OKLAHOMA CITY, Jan. 31 /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 that it has reached a definitive agreement with PVR East Texas Gas Processing LLC ("PVR"), a wholly owned subsidiary of Penn Virginia Resource Partners, to process all of its natural gas produced from wells jointly developed with Penn Virginia Oil & Gas, LP located in Harrison and Panola County, Texas. GMXR estimates that processing revenues, on the associated natural gas production will increase the current average sales price by approximately $1.20/MMBtu. The Company expects a potential $4,500,000 revenue increase for FY2008 at today's current commodity prices. Processing is expected to commence no later than March 1, 2008. In addition, GMXR will gain access for its residue gas to additional pipelines serving the Perryville, Louisiana market hub. GMXR is negotiating a similar processing agreement to cover the balance of its production in its core area.
GMXR has also finalized the definitive agreement for the previously announced proposed acquisition of approximately 3,200 gross / 3,000 net acres of undeveloped leases in Harrison County, Texas increasing its overall net acreage by 18% and operated acreage to 65%. Closing of this acquisition is subject to completion of title due diligence. As previously announced, the Company estimates this property to add an additional 150 Net Cotton Valley ("CV") well locations based on 20 acre spacing in its contiguous CV resource development; after completion of the acquisition the overall total un-drilled locations are:
-- 437 gross/ 296 net Un-drilled CV Locations assigned as Proved Undeveloped reserves -- 992 gross/ 635 net Un-drilled Potential CV Locations not assigned as proved reserves
The potential CV locations are not included in the YE2007 proved reserve estimates. As previously announced, the Company experienced reserve growth (Bcfe) of 69% over YE2006. Proved developed reserves were 36% of total proved reserves at YE2007 compared to 30% YE2006.
The following table provides additional detail about the composition of the Company's reserves at YE2007 compared to YE2006:
YE2007 YE2006 Change Proved Developed Producing BCFE 126 48 163% PV 10% 321 94 241% Proven Non-Producing BCFE 30 28 7% PV 10% 59 51 16% Proved Undeveloped BCFE 281 182 54% PV 10% 335 117 186% Total Proved BCFE 437 258 69% PV 10% 715 262 173% PV 10% in millions USD PUD = 3.5 yrs. drilling plan using current rig count and CAPEX budget
Ken L. Kenworthy, Jr. CEO said, "This will be the single largest property set addition we've made in the last four years. This property is contiguous with our existing core assets allowing us to leverage our $60mm investment in infrastructure. We have set our strategy to grow our operated position, in this low cost, 100% successful, Cotton Valley development; this is the third meaningful step in that goal." GMXR land department has increased the net un-drilled locations 38% since September 30, 2007, adding 259 net new 20 acre locations (including the 150 new locations described above) bringing the total to 931 net un-drilled locations.
GMXR also announced the portion of its previously announced 2008 capital expenditure budget that would be allocated to drilling 20 acre spaced CV wells. 23% of FY2008 budgeted CAPEX will be allocated for drilling an estimated 30 gross / 18 net new 20 acre wells. Year end results from its initial twenty three 20 acre pilot wells drilled in 2007 proved successful with 24 hour initial production average rates of 1,447 MCFEPD, which is 14% above the average rate for the Company's 40 acre-spaced wells. Production guidance for Q1 2008 remains 2.8 BCFE, a 55% increase over Q1 2007 production of 1.8 BCFE.
GMXR Board of Directors has also approved an amendment to the Company's Shareholder Rights Plan originally adopted in 2005 to increase the ownership threshold for when the rights become exercisable from 20% to 29% of the outstanding common stock. The Company believes that increasing the threshold will enable shareholders to accumulate larger blocks of common stock should they desire to do so, but still provide the Company shareholders with the benefits of the protection from a potential hostile takeover that the rights plan was designed to provide.
GMX RESOURCES INC. is a 'Pure Play' E & P company with over 1,429 gross/ 931 net CV un-drilled locations, 242 gross / 134 net CV producers; with a 100% success rate and 15% developed. Eight rigs are currently drilling its contiguous Cotton Valley (CV) gas resource play on the Sabine Uplift; Carthage, North Field, East Texas, Panola & Harrison County. Additionally there are 37 gross / 30 net Travis Peak/Hosston Sands & Pettit producers and the property also contains Lower CV Bossier/Haynesville "Gas Shales". These multiple resource layers provide repeatable organic growth at low finding and development costs for the Company which are contained in one contiguous 'Core Area' where the company has invested $60 MM in infrastructure; consisting of 94% Natural Gas. Headquartered in Oklahoma City, Oklahoma, GMXR has interests in 300 gross / 175 net producing wells and operates 65% of its reserves consisting of 94% natural gas. The Company's strategy is to grow shareholder value through operational growth, acreage expansion in its resource play, growing and proving-up its natural gas reserves, and strong production growth, while maintaining low finding and development costs; which should result in shareholder value growth.
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.
