OKLAHOMA CITY, March 9, 2009 (GLOBE NEWSWIRE) -- GMX Resources Inc. (Nasdaq:GMXR) (please visit www.gmxresources.com to view the latest corporate presentation) today announces a reduced capital expenditure plan for 2009 and corresponding adjustments to its production guidance for 2009. Additionally, the Company announced the acquisition of additional Haynesville/Bossier prospective acreage in East Texas, and that the Company and its lenders have agreed to modify certain covenants in the Company's credit agreements. The Company has also declared a regular quarterly cash dividend on its 9.25% Series B Cumulative Preferred Stock.
2009 Capital Expenditures and Revised Guidance
GMXR has reduced its 2009 CAPEX budget by $70 million to $150 million. Under this modified CAPEX budget, the Company expects to drill fourteen and complete sixteen net Haynesville Bossier horizontal ("H/B Hz") wells (100% GMXR operated) including the two completions that have already occurred in the first quarter. There are four rigs currently drilling with completions expected in April. Once these four rigs finish drilling, the Company will release the two rigs on well-to-well contracts and lay down the other two rigs which are owned by a subsidiary of the Company. The Company will transition to two new H&P FlexRigs(tm) for drilling its H/B Hz wells in the second quarter of 2009. The Company will be focused on the Haynesville/Bossier horizontal drilling program (98% of 2009's CAPEX) that has a rate of return of 25% at current natural gas prices.
New guidance for 2009 production is 14.6 billion cubic feet equivalent ("Bcfe") of gas, an estimated 13% growth over 2008, and 2.8 Bcfe in 1Q09, with only two H/B Hz completions. Four H/B Hz completions are projected for 2Q09, five in 3Q09 and five in 4Q09. The Company expects the estimated sixteen H/B Hz completions in 2009 should add 80 Bcfe to its Proved Developed Producing ("PDP") reserves.
Based on the revised 2009 capital expenditure budget, cash flow and EBITDA for 2009 are projected to be approximately $50 million and $62 million, respectively. Based on the Company's 2009 expected production of 14.6 Bcfe, the current natural gas strip price and our current hedges, we expect our average Mcfe price to be $7.20 for 2009.
As of December 31, 2009, the Company had $110 million available under its current borrowing base of $190 million. The Company has a borrowing base redetermination scheduled for early April. As a result of significantly lower commodity prices, the Company could potentially see a reduction in its borrowing base at its next bank redetermination. As the additional HB Hz wells are completed during the year, including four scheduled completions during the second quarter of 2009, the Company should realize a significant increase in PDP reserves which should increase the borrowing base.
The Company continuously monitors its capital expenditure budget and available liquidity and capital resources. After reviewing the Company's estimated PDP reserve growth in 2009 at a current bank price deck that includes the effects of reducing the capital expenditure budget and a potential near-term reduction in bank borrowing base, the Company estimates based on historical experience with its bank group that it will have the following availability under its revolving bank credit facility as of the end of each quarter in 2009:
Excess available bank borrowing base as of the end of each quarter:
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1Q09 - $ 82 million
2Q09 - $ 36 million
3Q09 - $ 25 million
4Q09 - $ 24 million
Update on Haynesville/Bossier Production Data
GMXR continues to have outstanding results from its first three H/B Hz wells. The first full month average daily production for the Callison #9H and the Bosh #11H was 4,100 Mcfgpd for each well. The 16-day average daily production for GMXR's most recent H/B Hz well, the Baldwin#17H, is 6,000 Mcfgpd.
Improvements to Bank and Credit Covenants
GMXR, as previously announced in a Form 8-K filed with the Securities and Exchange Commission on March 2, 2009, has reached agreements with the banks under the revolving credit facility and the lenders under the Senior Subordinated Secured Notes to amend the covenants pertaining to these credit agreements. These industry common covenant amendments provide more flexibility relating to the non-cash impairment charges the Company reported in the YE2008 financial results and help ensure the Company is in compliance with all debt covenants.
Acreage Acquisitions
GMXR continues to expand its Haynesville Bossier prospective acreage in East Texas with contracts in place for 3,900 gross (3,700 net) acres of acquired and drill to earn leasehold representing 49 gross (46 net) H/B Hz locations. GMXR is currently drilling on 1,100 gross acres of the drill to earn leasehold. GMXR has also obtained first right of refusal on an additional 5,000 gross acres which could add as many as 62 gross H/B Hz locations.
