(GMXR): No position yet but its on my list of dance partners that will shine when the commodities stabilize. Highly concentrated, gassy play with high leverage to the Haynesville and little if any value in the stock for it. They’d make a nice stocking stuffer for any mid or large cap E&P that finds itself behind in the resource play game.

Price as of 8/13/08: $62.19

GMXR - East Texas Cotton Valley Lime player with Bossier  / Haynesville Shale underlying their acreage. 94% gas with a strong balance sheet.

• What’s To Like:
  • Highly concentrated: 1 core asset in 2 counties (Harrison and Panola in E. Texas)
  • "Soft guidance" for 100% production growth next year. They have grown production by 100% in each of the last 3 years.
    
  • Large inventory of highly economic drilling locations (read on)
  • Proved Reserves at YE 2007: 434 Bcfe. At $3 per Mcfe in the ground that equals  $1.3  billion vs a current Total Enterprise Value of $1.25 B.
    
  • They see 3P reserves at 3 Tcfe (7x current proved)
  • Operating costs : falling below $1/ Mcfe and looks to fall more as production runs up
  • Deal already out of the way, they are saying taking the deal fear off the table for the next 18 months and took debt down to 32% debt to cap.
  • Bread & Butter business is Cotton Valley wells
    • low, low F&D costs of $0.79  per Mcfe …just about best in class
      
    • only 15% of acreage drilled up so far; 890+ locations remain
  • Haynesville/Bossier Shale Exposure:
    
    • 38,455 haynesville acres - with two targets,
      
    • 480 net locations on 80 acres,
      
    • acreage in fairway of the play
      
    • 350 foot thick section, EURs of 4.5 to 8.5 Bcfe estimated by others in the play; is about 10 miles west of CHK’s big well and just east of PVA’s wells.
      
    • Have drilled multiple vertical wells on their acreage back to 2006, waited for industry leaders to crack the code on horizontal development and to share data - goes to management intelligence.
      
    • Porosity of 12 to15%, maybe be underestimated due to presence of dolomite. It’s going to flow.
    • Gas in place in this area is in the 170 to 200+ Bcf range per secton 
    • 81% operated with a 79% net revenue interest
    • Plan to spud first horizontal well in 3Q08.
    • pre purchased OCTG for near term program,
      
    • 5 rigs now, 6th rig coming Nov., 2 will drill vert cv wells, 3 now drilling cv and they will be repurposed to finish the current well and then go Hs, sixth rig goes hs immediately on delivery in NOV. HP flex rigs show up next year (2) and go to drill HS.