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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-K/A
 Amendment No. 1
 þ
    
    ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2006
 Commission file number 001-32977
 GMX RESOURCES INC.
 (Exact name of registrant as specified in its charter)
 Oklahoma
    
    73-1534474(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)9400 North Broadway, Suite 600, Oklahoma City, Oklahoma
    
    73114(Address of principal executive offices)
    
    (Zip Code)(Registrants telephone number, including area code)
    
    (405) 600-0711
  Title of Class
    
    Name of Exchange on Which RegisteredCommon Stock, $0.001 par value
    
    The NASDAQ Stock Market, LLCSeries B Cumulative Preferred Stock, $0.001 par value
    
    The NASDAQ Stock Market, LLC
  o þ
 o þ
 þ o
 þ
  o þ o
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE:




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EXPLANATORY NOTE




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GMX RESOURCES INC.
Form 10-K
Table of Contents
 PagePART I
    
    
    1Item 1. Business
    
    
    1General
    
    
    12006 and 2007 Developments
    
    
    2Business Strategy
    
    
    22007 Plans
    
    
    3Marketing
    
    
    3Regulation
    
    
    4Gas Gathering
    
    
    7Competition
    
    
    7Facilities
    
    
    8Employees
    
    
    8Certain Technical Terms
    
    
    8Availability of Information
    
    
    11Item 1A. Risk Factors
    
    
    12Risks Related to GMX
    
    
    12Risks Related to the Oil and Gas Industry
    
    
    15Item 1B. Unresolved Staff Comments
    
    
    19Item 2. Properties
    
    
    19General
    
    
    19East Texas
    
    
    20Northwestern Louisiana
    
    
    22Southeast New Mexico
    
    
    23Reserves
    
    
    23Costs Incurred
    
    
    24Drilling Results
    
    
    25Acreage
    
    
    26Productive Well Summary
    
    
    26Item 3. Legal Proceedings
    
    
    26Item 4. Submission of Matters to a Vote of Security Holders
    
    
    26PART II
    
    
    27Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
    
    
    27Common Stock
    
    
    27Equity Compensation Plan Information
    
    
    27Shareholder Return Performance Graph
    
    
    28Recent Sales of Unregistered Securities
    
    
    28
  i




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Purchases of Equity Securities
    
    
    28Item 6. Selected Financial Data
    
    
    28Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operation
    
    
    30Summary Operating and Reserve Data
    
    
    30Critical Accounting Policies
    
    
    31Results of Operations for the Year Ended December 31, 2006 Compared
to the Year Ended December 31, 2005
    
    
    34Results of Operations for the Year Ended December 31, 2005 Compared to
the Year Ended December 31, 2004
    
    
    35Capital Resources and Liquidity
    
    
    36Credit Facility
    
    
    37Other Financing  2006 and 2007
    
    
    38Working Capital
    
    
    38Commitments and Capital Expenditures
    
    
    38Liquidity and Financing Considerations
    
    
    392007 Guidance
    
    
    39Recently Issued Accounting Pronouncements
    
    
    39Off-Balance Sheet Arrangements
    
    
    39Price Risk Management
    
    
    39Forward-Looking Statements
    
    
    40Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    40Item 8. Financial Statements and Supplementary Data
    
    
    41Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
    
    
    41Item 9A. Controls and Procedures
    
    
    41Controls and Procedures
    
    
    41Changes in Internal Control Over Financial Reporting
    
    
    42Managements Annual Report on Internal Control over Financial Reporting
    
    
    42Certifications
    
    
    42Item 9B. Other Information
    
    
    42PART III
    
    
    43PART IV
    
    
    44Item 15. Exhibits and Financial Statement Schedules
    
    
    44Exhibit 23.1Exhibit 23.2Exhibit 23.3Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   ii




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PART I
 
 Item 1. Business
 
      1




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2006 and 2007 Developments
    
 Business Strategy
  Experienced Management.
 Substantial Drilling and Exploitation Opportunities.
  2




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Significant Inventory of Unproved Prospects.
 Emphasis on Gas Reserves.
 Joint Development of East Texas
 Control of Rigs.
 
 2007 Plans
  
 Marketing
   3




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Natural Gas.
  Crude Oil.
   
 Regulation
 Exploration and Production.
  4




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Environmental Matters.
     5




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Marketing and Transportation.
    6




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Gas Gathering
   
 Competition
    7




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Facilities
   
 Employees
  
 Certain Technical Terms
  Bbl.
 Bcf.
 Bcfe.
 Btu.
 BBtu.
 Developed Acreage.
 Development Location.
 Development Well.
  8




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Drilling Unit.
 Dry Hole.
 Estimated Future Net Revenues.
 Exploratory Well.
 Gross Acre.
 Gross Well.
 Infill Drilling.
 Injection Well.
 Lease Operating Expense.
 MBbls.
 MBtu.
 Mcf.
 Mcfpd
 Mcfe.
 MMBbls.
 MMBtu.
 MMcf.
  9




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MMcfe.
 Natural Gas Liquids.
 Net Acres or Net Wells.
 NYMEX.
 Operator.
 Present Value.
 Productive Well.
 Proved Developed Reserves.
 Proved Reserves.
 Proved Undeveloped Reserves.
  10




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Recompletion.
 Royalty.
 Secondary Recovery.
 Undeveloped Acreage.
 Waterflood.
 Working Interest.
 Workover.
 
 Availability of Information
    11




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Item 1A. Risk Factors.
 
 Risks Related to GMX
 Our principal shareholders own a significant amount of common stock, giving them significant
influence over corporate transactions and other matters.
  The loss of our President or other key personnel could adversely affect us.
  We are managed by the members of a single family, giving them influence and control in
corporate transactions and their interests may differ from those of other shareholders.
  Our wells produce oil and gas at a relatively slow rate.
   12




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Our future performance depends upon our ability to obtain capital to find or acquire
additional oil and natural gas reserves that are economically recoverable.
  We have not paid dividends and do not anticipate paying any dividends on our common stock in
the foreseeable future.
  Hedging our production may result in losses or limit potential gains.
  
    
    production is less than expected;
    
    the counter-party to the hedging contract defaults on its contact obligations; or
    
    there is a change in the expected differential between the underlying price in the
hedging agreement and actual prices received.
   13




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Our credit facility contains certain covenants that may inhibit our ability to make certain
investments, incur additional indebtedness and engage in certain other transactions, which could
adversely affect our ability to meet our future goals.
  
    
    our investments, loans and advances and the paying of dividends on common stock and
other restricted payments;
    
    our incurrence of additional indebtedness;
    
    the granting of liens, other than liens created pursuant to the credit facility and
certain permitted liens;
    
    mergers, consolidations and sales of all or substantial part of our business or
properties; and
    
    the hedging, forward sale or swap of our production of crude oil or natural gas or
other commodities.
  Failure by us to achieve and maintain effective internal control over financial reporting in
accordance with the rules of the SEC could harm our business and operating results and/or result in
a loss of investor confidence in our financial reports, which could have a material adverse effect
on our business and stock price.
   14




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We have a shareholder rights plan and provisions in our organizational documents and under
Oklahoma law that could delay or prevent a change in control of our company, which could adversely
affect the price of our common stock.
  
