Friday, May 4, 2012

"GMX RESOURCES (GMXR) Announces Financial and Operational Results for the Three Months Ended March 31, 2012"

As I mentioned briefly yesterday, GMXR has announced its most recent quarterly results. Also, the latest investor presentation has been posted. Here are some of the highlights.

Natural gas production for the three months ended March 31, 2012 decreased to 2.5 Bcfe compared to 5.5 Bcfe for the three months ended March 31, 2011, a decrease of 54%. If we add back the VPP volumes of 1.2 Bcfe, natural gas production decreased by 1.8 Bcfe, or 33%. The decrease in natural gas production resulted primarily from the natural decline in the Company's Haynesville/Bossier (H/B) wells as a result of the Company's suspension of its H/B horizontal drilling program in mid-2011, as well as the conversion of more natural gas into NGLs.
This is notable for a couple of reasons. First, the VPP on production that was sold last year is taking up a sizable chunk of gas production. Second, it looks like the Haynesville wells have a steep decline rate. This is good because it is bearish GMXR yet bullish natural gas generally.
Full year 2012 guidance is estimated by the Company to be 2,355,000 BOE, which includes 346,000 Bbls of oil and 473,000 Bbls of NGLs. The decrease in second quarter NGL production guidance is due to a declared force majeure at a Carthage Texas plant that lasted for two weeks that had an estimated 15,000 Bbl impact, and the sale of a portion of our un-processed gas in the Carthage Texas area for a total price that is greater than the combined estimated price of residue gas and the net processing upgrade.
Last we heard, the guidance for 2012 was 354,000 bbls and 562,000 bbl/NGLs, so the revenue for 2012 looks like it will be about $4 million less than assumed. Maybe more alarming is how this figure continues to drop every time guidance is updated.
Initial Production ("IP") rates reported is either peak one hour rates multiplied times 24 or full 24 hour volumes depending upon the operator.
There was no update on Lange production. They did clarify somewhat how they calculate their "initial production" stat, although this is not very helpful.
The Company's workover rig arrived in North Dakota on March 23, 2012, and work has been done on the Evoniuk 21-2-1H and the Frank 31-4-1H and Wock 21-2-1H. The Evoniuk 21-2-1H, Frank 31-4-1H and Wock 21-2-1H are currently on pump and producing oil.
So... no updates on the effect of the workover rig except to say that they are all on pump. I sort of assume that is the production had experienced a big increase, they would have told us. I've checked with the state of ND and I will have an update on that later.
The 2012 approved capital expenditure plan is $97 million (including capitalized interest expense and G&A), which will fund our oil focused drilling and development plans. In the Bakken, the Company expects to spend approximately $68 million and plans to complete 7.1 net wells in 2012. Decisions regarding the addition of a second drilling rig in the Bakken and the level of participation in the non-operated development of the Niobrara will be made based on available liquidity and drilling results. As of March 31, 2012, we have made $25.1 million of these planned capital expenditures.
Apparently, they plan to spend another $72 million this year. That will be interesting. Which raises the question of the notes due in 2013.
The Company's balance on its 2013 Senior Convertible Notes at year-end 2011 was $72.8 million. The Company completed a total of four separately negotiated debt-for-equity exchange transactions with holders of the 2013 Senior Convertible Notes since year-end 2011. The debt for equity transactions have resulted in the issuance of 8,901,089 shares of common stock and has reduced the principal amount of the 2013 Senior Convertible Notes by $18.1 million leaving a principal balance of $54.7 million as of May 1, 2012.
During 2012, we will continue to evaluate additional opportunities to exchange our equity securities for our 5.00% Convertible Notes and other refinancing and repayment options allowed under the Senior Secured Notes to address the 2013 maturity of these notes.
Aha! It sounds to me like more exchange offers. I wonder how the price will hold up if more shares continue to hit the market?

No comments: