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GMX Resources Inc. Message Board

  • pocilujko pocilujko Dec 10, 2012 8:56 PM Flag

    Ceililing Test at YEAR END

    "The trailing 12-month average commodity prices used for the third quarter write-down were $2.83 per MMbtu for Henry Hub natural gas and $94.97 per barrel for West Texas Intermediate oil, prior to adjustments for market differentials.

    On 12/31/2012:

    Natural Gas:

    WTI OIL: $ 94.71

    At Year End:
    Looks like a small write Down of the Value of Natural Gas Reserves; unless Bakken Gas Reserves increases.

    Looks like a small Write Down of the Value of Oil Reserves but Bakken Reserves should more than offset this small write down.


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    • Ed,
      How do you find the trailing month natural gas average?
      What is this ceiling test all about? Please help me understand what it means for the stock.

      • 1 Reply to hotshot_43302
      • I posted on Message #399; Investor Village; GMXR Message Board basically the Information you are asking.

        GMXR uses Full Cost in accounting for all its Leases purchases and all its drilling costs.

        At each quarter end; GMXR is require to calculate a PV-10 (Present Value using a 10% Discount) on its Quarterly Reserves based on Reserve Quantities and the 12 Month(1st of month) trailing average Price. Price uses are the Henry Hub for Natural Gas and WTI for Oil.
        If the Calculation is higher than the carrying value on the Balance Sheet; there is no Effect.
        If the Calculation is Lower than the Balance Sheet amount; then there is an Impairment Charge Expense which lowers the Asset Value and thereby reduces the Company Equity.

        The Impairment charge is a Non Cash Expense that reduces any profits.

        Once the Asset is reduce by the Impairment Charge; it cannot be Written Up.

        GMXR, now has a Negative Equity due to many Impairment charges.