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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
x | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For The Quarterly Period Ended September 30, 2009
¨ | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For The Transition Period From to
Commission File Number 001-32977
GMX RESOURCES INC.
(Exact name of registrant as specified in its charter)
Oklahoma | 73-1534474 | |
(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) | |
One Benham Place, 9400 North Broadway, Suite 600 Oklahoma City, Oklahoma |
73114 | |
(Address of principal executive offices) | (Zip Code) |
(Registrants telephone number, including area code): (405) 600-0711
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. Check one:
Large accelerated filer | x | Accelerated filer | ¨ | |||
Non-accelerated filer | ¨ (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Check one: Yes ¨ No x
The number of shares outstanding of the registrants common stock as of October 30, 2009 was 31,213,791, which included 3,140,000 shares under a share loan which will be returned to the registrant upon conversion of certain outstanding convertible notes.
Table of Contents
GMX Resources Inc.
Form 10-Q
For the Quarter Ended September 30, 2009
1 | ||||
ITEM 1. |
1 | |||
ITEM 2. |
Managements Discussion and Analysis of Financial Condition and Results of Operations |
21 | ||
ITEM 3. |
30 | |||
ITEM 4. |
32 | |||
32 | ||||
ITEM 1. |
32 | |||
ITEM 1A. |
32 | |||
ITEM 2. |
33 | |||
ITEM 3. |
33 | |||
ITEM 4. |
33 | |||
ITEM 5. |
33 | |||
ITEM 6. |
33 | |||
34 | ||||
35 |
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ITEM 1. | Financial Statements |
GMX Resources Inc. and Subsidiaries
Consolidated Balance Sheets
(dollars in thousands, except share data)
December 31, 2008 |
September 30, 2009 |
|||||||
(as adjusted) | (Unaudited) | |||||||
ASSETS |
||||||||
CURRENT ASSETS |
||||||||
Cash and cash equivalents |
$ | 6,716 | $ | 4,192 | ||||
Accounts receivable interest owners |
576 | 1,272 | ||||||
Accounts receivable oil and gas revenues, net |
9,145 | 6,585 | ||||||
Derivative instruments |
21,325 | 14,677 | ||||||
Inventories |
691 | 532 | ||||||
Prepaid expenses and deposits |
2,040 | 2,987 | ||||||
Total current assets |
40,493 | 30,245 | ||||||
OIL AND GAS PROPERTIES, BASED ON THE FULL COST METHOD |
||||||||
Properties being amortized |
608,865 | 722,163 | ||||||
Properties not subject to amortization |
36,034 | 40,978 | ||||||
Less accumulated depreciation, depletion, and amortization |
(211,785 | ) | (410,755 | ) | ||||
433,114 | 352,386 | |||||||
PROPERTY AND EQUIPMENT, AT COST, NET |
85,284 | 94,682 | ||||||
DEFERRED INCOME TAXES |
7,649 | 53,047 | ||||||
OTHER ASSETS |
7,131 | 5,483 | ||||||
TOTAL ASSETS |
$ | 573,671 | $ | 535,843 | ||||
LIABILITIES AND SHAREHOLDERS EQUITY | ||||||||
CURRENT LIABILITIES |
||||||||
Accounts payable |
$ | 35,599 | $ | 20,038 | ||||
Accrued expenses |
6,089 | 13,395 | ||||||
Accrued interest |
3,290 | 1,851 | ||||||
Revenue distributions payable |
5,293 | 3,512 | ||||||
Deferred income taxes |
6,996 | 5,715 | ||||||
Current maturities of long-term debt |
61 | 56 | ||||||
Total current liabilities |
57,328 | 44,567 | ||||||
LONG-TERM DEBT, LESS CURRENT MATURITIES |
224,281 | 270,368 | ||||||
OTHER LIABILITIES |
6,645 | 9,308 | ||||||
SHAREHOLDERS EQUITY |
||||||||
Preferred stock, par value $.001 per share, 10,000,000 shares authorized: |
||||||||
Series A Junior Participating Preferred Stock 25,000 shares authorized, none issued and outstanding |
| | ||||||
9.25% Series B Cumulative Preferred Stock, 3,000,000 shares authorized, 2,000,000 shares issued and outstanding (aggregate liquidation preference $50,000,000) |
2 | 2 | ||||||
Common stock, par value $.001 per share authorized 50,000,000 shares; issued and outstanding 18,794,691 shares in 2008 and 24,263,791 shares in 2009 |
19 | 25 | ||||||
Additional paid-in capital |
328,002 | 397,577 | ||||||
Retained earnings |
(57,902 | ) | (195,597 | ) | ||||
Accumulated other comprehensive income, net of taxes |
15,296 | 9,593 | ||||||
Total shareholders equity |
285,417 | 211,600 | ||||||
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY |
$ | 573,671 | $ | 535,843 | ||||
See accompanying notes to consolidated financial statements.
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GMX Resources Inc. And Subsidiaries
Consolidated Statements of Operations
(dollars in thousands, except share and per share data)
(Unaudited)
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2008 | 2009 | 2008 | 2009 | |||||||||||||
(as adjusted) | (as adjusted) | |||||||||||||||
OIL AND GAS SALES |
$ | 36,408 | $ | 23,075 | $ | 101,647 | $ | 68,737 | ||||||||
EXPENSES: |
||||||||||||||||
Lease operations |
4,111 | 2,708 | 10,651 | 8,581 | ||||||||||||
Production and severance taxes |
1,651 | 279 | 4,709 | (1,074 | ) | |||||||||||
Depreciation, depletion, and amortization |
8,287 | 7,834 | 22,743 | 24,386 | ||||||||||||
Impairment and other writedowns |
| | | 186,517 | ||||||||||||
General and administrative |
4,592 | 4,811 | 11,958 | 14,580 | ||||||||||||
Total expenses |
18,641 | 15,632 | 50,061 | 232,990 | ||||||||||||
Income (loss) from operations |
17,767 | 7,443 | 51,586 | (164,253 | ) | |||||||||||
NON-OPERATING INCOME (EXPENSES): |
||||||||||||||||
Interest expense |
(3,583 | ) | (4,229 | ) | (10,338 | ) | (12,080 | ) | ||||||||
Interest and other income |
100 | 4 | 146 | 40 | ||||||||||||
Unrealized loss on derivatives |
| (1,454 | ) | | (2,827 | ) | ||||||||||
Total non-operating expense |
(3,483 | ) | (5,679 | ) | (10,192 | ) | (14,867 | ) | ||||||||
Income (loss) before income taxes |
14,284 | 1,764 | 41,394 | (179,120 | ) | |||||||||||
(PROVISION) BENEFIT FOR INCOME TAXES |
(4,653 | ) | (4,546 | ) | (13,208 | ) | 43,738 | |||||||||
NET INCOME (LOSS) |
9,631 | (2,782 | ) | 28,186 | (135,382 | ) | ||||||||||
Preferred stock dividends |
1,156 | 1,156 | 3,469 | 3,469 | ||||||||||||
NET INCOME (LOSS) APPLICABLE TO COMMON STOCK |
$ | 8,475 | $ | (3,938 | ) | $ | 24,717 | $ | (138,851 | ) | ||||||
EARNINGS (LOSS) PER SHARE Basic |
$ | 0.57 | $ | (0.19 | ) | $ | 1.79 | $ | (7.61 | ) | ||||||
EARNINGS (LOSS) PER SHARE Diluted |
$ | 0.50 | $ | (0.19 | ) | $ | 1.62 | $ | (7.60 | ) | ||||||
WEIGHTED AVERAGE COMMON SHARES Basic |
14,900,089 | 21,122,331 | 13,835,487 | 18,235,889 | ||||||||||||
WEIGHTED AVERAGE COMMON SHARES Diluted |
17,099,929 | 21,160,616 | 15,224,742 | 18,278,639 | ||||||||||||
See accompanying notes to consolidated financial statements.
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GMX Resources Inc. And Subsidiaries
Consolidated Statements of Cash Flows
(dollars in thousands, except share and per share data)
(Unaudited)
Nine Months Ended September 30, |
||||||||
2008 | 2009 | |||||||
(as adjusted) | ||||||||
CASH FLOWS DUE TO OPERATING ACTIVITIES |
||||||||
Net income (loss) |
$ | 28,186 | $ | (135,382 | ) | |||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
||||||||
Depreciation, depletion, and amortization |
22,743 | 24,386 | ||||||
Impairment and other writedowns |
| 186,517 | ||||||
Deferred income taxes |
13,173 | (43,738 | ) | |||||
Non-cash compensation expense |
2,059 | 3,658 | ||||||
Other |
1,460 | 5,779 | ||||||
Decrease (increase) in: |
||||||||
Accounts receivable |
(10,614 | ) | 1,378 | |||||
Prepaid expenses and other assets |
181 | 290 | ||||||
Increase (decrease) in: |
||||||||
Accounts payable and accrued expenses |
(2,982 | ) | (9,516 | ) | ||||
Revenue distributions payable |
4,634 | (1,686 | ) | |||||
Net cash provided by operating activities |
58,840 | 31,686 | ||||||
CASH FLOWS DUE TO INVESTING ACTIVITIES |
||||||||
Purchase of oil and natural gas properties |
(196,870 | ) | (116,013 | ) | ||||
Purchase of property and equipment |
(19,269 | ) | (22,247 | ) | ||||
Net cash used in investing activities |
(216,139 | ) | (138,260 | ) | ||||
CASH FLOWS DUE TO FINANCING ACTIVITIES |
||||||||
Advance on borrowings |
160,000 | 99,000 | ||||||
Payments on debt |
(204,115 | ) | (55,069 | ) | ||||
Issuance of 5.00% Senior Convertible Notes |
125,000 | | ||||||
Proceeds from sale of common stock |
134,681 | 65,264 | ||||||
Dividends paid on Series B preferred stock |
(3,469 | ) | (2,313 | ) | ||||
Fees paid relating to financing activities |
(4,796 | ) | (2,832 | ) | ||||
Net cash provided by financing activities |
207,301 | 104,050 | ||||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
50,002 | (2,524 | ) | |||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD |
5,907 | 6,716 | ||||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD |
$ | 55,909 | $ | 4,192 | ||||
SUPPLEMENTAL CASH FLOW DISCLOSURE: |
||||||||
CASH PAID DURING THE PERIOD FOR: |
||||||||
Interest |
$ | 7,859 | $ | 5,283 | ||||
Taxes |
$ | 35 | $ | |
See accompanying notes to consolidated financial statements.
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GMX Resources Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income
(dollars in thousands)
(Unaudited)
Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||||||||||
2008 | 2009 | 2008 | 2009 | ||||||||||||
(as adjusted) | (as adjusted) | ||||||||||||||
Net income (loss) |
$ | 9,631 | $ | (2,782 | ) | $ | 28,186 | $ | (135,382 | ) | |||||
Other comprehensive income (loss), net of income tax: |
|||||||||||||||
Change in fair value of derivative instruments, net of income tax of $13,646, ($273), ($1,180), and $5,329, respectively |
26,490 | (530 | ) | (2,290 | ) | 10,345 | |||||||||
Reclassification of (gain) loss on settled contracts, net of income tax of $1,236, ($2,797), $2,882, and ($8,267), respectively |
2,400 | (5,430 | ) | 5,594 | (16,048 | ) | |||||||||
Other comprehensive income (loss), net of income tax |
28,890 | (5,960 | ) | 3,304 | (5,703 | ) | |||||||||
Comprehensive income (loss) |
$ | 38,521 | $ | (8,742 | ) | $ | 31,490 | $ | (141,085 | ) | |||||
See accompanying notes to consolidated financial statements.
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GMX Resources Inc.
Condensed Notes To Interim Financial Statements
Three Months Ended September 30, 2008 and 2009
(Unaudited)
NOTE A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements and notes thereto of GMX Resources Inc. (the Company, we, us, or GMX) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, certain footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) have been omitted. The accompanying consolidated financial statements and notes thereto should be read in conjunction with the consolidated financial statements and notes thereto included in GMXs 2008 Annual Report on Form 10-K (2008 10-K). References to GAAP issued by the Financial Accounting Standards Board (FASB) in these footnotes are to the FASB Accounting Standards Codification (ASC).
In the opinion of GMXs management, all adjustments (all of which are normal and recurring) have been made which are necessary to fairly state the consolidated balance sheet of GMX as of September 30, 2009, and the results of its operations for the three and nine month periods ended September 30, 2008 and 2009 and its cash flows for the nine months ended September 30, 2008 and 2009.
