GeoPetro Resources Company Announces Year End 2009 Financial Results Including Non-Cash Impairment Write-Down Resulting From Application of New SEC and GAAP Accounting Rules

SAN FRANCISCO, March 31 /PRNewswire-FirstCall/ -- GeoPetro Resources Company ("GeoPetro" or the "Company") (NYSE Amex: GPR) today announced financial results for the year ended December 31, 2009.  

During the twelve months ended December 31, 2009, the Company reported a net loss available to common shareholders of $25,987,305 ($0.76 per basic and diluted share), compared to a net loss available to common shareholders of $174,825 ($.01 per basic and diluted share) in the previous year. The net loss in 2009 was primarily due to a $19.8 million non-cash impairment write-down associated with the Company's US full cost pool resulting from the application of new Securities and Exchange Commission ("SEC") and Generally Accepted Accounting Principles ("GAAP") accounting rules adopted, as required, by the Company as of December 31, 2009.  Had we reported our financial results under the SEC and GAAP accounting rules in effect prior to year-end 2009, we would not have recorded the $19.8 million impairment charge.

Asset Impairment-- GeoPetro follows the full cost method of accounting for oil and gas producing activities and, accordingly, capitalizes all costs incurred in the acquisition, exploration, and development of proved oil and gas properties.  Under the full cost method net capitalized costs of proved oil and gas properties (full cost ceiling limitation) are not to exceed their related estimated future net revenues discounted at 10%, and the lower of cost or estimated fair value of unproved properties, net of tax considerations.

Effective December 31, 2009, we adopted new rules mandated by the SEC designed to modernize the oil and gas company reserves reporting requirements.  Application of the new reserve rules resulted in the use of a lower natural gas price at December 31, 2009 than would have resulted under the previous rules.  As a result, the new pricing methodology rules result in a lower net present value (PV-10) of economically producible reserves.  The new SEC rules require that reserve calculations be based on the un-weighted average first-day-of-the-month prices for the prior twelve months, in contrast with the previous method required by the SEC which utilized period end prices.  The prices under the new rules were $3.11 per Mcf for natural gas adjusted for energy content, quality and basis differentials.  Under the new rules, this resulted in a year-end ceiling test write-down of approximately $19.8 million associated with the US full cost pool.  Had we used the price prevailing on December 31, 2009 of $5.45 per Mcf for natural gas as prescribed under the previous SEC mandated method, there would have been no ceiling test write-down.

The lower net present value (PV-10) of economically producible reserves used for purposes of determining impairment is not indicative of the fair market value of the properties, but rather a result of the natural gas pricing anomaly that existed during 2009 when the prices were at an eight year low.  The $3.11 per Mcf price used in the determination is substantially below the period end price received as of December 31, 2009 of $5.45 per Mcf.  The Company also wishes to emphasize that the impairment is a non-cash charge to earnings and does not impact liquidity.

Stuart J. Doshi, Chairman, President and Chief Executive Officer, commented, "GeoPetro made significant progress in 2009 and first quarter 2010 despite the challenging environment we are currently facing.  In March of 2010, we announced the successful sale of our Alaskan Cook Inlet leases for cash and a significant retained royalty position.  We are also actively seeking industry partners to fund costs associated with drilling test wells on our Madisonville Deep and California projects.  The execution of farmout arrangements will reduce the Company's capital exposure and allow it to receive reimbursement of some or all of its sunk costs associated with these projects.

"Our efforts have been nonetheless overshadowed by the significant drop in commodity prices that occurred during 2009, which materially impacted our year-end reserves calculation and imposed a ceiling test write-down of our oil and gas properties consistent with a large portion of the exploration and production sector of the petroleum industry.  The impact of the ceiling test measurement was compounded by the new SEC requirements which require us to use a look-back price as of the end of the year in place of a period end price.  Had we been able to report under the previous SEC mandated rules, we would have not been required to report any impairment associated with our US proved oil and gas properties at year-end.  Many of our peers in the natural gas sector are being similarly impacted by the new SEC rules.

"Commodity-based businesses are cyclical by their very nature.  Natural gas prices are near the bottom of the current cycle primarily due to a reduction in demand caused by the deep recession seen around the globe.  During such times, the prudent, near-term strategy for GeoPetro is to focus on cost reductions, improve our balance sheet, maximize the value of our proven producing Madisonville Project through production enhancements, seek opportunities to optimize our remaining portfolio of assets through strategic farmouts and pursue other strategic alternatives.  We are pleased with the progress being made on all these fronts.  Your management and Board are being proactive to ensure that GeoPetro remains well situated to return to growth as the economy and commodity prices continue to recover."

The following represents selected financial results for the twelve months ended December 31, 2009:  

About GeoPetro

GeoPetro is an independent oil and natural gas company headquartered in San Francisco, California.  GeoPetro currently has projects in the United States, Canada and Indonesia.  GeoPetro has developed a producing oil and gas property in its Madisonville Field Project in Texas.  Elsewhere, GeoPetro has assembled a geographically-diversified portfolio of exploratory and appraisal prospects.

Cautionary Statements

This news release contains forward-looking information.  Statements contained in this news release relating to future results, events and expectations are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended.  These forward-looking statements may involve known and unknown risks involving market prices for natural gas and oil, economic and competitive conditions, regulatory changes, resource estimates, estimates of proved and probable reserves, production forecasts, geological and engineering uncertainties, potential failure to achieve production from development drilling projects, capital expenditures and other risks and uncertainties, which may cause the actual results to be materially different from those expressed or implied by such statements.  Additional risk factors include, among others, those described in the Company's Annual Report on Form 10-K on file with the U.S. Securities and Exchange Commission.  We do not have any intention or obligation to update forward-looking statements included in this press release after the date of this press release, except as required by law.  

No stock exchange or regulatory authority has approved or disapproved of the information contained herein.

SOURCE GeoPetro Resources Company

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