OKLAHOMA CITY, April 13, 2010 (GLOBE NEWSWIRE) -- GMX Resources Inc. (NYSE:GMXR) (visit www.gmxresources.com to view the most recent Company presentation and for more information on the Company) today announced the partial completion of the Bosh #19H Haynesville/Bossier ("H/B") horizontal well ("Hz") with a 10.1 million cubic feet of gas per day ("MMCF/D") initial production ("IP") rate. The well was drilled with a 4,153 foot lateral, and stimulated with 12 frac stages, however during the process of drilling out the plugs an obstruction prevented the last 5 ½ stages from being accessed. After several attempts the Company made a decision to cease current efforts to drill out the remaining plugs and produce the well from approximately 6 ½ stages across 2,174 feet of the open lateral. The well test was over 24 hours on a 14/64 choke with 4,526 pounds of Flowing Casing Pressure ("FCP") into a sales line with 590 pounds per square inch ("PSI") of Line Pressure ("LP"). Plans are to re-attempt to access the entire lateral in the future when pressures are favorable.
Additionally, the Blocker Heirs 20H has been successfully completed with a 4,450 foot lateral, stimulated with 11 frac stages and 11 perforations per stage. All the plugs have been successfully drilled out and the well is currently flowing back and is expected to have an IP test by April 16, 2010.
Operational Update
The Company expects to drill and complete five additional H/B horizontal wells for a total of seven completions in Q2 2010. All the wells drilled and completed will be constructed using 5 ½" casing, will have an average lateral length of 4,500 feet and are scheduled for 10 to 12 frac stages. The Company expects Q1 production to meet previously announced guidance of 3.2 Bcfe to 3.3 Bcfe and reconfirms Q2 2010 production guidance of 4.2 Bcfe to 4.4 Bcfe which will be a sequential growth of approximately 34%. Completed Well Costs ("CWC") are expected to decline from Q1 2010 to Q2 2010 by approximately 10% to $8.2 million. The cost reductions reflect increased drilling efficiencies, redesigned completion plans and continued focus on cost management.
2010 production guidance is 17.5 Bcfe which will result in operating cash flow of approximately $62 million including income from hedges. The Company expects to spend $175 million in CAPEX and with current cash on hand, expects to draw approximately $78 million on its $130 million borrowing base over the 12 months of 2010. Based on our current drilling plans and proved developed producing ("PDP") reserve increases, the Company expects to increase its borrowing base in excess of our liquidity needs over the next three years.
Rig Sublease
The Company has agreed to sublease its fourth Helmerich and Payne FlexRig 3™ to another major operator for a period of 180 days. This sublease agreement entitles the Company to receive a day rate which will be applied to its previously contracted day rate and the sublease period will be deducted from the three year contract. The primary term of the sublease began on March 25, 2010.
Joint Operating Agreement
The Company has executed a Joint Operating Agreement ("JOA") with EXCO Operating Company, LP to jointly develop H/B leasehold rights in the Scottsville area of Harrison County, Texas. Under the JOA, the Company is contributing its H/B leasehold rights in the Verhalen Prospect and EXCO is contributing its H/B leasehold rights in the Hamilton Unit, creating a 3,850 acre block of contiguous leasehold with a potential of 49 H/B Horizontal locations on 80 acre spacing. The JOA adds an additional 9 H/B Hz drilling locations. The Company will operate the joint leasehold with an 84.3% working interest and EXCO will participate with a 15.7% working interest representing the pro rata shares of each company's leasehold contribution under the JOA. The reduction in the Company's capital expenditures, production, and operating cash flow and the increase in liquidity related to the JOA already has been included in the published production guidance of 17.5 Bcfe, capital expenditures of $175 million, and operating cash flow of $62 million.
GMXR began developing the Verhalen Prospect in 2009 and has previously drilled and completed 7 H/B Hz wells in this prospect that are not part of the JOA. The Company spud the first well under the JOA, the Verhalen F #1H on March 29, 2010 with an AFE of $8 million.
Michael J. Rohleder, President of GMXR, said, "We are in the best liquidity position in our history and with the transition to drilling with 5 ½" casing, we continue to improve well results and our focus on cost and prudent financial management. The results of our Mia Austin #1H, which has averaged over 6.7 Mmcfe/d for the first 60 days and has an internally generated estimated EUR of 5.7 Bcfe, demonstrates our ability to deliver results consistent with our expectations of 5.5 Bcfe to 6.5 Bcfe EUR's. Q2 will be a significant catalyst for growth as we complete a record number of H/B Hz wells utilizing our larger diameter casing design and stimulation plans directed by our new drilling and completions team. Our estimated production for 2010 is 77% protected with floors at $6.43; 2011 is 62% protected at $6.14 and 2012 is 58% protected at $6.08. This positions us to continue our three rig drilling program and generate positive operating cash flow even in sub $4.00 gas markets. We will also add significant collateral to our borrowing base which will allow us to expand our liquidity."
GMXR is a 'Pure Play', E & P Company with one of the most concentrated Haynesville / Bossier (H/B) Horizontal Shale Operations in East Texas. The Company has 355 Bcfe in proved reserves (YE2009), 94% of which are natural gas. The Company's proved reserves are 81% operated and consist of 278 net "Capital Core" H/B Hz un-drilled locations; 14 gross / 13.9 net H/B producers, and 324 gross / 186.9 net Cotton Valley Sand ("CVS") producers; 1,382 net CVS un-drilled locations; and 47 net Travis Peak / Hosston Sands & Pettit producers. These multiple resource layers provide high probability and the potential for repeatable, organic growth.
The GMX Resources Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=5158
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.