GMX Resources Slips To Loss In Q2; Signs LOI With Kinder Morgan For Interest In Pipeline

8/4/2009 1:05 AM ET

(RTTNews) - Oil and gas explorer GMX Resources Inc. (GMXR: News ) late Monday reported a net loss for the second quarter compared to net income in the year-ago period, as a 2% increase in production was largely offset by lower crude oil and natural gas prices. The results for the latest quarter also include inventory writedowns and deferred income tax valuation allowance.

On an adjusted basis, the company reported a profit for the latest quarter. The company also said it signed a non-binding letter of intent for the sale of an interest in its Endeavor Pipeline assets to Kinder Morgan Tejas Pipeline LLC for $40 million.

For the second quarter, the Oklahoma-based company's net loss applicable to common stock was $9.32 million, or $0.51 per share, compared to net income of $10.90 million, or $0.74 per share, in the same period last year.

The results for the latest quarter include inventory writedown of $1.84 million, or $0.10 per share, deferred income tax valuation allowance of $7.91 million, or $0.43 per share, unrealized losses on derivatives of $680 million, or $0.04 per share, and bad debt expense of $321 million, or $0.02 per share.

On a non-GAAP basis, adjusted net income for the latest quarter was $1.43 million, or $0.08 per share. On average, fourteen analysts polled by Thomson Reuters expected the company to report a loss of $0.02 per share for the quarter. Analysts' estimates typically exclude special items.

The company said it did not recognize a full cost accounting impairment charge during the latest quarter due to an increase in natural gas and crude oil prices from March 31, 2009.

The company's oil and gas sales for the latest quarter declined 40% to $22.84 million from $38.04 million in the year-ago period, and missed analysts' consensus revenue estimate for the quarter of $23.12 million.

The company attributed the decline in oil and gas sales for the quarter to a 2% increase in production that was largely offset by lower crude oil and natural gas prices.

Income from operations for the quarter dropped to $4.86 million from $20.88 million a year ago.

GMXR's production during the quarter was 3.31 Bcfe, compared to 3.25 Bcfe in the year-ago period. On a sequential basis, production increased 3% from the preceding first quarter.

Production of oil during the quarter decreased 34% to 33 MBbls from 50 MBbls for the year-ago period, while natural gas production for the quarter increased 5.6% to 3,113 MMcf from 2,949 MMcf in the previous-year quarter.