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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q







|x | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ---------------------------------------------------------------------------------------

For the Quarterly Period ended March 31, 2009



| ̈ | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ----------------------------------------------------------------------------------------

Commission File Number  0-8041





LOGO

GEORESOURCES, INC.

(Exact name of registrant as specified in its charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Colorado                                                       |  | 84-0505444                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|110 Cypress Station Drive, Suite 220 Houston, Texas            |  | 77090-1629                          
|(Address of principal executive offices)                       |  | (Zip code)                          

(281) 537-9920

(Registrants telephone number, including area code)





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 registration was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.    Yes  x    No   ̈

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).    Yes   ̈    No  x

Indicated by check mark whether the registrant is a large accelerated file, an accelerated file, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated file, accelerated
filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):



|                                              |  |   |  |                           |  |  
|--------------------------------------------- |  | - |  | ------------------------- |  | -
|Large accelerated filer                       |  |  ̈ |  | Accelerated filer         |  | x
|                                              |  |   | 
|Non-accelerated filer                         |  |  ̈ |  | Smaller reporting company |  |  ̈
|                                             
|(Do not check if a smaller reporting company)

Indicated by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).    Yes   ̈    No  x

Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date.



|                                       |  |                           
|-------------------------------------- |  | --------------------------
|Class of equity                        |  | Outstanding at May 8, 2009
|Common stock, par value $.01 per share |  | 16,241,717 shares         









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TABLE OF CONTENTS



|                               |  |                                                                                                                     |  |   
|------------------------------ |  | ------------------------------------------------------------------------------------------------------------------- |  | --
|PART I  FINANCIAL INFORMATION
|                               |  |                                                                                                                    
|Item 1.                        |  | Financial Statements.                                                                                               |  |   
|                               |  |                                                                                                                    
|                               |  | Consolidated Balance Sheets as of March 31, 2009 and December 31, 2008.                                             |  | 3 
|                               |  |                                                                                                                    
|                               |  | Consolidated Statements of Income for Three Months ended March 31, 2009 and 2008.                                   |  | 5 
|                               |  |                                                                                                                    
|                               |  | Consolidated Statements of Stockholders Equity and Comprehensive Income for the Three Months ended March 31, 2009. |  | 6 
|                               |  |                                                                                                                    
|                               |  | Consolidated Statements of Cash Flows for the Three Months ended March 31, 2009 and 2008.                           |  | 7 
|                               |  |                                                                                                                    
|                               |  | Notes to Consolidated Financial Statements.                                                                         |  | 8 
|                               |  |                                                                                                                    
|Item 2.                        |  | Managements Discussion and Analysis of Financial Condition and Results of Operations.                              |  | 21
|                               |  |                                                                                                                    
|Item 3.                        |  | Quantitative and Qualitative Disclosures About Market Risk.                                                         |  | 29
|                               |  |                                                                                                                    
|Items 4.                       |  | Controls and Procedures.                                                                                            |  | 30
|                              
|PART II  OTHER INFORMATION   
|                               |  |                                                                                                                    
|Item 1.                        |  | Legal Proceedings.                                                                                                  |  | 31
|                               |  |                                                                                                                    
|Item 1A.                       |  | Risk Factors.                                                                                                       |  | 31
|                               |  |                                                                                                                    
|Item 2.                        |  | Unregistered Sales of Equity Securities and Use of Proceeds.                                                        |  | 31
|                               |  |                                                                                                                    
|Item 3.                        |  | Defaults Upon Senior Securities.                                                                                    |  | 31
|                               |  |                                                                                                                    
|Item 4.                        |  | Submission of Matters to a Vote of Security Holders.                                                                |  | 31
|                               |  |                                                                                                                    
|Item 5.                        |  | Other Information.                                                                                                  |  | 31
|                               |  |                                                                                                                    
|Item 6.                        |  | Exhibits.                                                                                                           |  | 32
|                               |  |                                                                                                                    
|                               |  | Signatures.                                                                                                         |  | 34



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GEORESOURCES, INC and SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In
thousands, except share and per share amounts)



|                                                          |  |               |         |   |                  |   |         |  
|--------------------------------------------------------- |  | ------------- | ------- | - | ---------------- | - | ------- | -
|                                                          |  | March 31,2009 |         |   | December 31,2008 |  
|                                                          |  | (unaudited)   |         |   |                  |  
|ASSETS                                                    |  |               |         |   |                  |   |         |  
|                                                          |  |              
|Current assets:                                           |  |               |         |   |                  |   |         |  
|                                                          |  |              
|Cash                                                      |  | $             | 7,059   |   |                  | $ | 13,967  |  
|Accounts Receivable                                       |  |               |         |   |                  |   |         |  
|Oil and gas revenues                                      |  |               | 9,381   |   |                  |   | 11,439  |  
|Joint interest billings and other                         |  |               | 6,046   |   |                  |   | 7,172   |  
|Affiliated partnerships                                   |  |               | 3,707   |   |                  |   | 2,905   |  
|Notes receivable                                          |  |               | 120     |   |                  |   | 120     |  
|Derivative financial instruments                          |  |               | 8,309   |   |                  |   | 8,200   |  
|Income taxes receivable                                   |  |               | 2,887   |   |                  |   | 2,165   |  
|Prepaid expenses and other                                |  |               | 4,564   |   |                  |   | 3,923   |  
|                                                          |  |               |         |   |                  |   |         |  
|Total current assets                                      |  |               | 42,073  |   |                  |   | 49,891  |  
|                                                          |  |               |         |   |                  |   |         |  
|                                                          |  |              
|Oil and gas properties, successful efforts method:        |  |               |         |   |                  |   |         |  
|                                                          |  |              
|Proved properties                                         |  |               | 208,517 |   |                  |   | 204,536 |  
|Unproved properties                                       |  |               | 2,415   |   |                  |   | 2,409   |  
|Office and other equipment                                |  |               | 752     |   |                  |   | 1,025   |  
|Land                                                      |  |               | 96      |   |                  |   | 96      |  
|                                                          |  |               |         |   |                  |   |         |  
|                                                          |  |               | 211,780 |   |                  |   | 208,066 |  
|                                                          |  |              
|Less accumulated depreciation, depletion and amortization |  |               | (30,242 | ) |                  |   | (26,486 | )
|                                                          |  |               |         |   |                  |   |         |  
|Net property and equipment                                |  |               | 181,538 |   |                  |   | 181,580 |  
|                                                          |  |               |         |   |                  |   |         |  
|                                                          |  |              
|Equity in oil and gas limited partnerships                |  |               | 3,148   |   |                  |   | 3,266   |  
|                                                          |  |              
|Derivative financial instruments                          |  |               | 7,107   |   |                  |   | 6,409   |  
|                                                          |  |              
|Deferred financing costs and other                        |  |               | 3,108   |   |                  |   | 2,388   |  
|                                                          |  |               |         |   |                  |   |         |  
|                                                          |  |              
|                                                          |  | $             | 236,974 |   |                  | $ | 243,534 |  
|                                                          |  |               |         |   |                  |   |         |  

The accompanying notes are an integral part of these statements.



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GEORESOURCES, INC and SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)



|                                                                                                           |  |               |         |                  |   |        
|---------------------------------------------------------------------------------------------------------- |  | ------------- | ------- | ---------------- | - | -------
|                                                                                                           |  | March 31,2009 |         | December 31,2008
|                                                                                                           |  | (unaudited)   |         |                 
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                       |  |               |         |                  |   |        
|                                                                                                           |  |              
|Current liabilities:                                                                                       |  |               |         |                  |   |        
|                                                                                                           |  |              
|Accounts payable                                                                                           |  | $             | 6,702   |                  | $ | 10,750 
|Accounts payable to affiliated partnerships                                                                |  |               | 5,464   |                  |   | 10,310 
|Revenue and royalties payable                                                                              |  |               | 11,591  |                  |   | 11,701 
|Drilling advances                                                                                          |  |               | 1,395   |                  |   | 2,169  
|Accrued expenses                                                                                           |  |               | 2,079   |                  |   | 1,506  
|Derivative financial instruments                                                                           |  |               | 2,220   |                  |   | 1,572  
|                                                                                                           |  |               |         |                  |   |        
|Total current liabilities                                                                                  |  |               | 29,451  |                  |   | 38,008 
|                                                                                                           |  |               |         |                  |   |        
|                                                                                                           |  |              
|Long-term debt                                                                                             |  |               | 40,000  |                  |   | 40,000 
|                                                                                                           |  |              
|Deferred income taxes                                                                                      |  |               | 19,198  |                  |   | 17,868 
|                                                                                                           |  |              
|Asset retirement obligations                                                                               |  |               | 5,291   |                  |   | 5,418  
|                                                                                                           |  |              
|Derivative financial instruments                                                                           |  |               | 916     |                  |   | 1,245  
|                                                                                                           |  |              
|Stockholders equity:                                                                                      |  |               |         |                  |   |        
|Common stock, par value $0.01 per share; authorized 100,000,000 shares; issued and outstanding: 16,241,717 |  |               | 162     |                  |   | 162    
|Additional paid-in capital                                                                                 |  |               | 112,788 |                  |   | 112,523
|Accumulated other comprehensive income                                                                     |  |               | 7,664   |                  |   | 7,283  
|Retained earnings                                                                                          |  |               | 21,504  |                  |   | 21,027 
|Total stockholders equity                                                                                 |  |               | 142,118 |                  |   | 140,995
|                                                                                                           |  |               |         |                  |   |        
|                                                                                                           |  |              
|                                                                                                           |  | $             | 236,974 |                  | $ | 243,534
|                                                                                                           |  |               |         |                  |   |        

The accompanying notes are an integral part of these statements.



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GEORESOURCES, INC. and SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In
thousands, except share and per share amounts)

(unaudited)



|                                         |      |                              |            |      |  |   |           
|---------------------------------------- | ---- | ---------------------------- | ---------- | ---- |  | - | ----------
|                                         |      | Three Months Ended March 31,
|                                         | 2009 |                              |            | 2008
|Revenue:                                 |      |                              |            |      |  |   |           
|Oil and gas revenues                     |      | $                            | 12,300     |      |  | $ | 22,463    
|Partnership management fees              |      |                              | 298        |      |  |   | 312       
|Property operating income                |      |                              | 458        |      |  |   | 314       
|Gain on sale of property and equipment   |      |                              | 1,399      |      |  |   | 410       
|Partnership income                       |      |                              | 5          |      |  |   | 225       
|Interest and other                       |      |                              | 105        |      |  |   | 223       
|                                         |      |                              |            |      |  |   |           
|                                         |      |                             
|Total revenue                            |      |                              | 14,565     |      |  |   | 23,947    
|                                         |      |                             
|Expenses:                                |      |                              |            |      |  |   |           
|Lease operating expense                  |      |                              | 4,390      |      |  |   | 5,791     
|Severance taxes                          |      |                              | 794        |      |  |   | 1,889     
|Re-engineering and workovers             |      |                              | 981        |      |  |   | 697       
|Exploration expense                      |      |                              | 80         |      |  |   |          
|General and administrative expense       |      |                              | 2,095      |      |  |   | 1,784     
|Depreciation, depletion and amortization |      |                              | 4,468      |      |  |   | 3,877     
|Hedge ineffectiveness                    |      |                              | 49         |      |  |   | 1,518     
|Loss on derivative contracts             |      |                              | 52         |      |  |   |          
|Interest                                 |      |                              | 819        |      |  |   | 1,569     
|                                         |      |                              |            |      |  |   |           
|                                         |      |                             
|Total expense                            |      |                              | 13,728     |      |  |   | 17,125    
|                                         |      |                             
|Income before income taxes               |      |                              | 837        |      |  |   | 6,822     
|                                         |      |                             
|Income tax expense (benefit):            |      |                              |            |      |  |   |           
|Current                                  |      |                              | (734       | )    |  |   | 1,429     
|Deferred                                 |      |                              | 1,094      |      |  |   | 1,167     
|                                         |      |                              |            |      |  |   |           
|                                         |      |                              | 360        |      |  |   | 2,596     
|                                         |      |                              |            |      |  |   |           
|Net income                               |      | $                            | 477        |      |  | $ | 4,226     
|                                         |      |                              |            |      |  |   |           
|Net income per share (basic and diluted) |      | $                            | 0.03       |      |  | $ | 0.29      
|                                         |      |                              |            |      |  |   |           
|Weighted average shares outstanding:     |      |                              |            |      |  |   |           
|Basic and diluted                        |      |                              | 16,241,717 |      |  |   | 14,703,383
|                                         |      |                              |            |      |  |   |           

The accompanying notes are an integral part of this statement.