Earnings Per Share
Basic net income per common share is computed by dividing the net income (loss) applicable to common stock by the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per common share is calculated in the same manner, but also considers the impact to net income (loss) and common shares for the potential dilution from our 5.00% senior convertible notes due 2013 (the 5.00% convertible notes), outstanding stock options and non-vested restricted stock awards. The following table reconciles the weighted average shares outstanding used:
Three months ended September 30, |
Nine months ended September 30, | |||||||
2008 | 2009 | 2008 | 2009 | |||||
Weighted average shares outstanding basic |
14,900,089 | 21,122,331 | 13,835,487 | 18,235,889 | ||||
Effect of dilutive securities: |
||||||||
5.00% convertible notes |
1,828,046 | | 1,159,558 | | ||||
Restricted stock |
72,655 | | 24,603 | | ||||
Stock options |
299,139 | 38,285 | 205,094 | 42,750 | ||||
Weighted average shares outstanding diluted |
17,099,929 | 21,160,616 | 15,224,742 | 18,278,639 | ||||
We did not recognize additional dilutive shares for the three and nine months ended September 30, 2009 related to the 5.00% convertible notes as the average stock prices for the three and nine months ended September 30, 2009 of $12.01 and $14.11, respectively, did not exceed the conversion price of $32.50. The number of shares issuable upon conversion of the 5.00% convertible notes increases as the Companys common stock price increases and is finally determined based on the Companys volume weighted average stock price for a specified 60 day measurement period ending on or about the actual conversion date.
Common shares loaned in connection with the convertible debt offering in the amount of 3,440,000 and 3,140,000 shares as of September 30, 2008 and 2009, respectively were not included in the computation of earnings per common share. While the borrowed shares are considered issued and outstanding for corporate law purposes, the Company believes that the borrowed shares are not
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GMX Resources Inc.
Condensed Notes To Interim Financial Statements
Three Months Ended September 30, 2008 and 2009
(Unaudited)
considered outstanding for the purposes of computing and reporting earnings per share under GAAP currently in effect because the shares lent pursuant to the share lending agreement are required to be returned to the Company.
For the three and nine months ended September 30, 2009, the weighted average shares outstanding basic excludes 584,782 and 306,495 shares, respectively of non-vested restricted stock that is subject to future vesting over time. For purposes of calculating weighted average common shares diluted, the non-vested restricted stock would be included in the computation using the treasury stock method, with the proceeds equal to the average unrecognized compensation during the period adjusted for any estimated future tax consequences recognized directly in equity. The non-vested shares at September 30, 2009, were excluded from the weighted average common periods, as the shares were anti-dilutive. The dilution impact of these shares on our earnings per share calculation may increase in future periods depending on the market price of our common stock during those periods.
Recently Issued Accounting Standards
In March 2008, the FASB, issued FASB ASC 815, Disclosures about Derivative Instruments and Hedging Activities an amendment to SFAS No. 133, which changes the disclosure requirements for derivative instruments and hedging activities. Expanded disclosures are required to provide information about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under ASC 815 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entitys financial position, financial performance, and cash flows. We adopted this Statement January 1, 2009 and we expanded our disclosures accordingly.
In May 2008, the FASB issued FASB ASC 470-20, Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement) (ASC 470-20). ASC 47-20 requires the issuer of certain convertible debt instruments that may be settled fully or partially in cash upon conversion to separately account for the liability and equity components of the instrument at inception in a manner that reflects the issuers nonconvertible debt borrowing rate when interest expense is recognized in subsequent periods. ASC 470-20 is effective for fiscal years beginning after December 15, 2008 on a retrospective basis and was adopted by the Company on January 1, 2009. See Note B for further information.
In February 2008, the FASB issued authoritative guidance, which deferred the effective date for applying the fair value measurement and disclosure framework of ASC 820 to non-financial assets and liabilities that are recorded at fair value on a non-recurring basis until periods beginning after November 15, 2008. We adopted this deferred portion of ASC 820 on January 1, 2009 on a prospective basis.
The Company adopted ASC 855, Subsequent Events effective during the second quarter of 2009. ASC 855 does not change the Companys accounting policy for subsequent events, but instead incorporates existing accounting and disclosure requirements related to subsequent events into GAAP. ASC 855 defines subsequent events as either recognized subsequent events, those that provide additional evidence about conditions at the balance sheet date, or nonrecognized subsequent events, those that provide evidence about conditions that arose after the balance sheet date. Recognized subsequent events are recorded in the financial statements for the period being presented, while nonrecognized subsequent events are not. Both types of subsequent events require disclosure in the consolidated financial statements
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GMX Resources Inc.
Condensed Notes To Interim Financial Statements
Three Months Ended September 30, 2008 and 2009
(Unaudited)
if those financial statements would otherwise be misleading. ASC 855 requires the Company to disclose the date through which subsequent events have been evaluated. The adoption of ASC 855 had no impact on the financial statements of the Company. The Company has evaluated subsequent events through November 9, 2009.
In March 2009, the FASB unanimously voted for the FASB Accounting Standards Codification (the Codification) to be effective beginning on July 1, 2009. Other than resolving certain minor inconsistencies in current GAAP, the Codification does not change GAAP, but is intended to make it easier to find and research GAAP applicable to particular transactions or specific accounting issues. The Codification is a new structure which takes accounting pronouncements and organizes them by approximately 90 accounting topics. The Codification is the single source of authoritative GAAP. All guidance included in the Codification is considered authoritative at that time, even guidance that comes from what is currently deemed to be a non-authoritative section of a standard. The Codification became effective in the third quarter of 2009, and all non-grandfathered, non-SEC accounting literature not included in the Codification became non-authoritative. We have updated our disclosures accordingly.
On April 1, 2009, the Company adopted ASC 825, Interim Disclosures about Fair Value of Financial Instruments (FSP 107-1). FSP 107-1 amends SFAS No. 107, Disclosures about Fair Value of Financial Instruments, and ASC 270, Interim Financial Reporting, which requires an entity to provide disclosures about fair value of financial instruments in interim financial information. ASC 825 requires the Company to include disclosures about the fair value of its financial instruments whenever it issues financial information for interim reporting periods and annual reporting periods, whether recognized or not recognized in the statement of financial position. The adoption of this pronouncement did not have any material impact on the Companys consolidated financial statements.
On September 18, 2009 the Emerging Issues Task Force (EITF) reached consensus on Issue No. 09-1, Accounting for Own-Share Lending Arrangements in Contemplation of Convertible Debt Issuance (EITF 09-1). EITF 09-1 requires a share-lending arrangement entered into relating to an issuers own shares in contemplation of a convertible debt offering or other financing is required to be measured at fair value at the date of issuance and accounted for as an issuance cost in the financial statements of the entity. It also clarifies the treatment of the loaned shares in the computation of basic and diluted earnings per share, requires additional disclosures in the financial statements with respect to share lending arrangements and requires recognition of a loss in the event that it becomes probable that the counterparty will default. The issue is effective for fiscal years beginning on or after December 15, 2009 and interim periods within those fiscal years for arrangements outstanding at the beginning of those years. The issue requires retrospective application for all arrangements outstanding as of the beginning of the fiscal years beginning on or after December 15, 2009. We are currently evaluating the impact of the provision on our financial statements as it relates to the shares outstanding under the share lending agreement that we entered into in connection with the issuance of our 5.00% convertible notes in February 2008.
NOTE B ADOPTION OF ASC 470-20
On January 1, 2009, the Company was required to adopt ASC 470-20, which changes the accounting treatment of the Companys 5.00% convertible notes that may be fully or partially settled in cash upon conversion. Under ASC 470-20, the initial carrying value of the liability component of our 5.00% convertible notes was restated to exclude the value of the embedded equity conversion option based upon available market information at the time of the original issuance and using the liability measurement approach prescribed in ASC 470-20.
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GMX Resources Inc.
Condensed Notes To Interim Financial Statements
Three Months Ended September 30, 2008 and 2009
(Unaudited)
In accordance with the transition provision of the pronouncements, the comparative financial statements have been restated to apply the new pronouncement retrospectively. The following financial statement line items in the consolidated balance sheet as of December 31, 2008 were affected by the adoption:
As Reported | Adjustments | As Adjusted | ||||||||||
(in thousands) | ||||||||||||
ASSETS |
||||||||||||
DEFERRED INCOME TAXES |
$ | 11,519 | $ | (3,870 | ) | $ | 7,649 | |||||
OTHER ASSETS |
$ | 7,442 | $ | (311 | ) | $ | 7,131 | |||||
LIABILITIES AND SHAREHOLDERS EQUITY |
||||||||||||
LONG-TERM DEBT, LESS CURRENT MATURITIES |
$ | 236,462 | $ | (12,181 | ) | $ | 224,281 | |||||
SHAREHOLDERS EQUITY |
||||||||||||
Additional paid-in capital |
$ | 318,752 | $ | 9,250 | $ | 328,002 | ||||||
Retained earnings |
$ | (56,652 | ) | $ | (1,250 | ) | $ | (57,902 | ) |
The following financial statement line items in the consolidated statement of operations for the three and nine months ended September 30, 2008 were affected by the adoption:
Three Months Ended September 30, 2008 |
||||||||||||
As Reported | Adjustments | As Adjusted | ||||||||||
(in thousands) | ||||||||||||
NON-OPERATING INCOME (EXPENSES) |
||||||||||||
Interest expense |
$ | (2,591 | ) | $ | (992 | ) | $ | (3,583 | ) | |||
PROVISIONS FOR INCOME TAXES |
$ | (4,992 | ) | $ | 339 | $ | (4,653 | ) | ||||
NET INCOME |
$ | 10,284 | $ | (653 | ) | $ | 9,631 | |||||
EARNINGS PER SHARE BASIC |
$ | 0.61 | $ | (0.04 | ) | $ | 0.57 | |||||
EARNINGS PER SHARE DILUTED |
$ | 0.53 | $ | (0.03 | ) | $ | 0.50 | |||||
Nine Months Ended September 30, 2008 |
||||||||||||
As Reported | Adjustments | As Adjusted | ||||||||||
(in thousands) | ||||||||||||
NON-OPERATING INCOME (EXPENSES) |
||||||||||||
Interest expense |
$ | (8,595 | ) | $ | (1,743 | ) | $ | (10,338 | ) | |||
PROVISIONS FOR INCOME TAXES |
$ | (13,804 | ) | $ | 596 | $ | (13,208 | ) | ||||
NET INCOME |
$ | 29,333 | $ | (1,147 | ) | $ | 28,186 | |||||
EARNINGS PER SHARE BASIC |
$ | 1.87 | $ | (0.08 | ) | $ | 1.79 | |||||
EARNINGS PER SHARE DILUTED |
$ | 1.70 | $ | (0.08 | ) | $ | 1.62 |
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GMX Resources Inc.
Condensed Notes To Interim Financial Statements
Three Months Ended September 30, 2008 and 2009
(Unaudited)
NOTE C LONG-TERM DEBT
Long-term debt consists of the following:
December 31, 2008 |
September 30, 2009 | |||||
(as adjusted) | ||||||
(in thousands) | ||||||
Revolving bank credit facility, maturity date of July 2011 bearing a weighted average interest rate of 3.25% and 3.69% as of December 31, 2008 and September 30, 2009, respectively, collateralized by all assets of the Company |
$ | 80,000 | $ | 124,000 | ||
Senior Subordinated Secured Notes due July 2012 with a fixed interest rate of 7.58% and secured by a second lien on all assets of the Company |
30,000 | 30,000 | ||||
5.00% Senior Convertible Notes due February 2013 |
112,819 | 114,970 | ||||
Joint venture financing (non-recourse, no interest rate) |
1,523 | 1,454 | ||||
224,342 | 270,424 | |||||
Less current maturities |
61 | 56 | ||||
$ | 224,281 | $ | 270,368 | |||
Revolving Bank Credit Facility
The revolving bank credit facility contains various affirmative and restrictive covenants. These covenants, among other things, prohibit additional indebtedness, sales of assets, mergers and consolidations, dividends and distributions, and changes in management and require the maintenance of various financial ratios. The required and actual financials ratios as of September 30, 2009 are shown below:
Financial Covenant |
Required Ratio |
Actual Ratio | ||
Current ratio(1) |
Not less than 1.1 | 1.69 to 1 | ||
Ratio of total debt to EBITDA(2) |
Not greater than 4 to 1 | 4.33 to 1 | ||
Ratio of EBITDA to cash interest expense(2)(3) |
Not less than 3 to 1 | 3.18 to 1 |
(1) | Current ratio is defined in our revolving bank credit facility as the ratio of current assets plus the unused and available portion of the revolving bank credit facility ($51.0 million as of September 30, 2009) to current liabilities. The calculation does not include the effects, if any, of derivatives under ASC 815. As of September 30, 2009, current assets included derivatives assets of $14.7 million and current liabilities included $5.0 million of deferred tax liabilities related to derivatives. In addition, the 5.00% convertible notes are not considered a current liability unless one or more of the 5.00% convertible notes have been surrendered for conversion and then only to the extent of the cash payment due on the conversion of the notes surrendered. As of September 30, 2009, none of the 5.00% convertible notes had been surrendered for conversion. |
(2) | Earnings before interest, taxes, depreciation and amortization, or EBITDA, as defined in our revolving bank credit facility for the trailing twelve months September 30, 2009 is calculated as follows (amounts in thousands): |
Net Loss |
$ | (246,531 | ) | |
Plus: |
||||
Interest expense |
15,359 | |||
Impairment of oil and natural gas properties |
338,146 | |||
Depreciation, depletion and amortization |
33,387 | |||
Other non-cash expenses |
7,053 | |||
Less: |
||||
Income tax benefit |
(82,612 | ) | ||
EBITDA |
$ | 64,802 | ||
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GMX Resources Inc.
