Tuesday, February 19, 2013

GMX Resources Hits All Time Low, Warns of "Potential Restructuring" ($GMXR)

This morning, GMX put out a press release with its 2012 reserve estimates. The PV-10 of the Bakken proved developed producing reserves (i.e. producing wells) is $38.7 million. That is astonishing, because the company spent close to $100 million on capital expenditures last year alone, mostly drilling wells in the Bakken. It supports the hypothesis that the company's Bakken wells have negative rates of return.

The company also said that, "using SEC pricing, Haynesville/Bossier PUD wells reflect a negative PV-10 value of -$48 million, and the PV-10 value for the Company’s proved reserves without the H/B PUD wells is $128.4 million compared to the total proved reserved reported of $80.1 million." One reason for the share price collapse is that it's seeming clearer now that the equity is an out of the money option.

However, the other major reason was this paragraph in today's press release,

The Company has recently sought indications of interest for certain debt and equity liquidity alternatives, but not received sufficient support for all of its liquidity needs or plans. The Company is continuing to explore and evaluate options for its capital needs, as well as continuing to evaluate and finalize its 2013 budget for capital expenditures based on its available liquidity. In connection with its evaluation, the Company plans to retain a financial advisor to assist the Board and senior management in its ongoing exploration of a variety of financing alternatives, including a potential restructuring of the Company’s balance sheet in light of its current liquidity and cash needs.
Yikes! Amazing that restructuring needs to be considered even though the next debt maturity is not until 2015. The working capital situation (still haven't seen a YE 2012 balance sheet) must be really dire.


whydibuy said...

This dud is past restructuring. It is now nothing more than a shell that mgt will try to resuscitate and pump up just for the generous compensation they are extracting. Nothing more.

CP said...

Preferred has gotten crushed.