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GeoResources Inc.

Wed, 10 Dec 2008|

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Automatically Generated Transcript (may not be 100% accurate)

Thank you to all for having me here let me tell you a little bit about -- -- resources. Course forward looking statements. -- Got a little frog in my throat today so. -- -- the programs via. It. He investment highlights GR resource truth is that we're an experienced management team. I've had a couple of public companies in the past and a couple of private companies that we are. Are always able to build up and and turning to cash in profits for our shareholders. We are -- strategically located in now in diverse basins as you'll see throughout this diversity. And staying power are a big part of -- Business strategy. We operate -- typically 80% or more of everything we do. It's going back to the management team -- second the folks on the staff have been with me from. 52. To twenty years through two or three different companies. So the staff knows the drill knows what we're supposed to dude knows how to create value mayor -- there in the past. We have significant upside in our portfolio. We have an ongoing track record of developing new prospects and so forth for considerable growth continued growth. And we'll have a strong and we have a strong financial position. This next slide give you sort of our footprint. You're excuse me for being a little bit a rare speak. -- resources is a little bit different than many of the other small cap and micro cap companies. In that. You probably need to consider us slightly meaning -- -- any. A company of that nature. We tend to bill a lot of staying power cash flow reserves. As you'll see your financial position and a moment. And then and then we expand our drilling based -- our operations all of the same time we hide reader program sets and so workers except that team's been here before. We operate majority of what we do and we have a full complement of technical and administrative land and their regulatory type of people. As of October Warren. Proved reserves totaled about twenty point one million barrels. About 55%. -- you'll see that chart back that about 75%. Of that is our directing -- And we've been known to promote in industry partners and and financial partners were known for our technical and administrative capabilities -- our operations. So about five million BO we have that has spread across a couple of partnerships -- -- talk about. -- channel -- as of that warrant was in the vicinity of 43035. Million dollars. I have the foot -- tell you. That is priced at 96 dollars and 740 which -- current ridiculous today of course. But we put out these types of in this type of information so that folks can compare us to the last ten K and that was the pricing at that time. At today's price range and so forth that obviously it's probably 150 your 200 million dollars less than that but the PV ten value. At today's price there. Without any upside potential which I'll talk about clearly exceeds our enterprise value. Our margin not really counting the upside potential that there. We have Bob quite a large acreage position the preponderance. Of our acreage is held by production. -- you see. This is the way we operate. The next slide. Gives you a little bit of our financial position are using around our recently Arnold -- Q. As ice had not been doing this long term and you can tell from the great hair and out. Markets come markets -- prices go -- prices going down like starter for myself and 84 we didn't have hedging capabilities so. So I've got this mentality and building staying power and financial stability within a company and -- we grow. -- -- earlier were a little bit different than some of the the micro caps in this market apps out there. You know. While we have three large acreage position and a lot of our opportunity our portfolio we're not one of these guys that have 4500000. Acres. With no cash flow no proved reserves no balance sheet no access to capital. So we build a lot of staying -- we're doing. And -- so we've got twenty some odd million dollars of cash we've got to a strong equity position. You know before the meltdown I don't know what it is maybe it's just day in tuition but I just felt a little bit -- tightening in the credit markets in the capital markets we raise some capital at a very opportune time. In -- June. Starting in late August I started putting banks together wanted to know what we can do in terms of increase borrowing base that process was going forward through the home melt down here. And thank -- -- started at our borrowing base is actually gone up we have a hundred million dollar. Borrowing base on a 200 million dollar facility. Are parlance of show you that are crossed the dead capsules very reasonable with the spread of like. One point 752 to her hair for 2.2 five over Libor. Cigarette point six million bucks fifty million dollars -- the capacity and a lot of cash flow. This slide apparently give you a little bit of a rundown of RRR. Operating. We had down. Several five million dollars -- revenue for the first nine months of the year seventeen million dollars in net income 44 million dollars or even Dax. That's gonna go -- down of course with the pricing. We do we have hedge probably in the vicinity of 50% of our production -- edges are contributing now. And I I don't think you have to be a financial analyst so this is not insider information to calculate what I'm gonna tell you. But. If you just assume that our production stayed flattery and reduced by 10% are gonna happen. And then you put today's price -- -- and so on we'll still have. You know 7080 million dollars of revenue next year and thirty -- forty million dollars cash flow positive net income. I am an accountant by training and I've been hanging out with the oil and gas guys all my life so I've run these calculations that thirty bucks okay. I'd just like in 1998 I ran the calculations at ten dollars. We survival overall we -- where all of the good times and we do very well -- the bad times so we're looking at. Opportunities here. Growth chart just just kind of tells you where we are. And and where we're going. Next chart talks about -- capital -- -- -- gotta get these aren't hopefuls tuned up one of these days because I can't see that. Right here I think