GMX Resources Inc. is pressing forward with a plan to sell its major assets, subject to a $338 million stalking horse bid from a group of its senior lenders.
The subject of a well attended bankruptcy court hearing Sept. 10 was a debtors’ motion for an order establishing bidding procedures in connection with the sale of substantially all of the debtors’ assets.
GMX asked the court to authorize and approve the form of a stalking horse asset purchase agreement, to set dates for an auction and sale hearing, and to establish procedures to determine cure amounts related to the assumption and assignment of contracts and unexpired leases.
GMX also asked for an order approving the sale of the assets free and clear of all liens, claims and encumbrances to the winning bidder; and authorizing the assumption and assignment of contracts and unexpired leases.
It is hoped that the stalking horse bid will attract additional bidding and preserve the company’s value.
“The stalking horse APA is, in the business judgment of the debtors, an agreement that allows the debtors to preserve, maintain and improve the marketability of the purchased assets, while at the same time allowing the debtors to seek higher and better bids,” the company said in an earlier motion to the Oklahoma bankruptcy court.
No other options
GMX told the court that it was not able to raise enough capital elsewhere to continue operating. The company had been hammered by the decline in natural gas prices.
“The debtors have been unable to raise sufficient capital to continue operating and developing their assets because of the debtors’ current capital structure and the decline in the price of natural gas,” GMX said.
In its April 1 bankruptcy filing GMX listed assets of $281.1 million and debt of $458.5 million as of Dec. 1.
In June, GMX reported losses for eight consecutive quarters.
According to court documents, the company’s cash position dropped from $107 million in the fourth quarter of 2011 down to $18 million in the third quarter of 2012.
In 2010, the company made a strategic decision to expand from East Texas into basins with oil potential. In early 2011, the company acquired positions in more than 75,000 undeveloped net acres in the Williston Basin of North Dakota and Montana, targeting the Bakken and Three Forks formations, and in the Denver Julesburg Basin of Wyoming, targeting the emerging Niobrara play.
GMX did boost production to about 5,400 barrels of oil equivalent per day — but that was only 11 percent of the company’s total net output according to last year’s third quarterly financial statement to the SEC.
