8-K 1 thirdqtr2007pr.htm 3RD QTR 2007 RESULTS PRESS RELEASE thirdqtr2007pr.htm
 
______________________________________________________________________________
 
 
SECURITIES AND EXCHANGE COMMISSION
 
Washington, D.C. 20549
 
FORM 8-K
 
 
CURRENT REPORT
 
 
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
 
Date of Report (Date of earliest event reported): November 12, 2007
 

GEORESOURCES, INC.
(Exact name of registrant as specified in its charter)

 
 
 
 
 
COLORADO
 
0-8041
 
84-0505444
 
 
  
 
  
(State or other jurisdiction
 
(Commission
 
(IRS Employer
of incorporation)
 
File Number)
 
Identification No.)

110 Cypress Station Drive, Suite 220
Houston, Texas 77090
(Address of principal executive offices) (Zip Code)

(281) 537-9920
Registrant’s telephone number, including area code

Not Applicable
 
 
(Former Name or Former Address, if Changed Since Last Report)

 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
 
___ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
___ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
___ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
___ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 

 
 

 
______________________________________________________________________________
 
 

 

On November 12, 2007, GeoResources, Inc. issued a press release announcing financial results for the third quarter and nine months ended September 30, 2007.  A copy of the press release is furnished with this report as Exhibit 99.7, and is incorporated herein by reference.

The information in this report is being furnished, not filed, for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and will not be incorporated by reference into any filing under the Securities Act of 1933, as amended.


 
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
 
 
 
(d)
 
Exhibits:
 
 
 
 
 
 
 
 
 
The following exhibit is included with this Current Report on Form 8-K:

 
 
 
Exhibit No.
 
Description
 
 
 
99.7
 
GeoResources, Inc. Press Release dated November 12, 2007.


 
2
 

 
SIGNATURE
 
 
Pursuant to the requirement of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
 
GEORESOURCES, INC.
 
 
 
 
 
/s/ Frank A. Lodzinski
 
 
 
 
 
By: Frank A. Lodzinski, President
 
 
  
 
Date: November 14, 2007
 


 
3
 

 
EXHIBIT INDEX
 
 
 
 
Exhibit No.
 
Description
 
99.7
 
 
GeoResources, Inc. Press Release dated November 12, 2007.

4
 
EXHIBIT 99.7
Contact:  Cathy Kruse
Telephone: 701-572-2020 ext 113
cathyk@geoi.net
FOR IMMEDIATE RELEASE

GeoResources, Inc. Reports Significantly Increased Net Income for the Third Quarter over the Second Quarter of 2007

Houston, Texas November 12, 2007 – GeoResources, Inc., (NASDAQ:GEOI), today announced its operating results for the three month and nine month periods ended September 30, 2007. The Company announced net income, for the third quarter, of $1,412,000, or $.10 per share, on revenue of $8,635,000. Earnings before interest, taxes, depreciation, depletion and amortization (EBITDA) for the quarter was $4,100,000. The operating results represent a significant increase over the second quarter of 2007.

Management advises interested parties that the Company consummated a merger (“Merger”) in April 2007 and current period earnings and related information contained in this release are not entirely comparable to corresponding  periods in 2006 for several reasons including: (1) the financial statements presented for corresponding  periods in 2006, in accordance with generally accepted accounting principles, are those of the largest party to the Merger, Southern Bay Oil & Gas LP (‘Southern Bay”), which was a private partnership and not a taxable entity, therefore no income tax expense was reported in 2006, (2) Southern Bay’s operating results in 2006 included significant non-recurring income and (3) the combined entity incurred significant charges related to the Merger in 2007, which management believes are largely non-recurring.

For further clarification, management also advises that the results announced herein for the periods in 2007 do not include the recently announced acquisition of producing oil and gas properties, which effectively doubles the size of the Company in terms of reserves, production and cash flows.

Accordingly, interested parties should review (1) the SEC Form 10-QSB for the period ended September 30, 2007, which discusses the Merger and the recent acquisition, (2) the press releases issued on October 18, 2007 and October 23, 2007 related to the aforementioned acquisitions and operations, respectively and (3) all related SEC filings.