Condensed Notes To Interim Financial Statements
Three Months Ended September 30, 2008 and 2009
(Unaudited)
(3) | Cash interest expense is defined in the revolving bank credit facility as all interest, fees, charges, and related expenses payable in cash for the applicable period payable to a lender in connection with borrowed money or the deferred purchase price of assets that is considered interest expense under GAAP, plus the portion of rent paid or payable for that period under capital lease obligations that should be treated as interest in accordance with ASC 840, Accounting for Leases. Cash interest expense also includes dividends paid on the Companys preferred stock. For the trailing twelve months ended September 30, 2009, cash interest expense included fees paid related to financing activities and other loan fees of $3.0 million. For the trailing twelve months ended September 30, 2009, non-cash interest expense of $1.9 million was added to interest expense to arrive at the cash interest expense used in the debt covenant calculation. Non-cash interest expense primarily relates to the amortization of debt and debt issuance costs. |
Our lenders may accelerate all of the indebtedness under our revolving bank credit facility upon the occurrence of any event of default unless we cure any such default within any applicable grace period. For payments of principal and interest under the revolving bank credit facility, we generally have a three business day grace period, and we have a 30-day cure period for most covenant defaults, but not for defaults of certain specific covenants, including our financial covenants and negative covenants. As of August 31 and September 30, 2009, we were in violation of the ratio of total debt to EBITDA covenant under our revolving bank credit facility. As described in Note H, the lenders agreed to waive these technical defaults. After the completion of our recent common stock and 4.50% convertible notes offerings, as described in Note H, the Companys pro forma ratio of total debt to EBITDA is 3.28.
Senior Subordinated Secured Notes
As described in Note H, our senior subordinated secured notes were paid in full on October 29, 2009. Prior to repaying the senior subordinated secured notes, as of August 31 and September 30, 2009, we were in violation of the ratio of total debt to EBITDA financial covenant under the Note Agreement, but we received waivers from the noteholder for these technical defaults.
5.00% Convertible Senior Notes
The principal, unamortized discount and carrying amount of the 5.00% convertible notes are as follows:
December 31, 2008 |
September 30, 2009 |
|||||||
(as adjusted) | ||||||||
(in thousands) | ||||||||
Principal amount |
$ | 125,000 | $ | 125,000 | ||||
Unamortized amount |
(12,181 | ) | (10,030 | ) | ||||
Net carrying value |
$ | 112,819 | $ | 114,970 | ||||
As of September 30, 2009, the unamortized discount is expected to be amortized into earnings over 3.3 years. The carrying value of the equity component of the 5.00% convertible notes was $6.5 million as of September 30, 2009. Upon conversion, we will satisfy our conversion obligation by paying and delivering cash for the lesser of the principal amount or the conversion value, and, if the conversion value is in excess of the principal amount, by paying or delivering, at our option, cash and/or shares of our common stock for such excess. The conversion value is a daily value calculated on a proportionate basis for each day of a 60 trading-day observation period. The conversion rate is initially 30.7692 shares of the Companys common stock per $1,000 principal amount of notes (equivalent to a conversion price of approximately $32.50 per share of common stock).
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GMX Resources Inc.
Condensed Notes To Interim Financial Statements
Three Months Ended September 30, 2008 and 2009
(Unaudited)
The adoption of ASC 470-20 results in an increase in the effective interest rate on our 5.00% convertible notes of approximately 2.8%, from 5.9% to 8.7%. For the three and nine months ended September 30, 2008, interest costs on the 5.00% convertible notes included $1.6 million and $3.9 million, respectively relating to the contractual interest coupon and $0.8 million and $1.9 million, respectively related to the amortization of the discount. For the three and nine months ended September 30, 2009, interest costs on the 5.00% convertible notes included $1.6 million and $4.7 million, relating to the contractual interest coupon and $0.8 million and $2.7 million, respectively related to the amortization of the discount.
NOTE D DERIVATIVE ACTIVITIES
The Company is subject to price fluctuations for natural gas and crude oil. Prices received for natural gas and crude oil sold on the spot market are volatile due to factors beyond our control. Reductions in crude oil and natural gas prices could have a material adverse effect on our financial position, results of operations, capital expenditures and quantities of reserves recoverable on an economic basis. Any reduction in reserves, including reductions due to lower prices, can reduce our borrowing base under our revolving bank credit facility and adversely affect our liquidity and our ability to obtain capital for acquisition and development activities.
To mitigate a portion of our exposure to fluctuations in commodity prices, we enter into financial price risk management activities with respect to a portion of projected crude oil and natural gas production through financial price swaps, collars, and put spreads (collectively derivatives). Additionally, we use basis protection swaps to reduce basis risk. Basis is the difference between the physical commodity being hedged and the price of the futures contract used for hedging. Basis risk is the risk that an adverse change in the futures market will not be completely offset by an equal and opposite change in the cash price of the commodity being hedged. Basis risk exists in natural gas due to the geographic price differentials between a given cash market location and the futures contract delivery locations. Settlement or expiration of our hedges are designed to coincide as closely as possible with the physical sale of the commodity being hedged daily for oil and monthly for natural gas to obtain reasonable assurance that a gain in the cash sale will offset the loss on the hedge and vice versa.
Our revolving bank credit facility requires us to maintain a hedging program on mutually acceptable terms whenever the loan amount outstanding exceeds 75% of the borrowing base.
Our derivative financial instruments potentially consist of price swaps, collars, put spreads and basis swaps. A description of these types of instruments is provided below:
Fixed price swaps |
We receive a fixed price and pay a variable price to the contract counterparty. The fixed-price payment and the floating price payment are netted, resulting in a net amount due to or from the counterparty. | |
Costless collars |
The instrument contains a fixed floor price (long put option) and ceiling price (short call option), where the purchase price of the put option equals the sales price of the call option. At settlement, if the market price exceeds the ceiling price, we pay the difference between the market price and the ceiling price. If the market price is less than the fixed floor price, we receive the difference between the fixed floor price and the market price. If the market price is between the ceiling and the fixed floor price, no payments are due from either party. | |
Three-way collars |
A three-way collar contract consists of a standard collar contract plus a put sold by us with a price below the floor price of the collar. This additional put requires us to make a payment to the counterparty if the settlement price for any settlement period is below the put price. Combining the collar contract with the additional put results in us being entitled to a net payment equal to the |
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GMX Resources Inc.
Condensed Notes To Interim Financial Statements
Three Months Ended September 30, 2008 and 2009
(Unaudited)
difference between the floor price of the standard collar and the additional put price if the settlement price is equal to or less than the additional put price. If the settlement price is greater than the additional put price, the result is the same as it would have been with a standard collar contract only. Therefore, if market prices are below the additional put option, we would be entitled to receive the market price plus the difference between the additional put option and the floor. This strategy enables us to increase the floor and the ceiling price of the collar beyond the range of a traditional costless collar while defraying the associated cost with the sale of the additional put. | ||
Put spreads |
A put spread is the same as a three-way collar without the ceiling price (short call option). Therefore, if market prices are below the additional put option, we would be entitled to receive the market price plus the difference between the additional put option and the floor. | |
Basis swaps |
Natural gas basis protection swaps are arrangements that guarantee a price differential between NYMEX natural gas futures and Houston Ship Channel, which is a close proximity for our primary market hubs. We receive a payment from the counterparty if the price differential is greater than the stated terms of the contract and pay the counterparty if the price differential is less than the stated terms of the contract. |
We utilize counterparties for our derivative instruments that are members of our lending bank group and that we believe are credit-worthy entities at the time the transactions are entered into. We closely monitor the credit ratings of these counterparties. Additionally, we perform both quantitative and qualitative assessments of these counterparties based on their credit ratings and credit default swap rates where applicable. However, the recent events in the financial markets demonstrate there can be no assurance that a counterparty financial institution will be able to meet its obligations to us.
None of our derivative instruments contain credit-risk-related contingent features. Additionally, we have not incurred any credit-related losses associated with our derivative activities and believe that our counterparties will continue to be able to meet their obligations under these transactions.
ASC 815 requires all derivative instruments to be recognized at fair value in the balance sheet. Fair value is generally determined based on the difference between the fixed contract price and the underlying estimated market price at the determination date. The following is a summary of the asset and liability fair values of our derivative contracts:
Asset Fair Value | ||||||||
Balance Sheet Location |
December 31, 2008 |
September 31, 2009 | ||||||
(in thousands) | ||||||||
Derivatives designated as Hedging Instruments under ASC 815 |
||||||||
Natural gas |
Current derivative asset | $ | 15,655 | $ | 13,799 | |||
Natural gas |
Other assets | 5,908 | 1,467 | |||||
Natural gas |
Other liabilities | | 827 | |||||
Crude oil |
Current derivative asset | 2,742 | 435 | |||||
$ | 24,305 | $ | 16,528 | |||||
Derivatives not designated as Hedging Instruments under ASC 815 |
||||||||
Natural gas |
Current derivative asset | $ | 3,043 | $ | 3,944 | |||
Natural gas basis |
Other liabilities | | 19 | |||||
Natural gas |
Other liabilities | | 1,517 | |||||
$ | 3,043 | $ | 5,480 | |||||
Total derivative asset fair value |
$ | 27,348 | $ | 22,008 | ||||
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GMX Resources Inc.
Condensed Notes To Interim Financial Statements
Three Months Ended September 30, 2008 and 2009
(Unaudited)
Liability Fair Value | ||||||||
Balance Sheet Location |
December 31, 2008 |
September 31, 2009 | ||||||
(in thousands) | ||||||||
Derivatives designated as Hedging Instruments under ASC 815 |
||||||||
Natural gas |
Current derivative asset | $ | 114 | $ | | |||
Natural gas |
Other liabilities | | 62 | |||||
$ | 114 | $ | 62 | |||||
Derivatives not designated as Hedging Instruments under ASC 815 |
||||||||
Natural gas |
Current derivative asset | $ | | $ | 3,412 | |||
Natural gas basis |
Current derivative asset | | 89 | |||||
Natural gas |
Other assets | 2,158 | 339 | |||||
Natural gas |
Other liabilities | | 4,038 | |||||
2,158 | 7,878 | |||||||
Total derivative liability fair value |
$ | 2,272 | $ | 7,940 | ||||
Total derivative fair value |
$ | 25,076 | $ | 14,068 | ||||
The following is a summary of the fair value of our natural gas and oil swaps and options as of September 30, 2009:
Effective Date |
Maturity Date | Notional Amount Per Month |
Remaining Notional Amount as of September 30, 2009 |
Additional Put Options |
Floor | Ceiling | Designation under ASC 815 | ||||||||||
Natural Gas (MMBtu): |
|||||||||||||||||
6/1/2008 |
12/31/2009 | 100,000 | 300,000 | $ | 3.50 | $ | 9.50 | $ | 12.20 | Cash flow hedge | |||||||
1/1/2008 |
12/31/2009 | 100,000 | 300,000 | $ | 3.50 | $ | 7.50 | $ | 8.15 | Cash flow hedge | |||||||
4/1/2009 |
12/31/2009 | 200,000 | 600,000 | $ | 3.50 | $ | 7.50 | $ | 9.17 | Cash flow hedge | |||||||
1/1/2009 |
12/31/2009 | 128,666 | 386,000 | $ | 3.50 | $ | 7.50 | $ | 8.60 | Cash flow hedge | |||||||
1/1/2009 |
12/31/2009 | 250,000 | 750,000 | $ | 3.50 | $ | 6.50 | $ | | N/A | |||||||
10/1/2009 |
10/31/2009 | 150,000 | 150,000 | $ | | $ | 4.07 | $ | 4.07 | Cash flow hedge | |||||||
11/1/2009 |
12/31/2009 | 300,000 | 600,000 | $ | 4.00 | $ | 5.00 | $ | 6.15 | Cash flow hedge | |||||||
1/1/2010 |
12/31/2010 | 471,833 | 5,662,000 | $ | 5.00 | $ | 7.50 | $ | | Cash flow hedge | |||||||
1/1/2010 |
12/31/2010 | 471,833 | 5,661,996 | $ | 4.00 | $ | 5.50 | $ | 7.00 | N/A | |||||||
1/1/2010 |
12/31/2010 | 25,000 | 300,000 | $ | | $ | 8.50 | N/A | |||||||||
1/1/2011 |
12/31/2011 | 188,781 | 2,265,372 | $ | | $ | 8.00 | N/A | |||||||||
1/1/2011 |
3/31/2011 | 200,000 | 600,000 | $ | 5.50 | $ | 7.00 | $ | 8.90 | Cash flow hedge | |||||||
4/1/2011 |
10/31/2011 | 200,000 | 1,400,000 | $ | 5.00 | $ | 6.50 | $ | 8.30 | Cash flow hedge | |||||||
11/1/2011 |
3/31/2012 | 200,000 | 1,000,000 | $ | 5.50 | $ | 7.00 | $ | 10.10 | Cash flow hedge | |||||||
Oil (Bbls): |
|||||||||||||||||
1/1/2009 |
12/31/2009 | 5,000 | 15,000 | $ | 100.00 | $ | 134.00 | Cash flow hedge |
In October 2009, the Company purchased $6.00 put options on 1.9 Bcf, 11.1 Bcf, and 13.4 Bcf of 2010, 2011, and 2012 natural gas production. The cost per MMbtu of these put options was $0.7725 for a total cost of $20.4 million which will be paid in the month the contract is settled. In November 2009, the Company sold $4.00 puts on 0.965 Bcf of 2010 natural gas production and received approximately $162,000. The Company anticipates selling additional puts and calls on these volumes over the three year period to recover the cost of these purchased puts.