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GEORESOURCES, INC. and SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY and COMPREHENSIVE INCOME

Three Months Ended March 31, 2009

(In thousands except share data)

(unaudited)



|                                                                        |        |              |           |                   |         |          |         |                               |               |   |        |  |   |        |   |  |   |         |  
|----------------------------------------------------------------------- | ------ | ------------ | --------- | ----------------- | ------- | -------- | ------- | ----------------------------- | ------------- | - | ------ |  | - | ------ | - |  | - | ------- | -
|                                                                        |        | Common Stock |           | AdditionalPaid-in |         | Retained |         | AccumulatedOtherComprehensive |               |   | Total  | 
|                                                                        | Shares |              | Par value |                   | Capital |          | Earning |                               | Income (Loss) |   |       
|Balance, December 31, 2008                                              |        | 16,241,717   |           | $                 | 162     |          | $       | 112,523                       |               | $ | 21,027 |  | $ | 7,283  |   |  | $ | 140,995 |  
|                                                                        |        |              |           |                   |         |         
|Comprehensive income:                                                   |        |              |           |                   |         |          |         |                               |               |   |        |  |   |        |   |  |   |         |  
|Net income                                                              |        |              |           |                   |         |          |         |                               |               |   | 477    |  |   |        |   |  |   | 477     |  
|Change in fair market value of hedged positions, net of taxes of $1,342 |        |              |           |                   |         |          |         |                               |               |   |        |  |   | 2,177  |   |  |   | 2,177   |  
|Net realized hedging gains charged to income, net of taxes of $1,107    |        |              |           |                   |         |          |         |                               |               |   |        |  |   | (1,796 | ) |  |   | (1,796  | )
|                                                                        |        |              |           |                   |         |          |         |                               |               |   |        |  |   |        |   |  |   |         |  
|Total comprehensive income                                              |        |              |           |                   |         |          |         |                               |               |   |        |  |   |        |   |  |   | 858     |  
|                                                                        |        |              |           |                   |         |          |         |                               |               |   |        |  |   |        |   |  |   |         |  
|                                                                        |        |              |           |                   |         |         
|Equity based compensation expense                                       |        |              |           |                   |         |          |         | 265                           |               |   |        |  |   |        |   |  |   | 265     |  
|                                                                        |        |              |           |                   |         |          |         |                               |               |   |        |  |   |        |   |  |   |         |  
|Balance, March 31, 2009                                                 |        | 16,241,717   |           | $                 | 162     |          | $       | 112,788                       |               | $ | 21,504 |  | $ | 7,664  |   |  | $ | 142,118 |  
|                                                                        |        |              |           |                   |         |          |         |                               |               |   |        |  |   |        |   |  |   |         |  

The accompanying notes are an integral part of this statement.



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GEORESOURCES, INC. and SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, except share and per share amounts)

(unaudited)



|                                                                                  |  |                             |        |   |      |   |         |  
|--------------------------------------------------------------------------------- |  | --------------------------- | ------ | - | ---- | - | ------- | -
|                                                                                  |  | Three Months EndedMarch 31, |       
|                                                                                  |  | 2009                        |        |   | 2008 |  
|Cash flows from operating activities:                                             |  |                             |        |   |      |   |         |  
|Net income                                                                        |  | $                           | 477    |   |      | $ | 4,226   |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                             |        |   |      |   |         |  
|Depreciation, depletion and amortization                                          |  |                             | 4,468  |   |      |   | 3,877   |  
|Gain on sale of property and equipment                                            |  |                             | (1,399 | ) |      |   | (410    | )
|Accretion of asset retirement obligations                                         |  |                             | 61     |   |      |   | 131     |  
|Unrealized gain on derivative contracts                                           |  |                             | (42    | ) |      |   |        |  
|Amortization of loss on canceled hedge contract                                   |  |                             | 122    |   |      |   |        |  
|Hedge ineffectiveness loss                                                        |  |                             | 49     |   |      |   | 1,518   |  
|Partnership income                                                                |  |                             | (5     | ) |      |   | (225    | )
|Partnership distributions                                                         |  |                             | 122    |   |      |   | 102     |  
|Deferred income taxes                                                             |  |                             | 1,094  |   |      |   | 1,167   |  
|Non-cash compensation                                                             |  |                             | 265    |   |      |   | 149     |  
|Changes in assets and liabilities:                                                |  |                             |        |   |      |   |         |  
|Decrease (increase) in accounts receivable                                        |  |                             | 1,660  |   |      |   | (4,306  | )
|Increase in prepaid expense and other                                             |  |                             | (1,360 | ) |      |   | (74     | )
|Increase (decrease) in accounts payable and accrued expense                       |  |                             | (9,378 | ) |      |   | 1,086   |  
|                                                                                  |  |                             |        |   |      |   |         |  
|Net cash (used in) provided by operating activities                               |  |                             | (3,866 | ) |      |   | 7,241   |  
|                                                                                  |  |                            
|Cash flows from investing activities:                                             |  |                             |        |   |      |   |         |  
|Proceeds from sale of property and equipment                                      |  |                             | 2,015  |   |      |   | 8,532   |  
|Additions to property and equipment                                               |  |                             | (5,057 | ) |      |   | (13,039 | )
|                                                                                  |  |                             |        |   |      |   |         |  
|Net cash used in investing activities                                             |  |                             | (3,042 | ) |      |   | (4,507  | )
|                                                                                  |  |                            
|Cash flows from financing activities:                                             |  |                             |        |   |      |   |         |  
|Reduction of long-term debt                                                       |  |                             |       |   |      |   | (10,000 | )
|                                                                                  |  |                             |        |   |      |   |         |  
|Net cash used in financing activities                                             |  |                             |       |   |      |   | (10,000 | )
|                                                                                  |  |                             |        |   |      |   |         |  
|Net decrease in cash and cash equivalents                                         |  |                             | (6,908 | ) |      |   | (7,266  | )
|                                                                                  |  |                             |        |   |      |   |         |  
|                                                                                  |  |                            
|Cash and cash equivalents at beginning of period                                  |  |                             | 13,967 |   |      |   | 24,430  |  
|                                                                                  |  |                             |        |   |      |   |         |  
|Cash and cash equivalents at end of period                                        |  | $                           | 7,059  |   |      | $ | 17,164  |  
|                                                                                  |  |                             |        |   |      |   |         |  
|                                                                                  |  |                            
|Supplementary information:                                                        |  |                             |        |   |      |   |         |  
|Interest paid                                                                     |  | $                           | 694    |   |      | $ | 1,584   |  
|Income taxes paid                                                                 |  | $                           | 25     |   |      | $ | 1,762   |  

The accompanying notes are an integral part of these statements.



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GEORESOURCES, INC. and SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE A: Organization and Basis of Presentation

Description of Operations

GeoResources operates a single business segment involved in the
acquisition, development and production of, and exploration for, crude oil, natural gas and related products primarily in Texas, Louisiana, Oklahoma, North Dakota, Montana and Colorado.

Consolidated Financial Statements

The unaudited consolidated financial statements include the
accounts of GeoResources, Inc. and its subsidiaries, all of which are wholly owned. The financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial reporting. All intercompany
balances and transactions have been eliminated in consolidation. In the opinion of management, the accompanying financial statements include all adjustments (consisting of normal recurring accruals and adjustments) necessary to present fairly, in
all material respects, the Companys interim results. GeoResources 2008 Annual Report on Form 10-K includes certain definitions and a summary of significant accounting policies and should be read in conjunction with this Form 10-Q. Except
as disclosed herein, there has been no material changes to the information disclosed in the notes to the consolidated financial statements included in GeoResources 2008 Annual Report on Form 10-K. Operating results for the periods presented
are not necessarily indicative of the results that may be expected for the full year.

Earnings Per Share

Basic net income per common share is calculated by dividing net income by the weighted average number of common shares outstanding during each period.
Diluted net income per common share is calculated by dividing net income by the weighted average number of common shares outstanding and other dilutive securities. The only securities considered potentially dilutive are the Companys stock
options. During the quarter ended March 31, 2009, there were not any potentially dilutive securities because the average price of the companys common stock was less than the exercise price of the options outstanding.

NOTE B: Acquisitions and Dispositions

On
April 17, 2007, the Company merged with Southern Bay Oil & Gas, L.P. and a subsidiary of Chandler Energy, LLC and acquired Chandler-associated oil and gas properties in exchange for 10,690,000 share of common stock (collectively, the
Merger).

In May 2008, the Company, through its wholly owned subsidiary, Catena Oil and Gas LLC (Catena), formed an
entity in connection with the acquisition of producing oil and gas properties located throughout Oklahoma. OKLA Energy Partners LP (OKLA) was formed with Catena as general partner with a 2% partnership interest, and a large institutional
investor as the sole limited partner with a 98% partnership interest. In May, 2008, these entities paid cash of $61.7 million to acquire certain Oklahoma properties. Catena purchased 18% of the interests and OKLA purchased the remaining 82%.
Catenas share of the property purchase price was $12.8 million, and its general partner contribution to OKLA was $978,000. The Companys investment in OKLA is accounted for under the equity method of accounting.

In January 2008, the Company sold all of its interest in the Grand Canyon Unit, a property acquired in the Merger. This property, located in Otsego
County, Michigan, was sold to an unaffiliated party for $6.6 million in cash. The carrying value of this property at the date of the sale was equal to the selling price; therefore, no gain or loss was recognized on sale.



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In February 2008, the Company acquired producing properties in the Williston Basin of North Dakota and
Montana from an unaffiliated party for $7.9 million in cash. The acquired properties are operated by the Company. The purchase price was allocated to oil and gas properties.

In February 2008, the Company sold its interests in certain non-core oil and gas properties located in Louisiana to unaffiliated parties for $1.8 million
in cash and recognized gains of $430,000.

In May 2008, the Company closed certain property sales. These sales consisted of seven non-core
fields in Louisiana and Texas and were sold to unaffiliated parties for approximately $11.8 million. The Company recognized a gain of $1.5 million related to these sales.

In September 2008, the Company acquired certain producing properties in Oklahoma from an unaffiliated party for $3.6 million in cash. The acquired properties are operated by the Company. The purchase price was
allocated to oil and gas properties.

In January 2009, the Company sold a producing property located in Louisiana to an unaffiliated party
for $1.6 million. The Company recognized a gain of $1.3 million in conjunction with this sale.

Note C: Recently Issued Accounting Pronouncements

On December 31, 2008, the SEC published the revised rules and interpretations updating its oil and gas reporting requirements. Many of
the revisions are updates to definitions in existing oil and gas rules to make them consistent with the petroleum resources management system, which is a widely accepted standard for the management of petroleum resources that was developed by
several industry organizations. Key revisions include the ability to include nontraditional resources in reserves, the use of new technology for determining reserves, permitting disclosure of probable and possible reserves, and changes to the
pricing used in determining reserves. To determine reserves companies must use a 12-month average price. The Company is required to comply with the amended disclosure requirement for registration statements filed after January 1, 2010, and for
annual reports for fiscal years ending on or after December 15, 2009. Early adoption is not permitted. We are currently assessing the impact that the adoption will have on the Companys disclosures, operating results, financial position
and cash flows.

In December 2007, the FASB issued Statement No. 141R, Business Combinations (SFAS 141R). SFAS 141R
may have an impact on the Companys consolidated financial statements if an acquisition is completed, but the nature and magnitude of the specific effects will depend upon the nature, terms, and size of the acquisitions that the Company
consummates. SFAS 141R establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statements, the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the
acquiree. The statement also provides guidance for recognizing and measuring goodwill acquired in business combinations and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial
effects of business combinations. SFAS 141R is effective for financial statements issued for fiscal years beginning after December 15, 2008. The Company adopted SFAS 141R effective January 1, 2009, and will apply its provisions
prospectively to any acquisitions completed in the future.

In April 2009, the FASB issued Staff Position 141R-1, Accounting for Assets
Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies (FSP FAS 141R-1). FSP FAS 141R-1 amends SFAS 141R and addresses application issues regarding the accounting and disclosure provisions for
contingencies. The FSP replaces the guidance in SFAS 141R on the initial recognition and measurement of assets and liabilities arising from contingencies acquired or assumed in a business combination with guidance similar to that in FASB Statement
141, before the 2007 revision. The FSP also amends Statement 141Rs subsequent guidance for contingent assets and liabilities recognized at the acquisition date and amends the disclosure requirements for contingencies. The FSP is effective for
business combinations with an acquisition date that is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The Company will apply its provisions prospectively to any acquisitions completed in
the future.



