Why Owning GMXR Shares is Dangerous
GMXR Conference Call Hints at 2006 Capex Program Being Derailed if Natural Gas Prices Should go any Lower


I would suggest that everyone go to 13 minutes 10 seconds on the audio and listen to the first question out of the que during the Q & A session.

(Note: You may want to open up a second window so you can read the transcript and listen to the audio at the same time.)

Click here to listen to the Call.

The first question was from the line of Eric Hagen - Analyst at First Albany. The Q&A begins at about 13 minutes and 10 seconds into the C.C. Pay close attention to the last sentence of the transcript. (The devil is in the details!)

Here is the transcript:


*CFO Ken Kenworthy Sr.*


Eric: "Hi Ken... and Ken. Ahh quick question about your financing of this years drilling program: ahh, have you made any progress on getting another credit facility in place and um given the recent pull back in gas prices do you think you might have to curtail your drilling if it continues?"

Ken Sr: "Ahh we have several proposals... Financing proposals and we're working through them and and actually we are pursuing the best term and best rate ahhhhh...it appears it isn't gonna be a problem. Ahh, we're probably going to get $50 million into debt of some sort. Ahh..the best...the status is is we just need to find the best deal."

Eric: "Ok so it should be no problem executing on the program this year then... Ken? The..."

Ken Sr: "Should not be."

Eric: "Ok."

Ken Sr: "Unless the commodity prices collapse of course."

End Transcript...


*CFO Ken Kenworthy Sr. *

Did you hear what KEN mumbled at the end? The part that he mumbled should have been the part that was annunciated with clarity and emphasis. Instead he tried to do the old mumbling trick...trying to slip a zinger in under the radar of the listeners. That just happened to be one of the most important statements in the entire conference call that listeners NEEDED to latch onto. With that said it should come as no surprise that if NG goes lower GMXR will be unable to go forward with their drilling program. That is how close to the edge they are driving this company. They are being RECKLESS with the company. There is very little margin of error for the company or shareholders. I have been table pounding all along that GMXR of all companies should NOT be taking such an aggressive stand in the 2006 CAPEX program given the fact that their revenue per BOE produced is worth $39 based on $6.50 NG. Also with their costs up over $29.06 there is only a margin of $9.94 per BOE produced. That is razor thin folks. If NG drops to say $5.00 per Mcfe then each GMXR BOE will only be worth $30. With rising costs for drilling, workers, etc I see the costs of $29.06 per BOE produced rising above $30. With that said GMXR is facing NG production at a loss! If you have your heart set on owning NG then I would highly recommend you think about a low cost producer like UPL. They can be profitable with NG prices under $2.75.

GMXR is very near a cliff right now. The reserves in the ground won't be able to prevent an early collapse of share price or market cap if NG prices should go any lower. Keep in mind that my $17 fair value assumes NG prices of $6.50. If NG prices would sink lower than $6.50 per mcfe then a share price of $17 would be unsustainable. Production at a loss would bring early selling to GMXR shares and my target price of $17 would be reached sooner than anticipated.