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GMX Resources Inc.
Condensed Notes To Interim Financial Statements
Three Months Ended September 30, 2008 and 2009
(Unaudited)
Effects of derivative instruments on the Condensed Consolidated Statement of Operations
For derivative instruments that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings.
For the Three Months Ended September 30, 2009 | |||||||||||||
Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion) |
Location of Gain Reclassified from |
Amount of Gain Reclassified from Accumulated OCI into Income (Effective Portion) |
Amount of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing) |
||||||||||
(in thousands) | (in thousands) | ||||||||||||
Natural gas |
$ | (362 | ) | Oil and Gas Sales | $ | 7,753 | $ | (72 | ) | ||||
Crude oil |
(442 | ) | Oil and Gas Sales | 474 | | ||||||||
$ | (804 | ) | $ | 8,227 | $ | (72 | ) | ||||||
For the Nine Months Ended September 30, 2009 | |||||||||||||
Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion) |
Location of Gain Reclassified from (Effective Portion) and Location of Gain Recognized in Income on Derivative (Ineffective Portion and Amount Excluded |
Amount of Gain Reclassified from Accumulated OCI into Income (Effective Portion) |
Amount of Gain Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing) |
||||||||||
(in thousands) | (in thousands) | ||||||||||||
Natural gas |
$ | 16,058 | Oil and Gas Sales | $ | 22,393 | $ | 920 | ||||||
Crude oil |
(384 | ) | Oil and Gas Sales | 1,922 | | ||||||||
$ | 15,674 | $ | 24,315 | $ | 920 | ||||||||
Assuming that the market prices of oil and gas futures as of September 30, 2009 remain unchanged, the Company would expect to transfer a gain of approximately $9.0 million from accumulated other comprehensive income to earnings during the next 12 months. The actual reclassification into earnings will be based on market prices at the contract settlement date.
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GMX Resources Inc.
Condensed Notes To Interim Financial Statements
Three Months Ended September 30, 2008 and 2009
(Unaudited)
For derivative instruments that do not qualify as hedges pursuant to ASC 815, changes in the fair value of these derivatives that occur prior to their maturity (i.e., temporary fluctuations in value) are recognized in current earnings. A summary of the effect of the derivatives not qualifying for hedges is as follows:
Three Months Ended September 30, 2009 |
Nine Months Ended September 30, 2009 |
|||||||||||
Location of Gain (Loss) Recognized in |
Amount of Gain (loss) Recognized in Income on Derivative |
Location of Gain (Loss) Recognized in |
Amount of Gain (loss) Recognized in Income on Derivative |
|||||||||
(in thousands) | (in thousands) | |||||||||||
Realized |
||||||||||||
Natural gas |
Oil and gas sales | $ | 1,676 | Oil and gas sales | $ | 4,415 | ||||||
Unrealized |
||||||||||||
Natural gas |
Unrealized losses on derivatives | (1,443 | ) | Unrealized losses on derivatives | (2,757 | ) | ||||||
Natural gas basis |
Unrealized losses on derivatives | (13 | ) | Unrealized losses on derivatives | (70 | ) | ||||||
$ | 220 | $ | 1,588 | |||||||||
NOTE E FAIR VALUE MEASUREMENTS
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. The Company generally applies the market and income approaches for recurring fair value measurements and utilizes the best available information. Accordingly, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. The Company has reviewed its recurring transactions and found that its markets and instruments are fairly liquid. The Company is able to classify fair value balances based on the observability of those inputs. ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The three levels of the fair value hierarchy defined by ASC 820 are as follows:
Level 1 | Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives, listed equities, and U.S. government treasury securities. | |
Level 2 | Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. Instruments in this category include non-exchange-traded derivatives such as over-the-counter forwards and options. |
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GMX Resources Inc.
Condensed Notes To Interim Financial Statements
Three Months Ended September 30, 2008 and 2009
(Unaudited)
Level 3 | Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in managements best estimate of fair value. At each balance sheet date, the Company performs an analysis of all instruments subject to ASC 820 and includes in Level 3 all of those whose fair value is based on significant unobservable inputs. As of September 30, 2009, the Company had no Level 3 measurements. |
The carrying values of Cash and cash equivalents, Accounts receivable-interest owners, Accounts receivable-oil and natural gas revenues, Accounts payable, Accrued expenses, Revenue distributions payable, and Other Liabilities included in the accompanying consolidated balance sheets approximated fair value at September 30, 2009. These assets and liabilities are not presented in the following tables.
The following table sets forth by level within the fair value hierarchy the Companys financial assets and liabilities that were accounted for at fair value on a recurring basis as of September 30, 2009. As required by ACS 820, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Companys assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels.
As of September 30, 2009 | |||||||||||||||
Fair Value Measurements Using | |||||||||||||||
Carrying Amount |
Total Fair Value |
Quoted Prices in Active Markets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) | |||||||||||
(in thousands) | |||||||||||||||
Financial assets: |
|||||||||||||||
Natural gas derivatives |
$ | 13,633 | $ | 13,633 | $ | | $ | 13,633 | $ | | |||||
Crude oil derivatives |
$ | 435 | $ | 435 | $ | | $ | 435 | $ | | |||||
Financial liabilities: |
|||||||||||||||
Long-term debt |
$ | 270,424 | $ | 273,178 | $ | 237,954 | $ | 35,224 | $ | |
The following methods and assumptions were used to estimate the fair values of the assets and liabilities in the table above. As per the requirements under ASC 820, all fair values reflected in the table above and on the balance sheet have been adjusted for non-performance risk. The adjustment to fair value related to non-performance risk as of September 30, 2009, was an addition to the net asset value of approximately $10,000.
Level 1 Fair Value Measurements
Long Term Debt The fair value of our revolving bank credit facility and our joint venture financing is the carrying value. The convertible notes are actively traded in an established market. The fair value of this debt is based on quotes obtained from brokers.
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GMX Resources Inc.
Condensed Notes To Interim Financial Statements
Three Months Ended September 30, 2008 and 2009
(Unaudited)
Level 2 Fair Value Measurements
Forward Natural Gas Swaps and Options The fair value of the forward natural gas swaps and options are estimated using a combined income and market based valuation methodology based upon forward commodity price curves. The curves are obtained from independent pricing services reflecting broker market quotes.
Forward Crude Swaps and Options The fair value of the forward crude swaps and options are estimated using a combined income and market based valuation methodology based upon forward commodity price curves. The curves are obtained from independent pricing services reflecting broker market quotes.
Long Term Debt The secured notes do not actively trade in an established market. The fair value of this debt is estimated by discounting the principal and interest payments at rates available for debt with similar terms and maturity.
Level 3 Fair Value Measurements
As of September 30, 2009, the Company did not have assets or liabilities measured under a Level 3 fair value hierarchy.
NOTE F STOCK COMPENSATION PLANS
We recognized $1.0 million and $1.4 million of stock compensation expense for the three months ending September 30, 2008 and 2009, respectively. We recognized $2.1 million and $3.7 million of stock compensation expense for the nine months ending September 30, 2008 and 2009, respectively. These non-cash expenses are reflected as a component of the Companys general and administrative expense. To the extent amortization of compensation costs relates to employees directly involved in exploration and development activities, such amounts are capitalized to oil and natural gas properties. Stock based compensation capitalized as part of oil & natural gas properties was $0.3 million and $0.2 million for the three months ended September 30, 2008 and 2009, respectively and $0.3 million and $0.7 million for the nine months ended September 30, 2008 and 2009, respectively.
2008 Long-Term Incentive Plan
In May 2008, the Board of Directors and shareholders adopted the 2008 Long-Term Incentive Plan (or LTI Plan) to retain and attract employees, consultants and directors, and to stimulate the active interest in the development and financial success of the Company. The LTI Plan provides for the grant of stock options, restricted stock awards, bonus stock awards, stock appreciation rights, performance units and performance bonuses, subject to certain conditions. Subject to certain adjustments, the aggregate number of shares of common stock available for awards may not exceed 750,000 shares, nor shall any individual employee award exceed 200,000 shares or $1,000,000 in any calendar year. The maximum period for exercise of an option or stock appreciation right may not be more than ten years from the date of grant and the exercise price may not be less than the fair market value of the shares underlying the option or stock appreciation right on the date of grant. Awards granted under the LTI Plan become vested at dates or upon the satisfaction of certain performance or other criteria as determined by the Board of Directors. No awards may be granted under the LTI Plan after May 2018.
Restricted Stock
In July 2008, the Company began issuing restricted stock awards to its officers, non-employee directors, consultants and certain employees under the LTI Plan. The holders of these shares have all the rights and privileges of owning the shares (including voting rights) except that the holders are not entitled to delivery of a portion thereof until certain passage of time requirements are met. With respect to the
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GMX Resources Inc.
Condensed Notes To Interim Financial Statements
Three Months Ended September 30, 2008 and 2009
(Unaudited)
restricted stock granted to officers, consultants, and employees of the Company, the shares vest over a 3 or 4 year period. With respect to restricted shares issued to the Companys non-employee directors, the shares vest over a two year period. The fair value of the awards issued is determined based on the fair market value of the shares on the date of grant. The value is amortized over the vesting period.
A summary of the status of our unvested shares of restricted stock and the changes during the nine months ended September 30, 2009 is presented below:
Number of unvested restricted shares |
Weighted average grant- date fair value | |||||
Unvested shares at December 31, 2008 |
62,728 | $ | 73.44 | |||
Granted |
542,847 | $ | 18.55 | |||
Vested |
(21,985 | ) | $ | 73.60 | ||
Forfeited |
(1,461 | ) | $ | 29.00 | ||
Unvested shares as of September 30, 2009 |
582,129 | $ | 22.36 | |||
As of September 30, 2009, there was $11.8 million of unrecognized compensation expense related to non-vested restricted stock grants. This unrecognized compensation cost is expected to be recognized over a weighted-average period of 3.2 years.
The vesting of certain restricted stock grants results in state and federal income tax benefits related to the difference between the market price of the common stock at the date of vesting and the date of grant. During the nine months ended September 30, 2009, we did not recognize excess tax benefits related to the vesting of restricted stock due to the market price of the common stock at the date of grant exceeding the market price at the vesting date.
NOTE G CAPITAL STOCK
In May 2009, the Company completed an offering of 5,750,000 shares of common stock for $12.00 per share. Net proceeds to the Company were $65.3 million. The Company used the net proceeds from this offering to repay outstanding indebtedness under its revolving bank credit facility.