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In April 2009, the FASB issues Staff Position 157-4, Determining Fair Value When the Volume and Level
of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly (FSP FAS 157-4), to provide additional guidance on estimating fair value when the volume and level of activity for
an asset or liability have significantly decreased. The FSP also includes guidance on identifying circumstances that indicate a transaction is not orderly. The FSP emphasizes that, regardless of whether the volume or level of activity for an asset
or liability have decreased significantly and regardless of which valuation technique was used, the objective of fair value measurement under FASB Statement 157, Fair Value Measurements, remains the same; that is to estimate the price that
would be received to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. The FSP also requires expanded disclosures. FSP FAS 157-4 is effective for
interim and annual periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009, and must be applied prospectively. The Company intends to adopt FSP FAS 157-4 effective June 30, 2009, and
apply its provisions prospectively. The Company is in the process of evaluating the impact FSP FAS 157-4 will have on valuing its financial assets and liabilities and the related disclosures.

NOTE D: Long-term debt

On September 26, 2007,
the Company entered into a Credit Agreement with Wachovia Bank, as Administrative Agent and Issuing Bank and U.S. Bank as Lenders. This agreement provided for a Senior Secured Revolving Credit Facility in the maximum amount of $100 million, with an
initial borrowing base of $35 million.

On October 16, 2007, the Company entered into an Amended and Restated Credit Agreement
(Amended Credit Agreement) with Wachovia Bank (the Bank) as Administrative agent, Issuing Bank, Sole Lead Arranger and Sole Bookrunner. The Amended Credit Agreement provides for financing of up to $200 million to the Company.
The initial borrowing base of the Amended Credit Facility was $110 million, subject to redetermination on April 1 and October 1 of each year. On September 30, 2008, the borrowing base was reduced to $95 million due to the sales of
certain non-core oil and gas properties. On November 5, 2008, the borrowing base was increased to $100 million and on April 6, 2009, the $100 million borrowing base was reaffirmed by the Bank. At that time, the Amended Credit Agreement was
amended to provide for interest rates at (a) LIBOR plus 2.25% to 3.00%, or (b) the prime lending rate plus 1.25% to 2.00%, depending on the amount borrowed. Principal amounts outstanding under this Amended Credit Agreement are due and
payable in full at maturity on October 16, 2010. The Amended Credit Agreement also requires the payment of commitment fees to the Lender in respect of the unutilized commitments thereunder. The commitment rate is 0.50% per year depending
on the amount of borrowing base utilization. The Company is also required to pay customary letter of credit fees. All of the obligations under the Amended Credit Agreement, and the guarantees of those obligations, are secured by substantially all of
the Companys assets.

At March 31, 2009, the outstanding principal balance was $40.0 million. The annual interest rate in effect
at March 31, 2009 was 2.55% on the entire amount of the outstanding principal.

Also, in October 2007, the Company entered into an
interest rate swap agreement with the Bank, providing a fixed rate of 4.79% on a notional $50,000,000 through October 16, 2010. During 2008, the Company broke the swap up into two pieces, a $40 million swap and a $10 million swap each with a
fixed rate of 4.29%. The $40 million swap is accounted for as a cash flow hedge while the $10 million swap is accounted for as a trading security. The fair market value of these swaps at March 31, 2009, was a liability of $2,606,000 of which
$1,690,000 is classified as a current liability. The Company also recognized a net loss of $52,000 on the $10 million swap during the first quarter of 2009. The net loss was due to cash settlements losses of $94,000 which were offset by a
mark-to-mark gain of $42,000. The value of the swap at December 31, 2008 was a liability of $2,817,000 of which $1,572,000 was classified as a current liability.



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At March 31, 2009 and December 31, 2008, accumulated other comprehensive income included
unrecognized losses of $1,290,000, net of a tax benefit of $795,000, and $1,394,000, net of a tax benefit of $859,000, respectively. These unrecognized losses represent the inception to date change in mark-to-market value of the Companys $40
million interest rate swap, designated as a hedge, as of the balance sheet date. For the quarter ended March 31, 2009, the Company recognized realized cash settlement losses of $470,000 related to its two swaps. Based on the estimated fair
market value of the Companys $40 million derivative contract designated as a hedge at March 31, 2009, the Company expects to reclassify net losses of $1.4 million into earnings from accumulated other comprehensive income during the next
twelve months; however, actual cash settlement gains and losses recognized may differ materially.

The Amended Credit Agreement contains a
number of covenants that, among other things, restrict, subject to certain exceptions, the Companys ability to incur additional indebtedness, create liens on assets, make investments, enter into sale and lease back transactions, pay dividends
and distributions or repurchase its capital stock, engage in mergers or consolidations, sell certain assets, sell or discount any notes receivable or accounts receivable and engage in certain transactions with affiliates. In addition, the Amended
Credit Agreement requires the maintenance of certain financial ratios, contains customary affirmative covenants, and provides for customary events of default. The Company was in compliance with all covenants at March 31, 2009.

The principal outstanding under the Amended Credit Agreement was $40.0 million at March 31, 2009 and December 31, 2008. The remaining borrowing
capacity under the Amended Credit Agreement at March 31, 2009, was $60.0 million. The maturity date for amounts outstanding under this agreement is October 16, 2010.

Interest expense for the quarter ended March 31, 2009 and 2008, includes amortization of deferred financing costs of $132,000 and $120,000
respectively.

NOTE E: Stock Options, Performance Awards and Stock Warrants

In March 2007, the shareholders of the Company approved the GeoResources, Inc, Amended and Restated 2004 Employees Stock Incentive Plan (the
Plan), which authorizes the issuance of options and other stock-based incentives to officers, employees, directors and consultants of the Company to acquire up to 2,000,000 shares of the Companys common stock at prices which may
not be less than the stocks fair market value on the date of grant. The options can be designated as either incentive options or nonqualified options.

On February 3, 2009, and March 26, 2009, the Company granted options under the Plan to officers and other employees to purchase 300,000 and 225,000 shares of common stock, respectively. Also on
February 3, 2009, the Company granted options to outside directors to purchase 200,000 shares of common stock. The following is a summary of the terms of these grants by exercise price:



|                       |       |                  |        |         |       |        
|---------------------- | ----- | ---------------- | ------ | ------- | ----- | -------
|Vesting Date           |       | Number of Shares
|                       | $8.50 |                  | $10.00 |         | Total
|                       |       |                  |       
|Officers and Employees |       |                  |        |         |       |        
|February 3, 2010       |       | 65,625           |        | 65,625  |       | 131,250
|February 3, 2011       |       | 65,625           |        | 65,625  |       | 131,250
|February 3, 2012       |       | 65,625           |        | 65,625  |       | 131,250
|February 3, 2013       |       | 65,625           |        | 65,625  |       | 131,250
|                       |       |                  |       
|Directors              |       |                  |        |         |       |        
|February 3, 2010       |       | 25,000           |        | 25,000  |       | 50,000 
|February 3, 2011       |       | 25,000           |        | 25,000  |       | 50,000 
|February 3, 2012       |       | 25,000           |        | 25,000  |       | 50,000 
|February 3, 2013       |       | 25,000           |        | 25,000  |       | 50,000 
|                       |       |                  |        |         |       |        
|Total                  |       | 362,500          |        | 362,500 |       | 725,000
|                       |       |                  |        |         |       |        



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The closing market prices of the Companys common stock on the date of the February and March 2009
grants were $7.62 and $7.16, respectively.

The options, if not exercised, will expire 10 years from the date of grant.

A summary of the Companys stock option activity for the three months ended March 31, 2009 is as follows:



|                               |  |                 |  |                              |      |                                                |   |                         |  |   |        
|------------------------------ |  | --------------- |  | ---------------------------- | ---- | ---------------------------------------------- | - | ----------------------- |  | - | -------
|                               |  | Number ofShares |  | WeightedAverageExercisePrice |      | WeightedAverageRemainingContractualLife (year) |   | AggregateIntrinsicValue
|Outstanding, December 31, 2008 |  | 790,000         |  | $                            | 9.39 |                                                |   | 8.81                    |  | $ | 158,750
|                               |  |                 |  |                             
|Granted                        |  | 725,000         |  | $                            | 9.25 |                                                |   |                         |  |   |        
|Exercised                      |  |                |  | $                            |     |                                                |   |                         |  |   |        
|Forfeited                      |  |                |  | $                            |     |                                                |   |                         |  |   |        
|                               |  |                 |  |                              |      |                                                |   |                         |  |   |        
|Outstanding, March 31, 2009    |  | 1,515,000       |  | $                            | 9.32 |                                                | $ | 9.02                    |  | $ |       
|                               |  |                 |  |                              |      |                                                |   |                         |  |   |        
|                               |  |                 |  |                             
|Exercisable at March 31, 2009: |  |                |  |                              |      |                                                |   |                         |  |   |        

The Company accounts for these stock option under the provision of Statement of Financial
Accounting Standards No. 123R, Share Based Payment and accordingly, recognized compensation expense based upon the fair value of the options at the date of grant determined by the Black-Scholes option pricing model. For the quarters
ended March 31, 2009 and 2008 the Company recognized compensation expense of $265,000 and $149,000, respectively, related to these options. As of March 31, 2009, the future pre-tax expense of non-vested stock options is $3,851,000 to be
recognized through the first quarter of 2013.

During March 31, 2009, the weighted-average fair value of the options granted during
the quarter was $4.36 per share, using the following assumptions:



|                        |  |         |  
|----------------------- |  | ------- | -
|Risk-free interest rate |  | 1.25    | %
|Dividend yield          |  | None    |  
|Volatility              |  | 87      | %
|Expected life of option |  | 4 Years |  



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##### Table of Contents

In measuring compensation associated with these options, an annual pre-vesting forfeiture rate of 1% was
used.

NOTE F: Income Taxes

The
Company accounts for income taxes under the provision of SFAS No. 109, Accounting for Income Taxes, which provides for an asset and liability approach in accounting for income taxes. Under this approach, deferred tax assets and
liabilities are recognized based on anticipated future tax consequences, using currently enacted tax laws, attributable to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts
calculated for income tax purposes.

FIN 48  Uncertain Tax Positions

The Company also accounts for income taxes under the provisions of FIN 48, which clarifies the accounting for uncertainty in income taxes recognized in
accordance with SFAS No. 109, and FSP FIN 48-1, which provides that a companys tax position will be considered settled if the taxing authority has completed its examination, the company does not plan to appeal, and it is remote that the
taxing authority would reexamine the tax position in the future. FIN 48 prescribes a benefit recognition model with a two-step approach, a more-likely-than-not recognition criteria and a measurement attribute that measures the position as the
largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement. If it is not more likely than not that the benefit will be sustained on its technical merits, no benefit will be recorded. FIN 48 also requires
that the amount of interest expense recognized related to uncertain tax positions be computed by applying the applicable statutory rate of interest to the difference between the tax position recognized in accordance with FIN 48 and the amount
previously taken or expected to be taken in a tax return.

The Company did not have any unrecognized tax benefits and there was no effect
on its financial condition or results of operations as a result of implementing FIN 48. The amount of unrecognized tax benefits may change in the next twelve months; however, the Company does not expect any possible change to have a significant
impact on its results of operations or financial position.

The Company files a consolidated federal income tax return and various combined
and separate filings in several state and local jurisdictions.

The Companys continuing practice is to recognize estimated interest
and penalties, if any, related to potential underpayment on any unrecognized tax benefits as a component of income tax expense in its Consolidated Statement of Income. As of the date of adoption of FIN 48, the Company did not have any accrued
interest or penalties associated with any unrecognized tax benefits, nor was any interest expense recognized during the current quarter. The Company does not anticipate that total unrecognized tax benefits will significantly change due to the
settlement of audits and the expiration of statute of limitations prior to March 31, 2010.

NOTE G: Derivative Financial Instruments

The Company enters into various crude oil and natural gas hedging contracts, primarily costless collars and swaps, in an effort to
manage its exposure to product price volatility. Historically, prices received for oil and gas production have been volatile because of seasonal weather patterns, supply and demand factors, worldwide political factors and general economic
conditions. Costless collars are designed to establish floor and ceiling prices on anticipated future oil and gas production. Swaps are designed so that the Company receives or makes payments based on a differential between fixed and variable prices
for crude oil and natural gas. The Company has designated its commodity derivative contracts as cash flow



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##### Table of Contents

hedges designed to achieve more predictable cash flows, as well as to reduce its exposure to price volatility. While the use of derivative instruments limits
the downside risk of adverse price movements, they also limit future revenues from favorable price movements.

