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, 1995.
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 W. Dakota Pkwy., Ste. 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 30, 1995
Common Stock 4,035,714 shares
(par value $.01 per share)
(11 pages total, no exhibits)
GEORESOURCES, INC.
INDEX
PAGE
NUMBER
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets. . . . . . . . . . . . . . . . . .3
(March 31, 1995 and December 31, 1994)
Consolidated Statements of Operations. . . . . . . . . . . . .4
(Three months ended March 31, 1995 and 1994)
Consolidated Statements of Cash Flows. . . . . . . . . . . . .5
(Three months ended March 31, 1995 and 1994)
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)
March 31, December 31,
1995 1994
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 124,300 $ 222,677
Trade receivables, net 518,001 493,595
Inventories 266,718 246,467
Prepaid expenses 18,765 17,273
Investments 2,969 20,972
Total current assets 930,753 1,000,984
PROPERTY, PLANT AND EQUIPMENT, at cost:
Oil and gas properties, using the
full cost method of accounting:
Properties being depleted 14,569,199 14,105,349
Properties not being depleted 138,073 134,330
Leonardite plant and equipment 3,196,633 3,173,533
Other 670,831 669,308
18,574,736 18,082,520
Less accumulated depreciation,
depletion and valuation allowance (13,560,524) (13,444,512)
Net property, plant and
equipment 5,014,212 4,638,008
OTHER ASSETS:
Mortgage loans receivable, related party 103,321 103,321
Other 72,664 54,041
175,985 157,362
$ 6,120,950 $ 5,796,354
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 834,243 $ 663,487
Current maturities of long-term debt 385,219 385,219
Accrued expenses 43,892 39,064
Total current liabilities 1,263,354 1,087,770
LONG-TERM DEBT, less current maturities 907,226 787,035
DEFERRED INCOME TAXES 123,000 123,000
STOCKHOLDERS' EQUITY:
Common stock, par value $.01 per share;
authorized 10,000,000 shares; issued
and outstanding, 4,035,714 and
4,023,214 shares, respectively 40,357 40,232
Additional paid-in capital 811,744 792,369
Retained earnings 2,975,269 2,965,948
Total stockholders' equity 3,827,370 3,798,549
$ 6,120,950 $ 5,796,354
See Notes to Consolidated Financial Statements.
GEORESOURCES, INC., AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
March 31,
1995 1994
OPERATING REVENUES:
Oil and gas sales $ 458,640 $ 293,972
Leonardite sales 153,612 172,009
612,252 465,981
OPERATING COSTS AND EXPENSES:
Oil and gas production 217,747 193,997
Cost of leonardite sold 138,728 142,652
Depreciation and depletion 116,012 108,754
Selling, general and administrative 85,555 84,316
558,042 529,719
Operating income (loss) 54,210 (63,738)
OTHER INCOME (EXPENSE):
Interest expense (32,210) (23,612)
Interest income 2,794 3,870
Other income and losses, net (15,473) 5,571
(44,889) (14,171)
Income (loss) before income taxes 9,321 (77,909)
Income tax benefit -- 32,000
Net income (loss) $ 9,321 $ (45,909)
Net income (loss) per common share $ -- $ (.01)
Weighted average number of shares
outstanding 4,025,714 4,023,214
See Notes to Consolidated Financial Statements.
GEORESOURCES, INC., AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 9,321 $ (45,909)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and depletion 116,012 108,754
Deferred income taxes -- (32,000)
Changes in assets and liabilities:
Decrease (increase) in:
Trade receivables (24,406) (14,914)
Inventories (20,251) 8,893
Prepaid expenses and other (1,492) (7,037)
Investments 18,003 --
Income taxes receivable -- 18,000
Increase (decrease) in:
Accounts payable (76,054) (29,835)
Accrued expenses 4,828 (17,401)
Net cash provided by (used in)
operating activities 25,961 (11,449)
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (245,406) (119,138)
Other (18,623) --
Net cash used in investing activities (264,029) (119,138)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock 19,500 --
Proceeds from long-term borrowings 200,000 --
Principal payments on long-term debt (79,809) (79,813)
Net cash used in financing activities 139,691 (79,813)
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS (98,377) (210,400)
CASH AND EQUIVALENTS, beginning of period 222,677 325,132
CASH AND EQUIVALENTS, end of period $ 124,300 $ 114,732
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid (received) for:
Interest $ 32,210 $ 23,612
Income taxes -- (18,000)
See Notes to Consolidated Financial Statements.
GEORESOURCES, INC., AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. In the opinion of the management of GeoResources, Inc. (the
"Company"), the accompanying unaudited financial statements
contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the financial position
of the Company as of March 31, 1995, and the results of opera-
tions and cash flows for the three month periods ended March
31, 1995 and 1994.
The results of operations for the three month period ended March
31, 1995, 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 state-
ments and the notes included in the Company's Annual Report on
SEC Form 10-K for the year ended December 31, 1994.
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
The following discussion of the Company's financial condition
and results of operations should be read in conjunction with the finan-
cial statements and notes contained in the Company's Annual Report on
SEC Form 10-K for the year ended December 31, 1994.