 Risks Related to the Oil and Gas Industry
 A substantial decrease in oil and natural gas prices would have a material impact on us.
   
    
    worldwide and domestic supplies of oil and gas;
    
    weather conditions;
    
    the level of consumer demand;
    
    the price and availability of alternative fuels;
    
    the availability of pipeline capacity;
    
    the price and level of foreign imports;
    
    domestic and foreign governmental regulations and taxes;
    
    the ability of the members of the Organization of Petroleum Exporting Countries to
agree to and maintain oil price and production controls;
    
    political instability or armed conflict in oil-producing regions, and
    
    the overall economic environment.
  15




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We have encountered difficulty in obtaining equipment and services.
  Estimates of proved natural gas and oil reserves and present value of proved reserves are not
precise.
    16




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We may incur write-downs of the net book values of our oil and gas properties that would
adversely affect our shareholders equity and earnings.
  Operational risks in our business are numerous and could materially impact us.
  
    
    the presence of unanticipated pressure or irregularities in formations;
    
    accidents;
    
    title problems;
    
    weather conditions;
    
    compliance with governmental requirements;
    
    shortages or delays in the delivery of equipment;
    
    injury or loss of life;
  17




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
    
    severe damage to or destruction of property, natural resources and equipment;
    
    pollution or other environmental damage;
    
    clean-up responsibilities;
    
    regulatory investigation and penalties; and
    
    other losses resulting in suspension of our operations.
  Governmental regulations could adversely affect our business.
   Environmental liabilities could adversely affect our business.
  
    
    from a well or drilling equipment at a drill site;
    
    leakage from gathering systems, pipelines, transportation facilities and storage
tanks;
    
    damage to oil and natural gas wells resulting from accidents during normal
operations; and
    
    blowouts, cratering and explosions.
  18




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Competition in the oil and gas industry is intense, and we are smaller than many of our
competitors.
  
 Item 1B. Unresolved Staff Comments.
  
 Item 2. Properties.
 
 General
  
    
    East Texas, Carthage, North Field and Northwest Louisiana and East Texas, Waskom
Field;
    
    The Tatum Basin, Crossroads Field in Southeast New Mexico.
  19




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East Texas
    
    
    Southeastand
    
    
    NewProperty Statistics:
    
    Louisiana
    
    
    Mexico
    
    
    TotalProved reserves (MMcfe)
    
    
    256,311
    
    
    
    2,092
    
    
    
    258,403Percent of total proved reserves
    
    
    99
    %
    
    
    1
    %
    
    
    100
    %Gross producing wells
    
    
    155
    
    
    
    9
    
    
    
    164Net producing wells
    
    
    90.1
    
    
    
    5.7
    
    
    
    95.8Gross acreage
    
    
    31,737
    
    
    
    1,920
    
    
    
    33,657Net acreage
    
    
    17,786
    
    
    
    1,458
    
    
    
    19,244Proved developed reserves (MMcfe)
    
    
    75,181
    
    
    
    1,302
    
    
    
    76,483Proved undeveloped reserves (MMcfe)
    
    
    181,130
    
    
    
    790
    
    
    
    181,920Estimated total future development costs ($000s)
    
    
    308,951
    
    
    
    956
    
    
    
    309,907Estimated 2007 development costs ($000s)
    
    
    145,000
    
    
    
    0
    
    
    
    145,000Proved undeveloped locations
    
    
    274
    
    
    
    1
    
    
    
    275Year ended December 31, 2006 results:Production (net MMcfe)
    
    
    4,166
    
    
    
    161
    
    
    
    4,327Average net daily production (Mcfe)
    
    
    11,413
    
    
    
    442
    
    
    
    11,855
  
 East Texas
    20




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21




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Northwestern Louisiana
   22




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Southeast New Mexico
   
 Reserves
   Years Ended December 31,2004
    
    
    2005
    
    
    2006Proved Developed:Gas (MMcf)
    
    
    18,980
    
    
    
    41,503
    
    
    
    70,801Oil (MBbls)
    
    
    584
    
    
    
    770
    
    
    
    947Total (MMcfe)
    
    
    22,484
    
    
    
    46,123
    
    
    
    76,484Proved Undeveloped:Gas (MMcf)
    
    
    37,908
    
    
    
    108,673
    
    
    
    171,140Oil (MBbls)
    
    
    653
    
    
    
    1,201
    
    
    
    1,797Total (MMcfe)
    
    
    41,826
    
    
    
    115,880
    
    
    
    181,920Total Proved:Gas (MMcf)
    
    
    56,888
    
    
    
    150,176
    
    
    
    241,941Oil (MBbls)
    
    
    1,237
    
    
    
    1,971
    
    
    
    2,744Total (MMcfe)
    
    
    64,309
    
    
    
    162,003
    
    
    
    258,404Estimated
Future Net Revenues1($000s)
    
    $
    214,278
    
    
    $
    1,648,402
    
    
    $
    1,577,259Present
Value1($000s)
    
    $
    83,237
    
    
    $
    409,624
    
    
    $
    262,066Standardized Measure1($000s)
    
    $
    64,231
    
    
    $
    302,396
    
    
    $
    196,015
 
 1
    
    The prices used in calculating Estimated Future Net
Revenues and the Present Value are determined using prices as of period end.
Estimated Future Net Revenues and the Present Value give no effect to federal
or state income taxes attributable to estimated future net revenues. See Note
LSupplemental Information on Oil and Gas Operations for information about the
standardized measure of discounted future net cash flows. We believe that the
Estimated Future Net Revenue and Present Value are useful measures in addition
to standardized measure as it assists in both the determination of future cash
flows of the current reserves as well as in making relative value comparisons
among peer companies. The standardized measure is dependent on the unique tax
situation of each individual company, while the pre-tax Present Value is based
on prices and discount factors which are consistent from company to company.
We also understand that securities analysts used this measure in similar ways.
  23




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Costs Incurred
   24




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Year ended December 31,2004
    
    
    2005
    
    
    2006Property acquisition costs:Proved
    
    $
    
    
    
    $
    
    
    
    $
    Unproved
    
    
    851,617
    
    
    
    1,255,680
    
    
    
    597,630Development costs
    
    
    9,152,257
    
    
    
    25,211,613
    
    
    
    104,657,264Total
    
    $
    10,003,874
    
    
    $
    26,467,293
    
    
    $
    105,254,894
 
 Drilling Results
  Year Ended December 31,2004
    
    
    2005
    
    
    2006Development wells:
    
    Gross
    
    
    Net
    
    
    Gross
    
    
    Net
    
    
    Gross
    
    
    NetGas
    
    
    15
    
    
    
    4
    
    
    
    31
    
    
    
    16
    
    
    
    67
    
    
    
    35.3Oil
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Dry
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    15
    
    
    
    4
    
    
    
    31
    
    
    
    16
    
    
    
    67
    
    
    
    35.3
 
 Acreage
  Developed
    
    
    UndevelopedLocation
    
    
    
    
    
    Gross
    
    
    Net
    
    
    Gross
    
    
    NetEast Texas and Louisiana
    
    
    
    
    
    
    24,347
    
    
    
    13,702
    
    
    
    7,390
    
    
    
    4,084Southeast New Mexico
    
    
    
    
    
    
    1,920
    
    
    
    1,458
    
    
    
    
    
    
    
    Total
    
    
    
    
    26,267
    
    
    
    15,160
    
    
    
    7,390
    
    
    
    4,084
   25




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Productive Well Summary
  Productive WellsType of Well
    
    Gross
    
    
    NetGas
    
    
    144
    
    
    
    80.4Oil
    
    
    20
    
    
    
    15.4Total
    
    
    164
    
    
    
    95.8
 
 Item 3. Legal Proceedings.
  
 Item 4. Submission of Matters to a Vote of Security Holders.
   26




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PART II
 
 Item 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities.
 