NOTE H SUBSEQUENT EVENTS
On October 16, 2009, we entered into a Purchase Agreement with Kinder Morgan Endeavor LLC (KME) relating to materially all of our natural gas gathering, compression and related assets. Pursuant to this agreement, we contributed our gathering, compression and certain related assets to a new entity, Endeavor Gathering LLC (Endeavor Gathering), and then sold a 40% interest in Endeavor Gathering to KME for $36 million effective on November 1, 2009. We retained the remaining 60% interest in Endeavor Gathering, and we also entered into agreements with Endeavor Gathering to provide us with continued access to its gathering system and that retain us as the day-to-day operator of the gathering system. Under the agreements that govern the Endeavor Gathering joint venture, KME and we are each obligated to contribute our pro rata share of the capital required to connect new wells to the gathering system and for certain sustaining projects. We have also agreed that KME will be entitled to 80% of the cash distributions from Endeavor Gathering until its investment has been repaid, at which point the cash distribution will follow KMEs and our respective ownership interests. Finally, we have committed to utilize at least two drilling rigs in our core area for three years following the closing of the Endeavor Gathering joint venture.
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GMX Resources Inc.
Condensed Notes To Interim Financial Statements
Three Months Ended September 30, 2008 and 2009
(Unaudited)
Effective as of October 17, 2009, the Company entered into a Fifth Amendment to Restated Loan Agreement and Waiver (the Fifth Amendment) to its Third Amended and Restated Loan Agreement dated effective as of June 12, 2008, with Capital One, National Association, Union Bank, N.A., BNP Paribas, Compass Bank, Fortis Capital Corp. and Bank of America, N.A. (as previously amended, the Bank Agreement). The Fifth Amendment amends the terms of the Bank Agreement to document our lenders consent to the Endeavor Gathering joint venture transaction. In addition, the Fifth Amendment reduced the Companys borrowing base under the Bank Agreement from $175 million to $140 million upon the closing of the Endeavor Gathering transactions effective November 1, 2009, based on the release by the lenders of our natural gas gathering and compression assets from the collateral pledged in support of the indebtedness under the Bank Agreement. As part of the Fifth Amendment, the Company also agreed to the inclusion of certain covenants in the Bank Agreement that prohibit the creation of certain debt or the creation of incurrence of certain liens by Endeavor Gathering.
In addition to the amendments relating to the Endeavor Gathering transactions, the Fifth Amendment also amended the terms of the Bank Agreement to: (i) permit the Company to offer and sell unsecured 4.50% convertible senior notes due 2015 (the 4.50% convertible notes) and to make certain related changes to provisions of the Bank Agreement restricting the Company from (a) selling 4.50% convertible notes with an aggregate principal amount greater than the amount received by the Company in its concurrent offering of common stock, and (b) making any payment of principal or interest on the 4.50% convertible notes if the Company is in default under the Bank Agreement at the time or if any such a payment would cause a default; and (ii) remove the minimum net worth covenant previously imposed on the Company under the Bank Agreement. Lastly, the Fifth Amendment included a waiver by the lenders of a technical default under the Bank Agreement as a result of the Companys failure to maintain a maximum ratio of total debt to earnings before interest, taxes, depreciation and amortization as of August 31 and September 30, 2009. There were no other material changes to the Bank Agreement.
Additionally, on October 18, 2009, we entered into an amendment to our senior secured subordinated note agreement with The Prudential Insurance Company of America (Prudential), pursuant to which Prudential agreed to accept repayment of its senior secured subordinated notes with a portion of the proceeds of our offering of 4.50% convertible notes and to waive our compliance with a ten-business day notice otherwise required for prepayment of such senior secured subordinated notes. We repaid all the senior secured subordinated notes on October 29, 2009. As a result of prepaying the senior secured subordinated notes, the Company recognized a charge of approximately $5.0 million related to the early payoff of such notes.
On October 28, 2009, we completed public offerings of 6,950,000 shares of common stock at $15.00 per share and $75 million aggregate principal amount of 4.50% convertible notes. We also granted the underwriters 30-day options to purchase a maximum of 1,042,500 additional shares of our common stock and a maximum of $11.25 million aggregate principal amount of additional 4.50% convertible notes, in each case, solely to cover over-allotments. The underwriters elected to purchase an additional $11.25 million aggregate principal amount of 4.50% convertible notes pursuant to this option, bringing the total amount of 4.50% convertible notes issued to $86.25 million. The Company used the aggregate net proceeds from these offerings to repay the outstanding indebtedness under its revolving bank credit facility and to repay all of its outstanding senior subordinated secured notes, and the Company will use the remaining portion of such net proceeds for general corporate purposes.
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GMX Resources Inc.
Condensed Notes To Interim Financial Statements
Three Months Ended September 30, 2008 and 2009
(Unaudited)
The 4.50% convertible notes are general senior, unsecured obligations of the Company and are convertible, under certain circumstances, into cash, shares of the Companys common stock or a combination of cash and shares of the Companys common stock, at the Companys election. The notes bear interest at a fixed rate of 4.50% per year, payable on May 1 and November 1 of each year, beginning May 1, 2010. The notes will mature on May 1, 2015.
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ITEM 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations |
General
We are an independent oil and natural gas exploration and production company focused on the development of the Cotton Valley group of formations, specifically the Cotton Valley Sands layer in the Schuler formation and the Upper Bossier, Middle Bossier and Haynesville/Lower Bossier layers of Bossier formation (the Haynesville/Bossier Shale or H/B) in the Sabine Uplift, of the Carthage, North Field of Harrison and Panola counties of East Texas (our core area). As of September 30, 2009, we had identified 768 gross (520 net) potential undrilled Haynesville/Bossier Shale horizontal well locations across our acreage, assuming 80-acre well spacing, and approximately 2,000 net potential undrilled Cotton Valley Sands drilling locations across our acreage, assuming 20-acre well spacing. We currently have 401 gross (251 net) producing wells, of which 10 gross (9.9 net) are Haynesville/Bossier Shale horizontal wells, 325 gross (187.9 net) are Cotton Valley Sands wells, and 47 gross (39.5 net) Travis Peak/Hosston Sands & Pettit producers. These multiple resource layers provide high probability and the potential for repeatable, organic growth. We intend to use up to four operated drilling rigs to develop this contiguous, multi-layer gas resource play. We have invested over $100 million in infrastructure and operate over 81% of our reserves.
Our strategy is to grow shareholder value through Haynesville/Bossier Shale horizontal well development as well as Cotton Valley Sand wells, to continue acreage acquisitions in our core area, to focus on operational growth in and around our core area, and to convert our natural gas reserves to proved reserves, while maintaining balanced prudent financial management. To date, we have experienced a 100% success rate and have maintained low finding and development costs while primarily drilling Cotton Valley Sand vertical wells. Almost 100% of our 2009 capital expenditure budget is focused on our H/B horizontal drilling program.
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The table below summarizes information concerning our activities in the three and nine months ended September 30, 2009 compared to the three and nine months ended September 30, 2008.
Summary Operating Data
Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||||||||||
2008 | 2009 | 2008 | 2009 | ||||||||||||
Production: |
|||||||||||||||
Oil (MBbls) |
51 | 28 | 150 | 91 | |||||||||||
Natural gas (MMcf) |
3,204 | 3,322 | 8,733 | 9,477 | |||||||||||
Gas equivalent production (MMcfe) |
3,513 | 3,491 | 9,632 | 10,024 | |||||||||||
Average daily (MMcfe) |
38.2 | 37.9 | 35.2 | 36.7 | |||||||||||
Average Sales Price: |
|||||||||||||||
Oil (per Bbl) |
|||||||||||||||
Wellhead price |
$ | 114.97 | $ | 63.93 | $ | 110.91 | $ | 51.18 | |||||||
Effect of hedges |
(15.14 | ) | 16.89 | (11.97 | ) | 21.11 | |||||||||
Total |
$ | 99.83 | $ | 80.82 | $ | 98.94 | $ | 72.29 | |||||||
Natural gas (per Mcf) |
|||||||||||||||
Wellhead price |
$ | 10.42 | $ | 3.44 | $ | 10.61 | $ | 3.63 | |||||||
Effect of hedges |
(0.66 | ) | 2.82 | (0.67 | ) | 2.93 | |||||||||
Total |
$ | 9.76 | $ | 6.26 | $ | 9.94 | $ | 6.56 | |||||||
Average sales price (per Mcfe) |
$ | 10.36 | $ | 6.61 | $ | 10.55 | $ | 6.86 | |||||||
Operating and Overhead Costs (per Mcfe): |
|||||||||||||||
Lease operating expenses |
$ | 1.17 | $ | 0.78 | $ | 1.11 | $ | 0.86 | |||||||
Production and severance taxes |
0.47 | 0.08 | 0.49 | (0.11 | ) | ||||||||||
General and administrative |
1.31 | 1.38 | 1.24 | 1.45 | |||||||||||
Total |
$ | 2.95 | $ | 2.24 | $ | 2.84 | $ | 2.20 | |||||||
Cash Operating Margin (per Mcfe) |
$ | 7.41 | $ | 4.37 | $ | 7.71 | $ | 4.66 | |||||||
Other (per Mcfe): |
|||||||||||||||
Depreciation, depletion and amortizationoil and natural gas properties |
$ | 2.00 | $ | 1.70 | $ | 2.01 | $ | 1.86 |
Results of OperationsThree Months Ended September 30, 2009 Compared to Three Months Ended September 30, 2008
Oil and Natural Gas Sales. Oil and natural gas sales in the three months ended September 30, 2009 decreased 37% to $23.1 million compared to the three months ended September 30, 2008. This decrease was due to a 36% decrease in the average realized price of oil and natural gas, net of hedging activities. The average price per barrel of oil and Mcf of natural gas received (net of hedging) in the three months ended September 30, 2009 was $80.82 and $6.26, respectively, compared to $99.83 and $9.76, respectively, in the three months ended September 30, 2008. Production of oil for the three months ended September 30, 2009 decreased to 28 MBbls compared to 51 MBbls for the three months ended September 30, 2008, a decrease of 45%. The decrease in oil production is due to the natural decline in the Companys Cotton Valley Sand vertical well production which has historically provided most of the Companys oil production. H/B horizontal wells typically do not have oil production. Natural gas production for the three months ended September 30, 2009 increased to 3,322 MMcf compared to 3,204 MMcf for the three months ended September 30, 2008, an increase of 4%. The increase in natural gas production resulted from production related to nine producing H/B horizontal wells that were on-line during 2009. Production from H/B horizontal wells accounted for 53% of total production in the third quarter of 2009.
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In the three months ended September 30, 2009, as a result of hedging activities, we recognized an increase in oil and natural gas sales of $0.5 million and $9.3 million, respectively, compared to a decrease in oil and natural gas sales of $0.8 million and $2.1 million, respectively, in the third quarter of 2008. In the third quarter of 2009, hedging increased the average natural gas and oil sales price by $2.82 per Mcf and $16.89 per Bbl compared to a decrease in natural gas sales price of $0.66 per Mcf and $15.14 per Bbl in the third quarter of 2008.
Lease Operations. Lease operations expense decreased $1.4 million, or 34.1%, in the three months ended September 30, 2009 to $2.7 million, compared to the three months ended September 30, 2008. Lease operations expense on an equivalent unit of production basis decreased $0.39 per Mcfe in the three months ended September 30, 2009 to $0.78 per Mcfe, compared to the three months ended September 30, 2008. The decrease in lease operating expenses on an equivalent unit basis resulted from an increase in H/B horizontal well production and cost control measures implemented during 2009. During the three months ended September 30, 2008, the Company incurred additional lease operating expenses related to several well workovers and road and compressor repairs. With little to no incremental increase in lease operating costs from a typical Cotton Valley vertical well, the significantly larger amount of production from a typical H/B horizontal well results in lower per unit lease operating costs.
Production and Severance Taxes. Production and severance taxes decreased 83% from $1.7 million in the three months ended September 30, 2008 to $0.3 million in the three months ended September 30, 2009. Production and severance tax expense decreased in comparison to the third quarter of 2008 due to a decrease in oil and natural gas prices between the two periods and the fact that more producing wells in the third quarter of 2009 have received production and severance tax exemptions. Upon approval by the State of Texas, certain wells, including our H/B horizontal wells, are exempt from severance taxes for a period of ten years and we expect this to continue to reduce our expense going forward.
Depreciation, Depletion and Amortization. Depreciation, depletion and amortization expense decreased $0.5 million, or 5%, to $7.8 million in the three months ended September 30, 2009 compared to the three months ended September 30, 2008. The oil and gas properties depreciation, depletion and amortization rate per equivalent unit of production was $1.70 per Mcfe in the three months ended September 30, 2009 compared to $2.00 per Mcfe in the three months ended September 30, 2008. This decrease is due primarily to a lower cost basis in oil and gas properties subject to amortization due to previously recorded impairment charges as a result of lower oil and natural gas prices at year end 2008 and March 31, 2009.