that's normal work -- of this thing here so I apologize for a little confusion from north American Fork. But our capital budget this is a two year capital budget. In our press releases. -- said that we are not to reducing our capital budget -- last board meeting we had extensive discussion about increasing capital budget. Our cash flows are strong our resources are strong. Pop the beauty of our capital budget however is. Virtually two thirds of everything that's in our capital budget is held by production. So even in a continuing. And deteriorating. Commodity price credit capacities so on and so on and we've got that all wired and -- proceed and we will not lose opportunities and in fact. Just like in 98 and just like in 86 and just like in early 2000 whatever was 0102 or whatever have you. We're looking at this market to really make some handy in terms of new acquisitions and new opportunities acreage -- -- are coming down. Drilling costs are coming down. The cost of two dealers and -- and so on just just went crazy in the last through your performance that starting come down so if we can operate like we did. In 98 nearly 2006. We're going to generate drum up some opportunities. So this slide shows our marriage -- history. A we've always operated in Texas Oklahoma and Louisiana the -- aside from the staying power in the cash flow and so -- Was to have a combination of long life predictable reserves and high impact kind of stuff alarm went off -- wouldn't have well. Like some of our chalk wells -- march 2 -- well in south Louisiana that comes actually -- twenty million day. It's adding something to your cash flow and so forth but the longevity of the reserves. And our hedging. Philosophy. Is what Unger writes our capital development program and under writes the staff and the reason I've been able to keep these people for five to twenty years -- different organizations. And and so -- that we all know that drone that's the way we operate we generate the staff we don't draw a line -- we don't PG NA in Baghdad. And we're here to stay. -- Hampton. -- Hampton and checks or work prior public companies that we built up and and sold as were always thinking about share value and liquidity and our share price. Eight rock was a public company that was financial disaster that I didn't create but I took over after we sold -- -- or Alter ocean. And we liquidated that over a period of time. Got the investors the majority the vast majority of their money Barack and we made some -- along the way. Our management team. And I started southern -- and southern bay GO re sources and Chandler came together in early 2007. To form -- now is GOP sources. So you know here we are in this environment of low prices limited credit capacity. Limited access to capital I'm -- and you need him. Access to equity -- all. Partnership -- all bank capital and cash flow and it's a result of the performance that this team. Has achieved for those types of investors over the years now. So what -- our business strategy is our portfolio just right. Well. You know the whole idea aside from the financial stuff that I talked about. Was that. We're not solely an expiration company. And we are not solely in acquisition company I think the following -- expiration of smart company of the world breast. And apart and do his acquisitions as small company -- -- slow day. So -- So we trying to move our portfolio back and forth with the markets in the first time I'm telling you we are an acquisition company. But we will continue. With our capital budget. Obviously. We're we're well funded we have access to capital and so -- -- -- obviously -- just have to believe me that. But what I'm telling you here is you've got any tired we -- Indians out there -- got any asset acquisitions acreage positions. -- and any opportunities at Cerro. Are principally been going to these conferences talked all the investment bankers and find new opportunity because Catholics -- -- Q are capital budget is that two thirds of its held -- production. And we can now we can slide things for good opportunities. I'm -- breezed through these next two slides which gives you. An overview of our southern region -- the region. As mentioned at the -- it's to have longevity. Of reserves that you can underpin. Your production operations with. You -- continuing activities. And high impact. The yellow dots on there. Or where we have partnership operations. And we have to partnerships with that would G. And that we've done this kind of thing in the past I'll talk about -- -- moment. But -- the golf Carlos we have. What is a significant. Drilling program along the -- -- room that I believe has additional exploratory opportunities. We have to. And we're fixing commence a third one. Two sizable 3-D for high impact exploration which -- talk about. And then we have some -- some. Lower risk. Good potential. Somberly economic data for your thirty bucks -- -- or whatever development projects. In our northern region and -- the red dots. -- Would GO resource has had to begin work about 375400. Barrels a day I think we've got that that what we took -- resources over. They had about three million barrels of proved reserves shallow my -- mission canyon that kind of stuff we felt that there was considerable horizontal drilling opportunities within the -- reserves. And there was considerable water slide and pressure maintenance opportunities and we felt that the three million barrels of proved that they had. You know that when you add in the two -- and three -- reasonably there was twice that much there. If you read our press release as you can see that we're developing up those opportunities we talk about. The yellow is one of the projects that we do not operate when I put GO together. The Bakken shale was in early 2007. The Bakken shale was just starting to take off. And we enter into a joint venture with -- and exploration and that. For lot of information out there on the -- are present I wish I had four times as much Barkin as I do but it's going to be a good program force. Next to slide show -- -- -- partnership operations as I mentioned we have to partnerships with would GE. I was just presenting -- in. We've done I've been several deals would EG over the course of -- My career. We always hold a direct interest in everything we acquire. We always try to be an operator but sometimes likened