Seven Secrets the Kenworthys' do Not want You to Know
Today's Press Release Confirms These Findings
In a Yahoo Message board post dated December 14, 2006 entitled, "7 Secrets the Kenworthys' Do NOT Want you to Know," seven reasons were given that cast serious doubt on the GMXR franchise ranging from significant overvaluation of GMXR shares to a GMXR management team that is not talented or detail oriented. One of the seven 'secrets' includes my near perfect track record on analyzing GMXR. Note how my GMXR FY2006 EPS estimate on March 10, 2006 was $0.67 when wallstreet was calling for $1.67. Today Wallstreet is calling for EXACTLY $0.67. My analysis is right on target!
Of the, "7 Secrets the Kenworthys' do NOT want You to Know" there are three that apply to the press release issued today after the market close on December 19, 2006.
The 'secrets' that apply include:
1. Secret #2 (high cost structure; horizontal well project producing at a loss.)
2. Secret #5 (Poor management team; Lack of talent & detail orientation.)
3. Secret #7 (My analysis on GMXR has been on target; Wallstreet is slow to understand GMXR)
Certainly connections can be made with all seven 'secrets' as they pertain to the press release but the above three need to be emphasized in relation to the high probability of failure with the GMXR horizontal well project.
Secret #2 High Cost Structure/ Horizontal Wells Economic Failure
GMXR has an extremely high cost structure and it is only going higher. Why? Horizontal drilling is very expensive. GMXR will more than likely be losing money on the projects. Drilling expensive wells when NG prices are low and headed lower is not a good business decision.
Let me repeat a key phrase in Secret #2: "GMXR will more than likely be losing money on the projects."
In the press release Ken Kenworthy Jr stated that the production rate from the completion is, "below expectations."
GMXR CEO Kenworthy Jr. indicated that the horizontal wells could be money losing projects when he emphasized, "We need 4 BCFE ultimate recovery per horizontal well at a finding cost of $1.25 per mcfe to justify a change from vertical development and it could take several wells to judge whether these efforts are going to provide the necessary results."
Secret #5 (Poor Management at GMXR; Lack of Talent and Attention to Detail)
GMXR has a management team that could easily be classified as poor. CEO Ken Kenworthy Jr. and CFO Ken Kenworthy Sr. lack the qualities of a superior management team in that their decision making skills are poor and could be classified as careless and reckless towards the shareholder's investment in the company and the success of GMXR. In addition the GMXR management team lacks the necessary attention to detail that is an absolute requirement of any senior leadership role.
One problem caused by a lack of attention to detail resulted in the CFO Ken Kenworthy Sr. signing the CEO certification of the 2005 10K. The CEO certification is reserved for the CEO and signifies that the 10K complies with the requirements of the SEC Act of 1934 and that the information contained in the report fairly presents the financial condition and results of company operations. Ultimately an amended 2005 10K report had to be filed.
Another problem caused by a lack of attention to detail resulted in GMXR filing 6 SEC filings late in the last 5 years. This is not normal to be late on so many SEC filings. As an example Arena Resources has been in business since 2001 and has submitted every SEC filing ontime. There is absolutely no excuse for a late filing.
What are some examples of poor decision making skills? In a Q4'05 conference call that took place in March of 2006, Ken Kenworthy Sr. noted his desire to saddle GMXR with $50 million in debt and to find, "the best deal." It is important to note that even the 'best deal' could be one that is not worth taking. Drilling the expensive horizontal wells at a time when natural gas prices are weak can only lead one to believe that the 'best deal' was a gamble (high risk/high cost bet) on a project with a low probability of economic success.
By stating in the press release, "We need 4 BCFE ultimate recovery per horizontal well at a finding cost of $1.25 per mcfe to justify a change from vertical development and it could take several wells to judge whether these efforts are going to provide the necessary results," the CEO is admitting that 'the best deal' is now presenting the likelihood of failure if ultimate recovery is less than expected or production costs are higher than expected. If natural gas prices soften as a result of warmer weather this expensive horizontal well drilling project would be a significant loss for GMXR and the shareholders.
Another drawback to the horizontal project is the fact that it will take several more wells to judge the longterm viability of the entire project. In other words the stakes must be raised where there is already disappointment in terms of production coming in "below expectations."
Superior management teams do not make decisions that are setups for failure.
Clearly this project was a setup for failure and the best deal was nothing more than a gamble. This is especially true given the fact that GMXR is a company with a very high cost structure as noted in secret #2.
Secret #7 (My analysis on GMXR has been Near Perfect; Wallstreet is Slow to Understand GMXR)
My track record on analyzing GMXR is near perfect. Note how my GMXR FY2006 EPS estimate on March 10, 2006 was $0.67 when wallstreet was calling for $1.67. Today Wallstreet is calling for EXACTLY $0.67. My analysis is right on target!
In conclusion, GMXR presents many risks to investors as stated in the post, "7 Secrets the Kenworthys' do Not want You to Know." The press release today confirms these findings.
