Thursday, October 4, 2012

GMX Resources Provides Operational Update ($GMXR)

From yesterday's press release:

The Basaraba 34-35-1H, 89%WI, GMXR's eighth operated well is [...the] Company's first Middle Bakken well in Billings County. [...] The peak flow rate was 1,673 BOEPD, 48/64" choke @ 1,000# Flowing Casing Pressure (FCP). [...] The Basaraba has a five day cumulative production of 4,375 BOE or an average of 875 BOE/Day.

The Company's seventh operated well Fairfield State 21-16-1H in Sections 16&21, Township 143N Range 99W in Billings County North Dakota. During the sliding sleeve completion of the Three Forks we screened out after the first four stages. We were only able to complete less than 30% of the remainder of the lateral as a modified plug and perf design. The peak flow rate on the well was 177 BOE.
That Basaraba number is not horrible. (The management comment was that this is their best Bakken well so far.) The five day average was only 50% of the IP though, so this well may have a pretty steep decline rate still. It's hard to compare, as I don't believe they've reported a 5-day average production number before. Also, keep in mind that these are BOEs and not bbls (and they aren't giving bbl numbers). I'll check the ND state production numbers and see how good this well actually is.

The Fairfield State well is horrible. It sounds like almost a total loss. I wonder how much it cost?

This press release has much more detail (trivia?) than usual about the well completion details. They may have identified an area that is more profitable in the Middle Bakken, but you can't determine that from the information they have given.

It would actually be better for the long bond, short stock trade if they could start drilling breakeven wells so that the security for the bonds was not being impaired. Also, if I'm correct about the 2013/2015 exchange offers being forthcoming, the upside for current equity holders is minimal.

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