Subject to the above comments, GeoResources is reporting the results of operations for the three month and nine month periods ended September 30, 2007 and corresponding periods in the prior year. For the third quarter 2007 net income was $1,412,000, or $.10 per share, on revenue of $8,635,000. Third quarter 2006 net income was $1,945,000 on revenue of $4,927,000.  Income before income taxes for the quarter was $2,346,000 in 2007 versus $1,945,000 in 2006.  EBITDA for the third quarter of 2007 was $4,100,000.  EBITDA was $2,814,000 for the third quarter of 2006.

Net income for the nine months ended September 30, 2007 was $949,000 or $0.08 per share, on revenue of $21,038,000. Year to date net income was reduced by significant charges related to the Merger totaling $2,904,000.  As shown in the table below, such charges include the actual costs of the Merger and non-cash charges related to equity based compensation and net deferred income taxes.  Reported net income for the nine months ended September 30, 2006 was $4,688,000, on revenue of $13,191,000.  Income before income taxes for the first nine months of 2007 was $3,738,000 and $ 4,688,000 for the similar period in 2006.

Without any adjustments for the non-recurring charges shown below, EBITDA for the first nine months of 2007 was $8,707,000. EBITDA was $7,035,000 for the similar period in 2006.  Without certain non-recurring charges associated with the Merger, as listed in the table below, EBITDA for the first nine months of 2007 would have been $10,056,000.  See the table below for a reconciliation of actual net income to EBITDA for the respective periods.

In the third quarter of 2007, natural gas sales totaled 330 MMcf and were 136 MMcf in the third quarter of 2006.  Oil sales for the third quarter of 2007 totaled 88 Mbbls and were 47 Mbbls in the third quarter of 2006.  The average realized price of natural gas was $5.63 per Mcf for the third quarter of 2007, or 12% less than the third quarter of the prior year.  The average realized price of oil was $64.08 per barrel or 9% more than the third quarter in the prior year.

For the nine months ended September 30, 2007, natural gas sales totaled 883 MMcf or 89% greater than the 467 MMcf sold during the first nine months of 2006.  Oil sales for the first nine months of 2007 increased 61% to 216 Mbbls from 134 Mbbls in the first nine months of 2006.  The average realized price of natural gas was $6.26 per Mcf for the first nine months of 2007 or 11 % less than the first nine months of the prior year.  The average realized price of oil was $58.40 per barrel or 5% more for the first nine months of 2007 than the first nine months in the prior year.
 
The significant increases in production in the three and nine months periods ended September 30, 2007 over the same periods of 2006, are a direct result of the Merger, certain producing property acquisitions and drilling activities , offset by production declines in Gulf Coast wells.
 
Frank A. Lodzinski, President and Chief Executive Officer of GeoResources, Inc., said, “We are pleased to report that our earnings for the third quarter of 2007 increased over the second quarter. Our earnings and cash flows from continuing operations have increased as a direct result of our Merger, acquisition and drilling activities. We expect increased future earnings as a result of our recently announced producing property acquisition, which closed in October 2007.  Fiscal 2007 has been a transitional and defining year for the Company.  We now produce over 3,400 BOE per day. Having built our reserve and cash flow foundation, we can now focus our attention to our capital expenditure program and further expansion of our acreage and drilling inventory. In addition, we will continue to search for accretive acquisitions and mergers.  We believe our diversified approach will provide continued profitable growth for the Company.
 
                The following tables reconcile our EBITDA to our reported net income for the periods indicated:
 
   
Three Months Ended September 30,
  
   
2007
    
2006
  
EBITDA (1)
            
             
Net income
   $
1,412,091
     $
1,945,051
  
Add back:
                
Interest expense
    
25,096
      
135,958
  
Income tax (2)
    
934,376
      
-
  
Depreciation, depletion and amortization
    
1,728,336
      
732,656
  
                 
EBITDA
   $
4,099,899
     $
2,813,665
  
                 
                 
                 
   
Nine Months Ended September 30,
  
   
2007
    
2006
  
                 
Net income
   $
949,466
     $
4,687,652
  
Add back:
                
Interest expense
    
380,423
      
174,074
  
Income tax (2)
    
2,788,075
      
-
  
Depreciation, depletion and amortization
    
4,589,243
      
2,172,856
  
                 
EBITDA
   $
8,707,207
     $
7,034,582
  
                 

(1) EBITDA is defined as earnings before interest, income taxes, depreciation, depletion and amortization, EBITDA should not be considered as an alternative to net income (as an indicator of operating performance) or as an alternative to cash flow (as a measure of liquidity or ability to service debt obligations) and is not in accordance with, nor superior to, generally accepted accounting principles, but provides additional information for evaluation of our operating performance.
(2) Includes deferred income tax expense of $381,217 and $2,138,885 recognized in the quarter and year to date periods, respectively.  The effect of Southern Bay becoming a taxable entity gave rise to a nonrecurring deferred tax of $1,555,000, which, as required under generally accepted accounting principles, was charged to expense in the second quarter.

