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 September 30, 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 jurisdic- (I.R.S. Employer
tion of incorporation or Identification No.
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 twelve months (or for such a
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 October 31, 1995
Common Stock 4,035,714 shares
(par value $.01 per share)
(45 pages total, see Exhibit Index)
GEORESOURCES, INC.
INDEX
PAGE
NUMBER
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets. . . . . . . . . . . . . . . . . . 3
(September 30, 1995 and December 31, 1994)
Consolidated Statements of Operations. . . . . . . . . . . . . 4
(Three months ended September 30, 1995 and 1994
and nine months ended September 30, 1995 and 1994)
Consolidated Statements of Cash Flows. . . . . . . . . . . . . 5
(nine months ended September 30, 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)
September 30, December 31,
1995 1994
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 213,165 $ 222,677
Trade receivables, net 461,696 493,595
Inventories 304,829 246,467
Prepaid expenses 15,704 17,273
Investments 5,272 20,972
Total current assets 1,000,666 1,000,984
PROPERTY, PLANT AND EQUIPMENT, at cost:
Oil and gas properties, using the
full cost method of accounting:
Properties being depleted 14,790,392 14,105,349
Properties not being depleted 121,101 134,330
Leonardite plant and equipment 3,196,633 3,173,533
Other 673,076 669,308
18,781,202 18,082,520
Less accumulated depreciation,
depletion and valuation allowance (13,841,119) (13,444,512)
Net property, plant and
equipment 4,940,083 4,638,008
OTHER ASSETS:
Mortgage loans receivable, related party 103,321 103,321
Other 81,412 54,041
184,733 157,362
6,125,482 5,796,354
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 508,175 $ 663,487
Current maturities of long-term debt 511,594 385,219
Accrued expenses 10,530 39,064
Total current liabilities 1,030,299 1,087,770
LONG-TERM DEBT, less current maturities 836,191 787,035
DEFERRED INCOME TAXES 139,000 123,000
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 3,267,891 2,965,948
Total stockholders' equity 4,119,992 3,798,549
$ 6,125,482 $ 5,796,354
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,
1995 1994 1995 1994
OPERATING REVENUES:
Oil and gas sales $ 508,352 $ 469,930 $1,584,965 $1,228,456
Leonardite sales 171,898 185,848 517,386 549,189
680,250 655,778 2,102,351 1,777,645
OPERATING COSTS AND EXPENSES:
Oil and gas production 234,927 237,775 668,890 678,738
Cost of leonardite sold 101,147 112,985 397,900 380,202
Depreciation and
depletion 134,231 124,957 396,607 355,029
Selling, general and
administrative 68,063 59,150 235,464 214,170
538,368 534,867 1,698,861 1,628,139
Operating income 141,882 120,911 403,490 149,506
OTHER INCOME (EXPENSE):
Interest expense (34,645) (26,899) (96,054) (74,915)
Interest income 2,414 3,591 8,127 11,217
Other income and
losses, net (1,167) 1,741 2,380 4,429
(33,398) (21,567) (85,547) (59,269)
Income (loss) before
income taxes 108,484 99,344 317,943 90,237
Income tax benefit
(expense) (16,000) -- (16,000) 20,000
Net income $ 92,484 $ 99,344 $ 301,943 $ 110,237
EARNINGS PER SHARE:
Net income per
common share $ .02 $ .02 $ .07 $ .03
Weighted average number
of shares outstanding 4,035,714 4,023,214 4,032,417 4,023,214
See Notes to Consolidated Financial Statements.
GEORESOURCES, INC., AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 301,943 $ 110,237
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and depletion 396,607 355,029
Deferred income taxes 16,000 (20,000)
Unrealized loss on other investments 15,700 13,687
Changes in assets and liabilities:
Decrease (increase) in:
Trade receivables 31,899 (15,996)
Inventories (58,362) 45,470
Prepaid expenses and other 1,569 (16,955)
Income taxes receivable -- 18,000
Increase (decrease) in:
Accounts payable (129,904) (58,392)
Accrued expenses (28,534) (17,401)
Net cash provided by
operating activities 546,918 413,679
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (724,090) (318,661)
Proceeds from sale of property and equipment -- 143,385
Other (27,371) (31,537)
Net cash (used in)
investing activities (751,461) (206,813)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock 19,500 --
Proceeds from long-term borrowings 415,000 100,000
Principal payments on long-term debt (239,469) (239,165)
Net cash provided by (used
in) financing activities 195,031 (139,165)
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS (9,512) 67,701
CASH AND EQUIVALENTS, beginning of period 222,677 325,132
CASH AND EQUIVALENTS, end of period $ 213,165 $ 392,833
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for:
Interest $ 96,054 $ 74,915
See Notes to Consolidated Financial Statements.
