OKLAHOMA CITY, June 9 /PRNewswire-FirstCall/ -- GMX RESOURCES INC., , (http://www.gmxresources.com/ ) announced it has executed an Amended and Restated Loan Agreement with Capital One, National Association, as Agent and lender, which adds Union Bank of California as a lender and increases its Borrowing Base to $35 million, up from $24 million. The amended loan agreement provides for the addition of additional lenders from time to time and increases the amount of the maximum availability, subject to the Borrowing Base limitation, to $100 million. The new $35 million borrowing base is subject to mandatory quarterly reductions of $1.5 million beginning on June 30, 2006. There are no material changes to the financial or other covenants from the existing agreement, other than to permit the Company to issue up to $45 million in preferred stock or subordinated debt.
GMXR also filed a universal shelf registration statement with the Securities and Exchange Commission to register up to $200 million of senior and subordinated debt securities, preferred stock, depositary shares, common stock, warrants or units which may be issued from time to time in the future. The filing of this registration statement facilitates the Company's ability to raise capital in the future as needs arise. The Company does not currently intend to issue common stock or any securities convertible into common stock. This announcement does not constitute an offer to sell any securities covered by such registration statement. Such offers will be made only by prospectus after the registration statement is effective.
Operational and Joint Development Update: 2Q 2006 Deeper Cotton Valley Layers Resource Development All Areas
Since February 19, 2006 all twelve wells drilled in our Resource Play, have been drilled into deeper layers of the Cotton Valley (CV) from 10,000 feet to 11,874 feet. Four CV rigs are drilling to similar targets in the resource play, two are operated by GMXR (one shared) and two are operated by Penn Virginia Oil & Gas, L.P. ("PVOG"), a subsidiary of Penn Virginia Corporation , our joint venture partner. In the deeper drilling we have encountered five new prospective reservoir layers, totaling up to 1,200 feet in the lower CV, which contain gas. Coring and special openhole logging has been conducted and is ongoing to aid in estimating gas in place and ultimate recovery potential. Seven of the wells have had at least one completion in one of the layers. Slick water fracture treatments and acid treatments have been utilized for the various completions. Initial 24 hour production rates varied from 900-200 mcfgpd and sustained (1-4 weeks) production rates also vary, from the best ranges of 400-100 mcfgpd per layer, to wells that load up and require gas lift or tubing. The layers are 20%-60% shale and 80%-40% carbonate and silica. Significantly higher pressures and temperatures for the deeper layers have slowed the cycle time of turning wells to constant sales and are causing delays in successive multiple completions. We will continue to modify methodology and tubulars to allow for more rapid multiple completions of all layers in the entire CV. Only three of these wells have recently been completed in the more permeable Taylor Sand layer of the CV, our primary target. Ken Kenworthy, Jr., Chief Executive Officer of GMXR stated, "We are highly encouraged by the discovery of gas in five deeper Cotton Valley sands and are taking extra time to complete and evaluate them. Because this is delaying the commencement of production from the primary Cotton Valley reservoir in these wells, our 2Q06 and YE06 production expectations will be reduced to approximately 0.9 BCFE and 5 BCFE, respectively. Until we have more production history in these new reservoir layers and consistency of completion cycle times these estimates could continue to vary. We do anticipate that these additional layers will add meaningful, low cost production and significant reserve adds to our resource play, which will become quantitatively more apparent over time. These new deeper reservoir layers appear to be widespread, highly saturated with natural gas and our expectations are that they should have a material impact on long- term production, finding costs, ultimate recoveries per well and natural gas reserves for the Company. The exact magnitudes of these impacts cannot be quantified at this time."
2006 Update and Planned Activity
Rig #7 drilled to 11,300 feet and will continue to drill to that depth. The additional drilling time required is 3 days. Rig #11 (Diamond Blue Drilling Co.; wholly owned sub of GMXR) is under construction and is currently expected to arrive in the third quarter. It will be capable of drilling to 14,000 feet. PVOG has indicated an additional CV rig is scheduled to arrive next month as well.
GMX RESOURCES INC. is a rapidly growing independent E & P company. Key Gas Resource Play in Cotton Valley Sands, Travis Peak Sands & Pettit Limes; North Carthage Field, East Texas, Panola & Harrison County; "Tight Gas Sands" on the Sabine Uplift; 93% Natural Gas; Core Area: 99% of NAV; Stacked Multiple Reservoirs; Drilled 68 CVS Wells, 7 Travis Peak Wells since inception in 1998; 26,853 gross / 15,948 net acres; 619 gross / 374 net CVS 40 acre locations; 7 Yrs of Development with 6 Rigs. Headquartered in Oklahoma City, Oklahoma, GMXR has interests in 114 gross / 68.13 net producing wells and operates 67% of its reserves. YTD price range $50.50 -- $28.65; Average Daily Volume 90 days -- 296,000 shares; Common Stock Outstanding -- 11,214,967 shares; Institutional Ownership approximately 60% at December 31, 2005; Management maintains 22% equity stake. The Company's strategy is to develop its resource play with multiple rigs, increase production, grow its natural gas reserves and continue to build shareholder value.
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.
