April 1, 2013 / 2:31 PM / 5 years ago

UPDATE 2-GMX Resources files for bankruptcy

April 1 (Reuters) - Oil and gas producer GMX Resources Inc filed for Chapter 11 bankruptcy protection, hit by weak natural gas prices.

The company, with assets in the Williston Basin in North Dakota and Montana, the Denver Julesburg Basin in Wyoming and the East Texas Basin, said it couldn’t raise funds for long-term liquidity needs.

Two GMX units - Diamond Blue Drilling Co and Endeavor Pipeline Inc - also filed for bankruptcy protection.

Diamond Blue has minimal assets, while Endeavor Pipeline operates a natural gas gathering system in the East Texas Basin.

GMX also has a 60 percent stake in Endeavor Gathering, which owns the natural gas gathering system and related equipment operated by Endeavor Pipeline. GMX did not include Endeavor Gathering in the filing.

The company said it was negotiating an agreement with holders of its senior secured notes due 2017 for them to acquire substantially all its operating assets and undeveloped acreage.

These “stalking horse bids” set baseline offers for the assets and are still subject to auctions. The sale also needs approval from the Bankruptcy Court.

GMX said it has obtained debtor-in-possession financing of up to $50 million from the bondholders.

Natural gas prices have dropped sharply as record production from U.S. shale fields created a glut. Natural gas prices were as high as $14 per million British thermal units (BTU) in 2005, compared with slightly below $4 per million BTU on Monday.

GMX like others has been trying to raise its oil output but the fuel accounted for only 11 percent of total net production in the third quarter, the company’s last reported quarter. GMX has reported losses for the last eight quarters.

The company in March suspended payment of quarterly dividends on its preferred stock. Later that month, GMX missed an interest payment on senior secured notes due 2018.

It said on March 4 that it had to make the payment within 30 days to avoid defaulting on the debt.

GMX had total assets of $281.1 million and liabilities of $458.5 million as of Dec. 1, according to court documents.

The case is In re: GMX Resources Inc, U.S. Bankruptcy Court, Western District of Oklahoma, No:13-11456.

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