GEORESOURCES, INC., AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of management of GeoResources, Inc. (the "Company"), the
accompanying unaudited financial statements contain all adjustments (con-
sisting of only normal recurring accruals) necessary to present fairly
the financial position of the Company as of September 30, 1995, and the
results of operations and cash flows for the three months and nine months
ended September 30, 1995 and 1994.
The results of operations for the periods ended September 30, 1995, are
not necessarily indicative of the results to be expected for the full
fiscal year.
Certain information and footnote disclosures normally included in finan-
cial 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 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 financial state-
ments 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 and nine months ended September 30, 1995, and the respec-
tive percent increase (decrease) from the same period in the prior year,
is set forth in the table below:
Oil and Gas Operations
Three Months % Change Nine Months % Change
Ended From 1994 Ended From 1994
Sept.30, 1995 Period Sept.30, 1995 Period
Oil and gas produc-
tion sold (BOE) 36,173 3% 110,006 7%
Average price per BOE $ 14.05 5% $ 14.41 21%
Oil and gas revenue $ 508,352 8% $1,584,965 29%
Production costs $ 234,927 (1%) $ 668,890 (1%)
Average production
cost per BOE $ 6.49 (4%) $ 6.08 (8%)
Oil and gas production sold, expressed in barrels of oil equiva-
lent (BOE), increased 3% and 7% for the three- and nine-month periods ended
September 30, 1995, compared to the same periods in 1994. The increases
in oil and gas production sold during both periods were due to production
contributed from the Company's Oscar Fossum H1 horizontal well (.67 net)
that was drilled and completed in the first quarter of 1995.
Oil and gas revenue increased 8% during the third quarter of 1995
compared to the same quarter in 1994. This increase resulted from the 3%
production increase previously discussed and 5% higher average oil and gas
prices in third quarter 1995 compared to third quarter 1994. Oil and gas
revenue for the nine months ended September 30, 1995, was 29% more than
the same period in 1994 due to 21% higher average oil and gas prices for
the nine months ended September 30, 1995, compared to the same period in
1994.
Oil and gas production costs were essentially stable for both the
three- and nine-month periods when compared to the same periods in 1994.
Production costs expressed on a per barrel of oil equivalent basis however
were 4% and 8% lower for the 1995 three- and nine-month periods respec-
tively. Average production cost per BOE for the 1995 periods were lower
because of lower cost horizontal well production contributed by the Com-
pany's Oscar Fossum H1 well previously discussed.
Recently the Company permitted its Oscar Fossum H2 well that it
intends to drill in the Wayne Field of Bottineau County, North Dakota, dur-
ing November, 1995. GeoResources owns a 67% working interest in the Oscar
Fossum lease and is the operator.
Information concerning the Company's leonardite operations for the
three- and nine-months ended September 30, 1995, and the respective percent
increase (decrease) from the same period in the prior year, is set forth
in the table below:
Leonardite Operations
Three Months % Change Nine Months % Change
Ended From 1994 Ended From 1994
Sept.30, 1995 Period Sept.30, 1995 Period
Leonardite produc-
tion sold (tons) 1,912 (4%) 5,536 (7%)
Average Revenue
per ton $ 89.90 (3%) $ 93.46 1%
Leonardite revenue $ 171,898 (8%) $ 517,386 (6%)
Cost of leonardite
sold $ 101,147 (10%) $ 397,900 5%
Average production
cost per ton $ 52.90 (7%) $ 71.88 12%
Leonardite production decreased 4% and 7%, respectively, for the
three- and nine-month periods ended September 30, 1995, compared to the
equivalent periods in 1994. Management believes these decreases are the
result of lower domestic natural gas drilling which reduced demand for the
Company's leonardite products.
