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 June 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 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 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 July 31, 1995
Common Stock 4,035,714 shares
(par value $.01 per share)
(12 pages total, with exhibits)<PAGE>
GEORESOURCES, INC.
INDEX
PAGE
NUMBER
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets. . . . . . . . . . . . . . . . . .3
(June 30, 1995 and December 31, 1994)
Consolidated Statements of Operations. . . . . . . . . . . . .4
(Three months ended June 30, 1995 and 1994
and six months ended June 30, 1995 and 1994)
Consolidated Statements of Cash Flows. . . . . . . . . . . . .5
(Six months ended June 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<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
GEORESOURCES, INC., AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, December 31,
1995 1994
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 111,940 $ 222,677
Trade receivables, net 530,714 493,595
Inventories 268,184 246,467
Prepaid expenses 16,490 17,273
Investments 11,972 20,972
Total current assets 939,300 1,000,984
PROPERTY, PLANT AND EQUIPMENT, at cost:
Oil and gas properties, using the
full cost method of accounting:
Properties being depleted 14,696,729 14,105,349
Properties not being depleted 129,068 134,330
Leonardite plant and equipment 3,196,633 3,173,533
Other 673,076 669,308
18,695,506 18,082,520
Less accumulated depreciation,
depletion and valuation allowance (13,706,887) (13,444,512)
Net property, plant and
equipment 4,988,619 4,638,008
OTHER ASSETS:
Mortgage loans receivable, related party 103,321 103,321
Other 80,690 54,041
184,011 157,362
$ 6,111,930 $ 5,796,354
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 513,093 $ 663,487
Current maturities of long-term debt 478,969 385,219
Accrued expenses 20,703 39,064
Total current liabilities 1,012,765 1,087,770
LONG-TERM DEBT, less current maturities 948,657 787,035
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 3,175,407 2,965,948
Total stockholders' equity 4,027,508 3,798,549
$ 6,111,930 $ 5,796,354
See Notes to Consolidated Financial Statements.<PAGE>
GEORESOURCES, INC., AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
OPERATING REVENUES:
Oil and gas sales $ 617,973 $ 464,554 $1,076,613 $ 758,526
Leonardite sales 191,876 191,332 345,488 363,341
809,849 655,886 1,422,101 1,121,867
OPERATING COSTS AND EXPENSES:
Oil and gas production 216,216 246,966 433,963 440,963
Cost of leonardite sold 158,025 124,565 296,753 267,217
Depreciation and
depletion 146,364 121,318 262,376 230,072
Selling, general and
administrative 81,846 70,704 167,401 155,020
602,451 563,553 1,160,493 1,093,272
Operating income 207,398 92,333 261,608 28,595
OTHER INCOME (EXPENSE):
Interest expense (29,199) (24,404) (61,409) (48,016)
Interest income 2,919 3,756 5,713 7,626
Other income and
losses, net 19,020 (2,883) 3,547 2,688
(7,260) (23,531) (52,149) (37,702)
Income (loss) before
income taxes 200,138 68,802 209,459 (9,107)
Income tax benefit
(expense) -- (12,000) -- 20,000
Net income $ 200,138 $ 56,802 $ 209,459 $ 10,893
EARNINGS PER SHARE:
Net income per
common share $ .05 $ .01 $ .05 $ --
Weighted average number
of shares outstanding 4,035,714 4,023,214 4,030,742 4,023,214
See Notes to Consolidated Financial Statements.<PAGE>
GEORESOURCES, INC., AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 209,459 $ 10,893
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and depletion 262,376 230,072
Deferred income taxes -- (20,000)
Changes in assets and liabilities:
Decrease (increase) in:
Trade receivables (37,119) (85,184)
Inventories (21,717) 46,989
Prepaid expenses and other 783 (12,028)
Investments 9,000 10,571
Income taxes receivable -- 18,000
Increase (decrease) in:
Accounts payable 152,902 66,831
Accrued expenses (18,361) (17,397)
Net cash provided by
operating activities 557,323 248,747
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (916,283) (190,551)
Other (26,649) (24,954)
Net cash (used in) investing activities (942,932) (215,505)
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 (159,628) (159,369)
Net cash provided by (used in)
financing activities 274,872 (59,369)
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS (110,737) (26,127)
CASH AND EQUIVALENTS, beginning of period 222,677 325,132
CASH AND EQUIVALENTS, end of period $ 111,940 $ 299,005
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for:
Interest $ 61,409 $ 48,016
See Notes to Consolidated Financial Statements.<PAGE>
GEORESOURCES, INC., AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. In the opinion of the management of GeoResources, Inc. (the "Com-
pany"), 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 June 30, 1995, and the results of operations and cash flows
for the three months and six months ended June 30, 1995, and 1994.
The results of operations for the periods ended June 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
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 connec-
tion 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.<PAGE>
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 and six months ended June 30, 1995, and the respective
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 Six Months % Change
Ended From 1994 Ended From 1994
June 30, 1995 Period June 30, 1995 Period
Oil and gas produc-
tion sold (BOE) 41,421 13% 73,833 9%
Average price per
BOE $ 14.92 18% $ 14.58 30%
Oil and gas revenue $ 617,973 33% $1,076,613 42%
Production costs $ 216,216 (12%) $ 433,963 (2%)
Average production
cost per BOE $ 5.22 (22%) $ 5.88 (10%)
Oil and gas production sold for the three months ended June 30,
1995, increased 4,600 barrels or 13% compared to the same period in 1994.
Production sold for the six months ended June 30, 1995, increased 6,200
barrels or 9% compared to the same period in 1994. Both of these increases
were primarily due to new production from the Company's Oscar Fossum H1
horizontal well (.61 net) that was drilled and completed in the latter
part of the first quarter of 1995.