these two cases we bring in a strong financial partner -- of the capital. And and so in addition to the direct working interest that we -- all. -- in both of these partnerships we are the operator the general partner and having 2%. General partner interest which once we -- -- or preferential rate of return. Increases to at 36 or 37%. This table kind of -- out to the numbers that -- Romney are very first slide shows are direct interest reserves and then our partnership reserves. And then it talks about it shows what are upside potential. -- talked about that on the next line. It's like I've got about five more minutes bomber crews from these things pretty quickly there is a great deal. We worked really hard hitting a lot of information. Into the marketplace there's a great deal of information or press releases are taking the easy keys and -- As far as the capital budget goes. You remember surged from about staying power you wanna live to fight again if you think -- company's ever gonna drill that hole work. -- lower if it works you -- good and if it doesn't you're dead. We we never do that. So we have a vast array. Low risk solid. Economic. Or oil and gas opportunities from developing the Bakken shale -- -- maintenance. To. To water floods as -- said to horizontal drilling to the Austin -- and things along those lines. And then we have some high impact exploration -- quarantine Berry and things mark. Are more stressed that what we have been here -- an eight million barrels of upside is the lower and of the risk spectrum on the to PP and three. And our disclosures you'll see that there's much more potential associated with these assets plus we have other plays in the house that were developing. That for competitive reasons we have not spoken about it. Okay I'm gonna blow through some of these -- -- relatively quickly. Every knows about the Procter and we've got a small interest in ten or 12% 15% from 26000 acres. What that means is that we'll end up with probably six to 89%. Interest in unit -- blocks. And we'll probably end up with fifty to sixty wells we're looking to expand our position in the -- particularly. Narrow. That a lot of people are cutting back their capital expenditures and acreage prices are coming -- This next line. Shows are Austin -- playing. This is also indicative of the way we operate we've been drilling horizontal Austin chalk wells since 1991 in fact we were drawings from Austin chalk wells Frances Marie and I. And he's been with me almost twenty years they -- back in the early ninety's even before Chesapeake -- -- PRC we're doing. This is a property that is in the partnership with. With that GE. We we -- producing asset base we are expanding the acreage position drove higher channel wells we have a 100% success rate these are. 141000 foot wells and we're getting to. Horizontal lateral throughout -- -- economic. We've taken this partnership from 28 million cubic feet of gas today to 55 million cubic feet yesterday -- it is just seeing monsters now. Now particularly. When you factor in -- all -- the results but the fact that we are earning a lot more than we pay for. The important part aside from that of this line however. Is that. When we go into an area out. We want reserves that we can produce and we can develop while we -- -- the expiration. So I'm using this just there's an example. Okay. There's eight you know. Prices of gas is moved down a preacher -- but there was always an emerging -- which -- -- statistically which French downward in the -- -- here. We've got some 40000 acres and if that trend of grown ups wherever. Much more importantly however some of the bigger companies like petrol popular hatching in particular. Art art testing and drilling what's known as the -- -- shale which is a -- that's right below the trial. When you're growing truck -- wanna stay on because -- -- -- mechanically. So we're just gotten back. We got 40000 acres held -- production leases that aren't going anywhere and -- open like -- that petrohawk and Apache developing neagle for shale play and show us. What it is. Similarly in our children ranch play which -- I don't have a slide on. But was in that table. We've got 121500. Acres in in a maverick counting. And Jim sick man at that TX CEO. He's trying to prove up the pierce -- shell out there -- so we're -- him -- just talked with him last week at a conference in New York. And we're just open like -- successful liquor store -- as we might have 121000 acres of itself. Take a look at the gray -- again we know where these trends are growing we -- staying power to the analogy. And we develop -- the assets where we hopefully wait for good things to happen. Oklahoma there's a lot of stuff out there we've added a hundred drilling locations up and Oklahoma. Quarantine bay I've been -- in this thing for five years and just as I had an all put together Hurricane Katrina wiped it out there was nothing left -- so it's been rebuilt. The quarantine bay field. Is out. Has produced. Up about 101000 feet has produced 101005. Has produced a 180. Million barrels and 280 -- -- BC. We've got 33 to 36% of the deep rights below 101500. Feet report -- -- It's -- been interpreted we hope control a couple of deeper prospects next year. And and in south this doesn't sound like much right Rocky Mountains or what. Signals sent up there and in the Rockies and so on but we're more than 141000 acres art production which is a huge acreage position himself -- Next two projects are shallow. North Dakota. Pressure maintenance and horizontal drilling solid solid economics. So with all that's. We've had a couple of private groups -- -- With all that's. Investment our -- Experienced management team and rarely -- good technical and operating staff. Strategically located in major basins. More more conventional. Resource which you know -- Conventional opportunities are not necessarily its price sensitive as one of the resource plays. Higher level of operating and technical control. Track record history we've done this before. And were all laughs sizable shareholders that. That both through our sweat equity -- -- options and my significant investments that management is made in terms of hard cash into this company. So what that I think there's a break our -- -- -- -- went two minutes over. -- bearish on operator.

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