The largest single shareholder of GMX Resources common stock has requested an evaluation of strategic options.

In a letter to Ken L. Kenworthy Jr., president, CEO and chairman of the board of Oklahoma City-based GMX, Peter K. Seldin, managing member of Centennial Energy Partners, said through various entities Centennial owns nearly 2.85 million shares, or 15.2 percent, of GMX common stock.

"We are concerned with the precipitous decline in GMX's share price in recent weeks," Seldin said in the letter.

In Nasdaq trading Wednesday, GMX closed at $7.39, up 34 cents, or 4.82 percent. The stock has traded as high as $25.72 within the last month. The 52-week range is $88.35 and $6.51.

"In addition, we are concerned that without immediate actions by GMX's board of directors, GMX will not be able to realize the value of its assets," Seldin said.

Seldin said the strategic options should include the potential sale of the company.

"The company's board of directors will consider Mr. Seldin's request in due course," GMX said in a press release Wednesday responding to the letter. "However, in the meantime, the company continues to operate its business in the ordinary course and believes that its current business plan reflects a balanced and prudent approach in light of currently prevailing economic conditions."

A copy of the letter was included with a Securities and Exchange Commission filing by GMX.

Seldin founded New York-based Centennial Energy Partners in 1994. He is a graduate of Princeton University and the Graduate School of Business at Stanford University.

Centennial also is the largest shareholder in Houston-based Tesco Corp., owning 16.9 percent of the drilling services provider. Seldin is a Tesco director.

GMX received the letter Tuesday, a day after it announced a reduction in planned capital expenditures and drilling for 2009.

Planned capital expenditures for 2009 were reduced by $70 million to $150 million with 98 percent of the adjusted budget allocated to horizontal drilling in the Haynesville Bossier area in east Texas.

"In light of the economic environment, we feel it is prudent to reduce our 2009 CAPEX to ensure our spending fits within our current liquidity," said James A. Merrill, GMX chief financial officer.

Under the modified budget, GMX plans to drill 14 wells and complete 16 wells in the Haynesville Bossier area. Four rigs are currently drilling in the prospect with completions expected in April. Two of the rigs are on well-to-well contracts and will be released. The other two rigs, owned by a GMX subsidiary, will be laid down.

GMX plans to use two new Helmerich & Payne FlexRigs for drilling Haynesville Bossier wells during the second quarter.

"We will spend less than our cash flow and available credit every quarter," Kenworthy said. "If prices improve, or if we continue to improve our completions and as we continue to lower well costs the cash flow and credit versus CAPEX picture gets even better."

As of Dec. 31, GMX had $110 million available under its $190 million borrowing base.

GMX reported a net loss for 2008 of $81.7 million, compared with net income of $16.9 million for 2007. The loss for 2008 included an impairment charge of $151.6 million related to oil and gas properties and a non-cash charge of $11.5 million. Without the charges, GMX's net income for 2008 would have been $29.9 million before preferred stock dividends of $4.6 million.

Production for 2008 totaled 12.9 billion cubic feet equivalent, up 48 percent from 2007. With the adjusted capital expenditures, GMX estimated production of 14.6 billion cubic feet for 2009.

Originally published by David Page.

(c) 2009 Journal Record - Oklahoma City. Provided by ProQuest LLC. All rights Reserved.

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