 Common Stock
  High
    
    
    LowYear Ended December 31, 2005First Quarter
    
    $
    13.29
    
    
    $
    6.22Second Quarter
    
    
    14.69
    
    
    
    9.53Third Quarter
    
    
    27.00
    
    
    
    13.69Fourth Quarter
    
    
    42.27
    
    
    
    20.66Year Ended December 31, 2006First Quarter
    
    $
    50.50
    
    
    $
    28.65Second Quarter
    
    
    47.00
    
    
    
    25.17Third Quarter
    
    
    35.12
    
    
    
    25.40Fourth Quarter
    
    
    48.88
    
    
    
    30.60
   
 Equity Compensation Plan Information
  Number of Shares to
    
    
    Weighted-Average
    
    
    Remaining Sharesbe Issued Upon
    
    
    Exercise Price of
    
    
    Available for FutureExercise of
    
    
    Outstanding
    
    
    Issuance Under EquityPlan Category
    
    Outstanding Options
    
    
    Options
    
    
    Compensation PlansEquity Compensation
Plans Approved by
Shareholders
    
    
    270,250
    
    
    $
    14.89
    
    
    
    134,749
  27




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Shareholder Return Performance Graph
   COMPARISON OF 5 YEAR
CUMULATIVE TOTAL RETURN*
Among GMX Resources, Inc., The Russell 2000 Index
And The AMEX Oil Index 
 * $100
invested on 12/31/01 in stock or index-including reinvestment of dividends. Fiscal year ending December 31. 
 Recent Sales of Unregistered Securities
  
 Purchases of Equity Securities
  
 Item 6. Selected Financial Data.
   28




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Years Ended December 31,2002
    
    
    2003
    
    
    2004
    
    
    2005
    
    
    2006Statement of Operations Data:Oil and gas sales
    
    $
    5,970,792
    
    
    $
    5,367,370
    
    
    $
    7,689,882
    
    
    $
    19,026,050
    
    
    $
    31,882,072Interest and other income
    
    
    17,550
    
    
    
    21,424
    
    
    
    143,828
    
    
    
    166,654
    
    
    
    150,616Total revenues
    
    
    5,988,342
    
    
    
    5,388,794
    
    
    
    7,833,710
    
    
    
    19,192,704
    
    
    
    32,032,688Lease operations
    
    
    1,324,481
    
    
    
    850,034
    
    
    
    1,261,109
    
    
    
    2,070,286
    
    
    
    4,478,805Production and severance taxes
    
    
    382,825
    
    
    
    384,069
    
    
    
    518,721
    
    
    
    1,241,338
    
    
    
    464,822General and administrative
    
    
    2,577,388
    
    
    
    1,578,865
    
    
    
    1,985,912
    
    
    
    3,388,396
    
    
    
    5,828,865Depreciation, depletion and
amortization
    
    
    1,901,976
    
    
    
    1,549,678
    
    
    
    2,043,485
    
    
    
    3,982,079
    
    
    
    8,046,173Interest
    
    
    510,472
    
    
    
    439,313
    
    
    
    558,504
    
    
    
    142,409
    
    
    
    824,055Total expenses
    
    
    6,697,142
    
    
    
    4,801,959
    
    
    
    6,367,731
    
    
    
    10,824,508
    
    
    
    19,642,720Income (loss) before income taxes
    
    
    (708,800
    )
    
    
    586,835
    
    
    
    1,465,979
    
    
    
    8,368,196
    
    
    
    12,389,968Income tax expense  current
    
    
    (263,000
    )
    
    
    
    
    
    
    24,206
    
    
    
    
    
    
    
    Income tax expense  deferred
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,212,100
    
    
    
    3,415,100Net income before cumulative effect
of a change in accounting
principle
    
    
    (445,800
    )
    
    
    586,835
    
    
    
    1,441,773
    
    
    
    7,156,096
    
    
    
    8,974,868Cumulative effect of a change in
accounting principle
    
    
    
    
    
    
    (51,834
    )
    
    
    
    
    
    
    
    
    
    
    Preferred stock dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,798,610Net income (loss) applicable to
common stock
    
    $
    (445,800
    )
    
    $
    535,001
    
    
    $
    1,441,773
    
    
    $
    7,156,096
    
    
    $
    7,176,258Net income (loss) per share  before
cumulative effect
    
    $
    (.07
    )
    
    $
    .09
    
    
    $
    .19
    
    
    $
    .81
    
    
    $
    .65Cumulative effect
    
    
    
    
    
    
    (.01
    )
    
    
    
    
    
    
    
    
    
    
    Net income (loss) per share 
basic
    
    $
    (.07
    )
    
    $
    .08
    
    
    $
    .19
    
    
    $
    .81
    
    
    $
    .65Net income (loss) per share  diluted
    
    $
    (.07
    )
    
    $
    .08
    
    
    $
    .19
    
    
    $
    .79
    
    
    $
    .64Weighted average common shares  basic
    
    
    6,550,000
    
    
    
    6,560,000
    
    
    
    7,396,880
    
    
    
    8,797,529
    
    
    
    11,120,204Weighted average common shares 
diluted
    
    
    6,550,000
    
    
    
    6,560,000
    
    
    
    7,491,778
    
    
    
    9,102,181
    
    
    
    11,283,265Statement of Cash Flows Data:Cash provided by (used in) operating
activities
    
    $
    (2,547,639
    )
    
    $
    1,014,290
    
    
    $
    3,684,155
    
    
    $
    16,323,103
    
    
    
    38,333,076Cash provided by (used in) investing
activities
    
    
    1,267,831
    
    
    
    464,315
    
    
    
    (8,877,944
    )
    
    
    (39,549,002
    )
    
    
    (130,572,799
    )Cash provided by (used in) financing
activities
    
    
    1,820,000
    
    
    
    (1,385,000
    )
    
    
    5,418,813
    
    
    
    24,755,850
    
    
    
    94,806,975Balance Sheet Data (at end of period):Oil and gas properties, net
    
    $
    29,359,309
    
    
    $
    27,660,317
    
    
    $
    35,956,760
    
    
    $
    58,927,397
    
    
    $
    157,300,361Total assets
    
    
    33,319,432
    
    
    
    31,501,206
    
    
    
    40,991,463
    
    
    
    81,103,271
    
    
    
    210,322,523Long-term debt, including current
portion
    
    
    8,100,000
    
    
    
    6,690,000
    
    
    
    3,762,294
    
    
    
    1,756,002
    
    
    
    41,820,283Shareholders equity
    
    
    21,607,463
    
    
    
    22,618,565
    
    
    
    32,406,856
    
    
    
    61,225,096
    
    
    
    131,480,942
  29




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##### Table of Contents



Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operation.
 
 Summary Operating and Reserve Data
  Year Ended December 31,2002
    
    
    2003
    
    
    2004
    
    
    2005
    
    
    2006Production:Oil (MBbls)
    
    
    70
    
    
    
    35
    
    
    
    30
    
    
    
    48
    
    
    
    69Natural gas (MMcf)
    
    
    1,639
    
    
    
    917
    
    
    
    1,049
    
    
    
    1,930
    
    
    
    3,915Gas equivalent (MMcfe)
    
    
    2,059
    
    
    
    1,124
    
    
    
    1,231
    
    
    
    2,220
    
    
    
    4,327Average Sales Price:Oil (per Bbl)
    
    $
    23.48
    
    
    $
    30.41
    
    
    $
    40.83
    
    
    $
    53.35
    
    
    $
    63.22Natural gas (per Mcf)(1)
    
    
    3.03
    
    
    
    4.73
    
    
    
    6.15
    
    
    
    8.52
    
    
    
    7.03Average sales price (per Mcfe)
    
    $
    3.22
    
    
    $
    4.79
    
    
    $
    6.25
    
    
    $
    8.57
    
    
    $
    7.37Operating and Overhead Costs (per Mcfe):Lease operating expenses
    
    $
    .64
    
    
    $
    .74
    
    
    $
    1.03
    
    
    $
    .93
    
    
    $
    1.04Production and severance taxes(2)
    
    
    .19
    
    
    
    .34
    
    
    
    .42
    
    
    
    .56
    
    
    
    .11General and administrative
    
    
    1.25
    
    
    
    1.40
    
    
    
    1.61
    
    
    
    1.53
    
    
    
    1.35Total
    
    $
    2.08
    
    
    $
    2.48
    
    
    $
    3.06
    
    
    $
    3.02
    
    
    $
    2.50Operating Margin (per Mcfe)
    
    $
    1.14
    
    
    $
    2.31
    
    
    $
    3.19
    
    
    $
    5.55
    
    
    $
    4.87Other (per Mcfe):Depreciation, depletion and
amortization  oil and gas
production
    
    $
    .92
    
    
    $
    1.08
    
    
    $
    1.28
    
    
    $
    1.58
    
    
    $
    1.59Estimated Net Proved Reserves (as of period-end):Natural gas (Bcf)
    
    
    56.7
    
    
    
    45.0
    
    
    
    56.9
    
    
    
    150.2
    
    
    
    241.9Oil (MMbls)
    
    
    1.7
    
    
    
    1.3
    
    
    
    1.2
    
    
    
    2.0
    
    
    
