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GMX Resources Provides Operational Update

Source: 10/3/2012, Location: North America

GMX RESOURCES INC., an oil and gas exploration and production Company with assets in the East Texas Basin, Denver Julesburg Basin and Williston Basin provides an update on recent drilling and completion activities.

Operations Update
Billings County North Dakota
The Basaraba 34-35-1H, 89%WI, GMXR’s eighth operated well is located in Sections 26&35, Township 144N Range 100W in Billings County North Dakota. The, well is the Company’s first Middle Bakken well in Billings County. It was successfully fracture stimulated using a thirty-nine stage plug and perf completion. It was fracture stimulated with 25% more proppant, 4MM# which was 44% white sand and 56% ceramic proppant. The peak flow rate was 1,673 BOEPD, 48/64” choke @ 1,000# Flowing Casing Pressure (FCP). The plug and perf completion was also the first time we used this completion procedure which included cleaning out the lateral. The coiled tubing unit was released on September 30th after milling out 33 plugs and reaching a depth of 19,000’. The Basaraba has a five day cumulative production of 4,375 BOE or an average of 875 BOE/Day.

The Company’s seventh operated well Fairfield State 21-16-1H in Sections 16&21, Township 143N Range 99W in Billings County North Dakota. During the sliding sleeve completion of the Three Forks we screened out after the first four stages. We were only able to complete less than 30% of the remainder of the lateral as a modified plug and perf design. The peak flow rate on the well was 177 BOE. The Middle Bakken in pilot hole looked very good and will be the target of future development.

McKenzie County North Dakota
The Akovenko 24-34-2H, the first Company well drilled with oil base mud is located in Sections 27&34, Township 146N, Range 99W in McKenzie County North Dakota. The well reached total depth in less than 30 days and drilling costs were $4MM, in line with our estimate. Plug and perf completion in the Middle Bakken is scheduled to begin in late October 2012. This ninth operated well will be the first plug and perf completion in McKenzie County in the Middle Bakken and the first completion in a lateral drilled with oil base mud. The oil base mud used in this well drilled to a total depth of 20,997' with a horizontal lateral length of 9,341' should exhibit very little damage to the rock’s natural permeability and porosity. The Company has a 92% working interest in the well. The Akovenko 24-34-2H will be the first well drilled with oil based mud and using a plug and perf completion methodology, completion recipe to be determined. The south offset Akovenko 24-34-1H was drilled with water base mud, completed thirty stages with sliding sleeves and should provide a good contrast to the Akovenko 24-34-2H.

We have spud our tenth operated well, the Lange 44-31-2H, located in Sections 30&3, Township 147N, Range 99W in McKenzie County North Dakota. The Company has an 89% working interest in the well and will target the Middle Bakken with a proposed total depth of 21,261' and a lateral length of 9,587'. The well will be our 2nd well drilled with oil base mud and completed with a plug and perf completion in McKenzie county. It will be drilled parallel to the Lange 11-30-1H and provide another comparison similar to the Akovenko wells. The Company has elected to participate in the drilling of the Marsh 41-16PH 2% working interest, which is located in Sections 16&21, Township 140N Range 97W in Stark County North Dakota.

<>Management Comment
Michael J. Rohleder Company President said” In our Q2 conference call we outlined a number of operational improvements that we expected to implement over the next few wells. These changes included using oil base mud during the entire drilling operation, switching to plug and perf completions versus sliding sleeve, using more proppant and using ceramic proppant in the mix. We also discussed the need for post completion operational improvements that would address the significant pump downtime we experienced in Q2 and into Q3 by installing more reliable diesel powered electrical generators on the pumps in the regions where no electrical infrastructure exists, which is most of our core acreage. We also stated that from this point our drilling will target the Middle Bakken in McKenzie and Billings Counties.

The Basaraba 34-35-1H is a Middle Bakken well, located in Billings County that incorporates most of the aforementioned improvements and, based on the first five day production rate, has the potential to be our best producing well. It clearly demonstrates that the Middle Bakken with the right drilling and completion recipe can produce meaningful production and reserves. The Fairfield State 21-16-1H however was completed in the Three Forks and as we reported on our Q2 call was unfortunately compromised and ultimately less than one-third of the lateral was able to be stimulated even after we attempted to complete the process with a modified plug and perf scheme. The early success we have seen with the Basaraba 34-35-1H and the log reports on the Fairfield State 21-16-1H showing similar Middle Bakken like the Basaraba suggests that future development in the Middle Bakken within the Fairfield State unit should yield similar results.

The Akovenko 24-34-2H well is our first well that will incorporate all of the changes I described and will be another important data point in our effort to determine the best development protocol. The Lange 41-31-2H will also provide very useful comparison information because it is being drilled parallel to the Lange 11-30-1H and will also incorporate all the improvements. We will continue evaluating our drilling and completion practices with the goal of delivering the best rate of return possible on our Bakken development program.”

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