GMX Resources: 4Q08 Pre-Call Notes

GMXR Reported In Line Result; Promising Haynesville/Bossier Completions

Talk about a story that has gotten simpler. Think 25 Haynesville wells in 2009 consuming 98% of the budget and leading to a back end loaded year with 2009 growing 86% over 2008 levels.

• The 4Q Numbers:
  • Production: 35.7 MMcfepd (a bit higher than recently reduced guidance)
  • Revenue: reported $24.1 mm vs $21 expected
  • EPS of ($0.63) vs $0.06 expected
  • CFPS of $0.63 vs $0.61 expected
• Guidance:
  • 1Q09
    • Production: 2.8 Bcfe or 31 MMcfepd.
  • 2009
    • Production: 24 Bcfe or 65.8 MMcfepd, up 86% over 2008 levels. This down slightly from previous press release guidance of 24.7 Bcfe or 67.7 MMcfepd but will still be best in class among the small cap E&P’s. They had put the 24 Bcfe number in their most recent presentation a few days ago so its probably not a big shock.
    • EBITDA of $114.1 mm vs Street Consensus EBITDA of $119 mm
• Hedges: 41% hedged at a $7.77 gas price.
• Operations Update:
  • Haynesville/Bossier horizontal wells to date:
    • 1st well IP of 7.8 MMcfepd with a 2,000 foot lateral (previously announced as a December completion)
    • 2nd well IP of 7.6 MMcfepd with a 3,100 foot lateral that was positioned in the A&B sub-layers of the Haynesville. These guys did a lot of work with vertical wells to understand the geology here prior to drilling these horizontals.
    • 3rd well IP of 8.7 MMcfepd with a 4,400 foot lateral positioned in the A sub-layer. You get the picture, longer laterals and better positioning = better well.
    • 4th through 7th wells still drilling, all being postioned in the A sub-layer. Results of these wells expected in April (first 3) and May for the last.
    • They plan to complete 6 wells in 1H09 (#2 through #7 outlined above),
    • and then 15 to 19 wells in 2H09 which will result in a bit of a hockey stick profile for the year with an end of year high exit rate.
• Nutshell: Story getting pretty simple, like GDP they had growing pains as they transitioned from a Cotton Valley program to a horizontal Haynesville/Bossier program which caused them to come in a little light on the 4Q volumes and will cause a little lighter 1Q before the Haynesville wells give them proper footing. Previous guidance was a bit higher for 2009 but not markedly so and it was based on a much lower assumed Haynesville per well IP than what we are seeing in these wells.
• Conference Call: 11 am EST

Comments

[PeteK:]

Congress is planning to require all automakers to have a few models of vehicles using only natural gas ASAP. Also, incentives will be given to stations that are willing to set up the NG refueling.
This is the best ideas the US Congress ever have.
Not only good for the US economy, but good for jobs and the automakers.
Electric cars sound good but not yet practical and too costly.
Cars using natural gas is old technology and can be improved with much much better results. Oil & Gas companies are so cheap now it's the best time to accumulate. With the oil money saved in the future, this country will be strong & automakers (if they listen) will be in much better shape.

Apr 19 12:06 PM