OKLAHOMA CITY, Feb. 19 /PRNewswire-FirstCall/ -- GMX RESOURCES INC., ; (visit http://www.gmxresources.com/ to view the most recent Company presentation and for more information on the Company) today announces the initial 24 hour production rate (IP) on the Cadenhead 6H (C6H), its second horizontal well, is 2.4 mmcfgpd. The rate is a 33% increase over the Baldwin 5H (B5H) which had an IP of 1.8 mmcfgpd and is currently producing 1.2 mmcfgpd. The Company also announced its final year end 2006 proved reserves of 258 BCFE representing a 59% increase over YE05 reserves of 162 BCFE. The Company previously announced preliminary year end reserves of 256 BCFE. The proved reserves were estimated by MHA Petroleum Consultants, Inc. in association with Sproule Associates, Inc. Thirty percent (30%) of the proved reserves are developed and 70% are undeveloped (PUD). The PUD ratio to producers (PDP) are slightly less than 2 PUDS to each PDP well (producing offset Cotton Valley Sand (CV) wells). The inventory of PUDS will take just over 2 years to fully develop with our current 7 drilling rigs. Commodity pricing used for YE06 proved reserves were $6.29/mmbtu & $61.05/bbl (less differential & other deductions) versus $11.225/mmbtu & $61.04/bbl for YE05 proved reserves, a 44% reduction in natural gas pricing for the reserves.
Ken Kenworthy, Jr. CEO said, "Steady production and reserve growth continue to be our focus; we have seven drilling rigs (including 3 'Flex Rigs') drilling all vertical CV wells in our Carthage North Field development. We plan to drill twice as many net vertical CV wells this year over last year and eleven gross, eight net Travis Peak wells. Current plans are to participate in two horizontals in our JV 50% Area, one well in the Taylor Sand and one in the Bossier Shale; otherwise we will monitor the horizontals production for a period of time before further development is planned. Capital expenditures for 2007 are estimated to be $145 million to $175 million."
The three horizontal wells B5H, Cadenhead 6H & 9H wells (C6H & C9H), drilled a total of 5,548 feet through the curve & lateral sections, had an average penetration rate of 263.45 feet per day utilizing downhole motors while drilling in the Lower Taylor Sand. The C9H drilled its 2,229 foot curve & horizontal section in an average of 300 feet per day. We raised the laterals 20-50 feet higher in the reservoir layer than the B5H and encountered 90%-95% sand while drilling in both C6H & C9H laterals. We also ran a shuttle openhole log on both wells prior to setting casing and picked our packer positions and perforations based on the logs. The continuity of the sand laterally, apparent from drilling samples as well as openhole logging, was more homogeneous than we previously thought. We sand cut perforations in C6H in each stage versus sliding sleeves used in the B5H; in order to assure each stage had open perforations. We changed the fracture treatment from a 'Gel Frac' to our 'Hybrid Frac' type which we employ in our vertical wells. Hybrid Fracs contain slickwater, less gel and less sand during the treatment when compared to a Gel Frac. After each stage we ran or attempted to run tracer surveys which indicate where the treatment migrated near the wellbore. We adjusted our perforations and treatment plans to 4 1/2 stages based on the tracer results. We intend to consider more changes on the completion approach of the C9H. Completion for the C9H is scheduled to begin early March 2007.
GMXR expects to announce year end results February 26, 2007 and will discuss its fourth quarter 2006 earnings and operational update in a conference call followed by a question and answer session on Tuesday, February 27, 2007 at 12:00 PM EST/11:00 AM CST/10:00 AM MST/9:00 AM PST. You can participate via telephone by dialing 1-800-909-7113 and referring to conference ID "GMX" five to ten minutes before the scheduled start of the conference call. You can also access the conference call via Internet web- cast by logging on to the Company's website at http://www.gmxresources.com/ at least 20 minutes prior to the scheduled start of the call to download and install any necessary audio software. You can find the Internet web-cast link under the Investor Relations tab where you will be required to register your name and email address. You must have either Microsoft Media Player or Real Player to access the conference call. During the conference call periodically the company's most recent presentation, on its website will be utilized. An on-demand replay of the teleconference call will be available until March 31, 2007 by calling 1-800-688-9445 referring to conference ID "GMX" and the web- cast will be available on GMXR's website for 30 days.
GMX RESOURCES INC. is a rapidly growing, E & P company with high quality unconventional gas resources, currently drilling wells in its Cotton Valley (CV) Gas Resource Play on the Sabine Uplift; Carthage North Field, East Texas, Panola & Harrison County, developing its Upper CV "Tight Gas Sands" and Lower CV Bossier "Gas Shales", also containing Travis Peak/Hosston Sands & Pettit Sands and Limes. These key resource layers provide repeatable organic growth for the Company; Core Area 99% of NAV; 94% Natural Gas. Headquartered in Oklahoma City, Oklahoma, GMXR has interests in 176 gross/ 101.72 net producing wells and operates 60% of its reserves. 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.
