About Us

Dear Shareholders and Interested Parties:

The turbulence in the financial markets has continued and indeed spread to the wider economy. Commodity prices including oil and natural gas prices have been dramatically impacted as the slowing economy affects demand. I believe that oil and natural gas prices are likely to stabilize at current levels until we see signs of growth returning to the economy. I am however concerned about the ability of our industry to meet increased demand when economic growth returns. Investments are currently being cancelled or postponed by most oil and gas companies who have to preserve liquidity and this will only exacerbate the supply problems which existed before the economic downturn. Such supply concerns will re-emerge as the economy recovers and I believe that oil and natural prices will increase in the medium term. However the timing of any such recovery is difficult to predict at this time.

We continue to believe in higher oil and natural gas prices in the long term and that access to reserves and production will ultimately create value for shareholders. In this respect, our strategy at GeoPetro has not fundamentally changed but we believe it is prudent to adopt a cautious approach in the current environment.

The Company has taken steps to address the weaker commodity price environment. Foremost was the acquisition of the natural gas treatment plant (the “Plant”) from Madisonville Gas Processing, LP (“MGP”), in exchange for shares of GeoPetro’s common stock, assumption of related debt and cash (“the Acquisition”) on December 31, 2008. The new owner of the Plant is GeoPetro’s wholly owned, indirect subsidiary, Madisonville Midstream LLC (“MM”). The Madisonville Project is located in Madison County, East Texas.

The Company hopes to realize both intermediate and long term cost and operating efficiencies by consolidating the upstream and midstream portions of Madisonville under common ownership. Prior to the consolidation, MGP and GeoPetro employed a combined total of 30 persons, whereas subsequent to the consolidation, GeoPetro and MM now employ a combined total of 21 persons, representing a net reduction of 9 persons (30% of the combined pre-consolidation workforce). Despite the challenges of the current environment, we accomplished the necessary goal of vertically integrating our position in the Madisonville field. The Company continues to explore other longer term cost saving and efficiency measures in the Plant.

The Company is also implementing measures to increase production volumes. GeoPetro plans to utilize idle equipment and implement operating efficiencies in the Plant to reduce the inlet pressure into the Plant. This would result in an immediate increase in production from the two wells currently producing, the Magness and Fannin wells. Preliminary test results suggest that the combined production from the Magness and Fannin wells has the potential to increase significantly. This measure is expected to be completed during the second quarter. In addition, the Company plans to workover the Mitchell #1 well and to frac and connect via gathering line the Wilson #1 well. Accordingly, once the above production enhancements are completed, the Company expects the combined Rodessa formation production from the four wells to be significantly higher than current rates.

In our Bengara Project we have received approval from the Indonesian government for an extension of additional time under the Bengara-II PSC until December 4, 2011 to more fully appraise, assess, and justify the economic feasibility of commercial development of the Bengara-II Block, onshore Kalimantan, Indonesia. The approval follows an earlier one-year extension through 2009, and was granted in response to a request by GeoPetro’s 12% owned subsidiary Continental-GeoPetro (Bengara-II) Ltd. (“CGB2”) to appraise promising oil indications on and adjacent to the Seberaba prospect revealed in a 2007 drilling program, as well as conduct appraisal work on the Makapan gas/condensate discovery on the Bengara-II Block.

The Company has also taken steps to address liquidity concerns arising from weaker commodity prices and severely limited access to the capital markets. In December, GeoPetro arranged a $6.7 million financing in the form of a 3 year loan with the Bank of Oklahoma to acquire the Plant. The Company raised an additional $1,050,000 by issuing promissory notes and $1,850,000 through the issuance of Series B Convertible Preferred Stock to accredited investors. GeoPetro is actively seeking an industry partner to fund costs associated with drilling test wells on its Madisonville Deep and Alaska projects and reduce the Company’s capital exposure in these projects.

These forward looking statements are based on our current expectations, but our future performance involves risks and uncertainties that could cause actual results to differ materially, which risks are detailed in our filings with U.S. Securities and Exchange Commission, including under the caption “Risk Factors” contained in our Annual Report on Form 10-K, which is included herewith and also available at www.sec.gov.

Industry Outlook

A report issued on April 14, 2009 by the United States Energy Information Administration (“EIA”) states that the global economic slowdown is projected to reduce the average oil price to $53 per barrel this year. Assuming an economic recovery next year, West Texas Intermediate oil prices are expected to average $63 in 2010. Total consumption of natural gas is projected to fall by nearly 2 percent in 2009, leading to lower natural gas prices. Industrial natural gas consumption is expected to decline by more than 7 percent, as industrial production declines during the current economic downturn. However, natural gas consumption in the electric power sector is projected to increase by almost 1 percent, since the lower natural gas prices will back out some coal consumption in this sector. The Henry Hub natural gas spot price is projected to decline from an average of $9.13 per thousand cubic feet (Mcf) in 2008 to $4.24 per Mcf in 2009, then increase in 2010 to an average of more than $5.80 per Mcf.

Conclusion

We live in challenging and extraordinary times. The global credit contraction, which first appeared in September and mushroomed in subsequent months, has taken a toll on each and every one of us, whether in our professional or our private lives. This credit squeeze has frozen up the usual flow of funding, the kind that businesses large and small rely upon every day to lubricate the gears of commerce. As these gears come to a grinding halt, uncertainty takes hold, and with it fear. I believe such fear is reflected in the price of the shares of many companies. We are undeterred and dedicated to the tasks ahead. We are focused on building a strong balance sheet and accessing necessary liquidity during these demanding times. We believe that our Company will not only meet the current challenges, but that we will thrive in the years ahead. On behalf of the Board of Directors and the employees of GeoPetro Resources Company, I want to thank our shareholders for your perseverance to date, as well as your continued confidence and support during this challenging financial climate. I look forward to greeting as many of you as possible at the Annual Meeting.

Sincerely,
Stuart J. Doshi
Chairman of the Board, President and Chief Executive Officer