Results of Operations
Information concerning the Company's oil and gas operations
for the three months ended March 31, 1995, is set forth in the table
below:
Oil and Gas Operations
Percent Increase
Three Months Ended (Decrease) from
March 31, 1995 1994 Period
Oil and gas production
sold (BOE) 32,412 5%
Oil and gas revenue $ 458,640 56%
Average price per BOE $ 14.15 49%
Production costs $ 217,747 12%
Average production cost $ 6.72 7%
per BOE
Oil and gas production sold increased by 1,520 BOE or 5% in
the first quarter of 1995 compared to the same period in 1994. This
increase was due to new production from the Company's Oscar Fossum
H1 horizontal well (.61 net) that was drilled and completed late in
the first quarter 1995. Oil and gas revenue increased $164,668 or
56% in the first quarter 1995 compared to the first quarter 1994. The
revenue increase was due to a substantially higher average oil price
of $14.15 in the first quarter 1995 compared to $9.52 in the first
quarter 1994 and to the higher volume of oil sold as discussed above.
First quarter 1995 oil and gas production costs increased $23,750 or
12% compared to the same period in 1994 due to the higher volume of
oil sold and moderately higher winter-related production costs. Pro-
duction costs on a per equivalent barrel basis averaged $6.72 for the
first quarter 1995 compared to $6.28 for the first quarter 1994, an
increase of 7%. Although the first quarter 1995 average per barrel
production costs were somewhat higher than the first quarter 1994,
they were stable with the 1994 average annual costs of $6.92.
Information concerning the Company's leonardite operations
for the three months ended March 31, 1995, is set forth in the table
below:
Leonardite Operations
Percent Increase
Three Months Ended (Decrease) from
March 31, 1995 1994 Period
Leonardite production
sold (tons) 1,639 (13%)
Leonardite revenue $ 153,612 (11%)
Average revenue per ton $ 93.72 2%
Cost of leonardite sold $ 138,728 (3%)
Average production cost $ 84.64 11%
per ton
Leonardite revenues for the first quarter 1995 decreased 11%
from the first quarter 1994 due to a 13% reduction in number of tons
sold. The decline in tons sold was the result of lower domestic natural
gas drilling activity during the first quarter 1995 which reduced demand
for the Company's leonardite products. Cost of leonardite sold declined
3% for the first quarter 1995 when compared to the same period in 1994.
The decrease in the cost of leonardite sold resulted from the decreased
production, but costs did not decline proportionately because of fixed
costs which do not change with the production volume. First quarter
1995 revenue per ton increased 2% compared to the first quarter 1994.
This fluctuation is due to the normal variations in revenue per ton
caused by the ratio of basic products to specialty products, the latter
having higher processing costs and selling prices.
Consolidated Analysis
Total operating revenue increased 31% for the first quarter
ended March 31, 1995, compared to the same period in 1994. This increase
was due to increased oil revenue. Total operating expenses increased
5% for the first quarter 1995 when compared to the same period in 1994.
This increase was primarily due to moderately higher oil and gas produc-
tion costs previously discussed and slightly higher depreciation and
depletion. Selling, general and administrative expenses remained flat
with a 1% increase during the first quarter 1995 compared to the same
period in 1994. Operating income increased to $54,000 from a loss of
$64,000 for the three months ended March 31, 1995 and 1994, respectively.
Total non-operating expense increased to $45,000 during the first quarter
1995 from $14,000 during the first quarter 1994, due primarily to increased
interest expenses and losses from oil price hedging activities.
The Company achieved net income for the first quarter 1995
of $9,300 or $.002 per share compared to the first quarter 1994 net
loss of $46,000 or $.01 per share.
Liquidity and Capital Resources
At March 31, 1995, the Company had negative working capital
of ($333,000) compared to negative working capital of ($87,000) at
December 31, 1994. The Company's current ratio was .74 to 1 at March
31, 1995, compared to .92 to 1 at year end 1994. This working capital
deficit was caused by the costs associated with the drilling and comple-
tion of the Company's first horizontal well, substantially all of which
was incurred by March 31, 1995. The Company is using a combination
of cash flow from operations and borrowings to pay drilling costs as
they become due. These costs are expected to be paid from cash flow
and borrowings during the second quarter of 1995 after which management
believes the Company could return to a positive working capital.
Net cash provided by (used in) operating activities was $26,000
for the first quarter ended March 31, 1995, compared to ($11,000) for
the same period in 1994. The increase in 1995 operating cash flows
was primarily due to higher oil prices and the 5% increase in produc-
tion. Cash was also utilized to make payments of $245,000 for additions
to property, plant and equipment and $80,000 for payments on long-term
debt.
During the first quarter 1995, the Company borrowed $200,000
to finance the acquisition of interests in several wells which included
an additional 11.25% working interest in the Oscar Fossum lease before
the horizontal well was drilled thereon and to fund the year end work-
ing capital deficit from late 1994 workovers. These funds were borrowed
under the Company's existing $1,000,000 line-of-credit with its bank.
Through March 31, total funds borrowed on the line-of-credit were $550,000.
Management believes its future cash requirements can be met by cash
flows from operations and its ability, if necessary, to borrow on its
existing line-of-credit.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
Reference is made to Part I, Item 3 of the Company's Annual Report
on SEC Form 10-K for the fiscal year ended December 31, 1993, concerning
legal proceedings for discussion on the matter of GeoResources, Inc.,
vs. MDU Resources Group, Inc., et al. That discussion is specifically
incorporated herein by reference. Other than the foregoing legal matter,
the Company is not a party, nor is any of its property subject to, any
pending material legal proceedings. The Company knows of no legal pro-
ceedings contemplated or threatened against it.
Item 2. Changes in Securities
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.
No reports on Form 8-K were filed during the fiscal quarter ended
March 31, 1995. There are no exhibits filed herewith.
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 12, 1995
/S/ J. P. Vickers
J. P. Vickers
Chief Executive Officer
Chief Financial Officer