GMX Resources Inc.GMXR

Morningstar Rating

Stock Research and Analysis

by Jennifer O'Connor

GMX Resources is a small oil and gas producer with East Texas as its home base. Historically, the firm has operated in the Cotton Valley Sands, drilling vertical wells. In the past year, however, GMX has followed the lead of other industry players chasing the potential offered by the Haynesville Shale. Read more

Bulls Say

There is potential for outsize production and reserve growth, as GMX is growing off a small base.

The addition of another drilling rig in the fourth quarter this year and the planned addition of two more in 2010 strengthens GMX's growth profile.

Net proceeds from the completion of a midstream sale and from a recent equity issuance give GMX significant liquidity, and will allow it to increase its capital budget this year and next.

Its lack of impending lease expirations gives GMX a leg up on other industry players scrambling to drill their acreage, as it can drill more strategically.

GMX's access to infrastructure mitigates the bottlenecks that have become characteristic in the region. Read more

Bears Say

GMX is highly leveraged and will need to depend on outside capital for growth.

The firm may face third-quarter impairment charges as a result of low spot natural gas prices at quarter-end.

GMX's highly concentrated asset base potentially exposes it to risk should the Haynesville experience more infrastructure-related issues, for example.

Given the early stage of development, potential operational missteps will likely be magnified. Read more

Strategy

GMX Resources has shifted from vertical drilling in the Cotton Valley Sands to horizontal drilling in the Haynesville Shale. The firm is seeking to prove up its 42,300 net acres in the play. Substantially all near-term efforts will be directed toward development drilling in the Haynesville. Read more

Management

Ken Kenworthy Sr. and Ken Kenworthy Jr. founded GMX Resources in 1998. Both have previous experience in oil and gas exploration. In 1982, Kenworthy Jr. founded OEXCO, a privately held oil and gas firm, which was sold in 1995. Before that, he held geology positions at several oil and gas companies. Read more

Profile

GMX Resources is engaged in the exploration for and production of oil and natural gas in East Texas. The firm had its beginnings in the Cotton Valley Sands and is now drilling solely in the Haynesville Shale. Read more

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