
November 13, 2001
/S/ J. P. Vickers
J. P. Vickers
Chief Executive Officer
Chief Financial Officer