About Us

Dear Shareholder:

The Past Year in Retrospect and Current Outlook

As Chairman, President & CEO of GeoPetro Resources Company (“GeoPetro”, “we”, “our” or the “Company”), I am pleased to provide an update of the Company’s recent accomplishments to date and the progress made on the Company’s projects during 2010 and our outlook for 2011. This letter also addresses some of the steps GeoPetro took to further strengthen our capital, liquidity and competitive position in 2010 in order to create the right conditions for growth in shareholder value. Although it was a difficult year on a number of fronts, we met our challenges head on, taking actions that significantly improved our business and strengthened our financial position. We also made progress in executing our business plan and strategies. We believe what we accomplished in 2010 better positions us to deliver the results that are rewarding to our shareholders. I stress to you that I, and every member of our management team, are committed to unlocking the value of GeoPetro and its oil and gas prospects.

Working Capital and Liquidity

During 2010, the Company addressed its liquidity issues throughout the year arising from unfavorable natural gas prices and lower production. The Company raised $675,000 in debt on favorable terms and $2.3 million through the issuance of common stock to accredited investors. The Company has also been successful in improving efficiencies resulting in reduced overhead costs and improving business operations. With the steps taken over the past year, GeoPetro is now better poised to grow through the exploration and development of its oil and natural gas properties.

The Company’s strategy is to build a solid production base with significant upside through exploration and development efforts. We create partnerships with other energy companies in order to bring de-risked opportunities to our shareholders. Consistent with this strategy, we successfully sold in March of 2010 our Alaskan Cook Inlet leases for cash and a significant retained royalty position. With our partner Linc Energy (Alaska) Inc. we commenced, in 2010, a drilling program in the Alaska Cook Inlet Area to appraise the LEA #1 well. Further drilling is planned during 2011.

Outlook for 2011

Already in 2011 we have executed certain transactions which improve the Company’s liquidity. The Bank of Oklahoma debt which had an initial principal balance of approximately $7.7 million, has been paid down to its current principal balance of approximately $4.4 million. The maturity of this term loan has been extended by one (1) year from December 31, 2011 to December 31, 2012 and the per annum interest rate has been reduced by three-quarters of one percent (3/4%). The Company also secured loan extensions with certain non-bank lenders by one (1) year, with maturity dates extending into 2012 and 2013.

We have also entered into a Purchase and Sale Agreement with Peregrine Midstream Partners LLC whereby we will sell certain idle and non-income producing equipment at the Madisonville Treatment Plant for $8.75 million. This transaction is subject to Peregrine securing certain regulatory approvals. We expect that the transaction will close during the May 31 to July 15, 2011 time period. The anticipated proceeds from this transaction will permit us to further pay down our debt and will also finance certain workovers at the Madisonville Project in Texas to enhance our natural gas production.

Progress has also been made in the exploration of the Bengara II Block in East Kalimantan, Indonesia. The acquisition of 178 square kilometers of new 3D seismic data in the Bengara II Block is now over 60% complete. Surface damage claim disputes with prawn farm operators in the area of the Company’s new seismic acquisition program have been largely resolved. Preparatory work is in progress for the planned acquisition of 920 line kilometers of 2D seismic data. The first well of 2011 is now set to be the Muara Makapan-2 well (“MM-2”) which is expected to be spudded in late third quarter. The MM-2 is designed as an appraisal well to the 1988 Muara Makapan-1 (“MM-1”) gas and condensate discovery which tested gas at a rate of 19.5 million cubic feet per day and condensate at a rate of 600 barrels per day. MM-2 offers a low-risk, fast track, path to a Plan-of-Development (“POD”) for the Bengara II Block. The results of the MM-1 well, the newly acquired 3D seismic data, and a successful confirmation test of gas and condensate at the planned MM-2 well, should provide sufficient confidence in reserves determination to justify a POD approval from the Indonesian government.

As we enter 2011, I am optimistic. The Company’s objectives in our 2011 plan reflect the initiatives we undertook and the progress we made in 2010. We continue to pursue growth opportunities and are looking to enhance shareholder value. We have two main objectives moving forward: first, to increase production to a level that will generate significant positive cash flow in our Madisonville Project; and, second, to farm-out our projects and engage in an aggressive exploration and development program with the goal of generating significant future revenue and income streams from these projects.

Summary

We have made significant progress in positioning GeoPetro for future success over the past few years and as a result we have many opportunities ahead of us in 2011 and beyond. Your management and Board are being proactive to ensure that GeoPetro remains well positioned to return to growth as the economy and commodity prices continue to recover.

I would like to express my sincere appreciation to our talented and hardworking employees for their contributions and dedication, to our Board for its stewardship and counsel, and finally to all of GeoPetro’s fellow shareholders for their continued support and faith in the future of our Company. We look forward to a prosperous future as we continue to explore and develop our projects and implement strategies to increase shareholder value.

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