Friday, February 8, 2013

"GMX RESOURCES INC. Provides Company Update" ($GMXR)

Wow, this is a bad update:

  • The Company's production for the fourth quarter of 2012 was approximately 310,000 BOE, which included approximately 55,100 Bbls of oil, 1.4 Bcf of natural gas and 23,800 Bbls of NGLs. The 55,100 Bbls of oil was virtually all Bakken generated and resulted in an average of ~600 Bbls/day
  • Production for the year-end 2012 was approximately 1.9 MMBOE, which included approximately 203,500 Bbls of oil, 8.9 Bcf of natural gas and 237,500 Bbls of NGLs. 
  • Estimated Bakken oil production for 2012 was 148,500 Bbls
  • The Company's available cash at year-end 2012 was $46.0 million and includes $16.8 million reserved for the maturity of the Company's 5% Convertible Senior Notes due 2013.
  • The Company has recently sought indications of interest for certain debt and equity liquidity alternatives, but not yet received sufficient support for all of its liquidity needs or plans.
Production for Q4 was initially "guided" to be 75,000 bbl. Then it was lowered to 60,000 on Dec 4. Turned out to be 55,100. (This is why we created the Chart of Truth for GMX.)

A good high estimate of producting well valuation might be about $100,000 per daily barrel of production. So their Bakken production is worth ballpark $60 million. That is a fraction of the secured debt.

So, the company ended the year with $29.2 million in cash. It was probably cash flow negative in Q1 so far and will continue to be. No wonder they are trying to raise more capital. And it is obviously why they made an interest payment on the Senior Secured Second-Priority Notes due 2018 in stock in lieu of cash.

The problem is that the nearest debt maturity (2015) yields 40 percent. They had to roll the 2013s over (partially) with secured debt. It's just not clear how they could borrow more money or who would be willing to lend them more money.

If I am running that company, I feel like I need to batten down the hatches on cash right away. No more preferred dividends (maybe let the preferreds swap for equity) and try to do something about the cash interest expense on the 2015s (swap those for equity too). No more capex. (Why are they participating in wells?)

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