General and Administrative Expense. General and administrative expense for the three months ended September 30, 2009 was $4.8 million compared to $4.6 million for the three months ended September 30, 2008, an increase of $0.2 million, or 5%. General and administrative expense per equivalent unit of production was $1.38 per Mcfe for the three months ended September 30, 2009 compared to $1.31 per Mcfe for the three months ended September 30, 2008. A significant portion of the Companys general and administrative expense is related to non-cash compensation expense. Non-cash compensation expense for the three months ended September 30, 2009 and 2008 was $1.4 million or 29% of total general and administrative expenses and $1.0 million or 21% of total general and administrative expenses, respectively. General and administrative expenses have not historically varied in direct proportion to oil and natural gas production because certain types of general and administrative expenses are non-recurring or fixed in nature. The Company expects general and administrative expenses on a per Mcfe basis to decrease as production increases.
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Interest. Interest expense for the three months ended September 30, 2009 was $4.2 million compared to approximately $3.6 million for the three months ended September 30, 2008. This increase is primarily due to a greater amount of outstanding debt during the three months ended September 30, 2009. Interest expense for the three months ended September 30, 2008 and 2009 includes non-cash interest expense of $757,000 and $846,000, respectively related to the amortization of the convertible notes and the adoption of FASB ASC 470-20, Accounting for Convertible Debt Instruments that May Be Settled in Cash Upon Conversion.
Income Taxes. Income tax for the three months ended September 30, 2009 was an expense of $4.5 million as compared to an expense of $4.7 million in the three months ended September 30, 2008. The tax expense for the three months ended September 30, 2009 was due to $4.6 million of deferred tax expense relating to a valuation allowance for federal net operating loss carryforwards that increased our tax expense.
Results of OperationsNine Months Ended September 30, 2009 Compared to Nine Months Ended September 30, 2008
Oil and Natural Gas Sales. Oil and natural gas sales in the nine months ended September 30, 2009 decreased 32% to $68.7 million compared to the nine months ended September 30, 2008. This decrease was due to a 35% decrease in the average realized price of oil and natural gas, net of hedging activities, partially offset by a 4% increase in production. The average price per barrel of oil and Mcf of natural gas received (net of hedging) in the nine months ended September 30, 2009 was $72.79 and $6.56, respectively, compared to $98.94 and $9.94, respectively, in the nine months ended September 30, 2008. Production of oil for the first nine months of 2009 decreased to 91MBbls compared to 150 MBbls for the first nine months of 2008, a decrease of 39%. The decrease in oil production is due to the natural decline in the Companys Cotton Valley Sand vertical well production which has historically provided most of the Companys oil production. H/B horizontal wells typically do not have oil production. Natural gas production for the first nine months of 2009 increased to 9,477 MMcf compared to 8,733 MMcf for the first nine months of 2008, an increase of 9%. The increase in natural gas production resulted from production related to nine producing H/B horizontal wells that were on-line during the first nine months of 2009. Production from H/B horizontal wells accounted for 30% of total production in the first nine months of 2009.
In the nine months ended September 30, 2009, as a result of hedging activities, we recognized an increase in oil and natural gas sales of $1.9 million and $27.7 million, respectively, compared to a decrease in oil and natural gas sales of $1.8 million and $5.8 million, respectively, in the first nine months of 2008. In the first nine months of 2009, hedging increased the average natural gas and oil sales price by $2.93 per Mcf and $21.11 per Bbl compared to a decrease in natural gas sales price of $0.67 per Mcf and $11.97 per Bbl in the first nine months of 2008.
Lease Operations. Lease operations expense decreased $2.1 million, or 19%, in the nine months ended September 30, 2009 to $8.6 million, compared to $10.7 million in the nine months ended September 30, 2008. Lease operations expense on an equivalent unit of production basis decreased $0.25 per Mcfe in the nine months ended September 30, 2009 to $0.86 per Mcfe, compared to the nine months ended September 30, 2008. The decrease in lease operating expenses on an equivalent unit basis resulted from an increase in H/B horizontal well production and cost control measures implemented during the first nine months of 2009. With little to no incremental increase in lease operating costs from a typical Cotton Valley vertical well, the significantly larger amount of production from a typical H/B horizontal well will result in lower per unit lease operating costs.
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Production and Severance Taxes. As a result of the recognition of severance tax refunds of approximately $2.0 million in the nine months ended September 30, 2009, production and severance taxes decreased 123% from an expense of $4.7 million in the nine months ended September 30, 2008 to income of $1.1 million in the nine months ended September 30, 2009. Upon approval by the State of Texas, certain wells, including our H/B horizontal wells, are exempt from severance taxes for a period of ten years and we expect this to reduce our expense going forward. Excluding the production and severance tax refunds received in the first nine months of 2009, production and severance tax expense decreased in comparison to the first nine months of 2008 due to a decrease in oil and natural gas prices between the two periods and the fact that more producing wells in the first nine months of 2009 have received the production and severance tax exemptions.
Depreciation, Depletion and Amortization. Depreciation, depletion and amortization expense increased $1.6 million, or 7%, to $24.4 million in the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008. The increase in expense is due to the increase in depreciation related to property and equipment. The oil and gas properties depreciation, depletion and amortization rate per equivalent unit of production was $1.86 per Mcfe in the nine months ended September 30, 2009 compared to $2.01 per Mcfe in the nine months ended September 30, 2008. This decrease in the rate per Mcfe is due to a lower cost basis in oil and gas properties subject to amortization due to previously recorded impairment charges as a result of lower oil and gas prices at year end 2008 and at March 31, 2009.
Impairment and other writedowns. As a result of lower oil and natural gas prices from year-end 2008, we recognized an impairment charge on oil and gas properties of $180.3 million in the nine months ended September 30, 2009. In addition, as a result of the decline in oil and natural gas related material costs, we recognized a writedown of $6.2 million on pipeline related inventories in this nine month period. The Company may be required to recognize additional impairment charges or writedowns in future reporting periods if market prices for oil or natural gas and material costs continue to decline.
General and Administrative Expense. General and administrative expense for the nine months ended September 30, 2009 was $14.6 million compared to $12.0 million for the nine months ended September 30, 2008, an increase of $2.6 million, or 22%. A $1.2 million allowance for bad debt was recognized in the second quarter of 2008 related to the bankruptcy of one of our crude oil purchasers. The allowance was subsequently adjusted downward in the third quarter of 2008 to $748,000. However, due to an unfavorable bankruptcy court ruling, we recognized $0.5 million additional bad debt expense in the second quarter of 2009. The reduction in bad debt expense between 2008 and 2009 was offset by an increase in non-cash compensation expense and an increase in administrative and supervisory personnel. General and administrative expense per equivalent unit of production was $1.45 per Mcfe for the nine months ended September 30, 2009 compared to $1.24 per Mcfe for the comparable period in 2008. Excluding the provisions for bad debt expense and non-cash compensation, general administrative expense for the nine months ended September 30, 2008 and 2009 would have been $0.95 per Mcfe and $1.04 per Mcfe, respectively. General and administrative expense has not historically varied in direct proportion to oil and natural gas production because certain types of general and administrative expenses are non-recurring or fixed in nature. In the second half of 2008, the Company added key employees to execute an H/B horizontal drilling program. As a result, personnel costs have increased in comparison to the first nine months of 2008. The Company expects general and administrative expenses on a per Mcfe basis to decrease as production increases.
Interest. Interest expense for the nine months ended September 30, 2009 was $12.1 million compared to $10.3 million for the nine months ended September 30, 2008. This increase is primarily due to a greater amount of outstanding debt during the nine months ended September 30, 2009. Interest expense for the nine months ended September 30, 2008 and 2009 includes non-cash interest expense of $1.9 million and $2.7 million, respectively related to the amortization of the 5.00% convertible notes and the adoption of FASB ASC 470-20, Accounting for Convertible Debt Instruments that May Be Settled in Cash Upon Conversion.
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Income Taxes. Income tax for the nine months ended September 30, 2009 was a benefit of $43.7 million as compared to an expense of $13.2 million in the nine months ended September 30, 3008. The effective tax rates for the nine months ended September 30, 2008 and 2009 were 32% and 24%, respectively. The decrease in the effective tax rate in the nine months ended September 30, 2009 was due to $17.3 million of deferred tax expense relating to a valuation allowance for federal net operating loss carryforwards that reduced our tax benefit. Excluding the deferred tax expense for the valuation allowance, our effective income tax rate would have been approximately 34%.
Net Income and Net Income Per Share
For the three months ended September 30, 2009 and 2008, we reported a net loss of $2.8 million and net income of $9.6 million, respectively, a decrease of 129%. Net loss applicable to common stock for the three months ended September 30, 2009 was $3.9 million compared to net income of $8.5 million for the three months ended September 30, 2008, a decrease of 146%. Net loss per basic and fully diluted share was $0.19 for the third quarter of 2009 compared to net income of $0.57 and $0.50 respectively, per basic and fully diluted share for the third quarter of 2008. Weighted average fully-diluted shares outstanding increased by 24% from 17,099,929 shares in the third quarter of 2008 to 21,160,616 shares in the third quarter of 2009.
For the nine months ended September 30, 2009 and 2008, we reported a net loss of $135.4 million and net income of $28.2 million, a decrease of 580%. Net income (loss) applicable to common stock for the nine months ended September 30, 2009 and 2008 was $(138.9) million and $24.7 million, respectively, a decrease of 662%. Net income (loss) per basic and fully diluted share was $(7.61) and $(7.60) respectively, for the nine months of 2009 compared to $1.79 and $1.62 respectively, for the nine months of 2008. Weighted average fully-diluted shares outstanding increased by 20% from 15,224,742 shares in the first nine months of 2008 to 18,278,639 shares in the first nine months of 2009.
Capital Resources and Liquidity
Our business is capital intensive. Our ability to grow our reserve base is dependent upon our ability to obtain outside capital and generate cash flows from operating activities to fund our drilling and capital expenditures. Our cash flows from operating activities are substantially dependent upon crude oil and natural gas prices, and significant decreases in market prices of crude oil or natural gas could result in reductions of cash flow and affect our drilling and capital expenditure plan. To mitigate a portion of our exposure to fluctuations in commodity prices, we have entered into crude oil and natural gas swaps, collars, and put spreads.
We continually review our drilling and capital expenditure plans and may change the amount we spend based on industry conditions and the availability of capital. In response to the changing economic environment, we have revised our capital expenditure budget throughout 2009, and we now expect expenditures of approximately $175.0 million for 2009, a decrease from $220 million budgeted at the beginning of the year. In the nine months ended September 30, 2009, our capital expenditures were $138.3 million of which $82.3 million was for drilling and completing H/B horizontal wells; $9.2 million was for rig delay fees; $9.3 million on Cotton Valley and Travis Peak drilling and other drilling related expenditures including tubular inventory and $37.5 million was related to leasehold and infrastructure costs. In the nine months ended September 30, 2009, we had nine H/B horizontal well completions.
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In the last three months of 2009, we expect to have capital expenditures of approximately $36.7 million primarily related to drilling and completing H/B horizontal wells. Our current capital expenditure budget for the rest of 2009 assumes two operated rigs drilling H/B horizontal wells, the most recent of which we activated on October 15, 2009. We do not expect to have significant infrastructure or inventory expenditures in the last three months of 2009. We expect to complete 2 wells drilled in the second and third quarter, drill and complete 2 H/B horizontal wells and begin drilling 2 H/B horizontal wells in the fourth quarter of 2009.
During 2009, we have accessed the capital markets and sold non-core assets to fund our H/B horizontal drilling program. In May 2009, we were successful in raising $65 million from the sale of 5.75 million shares of common stock. In October 2009, we were again successful in raising $190 million, before estimated expenses of $9 million, from the sale of 6.95 million shares of common stock and the issuance of $86 million aggregate principal amount of 4.50% convertible notes. In addition to these capital market transactions, we received $36 million in November 2009 from the partial monetization of our mid-stream assets in the Endeavor Gathering transactions. We expect that this capital raised during 2009 will be sufficient to fund a four rig drilling program through the point at which our discretionary cash flows will exceed our capital expenditures. We will continually adjust our capital expenditures based on the current commodity price environment to ensure that we have adequate liquidity in cash and/or with availability under our revolving bank credit facility. We anticipate using various derivative contracts such as puts, put spreads, and collars to mitigate natural gas and crude oil price risk on 60% to 80% of our expected production over a rolling 36 month period.
Anticipated 2010 capital expenditure guidance ranges from $190 million for a three H/B Hz rig drilling program to $240 million if the fourth contracted rig begins H/B Hz drilling in late March 2010 as currently scheduled. Due to the recent capital raising activities exceeding the original offering amounts, we have the potential to increase the 2010 capital expenditure guidance by approximately $25 million, if we elect to participate in additional proposed non-operated wells.