Non recurring charges:

During the nine months ended September 30, 2007, the Company recognized certain significant charges which it believes are largely non-recurring.  The table lists such costs.

       
 Nine Months Ended
       
September 30, 2007
         
 
Non-cash equity based compensation (1)
    
 $                       523,598
 
Professional fees
    
                          467,472
 
NASDAQ Global Market entry fee
    
                          100,000
 
Merger related proxy costs
    
                            86,937
 
Western Star Drilling (2)
    
                            96,114
 
Other
    
                            75,000
 
Subtotal
    
                       1,349,121
 
Income taxes (3)
    
                       1,555,000
         
 
Total
    
 $                    2,904,121

(1)  
Represents non-cash required charge to expense resulting from acceleration of certain vesting requirements associated with Southern Bay’s equity incentive plan which was eliminated pursuant to the Merger, and stock bonuses issued to employees of GeoResources.
(2)  
Costs associated with sold operations.
(3)  
Represents a nonrecurring charge, attributable to Southern Bay becoming a taxable entity.  Generally accepted accounting principles require that when an entity’s tax status changes from nontaxable to taxable, the deferred taxes related to differences in the accounting basis of net assets and their tax basis be recognized in the period of that change in status.

About GeoResources, Inc.

GeoResources, Inc. is an independent oil and gas company engaged in the acquisition and development of oil and gas reserves through an active and diversified program which includes purchases of reserves, re-engineering, and development and exploration activities, currently focused in Texas, Louisiana, North Dakota, Montana and Colorado.  In April 2007, the Company completed its Merger with Southern Bay and Chandler Energy, LLC.   The Company conducts its exploration development and production operations through wholly owned subsidiaries.  Activities in the Southern Region are conducted through Southern Bay Energy, LLC, located in Houston, Texas and Northern Region operations are conducted through G3 Energy LLC, located in Denver, Colorado.  The Company also maintains a regional office in Williston, North Dakota.  For more information, visit our website at www.georesourcesinc.com.

Forward-Looking Statements
Information herein contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which can be identified by words such as "may," "will," "expect," "anticipate," "estimate" or "continue," or comparable words.  All statements other than statements of historical facts that address activities that the Company expects or anticipates will or may occur in the future are forward-looking statements.  Readers are encouraged to read the SEC reports of the Company, Readers are encouraged to read the December 31, 2006 Annual Report on Form 10-KSB, the March 31, 2007 and the June 30, 2007 quarterly reports on Form 10-QSB, and the proxy statement dated February 23, 2007 and any and all other relevant documents filed with the SEC regarding information about GeoResources for meaningful cautionary language in respect of the forward-looking statements herein.  Interested persons are able to obtain free copies of filings containing information about GeoResources, without charge, at the SEC’s Internet site (http://www.sec.gov).

 


 
CONSOLIDATED BALANCE SHEETS
  
(unaudited)
  
   
September 30,
    
December 31,
  
   
2007
    
2006
  
             
ASSETS
            
Current assets:
            
Cash
   $
17,372,026
     $
6,216,822
  
Accounts receivable:
                
  Oil and gas revenues
    
15,505,694
      
7,201,902
  
  Joint interest billings and other
    
5,543,145
      
2,294,237
  
Accounts receivable from affiliated partnerships
    
3,484,948
      
1,742,174
  
Notes receivable
    
860,000
      
-
  
Prepaid expenses and other
    
466,734
      
352,515
  
 Total current assets
    
43,232,547
      
17,807,650
  
                 
Oil and gas properties, successful efforts method:
                
Proved properties
    
83,561,738
      
34,204,118
  
Unproved properties
    
4,369,539
      
1,643,041
  
Office and other equipment
    
996,574
      
292,297
  
Land
    
96,462
      
96,462
  
     
89,024,313
      
36,235,918
  
Less accumulated depreciation, depletion and amortization
     (9,596,338 )     (5,007,095 )
                     Net property and equipment
    