On October 17, 2008,
the Company paid $2,975,000 to cancel its 2009 natural gas swaps that were previously accounted for as cash flow hedges. At the time of cancelation, accumulated other comprehensive income (loss) contained $482,000 of acquisition to date
mark-to-market losses on the effective portion of these commodity derivative contracts. As a result of the cancelation of the swaps, the amounts recorded in accumulated other comprehensive income (loss) as of the date of cancelation remain in
accumulated other comprehensive income (loss) and will be reclassified into earnings during 2009 as the original hedged transactions affect earnings. The Company expects to reclassify into earnings $360,000 of losses from accumulated other
comprehensive income (loss) related the canceled swaps during the next twelve months. The remainder of the cost to cancel was previously recognized as part of a prior acquisition or through ineffectiveness charges.

At March 31, 2009, accumulated other comprehensive income (loss) consisted of unrecognized gains of $8,954,000, net of taxes of $5,519,000,
representing the inception to date change in mark-to-market value of the effective portion of the Companys open commodity contracts, designated as cash flow hedges, as of the balance sheet date. At December 31, 2008, accumulated other
comprehensive income (loss) consisted of unrecognized gains of $8,677,000, net of taxes of $5,348,000. For the quarter ended March 31, 2009, the Company recognized realized cash settlement gains on commodity derivatives of $3,401,000 and
reclassified losses related to the swap contracts canceled during 2008 of $122,000. For the quarter ended March 31, 2008, the Company recognized realized cash settlement losses of $2,086,000. Based on the estimated fair market value of the
Companys derivative contracts designated as hedges at March 31, 2009, the Company expects to reclassify net gains of $7,780,000 into earnings from accumulated other comprehensive income during the next twelve months; however, actual cash
settlement gains and losses recognized may differ materially. The Company also expects to reclassify losses of $360,000, related to the commodity swaps canceled during 2008, into earnings from accumulated other comprehensive income.



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##### Table of Contents

During the first quarter of 2009 the Company entered into two natural gas swap contracts and one crude
oil fixed price forward sale contract. The natural gas swaps have fixed prices of $4.86 and $4.87 per MMBTU. The term of the contracts is from April 2009 to March 2010 and each contract is for 50,000 MMBTUs per month. The fixed price crude oil
contract is directly associated with the Companys Williston Basin production. Under this agreement the Company will sell 9,000 Bbls per month from April 2009 to March 2010 at a price of $43.85. At March 31, 2009, the Company had hedged
its exposure to the variability in future cash flows from forecasted oil and gas production volumes as follows:



|                              |  |                      |  |            |      |                    |   |      
|----------------------------- |  | -------------------- |  | ---------- | ---- | ------------------ | - | -----
|                              |  | TotalRemainingVolume |  | FloorPrice |      | Ceiling /SwapPrice
|Crude Oil Contracts (Bbls):   |  |                      |  |            |      |                    |   |      
|Swap contracts:               |  |                      |  |            |      |                    |   |      
|2009                          |  | 276,000              |  |            |      |                    | $ | 76.00
|2010                          |  | 322,000              |  |            |      |                    | $ | 74.71
|2011                          |  | 282,000              |  |            |      |                    | $ | 74.37
|Forward sales contracts:      |  |                      |  |            |      |                    |   |      
|2009                          |  | 81,000               |  |            |      |                    | $ | 43.85
|2010                          |  | 27,000               |  |            |      |                    | $ | 43.85
|                              |  |                      | 
|Natural Gas Contracts (Mmbtu) |  |                      |  |            |      |                    |   |      
|Swap contracts                |  |                      |  |            |      |                    |   |      
|2009                          |  | 450,000              |  |            |      |                    | $ | 4.86 
|2009                          |  | 450,000              |  |            |      |                    | $ | 4.87 
|2010                          |  | 150,000              |  |            |      |                    | $ | 4.86 
|2010                          |  | 150,000              |  |            |      |                    | $ | 4.87 
|Costless collars contracts:   |  |                      |  |            |      |                    |   |      
|2009                          |  | 206,645              |  | $          | 7.00 |                    | $ | 10.75
|2010                          |  | 1,287,000            |  | $          | 7.00 |                    | $ | 9.90 
|2011                          |  | 1,079,000            |  | $          | 7.00 |                    | $ | 9.20 

The fair market value of these hedge contracts at March 31, 2009, was a net asset of
$14,886,000 of which $8,309,000 was classified as a current asset, $7,107,000 was classified as a long-term asset and $530,000 was classified as a current liability. The fair market value of the Companys hedge contracts at December 31,
2008 was an asset of $14,609,000, of which $8,200,000 was classified as a current asset. During the quarter ended March 31, 2009 and 2008, the Company recognized a loss of $49,000 and $1,518,000, respectively, due to hedge ineffectiveness on
these hedge contracts.

The Company has also entered into an interest rate swap designated as a cash flow hedge as discussed in Note D
above.

SFAS 161  Effective January 1, 2009, the Company adopted Financial Accounting Standard Board
(FASB) statement No. 161, Disclosure about Derivative Instruments and Hedging Activities  an amendment to FASB Statement No. 133 (SFAS 161). SFAS 161 expands interim and annual disclosures about derivative and
hedging activities that are intended to better convey the purpose of derivative use and the risks managed. The adoption of SFAS 161 did not have an impact on the Companys consolidated financial statements, other than additional disclosures
which are set forth below.



15



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##### Table of Contents

All derivative instruments are recorded on the consolidated balance sheet at fair value. The following
table summarizes the location and fair value amounts of all derivative instruments in the consolidated balance sheets (in thousands):



|                                              |                        |                                                  |            |                       |                        |  |              |        |  |                                                      |  |   |        |   |  |   |        |  
|--------------------------------------------- | ---------------------- | ------------------------------------------------ | ---------- | --------------------- | ---------------------- |  | ------------ | ------ |  | ---------------------------------------------------- |  | - | ------ | - |  | - | ------ | -
|Derivatives designated as SFAS 133hedges:     |                        | Asset Derivatives                                |            | Liability Derivatives |                       
|                                              | Balance Sheet Location |                                                  | Fair Value |                       | Balance Sheet Location |  | Fair Value   |       
|                                              |                        | Mar. 31,2009                                     |            | Dec. 31,2008          |                        |  | Mar. 31,2009 |        |  | Dec. 31,2008                                         | 
|Commodity contracts                           |                        | Current derivative financial instruments asset   |            | $                     | 8,309                  |  | $            | 8,200  |  | Current derivative financial instruments liability   |  | $ | (530   | ) |  | $ |       |  
|                                              |                        |                                                  |            |                       |                        | 
|Commodity contracts                           |                        | Long-term derivative financial instruments asset |            |                       | 7,107                  |  |              | 6,409  |  | Long-term derivative financial instruments liability |  |   |       |   |  |   |       |  
|                                              |                        |                                                  |            |                       |                        | 
|Interest rate swap contract                   |                        | Current derivative financial instruments asset   |            |                       |                       |  |              |       |  | Current derivative financial instruments liability   |  |   | (1,352 | ) |  |   | (1,258 | )
|                                              |                        |                                                  |            |                       |                        | 
|Interest rate swap contract                   |                        | Long-term derivative financial instruments asset |            |                       |                       |  |              |       |  | Long-term derivative financial instruments liability |  |   | (733   | ) |  |   | (996   | )
|                                              |                        |                                                  |            |                       |                        |  |              |        |  |                                                      |  |   |        |   |  |   |        |  
|                                              |                        |                                                  |            | $                     | 15,416                 |  | $            | 14,609 |  |                                                      |  | $ | (2,615 | ) |  | $ | (2,254 | )
|                                              |                        |                                                  |            |                       |                        |  |              |        |  |                                                      |  |   |        |   |  |   |        |  
|                                              |                        |                                                 
|Derivatives not designated as SFAS133 hedges: |                        | Asset Derivatives                                |            | Liability Derivatives |                       
|                                              | Balance Sheet Location |                                                  | Fair Value |                       | Balance Sheet Location |  | Fair Value   |       
|                                              |                        | Mar. 31,2009                                     |            | Dec. 31,2008          |                        |  | Mar. 31,2009 |        |  | Dec. 31,2008                                         | 
|Interest rate swap contract                   |                        | Current derivative financial instruments asset   |            | $                     |                       |  | $            |       |  | Current derivative financial instruments liability   |  | $ | (338   | ) |  | $ | (314   | )
|Interest rate swap contract                   |                        | Long-term derivative financial instruments asset |            |                       |                       |  |              |       |  | Long-term derivative financial instruments liability |  |   | (183   | ) |  |   | (249   | )
|                                              |                        |                                                  |            |                       |                        |  |              |        |  |                                                      |  |   |        |   |  |   |        |  
|                                              |                        |                                                  |            | $                     |                       |  | $            |       |  |                                                      |  | $ | (521   | ) |  | $ | (563   | )
|                                              |                        |                                                  |            |                       |                        |  |              |        |  |                                                      |  |   |        |   |  |   |        |  



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##### Table of Contents

Commodity derivative contracts  The following table summarizes the effects of commodity
derivative instruments on the consolidated statements of income for the three months ended March 31, 2009 and 2008 (in thousands):



|                                           |              |                                                                            |       |              |                                                                               |   |                                                                              |              |  |                      |              |   |       |   |  |   |        |  
|------------------------------------------ | ------------ | -------------------------------------------------------------------------- | ----- | ------------ | ----------------------------------------------------------------------------- | - | ---------------------------------------------------------------------------- | ------------ |  | -------------------- | ------------ | - | ----- | - |  | - | ------ | -
|Derivatives designated as SFAS 133 hedges: |              | Amount of Gain or (Loss)Recognized in OCIon Derivative (Effective Portion) |       |              | Location of Gain or(Loss) Reclassified
fromOCI into Income(Effective Portion) |   | Amount of Gain or (Loss)Reclassified from OCI intoIncome (Effective Portion) |             
|                                           | Mar. 31,2009 |                                                                            |       | Mar. 31,2008 |                                                                               |   |                                                                              | Mar. 31,2009 |  |                      | Mar. 31,2008 |  
|Commodity contracts                        |              | $                                                                          | 3,727 |              |                                                                               | $ | (14,122                                                                      | )            |  | Oil and gas revenues |              | $ | 3,278 |   |  | $ | (2,086 | )
|                                           |              |                                                                            |       |              |                                                                              
|Interest rate swap contract                |              |                                                                            | (208  | )            |                                                                               |   | 56                                                                           |              |  | Interest expense     |              |   | (376  | ) |  |   | 55     |  
|                                           |              |                                                                            |       |              |                                                                               |   |                                                                              |              |  |                      |              |   |       |   |  |   |        |  
|                                           |              |                                                                            |       |              |                                                                              
|                                           |              | $                                                                          | 3,519 |              |                                                                               | $ | (14,066                                                                      | )            |  |                      |              | $ | 2,902 |   |  | $ | (2,031 | )
|                                           |              |                                                                            |       |              |                                                                               |   |                                                                              |              |  |                      |              |   |       |   |  |   |        |  



|                                                         |  |                                                                                 |  |                                                                                |              |   |  |   |      
|-------------------------------------------------------- |  | ------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------ | ------------ | - |  | - | -----
|Derivatives in SFAS 133 Cash Flow Hedging Relationships: |  | Location of(Gain) or LossRecognized in Income onDerivative (IneffectivePortion) |  | Amount of (Gain) or LossRecognized in Income onDerivative(Ineffective Portion)
|                                                         |  | Mar. 31,2009                                                                    |  |                                                                                | Mar. 31,2008
|Commodity contracts                                      |  | Hedge ineffectiveness                                                           |  | $                                                                              | 49           |   |  | $ | 1,518
|                                                         |  |                                                                                 |  |                                                                                |              |   |  |   |      
|                                                         |  |                                                                                
|Derivatives not designated as SFAS 133 hedges:           |  | Location of(Gain) or LossRecognized in Income onDerivative                      |  | Amount of (Gain) or LossRecognized in Income onDerivative                     
|                                                         |  | Mar. 31,2009                                                                    |  |                                                                                | Mar. 31,2008
|Realized cash settlements on interest rate swap          |  | Loss on derivative contracts                                                    |  | $                                                                              | 94           |   |  | $ |     
|Unrealized (gains) on commodity contracts                |  | Loss on derivative contracts                                                    |  |                                                                                | (42          | ) |  |   |     
|                                                         |  |                                                                                 |  |                                                                                |              |   |  |   |      
|                                                         |  |                                                                                 | 
|                                                         |  |                                                                                 |  | $                                                                              | 52           |   |  | $ |     
|                                                         |  |                                                                                 |  |                                                                                |              |   |  |   |      

Contingent features in derivative instruments None of the Companys derivative
instruments contain credit-risk-related contingent features. Counterparties to the Companys derivative contracts are high credit quality financial institutions.

