GeoPetro Resources Company Acquires Madisonville Gas Treatment Plant in East Texas

SAN FRANCISCO--(BUSINESS WIRE)--GeoPetro Resources Company ("GeoPetro" or the "Company") (NYSE Alternext US:GPR) (TSX:GEP) announced the acquisition of a natural gas treatment plant and related gas gathering pipelines and related facilities (collectively, the “Plant”) from Madisonville Gas Processing, LP (“MGP”), in exchange for assumption of secured debt, payment of certain outstanding payables of MGP and shares of GeoPetro’s common stock (“the Acquisition”). The effective date of the acquisition was December 31, 2008. The Plant is located in Madison County, Texas. The new owner of the Plant will be GeoPetro’s wholly-owned, indirect subsidiary, Madisonville Midstream LLC (“MM”).

GeoPetro paid consideration for the Plant, as follows:

1. Assumption of secured debt. GeoPetro assumed approximately $7.7 million of MGP’s bank debt via a (i) $1 million cash payment applied directly towards pay-down of debt principal, and (ii) a refinancing by GeoPetro of the $6.7 million remaining balance in the form of a 3 year loan with the lender, Bank of Oklahoma, National Association (“BOK”). The terms of the three year loan provide for an annual interest rate of prime plus 4% or, optionally, LIBOR plus 5.5%
2. Assumption and payment of certain MGP payables. GeoPetro assumed and paid approximately $1.1 million of MGP’s outstanding payables.
3. Issuance of common stock. GeoPetro issued 1.5 million shares of its common stock.

The Plant consists of the original facilities (currently in service) installed and made operational by Hanover Compression Limited Partnership (“Hanover”) in 2003 and the expanded facilities which were installed by MGP in 2007, but which have not yet been placed into operation. The Plant’s primary components consist of amine treaters, nitrogen rejection units, compressors and related equipment. Other assets acquired in the transaction include gathering lines, fuel lines, acid injection lines and rights of way. The Plant facilities were installed in order to treat and remove impurities associated with natural gas produced from the Rodessa Formation at the Madisonville Field. The expanded facilities have a designed capacity to treat 50 million cubic feet of natural gas per day (“MMcf/d”), which combined with the effective operational capacity of the current in-service facilities of 15 MMcfd/d will represent a total treating capacity of 65 MMcf/d for the Plant.

The Company’s Chairman, President and CEO, Stuart J. Doshi stated “the acquisition of the Madisonville natural gas treatment plant represents an important milestone for our Company. We hope to realize long term cost and operating efficiencies by consolidating the upstream and midstream portions of Madisonville under common ownership. By owning the mid-stream portion of the Madisonville project, we not only expect better net price realizations and operational efficiencies (i.e. improved volume realizations: less shrinkage), but we also control the timing and design of the current expansion of the plant facilities as well as future expansions, if needed.”

MGP’s President, Robert J. Clark, stated “this transaction allows us participation in the reserve upside of the Madisonville Field and GeoPetro’s other projects through the ownership of GeoPetro’s common shares. We view GeoPetro as an exciting growth opportunity not only through its holdings in the Madisonville Rodessa and the Madisonville Deep, but also through its participation in projects in Alaska Cook Inlet, California, Alberta and Indonesia.”

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 property in its Madisonville 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, estimates of proved and probable reserves, 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.