GMX Resources Q3 earnings surge, top estimates; initiates FY09 forecast - Update

Monday, oil and natural gas company GMX Resources Inc. (GMXR) reported an 186% increase in third quarter earnings helped by a 113% surge in sales, both beating analysts' estimates. Further, the company initiated a fiscal 2009 guidance, and provided an update on its Haynesville Shale drilling program.

Net income for the three-month period rose 186% to $10.3 million from $3.6 million in the corresponding period last year. Earnings surged 194% to $0.53 per share from $0.18 in the prior-year period, and exceeded the estimate of $0.48 a share projected by eight analysts surveyed by First Call/Thomson Financial.

Oil and Gas sales climbed 113% to $36.41 million, from $17.1 million in the same quarter last year and exceeded the average consensus estimate of $32.05 million projected by three Street analysts. Oil and natural gas production rose 59% to 3.5 BCFE from 2.2 BCFE in the corresponding period of the previous year.

Income from operations more than doubled to $17.77 million from $7.1 million in the same quarter of the previous year.

For the nine-month period, net income was $29.3 million, an increase of 144% from $12.0 million in the prior year period. Earnings per share were $1.70, up 162% from $0.65 in the prior year period. Sales rose to $101.65 million from $46.69 million in the same period last year.

GMX announced an increase in its bank-borrowing base of $50 million to $190 million effective October 30, 2008, and it expects to enter 2009 with a net available credit line of about $160 million under this facility.

The company said during the fourth quarter it will complete its first Haynesville/Bossier, or HB, horizontal well in late November 2008. Two operated rigs are currently drilling the HB and should reach TD in late December. Two more operated rigs will spud HB wells in the fourth quarter. Four rigs in the operated area will be drilling HB wells going into 2009, the company added.

Jim Merrill, chief financial officer said, "As the expected H/B production begins to come on-line in the later part of the fourth quarter and early next year, we believe we will lower many of our per mcfe operating metrics."

Looking ahead, for 2009, GMX expects to generate revenue of about $253 million, discretionary cash flow of $186 million and earnings before interest, tax, depreciation, and amortization, or EBITDA, of about $197 million. Capital expenditure budget for 2009 is expected to be $400 million and 88% of that budget is to focus on the HB development.

GMXR closed Friday's regular trading session at $37.75.

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