Cash FlowNine Months Ended September 30, 2009 Compared to Nine Months Ended September 30, 2008
In the nine months ended September 30, 2009 and 2008, we spent $138.3 million and $216.1 million, respectively, for oil and gas acquisitions and development activities, including the acquisition of property and equipment. These investments were funded during the nine months ended September 30, 2009 by cash flow from operations, borrowing under our revolving bank credit facility and proceeds from the issuance of common stock and 4.50% convertible notes. Cash flow provided by operating activities in the nine months ended September 30, 2009 and 2008 was $31.7 million and $58.8 million, respectively. The decrease in net cash provided by operating activities is due to a decrease in income from operations caused by lower oil and natural gas prices.
Revolving Bank Credit Facility and Other Debt
Revolving Bank Credit Facility. We have a secured revolving bank credit facility, which matures on July 15, 2011 and provides for a line of credit of up to $250 million (the commitment), subject to a borrowing base which is based on a periodic evaluation of oil and gas reserves (borrowing base). The amount of credit available at any one time under the credit facility is the lesser of the borrowing base or the amount of the commitment. On June 5, 2009, we completed our semi-annual redetermination of our revolving credit facility borrowing base. As a result, the borrowing base was amended to $175 million, as compared to the prior level of $190 million. Also in connection with this amendment, the interest rate applicable to borrowings under our revolving bank credit facility was increased and we agreed to an additional financial covenant relating to our ratio of total debt to EBITDA. At September 30, 2009, the amount outstanding under our revolving bank credit facility was $124 million.
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Effective as of October 17, 2009, we amended the terms of our revolving bank credit facility to document our lenders consent to the Endeavor Gathering joint venture transaction. In addition, this amendment decreased our borrowing base under the revolving bank credit facility from $175 million to $140 million upon the closing of the Endeavor Gathering joint venture transaction effective on November 1, 2009, based on the release by the lenders of the contributed assets from the collateral pledged in support of the indebtedness under the revolving credit facility. As part of the amendment, we also agreed to the inclusion of certain covenants in the revolving credit facility that prohibit the creation of certain debt or the creation of incurrence of certain liens by Endeavor Gathering.
In addition to the amendments relating to the Endeavor Gathering joint venture transaction, this amendment also amended the terms of the revolving bank credit facility to: (i) permit us to offer and sell our 4.50% convertible notes and to make certain related changes to provisions of the revolving bank credit facility restricting us from (a) selling 4.50% convertible notes with an aggregate principal amount greater than the amount received by us in our concurrent offering of common stock, and (b) making any payment of principal or interest on the 4.50% convertible notes if we are in default under the revolving bank credit facility at the time or if any such a payment would cause a default; and (ii) remove the minimum net worth covenant previously imposed on us under the revolving bank credit facility. Lastly, the amendment included a waiver by the lenders of a technical default as a result of our failure to maintain a maximum ratio of total debt to earnings before interest, taxes, depreciation and amortization as of August 31 and September 30, 2009. There were no other material changes to the revolving bank credit facility. See Note H to the Interim Financial Statements.
The terms of the revolving bank credit facility are more fully described in our 2008 10-K and our Forms 8-K filed on September 8 and October 17, 2009. The revolving bank credit facility contains various affirmative and restrictive covenants. These covenants, among other things, prohibit additional indebtedness, sale of assets, mergers and consolidations, dividends and distributions, and changes in management and require the maintenance of various financial ratios. We were in compliance with, or received waivers for, all financial and nonfinancial covenants at September 30, 2009.
We expect to complete a semi-annual redetermination of our revolving bank credit facility borrowing base in November 2009. We do not anticipate a material change in our borrowing base. Our lending bank group consists of Capital One, N.A., Bank of America, BNP Paribas, Union Bank, N.A., Compass Bank, and Fortis Capital Corp.
Senior Secured Subordinated Notes and Unsecured Convertible Notes. In July 2007, we issued $30 million of 7.58% Series A Notes due July 31, 2012 (senior secured subordinated notes) which were secured by a second lien on all of our assets. On October 18, 2009 we entered into an amendment to our senior secured subordinated notes which allowed repayment of the senior secured subordinated notes. The senior secured subordinated notes were repaid on October 29, 2009. We also have outstanding $125 million of 5.00% convertible notes that we issued in February 2008 and $86.25 million of 4.50% convertible notes that we issued in October 2009. The 5.00% convertible notes and 4.50% convertible notes are unsecured. The terms of the senior secured subordinated notes and the 5.00% convertible notes are more fully described in our 2008 10-K. The terms of the 4.50% convertible notes are more fully described in our 8-K filed on October 28, 2009. We were in compliance with the terms of the 5.00% convertible notes at September 30, 2009. See Note H to the Interim Financial Statements.
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Working Capital
At September 30, 2009, we had a working capital deficit of $14.3 million. Including availability under our credit facility, our working capital as of September 30, 2009 would have been $36.7 million.
Price Risk Management
See Part I, Item 3 Quantitative and Qualitative Disclosure about Market Risk.
Critical Accounting Policies
Our critical accounting policies are summarized in our 2008 10-K. There have been no changes in those policies.
Contractual Obligations
During the quarter ended September 30, 2009, there were no significant changes in our contractual obligations from those disclosed in our 2008 10-K, other than in the ordinary course of business except for two agreements we entered into during the second quarter of 2009. We entered into a firm transportation and a firm sales contract for various terms through 2020. Under these contracts, we are obligated to transport or sell minimum daily gas volumes, as calculated on a monthly basis, or pay for any deficiencies, at a set rate. The firm transportation contract for 50 Mmbtu per day commences with the completion of a pipeline expected to be completed in the first quarter of 2010. The sales contract was effective in September, 2009 for 15 Mmbtu per day and increases through 2014 up to 100 Mmbtu per day. Obligations for these contracts are approximately $6 million per year beginning in 2010 through 2020.
In October 2009, the Company purchased $6.00 put options on 1.9 Bcf, 11.1 Bcf, and 13.4 Bcf, respectively, of 2010, 2011, and 2012 natural gas production. The cost per MMbtu of these put options was $0.7725 for a total cost of $20.4 million which will be paid in the month the contract is settled. In November 2009, the Company sold $4.00 puts on 0.965 Bcf of 2010 natural gas production and received approximately $162,000. The Company anticipates selling additional puts and calls on these volumes over the three year period to recover the cost of these purchased puts.
Recently Issued Accounting Standards
See Note A to our financial statements included in Part I, Item 1.
Forward-Looking Statements
All statements made in this document other than purely historical information are forward looking statements within the meaning of the federal securities laws. These statements reflect expectations and are based on historical operating trends, proved reserve positions and other currently available information. Forward-looking statements include statements regarding future plans and objectives, future exploration and development expenditures, the number and location of planned wells, the quality of our properties and potential reserve and production levels, and future revenue and cash flow. These statements may be preceded or followed by or otherwise include the words believes, expects, anticipates, intends, continues, plans, estimates, projects, guidance or similar expressions or statements that events will should, could, might or may occur. Except as otherwise specifically indicated, these statements assume that no significant changes will occur in the operating environment for oil and gas properties and that there will be no material acquisitions or divestitures except as otherwise described.
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The forward-looking statements in this report are subject to all the risks and uncertainties which are described in our 2008 10-K and in this document. We may also make material acquisitions or divestitures or enter into financing transactions. None of these events can be predicted with certainty or taken into consideration in the forward-looking statements.
For all of these reasons, actual results may vary materially from the forward looking statements and we cannot assure you that the assumptions used are necessarily the most likely. We will not necessarily update any forward looking statements to reflect events or circumstances occurring after the date the statement is made except as may be required by federal securities laws.
ITEM 3. | Quantitative and Qualitative Disclosures About Market Risk |
Commodity Price Risk
We are subject to price fluctuations for natural gas and crude oil. Prices received for natural gas and crude oil sold on the spot market are volatile due to factors beyond our control. Reductions in crude oil and natural gas prices could have a material adverse effect on our financial position, results of operations, capital expenditures and quantities of reserves recoverable on an economic basis. Any reduction in reserves, including reductions due to lower prices, can reduce our borrowing base under our revolving bank credit facility and adversely affect our liquidity and our ability to obtain capital for our acquisition and development activities.
To mitigate a portion of our exposure to fluctuations in commodity prices, we enter into financial price risk management activities with respect to a portion of projected crude oil and natural gas production through financial price commodity swaps, collars and put spreads. Our revolving bank credit facility requires us to maintain a hedging program on mutually acceptable terms whenever the loan amount outstanding exceeds 75% of the borrowing base.
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Following is a summary of the outstanding crude oil and natural gas derivative contracts we had in place as of September 30, 2009:
Effective Date |
Maturity Date |
Notional Amount Per Month |
Remaining Notional Amount as of September 30, 2009 |
Additional Put Options |
Floor | Ceiling | Designation under ASC 815 | ||||||||||
Natural Gas (MMBtu): |
|||||||||||||||||
6/1/2008 |
12/31/2009 | 100,000 | 300,000 | $ | 3.50 | $ | 9.50 | $ | 12.20 | Cash flow hedge | |||||||
1/1/2008 |
12/31/2009 | 100,000 | 300,000 | $ | 3.50 | $ | 7.50 | $ | 8.15 | Cash flow hedge | |||||||
4/1/2009 |
12/31/2009 | 200,000 | 600,000 | $ | 3.50 | $ | 7.50 | $ | 9.17 | Cash flow hedge | |||||||
1/1/2009 |
12/31/2009 | 128,666 | 386,000 | $ | 3.50 | $ | 7.50 | $ | 8.60 | Cash flow hedge | |||||||
1/1/2009 |
12/31/2009 | 250,000 | 750,000 | $ | 3.50 | $ | 6.50 | $ | | N/A | |||||||
10/1/2009 |
10/31/2009 | 150,000 | 150,000 | $ | | $ | 4.07 | $ | 4.07 | Cash flow hedge | |||||||
11/1/2009 |
12/31/2009 | 300,000 | 600,000 | $ | 4.00 | $ | 5.00 | $ | 6.15 | Cash flow hedge | |||||||
1/1/2010 |
12/31/2010 | 471,833 | 5,662,000 | $ | 5.00 | $ | 7.50 | $ | | Cash flow hedge | |||||||
1/1/2010 |
12/31/2010 | 471,833 | 5,661,996 | $ | 4.00 | $ | 5.50 | $ | 7.00 | N/A | |||||||
1/1/2010 |
12/31/2010 | 25,000 | 300,000 | $ | | $ | 8.50 | N/A | |||||||||
1/1/2011 |
12/31/2011 | 188,781 | 2,265,372 | $ | | $ | 8.00 | N/A | |||||||||
1/1/2011 |
3/31/2011 | 200,000 | 600,000 | $ | 5.50 | $ | 7.00 | $ | 8.90 | Cash flow hedge | |||||||
4/1/2011 |
10/31/2011 | 200,000 | 1,400,000 | $ | 5.00 | $ | 6.50 | $ | 8.30 | Cash flow hedge | |||||||
11/1/2011 |
3/31/2012 | 200,000 | 1,000,000 | $ | 5.50 | $ | 7.00 | $ | 10.10 | Cash flow hedge | |||||||
Oil (Bbls): |
|||||||||||||||||
1/1/2009 |
12/31/2009 | 5,000 | 15,000 | $ | 100.00 | $ | 134.00 | Cash flow hedge |
In October 2009, the Company purchased $6.00 put options on 1.9 Bcf, 11.1 Bcf, and 13.4 Bcf, respectively, of 2010, 2011, and 2012 natural gas production. The cost per MMbtu of these put options was $0.7725 for a total cost of $20.4 million which will be paid in the month the contract is settled. In November 2009, the Company sold $4.00 puts on 0.965 Bcf of 2010 natural gas production and received approximately $162,000. The Company anticipates selling additional puts and calls on these volumes over the three year period to recover the cost of these purchased puts.
The fair value of our natural gas and oil derivative contracts in effect at September 30, 2009 was $14.1 million, of which $14.7 million was classified as a current asset, $1.1 was classified as a long-term asset and included in other assets and $1.7 was classified as a long-term liability and included in other liabilities at September 30, 2009.
Based on the monthly notional amount for natural gas in effect at September 30, 2009, a hypothetical $1.00 increase in natural gas prices would have decreased the fair value of our natural gas swaps and options by $21.5 million and a $1.00 decrease in natural gas prices would increase the fair value of our natural gas swaps and option by $23.6 million. Based on the monthly notional amount for crude oil in effect at September 30, 2009, a hypothetical $1.00 increase in oil prices would have decreased the fair value of our oil swap by $15,000 and a $1.00 decrease in oil prices would increase the fair value of our oil swap by $15,000.