Today's Press Release Confirms These Findings
In a Yahoo Message board post dated December 14, 2006 entitled, "7 Secrets the Kenworthys' Do NOT Want you to Know," seven reasons were given that cast serious doubt on the GMXR franchise ranging from significant overvaluation of GMXR shares to a GMXR management team that is not talented or detail oriented. One of the seven 'secrets' includes my near perfect track record on analyzing GMXR. Note how my GMXR FY2006 EPS estimate on March 10, 2006 was $0.67 when wallstreet was calling for $1.67. Today Wallstreet is calling for EXACTLY $0.67. My analysis is right on target!
Of the, "7 Secrets the Kenworthys' do NOT want You to Know" there are three that apply to the press release issued today after the market close on December 19, 2006.
The 'secrets' that apply include:
1. Secret #2 (high cost structure; horizontal well project producing at a loss.)
2. Secret #5 (Poor management team; Lack of talent & detail orientation.)
3. Secret #7 (My analysis on GMXR has been on target; Wallstreet is slow to understand GMXR)
Certainly connections can be made with all seven 'secrets' as they pertain to the press release but the above three need to be emphasized in relation to the high probability of failure with the GMXR horizontal well project.
Secret #2 High Cost Structure/ Horizontal Wells Economic Failure
GMXR has an extremely high cost structure and it is only going higher. Why? Horizontal drilling is very expensive. GMXR will more than likely be losing money on the projects. Drilling expensive wells when NG prices are low and headed lower is not a good business decision.
Let me repeat a key phrase in Secret #2: "GMXR will more than likely be losing money on the projects."
In the press release Ken Kenworthy Jr stated that the production rate from the completion is, "below expectations."
GMXR CEO Kenworthy Jr. indicated that the horizontal wells could be money losing projects when he emphasized, "We need 4 BCFE ultimate recovery per horizontal well at a finding cost of $1.25 per mcfe to justify a change from vertical development and it could take several wells to judge whether these efforts are going to provide the necessary results."
Secret #5 (Poor Management at GMXR; Lack of Talent and Attention to Detail)
GMXR has a management team that could easily be classified as poor. CEO Ken Kenworthy Jr. and CFO Ken Kenworthy Sr. lack the qualities of a superior management team in that their decision making skills are poor and could be classified as careless and reckless towards the shareholder's investment in the company and the success of GMXR. In addition the GMXR management team lacks the necessary attention to detail that is an absolute requirement of any senior leadership role.
One problem caused by a lack of attention to detail resulted in the CFO Ken Kenworthy Sr. signing the CEO certification of the 2005 10K. The CEO certification is reserved for the CEO and signifies that the 10K complies with the requirements of the SEC Act of 1934 and that the information contained in the report fairly presents the financial condition and results of company operations. Ultimately an amended 2005 10K report had to be filed.
Another problem caused by a lack of attention to detail resulted in GMXR filing 6 SEC filings late in the last 5 years. This is not normal to be late on so many SEC filings. As an example Arena Resources has been in business since 2001 and has submitted every SEC filing ontime. There is absolutely no excuse for a late filing.
What are some examples of poor decision making skills? In a Q4'05 conference call that took place in March of 2006, Ken Kenworthy Sr. noted his desire to saddle GMXR with $50 million in debt and to find, "the best deal." It is important to note that even the 'best deal' could be one that is not worth taking. Drilling the expensive horizontal wells at a time when natural gas prices are weak can only lead one to believe that the 'best deal' was a gamble (high risk/high cost bet) on a project with a low probability of economic success.
By stating in the press release, "We need 4 BCFE ultimate recovery per horizontal well at a finding cost of $1.25 per mcfe to justify a change from vertical development and it could take several wells to judge whether these efforts are going to provide the necessary results," the CEO is admitting that 'the best deal' is now presenting the likelihood of failure if ultimate recovery is less than expected or production costs are higher than expected. If natural gas prices soften as a result of warmer weather this expensive horizontal well drilling project would be a significant loss for GMXR and the shareholders.
Another drawback to the horizontal project is the fact that it will take several more wells to judge the longterm viability of the entire project. In other words the stakes must be raised where there is already disappointment in terms of production coming in "below expectations."
Superior management teams do not make decisions that are setups for failure.
Clearly this project was a setup for failure and the best deal was nothing more than a gamble. This is especially true given the fact that GMXR is a company with a very high cost structure as noted in secret #2.
Secret #7 (My analysis on GMXR has been Near Perfect; Wallstreet is Slow to Understand GMXR)
My track record on analyzing GMXR is near perfect. Note how my GMXR FY2006 EPS estimate on March 10, 2006 was $0.67 when wallstreet was calling for $1.67. Today Wallstreet is calling for EXACTLY $0.67. My analysis is right on target!
In conclusion, GMXR presents many risks to investors as stated in the post, "7 Secrets the Kenworthys' do Not want You to Know." The press release today confirms these findings.
posted by -Aztec- at 4:36 PM
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