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, 1997.
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, 1997
Common Stock 4,060,714 shares
(par value $.01 per share)
GEORESOURCES, INC.
INDEX
PAGE
NUMBER
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets 3
(March 31, 1997 and December 31, 1996)
Consolidated Statements of Operations 4
(Three months ended March 31, 1997 and 1996)
Consolidated Statements of Cash Flows 5
(Three months ended March 31, 1997 and 1996)
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,
1997 1996
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 410,005 $ 754,888
Trade receivables, net 634,503 936,045
Inventories 240,091 251,499
Prepaid expenses 13,134 18,201
Investments 7,321 57,771
Total current assets 1,305,054 2,018,404
PROPERTY, PLANT AND EQUIPMENT, at cost:
Oil and gas properties, using the
full cost method of accounting:
Properties being amortized 16,531,576 16,450,061
Properties not subject to amortization 105,738 93,640
Leonardite plant and equipment 3,251,007 3,216,597
Other 695,990 693,641
20,584,311 20,453,939
Less accumulated depreciation, depletion
amortization and impairment (14,878,414) (14,708,047)
Net property, plant and
equipment 5,705,897 5,745,892
OTHER ASSETS:
Mortgage loans receivable, related party 103,321 103,321
Other 41,682 42,348
Total other assets 145,003 145,669
TOTAL ASSETS $ 7,155,954 $ 7,909,965
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 487,467 $ 1,343,677
Current maturities of long-term debt 283,200 283,200
Accrued expenses 165,975 186,064
Total current liabilities 936,642 1,812,941
LONG-TERM DEBT, less current maturities 927,297 998,097
DEFERRED INCOME TAXES 234,600 225,000
STOCKHOLDERS' EQUITY:
Common stock, par value $.01 per share;
authorized 10,000,000 shares; issued and
outstanding, 4,060,714 shares 40,607 40,607
Additional paid-in capital 829,757 829,757
Retained earnings 4,187,051 4,003,563
Total stockholders' equity 5,057,415 4,873,927
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 7,155,954 $ 7,909,965
See Notes to Consolidated Financial Statements.
GEORESOURCES, INC., AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
March 31,
1997 1996
OPERATING REVENUES:
Oil and gas sales $ 826,381 $ 683,309
Leonardite sales 192,974 184,177
1,019,355 867,486
OPERATING COSTS AND EXPENSES:
Oil and gas production 344,674 256,645
Cost of leonardite sold 171,885 167,079
Depreciation and depletion 170,367 168,992
Selling, general and administrative 115,808 124,083
802,734 716,799
Operating income 216,621 150,687
OTHER INCOME (EXPENSE):
Interest expense (26,728) (33,008)
Interest income 6,670 3,858
Other income, net 4,425 3,479
(15,633) (25,671)
Income before income taxes 200,988 125,016
Income tax expense 17,500 11,000
Net income $ 183,488 $ 114,016
Net income per common share $ .05 $ .03
Weighted average number of shares
outstanding 4,060,714 4,042,857
See Notes to Consolidated Financial Statements.
GEORESOURCES, INC., AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 183,488 $ 114,016
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and depletion 170,367 168,992
Deferred income taxes 9,600 11,000
Issuance of common stock as compensation -- 26,200
Other 548 548
Changes in assets and liabilities:
Decrease (increase) in:
Trade receivables 301,542 64,865
Inventories 11,408 (1,460)
Prepaid expenses and other 5,067 (2,635)
Investments 50,450 (26,521)
Increase (decrease) in:
Accounts payable 43,670 (30,767)
Accrued expenses (20,089) (8,510)
Net cash provided by
operating activities 756,051 315,728
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (1,030,252) (391,590)
Other 118 (2,651)
Net cash used in investing activities (1,030,134) (394,241)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt (70,800) (127,887)
Debt issue costs -- (2,936)
Net cash used in financing activities (70,800) (130,823)
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS (344,883) (209,336)
CASH AND EQUIVALENTS, beginning of period 754,888 392,078
CASH AND EQUIVALENTS, end of period $ 410,005 $ 182,742
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for:
Interest $ 26,728 $ 33,008
Income taxes 50 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, 1997, and
the results of operations and cash flows for the three month periods
ended March 31, 1997 and 1996.
The results of operations for the three month period ended March 31,
1997, 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,
1996.
2. Certain accounts in the prior-year financial statements have been
reclassified for comparative purposes to conform with the presentation in
the current-year financial statements.
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, 1996.