Interest Rate Risk
As of September 30, 2009, we had $124.0 million of long-term debt outstanding under our revolving bank credit facility. The revolving bank credit facility matures in July 2011 and is governed by a borrowing base calculation that is redetermined periodically. We have the option to elect interest at
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either (a) a base rate tied to the greatest of (i) the prime rate as published in The Wall Street Journal plus a margin ranging from 1% to 2% based on the amount of the loan outstanding in relation to the borrowing base, (ii) the federal funds rate plus a margin ranging from 3.25% to 4.75% based on the amount of the loan outstanding in relation to the borrowing base, or (iii) the one-month LIBO rate plus a margin ranging from 2.75% to 4.25% based on the amount of the loan outstanding in relation to the borrowing base (payable monthly), or (b) the LIBO rate plus a margin ranging from 2.75% to 4.25% based on the amount of the loan outstanding in relation to the borrowing base for a period of one, two or three months (payable at the end of such period). As a result, our interest costs fluctuate based on short-term interest rates relating to our revolving bank credit facility. Based on borrowings outstanding at September 30, 2009, a 100 basis point change in interest rates would change our annual interest expense by approximately $1,240,000. We had no interest rate derivatives during 2009.
Our $125 million of 5.00% convertible notes and $86.25 million of 4.50% convertible notes have fixed interest rates of 5.00% and 4.50%, respectively.
ITEM 4. | Controls and Procedures |
Evaluation of disclosure controls and procedures. Our principal executive officer and principal financial officer have reviewed and evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this report. Disclosure controls and procedures include, without limitation, controls and procedures designed to provide us with reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosures. Based on that evaluation, our principal executive officer and principal financial officer have concluded that our current disclosure controls and procedures are effective to provide us with this reasonable assurance.
Changes in internal controls over financial reporting. There were no changes in our internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 1. | Legal Proceedings |
None
We noted in our 2008 10-K a risk relating to the resolution of certain comments we had received from the SEC Staff. On July 20, 2009, the SEC Staff notified us that it had completed its review of our annual report on Form 10-K for the year ended December 31, 2007, and had no further comments. Otherwise, there have been no material changes in the risk factors applicable to us from those disclosed in our 2008 10-K.
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ITEM 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
The following table presents information about repurchases of our common stock during the three months ended September 30, 2009:
Period |
Total Number of Shares Purchased (1) |
Average Price Paid per Share |
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |
Maximum Number of Shares that May Yet Be Purchased Under the plans or Programs | |||||
July 1, 2009 to July 31, 2009 |
| $ | | | | ||||
August 1, 2009 to August 31, 2009 |
| | | | |||||
September 1, 2009 to September 30, 2009 |
720 | $ | 15.44 | | |
(1) | The number of shares of our common stock repurchased reflects the number of shares surrendered to the Company to pay withholding taxes in connection with the vesting of employee restricted stock awards. |
ITEM 3. | Defaults Upon Senior Securities |
None.
ITEM 4. | Submission of Matters to a Vote of Security Holders |
None.
ITEM 5. | Other Information |
None.
ITEM 6. | Exhibits |
See Exhibit Index.
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In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
GMX RESOURCES INC. | ||
(Registrant) | ||
Date: November 9, 2009 |
/s/ James A. Merrill | |
James A. Merrill | ||
Chief Financial Officer |
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Incorporated by Reference | ||||||||||||
Exhibit No. |
Exhibit Description |
Form | SEC File No. |
Exhibit | Filing Date | Filed Herewith | ||||||
3.1 | Amended and Restated Certificate of Incorporation of GMX Resources Inc. | SB-2 | 353-49328 | 3.1 | 11/06/2000 | |||||||
3.2 | Amended and Restated Bylaws of GMX Resources Inc | 8-K | 001-32997 | 3.2 | 11/04/2008 | |||||||
3.3 | Certificate of Designation of Series A Junior Participating Preferred Stock of GMX Resources Inc. | 8-K | 000-32325 | 3.1 | 05/18/2005 | |||||||
3.4 | Certificate of Designation of 9.25% Series B Cumulative Preferred Stock | 8-A12B | 001-32977 | 4.1 | 08/08/2006 | |||||||
4.1(a) | Rights Agreement dated May 17, 2005 by and between GMX Resources Inc. and UMB Bank, N.A., as Rights Agent | 8-K | 000-32325 | 4.1 | 05/18/2005 | |||||||
4.1(b) | Amendment No. 1 to Rights Agreement dated February 1, 2008 | 8-A/A | 001-32977 | 4.1 | 02/21/2008 | |||||||
4.1(c) | Amendment No. 2 to Rights Agreement dated October 30, 2008 | 8-A/A | 001-32977 | 1 | 11/17/2008 | |||||||
4.2 | Indenture dated February 15, 2008, between GMX Resources Inc. and The Bank of New York Trust Company, N.A., as trustee | 8-K | 001-32977 | 4.1 | 02/15/2008 | |||||||
4.3 | Indenture dated October 28, 2009, between GMX Resources Inc. and The Bank of New York Mellon Trust Company, N.A. as trustee | 8-K | 001-32977 | 4.1 | 10/28/2009 | |||||||
4.4 | Supplemental Indenture dated October 28, 2009, between GMX Resources Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee | 8-K | 001-32977 | 4.2 | 10/28/2009 | |||||||
10.1 | Amended and Restated Stock Option Plan | 10-Q | 001-32977 | 10.1 | 11/09/2007 | |||||||
10.2 | Form of Director Indemnification Agreement | SB-2 | 333-49328 | 10.5 | 11/06/2000 | |||||||
10.3(a) | Participation Agreement dated December 29, 2003 by and among Penn Virginia Oil & Gas Company, the Company and its wholly owned subsidiaries | 8-K | 000-32325 | 10.1 | 12/31/2003 | |||||||
10.3(b) | First Amendment dated February 27, 2004 to Participation Agreement between GMX Resources Inc. and Penn Virginia Oil & Gas Corporation | 8-K | 000-32325 | 10.1 | 09/14/2004 | |||||||
10.3(c) | Second Amendment dated May 9, 2004 to Participation Agreement between GMX Resources Inc. and Penn Virginia Oil & Gas Corporation | 8-K | 000-32325 | 10.2 | 09/14/2004 | |||||||
10.3(d) | Third Amendment dated April 6, 2004 to Participation Agreement between GMX Resources Inc. and Penn Virginia Oil & Gas Corporation | 8-K | 000-32325 | 10.3 | 09/14/2004 |
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Incorporated by Reference | ||||||||||||
Exhibit No. |
Exhibit Description |
Form | SEC File No. |
Exhibit | Filing Date | Filed Herewith | ||||||
10.3(e) | Fourth Amendment dated August 11, 2004 to Participation Agreement between GMX Resources Inc. and Penn Virginia Oil & Gas Corporation | 8-K | 000-32325 | 10.4 | 09/14/2004 | |||||||
10.3(f) | Fifth Amendment dated effective January 1, 2005 to Participation Agreement between GMX Resources Inc. and Penn Virginia Oil & Gas L.P., successor to Penn Virginia Oil & Gas Corporation | 10-QSB | 000-32325 | 10.6(e) | 05/12/2005 | |||||||
10.3(g) | Sixth Amendment dated effective January 1, 2006, to Participation Agreement between GMX Resources Inc. and Penn Virginia Oil & Gas L.P., successor to Penn Virginia Oil & Gas Corporation | 8-K | 000-32325 | 10.1 | 01/20/2006 | |||||||
10.4(a) | Third Amended and Restated Loan Agreement dated June 12, 2008 between GMX Resources Inc., Capital One, National Association, and Union Bank of California, N.A. | 8-K | 001-32977 | 10.1 | 06/18/2008 | |||||||
10.4(b) | First Amendment to Restated Loan Agreement dated October 29, 2008 between GMX Resources Inc., Capital One, National Association, and Union Bank of California, N.A. | 10-Q | 001-32977 | 10.4(b) | 01/10/2008 | |||||||
10.4(c) | Second Amendment to Restated Loan Agreement dated November 12, 2008 among GMX Resources Inc., Capital One, National Association, and Union Bank of California, N.A. | 8-K | 001-32977 | 10.5 | 03/02/2009 | |||||||
10.4(d) | Third Amendment to Restated Loan Agreement dated February 27, 2009 between GMX Resources, Inc., and Capital One, National Association, and Union Bank of California, N.A. | 8-K | 001-32977 | 10.2 | 03/02/2009 | |||||||
10.4(e) | Fourth Amendment to Restated Loan Agreement dated June 3, 2009 among GMX Resources, Inc., Capital One, National Association, Union Bank, N.A., BNP Paribas and Compass Bank | 8-K | 001-32977 | 10.1 | 06/08/2009 | |||||||
10.4(f) | Fifth Amendment to Restated Loan Agreement and Waiver dated as of October 17, 2009, among GMX Resources Inc., Capital One, National Association, as Administrative Agent, and the banks named therein | 8-K | 001-32977 | 10.1 | 10/20/2009 | |||||||
10.6 | Gas Gathering and Processing Agreement effective January 31, 2008 between PVR East Texas Gas Processing LLC and GMX Resources Inc. | 8-K | 001-32977 | 10.1 | 02/01/2008 | |||||||
10.7 | Purchase Agreement dated February 11, 2008, between GMX Resources Inc. and Jefferies & Company, Inc., as representative of the Initial Purchasers named therein | 8-K | 001-32977 | 10.1 | 02/15/2008 | |||||||
10.8 | Share Lending Agreement dated February 11, 2008, between GMX Resources Inc., Jefferies Funding LLC and Jefferies & Company, Inc., as collateral agent | 8-K | 001-32977 | 10.3 | 02/15/2008 |
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Incorporated by Reference | ||||||||||||
Exhibit No. |
Exhibit Description |
Form | SEC File No. |
Exhibit | Filing Date | Filed Herewith | ||||||
10.9 | Registration Rights Agreement dated February 11, 2008, between GMX Resources Inc. and Jefferies Funding LLC | 8-K | 001-32977 | 10.4 | 02/15/2008 | |||||||
10.10 | 2008 Long-Term Incentive Plan | 8-K | 001-32977 | 10.1 | 06/16/2008 | |||||||
10.11 | Underwriting Agreement dated July 17, 2008, between GMX Resources Inc. and Jefferies & Company, Inc., as Representative | 8-K | 001-32977 | 1.1 | 07/21/2008 | |||||||
10.12 | Purchase Agreement dated May 13, 2009, between GMX Resources Inc. and Merrill Lynch & Co., as Representative | 8-K | 001-32977 | 1.1 | 05/18/2008 | |||||||
10.13 | Underwriting Agreement dated October 22, 2009, between GMX Resources Inc. and Credit Suisse Securities (USA) LLC, as representative of the several underwriters named therein | 8-K | 001-32977 | 1.1 | 10/28/2009 | |||||||
10.14 | Underwriting Agreement dated October 22, 2009, between GMX Resources Inc. and Credit Suisse Securities (USA) LLC, as representative of the several underwriters named therein | 8-K | 001-32977 | 1.2 | 10/28/2009 | |||||||
10.15 | Purchase Agreement dated October 16, 2009, between GMX Resources Inc. and Kinder Morgan Endeavor LLC | 8-K | 001-32977 | 10.1 | 10/19/2009 | |||||||
10.16 | Amended and Restated Limited Liability Company Agreement of Endeavor Gathering LLC dated effective November 1, 2009, between GMX Resources Inc. and Kinder Morgan Endeavor LLC | 8-K | 001-32977 | 10.1 | 11/5/2009 | |||||||
10.17 | Pipeline Operating Agreement dated effective November 1, 2009, between Endeavor Gathering LLC and Endeavor Pipeline Inc. | 8-K | 001-32977 | 10.2 | 11/5/2009 | |||||||
10.18 | Gas Gathering Agreement dated effective November 1, 2009, among GMX Resources Inc., Endeavor Pipeline Inc. and Endeavor Gathering LLC. | 8-K | 001-32977 | 10.3 | 11/5/2009 | |||||||
31.1 | Rule 13a-14(a) Certification of Chief Executive Officer | 001-32977 | * | |||||||||
31.2 | Rule 13a-14(a) Certification of Chief Financial Officer | 001-32977 | * | |||||||||
32.1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. § 1350 | 001-32977 | * | |||||||||
32.2 | Certification of Chief Financial Officer pursuant to 18 U.S.C. § 1350 | 001-32977 | * |
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