I have 15K shares, at an average price of $5.95. I will never forget staring at the ticker symbol back in may, but not pressing sell at $6.10. So the question now is do we sell, take our huge loss and put the money in something like Sandridge that seems to have a very good upside, or do we ride the train wherever it may lead. I am very close to selling, and hopefully making my loss up in a year or so under some other Energy plays. I mean at this point, the future of GMX is very simple and straightforward to understand. They received this one last loan for $100 million; one with Cash advance rates. So at the end of 2012 they will either have their own cash flow to fund 2013 Capex or they won't. Pretty simple to understand I think. We know for sure that if the rest of the Wells have production values mirroring the Wock, it will be game over, no passing go and collecting $200. So again, if we hold GMX we have to hope and pray that the Wells start to come in with high IP rates, and that we can generate enough Revenue to fund 2013 capex. If they don't, what is the play? Seriously, what is the play at that point. Are they going to fund CAPEX by raising Equity dollars? If so, let's see, they would have to sell $50 million shares of stock to raise another $100 million. What do you think that level of dilution would do to the stock? Is it possible that they could get one last loan? I guess it's possible, but the results would have to be looking very good. I guess the bottom line is that I am realizing the risk reward of holding GMX no longer exists. While I can kick myself over and over for not selling at $6.10, it is what it is. At this point, I don't think GMX can pull out of this, I really don't. We are asking a company that is new to oil to go out on their first try in their first year and drill nothing but great wells. Hell, the big boys don't always do this, and we are expecting a NG company to do this. I'm not mad at GMX, I mean, what else could they do. Capex for NG was even higher than the $8 million per Well oil cost, and they knew that math didn't work. This is a hail mary, with the hopes they get that incredible 1 or 2 wells that will turn things around. I am now convinced that the odds truly are that GMX files BK. I don't see any first time oil company just nailing it in their first year, and that is the only scenario that would keep GMX afloat. I am going to give it a couple days to think about it, but I think I am going to sell for the biggest loss I have ever had, and will try to make some money in some other players like SD. At least that gives me the chance to make up a good portion of my money.
I'm afraid that the "one good well" concept is unlikely to fly. Just as we're seeing with Greece, Italy et al today, the markets react with short term sentiment to positive news but soon settle back to the fundamentals - liquidity is an issue.
In making a switch to liquids, management made a terrible error in not insuring that they had adequate liquidity to exploit their new assets. They simply overextended by desperately grabbing acreage (some of it attractive) without a sound financial plan. Bakken wells can be provide great returns but payout is not particularly quick. Being a resource play they have to be comfortable that they will drill some great wells and some poor wells. It will take them more than a year of drilling in the Bakken before they can evaluate what they have. The new liquidity they have negotiated does not get them from where they are today to any sort of stable position. VPPs are a terrible idea as they simply borrow future cash flow at unattractive discount rates. Management should be focusing on raising liquidity from non productive assets which, in terms of value as to mean selling down probable and PUD interest in H/B and selling down the Niobrara ( where their position is twice as large as it should have been).
GMXR has solidified me in my new rule - never invest in E&P companies that are run by Geoscentists.
patience is virtue unless you've been saying that for the last $4. therein lies the difference between being stubborn and being patient. if you've been holding since $5 you are just being stubborn. you guys are stubbornly bullish and are going to get slaughtered. if that tail at 1.56 snaps it's going to be another quick 10% down. there has to be a lot of stops under that.
this is a very good and thought out post.I sold my position at 3.63 and was in at 5.45.It hurt like hell to sell at that loss.I made the mistake of buying the jan 4 dollar calls to replace my position in the stock.I thought they would have drilled a gusher or two by then for sure.Well,you couls sell your position now for the loss and buy the jan 13 leaps for around 1.15.So that would be $1150 per thousand shares,but you would have more than one year and a strike of only 1 stinking dollar.It might be better to just hold the stock,I dont know.
I am under water too but for only 500 shares @ 4.41 so i think i'll ride it out but here's another option - sell 80% of your position and invest in SD or whatever. If GMXR does come back sell the remaining 20% to break even or at least come close. Good luck.
We've all been there. I think you've got a good handle on it. You are asking qusetions that you already know the answer to. Keep in mind that losses have value for tax purpose. It's all over except for hitting the sell button. Good luck.
BTW, look at MMR. Speculative, but very interesting play with some important conclusions fast approaching. Check the msg board and the one on investor village
I have a question that maybe someone can help me with. If the major holders of these bonds that are being exchanged are officers and insiders and thus being secured now by the entire assests of the company. Would they not benefit in bankruptcy while the rest of us lose everything? Seems they could reorg. and continue. I am probably missing something here but still would like a different view. Why would they not file under the Sec act of 1933 where full disclosure would be required? I have lost big like what many others and feel like more pain is coming.
I think you will do well with SD.
As far as GMXR they should be around 'till early 2014. They will get another loan bankruptcy is not an option. They have come to far and by then they should be close to cashflow positive. Oil's not getting any cheaper IMHO
I like SD a lot and bought quite a bit between $5 and $6 when it tanked. One caveat is that they are heavily hedged which is great to insure that they monetize their production but the long shot risk is that counter-parties like Morgan Stanley or Barclays don't perform. Spread you money around a little and learn that diversification can help avoid a major loss like you have incurred in GMXR....
Raven, trust me, I would like to think so, but I think unless they were showing some really good results, and at least some decent positive cash flow, that may be doubtful. And to be honest, 20% ROI's like the recent Wock ain't gonna do it. Sandridge is booking 100% ROI's all day long and twice on Sunday's. So when Ken started talking about a 20% ROI, the whole call got a little quiet. Can you imagine if the next few Wells come in like the Wock. GMX will drop below a buck in short order. Maybe I'm wrong, but I don't think so. I am sure before BK they would be forced to institute the Nuclear Option if you will, which would be to sell about 50 million shares to raise another 100 million for Capex. I think we know what that level of dilution would do. Bottom line is, GMX has to be able to make money again, and lots of it.
I hear you. Maybe Iran starts a nuclear war in the ME. Wrecks world oil prices and production. Not a happy thought for the world at all. And frankly not likely. But a real world wreck like that is about the only thing to reverse energy price declines.
Energy prices unless you are talking about NG are not the issue. GMX is hedged to make plenty of money in oil, that is if they find a lot of it. But yes, NG price upswing would be the silver bullet or the rabbit in the hat that would save GMX. But the reality is this; first, they are already hedged for lower NG prices, so if NG spiked tomorrow, GMX could not immediately feel the impact. But either way, NG prices are not going anywhere for another 5 years or so. Companies did it to themselves when they simply got greedy and over produced. The US Natural GAS act would help as well, but the Senate will never bring it to a vote even though it is co-sponsored by both Dems and GOP 50/50. Again,everyone is mad at GMX, but seriously, what would the gripers on here have done differently? They didn't ask for the price of NG to go down by 75%. That's a little hard to plan for. They have been trying to make a run out of this, and that's what the Bakken and Niobra are all about. Hey, at least they are trying; they may go down, but at least they will go down swinging. However, I would rather walk away with some money to try and recover, versus walking away with zero.