Leonardite revenue decreased 8% and 6%, respectively, for the three-
and nine-month periods ended September 30, 1995, compared to the same periods
in 1994 primarily due to the lower production discussed above. Revenue
per ton for the three- and nine-month periods were within the range of nor-
mal variation but the three-month period exhibited a larger percentage of
basic products which have lower processing costs and selling prices. This
caused revenue per ton to be 3% lower for the three-month period compared
to the same period in 1994.
Cost of leonardite sold decreased 10% for the three-month period
and increased 5% for the nine-month period. The 10% decrease for the three-
month period was due to the higher percentage of basic product sales which
have lower selling prices as discussed above. The 5% increase in the nine-
month period was due to somewhat higher equipment repair costs that were
incurred in the first half of 1995.
Consolidated Analysis
Total operating revenues increased 4% and 18%, respectively, for
the three- and nine-month periods ended September 30, 1995, compared to
the same periods in 1994. These increases were due to increased oil pro-
duction and higher oil prices. Total operating expenses increased 1% for
the three months and 4% for the nine months ended September 30, 1995. Both
increases were primarily due to increased depletion expense due to increased
oil production. Operating income increased significantly in the nine months,
ended September 30, 1995, compared to the same period in 1994, due to higher
oil revenues.
Nonoperating expenses were higher in both the three- and nine-month
periods due primarily to higher interest expense associated with borrowings
to fund the drilling and completion of the Oscar Fossum H1 and several small
acquisitions.
The Company's net income was $92,484 or $.02 per share for third
quarter 1995 compared to a net income of $99,344 for third quarter 1994.
Net income for the nine months ended September 30, 1995, was $301,943 or
$.07 per share compared to $110,237 or $.03 per share in the same period
of 1994.
Liquidity and Capital Resources
At September 30, 1995, the Company had a negative working capital
of ($30,000) compared to a negative working capital of ($87,000) at December
31, 1994. The Company's current ratio was .97 to 1 at September 30, 1995,
compared to .92 to 1 at year end 1994.
Net cash provided by operating activities was $547,000 for the nine
months ended September 30, 1995, compared to $414,000 for the same period
in 1994. The increase in 1995 operating cash flows was primarily due to
higher oil prices and the 7% increase in production. Cash was utilized
to make payments of $751,000 to property, plant and equipment and $239,000
for payments on long-term debt.
During the nine months ended September 30, 1995, the Company borrowed
$415,000 to finance the acquisition of interests in several properties and
to pay a portion of drilling and completion costs on the Oscar Fossum H1,
as previously discussed. These funds were borrowed under a $1,000,000 re-
volving line of credit the Company had since 1993. The total funds borrowed
under this line of credit was $765,000. During 1995, the 1993 revolving
line of credit expired and converted to a term loan payable in 48 monthly
installments of $16,000. At the same time, a new $1,000,000 line of credit
was also established. Management believes the anticipated cash flows from
existing producing wells combined with the new $1,000,000 revolving line
of credit will be sufficient to finance activities planned for 1995.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
Reference is made to Part II of the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1989, concerning legal proceed-
ings 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 other legal proceedings 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.
See Exhibit Index on the page following signatures. No reports
on Form 8-K were filed during the fiscal quarter ended September 30, 1995.
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.
November 14, 1995
/S/ J. P. Vickers
J. P. Vickers
Chief Executive Officer
Chief Financial Officer
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
GEORESOURCES, INC.
(Commission File Number: 0-8041)
E X H I B I T I N D E X
F O R
Form 10-Q for fiscal quarter ended
September 30, 1995
EXHIBIT PAGE NO.
10.1 Amended and Restated Secured Term Loan and Re-
solving Credit Agreement made as of September
1, 1995, by and between GeoResources, Inc. and
Norwest Bank Montana. . . . . . . . . . . . . . . . . 13
10.2 First Amendment of Mortgage, Security Agreement,
Assignment of Production and Financing Statement
and Mortgage - Collateral Real Estate Mortgage
dated September 1, 1995, by and between GeoRe-
sources, Inc. and Norwest Bank Montana. . . . . . . . 41
27 Financial Data Schedule. . . . . . . . . . . . . . . .46