NOTE H: Fair Value Disclosures

SFAS 157  Effective January 1, 2008, the
Company adopted Financial Accounting Standards Board (FASB) Statement No. 157, Fair Value Measurements(SFAS 157), which defines fair value, establishes a framework for measuring fair value, establishes a fair
value hierarchy based on the quality of inputs used to measure fair value and enhances disclosure requirements for fair value measurements. The implementation of SFAS 157 did not cause a change in the method of calculating fair value assets or
liabilities. The primary impact from adoption was additional disclosures.



17



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##### Table of Contents

Fair Value Hierarchy  SFAS 157 establishes a three-level valuation hierarchy for
disclosure of fair value measurements. The valuation hierarchy categorizes assets and liabilities at fair value into one of three different levels depending on the observability of the inputs employed in the measurement. The three levels are defined
as follows:



| |  |  | Level 1  inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------



| |  |  | Level 2  inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs are observable for
the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Level 3  inputs to the valuation methodology are unobservable and significant to the fair value measurement.
| | - |  | -------------------------------------------------------------------------------------------------------------

A financial instruments categorization within the valuation hierarchy is based upon the lowest level of the input that is significant to the fair
value measurement. The Companys assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. The following table presents
information about the Companys assets and liabilities measured at fair value on a recurring basis as of March 31, 2009, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair
value:

Fair Value of Financial Assets and Liabilities - March 31, 2009



|                                                                  |  |                                                            |  |                                           |            |   |                                        |   |                            |   |            |  
|----------------------------------------------------------------- |  | ---------------------------------------------------------- |  | ----------------------------------------- | ---------- | - | -------------------------------------- | - | -------------------------- | - | ---------- | -
|                                                                  |  | Quoted Prices inActive Marketsfor IdenticalAssets(Level
1) |  | SignificantOtherObservableInputs(Level
2) |            |   | SignificantUnobservableInputs(Level 3) |   | Balancesas ofMarch 31,2009 |  
|Current portion of derivative financial instrument asset(1)       |  |                                                           |  | $                                         | 8,309,000  |   |                                        |  |                            | $ | 8,309,000  |  
|                                                                  |  |                                                            |  |                                          
|Long-term portion of derivative financial instrument asset(1)     |  |                                                           |  |                                           | 7,107,000  |   |                                        |  |                            |   | 7,107,000  |  
|                                                                  |  |                                                            |  |                                          
|Current portion of derivative financial instrument liability(2)   |  |                                                           |  |                                           | (2,220,000 | ) |                                        |  |                            |   | (2,220,000 | )
|                                                                  |  |                                                            |  |                                          
|Long-term portion of derivative financial instrument liability(3) |  |                                                           |  |                                           | (916,000   | ) |                                        |  |                            |   | (916,000   | )



|(1) | Commodity derivative instruments accounted for as cash flow hedges.
|--- | -------------------------------------------------------------------

|(2) | Includes a $40 million interest rate swap accounted for as a cash flow hedge ($1,352,000), a $10 million interest rate swap accounted for as a trading security ($338,000) and a
commodity derivative accounted for as a cash flow hedge ($530,000).
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Includes a $40 million interest rate swap accounted for as a cash flow hedge ($733,000) and a $10 million interest rate swap accounted for as a trading security ($183,000).
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

Fair Value of Financial Assets and Liabilities - December 31, 2008



|                                                                  |  |                                                            |  |                                           |            |   |                                        |   |                               |   |            |  
|----------------------------------------------------------------- |  | ---------------------------------------------------------- |  | ----------------------------------------- | ---------- | - | -------------------------------------- | - | ----------------------------- | - | ---------- | -
|                                                                  |  | Quoted Prices inActive Marketsfor IdenticalAssets(Level
1) |  | SignificantOtherObservableInputs(Level
2) |            |   | SignificantUnobservableInputs(Level 3) |   | Balancesas ofDecember 31,2008 |  
|Current portion of derivative financial instrument asset(1)       |  |                                                           |  | $                                         | 8,200,000  |   |                                        |  |                               | $ | 8,200,000  |  
|                                                                  |  |                                                            |  |                                          
|Long-term portion of derivative financial instrument asset(1)     |  |                                                           |  |                                           | 6,409,000  |   |                                        |  |                               |   | 6,409,000  |  
|                                                                  |  |                                                            |  |                                          
|Current portion of derivative financial instrument liability(2)   |  |                                                           |  |                                           | (1,572,000 | ) |                                        |  |                               |   | (1,572,000 | )
|                                                                  |  |                                                            |  |                                          
|Long-term portion of derivative financial instrument liability(3) |  |                                                           |  |                                           | (1,245,000 | ) |                                        |  |                               |   | (1,245,000 | )



|(1) | Commodity derivative instruments accounted for as cash flow hedges.
|--- | -------------------------------------------------------------------

|(2) | Includes a $40 million interest rate swap accounted for as a cash flow hedge ($1,258,000) and a $10 million interest rate swap accounted for as a trading security ($314,000).
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Includes a $40 million interest rate swap accounted for as a cash flow hedge ($996,000) and a $10 million interest rate swap accounted for as a trading security ($249,000).
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Commodity Derivative Instruments - Commodity derivative instruments consist of costless collars and swaps for
crude oil and natural gas. The Companys costless collars are valued based on the counterpartys marked-to-market statements, which are validated by observable transactions for the same or similar commodity options using the NYMEX futures
index, and are designated as Level 2 within the valuation hierarchy. The Companys swaps are valued based on a discounted future cash flow model. The primary input for the model is the NYMEX futures index. The Companys model is validated
by the counterpartys marked-to-market statements. The swaps are also designated as Level 2 within the valuation hierarchy. The discount rate used in determining the fair values of these instruments includes a measure of nonperformance risk.

Interest Rate Swap - The Companys interest rate swap is valued using the counterpartys marked-to-market
statement, which can be validated using modeling techniques that include market inputs such as publically available interest rate yield curves, and is designated as Level 2 within the valuation hierarchy.

At March 31, 2009, and December 31, 2008, the Company has no assets or liabilities measured at fair value on a recurring basis that meet the
definition of Level 1 or Level 3.

FSP 157-2 - The Company elected to implement SFAS 157 with the one-year deferral permitted by
FASB Staff Position No. FAS 157-2, Effective Date of FASB Statement No. 157 (FSP 157-2), issued February 2008, which defers the effective date of SFAS 157 for one year for certain nonfinancial assets and nonfinancial
liabilities measured at fair value. Accordingly, the Company adopted SFAS 157 on January 1, 2009, for its nonfinancial assets and nonfinancial liabilities measured at fair value on a non-recurring basis. As it relates to the Company, this
delayed adoption applies to certain nonfinancial assets and liabilities as may be acquired in a business combination and thereby measured at fair value; impaired oil and gas property assessments; and the initial recognition of asset retirement
obligations for which fair value is used. This deferred adoption of SFAS 157 did not have an impact on the Companys consolidated financial statements or its disclosures during the first quarter of 2009; however, the statement could have impact
on the remainder of 2009 in the form of additional disclosures.



19



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##### Table of Contents

NOTE I: Private Placement Offering

On June 5, 2008, the Company issued 1,533,334 shares of common stock and 613,336 warrants to purchase common stock to non-affiliated accredited investors pursuant to exemptions from registration under federal and
state securities laws. The shares of common stock were sold for $22.50 per share. The warrants have a term of five years with an exercise price of $32.43. The gross proceeds to the Company of $34.5 million were reduced by placement fees and issue
costs of $2.3 million.

NOTE J: Asset Retirement Obligations

The Companys asset retirement obligations represent the estimated future costs associated with the plugging and abandonment of oil and gas wells, removal of equipment and facilities from leased acreage and land
restoration, in accordance with applicable local, state and federal laws. In accordance with Statement of Financial Accounting Standards No. 143, Accounting for Asset Retirement Obligations (SFAS 143), the Company determines
its obligation by calculating the present value of estimated cash flows related to plugging and abandonment obligations. The changes to the Asset Retirement Obligations (ARO) for oil and gas properties and related equipment during the
three months ended March 31, 2009, are as follows (in thousands):



|                                             |  |   |       |  
|-------------------------------------------- |  | - | ----- | -
|Asset retirement obligation, January 1, 2009 |  | $ | 5,418 |  
|                                             | 
|Accretion expense                            |  |   | 61    |  
|Disposals of properties                      |  |   | (188  | )
|                                             |  |   |       |  
|Asset retirement obligation, March 31, 2009  |  | $ | 5,291 |  
|                                             |  |   |       |  

NOTE K: Related Party Transactions

Accounts receivable at March 31, 2009, and December 31, 2008, includes $3,507,000 and $2,311,000, respectively, due from SBE Partners LP
(SBE Partners). Accounts receivable at March 31, 2009, and December 31, 2008, also includes $200,000 and $594,000, respectively, due from OKLA Energy Partners LP. Both of these partnerships are oil and gas limited partnerships
for which a subsidiary of the Company serves as general partner. These amounts represent the limited partnerships share of property operating expenditures incurred by operating subsidiaries of the Company on their behalf, as well as accrued
management fees. Accounts payable at March 31, 2009, and December 31, 2008, includes $5,018,000 and $9,333,000, respectively, due to the SBE Partners for oil and gas revenues collected on its behalf. Accounts payable at March 31,
2009, and December 31, 2008, also includes $446,000 and $977,000, respectively, due to OKLA Energy for oil and gas revenues collected on its behalf.

The Company earned partnership management fees during the three months ended March 31, 2009 and 2008 of $298,000, and $312,000 respectively.

Subsidiaries of the Company operate the majority of oil and gas properties in which the two limited partnerships have an interest. Under this
arrangement, the Company collects revenues from purchasers and incurs property operating and development expenditures on each partnerships behalf. These revenues are paid monthly to each partnership, which in turn reimburses the Company for
the partnerships share of expenditures.



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##### Table of Contents

|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

The following is Managements Discussion and Analysis (MD&A) of significant factors that have affected certain aspects of our
financial position and operating results during the periods included in the accompanying unaudited consolidated financial statements. This discussion should be read in conjunction with the accompanying unaudited consolidated financial statements and
related notes thereto, included elsewhere in this Quarterly Report on Form 10-Q and should further be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2008.

Forward-Looking Information

Certain of the
statements in all parts of this document, contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which can be identified by words such as may, will,
expect, anticipate, estimate or continue, or comparable words. All statements other than statements of historical facts included in this report, including, without limitation, statements regarding our
business strategy, plans, objectives, expectations, intent, and beliefs of management, related to current or future operations are forward-looking statements. Such statements are based on certain assumptions and analyses made by management in light
of its experience and its perception of historical trends, current conditions, expected future developments and other factors it believes to be appropriate. The forward-looking statements included in this report are subject to a number of material
risks and uncertainties including assumptions about the pricing of oil and gas, assumptions about operating costs, operations continuing as in the past or as projected by independent or Company engineers, the ability to generate and take advantage
of acquisition opportunities and numerous other factors. A detailed discussion of important factors that could cause actual results to differ materially from the Companys expectations are discussed herein and in the Companys Annual
Report on Form 10-K for the year ended December 31, 2008. Forward-looking statements are not guarantees of future performance and actual results; therefore, developments and business decisions may differ materially from those envisioned by such
forward-looking statements.

General Overview

We are an independent oil and gas company engaged in the acquisition and development of oil and gas reserves through an active and diversified program which includes purchases of reserves, re-engineering, development and exploration
activities. As further discussed herein, future growth in assets, earnings, cash flows and share values will be dependent upon our ability to effectively compete for capital and acquire, discover and develop commercial quantities of oil and gas
reserves that can be produced at a profit, and assemble an oil and gas reserve base with a market value exceeding its acquisition, development and production costs.

