Wednesday, December 22, 2010

GMX Reduces 2011 Capex for Third Time

GMX Resources announced that it has reduced its 2011 capital budget to $110 million.  This is the third time that the company has reduced its planned capex, from $200 million to $175 million to $152 million and now to $110 million.  For reference, GMX expects 2010 capex to come in at between $195 and $200 million.  The company plans to operate only one rig in 2011.  If market conditions improve, the company may add another rig mid-year, which would increase capex by $40 million.

The capex reduction occurred simultaneously with a redetermination of the company's borrowing base, which set GMX's borrowing limit at $130 million (of a $250 million facility).  GMX, like many other companies that depend on debt to fund growth, constantly has to watch its borrowing base, especially when operations don't generate strong cash flows because of low commodity prices.  The capital budget presumably will be funded by a recent preferred stock offering, debt and excess cash flow.

The company also announced results from some recent completions that I have yet to note:

  • Mia Austin #6H, GMX Resources:  7.891 MMcf/day IP (30 days); Carthage Field (Haynesville Shale), Harrison Co., Survey: WILLIAMS, W, A-757 
  •  Blocker Ware #8H, GMX Resources:  5.724 MMcf/day IP (60 days); North Carthage Field (Bossier Shale), Harrison Co., Survey: WILLIAMS, W, A-757

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