The net loss in 2009 was mainly because of lower average gas prices and lower production volumes in the three months ended March 31, 2009. Production volumes were lesser in the first quarter 2009 compared to the year-ago quarter due to higher shrinkage rates in the plant and production restrictions due to high inlet pressures into the natural gas treatment plant at the Madisonville field situated in East Texas.
GeoPetro Resources is taking immediate steps to raise production volumes. Subsequent to the acquisition of the plant, the company is at present reconfiguring idle equipment and implementing operating efficiencies in the plant to decrease the inlet pressure into the Plant. This work is projected to be concluded around mid-May 2009 and is anticipated to result in an immediate raise in production from the two wells presently producing, the Magness and Fannin wells. Preliminary test results suggest that the combined production from the Magness and Fannin wells could be increased considerably.
GeoPetro Resources anticipates realizing intermediate and long term cost and operating efficiencies by consolidating the upstream and midstream portions of Madisonville under common ownership. Despite the challenges of the current environment, the company has accomplished the necessary goal of vertically integrating its position in the Madisonville field. The company continues to explore other longer term cost saving and efficiency measures in the plant.
In addition, subject to capital availability, GeoPetro Resources plans to workover the Mitchell #1 well and plans to frac and connect via gathering line the Wilson #1 well. Accordingly, once the above production enhancements are completed, the company approximates the combined Rodessa formation production from the four wells to be significantly higher than existing rates.
Stuart J. Doshi, chairman, president and chief executive officer, commented, we have taken steps to address liquidity concerns arising from weaker commodity prices and severely limited access to the capital markets. The increase in production resulting from lower inlet pressures is projected to occur during this month and should result in improved cash flow from operations. In December, GeoPetro arranged, in a difficult financial environment, a $6.7 million financing on favorable terms in the form of a 3 year loan with the Bank of Oklahoma to acquire the Plant.
The company raised an additional $1.05 million by issuing promissory notes, also on attractive terms. I am pleased to inform you that we have successfully raised the first tranche of Series B Convertible Preferred stock in the amount of $1.85 million. All of these financings have been done in the most difficult of circumstances and yet on terms that are highly competitive considering the state of the capital markets. We are also focused on striving to build a strong balance sheet and greater liquidity during these demanding times. We continue to look to the future and are positioning our company to emerge from this economic downturn as a strong and profitable company.
