Re: GMXR - Shorts HTB stock
Not too sure but according to Schwab it is listed as a HTB stock. It could be that at one time some large hedge funds were in the stock and there was forced liquidation(s) that drove the stock down. Also, their production is largely NG and with such low prices, investors saw a good short opportunity. Now, NG prices are higher and shorts are covering.
I posted this earlier but the long term prospectus look good to me.
From Josh Young Finds Value in Oil and Gas E&Ps article (11/16/2010)
oakshirefinancial.com
"...GMX is interesting to me because it has a tremendous amount of proven natural gas reserves on its books and is in the process of reducing the cost of adding additional reserves. Relative to the company’s enterprise value, you pay less than $1 per 1,000 cubic feet of proven natural gas reserves. A large portion of those proven reserves are developed and producing. The company is profitable right now—primarily because of its hedges—but it is profitable.
GMX has done a couple of things that have substantially increased the company’s value and the value of its assets. First, it has significantly increased the amount of reserves it accesses with its Haynesville well. At some point a couple of years ago, GMX was booking 3–4 billion cubic feet (bcf) of reserves per well. Now it’s up to somewhere around 6–6.5 bcf per well in reserves, with associated higher production. Based on the type of improvements the company is achieving, it could get reserves as high as 7–8 bcf per well, comparable to some other places in the Haynesville historically considered more “core” than GMX’s area. These are $9 million wells, so GMX’s finding costs are pretty low. It’s not the lowest-cost producer, but the company has definitely improved its cost structure. That’s one really big positive.
Another big positive is that it did a deal with Kinder Morgan Energy Partners, L.P. (NYSE:KMP), one of the big pipeline companies. GMX sold a minority interest in its gathering system in East Texas for more than $40 million. I think it was a 40% stake or somewhere in that range. GMX still has the majority ownership in that system. Valuations on mainstream and gathering assets have gone up a lot since that transaction. So GMX has what’s probably a $60–$70 million asset that no one seems to be giving them credit for. The company’s valuation is very low because people are worried it will outspend its cash flow. Yet, it has this asset that it will be able to sell to fund its development, increasing expected future reserves and cash flow. When GMX sells that gathering asset, it’s really going to unlock value there. It will highlight how discounted the stock is relative to its fundamental value. And this is the kind of discount I look for and the kind of misunderstanding I take advantage of for my fund...."
Stock up 9% this AM to $5.88.
EKS |
