Wednesday, October 6, 2010

GMX Lowers 2011 Capex Again

For the second time in a month, GMX Resources has announced that the company has reduced expected capital expenditures for 2011.  A month ago, the company reduced 2011 capex to $175 million.  Yesterday, the company reduced 2011 capex to $152 million.  The company will continue to run one rig in the Haynesville Shale.  Three of its four leased rigs are subleased, two for the life of the leases, one through June 2011.

GMX is making a prudent call on capital spending.  Given the small size of the company's operations, it is having some trouble efficiently completing wells on a timely basis.  Completion services are a bottleneck, and it doesn't make sense to spend a lot of money to build an inventory of uncompleted (non-revenue producing) wells in a low price environment.  GMX is putting a happy face on things suggesting that it will resume a two rig program next June, but if commodity prices continue to run low I would not be surprised to see more spending cuts.

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