    2.7Total (Bcfe)
    
    
    66.7
    
    
    
    53.0
    
    
    
    64.3
    
    
    
    162.0
    
    
    
    258.4Estimated Future Net Revenues ($MM)(3)(4)
    
    $
    486.3
    
    
    $
    178.3
    
    
    $
    214.3
    
    
    $
    1,648.9
    
    
    $
    1,557.3Present Value ($MM)(3)(4)
    
    $
    80.6
    
    
    $
    71.2
    
    
    $
    83.2
    
    
    $
    409.6
    
    
    $
    262.1Standardized measure of discounted future net cash
flows ($MM)(5)
    
    $
    54.3
    
    
    $
    48.0
    
    
    $
    64.2
    
    
    $
    302.4
    
    
    $
    196.0
 
 1
    
    Net of results of hedging activities reduced the average
gas price in 2002 by $.40 per Mcf and 2003 by $.48 per Mcf and increased the
average gas price in 2006 by $0.24 per Mcf. There was no hedging activity in
2004 or 2005.2
    
    Production and severance taxes in 2006 reflect
severance tax refunds of $1,408,433 received or accrued during the year.3
    
    See Item 1  Certain Technical Terms.4
    
    The prices used in calculating Estimated Future Net
Revenues and the Present Value are determined using prices as of period end.
Estimated Future Net Revenues and the Present Value give no effect to federal
or state income taxes attributable to estimated future net revenues. See Item
2  Reserves.5
    
    The standardized measure of discounted future net cash
flows gives effect to federal and state income taxes attributable to estimated
future net revenues. See Note L  Supplemental Information on Oil and Gas
Operations.  30




---



##### Table of Contents



Critical Accounting Policies
  Full Cost Calculations
    31




---



##### Table of Contents



Asset Retirement Obligations
 Accounting for Asset
Retirement Obligations
  32




---



##### Table of Contents



Income Taxes
  Derivative Instruments
 Accounting for Derivative Instruments and Hedging Activities
   33




---



##### Table of Contents



Other
  
 Results of Operations for the Year Ended December 31, 2006 Compared to the Year Ended December 31,
2005
 Oil and Gas Sales
 Lease Operations
 Production and Severance Taxes
 Depreciation, Depletion and Amortization.
 Interest
  34




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##### Table of Contents



General And Administrative Expense.
 Income Taxes
 Net Income and Net Income Per Share.
 
 Results of Operations for the Year Ended December 31, 2005 Compared to the Year Ended December 31,
2004
 Oil and Gas Sales.
 Lease Operations.
 Production and Severance Taxes
 Depreciation, Depletion and Amortization
 Interest
  35




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##### Table of Contents



General And Administrative Expense.
 Income Taxes
 Net Income and Net Income Per Share
 
 Capital Resources and Liquidity
  Cash FlowYear Ended December 31, 2006 Compared to Year Ended December 31, 2005.
 Cash FlowYear Ended December 31, 2005 Compared to Year Ended December 31, 2004.
  36




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##### Table of Contents



Credit Facility
             37




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##### Table of Contents



Other Financing  2006 and 2007
 Warrant Exercises.
 Preferred Stock Issuance
 Common Stock Sale and Issuance
 
 Working Capital
  
 Commitments and Capital Expenditures
  Payments Due by PeriodLess than
    
    
    
    
    
    
    
    
    
    
    More thanContractual Obligations
    
    Total
    
    
    1 year
    
    
    1-3 years
    
    
    3-5 years
    
    
    5 yearsLong-term debt
    
    $
    40,000,000
    
    
    $
    
    
    
    $
    40,000,000
    
    
    $
    
    
    
    $
    Operating leases
    
    
    564,950
    
    
    
    190,611
    
    
    
    339,526
    
    
    
    34,813
    
    
    
    75% PVOG Financing1
    
    
    1,820,283
    
    
    
    251,447
    
    
    
    386,985
    
    
    
    318,884
    
    
    
    862,967Total
    
    $
    42,385,233
    
    
    $
    442,058
    
    
    $
    40,726,511
    
    
    $
    353,697
    
    
    $
    862,967
 
 1
    
    PVOG financing is payable out of 75% of revenues from
the wells financed and repayment is based on estimated production which may
vary from actual.  38




---



##### Table of Contents



Liquidity and Financing Considerations
  
 2007 Guidance
  
 Recently Issued Accounting Pronouncements
  
 Off-Balance Sheet Arrangements
  
 Price Risk Management
   39




---



##### Table of Contents



Forward-Looking Statements
     
 Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
 Commodity Price Risk
    40




---



##### Table of Contents



RemainingNotional Amount
    
    
    Notional AmountPer Month
    
    
    as of December 31,
    
    
    Fixed PriceEffective Date
    
    Maturity Date
    
    
    (MMBtu)
    
    
    2006 (MMBtu)
    
    
    per MMBtu8/1/2006
    
    
    7/31/2007
    
    
    
    100,000
    
    
    
    700,000
    
    
    $
    8.0052/1/2007
    
    
    12/31/2008
    
    
    
    200,000
    
    
    
    4,600,000
    
    
    $
    7.4608/1/2007
    
    
    12/31/2008
    
    
    
    100,000
    
    
    
    1,700,000
    
    
    $
    7.600
   Interest Rate Risk
  
 Item 8. Financial Statements and Supplementary Data.
  
 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
  
 Item 9A. Controls and Procedures.
 
 Controls and Procedures
   41




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##### Table of Contents



Changes in Internal Control Over Financial Reporting
  
 Managements Annual Report on Internal Control over Financial Reporting
   
 Certifications
  
 Item 9B. Other Information.
   42




---



##### Table of Contents



PART III
   43




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##### Table of Contents



PART IV
 
 Item 15. Exhibits and Financial Statement Schedules.
  1.
    
    Financial Statements: See Index to Consolidated Financial Statements and
Consolidated Financial Statement Schedule set forth on page F-1 of this report.2.
    
    Exhibits: For a list of documents filed as exhibits to this report, see the
Exhibit Index immediately preceding the Exhibits filed with this report.
  44




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##### Table of Contents



SIGNATURES
  GMX RESOURCES INC.Dated:  January 23, 2008
    By:
    /s/ Ken L. Kenworthy, Jr.Ken L. Kenworthy, Jr., President  Signatures
    
    Title
    
    Date/s/ Ken L. Kenworthy, Jr.

Ken L. Kenworthy, Jr.
    
    President and Director
(Principal Executive Officer)
    
    January 23, 2008/s/ Ken L. Kenworthy, Sr.

Ken L. Kenworthy, Sr.
    
    Executive Vice President,
Chief Financial Officer and
Director (Principal
Financial and Accounting
Officer)
    
    January 23, 2008/s/ T. J. Boismier

T. J. Boismier
    
    Director
    
    January 23, 2008/s/ Steven Craig

Steven Craig
    
    Director
    
    January 23, 2008/s/ Jon W. McHugh

Jon W. McHugh
    
    Director
    
    January 23, 2008
  45




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##### Table of Contents



INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 Report of Independent Registered Public Accounting Firm
    
    F-2Managements Annual Report on Internal Control over Financial Reporting
    
    F-4Consolidated Balance Sheets, December 31, 2005 and 2006
    
    F-5Consolidated Statements of Operations, Years Ended December 31, 2004,
2005 and 2006
    
    F-6Consolidated Statements of Changes in Shareholders Equity, Years
Ended December 31, 2004, 2005 and 2006
    
    F-7Consolidated Statements of Cash Flows, Years Ended December 31, 2004,
2005 and 2006
    
    F-8Consolidated Statements of Comprehensive Income, Years Ended December
31, 2004, 2005 and 2006
    
    F-9Notes to Consolidated Financial Statements
    
    F-10
  F-1




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 To:
    
    The Board of Directors and ShareholdersGMX Resources Inc. and Subsidiaries
 GMX Resources Inc and Subsidiaries GMX Resources Inc. and
Subsidiaries Internal Control-Integrated Framework GMX Resources Inc.s
    F-2