We continue to implement our business strategy to acquire, discover and develop oil and gas reserves and achieve continued growth. Management continues to focus on reducing operating and administrative costs on a per
unit basis. In addition, we have attempted to mitigate downward price volatility by the use of commodity price hedging. The current volatile price environment for oil and natural gas is significant, and management cannot predict the prices that will
be available during the life of our current business plan. Following is a brief outline of our current plans:



| | (1) | Acquire oil and gas properties with significant producing reserves and development and exploration potential;
| | --- | -------------------------------------------------------------------------------------------------------------



| | (2) | Solicit industry partners in acquisitions, on a promoted basis, in order to diversify, reduce average cost and generate operating fees;
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------



| | (3) | Implement re-engineering and development programs within existing fields;
| | --- | -------------------------------------------------------------------------



| | (4) | Pursue exploration projects and increase direct participation over time. Solicit industry partners, on a promoted basis, for internally generated projects;
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| | (5) | Selectively divest assets to upgrade our producing property portfolio and to lower corporate wide per-unit operating and administrative costs, and focus on existing
fields and new projects with greater development and exploitation potential;
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

| | (6) | Continue activities directed toward reducing per-unit operating and general and administrative costs on a long-term sustained basis; and
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------



| | (7) | Obtain additional capital through the issuance of equity securities and/or through debt financing.
| | --- | --------------------------------------------------------------------------------------------------

While the impact and success of our plans cannot be predicted with accuracy, managements goal is to replace production and further increase our
reserve base at an acquisition or finding cost that will yield attractive rates of return and increase shareholder value.

In addition to
our fundamental business strategy, we intend to actively pursue corporate acquisitions or mergers. Management believes that opportunities may become available to acquire corporate entities or otherwise effect business combinations, particularly as a
result of recent lower commodity prices and the contraction in equity and debt financing markets. We intend to consider any such opportunities which may become available and are beneficial to stockholders. The primary financial considerations in the
evaluation of any such potential transaction will include, but are not limited to: (1) the ability of small capitalization oil and gas companies to gain recognition and favor in the public markets, (2) share appreciation potential,
(3) shareholder liquidity, and (4) capital formation and cost of capital to effect growth.

Oil and Gas Properties

We use the Successful Efforts method of accounting for oil and gas operations. Under this method, costs to acquire oil and gas properties, drill
successful exploratory wells, drill and equip development wells and install production facilities are capitalized. Exploration costs, including unsuccessful exploratory wells and geological and geophysical costs are charged to operations as
incurred. Depreciation, depletion and amortization (DD&A) of the capitalized costs associated with proved oil and gas properties are computed using the unit-of-production method, at the field level, based on proved reserves. Oil and
gas properties are periodically assessed for impairment and generally written down to estimated fair value if the sum of estimated future undiscounted pretax cash flows, based on engineering and expected economic circumstances, is less than the
carrying value of the asset. The fair value of impaired assets is generally determined using market values, if known, or using reasonable projections of production, prices and costs and discount rates commensurate with the risks involved.

Recent Property Acquisitions and Divestitures

In January 2008, we sold all of our interest in a property located in Otsego County, Michigan. The property was sold to an unaffiliated party for $6.6 million in cash. The carrying value of this property at the date of the sale was equal to
the selling price; therefore, no gain or loss was recognized. The sale of the property allowed us to focus on our core areas of operation.

In February 2008, we sold all of our interests in certain oil and gas properties to unaffiliated parties for $1.8 million and recognized a gain of $430,000. In May 2008, we closed the sales of certain other non-core oil and gas
properties in Louisiana and Texas to unaffiliated parties for approximately $11.8 million. These sales were part of our planned property divestiture program. The properties, which were producing approximately 390 BOPD, included fields located in
inland waters with short production lives, limited upside, high operating and administrative costs and significant plugging and abandonment obligations. These divestures have allowed us to focus on activities that have greater development and
exploration potential and therefore, higher potential returns.

In May 2008, we, through our wholly-owned subsidiary, Catena,
formed an entity in connection with the acquisition of producing oil and gas properties located throughout Oklahoma. OKLA Energy Partners LP (OKLA) was formed with Catena as general partner with a 2% partnership interest, and a large
institutional investor as the sole limited partner with a 98% partnership interest. In May 2008, these entities paid cash of $61.7 million to acquire certain Oklahoma properties. Catena, purchased 18% of the interests and OKLA purchased the
remaining 82%. Catenas share of the property purchase price was $12.8 million, and its general partner contribution to OKLA was $978,000. Our investment in OKLA is accounted for under the equity method of accounting.



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##### Table of Contents

In September 2008, we acquired certain producing properties in Oklahoma from an unaffiliated party for
$3.6 million in cash. We operate the acquired properties. The purchase price was allocated to oil and gas properties.

In January 2009, we
sold a producing property located in Louisiana to an unaffiliated party for $1.6 million. We recognized a gain of $1.3 million in conjunction with this sale.

Results of Operations

Three months ended March 31, 2009, compared to three months ended March 31, 2008

The Company recorded net income of $477,000 for the three months ended March 31, 2009 compared to net income of $4,226,000 for the same period in
2008. This $3,749,000 decrease resulted primarily from the following factors:

Net amounts contributing to increase (decrease) in net
income (in 000s):



|                                                          |  |   |         |  
|--------------------------------------------------------- |  | - | ------- | -
|Oil and gas sales                                         |  | $ | (10,163 | )
|Lease operating expenses                                  |  |   | 1,401   |  
|Production taxes                                          |  |   | 1,095   |  
|Exploration expense                                       |  |   | (80     | )
|Re-engineering and workovers                              |  |   | (284    | )
|General and administrative expenses (G&A)               |  |   | (311    | )
|Depletion, depreciation and amortization expense (DD&A) |  |   | (591    | )
|Net interest income (expense)                             |  |   | 632     |  
|Hedge ineffectiveness                                     |  |   | 1,469   |  
|Gain (loss) on derivative contracts                       |  |   | (52     | )
|Gain (loss) on sale of property                           |  |   | 989     |  
|Other income - net                                        |  |   | (90     | )
|                                                          |  |   |         |  
|Income before income taxes                                |  |   | (5,985  | )
|Provision for income taxes                                |  |   | 2,236   |  
|                                                          |  |   |         |  
|Net decrease                                              |  | $ | (3,749  | )
|                                                          |  |   |         |  

The following discussion applies to the above changes.

Oil and Natural Gas Sales. Net revenues from oil and gas sales decreased $10,163,000, or 45%. Revenue decreased by $1,431,000 due to properties
sold during the first and second quarters of 2008. The remaining decrease of $8,732,000 resulted primarily from decreases in commodity prices and decreases in production volumes. Price and production comparisons are set forth in the following table.
Properties sold during the second quarter of 2008 accounted for decreased production of approximately 75,000 Mcf of gas and approximately 31,000 barrels of oil.



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##### Table of Contents

|                                                     |  |                           |   |      |                            |       |  |   |      
|---------------------------------------------------- |  | ------------------------- | - | ---- | -------------------------- | ----- |  | - | -----
|                                                     |  | Percentincrease(decrease) |   |      | Three MonthsEnded March 31
|                                                     |  | 2009                      |   | 2008
|Gas Production (MMcf)                                |  | -18                       | % |      |                            | 665   |  |   | 809  
|Oil Production (Mbbls)                               |  | -12                       | % |      |                            | 177   |  |   | 200  
|Barrel of Oil Equivalent (MBOE)                      |  | -14                       | % |      |                            | 288   |  |   | 335  
|Average Price Gas Before Hedge Settlements (per Mcf) |  | -51                       | % |      | $                          | 3.83  |  | $ | 7.75 
|Average Price Oil Before Hedge Settlements (per Bbl) |  | -60                       | % |      | $                          | 36.89 |  | $ | 91.37
|Average Realized Price Gas (per Mcf)                 |  | -47                       | % |      | $                          | 4.12  |  | $ | 7.73 
|Average Realized Price Oil (per Bbl)                 |  | -33                       | % |      | $                          | 54.00 |  | $ | 81.00

Lease Operating Expenses. Lease operating expenses decreased from approximately $5,791,000
in the first quarter of 2008 to $4,390,000 for the same period in 2009, a decrease of $1,401,000 or 24%. Properties sold during the first and second quarters of 2008 accounted for $893,000 of the decrease. On a unit-of-production basis, barrel of
oil equivalent (BOE) costs decreased by $2.04 or 12% as a result of divestitures of properties with higher operating costs, re-engineering projects completed during 2008 that either enhanced production or lowered per unit operating
costs, and reductions in costs for materials, services and rigs during 2008.

Re-engineering and workover. Re-engineering and
workover costs increased by $284,000 from $697,000 to $981,000, due to increased emphasis on restoring and enhancing existing production capabilities.

Production Taxes. Production taxes decreased by $1,095,000 or 58%, due to decreased production volumes and revenues. The production taxes we pay are generally calculated as a percentage of oil and natural gas
sales revenues before the effects of hedging. Our production taxes for the quarter ended March 31, 2009 and 2008 were 8.7% and 7.7%, respectively, of oil and gas sales before the effects of hedging. The 2009 rate increased from 2008 due to a
change in our portfolio of producing properties.

General and Administrative Expenses.G&A increased $311,000 due primarily to
overall business expansion, as well as increases in salaries and other overhead expenses, partially offset by cost reductions resulting from the centralization of certain functions.

Depreciation, Depletion and Amortization. DD&A expense increased by $591,000 or 15% due to higher capitalized costs. Capitalized costs
increased from period to period due to acquisitions of property in Oklahoma and continued successful drilling in the Austin Chalk and Bakken Shale.

Interest Income and Expense. Interest expense decreased by $750,000 due to lower debt levels in the first quarter of 2009 compared to the same period in 2008. As of March 31, 2009, we had outstanding debt of $40,000,000 compared
to a balance of $86,000,000 as of March 31, 2008. During the first quarter of 2009 and 2008, our average outstanding debt was approximately $40,000,000 and $88,500,000, respectively. Interest income decreased by $118,000 in the first quarter of
2009 over the same period of 2008, due to lower interest rates on average invested cash balances.

Hedge Ineffectiveness. In the
first quarter of 2009 the loss from hedge ineffectiveness was $49,000, compared to a loss of $1,518,000 for the same period in 2008. In the first quarter of 2008 there was a larger than normal differential between the market benchmark used for
hedging and the prices we realized on sales of oil and gas. This, combined with an increased liability, caused us to record a large ineffectiveness loss for the first quarter of 2008. In the second, third and fourth quarters of 2008 our realized
price was more consistent with the market benchmark used for hedging; therefore, the cumulative ineffectiveness charge was reduced and we recorded a gain on hedge ineffectiveness for the year. In the first quarter of 2009, the differential between
the market benchmark used for hedging and the prices we realized on our sales of oil and gas increased slightly and given that the commodity hedges increased in value during the quarter the inception-to-date ineffectiveness decreased and as such we
recorded an expense.



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##### Table of Contents

Loss on Derivative Contracts. In December 2008, we split a $50 million notional value interest
rate swap that was previously accounted for as a cash flow hedge. The swap was split into a $10 million swap and the $40 million notional amount swap. We continued hedge accounting for the $40 million swap and accounted for the $10 million swap as a
trading security. In the first quarter of 2009, we recognized cash settlement losses on the $10 million swap of $94,000. These losses were offset by mark-to-market gains of $42,000.

Other Income. Other income decreased by $90,000 in the first quarter of 2009 compared to the same period in 2008 due to a decrease in partnership
management fees of $14,000 and a decrease in partnership income of $220,000. These decreases were offset by an increase in property operating income of $144,000. Additionally, in the first quarter of 2009 we had a net gain on sales of properties and
other assets of $1,399,000 versus $410,000 in the same period of 2008.

Income Tax Expense. Income tax expense for the first quarter
of 2009 was $360,000 compared to $2,596,000 for the same period in 2008. Our income tax expense decreased due to lower pre-tax earnings. Our effective tax rate during the first quarter of 2009 was approximately 43% versus 38% in the same period
during 2008. Our effective tax rate increased as a result of the qualified stock options, the expense related to these options is not deductible in determining taxable income.

Impact of Changing Prices and Costs

Our revenues and the carrying value of our oil and gas
properties are subject to significant change due to changes in oil and gas prices. As demonstrated historically, prices are volatile and unpredictable. Oil prices increased appreciably during 2007 and again during the first and second quarters of
2008 but retreated somewhat during the third quarter of 2008 and have dropped significantly since then. Average realized oil prices of $54.00 per Bbl, net of hedges, for the three months ended March 31, 2009, were 33% lower than for the
comparable period in 2008. Average realized natural gas prices of $4.12 per Mcf, net of hedges, for the three months ended March 31, 2009, were 47% lower than for the comparable period in 2008. The average realized prices for the three months
ended March 31, 2009, included the effects of our hedges. Should significant, further price decreases occur or should prices fail to remain at levels which will facilitate repayment of debt and reinvestment of cash flow to replace current
production, we could experience difficulty in developing our assets and continuing our growth.