79,427,975
      
31,228,823
  
Other assets:
                
Equity in oil and gas limited partnerships
    
3,356,493
      
1,517,430
  
Notes receivable and other
    
1,323,174
      
113,123
  
    $
127,340,189
     $
50,667,026
  
LIABILITIES AND STOCKHOLDERS' EQUITY
                
Current liabilities:
                
Accounts payable
   $
5,944,391
     $
5,225,291
  
Accounts payable to affiliated partnerships
    
5,934,142
      
2,201,141
  
Revenues and royalties payable
    
16,798,617
      
7,347,702
  
Drilling advances
    
2,888,180
      
2,120,770
  
Accrued expenses payable
    
1,754,204
      
915,445
  
Commodity hedges
    
941,987
      
1,685,938
  
     Total current liabilities
    
34,261,521
      
19,496,287
  
Long-term debt
    
-
      
5,000,000
  
Deferred income taxes
    
3,725,420
      
32,535
  
Asset retirement obligations
    
5,198,656
      
2,478,205
  
Stockholders' equity:
                
Common stock, par value $.01 per share; authorized
                
    100,000,000 shares; issued and outstanding: 14,703,383
                
    shares in 2007 and 4,858,000 shares in 2006
    
147,034
      
48,580
  
Additional paid-in capital
    
79,558,527
      
16,848,643
  
Accumulated other comprehensive income
     (935,647 )     (1,679,388 )
Retained earnings
    
5,384,678
      
8,442,164
  
                      Total stockholders' equity
    
84,154,592
      
23,659,999
  
    $
127,340,189
     $
50,667,026
  



GEORESOURCES, INC. and SUBSIDIARIES
  
CONSOLIDATED STATEMENTS OF OPERATIONS
  
(unaudited)
  
                         
   
Three Months Ended September 30,
    
Nine Months Ended September 30,
  
   
2007
    
2006
    
2007
    
2006
  
                         
Revenue:
                        
 Oil and gas revenues
   $
7,512,616
     $
3,661,985
     $
18,110,424
     $
10,687,455
  
 Partnership management fees
    
300,915
      
63,651
      
712,735
      
247,189
  
 Property operating income
    
399,803
      
368,090
      
1,082,093
      
766,560
  
 Gain (loss) on sale of property and equipment
    
-
      
20,454
       (15,218 )    
335,294
  
 Partnership income (loss)
    
115,856
      
36,320
      
329,203
      
116,619
  
 Interest and other
    
306,205
      
776,408
      
818,403
      
1,037,435
  
      Total revenue
    
8,635,395
      
4,926,908
      
21,037,640
      
13,190,552
  
                                 
 Expenses:
                                
 Lease operating expense
    
2,367,829
      
1,018,179
      
5,683,099
      
2,892,956
  
 Severance taxes
    
604,758
      
349,711
      
1,407,499
      
831,760
  
 Re-engineering and workovers
    
301,354
      
152,003
      
734,426
      
330,477
  
 Exploration
    
-
      
52,287
      
-
      
483,808
  
 General and administrative expense
    
1,258,361
      
729,709
      
4,505,619
      
1,982,844
  
 Depreciation, depletion, and amortization
    
1,728,336
      
732,656
      
4,589,243
      
2,172,856
  
 Hedge ineffectiveness
    
3,194
       (188,646 )     (210 )     (365,875 )
 Interest
    
25,096
      
135,958
      
380,423
      
174,074
  
      Total expense
    
6,288,928
      
2,981,857
      
17,300,099
      
8,502,900
  
                                 
 Income before income taxes
    
2,346,467
      
1,945,051
      
3,737,541
      
4,687,652
  
                                 
Income taxes:
                                
 Current
    
553,159
      
-
      
649,190
      
-
  
 Deferred
    
381,217
      
-
      
2,138,885
      
-
  
     
934,376
      
-
      
2,788,075
      
-
  
                                 
Net income
   $
1,412,091
     $
1,945,051
     $
949,466
     $
4,687,652
  
                                 
Net income per share (basic and diluted)
   $
0.10
     $
0.40
     $
0.08
     $
0.96
  
                                 
                                 
Weighted average shares outstanding (basic and diluted)
    
14,703,383
      
4,858,000
      
11,638,567
      
4,858,000