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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Spekulatius who wrote (38811)	8/18/2010 3:07:58 PM
From: E_K_S	Read Replies (2) \| Respond to of 78632

Their gas gathering business Endeavor Gathering an undiscovered gem with value close to $2.00/share. Re: GMX Resources Inc. (GMXR) Doubled my position in GMXR. In reviewing their annual report and their most recent 8K. I discovered that they have a Gas Gathering subsidiary called Endeavor Gathering . I calculate their ownership interests in this subsidiary company to be worth $54 Million or $1.91/share (based on what KME pais in 12/2009). Their Gas Gathering assets subject to depreciation is valued at $60 Million or $1.28/share BV. This subsidiary is also spinning off income (40% they share with Kinder Morgan Energy - KME) equivalent to $0.21/Mcfe. It still has capacity to grow which will help the company reduce their operating lease expenses. From their most recent 8K report: - lease operating expenses are down 21% to $0.71/Mcfe Avg. ( Lease operating expenses of $0.52 per Mcfe and $0.71 per Mcfe for the three and six months ended June 30, 2010, respectively, compared to $0.82 and $0.90 per Mcfe for the three and six months ended June 30, 2009, respectively. These monies went to Kinder Morgan Energy for their 40% interest in the Gas Gathering Business. "...Decreases in 2010 LOE offset by $0.14 per Mcfe and $0.12 per Mcfe for the three and six months ended 2010, respectively, attributable to net income of the noncontrolling owner in our gathering assets...." "...In controlling operating expenses, we reduced our lease operating expense on a per Mcfe basis. Lease operating expense per Mcfe for the first six months of 2010 was $0.71 compared to $0.90 in the first six months of 2009, a decrease of 21%...." Gas Gathering Business valued at $90 Million (Dec 2009). Kinder Morgan Energy bought a 40% interest in the new company Endeavor Gathering for $36 Million (equity sale). Gas Gathering We have, through our majority-owned subsidiary, Endeavor Gathering, gas gathering lines and compression equipment for gathering and delivery of natural gas from our core area that we operate. As of December 31, 2009, we had invested approximately $60 million in this gathering system, including the purchase of compressors and pipe inventory, which consisted of approximately 120 miles of gathering lines and compressors that collect and compress gas from approximately 99% of our operated gas production from wells in our core area. At year end 2009, this gas gathering system had takeaway capacity of 115 MMcf per day compared to our year end gross production volumes of 37.3 MMcfe per day. This system enables us to improve the control over our production and enhances our ability to obtain access to pipelines for ultimate sale of our gas. ================================================================ This stock has a very large short interest so buy with care and set your price limits. MHR is also establishing a gas gathering business subsidiary. I believe they are also talking with Kinder Morgan Energy to structure the same type of deal that GMXR did in December 2009. EKS