Hedging Activities

In an attempt to reduce our sensitivity to oil and gas price volatility and secure favorable debt financing, we have and will likely continue to enter
into hedging transactions which may include fixed price swaps, price collars, puts and other derivatives. Management believes our hedging strategy will result in greater predictability of internally generated funds, which can be dedicated to capital
development projects and corporate obligations.

We do not engage in speculative commodity trading activities and do not hedge all
available or anticipated quantities. Our strategy with regard to hedging includes the following factors:



| | (1) | Secure and maintain favorable debt financing terms;
| | --- | ---------------------------------------------------



| | (2) | Minimize price volatility and generate internal funds available for capital development projects and additional acquisitions;
| | --- | -----------------------------------------------------------------------------------------------------------------------------



| | (3) | Lock-in growth in revenues, cash flows and profits for financial reporting purposes; and
| | --- | ------------------------------------------------------------------------------------------



| | (4) | Allow certain quantities to float, particularly in months with high price potential.
| | --- | ------------------------------------------------------------------------------------

We believe that commodity speculation and trading activities are inappropriate for us, but further believe appropriate management of realized prices is an integral part of managing our business strategy.



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##### Table of Contents

Administrative and Operating Costs

We continue to focus on cost-containment efforts regarding lower per-unit administrative and operating costs. However, we must continue to attract and retain competent management, technical and administrative
personnel in pursuing our business strategy and fulfill our contractual obligations.

Liquidity and Capital Resources

We expect to finance our future acquisition, development and exploration activities through working capital, cash flow from operating activities, our bank
credit facility, sale of non-strategic assets, various means of corporate and project finance and possibly through the issuance of additional debt and equity securities. In addition, we intend to continue to partially finance our drilling activities
through the sale of participations to industry partners on a promoted basis, whereby we will earn working interests in reserves and production greater than our proportionate capital cost.

Credit Facility

In connection with the borrowing
base redetermination on April 1, 2009, we entered into certain amendments that retained our $100 million borrowing base, but also provided for a modest increase in interest rates at either, (a) LIBOR plus 2.25% to 3.00% or (b) the
prime lending rate plus 1.25% to 2.00%, depending on the amount borrowed. We currently have an outstanding balance of $40 million with $60 million in unused borrowing base capacity. The Amended and Restated Credit Agreement provides for financing up
to $200 million and expires on October 16, 2010. We have had preliminary discussion with our bank group and as a result we expect to extend the maturity date in connection with the next borrowing base redetermination.

Cash Flows from Operating Activities

For the three
months ended March 31, 2009, our net cash used in operating activities was $3.9 million, versus operating activities providing cash of $7.2 million from the same period in 2008. We reduced our net current liabilities by $7.7 million and
incurred unfavorable commodity price changes and decreases in production resulting from property disposals that we made as part of our on-going strategy to high-grade our portfolio. We believe that we can continue to generate cash flows sufficient
to allow us to continue with our planned capital program which will replace our reserves and increase our production.

Cash Flows from Investing
Activities

Cash applied to oil and gas capital expenditures for the three months ended March 31, 2009 and 2008, was $5.1 million
and $13.0 million, respectively. In 2009, we also realized cash of $2.0 million from the sale of properties compared to $8.5 million during the same period during 2008. Capital expenditures for 2009 were financed with working capital. We expect to
spend approximately $60 to $64 million in capital expenditures during the remainder of 2009 thru 2010.

Capital Budget

In early 2008, we developed and reported a two-year capital budget totaling $61.5 million. As the year progressed we expanded our portfolio of projects,
including both new and expanded projects. The projects were also modified based on performance and the effects of our acquisition and divestiture activities. The overall regional focus and profile of our portfolio remained consistent with our
business strategy. In the third quarter of 2008, we updated our projected expenditures for the detailed review of our management and Board of Directors. While our intent, at that time, was to formally plan to increase our capital spending, the rapid
and significant reductions in commodity prices caused us to re-evaluate and in some cases, re-direct our capital spending. The table below is presented simply to disclose the nature and diversity of opportunities currently in our portfolio. However,
considering the current commodity prices, we now expect to return to our original capital budget and spend approximately $60 to $64 million over the



26



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##### Table of Contents

course of 2009 and 2010. The remaining $19 to $23 million presented below are for projects that we anticipate undertaking after 2010; however, considering
the significant volatility in commodity prices we have not yet set a date certain for the projects. These deferred projects are largely held by production and most can be deferred without exposure to lease expiration under present operating
conditions. Our current estimate of $60 to $64 million is predicated on prices equal to or better than the NYMEX forward curve, our hedge positions, reasonable success once the projects are undertaken and costs that are consistent with our
estimates. However, we are committed to generally limiting our capital spending to the Companys cash flows, although in certain limited circumstances, we may utilize our borrowing capacity for development or lease saving operations. We
absolutely will not use our borrowing capacity for exploratory drilling. Additionally, in the opinion of management, we have sufficient cash flows and liquidity to fulfill all lease obligations.

Inventory of Planned Exploration and Development Projects



|                                             |  |              |     
|-------------------------------------------- |  | ------------ | ----
|                                             |  | ($ Millions)
|Southern District                            |  |              |     
|Austin Chalk drilling and development(1) (2) |  | $            | 6.2 
|Other development drilling(2)                |  |              | 14.8
|Waterflood expansion                         |  |              | 1.3 
|Exploratory drilling(3)                      |  |              | 8.2 
|Re-engineering(4)                            |  |              | 4.1 
|Acreage, seismic and other(5)                |  |              | 6.4 
|Northern District                            |  |              |     
|Horizontal development drilling(2) (6)       |  |              | 11.0
|Other development drilling(2)                |  |              | 9.8 
|Waterflood and associated drilling           |  |              | 4.7 
|Bakken Shale drilling(7)                     |  |              | 12.7
|Re-engineering(4)                            |  |              | 1.0 
|Acreage, seismic and other(5)                |  |              | 2.8 
|                                             |  |              |     
|Total                                        |  | $            | 83.0
|                                             |  |              |     



Notes:



| | (1) | Continuation of an ongoing horizontal drilling and development program with an affiliated institutional partnership. We believe we can spud a new well every 60-75 days, utilizing
one rig for a 3-4 year period. At present, we believe we have at least 15 drilling locations, the majority of which are expected to be dual laterals. The dual lateral configuration reduces the number of wells but also increases reserve recoveries
and favorably impacts finding and development costs. In addition, without further significant declines in commodity prices and development costs, we expect to re-enter numerous well bores and extend existing laterals or drill additional laterals.
None of the possible reentries are included in the above table as all such opportunities are held by production and have no critical timing. We may consider deploying a second drilling rig as drilling costs come down.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | Includes both proved undeveloped and non-proved reserve potential.
| | --- | ------------------------------------------------------------------

| | (3) | Principally South Louisiana and the Texas Gulf Coast.
| | --- | -----------------------------------------------------

| | (4) | Includes activities related to existing fields intended to enhance production and lower operating expenses. These expenditures include replacement, repairs or additional flowlines,
facilities, and/or compression as well as the modification of the down-hole lift method, recompletions and side-track drilling.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (5) | Potential expenditures associated with further expansion of acreage and prospect inventory generally within close proximity of our existing fields.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------

| | (6) | Includes eight horizontal development wells or additional lateral wells within existing fields where we have interests ranging from 66% to 100%.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

| | (7) | Includes 20 wells operated by our joint venture partner where our working interests may range from 4% to 10%. Our participating working interests vary based on acreage contributed
to the approved drilling units. It also includes numerous wells where our working interest is 1% or less. While not material financially, management has generally elected to participate in all such drilling within our focus area primarily to collect
valuable technical data related to the drilling operations and reservoir characteristics. Also, it includes one Bakken Shale test well in Montana where our working interest presently is 50%.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The table above does not include all contemplated projects or inventory in our portfolio but is representative of the bulk of such activities. In
summary, our drilling and development activities include diversified opportunities intended to develop reserves and increase production. The current exploration and development schedule presented in the table above includes (i) 32 wells which
have assigned proved undeveloped reserves and the potential for the development of non-proved reserves (excluding numerous smaller non-operated interest which may be developed); (ii) seven exploratory test wells including two potentially high
impact exploratory wells at Quarantine Bay, Plaquemines Parish, Louisiana; (iii) 20 Bakken Shale wells (excluding minor non-operated interests); (iv) water flood installation and expansion opportunities; and (v) seismic and acreage
expenditures intended to further expand our portfolio.

The budget, as well as the timing of expenditures, is subject to change as we
re-evaluate alternative projects and further expand our portfolio. Further, because much of our opportunity is held by production we may shift our expenditures between regions and projects (such as development versus exploration) in an attempt to
maximize cash flow and take advantage of regional differences in net commodity prices and service costs. Furthermore, our budget may be accelerated or deferred, pending commodity prices, drilling and service rig availability and cost and adequate
staffing to effectively manage activities and control costs. Finally, certain expenditures may be deferred in favor of new opportunities.

We believe projected expenditures will result in increased production, cash flows and reserve value and will further expose us to potential upside from exploration. We further believe any deferral of certain projects will not result in any
material loss. Should we be unable to acquire new properties, capital expenditures associated with existing properties could be increased.



28



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##### Table of Contents

|Item 3. | Quantitative and Qualitative Disclosures About Market Risk
|------- | ----------------------------------------------------------

We are exposed to market risk from changes in commodity prices. In the normal course of business, we enter into derivative transactions, including commodity price collars, swaps and floors to mitigate our exposure to
commodity price movements. We do not participate in these transactions for trading or speculative purposes. While the use of these arrangements may limit the benefit to us of increases in the prices of oil and natural gas, it also limits the
downside risk of adverse price movements.

The following is a list of contracts outstanding at March 31, 2009:



|                 |  |                 |  |           |  |          |  |                |  |                                  |  |                                         |        |  
|---------------- |  | --------------- |  | --------- |  | -------- |  | -------------- |  | -------------------------------- |  | --------------------------------------- | ------ | -
|Transaction Date |  | TransactionType |  | Beginning |  | Ending   |  | Price Per Unit |  | RemainingAnnual Volumes          |  | Fair ValueOutstandingas ofMarch 31,2009 |       
|                 |  |                 |  |           |  |          |  |                |  |                                  |  | (in thousands)                          |       
|Natural Gas      |  |                 |  |           |  |          |  |                |  |                                  |  |                                         |        |  
|October-07       |  | Collar          |  | 01/01/09  |  | 12/31/09 |  | $7.00 - $10.75 |  | 206,645 Mmbtu                    |  | $                                       | 670    |  
|October-07       |  | Collar          |  | 01/01/10  |  | 12/31/10 |  | $7.00 - $9.90  |  | 1,287,000 Mmbtu                  |  |                                         | 1,567  |  
|October-07       |  | Collar          |  | 01/01/11  |  | 12/31/11 |  | $7.00 - $9.20  |  | 1,079,000 Mmbtu                  |  |                                         | 1,027  |  
|February-09      |  | Swap            |  | 04/01/09  |  | 03/31/10 |  | $4.86          |  | 600,000 Mmbtu                    |  |                                         | 130    |  
|March-09         |  | Swap            |  | 04/01/09  |  | 03/31/10 |  | $4.87          |  | 600,000 Mmbtu                    |  |                                         | 135    |  
|                 |  |                 |  |           |  |          |  |                |  |                                  |  |                                         |        |  
|                 |  |                 |  |           |  |          |  |                |  |                                  |  |                                         | 3,529  |  
|                 |  |                 |  |           |  |         
|Crude Oil        |  |                 |  |           |  |          |  |                |  |                                  |  |                                         |        |  
|October-07       |  | Swap            |  | 01/01/09  |  | 12/31/09 |  | $76.00         |  | 276,000 Bbls                     |  |                                         | 6,175  |  
|October-07       |  | Swap            |  | 01/01/10  |  | 12/31/10 |  | $74.71         |  | 322,000 Bbls                     |  |                                         | 3,897  |  
|October-07       |  | Swap            |  | 01/01/11  |  | 12/31/11 |  | $74.37         |  | 282,000 Bbls                     |  |                                         | 1,815  |  
|March-09         |  | Forward Sale    |  | 04/01/09  |  | 03/31/10 |  | $43.85         |  | 108,000 Bbls                     |  |                                         | (530   | )
|                 |  |                 |  |           |  |          |  |                |  |                                  |  |                                         |        |  
|                 |  |                 |  |           |  |          |  |                |  |                                  |  |                                         | 11,357 |  
|                 |  |                 |  |           |  |         
|Interest Rate    |  |                 |  |           |  |          |  |                |  |                                  |  |                                         |        |  
|Oct-07/Dec-09    |  | Swap            |  | 10/10/07  |  | 10/16/10 |  | 4.29375%       |  | $40 Million Notional30-day LIBOR |  |                                         | (2,085 | )
|                 |  |                 |  |           |  |          |  |                |  |                                  |  |                                         |        |  
|Oct-07/Dec-09    |  | Swap            |  | 12/16/08  |  | 10/16/10 |  | 4.29375%       |  | $10 Million Notional30-day LIBOR |  |                                         | (521   | )
|                 |  |                 |  |           |  |          |  |                |  |                                  |  |                                         |        |  
|                 |  |                 |  |           |  |          |  |                |  |                                  |  |                                         | (2,606 | )
|                 |  |                 |  |           |  |          |  |                |  |                                  |  |                                         |        |  
|                 |  |                 |  |           |  |          |  |                |  |                                  |  | $                                       | 12,280 |  
|                 |  |                 |  |           |  |          |  |                |  |                                  |  |                                         |        |  



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##### Table of Contents

|Item 4. | Controls and Procedures
|------- | -----------------------

Evaluation of
disclosure controls and procedures. In accordance with Rule 13a-15(b) of the Securities Exchange Act of 1934 (the Exchange Act), our management evaluated, with the participation of our Chief Executive Officer and our Chief Financial
Officer, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of March 31, 2009. Based upon their evaluation of these disclosure controls and
procedures, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were not effective as of March 31, 2009, as discussed below, to ensure that information required to be disclosed by us in
the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (the SEC), and to ensure that
information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate, to allow timely
decisions regarding required disclosure.

