Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Jurgis Bekepuris who wrote (42092)	3/31/2011 3:01:07 PM
From: E_K_S	Respond to of 78525

Some thinking on GMXR - The newly restructured company I am not too sure what their reason was for taking the impairment charge but it is history now and reflected in the stock price. My intended small position in the newly issued preferred shares is basically to take proceeds from a portion of my stock that I sold covered calls on (May $5.00 Calls) and buy the 9.5% preferreds. It is important to me that I show some type of income from the stock position and by holding BOTH the preferred and common shares I accomplish this. The impairment charge was large and I have to applaud management for accounting for the worst case and booking the loss quickly. That is one of the reasons the stock dropped from it's earlier highs at the $10.00-$15.00 share range. What ever the reasons were (production issues, no JV partner interest, location did not complement a NG gathering business, or merely the company had limited cash resources to fully complete the project and had better uses for what they had - ie. completing their Endeavor Gathering LLC project), it is what it is. I do not believe their is any impending lease expiration on these parcel(s), so any eventual sale will be gravy for the company (as the loss is already booked). Some other group may find more value in the project than GMXR. This would be the best time to sell especially with interest in US shale. Along the same time line, the company completed the build out of their NG gathering facility (Endeavor Gathering LLC) and subsequently sold a 40% interest to Kinder Morgan Endeavor LLC (KME) to raise more cash. Endeavor Gathering LLC is a midstream gas gathering operation that currently has 109 miles of pipeline, both high and low pressure, 25,000 horsepower of compression with an estimated enterprise value of $95-100 million. Endeavor Gathering LLC (a GMXR subsidiary company) generates good free flow cash so this assets s/b able to help service the preferred debt. Along with the new preferred issues, they refinanced their senior debt which give them a bit more flexibility in their day-to-day credit facility. This should allow their new wells under development to be brought into production. The combined net cash flows should more than cover the new debt service. I am expecting them to turn the corner and report positive net income and hopefully a steady stream of growing earnings. I have been wrong in the past and could very well be wrong now but I do like the way management has maneuvered the company past this bump in the road. At least I am pretty sure their is no fraud, their wells actually produce NG and their bank accounts really do show they have $2.35 Million cash. EKS