About Us

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. Natural gas has fallen to its lowest price in more than a decade. Large deposits of natural gas have been discovered from shale rock formations throughout the continent which has shifted the supply curve. The abnormally mild weather and an anemic economic recovery have dampened demand. As a result, companies in the natural gas space have suffered significant share devaluations. In response to the depressed natural gas prices, GeoPetro has elected to temporarily shut-in its production at Madisonville Field, Madison County, Texas. The Company plans to resume its natural gas production from the Madisonville Field when natural gas prices recover from the recently depressed levels, thus providing a better economic return. The Company will monitor market conditions and bring its natural gas production back on stream as market conditions warrant.

In September, 2011, GeoPetro closed a transaction to sell certain idle and non-income producing equipment at its gas treatment plant located in Madisonville, Madison County, Texas for $9,250,000, resulting in a net gain to the Company of approximately $4.1 million. The Company used the majority of the proceeds to retire the secured loan with the Bank of Oklahoma and to pay down certain other debt. The Company no longer has any secured debt and currently has approximately $2.8 million of total unsecured debt outstanding. It was important to sell these non-income producing assets because it allowed us to bolster and deleverage our balance sheet and improve liquidity by monetizing some idle assets which gave us the financial flexibility we need in today’s low natural gas price environment.

The year 2011 was also another year for reducing the Company’s expenses. We made some tough choices resulting in an even leaner organization. General and administrative expenses, plant operating expenses and lease operating expenses were all significantly reduced. Some of these efforts resulted in an increased value of our proved reserves. 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, 2011, showed the Net Present Value discounted at 10% of total proved reserves net to the Company improving to $32.6 million from $29.1 million at December 31, 2010.

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 are currently preparing a CEQA application which is expected to be filed with the DOGGR in the second quarter. Industry partners have shown significant 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.

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