Results of Operations - Three Months Ended March 31, 1997 compared to Three
Months Ended March 31, 1996
Information concerning the Company's oil and gas operations for the
three months ended March 31, 1997, is set forth in the table below:
Oil and Gas Operations
Percent Increase
Three Months Ended (Decrease) from
March 31, 1997 1996 Period
Oil and gas production
sold (BOE) 45,091 2%
Average price per BOE $ 18.33 19%
Oil and gas revenue $ 826,381 21%
Production costs $ 344,674 34%
Average production cost $ 7.64 32%
per BOE
Oil and gas production sold increased by 825 barrels of oil equivalent
(BOE) or 2% compared to the quarter ended March 31, 1996. This increase was
due to new production from the Company's Oscar Fossum H3 horizontal well
(.67 net) that was drilled and completed late in the fourth quarter 1996.
Total oil production did not increase as much as the Fossum H3 horizontal well
produced because of harsh winter weather that curtailed production from some
of the Company's vertical wells during the first quarter of 1997. Oil and gas
revenue increased $143,000 or 21%. The revenue increase was due to the higher
volume of oil sold combined with a higher average oil price of $18.33 in the
first quarter of 1997 compared to $15.44 in the first quarter of 1996. Oil
and gas production costs increased $88,000 or 34%, due in part to the higher
oil revenue, which increased production taxes, but also due to higher winter-
related production costs. The '96-97 winter was extremely harsh in North
Dakota, and first quarter 1997 production costs were impacted by higher costs
for snow removal to keep lease roads open and higher propane costs associated
with the Company's oil treating facilities. Production costs on a per
equivalent barrel basis increased to $7.64 compared to $5.80 for the first
quarter 1996, an increase of 32%, due primarily to the higher winter-related
production costs.
Information concerning the Company's leonardite operations for the
three months ended March 31, 1997, is set forth in the table below:
Leonardite Operations
Percent Increase
Three Months Ended (Decrease) from
March 31, 1997 1996 Period
Leonardite production
sold (tons) 2,390 34%
Average revenue per ton $ 80.74 (22%)
Leonardite revenue $ 192,974 5%
Cost of leonardite sold $ 171,885 3%
Average production cost $ 71.92 (23%)
per ton
Leonardite revenues increased 5%, due to a 34% increase in the number
of tons sold and a 22% decrease in average revenue per ton. The 22% decline
in average revenue per ton was due to a much larger percentage of basic product
sales, which have lower selling prices. The 3% increase in cost of leonardite
sold resulted from the 34% increase in production coupled with the 23% lower
per ton average production costs. Average production costs declined, due
again to the larger percentage of basic product sales, which also have lower
processing costs. For the first quarter of 1997, the Company's leonardite
sales were almost entirely sales of basic product.
Consolidated Analysis
Total operating revenue increased $152,000 or 18%, due mainly to higher
oil prices and increased oil production. Total operating expenses increased
$86,000 or 12%, due to the higher oil and gas production costs previously
discussed. As a result of higher revenues, and to a lesser extent higher
expenses, operating income increased to $217,000 from $151,000. Total non-
operating expense declined to $16,000 from $26,000, due to somewhat lower
interest expense and higher interest income.
As a result of consolidated operations, the Company achieved net income
for the first quarter 1997 of $183,000 or $.05 per share compared to the first
quarter 1996 net income of $114,016 or $.03 per share.
Liquidity and Capital Resources
At March 31, 1997, the Company had positive working capital of $368,000
compared to working capital of $205,000 at December 31, 1996. The Company's
current ratio was 1.39 to 1 at March 31, 1997, compared to 1.11 to 1 at year
end 1996. The $163,000 increase in working capital in one quarter was
primarily due to the Company's reduction of accounts payables related to the
Fossum H3 horizontal drilling.
Net cash provided by operating activities was $756,000 for the quarter
ended March 31, 1997, compared to $316,000 for the same period in 1996. The
substantial increase in 1997 operating cash flows was primarily due to higher
oil prices and a substantial reduction of trade receivables. Cash was also
utilized to make payments of $1,030,000 for additions to property, plant and
equipment and $71,000 for payments on long-term debt.
Management believes its future cash requirements can be met by cash
flows from operations and its ability, if necessary, to borrow on the Company's
existing line-of-credit. Future cash requirements might also be provided by
possible forward sales of oil reserves or additional debt or equity financing.
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, 1996, 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 were filed during the quarter ended March 31, 1997.
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 9, 1997
/S/ J. P. Vickers
J. P. Vickers
Chief Executive Officer
Chief Financial Officer
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