GMX Resources pays down debt, ends year with $106.8 million of cash

By Lisa Kerner

Charlotte, N.C., March 1 - GMX Resources Inc. chief executive officer Ken Kenworthy said his company, like other natural gas producers, is challenged by developing alternative strategies to combat the continued decline in natural gas pricing.

Already 2012 is shaping up to be a tough year, Kenworthy said during the company's fourth-quarter and full-year 2011 earnings call on Thursday.

"The precipitous drop in natural gas prices" prompted GMX to take what Kenworthy called "an unprecedented series of liquidity-enhancing moves." These moves included the exchange of 2019 bonds for new 2017 secured bonds with $100 million of new money, retiring a bank revolver, selling noncore assets, subleasing rigs and temporarily suspending some drilling.

In December, GMX monetized its remaining natural gas hedge portfolio, receiving $18.5 million net of deferred premiums payable.

During 2011, GMX raised $105.3 million from the issuance of about 22.2 million shares of its common stock and $25.8 million from the issuance of about 1.12 million shares of its 9.25% series B cumulative preferred stock.

In February 2011, the company issued $200 million of senior notes due 2019 and used the proceeds to repay a portion of its convertible notes due 2013, repay the secured credit facility, fund the purchase of undeveloped oil acreage, contract for a drilling rig and begin drilling in the Williston Basin.

GMX ended the year with $106.8 million of cash and cash equivalents.

Looking ahead, GMX expects to fund about $97 million of cash capital expenditures in 2012 with cash on hand, positive operating cash flow and a partial sale of its Niobrara acreage or other potential capital market activities.

Financial highlights

GMX reported a net loss of $79.8 million, or $1.39 million, for the fourth quarter and $218.6 million, or $4.12 per share, for the full year ended Dec. 31.

Adjusted EBITDA was $12.9 million and $71.2 million for the fourth quarter and full year, respectively, compared with $16.9 million and $61.9 million for the fourth quarter and full year of 2010, respectively.

Based in Oklahoma City, GMX Resources is a natural gas production company.

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