GeoResources: All bets are on

It’s not always easy to figure out which horses to back in the exploration and production sector as oil and gas prices remain at high levels. Analysts are trying hard to keep up with the wide array of companies, but have trouble covering all promising prospects.

One company that’s pulling ahead of the pack is GeoResources, Inc. (Nasdaq:GEOI). The small cap, which has properties in Wyoming, North Dakota, along the Gulf of Mexico and has targeted Oklahoma for expansion, was No. 31 on Fortune Small Business’s list of the 100 fastest-growing small companies last month.

It has other fans waiting in the stands. In June, GeoResources once again tapped into General Electric Co.’s (NYSE:GE) deep pockets when it partnered with GE Energy Financial Services to spend up to $90.5 million to acquire and develop new properties in Oklahoma. GeoResources and its predecessor companies have partnered with the GE unit twice before.

C.K. Cooper initiated coverage in February and subsequently upgraded its rating on July 1 to a “buy” earlier this month after the GE deal and a new operating report from the company. Analyst Joel Musante raised his NAV range for the firm to $20.91 to $23.12 per share, from $18.39 to $21.11, and raised the target price to $22 from $20.

In the Oklahoma deal, GeoResources functions as general partner with the GE unit and will boost its share of the income from the properties to 35% from an initial 2%, once capital costs are covered and certain hurdles reached. (GeoResources also directly acquired 18% of the Oklahoma properties.)

Commenting on the structure of the Oklahoma deal, Musante said, “This type of structure has been beneficial to GEOI in the past.” In one of the earlier deals with GE, GeoResources is the general partner where the two companies are developing Austin Chalk drilling opportunities in the Giddings Field in central Texas. Musante estimates the value of GeoResources’ general partnership interest in that venture . . .

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