GeoResources Doubles Reserves and Production Base

GeoResources has acquired all of the limited partner interest in an affiliated partnership, from an undisclosed financial institution, for $91.1 million.

This acquisition effectively doubles the reserves and production base of the company and includes oil and gas properties located in Louisiana, the Gulf Coast, South Texas, the Permian Basin and the Black Warrior Basin.

As of October 1, 2007, the acquired proved reserves are estimated, by the company, at 16.3 Bcf and 4.9 MMbbl or 7.6 MMboe and current production from the properties is 5,194 Mcfd and 1,096 bo/d or 1,962 boe/d.

The company was the general partner of the affiliated partnership and operator of a majority of the properties, and accordingly, no additional staffing is required to operate the properties. The company intends to dissolve the partnership in the normal course of business. In addition, the company expects to divest certain existing and acquired non-core properties.

In connection with the transaction, the company paid approximately $12.95 million to unwind certain commodity price hedges and, in addition, the company assumed certain natural gas hedges with an estimated current unwind cost of approximately $4.8 million. The majority of those hedges apply to 2009, and the company will consider replacing those hedges.

Further, in order to attract its financing and maintain predictable cash flows, GeoResources entered into new commodity price hedges, for four years commencing January 1, 2008, for approximately 77% of projected production, from currently producing reserves excluding expected divestitures.

The net cost of the oil & gas reserves acquired was approximately $97.4 million and was funded with cash and borrowings of $96.0 million from an amendment and restatement of the company's Senior Secured Revolving Credit Facility, which was underwritten by Wachovia Capital Markets, LLC, as sole lead arranger and sole book runner. The increased $200 million Facility, has an initial available borrowing base of $110 million.

"This acquisition is immediately accretive and doubles the size of the company in terms of reserves, production, revenues and cash flow," said Frank A. Lodzinski, CEO of GeoResources. "Importantly, it can be operated without additional staffing. Further, the acquisition has been financed entirely with reasonable levels of senior secured debt under our increased Facility, at favorable interest rates. We have also entered into commodity price hedges to take advantage of high oil prices and to negotiate favorable financing terms. We expect to sell or trade certain properties to reduce debt, streamline operations and to focus our personnel on the upside in our portfolio and generate additional opportunities for growth."