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##### Table of Contents



GMX Resources Inc. and Subsidiaries GMX Resources Inc. and
Subsidiaries Internal
Control-Integrated Framework GMX Resources Inc. and Subsidiaries Internal Control-Integrated Framework
  
  F-3




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##### Table of Contents



MANAGEMENTS ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
 Internal ControlIntegrated Framework
  Internal ControlIntegrated
Framework
   F-4




---



##### Table of Contents



GMX Resources Inc. and Subsidiaries
Consolidated Balance Sheets
 December 31,2005
    
    
    2006ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    2,392,497
    
    
    $
    4,959,749Accounts receivableinterest owners
    
    
    74,971
    
    
    
    64,185Accounts receivableoil and gas revenues
    
    
    4,188,451
    
    
    
    5,766,286Derivative instruments
    
    
    
    
    
    
    1,175,669Inventories
    
    
    247,364
    
    
    
    373,420Prepaid expenses and deposits
    
    
    10,028
    
    
    
    1,284,904Total current assets
    
    
    6,913,311
    
    
    
    13,624,213OIL AND GAS PROPERTIES, AT COST, BASED ON THE FULL COST METHOD OF
ACCOUNTINGProperties being amortized
    
    
    67,130,448
    
    
    
    173,050,284Properties not subject to amortization
    
    
    1,789,816
    
    
    
    1,124,873Less accumulated depreciation, depletion, and amortization
    
    
    (9,992,867
    )
    
    
    (16,874,796
    )58,927,397
    
    
    
    157,300,361OTHER PROPERTY AND EQUIPMENT
    
    
    17,044,734
    
    
    
    43,097,326Less accumulated depreciation
    
    
    (1,793,781
    )
    
    
    (3,742,057
    )15,250,953
    
    
    
    39,355,269OTHER ASSETS
    
    
    11,610
    
    
    
    42,680TOTAL ASSETS
    
    $
    81,103,271
    
    
    $
    210,322,523LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Accounts payable
    
    $
    7,809,387
    
    
    $
    24,658,305Accrued expenses
    
    
    419,130
    
    
    
    3,236,536Accrued interest
    
    
    25,430
    
    
    
    314,181Revenue distributions payable
    
    
    317,232
    
    
    
    513,416Short-term loan
    
    
    5,100,000
    
    
    
    Current portion of long-term debt
    
    
    345,967
    
    
    
    251,447Total current liabilities
    
    
    14,017,146
    
    
    
    28,973,885LONG-TERM DEBT, LESS CURRENT PORTION
    
    
    1,410,035
    
    
    
    41,568,836OTHER LIABILITIES
    
    
    3,238,894
    
    
    
    3,271,933DEFERRED INCOME TAXES
    
    
    1,212,100
    
    
    
    5,026,927SHAREHOLDERS EQUITY:Preferred stock, par value $.001 per share, 10,000,000 shares authorized:Series A Junior Participating Preferred Stock
25,000 shares authorized, none issued and outstanding
    
    
    
    
    
    
    9.25% Series B Cumulative Preferred Stock, 3,000,000 Shares authorized,
2,000,000 shares issued and outstanding (aggregate liquidation preference
$50,000,000)
    
    
    
    
    
    
    2,000Common stock, par value $.001 per shareauthorized 50,000,000 shares
issued and outstanding 9,975,315 shares in 2005 and 11,242,136 shares in 2006
    
    
    9,975
    
    
    
    11,242Additional paid-in capital
    
    
    50,965,235
    
    
    
    113,265,614Retained earnings
    
    
    10,249,886
    
    
    
    17,426,144Other comprehensive income
    
    
    
    
    
    
    775,942Total shareholders equity
    
    
    61,225,096
    
    
    
    131,480,942TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    81,103,271
    
    
    $
    210,322,523
   F-5




---



##### Table of Contents



GMX Resources Inc. and Subsidiaries
Consolidated Statements of Operations
 Year Ended December 31,2004
    
    
    2005
    
    
    2006REVENUE:Oil and gas sales
    
    $
    7,689,882
    
    
    $
    19,026,050
    
    
    $
    31,882,072Interest income
    
    
    14,498
    
    
    
    161,434
    
    
    
    150,285Other income
    
    
    129,330
    
    
    
    5,220
    
    
    
    331Total revenue
    
    
    7,833,710
    
    
    
    19,192,704
    
    
    
    32,032,688EXPENSES:Lease operations
    
    
    1,261,109
    
    
    
    2,070,286
    
    
    
    4,478,805Production and severance taxes
    
    
    518,721
    
    
    
    1,241,338
    
    
    
    464,822Depreciation, depletion and amortization
    
    
    2,043,485
    
    
    
    3,982,079
    
    
    
    8,046,173Interest
    
    
    558,504
    
    
    
    142,409
    
    
    
    824,055General and administrative
    
    
    1,985,912
    
    
    
    3,388,396
    
    
    
    5,828,865Total expenses
    
    
    6,367,731
    
    
    
    10,824,508
    
    
    
    19,642,720Income before income taxes
    
    
    1,465,979
    
    
    
    8,368,196
    
    
    
    12,389,968INCOME TAXES
    
    
    24,206
    
    
    
    1,212,100
    
    
    
    3,415,100NET INCOME
    
    
    1,441,773
    
    
    
    7,156,096
    
    
    
    8,974,868Preferred stock dividends
    
    
    
    
    
    
    
    
    
    
    1,798,610NET INCOME APPLICABLE TO COMMON STOCK
    
    $
    1,441,773
    
    
    $
    7,156,096
    
    
    $
    7,176,258Earnings per share  Basic
    
    $
    0.19
    
    
    $
    0.81
    
    
    $
    0.65Earnings per
share  Diluted
    
    $
    0.19
    
    
    $
    0.79
    
    
    $
    0.64Weighted
average common shares  Basic
    
    
    7,396,880
    
    
    
    8,797,529
    
    
    
    11,120,204Weighted
average common shares  Diluted
    
    
    7,491,778
    
    
    
    9,102,181
    
    
    
    11,283,265See accompanying notes to consolidated financial statements.
  F-6




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##### Table of Contents



GMX Resources Inc. and Subsidiaries
 
 Consolidated Statement of Changes in Shareholders Equity
 Years Ended December 31, 2004, 2005, and 2006
 OtherAdditional
    
    
    
    
    
    
    compre-
    
    
    TotalPreferred
    
    
    Common
    
    
    Preferred
    
    
    Common
    
    
    paid-in
    
    
    Retained
    
    
    hensive
    
    
    shareholdersshares
    
    
    shares
    
    
    par value
    
    
    par value
    
    
    capital
    
    
    earnings
    
    
    income
    
    
    equityBALANCE AT DECEMBER 31,
2003
    
    
    
    
    
    
    6,575,000
    
    
    $
    
    
    
    $
    6,575
    
    
    $
    20,959,973
    
    
    $
    1,652,017
    
    
    $
    
    
    
    $
    22,618,565Options Exercised
    
    
    
    
    
    
    15,000
    
    
    
    
    
    
    
    15
    
    
    
    14,985
    
    
    
    
    
    
    
    
    
    
    
    15,000Redeemed & Cancelled
Warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (118,712
    )
    
    
    
    
    
    
    
    
    
    
    (118,712
    )Warrants Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    257,250
    
    
    
    
    
    
    
    
    
    
    
    257,250Warrants Exercised
    
    
    
    
    
    
    163,540
    
    
    
    
    
    
    
    164
    
    
    
    177,398
    
    
    
    
    
    
    
    
    
    
    
    177,562Shares Issued
    
    
    
    
    
    
    1,300,000
    
    
    
    
    
    
    
    1,300
    
    
    
    8,014,118
    
    
    
    
    
    
    
    
    
    
    
    8,015,418Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,441,773
    
    
    
    
    
    
    
    1,441,773BALANCE AT DECEMBER 31,
2004
    
    
    
    
    
    
    8,053,540
    
    
    $
    
    
    
    $
    8,054
    
    
    $
    29,305,012
    
    
    $
    3,093,790
    
    
    $
    
    
    
    $
    32,406,856Options Exercised
    
    
    
    
    
    
    128,250
    
    
    
