Thursday, June 14, 2012

New GMXR Press Release ($GMXR) - Johnston Well, Production Guidance

GMX Resources (GMXR) just put out an after hours press release, announcing that it

"has successfully drilled and completed its sixth operated horizontal Bakken well, the Johnston 31-4-1H, 55% working interest, located in Sections 4&9 Township 146N Range 99W in McKenzie County, North Dakota. The Johnston 31-4-1H was drilled to a measured depth of 20,979' with a lateral length of 8,869'. It was completed as a 34-stage frac Middle Bakken producer achieving a peak rate of 1,479 boepd."
Of course, what matters is not successfully drilling a well, but having a well with sufficient production to be a positive NPV proposition. There is no production data on this Johnston well available at the NDIC yet, so all we have to go on is the "peak rate" oil equivalent number provided by the company. However, I'm not seeing anything that makes me wish I'd bought a working interest in this well.

The company also gives a production guidance update,
"The second quarter 2012 production is expected to be in a range of 539,000 to 543,000 BOE, which includes 60,000 to 65,000 Bbls of oil."
What's interesting about this is the unremarked-upon drop compared to the production guidance from May 2, which was for "591,000 BOE, which includes 80,000 Bbls of oil and 94,000 Bbls of NGLs." So, second quarter production guidance has plummeted by about 50,000 BOE, or 20,000 Bbls and an unknown quantity of NGLs. That is a lot of revenue, and a big percentage decline!

The Feb 2013 notes last traded at 74, and the May 2015s traded at 39.25. Amusingly, the stock is up 20% after hours (on low volume). I guess you can cut your oil production guidance by 25% as long as you put the word "successful" in your press release.

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