Subsequent to the Companys filing of its December 31, 2008 Annual Report on Form 10-K,
management determined that the Company should have filed the report as an accelerated filer. On June 30, 2008, the Company exceeded the public float limit for a smaller reporting company and began the process of transitioning from a smaller
reporting company to an accelerated filer. During the transition period the Company is allowed to continue to use the scaled disclosures provided for a smaller reporting company until the first interim period of fiscal 2009. Management believed that
this transition period also applied to the filing deadline for the Companys annual report on Form 10-K and that the transition period granted the Company relief from engaging its independent auditor to attest to the effectiveness of its
internal control over financial reporting. Because the Company did not timely file its Form 10-K and include the Independent Auditors Report on Internal Control over Financial Reporting when originally filed on March 25, 2009, management
has determined that the Companys disclosure controls and procedures were not effective, including those to ensure that information concerning the Company which is required to be disclosed in reports filed or submitted under the Securities
Exchange Act is recorded, processed, summarized and reported by the Company within the time periods specified in the SECs rules and forms. The Company has remedied this by implementing additional controls and procedures requiring that Company
personnel with financial reporting responsibilities maintain knowledge of rule changes and related interpretations issued by the staff of the Securities and Exchange Commission. In addition, those individuals are now required to obtain at least 20
hours per year in relevant professional education courses and are required to seek the advice of competent professionals on highly complex issues.

The Company has engaged its independent auditors to attest to the effectiveness of the Companys internal control over financial reporting. Once this engagement is completed, the Company will file an amended Form 10-K for the
year ended December 31, 2008. The amendment will include the required reports of management and that of our independent auditor. Furthermore, the Company will now file all future reports within the timetable of an accelerated filer unless its
public float drops below $50 million and the Company transitions to non-accelerated filer status. Management believes that these actions will remediate the failure to include the auditors attestation in our previously filed Annual Report on
Form 10-K for 2008.

Changes in internal control over financial reporting. There have been no changes in our internal control
over financial reporting that occurred during the quarter ended March 31, 2009, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



30



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##### Table of Contents

PART II. OTHER INFORMATION



|Item 1. | Legal Proceedings
|------- | -----------------

We are not
a party to, nor are any of our properties subject to, any material pending legal proceedings. We know of no material legal proceedings contemplated or threatened against the Company.



|Item 1A. | Risk Factors
|-------- | ------------

In addition to the
other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1- Risk Factors in our 2008 Annual Report on Form 10-K, which could materially affect our business, financial condition or
future results. The risks described in our 2008 Annual Report on Form 10-K may not be the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may materially adversely
affect our business, financial condition and/or operating results.



|                                                                           |  |      |  |  |  | 
|-------------------------------------------------------------------------- |  | ---- |  |  |  | 
|Item 2.        Unregistered Sales of Equity Securities
and Use of Proceeds |  | None |  | 
|Item 3.        Defaults Upon Senior Securities                             |  | None |  | 
|Item 4.        Submission of Matters to Vote of
Security Holders           |  | None |  | 
|Item 5.        Other
Information                                           |  | None |  | 



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##### Table of Contents

Item 6.Exhibits

EXHIBIT INDEX

FOR

Form 10-Q for the quarter ended March 31, 2009.



|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                               
|------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1    |  | Amended and Restated Articles of Incorporation dates June 10, 2003, incorporated by reference to Exhibit 3.1 of Registrants Form 10-KSB for the year ended December 31,
2003.                                                                                                                                                                                                                                                                
|       | 
|3.1(a) |  | Articles of Amendment to the Articles of Incorporation, incorporated by reference as Annex C to the Registrants definitive Proxy Statement dated February 23, 2007, and filed with the
Commission on February 23, 2007.                                                                                                                                                                                                                      
|       | 
|3.1(b) |  | Articles of Amendment to Articles of Incorporation, dated November 6, 2007. (5)                                                                                                                                                                                                                                                                                                                                                               
|       | 
|3.2    |  | Bylaws, as amended March 2, 2004, incorporated by reference to Exhibit 3.2 of Registrants Form 10-KSB for the year ended December 31, 2003.                                                                                                                                                                                                                                                                                                  
|       | 
|10.15  |  | Agreement and Plan of Merger dated September 14, 2006, among GeoResources, Inc., Southern Bay Energy Acquisition, LLC, Chandler Acquisition, LLC, Southern Bay Oil & Gas, L.P., Chandler
Energy, LLC and PICA Energy, LLC (including Amendment No. 1 dated February 16, 2007). Incorporated by reference as Annex A to the Registrants Definitive Proxy Statement dated February 23, 2007 and filed with the Commission on February 23,
2007.
|       | 
|10.19  |  | June 7, 2001 Lease Agreement by and between AROC, Inc. and BGK Texas Property Management, Inc. for 110 Cypress Station Drive, Suite 220, Houston, Texas 77090. (3)                                                                                                                                                                                                                                                                            
|       | 
|10.20  |  | First Amendment to June 7, 2001 Lease Agreement by and between AROC, Inc. and BGK Texas Property Management, Inc. for 110 Cypress Station Drive, Suite 220, Houston, Texas 77090, dated November
10, 2003. (3)                                                                                                                                                                                                                                
|       | 
|10.21  |  | Assignment and Assumption by Southern Bay Energy, L.L.C. of June 7, 2001 Lease Agreement by and between AROC, Inc. and BGK Texas Property Management, Inc. for 110 Cypress Station Drive, Suite
220, Houston, Texas 77090, dated April 19, 2005. (3)                                                                                                                                                                                          
|       | 
|10.22  |  | Unconditional Guaranty of June 7, 2001 Lease Agreement by and between Southern Bay Energy, L.L.C. and BGK Texas Property Management, Inc. for 110 Cypress Station Drive, Suite 220, Houston, Texas
77090, dated April 19, 2005. (3)                                                                                                                                                                                                           
|       | 
|10.23  |  | Second Amendment to June 7, 2001 Lease Agreement by and between Southern Bay Energy, L.L.C. and BGK Texas Property Management, Inc. for 110 Cypress Station Drive, Suite 220, Houston, Texas
77090, dated April 19, 2005. (3)                                                                                                                                                                                                                 
|       | 
|10.24  |  | Third Amendment to June 7, 2001 Lease Agreement by and between Southern Bay Energy, L.L.C. and BGK Texas Property Management, Inc. for 110 Cypress Station Drive, Suite 220, Houston, Texas 77090,
dated April 9, 2007. (3)                                                                                                                                                                                                                   
|       | 
|10.26  |  | January 31, 2000 Office Building Lease by and between 475-17thStreet, CO. and Collis P.
Chandler III for 475 17th Street Building, Suite 860, 475 17th Street, Denver, Colorado 80202. (3)                                                                                                                                                                                                                                                    
|       | 
|10.27  |  | First Amendment to January 31, 2000 Office Building Lease by and between 475-17thStreet, CO.
and Collis P. Chandler III for 475 17th Street, Suite 860, Denver, Colorado 80202, dated September 28, 2001. (3)                                                                                                                                                                                                                                 
|       | 
|10.28  |  | Second Amendment to January 31, 2000 Office Building Lease by and between 475-17thStreet,
CO. and Collis P. Chandler III for 475 17th Street, Suite 860, Denver, Colorado 80202, dated October 23, 2002. (3)                                                                                                                                                                                                                                  
|       | 
|10.29  |  | Third Amendment to January 31, 2000 Office Building Lease by and between 475-17thStreet, CO.
and Collis P. Chandler III for 475 17th Street, Suite 860, Denver, Colorado 80202, dated June 28, 2004. (3)                                                                                                                                                                                                                                      



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|      |  |                                                                                                                                                                                                                      
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      | 
|10.30 |  | Credit Agreement dated September 26, 2007 between the Registrant and Wachovia Bank National Association. (2)                                                                                                         
|      | 
|10.31 |  | Limited Partner Interest Purchase and Sale Agreement dated October 16, 2007 between the Registrant and TIFD III-X, LLC. (2)                                                                                          
|      | 
|10.32 |  | Amended and Restated Credit Agreement dated October 16, 2007 between the Registrant and Wachovia Bank National Association. (2)                                                                                      
|      | 
|10.33 |  | Amended and Restated Credit Agreement dated October 16, 2007 between the Registrant and Wachovia Bank National Association. (2)                                                                                      
|      | 
|10.34 |  | Form of Purchase Agreement. (4)                                                                                                                                                                                      
|      | 
|10.35 |  | Form of Warrant. (4)                                                                                                                                                                                                 
|      | 
|10.36 |  | Form of Registration Rights Agreement. (4)                                                                                                                                                                           
|      | 
|10.37 |  | Agreement of Limited Partnership for OKLA Energy Partners LP dated May 20, 2008. (6)                                                                                                                                 
|      | 
|10.38 |  | Lease Agreement by and between Southern Bay Energy, L.L.C. and Cypress Court Operating Associates, L.P. for office space at 110 Cypress Station Drive, Suite 220, Houston, Texas 77090, dated
September 25, 2008. (7)
|      | 
|14.1  |  | Code of Business Conduct and Ethics adopted March 2, 2004, incorporated by reference to Exhibit 14.1 of Registrants Form 10-KSB for fiscal year ended December 31, 2003.                                            
|      | 
|21.1  |  | Subsidiaries of the Registrant. (3)                                                                                                                                                                                  
|      | 
|31.1  |  | Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act. (1)                                                                                                                  
|      | 
|31.2  |  | Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act. (1)                                                                                                                  
|      | 
|32.1  |  | Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act. (1)                                                                                                                  
|      | 
|32.2  |  | Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act. (1)                                                                                                                  



|(1) | Filed herewith.
|--- | ---------------

|(2) | Filed with the Registrants Form 10-QSB for the quarter ended September 30, 2007.
|--- | ---------------------------------------------------------------------------------

|(3) | Filed with the Registrants Form 10-QSB for the quarter ended June 30, 2007.
|--- | ----------------------------------------------------------------------------

|(4) | Filed with the Registrants Form 8-K on June 11, 2008.
|--- | ------------------------------------------------------

|(5) | Filed with the Registrants Form 10-KSB for the year ended December 31, 2007.
|--- | -----------------------------------------------------------------------------

|(6) | Filed with the Registrants Form 10-Q for the quarter ended June 30, 2008.
|--- | --------------------------------------------------------------------------

|(7) | Filed with the Registrants Form 10-Q for the quarter ended September 30, 2008.
|--- | -------------------------------------------------------------------------------



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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 8, 2009 |  |                                                       
|            |  | /s/ Frank A. Lodzinski                                
|            |  | Frank A. Lodzinski                                    
|            |  | Chief Executive Officer (Principal Executive Officer) 
|            | 
|            |  | /s/ Howard E. Ehler                                   
|            |  | Howard E. Ehler                                       
|            |  | Chief Financial Officer (Principal Accounting Officer)



34