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GMX Resources (ticker: GMXR) is an oil and natural gas exploration and production company targeting oil prospects in the Williston Basin Bakken/Three Forks, and the DJ Basin Niobrara. GMXR also operates in the Haynesville/Bossier Formation and the Cotton Valley Sand Formation in the East Texas Basin.

On July 17, 2012, GMXR proposed a sale of a portion of its Cotton Valley Sand liquids rich natural gas properties located in East Texas. GMXR reported in the news release they expect a sale to occur during Q3’12.

OAG360 Comments:

GMXR plans to sell a portion of its 17,200 net acres Cotton Valley Sand Formation assets in East Texas. We expect the asset monetization will ultimately be a positive given the high cost of operating the Cotton Valley, and its 82% natural gas content. As of year-end 2011, GMXR’s Cotton Valley assets had a PV-10 of $99.3 million (using a $4.12 per MMBtu natural gas price). A few data points to consider regarding GMXR’s Cotton Valley Position:

  • 100% working interest/81% NRI
  • 65% operated
  • 83 net horizontal drilling locations
  • 348 producing wells
  • 82% natural gas/18% liquids

The Street does not have recent production data from GMXR’s Cotton Valley Sands. Based on public data, SandRidge (ticker: SD) divested its East Texas Cotton Valley assets to NFR Energy for $231 million, or $9,239 per flowing Mcfe in September 2011.

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The company estimates horizontal well EURS in the 7.5 Bcfe (18% liquids) range with an estimated well cost of approximately $7.5MM per well.  GMXR provided a cumulative resource gas potential of 410 Bcf and liquids resource potential of 15 MMBO for the Cotton Valley Sands in its recent investment presentation.


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Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable. This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note. This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results. EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services. In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies. As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note. EnerCom, or its principals or employees, may have an economic interest in any of the companies covered in this report or on Oil & Gas 360®. As a result, readers of EnerCom’s reports or Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.