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, 1996.
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 30, 1996
Common Stock 4,060,714 shares
(par value $.01 per share)
(11 pages total, with exhibit)
GEORESOURCES, INC.
INDEX
PAGE
NUMBER
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets 3
(March 31, 1996 and December 31, 1995)
Consolidated Statements of Operations 4
(Three months ended March 31, 1996 and 1995)
Consolidated Statements of Cash Flows 5
(Three months ended March 31, 1996 and 1995)
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,
1996 1995
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 182,742 $ 392,078
Trade receivables, net 525,465 590,330
Inventories 286,478 285,018
Prepaid expenses 20,095 17,460
Investments 36,640 10,119
Total current assets 1,051,420 1,295,005
PROPERTY, PLANT AND EQUIPMENT, at cost:
Oil and gas properties, using the
full cost method of accounting:
Properties being depleted 15,325,559 15,272,170
Properties not being depleted 62,273 88,759
Leonardite plant and equipment 3,199,797 3,199,797
Other 673,091 672,546
19,260,720 19,233,272
Less accumulated depreciation,
depletion and valuation allowance (14,214,594) (14,045,602)
Net property, plant and
equipment 5,046,126 5,187,670
OTHER ASSETS:
Mortgage loans receivable, related party 103,321 103,321
Other 109,328 104,289
212,649 207,610
$6,310,195 $6,690,285
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 461,914 $ 856,823
Current maturities of long-term debt 455,344 511,594
Accrued expenses 90,027 98,537
Total current liabilities 1,007,285 1,466,954
LONG-TERM DEBT, less current maturities 886,693 958,330
DEFERRED INCOME TAXES 162,000 151,000
STOCKHOLDERS' EQUITY:
Common stock, par value $.01 per share;
authorized 10,000,000 shares; issued
and outstanding, 4,060,714 and
4,035,714 shares, respectively 40,607 40,357
Additional paid-in capital 829,757 803,807
Retained earnings 3,383,853 3,269,837
Total stockholders' equity 4,254,217 4,114,001
$6,310,195 $6,690,285
See Notes to Consolidated Financial Statements.
GEORESOURCES, INC., AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
March 31,
1996 1995
OPERATING REVENUES:
Oil and gas sales $ 708,975 $ 458,640
Leonardite sales 184,177 153,612
893,152 612,252
OPERATING COSTS AND EXPENSES:
Oil and gas production 256,645 217,747
Cost of leonardite sold 167,079 138,728
Depreciation and depletion 168,992 116,012
Selling, general and administrative 124,083 85,555
716,799 558,042
Operating income (loss) 176,353 54,210
OTHER INCOME (EXPENSE):
Interest expense (33,008) (32,210)
Interest income 3,858 2,794
Other income and losses, net (22,187) (15,473)
(51,337) (44,889)
Income (loss) before income taxes 125,016 9,321
Income tax expense 11,000 --
Net income (loss) $ 114,016 $ 9,321
Net income (loss) per common share$ .03 $ --
Weighted average number of shares
outstanding 4,042,857 4,025,714
See Notes to Consolidated Financial Statements.
GEORESOURCES, INC., AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 114,016 $ 9,321
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and depletion 168,992 116,012
Deferred income taxes 11,000 --
Other 26,748 19,500
Changes in assets and liabilities:
Decrease (increase) in:
Trade receivables 64,865 (24,406)
Inventories (1,460) (20,251)
Prepaid expenses and other (29,156) 16,511
Increase (decrease) in:
Accounts payable (30,767) (76,054)
Accrued expenses (8,510) 4,828
Net cash provided by (used in)
operating activities 315,728 45,461
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (391,590) (245,406)
Other (2,651) (18,623)
Net cash used in
investing activities (394,241) (264,029)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings -- 200,000
Principal payments on long-term debt (127,887) (79,809)
Debt issue costs (2,936) --
Net cash used in
financing activities (130,823) 120,191
NET INCREASE (DECREASE) IN
CASH AND EQUIVALENTS (209,336) (98,377)
CASH AND EQUIVALENTS, beginning of period 392,078 222,677
CASH AND EQUIVALENTS, end of period $ 182,742 $ 124,300
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid (received) for:
Interest $ 33,008 $ 32,210
Income taxes 1,946 --
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, 1996, and the results
of operations and cash flows for the three month periods ended March 31,
1996 and 1995.
The results of operations for the three month period ended March 31, 1996,
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 the Company's
Annual Report on SEC Form 10-K for the year ended December 31, 1995.
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
statements and notes contained in the Company's Annual Report on SEC Form
10-K for the year ended December 31, 1995.
