Newspaper article THE JOURNAL RECORD

Oklahoma City-Based GMX Resources to Sell Endeavor Pipeline Assets

Newspaper article THE JOURNAL RECORD

Oklahoma City-Based GMX Resources to Sell Endeavor Pipeline Assets

Article excerpt

GMX Resources on Tuesday announced a letter of intent to sell an interest in its Endeavor Pipeline assets to Houston-based Kinder Morgan Tejas Pipeline for $40 million.

Selling the midstream assets will provide capital to add a second H&P FlexRig3 to the Oklahoma City-based company's Haynesville/ Bossier horizontal development program in east Texas and northwest Louisiana. The sale is expected to be completed within 45 days.

"This transaction will provide enough near-term liquidity for us to be able to activate another FlexRig3 in early October," said Ken L. Kenworthy, GMX CEO.

GMX has 62,160 acres that are prospective for Haynesville/ Bossier development providing 777 horizontal drilling locations.

GMX credits use of the first FlexRig 3 from Tulsa-based Helmerich & Payne for a reduction in drilling costs. Completed well costs for drilling four horizontal wells during the second quarter dropped 40 percent.

"Additionally, the activation will further reduce our lay-down fees for our contracted rigs," Kenworthy said.

After the second FlexRig3 is activated, GMX plans to attempt to hedge 60 percent to 80 percent of future production, he said.

"This focus on liquidity should reassure our shareholders that we can continue to find avenues to exploit our position in the Haynesville/Bossier horizontal development and ultimately return to a growth and value enhancement business plan," Kenworthy said.

In Nasdaq trading Tuesday, GMX closed up 20 cents, or 1.6 percent, at $12.69. The 52-week range is $75.81 and $5.57.

GMX also on Tuesday announced a net loss for the second quarter of $8.2 million, or 51 cents per diluted share, compared with net income of $12.1 million, or 74 cents per diluted share, for the second quarter of 2008. Results for the second quarter included a $2.8 million write-down on pipeline inventories and a $1.2 million allowance for bad debt related to the bankruptcy of a crude oil purchaser.

Oil and gas sales for the quarter decreased 40 percent to $22.8 million from $38 million a year earlier. A 1.7-percent increase in production was offset by lower oil and natural gas prices. …

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