    
    
    
    
    128
    
    
    
    422,787
    
    
    
    
    
    
    
    
    
    
    
    422,915Redeemed & Cancelled
Warrants
    
    
    
    
    
    
    (144,180
    )
    
    
    
    
    
    
    (144
    )
    
    
    (774,134
    )
    
    
    
    
    
    
    
    
    
    
    (774,278
    )Warrants Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Warrants Exercised
    
    
    
    
    
    
    337,705
    
    
    
    
    
    
    
    337
    
    
    
    1,666,898
    
    
    
    
    
    
    
    
    
    
    
    1,667,235Shares Issued
    
    
    
    
    
    
    1,600,000
    
    
    
    
    
    
    
    1,600
    
    
    
    20,344,672
    
    
    
    
    
    
    
    
    
    
    
    20,346,272Net Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,156,096
    
    
    
    
    
    
    
    7,156,096BALANCE AT DECEMBER 31,
2005
    
    
    
    
    
    
    9,975,315
    
    
    $
    
    
    
    $
    9,975
    
    
    $
    50,965,235
    
    
    $
    10,249,886
    
    
    $
    
    
    
    $
    61,225,096Stock Options Exercised
    
    
    
    
    
    
    102,500
    
    
    
    
    
    
    
    103
    
    
    
    555,065
    
    
    
    
    
    
    
    
    
    
    
    555,168Warrants Exercised
    
    
    
    
    
    
    1,164,321
    
    
    
    
    
    
    
    1,164
    
    
    
    13,971,776
    
    
    
    
    
    
    
    
    
    
    
    13,972,940Stock Option Compensation
Expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    662,341
    
    
    
    
    
    
    
    
    
    
    
    662,341Series B Preferred Shares
Issued
    
    
    2,000,000
    
    
    
    
    
    
    
    2,000
    
    
    
    
    
    
    
    47,111,197
    
    
    
    
    
    
    
    
    
    
    
    47,113,197Preferred Stock Dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,798,610
    )
    
    
    
    
    
    
    (1,798,610
    )Unrealized Gain on
Derivative Instruments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    775,942
    
    
    
    775,942Net Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,974,868
    
    
    
    
    
    
    
    8,974,868BALANCE AT DECEMBER 31,
2006
    
    
    2,000,000
    
    
    
    11,242,136
    
    
    $
    2,000
    
    
    $
    11,242
    
    
    $
    113,265,614
    
    
    $
    17,426,144
    
    
    $
    775,942
    
    
    $
    131,480,942
   F-7




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##### Table of Contents



GMX Resources Inc. and Subsidiaries
 
 Consolidated Statements of Cash Flows
 Years Ended December 31,2004
    
    
    2005
    
    
    2006CASH FLOWS DUE TO OPERATING ACTIVITIESNet income
    
    $
    1,441,773
    
    
    $
    7,156,096
    
    
    $
    8,974,868Adjustments to reconcile net income
to net cash provided by operating activities;Depreciation, depletion, and amortization
    
    
    2,043,485
    
    
    
    3,982,080
    
    
    
    8,046,173Amortization of loan fees
    
    
    326,762
    
    
    
    112,349
    
    
    
    29,610Deferred income taxes
    
    
    
    
    
    
    1,212,100
    
    
    
    3,415,100Non cash stock compensation expense
    
    
    
    
    
    
    
    
    
    
    662,341Decrease (increase) in:Accounts receivable
    
    
    (865,035
    )
    
    
    (2,666,101
    )
    
    
    (1,567,049
    )Inventory and prepaid expenses
    
    
    (431,908
    )
    
    
    (56,852
    )
    
    
    (1,430,543
    )Other assets
    
    
    
    
    
    
    43,273
    
    
    
    (31,070
    )Increase (decrease) in:Accounts payable
    
    
    1,187,017
    
    
    
    5,487,870
    
    
    
    16,848,918Accrued expenses and other liabilities
    
    
    40,128
    
    
    
    309,842
    
    
    
    3,106,157Revenue distributions payable
    
    
    (58,067
    )
    
    
    742,446
    
    
    
    278,571Net cash provided by operating activities
    
    
    3,684,155
    
    
    
    16,323,103
    
    
    
    38,333,076CASH FLOWS DUE TO INVESTING ACTIVITIESAdditions to oil and gas properties
    
    
    (8,543,367
    )
    
    
    (26,019,690
    )
    
    
    (104,412,090
    )Purchase of property and equipment
    
    
    (334,577
    )
    
    
    (13,529,312
    )
    
    
    (26,160,709
    )Net cash provided by (used in) investing activities
    
    
    (8,877,944
    )
    
    
    (39,549,002
    )
    
    
    (130,572,799
    )CASH FLOWS DUE TO FINANCING ACTIVITIESAdvance on borrowings
    
    
    3,872,457
    
    
    
    10,701,763
    
    
    
    78,861,250Payments on debt
    
    
    (6,800,162
    )
    
    
    (7,608,056
    )
    
    
    (43,896,969
    )Proceeds from sale of common stock
    
    
    8,346,518
    
    
    
    21,662,143
    
    
    
    14,528,107Proceeds from sale of Series B preferred stock
    
    
    
    
    
    
    
    
    
    
    47,113,197Dividends paid on Series B preferred stock
    
    
    
    
    
    
    
    
    
    
    (1,798,610
    )Net cash provided by financing activities
    
    
    5,418,813
    
    
    
    24,755,850
    
    
    
    94,806,975NET INCREASE IN CASH
    
    
    225,024
    
    
    
    1,529,951
    
    
    
    2,567,252CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
    
    
    637,522
    
    
    
    862,546
    
    
    
    2,392,497CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    862,546
    
    
    $
    2,392,497
    
    
    $
    4,959,749CASH PAID FOR INTEREST
    
    $
    261,445
    
    
    $
    116,979
    
    
    $
    683,486CASH PAID FOR INCOME TAXES
    
    $
    24,206
    
    
    $
    
    
    
    $
    
   F-8




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##### Table of Contents



GMX Resource Inc. and Subsidiaries
 
 Consolidated Statements of Comprehensive Income
 Year Ended December 31,2004
    
    
    2005
    
    
    2006Net Income
    
    $
    1,441,773
    
    
    $
    7,156,096
    
    
    $
    8,974,868Other comprehensive income tax:Change in fair value of derivative instruments
    
    
    
    
    
    
    
    
    
    
    2,115,169Adjustment for derivative gains reclassified
into oil and gas sales
    
    
    
    
    
    
    
    
    
    
    (939,500
    )Other comprehensive income, before income tax
    
    
    
    
    
    
    
    
    
    
    1,175,669Income tax provision related to items of other
comprehensive income
    
    
    
    
    
    
    
    
    
    
    (399,727
    )Other comprehensive income, net of income tax
    
    
    
    
    
    
    
    
    
    
    775,942Comprehensive income
    
    $
    1,441,773
    
    
    $
    7,156,096
    
    
    $
    9,750,810
   F-9




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##### Table of Contents



GMX Resources Inc. and Subsidiaries
 
 Notes to Consolidated Financial Statements
 December 31, 2004, 2005 and 2006
 NOTE ASUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 GMX
Resources Inc.
       F-10




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##### Table of Contents



GMX Resources Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2004, 2005 and 2006
  Accounting for the
Impairment or Disposal of Long-Lived Assets
        F-11




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##### Table of Contents



GMX Resources Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2004, 2005 and 2006
  Accounting for Derivative Instruments and Hedging Activities
     F-12




---



##### Table of Contents



GMX Resources Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2004, 2005 and 2006
     2005
    
    
    2006Options excluded from dilution calculation
    
    
    77,000
    
    
    
    25,000Range of exercise prices
    
    
    $20.01-$29.00
    
    
    
    $39.65Weighted average exercise price
    
    
    $20.98
    
    
    
    $39.65
 Share-Based
Payment
  Accounting for Stock Issued to Employees
  F-13




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##### Table of Contents



GMX Resources Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2004, 2005 and 2006
  Year Ended
    