Oil and gas revenue increased $153,000 or 33% for the three months
ended June 30, 1995, compared to the same period in 1994. This increase
was due to the 13% higher sales volume and 18% higher average price per
BOE in the second quarter of 1995 compared to second quarter 1994. Oil
and gas revenue for the six months ended June 30, 1995, increased $318,000
or 42% compared to the same period in 1994. This increase was due to the
9% higher sales volume and 30% higher average price per BOE that existed
in the first half of 1995 compared to 1994. The higher average oil prices
for the three months and six months periods ended June 30, 1995, resulted
from unusually low oil prices during the first quarter of 1994.<PAGE>
Production costs for the three months ended June 30, 1995, were
12% lower then the same period in 1994, due to lower workover operations
in the 1995 period. Production costs for the 1995 six months period were
essentially stable with the prior year. Production costs expressed on
a per equivalent barrel basis were lower in both the three months and
six months periods ended June 30, 1995, compared to the same periods in
1994, due to the lower production costs previously discussed and due to
the initial contribution of lower cost horizontal well production.
Leonardite Operations
Three Months % Change Six Months % Change
Ended From 1994 Ended From 1994
June 30, 1995 Period June 30, 1995 Period
Leonardite produc-
tion sold (tons) 1,985 (4%) 3,624 (8%)
Average revenue
per ton $ 96.66 4% $ 95.33 3%
Leonardite revenue $ 191,876 -- $ 345,488 (5%)
Cost of leonardite
sold $ 158,025 27% $ 296,753 11%
Average production
cost per ton $ 79.61 32% $ 81.88 21%
Leonardite production decreased 4% and 8%, respectively, for
the three months and six months periods ended June 30, 1995, compared
to the equivalent periods in 1994. Management believes these decreases
are the result of lower domestic natural gas drilling during the first
half of 1995 which reduced demand for the Company's leonardite products.
Leonardite revenue for the three months ended June 30, 1995,
remained steady compared to the same period in 1994 and decreased 5% for
the six months ended June 30, 1995, compared to the same period in 1994
due to the lower production discussed above. Fluctuations in average
revenue per ton for the three months and six months periods are due to
normal variations in the ratio of basic products to specialty products,
the latter having higher processing costs and selling prices.
Cost of leonardite sold increased 27% and 11%, respectively,
for the three months and six months periods. These increases were due
to unusually high equipment repair costs that were incurred in the second
quarter of 1995.
Consolidated Analysis
Total operating revenues increased 23% and 27%, respectively,
for the three months and six months periods ended June 30, 1995 compared
to the same periods in 1994. These increases were due to increased oil<PAGE>
revenues. Total operating expenses increased 7% and 6% for the three
months and six months periods of 1995, respectively, compared to the same
periods in 1994. This was primarily due to increased expenses for cost
of leonardite sold and oil and gas depletion, which increased because
of increased oil production. Operating income increased significantly
in the second quarter 1995 compared to second quarter 1994, due to higher
oil revenues.
Nonoperating expenses were higher in the six months period ended
June 30, 1995, due primarily to higher interest expense associated with
borrowings to fund the drilling and completion of the Oscar Fossum H1
and several small acquisitions. Nonoperating expenses were lower in the
1995 three months period, due to gains from oil price hedging activities
which offset the increased interest expense. The Company's management
plans to continue trading in the futures market to hedge against oil price
fluctuations.
No income tax benefit or (expense) is recognized in the three
months and six months periods ended June 30, 1995, because no tax is ex-
pected to be currently payable and there has been no net change in the
deferred tax liability.
The Company achieved net income for the second quarter, 1995 of
$200,000 or $.05 per share compared to the second quarter, 1994 net income
of $57,000 or $.01 per share.
Liquidity and Capital Resources
At June 30, 1995, the Company had negative working capital of
($73,000) compared to a negative working capital of ($87,000), at Decem-
ber 31, 1994. The Company's current ratio was .93 to 1 at June 30, 1995,
compared to .92 to 1 at year end 1994. This working capital deficit was
caused by the costs associated with the drilling and completion of the
Company's first horizontal well and the cost of several small acquisi-
tions. During the second quarter, the Company used a combination of cash
flow from operations and borrowings to pay drilling and completion costs
as they became due. Management believes the Company could return to a
positive working capital by the end of the third quarter of 1995 assuming
oil prices continue at current levels.
Net cash provided by operating activities was $557,000 for the
six months ended June 30, 1995, compared to $249,000 for the same period
in 1994. The increase in 1995 operating cash flows was primarily due
to higher oil prices and the 9% increase in production. Cash was also
utilized to make payments of $916,000 for additions to property, plant
and equipment and $160,000 for payments on long-term debt.
During the first six months of 1995, the Company borrowed $415,000
to finance the acquisition of interests in several properties and to pay
drilling and completion costs on the Oscar Fossum H1 as previously dis-
cussed. These funds were borrowed under the Company's existing $1,000,000
line-of-credit with its bank. Through June 30, total funds borrowed on
the line-of-credit were $765,000. 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.<PAGE>
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.
The Annual Meeting of the Registrant was held on June 22, 1995.
Directors elected were R. C. Vickers, Dennis Hoffelt, J. P. Vickers,
Jeff Greek, and Patrick Montalban.
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
June 30, 1995. <PAGE>
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.
August 11, 1995
/S/ J. P. Vickers
J. P. Vickers
Chief Executive Officer
Chief Financial Officer<PAGE>
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<PERIOD-START> JAN-1-1995
<PERIOD-END> JUN-30-1995
<CASH> 111,940
<SECURITIES> 11,972
<RECEIVABLES> 530,714
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