The Past Year in Retrospect and Current Outlook
GeoPetro Resources Company made difficult decisions in a challenging and testing economic climate to ensure that the company is in a stronger position. In 2012, natural gas fell to its lowest price in more than a decade as large deposits of natural gas have been discovered from shale rock formations throughout the continent which has shifted the supply curve. As a result, companies in the natural gas space have suffered significant share devaluations. In response to the depressed natural gas prices, GeoPetro elected to temporarily shut-in its production at Madisonville Field, Madison County, Texas in 2012. In March 2014, the company commenced reworking operations on the Magness #1 and Fannin #1 wells in anticipation of restoring production.
The Reserve Report for the Madisonville Field that was recently completed by an independent petroleum and reservoir engineering firm for the period ending December 31, 2013, showed the Net Present Value discounted at 10% of total proved reserves net to the Company improving to $29.1 million from $16.1 million at December 31, 2012. The average natural gas price used in the December 31, 2013 report was $3.31, whereas the average natural gas price used in the December 31, 2012 report was $2.46.
Based upon the estimated reserves at December 31, 2013, the following is a table of Present Value of Proven Recoverable Reserves in the Rodessa Formation at various natural gas prices held constant over the life of the reserves.
|Price of Gas per MCF (held constant)||PV10 (in millions)|
Significant progress is being made in permitting the wells in the Lokern Prospect located in the San Joaquin Basin, Kern County, California. We met with the Department of Fish and Game in February, 2012 to discuss the securing of the necessary drilling permits and to determine what activities would need to be performed in order to comply with the Department of Fish and Game requirements so that we can prepare and file a CEQA document with the Division of Oil, Gas and Geothermal Resources (DOGGR). GeoPetro received encouraging feedback from the Department of Fish and Game. As a result, we have prepared a CEQA application and have filed it with the DOGGR. Industry partners have shown an interest in the project and discussions are ongoing.Summary
We continue to progress in positioning the Company for future growth. We have bold aspirations and are focused on initiatives to enhance shareholder wealth. GeoPetro has a strong and balanced exploration and development portfolio of projects with significant opportunities to create meaningful shareholder equity.
On behalf of the Board of Directors, I would like to thank our shareholders for their continued patience and support. We remain committed to protecting and increasing the value of our Company and to pursuing new value-enhancing opportunities. I also want to take this opportunity to acknowledge our employees for their hard work, dedication and many contributions during the past year.
Stuart J. Doshi
Chairman of the Board, President and Chief Executive Officer