    
    Year EndedDecember 31, 2004
    
    
    December 31, 2005Net income as reported
    
    $
    1,441,773
    
    
    $
    7,156,096Add: Stock-based compensation recognized
    
    
    
    
    
    
    163,379Deduct: Stock-based compensation, net
of tax
    
    
    (316,085
    )
    
    
    (467,085
    )Pro forma net earnings
    
    $
    1,125,688
    
    
    $
    6,852,390Pro forma earnings per share  basic:
    
    $
    0.15
    
    
    $
    0.78Pro forma earnings per share  diluted
    
    $
    0.15
    
    
    $
    0.75
  WeightedNumber of
    
    
    average exerciseshares
    
    
    priceBalance as of December 31, 2003
    
    
    139,000
    
    
    $
    5.69Granted
    
    
    190,000
    
    
    
    3.83Exercised
    
    
    (15,000
    )
    
    
    1.00Forfeited
    
    
    
    
    
    
    Expired
    
    
    
    
    
    
    Balance as of December 31, 2004
    
    
    314,000
    
    
    $
    3.67Granted
    
    
    137,000
    
    
    
    16.58Exercised
    
    
    (128,250
    )
    
    
    2.69Forfeited
    
    
    
    
    
    
    Expired
    
    
    
    
    
    
    Balance as of December 31, 2005
    
    
    322,750
    
    
    $
    8.65Granted
    
    
    53,000
    
    
    
    35.31Exercised
    
    
    (102,500
    )
    
    
    5.42Forfeited
    
    
    (3,000
    )
    
    
    27.91Expired
    
    
    
    
    
    
    Balance as of December 31, 2006
    
    
    270,250
    
    
    $
    14.89
     F-14




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##### Table of Contents



GMX Resources Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2004, 2005 and 2006
          F-15




---



##### Table of Contents



GMX Resources Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2004, 2005 and 2006
      Balance as of December 31, 2004
    
    $
    1,764,631Liabilities incurred
    
    
    295,756Liabilities settled
    
    
    (474,601
    )Accretion(1)
    
    
    70,585Increase due to revisions(2)
    
    
    555,862Balance as of December 31, 2005
    
    $
    2,212,233Liabilities incurred
    
    
    337,160Liabilities settled
    
    
    Accretion(1)
    
    
    81,646Decrease due to revisions(2)
    
    
    (468,154
    )Balance as of December 31, 2006
    
    $
    2,162,885
 
 1
    
    Annual accretion is added to the full cost pool.2
    
    2005 revisions were due to the increase in market prices
for services related to plugging a well, the current inflation rate and
interest rate. 2006 revisions were due to a decrease in the current inflation
rate and an increase in the current interest rate.
  Share-Based Payment Accounting for Stock-Based Compensation
  F-16




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##### Table of Contents



GMX Resources Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2004, 2005 and 2006
 Accounting for Uncertainty in
Income Taxesan Interpretation of FASB Statement No. 109 Accounting for Income Taxes
 Fair Value Measurements
 The Fair Value Option for Financial Assets and
Financial Liabilities
  F-17




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##### Table of Contents



GMX Resources Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2004, 2005 and 2006
 NOTE BPROPERTY AND EQUIPMENT
  December 31,2005
    
    
    2006Oil and gas properties:Subject to amortization
    
    $
    67,130,448
    
    
    $
    173,050,284Acquisition costs not subject to amortization:Acquired in 2006
    
    
    
    
    
    
    597,630Acquired in 2005
    
    
    1,255,680
    
    
    
    288,262Acquired in 2004
    
    
    432,880
    
    
    
    238,981Acquired prior to 2004
    
    
    101,256
    
    
    
    1,789,816
    
    
    
    1,124,873Accumulated depreciation, depletion, and
amortization
    
    
    (9,992,867
    )
    
    
    (16,874,796
    )Net oil and gas properties
    
    
    58,927,397
    
    
    
    157,300,361Other property and equipment
    
    
    17,044,734
    
    
    
    43,097,326Less accumulated depreciation
    
    
    (1,793,781
    )
    
    
    (3,742,057
    )Net other property and equipment
    
    
    15,250,953
    
    
    
    39,355,269Property and equipment, net of accumulated
depreciation, depletion, and amortization
    
    $
    74,178,350
    
    
    $
    196,655,630
   For The Year EndedDecember 31,2004
    
    
    2005
    
    
    2006Depreciation, depletion, and amortization
of oil and gas properties
    
    $
    1,707,431
    
    
    $
    3,496,657
    
    
    $
    6,881,930Depreciation of other property and equipment
    
    
    336,054
    
    
    
    485,422
    
    
    
    1,164,243Total
    
    $
    2,043,485
    
    
    $
    3,982,079
    
    
    $
    8,046,173
  F-18




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##### Table of Contents



GMX Resources Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2004, 2005 and 2006
 NOTE CLONG-TERM DEBT
 December 31,2005
    
    
    2006Note payable to bank, maturity date of July
2008 bearing a variable weighted average
interest rate of 7.5% and 7.45% as of December
31, 2005 and 2006, respectively,
collateralized by oil and gas properties
    
    $
    1,000
    
    
    $
    40,000,000Joint venture partner project (financing,
non-recourse, no interest rate)
    
    
    1,755,002
    
    
    
    1,820,2831,756,002
    
    
    
    41,820,283Current portion
    
    
    345,967
    
    
    
    251,447Long Term
    
    $
    1,410,035
    
    
    $
    41,568,836
  Year
    
    Amount2007
    
    $
    251,4472008
    
    
    40,215,0442009
    
    
    171,9412010
    
    
    134,8032011
    
    
    184,0812012-2016
    
    
    584,6292017-2021
    
    
    188,005Thereafter
    
    
    90,333$
    41,820,283
 Credit Facility
    F-19




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##### Table of Contents



GMX Resources Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2004, 2005 and 2006
 PVOG Financing
  NOTE DINCOME TAXES
   Net Operating Losses:Federal
    
    $
    27,115,255Statutory depletion
    
    
    8,005,037
   F-20




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##### Table of Contents



GMX Resources Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2004, 2005 and 2006
  December 31,2005
    
    
    2006Deferred tax assets:Net operating loss carry forwards
    
    $
    9,272,000
    
    
    $
    9,454,770Statutory depletion carry forwards
    
    
    2,274,900
    
    
    
    2,721,713Stock option compensation expense
    
    
    
    
    
    
    120,428Total
    
    
    11,546,900
    
    
    
    12,296,911Deferred tax liabilities:Property, plant and equipment
    
    
    (12,759,000
    )
    
    
    (16,924,111
    )Unrealized gain on derivative
instrument
    
    
    
    
    
    
    (399,727
    )Total
    
    
    (12,759,000
    )
    
    
    (17,323,838
    )Net deferred tax liability
    
    $
    (1,212,100
    )
    
    $
    (5,026,927
    )
    For The Year EndedDecember 31,2004
    
    
    2005
    
    
    2006U.S. statutory tax rate
    
    
    34
    %
    
    
    34
    %
    
    
    34
    %Statutory depletion
    
    
    (25
    )
    
    
    (12
    )
    
    
    (4
    )Change in valuation allowance
    
    
    (24
    )
    
    
    (8
    )
    
    
    Other
    
    
    16
    
    
    
    
    
    
    
    (2
    )Effective income tax rate
    
    
    1
    %
    
    
    14
    %
    
    
    28
    %
 NOTE ECOMMITMENTS AND CONTINGENCIES
   F-21




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##### Table of Contents



GMX Resources Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2004, 2005 and 2006
  Year Ending December 31:2007
    
    $
    190,6112008
    
    
    170,4022009
    
    
    169,1242010
    
    
    34,813Total
    
    $
    564,950
  2004
    
    $
    153,6132005
    
    $
    118,7012006
    
    $
    153,589
 NOTE FSHAREHOLDERS EQUITY
     F-22




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##### Table of Contents



GMX Resources Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2004, 2005 and 2006
      NOTE GMAJOR CUSTOMERS
  2004
    
    
    2005
    
    
    2006Various purchasers through Penn Virginia Oil &
Gas (Oil)
    
    
    
    
    
