GMX Resources (Nasdaq:GMXR) will spend 2011 working to develop its recently acquired oil and liquid plays, as the company tries to transform from a natural gas operator into a more balanced exploration and production company.

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2010 Results
A review of GMX Resources in 2010 shows that the company is highly leveraged to natural gas. The company reported proved reserves of 319.3 Bcfe at the end of 2010, with all of these reserves from Haynesville or Cotton Valley wells. GMX Resources also put 85% of its 2010 capital budget into drilling and completion of Haynesville Shale wells.

Oil and Liquid Acquisitions
In January 2011, GMX Resources announced the purchase of acreage in two high-growth oil and liquid plays in the United States. The company acquired approximately 40,000 net acres in the Denver Julesburg Basin that is prospective for the Niobrara formation, and another 26,000 net acres in Montana and North Dakota that are prospective for the Bakken and Three Forks formations.

Niobrara
GMX Resources has allocated $26.9 million in 2011 to develop the Niobrara. The company will begin with vertical test wells starting in July 2011 and will start a horizontal development program by the end of 2011. GMX Resources estimates it has 254 horizontal drilling locations here. Many companies are crowding into the Niobrara. Chesapeake Energy (NYSE:CHK) recently signed an agreement with CNOOC Limited (NYSE:CEO) to jointly develop acreage here.

Williston Basin
GMX Resources has budgeted $15.5 million in 2011 to develop its properties in the Williston Basin. The company plans to begin a horizontal development program starting in the third quarter of 2011. GMX Resources estimates that it has 81 locations to develop.

If the company is successful in its development plans over the next two years, GMX Resources will have 33% of its revenue and 23% of its production from oil and natural gas liquids in 2012. Fifty four percent of the company's capital budget will be devoted to oil and liquid development in 2012.

Another company active in the Bakken is Northern Oil and Gas (NYSE:NOG), which has a working interest in 332 Bakken and Three Forks wells in the Williston Basin. The company plans to participate in 36 net wells in 2011.

One impact of the shift to oil and liquid development is that GMX Resources removed all of its Cotton Valley proved undeveloped reserves (PUD's) from its books at the end of 2010. This was done to comply with accounting rules that require all PUD's to be developed within five years.

The Bottom Line
GMX Resources is slowing changing into a more balanced oil and gas company as the company continues to expand its operations into various oil and liquid plays in 2011. (For related reading, take a look at Unearth Profits In Oil Exploration And Production.)

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