GMX Resources says that production for 2008 is expected to reach 12.5 Bcfe, an increase of 44% over 2007 production of 8.7 Bcfe. Previous guidance estimated the 2008 production to be 13.0 Bcfe. The reduction in the previous production guidance is attributable to decreased activity in the Joint Development Area (JD) with Penn Virginia Oil and Gas, L.P. (PVOG), a wholly owned sub of Penn Virginia Corporation (NYSE:PVA). PVOG has reduced the number of rigs from 4 in 1H08 to no rigs in 2H08 operating in the JD. GMXR has drilled and completed one Haynesville/Bossier (H/B) well and two H/B wells are drilling and should be completed in 1Q09.

The Company has chosen to reduce its previously announced Capital Expenditure Budget to $220 million from $400 million, a 45% reduction. The reduction is due to continued peril in the global and domestic credit markets and lower commodity prices. As a result of reducing the H/B development plan for 2009, the Company now expects to drill 27 net H/B wells (including 5 net wells in the JD) with an average initial rate of 4.0 mmcfepd per well. Using this starting rate, the Company expects to have production of 24.7 Bcfe, a 93% increase over 2008's revised production estimate. PVOG has indicated that they will have 2 rigs scheduled for 2009 to be operating in the JD drilling H/B horizontals. "Based on this revised CAPEX Budget, we expect to be able to fund 2009's CAPEX based on cash flow and our existing $190 million bank credit facility and to exit 2009 with $16 million of unused bank capacity," stated Ken Kenworthy, Jr, CEO. Based on a Henry Hub price of $6.00 per mmbtu for natural gas and $50 per bbl of oil, the Company expects to generate oil and natural gas sales revenue of approximately $158.2 million, discretionary cash flow of $116.1 million and EBITDA of approximately $128.3 million. The Company will be operating 4 to 5 rigs throughout 2009 drilling H/B horizontals.

Tags: GMX Resources Inc.