Management Comment
James A. Merrill, Chief Financial Officer, said, "In light of the economic environment we feel it is prudent to reduce our 2009 CAPEX to ensure our spending fits within our current liquidity. Our assumptions are fairly conservative: natural gas prices will remain flat for the year, our well results will be at least as good as our first three and the banks will remain open and willing to lend to the energy sector. With four H/B Hz well completions scheduled for the second quarter of 2008 and five more in the third quarter, we believe we will more than offset any short-term decrease in our borrowing base with growth in our proved producing reserves. Our banks remain steadfast in their support of us, as evidenced by their willingness to amend the loan covenants."
Ken L. Kenworthy, Jr., President and CEO said, "We have stated in the past that we have operational flexibility. We are laying down a total of five rigs this quarter and cutting our capital expenditure budget by $70 million. We will spend less than our cash flow and available credit every quarter. If prices improve, or if we continue to improve our completions and as we continue to lower well costs the cash flow and credit versus CAPEX picture gets even better. We have successfully drilled three H/B Hz wells that have a 25% or greater return at today's prices. All fourteen of our 2009 wells will be drilled inside our H/B acreage that we believe is substantially de-risked. Additionally our current banks and lenders have confirmed their support to provide additional borrowing base capacity as our reserves grow."
Dividend on 9.25% Series B Cumulative Preferred Stock
GMXR will pay a regular quarterly dividend of $0.578125 per share on April 1, 2009 to holders of record as of March 20, 2009 of its 2,000,000 outstanding shares of 9.25% Series B Cumulative Preferred Stock. The shares are listed on The NASDAQ Global Select Market under the symbol "GMXRP."
GMXR is a 'Pure Play', E & P Company and one of the most concentrated Haynesville / Bossier Horizontal Shale Operators in East Texas. The Company has 465.3 Bcfe in proved reserves (YE2008) and over 3.2 Tcfe in total potential reserves that are 94% natural gas. The reserves consist of 770 gross / 529 net Haynesville /Bossier 80 acre horizontal locations; 3 gross / 3 net Haynesville/Bossier producers, and 324 gross / 186.9 net Cotton Valley ("CV") producers; 2,657 gross / 1,974 net CV un-drilled locations; and 45 gross / 37.5 net Travis Peak / Hosston Sands & Pettit producers. These multiple resource layers provide high probability and repeatable, organic growth. Four operated drilling rigs are currently developing this contiguous, multi-layer gas resource play on the Sabine Uplift; Carthage, North Field, in Panola & Harrison County of East Texas, and Caddo Parish of North Louisiana. The Company has invested $100 million in infrastructure which has contributed to 'Best in Class' finding and development costs. The Company, headquartered in Oklahoma City, Oklahoma, has interests in 392 gross / 242 net producing wells and operates over 81% of its reserves. The Company's strategy is to grow shareholder value through Haynesville/Bossier Shale horizontal well development as well as Cotton Valley Sand vertical wells, to continue acreage acquisitions, to focus on operational growth around its core area, and to convert its natural gas reserves to proved reserves, while maintaining balanced prudent financial management.
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This press release includes certain statements that may be deemed to be "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. They include statements regarding the Company's financing plans and objectives, drilling plans and objectives, related exploration and development costs, number and location of planned wells, reserve estimates and values, statements regarding the quality of the Company's properties and potential reserve and production levels. These statements are based on certain assumptions and analysis made by the Company in light of its experience and perception of historical trends, current conditions, expected future developments, and other factors it believes appropriate in the circumstances, including the assumption that there will be no material change in the operating environment for the company's properties. Such statements are subject to a number of risks, including but not limited to commodity price risks, drilling and production risks, risks relating to the Company's ability to obtain financing for its planned activities, risks related to weather and unforeseen events, governmental regulatory risks and other risks, many of which are beyond the control of the Company. Reference is made to the company's reports filed with the Securities and Exchange Commission for a more detailed disclosure of the risks. For all these reasons, actual results or developments may differ materially from those projected in the forward-looking statements.