Results of Operations
Information concerning the Company's oil and gas operations for the
three months ended March 31, 1996, is set forth in the table below:
Oil and Gas Operations
Percent Increase
Three Months Ended (Decrease) from
March 31, 1996 1995 Period
Oil and gas production
sold (BOE) 44,266 37%
Average price per BOE $ 16.02 13%
Oil and gas revenue $ 708,975 55%
Production costs $ 256,645 18%
Average production cost $ 5.80 (14%)
per BOE
Oil and gas production sold increased by 11,854 BOE or 37% in the first
quarter of 1996 compared to the same period in 1995. This increase was due to
new "flush" production from the Company's Oscar Fossum H2 horizontal well
(.67 net) that was drilled and completed late in the fourth quarter 1995. Oil
and gas revenue increased $250,000 or 55% in the first quarter 1996 compared to
the first quarter 1995. The revenue increase was due to the substantially
higher volume of oil sold, discussed above, combined with a higher average oil
price of $16.02 in the first quarter 1996 compared to $14.15 in the first
quarter 1995. First quarter 1996 oil and gas production costs increased
$39,000 or 18% compared to the same period in 1995 due in part to the higher
volume of oil sold, which increased production taxes, but also due to higher
winter-related production costs. The `95-96 winter was harsh in North Dakota,
and first quarter 1996 production costs were impacted by higher costs for snow
removal and higher propane usage for oil treating facilities. Even with the
harsh winter, however, production costs on a per equivalent barrel basis
declined to $5.80 for the first quarter 1996 compared to $6.72 for the first
quarter 1995, a decrease of 14%. This decline is due to the contribution of
much lower per barrel cost horizontal well "flush" production provided by the
Oscar Fossum H2. During the first quarter 1996, production costs for the
Fossum H2 were $1.31 per barrel, $.76 of which was expense for production
taxes.
Information concerning the Company's leonardite operations for the
three months ended March 31, 1996, is set forth in the table below:
Leonardite Operations
Percent Increase
Three Months Ended (Decrease) from
March 31, 1996 1995 Period
Leonardite production
sold (tons) 1,790 9%
Average revenue per ton $ 102.89 10%
Leonardite revenue $ 184,177 20%
Cost of leonardite sold $ 167,079 20%
Average production cost $ 93.34 10%
per ton
Leonardite revenues for the first quarter 1996 increased 20% from the
first quarter 1995 due to a 9% increase in the number of tons sold and a 10%
increase in average revenue per ton. First quarter 1995 tonnage sold was
atypically low, thus the 1996 first quarter tonnage sold represents a return
to a more average first quarter. The 10% increase in average revenue per ton
was due to a larger percentage of specialty product sales which have higher
selling prices. The 20% increase in cost of leonardite sold resulted from the
9% increase in production coupled with the 10% higher per ton average
production costs. Average production costs increased, again due to the larger
percentage of specialty products which also have higher processing costs.
Consolidated Analysis
Total operating revenue increased $281,000 or 46% for the first quarter
ended March 31, 1996, compared to the same period in 1995. This increase was
due mainly to increased oil production and higher oil prices. Total operating
expenses increased $159,000 or 28% for the first quarter 1996 when compared to
the same period in 1995. This increase was due to the higher oil and gas and
leonardite costs previously discussed; higher depreciation and depletion due
to increased oil production; and an increase in selling, general and
administrative (SG&A) expenses. The SG&A increase was due, in large part, to
expense the Company incurred in the first quarter 1996 to advertise its
horizontal drilling success in publications targeted toward the investment
community. As a result of higher revenues, and to a lesser extent higher
expenses, operating income increased to $176,000 from $54,000 for the three
months ended March 31, 1996 and 1995, respectively. Total non-operating
expense increased to $51,000 for the first quarter 1996 from $45,000 for the
first quarter 1995 due to increased expenses related to oil price hedging
activities. Rising oil prices on the NYMEX at March 31, 1996, caused moderate
losses in the Company's hedge position designed to protect the Company in times
of falling prices.
As a result of consolidated operations, the Company achieved net income
for the first quarter 1996 of $114,000 or $.03 per share compared to the first
quarter 1995 net income of $9,300 or $.002 per share.
Liquidity and Capital Resources
At March 31, 1996, the Company achieved a positive working capital of
$44,000 compared to a negative working capital of ($172,000) at December 31,
1995. The Company's current ratio was 1.04 to 1 at March 31, 1996, compared
to .88 to 1 at year end 1995. The $216,000 change in working capital in one
quarter was primarily due to the Company paying off all remaining payables
related to the H2 horizontal drilling with cash flow provided by the H2 "flush"
production.
Net cash provided by operating activities was $316,000 for the first
quarter ended March 31, 1996, compared to $45,000 for the same period in 1995.
The substantial increase in 1996 operating cash flows was primarily due to
higher oil prices and the 37% increase in production provided by the Fossum H2
horizontal well. Cash was also utilized to make payments of $392,000 for
additions to property, plant and equipment and $128,000 for payments on
long-term debt.
The Company did not make any significant proved property acquisitions
in the first quarter 1996. 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 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.
A. Exhibits
Exhibit 27. Financial Data Schedule
B. Reports on Form 8-K
No reports on Form 8-K were filed during the fiscal quarter ended
March 31, 1996.
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 13, 1996
/S/ J. P. Vickers
J. P. Vickers
Chief Executive Officer
Chief Financial Officer