    
    27
    %
    
    
    44
    %Teppco Crude (Oil)
    
    
    93
    %
    
    
    65
    %
    
    
    48
    %CrossTex Energy Services, Inc. (Gas)
    
    
    63
    %
    
    
    44
    %
    
    
    42
    %Penn Virginia Oil & Gas (Gas)
    
    
    21
    %
    
    
    48
    %
    
    
    48
    %Duke Energy (Gas)
    
    
    10
    %
    
    
    7
    %
    
    
    4
    %
  F-23




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##### Table of Contents



GMX Resources Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2004, 2005 and 2006
 NOTE HCONCENTRATION OF CREDIT RISK
  NOTE IRETIREMENT PLANS
  NOTE
J  HEDGING ACTIVITY
       F-24




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##### Table of Contents



GMX Resources Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2004, 2005 and 2006
 NOTE KOIL AND GAS OPERATIONS (Unaudited)
  2005
    
    
    2006Unproved properties
    
    $
    1,789,816
    
    
    $
    1,124,873Producing properties
    
    
    67,130,448
    
    
    
    173,050,28468,920,264
    
    
    
    174,175,157Less accumulated depreciation, depletion,
and amortization
    
    
    (9,992,867
    )
    
    
    (16,874,796
    )Net capitalized costs
    
    $
    58,927,397
    
    
    $
    157,300,361
   2004
    
    
    2005
    
    
    2006Property acquisition costs  unproved
    
    $
    851,617
    
    
    $
    1,255,680
    
    
    $
    597,630Development costs
    
    
    9,152,257
    
    
    
    25,211,613
    
    
    
    104,657,264$
    10,003,874
    
    
    $
    26,467,293
    
    
    $
    105,254,894
    2004
    
    
    2005
    
    
    2006Oil and gas sales
    
    $
    7,689,882
    
    
    $
    19,026,050
    
    
    $
    31,882,072Production costs
    
    
    (1,779,830
    )
    
    
    (3,311,624
    )
    
    
    (4,943,627
    )Depreciation, depletion and
amortization
    
    
    (1,707,431
    )
    
    
    (3,496,657
    )
    
    
    (6,881,930
    )Income tax expense
    
    
    (1,047,075
    )
    
    
    (1,212,100
    )
    
    
    (3,415,100
    )Results of operations for oil and gas
producing activities
    
    $
    3,155,546
    
    
    $
    11,005,669
    
    
    $
    16,641,415
  F-25




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##### Table of Contents



GMX Resources Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2004, 2005 and 2006
 NOTE LSUPPLEMENTAL INFORMATION ON OIL AND GAS OPERATIONS (UNAUDITED)
   OIL
    
    
    GAS(MBBLS)
    
    
    (MMCF)December 31, 2004Proved reserves, beginning of period
    
    
    1,323
    
    
    
    45,029Extensions, discoveries, and other additions
    
    
    51
    
    
    
    14,644Production
    
    
    (30
    )
    
    
    (1,049
    )Revisions of previous estimates
    
    
    (107
    )
    
    
    (1,736
    )Proved reserves, end of period
    
    
    1,237
    
    
    
    56,888Proved developed reserves:Beginning of period
    
    
    568
    
    
    
    18,277End of period
    
    
    584
    
    
    
    18,980December 31, 2005Proved reserves, beginning of period
    
    
    1,237
    
    
    
    56,888Extensions, discoveries, and other additions
    
    
    694
    
    
    
    84,026Production
    
    
    (48
    )
    
    
    (1,930
    )Revisions of previous estimates
    
    
    88
    
    
    
    11,192Proved reserves, end of period
    
    
    1,971
    
    
    
    150,176Proved developed reserves:Beginning of period
    
    
    584
    
    
    
    18,980End of period
    
    
    770
    
    
    
    41,503December 31, 2006Proved reserves, beginning of period
    
    
    1,971
    
    
    
    150,176Extensions, discoveries, and other additions
    
    
    831
    
    
    
    87,754Production
    
    
    (69
    )
    
    
    (3,915
    )Revisions of previous estimates
    
    
    10
    
    
    
    7,926Proved reserves, end of period
    
    
    2,743
    
    
    
    241,941Proved developed reserves:Beginning of period
    
    
    770
    
    
    
    41,503End of period
    
    
    947
    
    
    
    70,801
  F-26




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##### Table of Contents



GMX Resources Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2004, 2005 and 2006
     December 31,
    
    
    December 31,
    
    
    December 31,2004
    
    
    2005
    
    
    2006(In thousands)
    
    
    (In thousands)
    
    
    (In thousands)Future cash inflows
    
    $
    375,427
    
    
    $
    1,648,402
    
    
    $
    1,577,259Future production costs
    
    
    (94,338
    )
    
    
    (373,614
    )
    
    
    (560,094
    )Future development costs
    
    
    (66,811
    )
    
    
    (190,700
    )
    
    
    (309,907
    )Future income tax provisions
    
    
    (48,926
    )
    
    
    (283,784
    )
    
    
    (178,258
    )Net future cash inflows
    
    
    165,352
    
    
    
    800,304
    
    
    
    529,000Less effect of a 10% discount factor
    
    
    (101,121
    )
    
    
    (497,908
    )
    
    
    (332,985
    )Standardized measure of
discounted
future net cash flows
    
    $
    64,231
    
    
    $
    302,396
    
    
    $
    196,015
   F-27




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##### Table of Contents



GMX Resources Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2004, 2005 and 2006
  December 31,
    
    
    December 31,
    
    
    December 31,2004
    
    
    2005
    
    
    2006(In thousands)
    
    
    (In thousands)
    
    
    (In thousands)Standardized measure, beginning of year
    
    $
    47,975
    
    
    $
    64,231
    
    
    $
    302,396Sales of oil and gas, net of production costs
    
    
    (5,910
    )
    
    
    (15,714
    )
    
    
    (26,938
    )Net changes in prices and production costs
    
    
    4,409
    
    
    
    49,869
    
    
    
    (214,311
    )Change in estimated future development costs
    
    
    
    
    
    
    
    
    
    
    (43,753
    )Extensions and discoveries, net of future
development costs
    
    
    18,949
    
    
    
    223,384
    
    
    
    93,427Development costs that reduced future
development costs
    
    
    6,863
    
    
    
    23,629
    
    
    
    104,707Revisions of quantity estimates
    
    
    (4,035
    )
    
    
    26,174
    
    
    
    17,399Sales of reserves in place
    
    
    
    
    
    
    
    
    
    
    Accretion of discount
    
    
    1,149
    
    
    
    97,164
    
    
    
    40,962Changes in timing of production and other
    
    
    (9,379
    )
    
    
    (78,118
    )
    
    
    (116,976
    )Net changes in income taxes
    
    
    4,210
    
    
    
    (88,223
    )
    
    
    39,102Standardized measure, end of year
    
    $
    64,231
    
    
    $
    302,396
    
    
    $
    196,015
  F-28




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##### Table of Contents



NOTE MQUARTERLY FINANCIAL DATA (UNAUDITED)
  First
    
    
    Second
    
    
    Third
    
    
    FourthQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Total2006Revenues
    
    $
    6,715,890
    
    
    $
    6,493,516
    
    
    $
    8,534,070
    
    
    $
    10,289,212
    
    
    $
    32,032,688Income before income taxes
    
    
    2,779,804
    
    
    
    1,942,117
    
    
    
    3,904,805
    
    
    
    3,763,242
    
    
    
    12,389,968Net income
    
    
    2,134,327
    
    
    
    1,592,494
    
    
    
    2,860,905
    
    
    
    2,387,142
    
    
    
    8,974,868Net income applicable to
common stock
    
    
    2,134,327
    
    
    
    1,592,494
    
    
    
    2,218,545
    
    
    
    1,230,892
    
    
    
    7,176,258Basic earnings per share1
    
    
    0.20
    
    
    
    0.14
    
    
    
    0.20
    
    
    
    0.11
    
    
    
    0.65Diluted earnings per share1
    
    
    0.19
    
    
    
    0.14
    
    
    
    0.19
    
    
    
    0.11
    
    
    
    0.642005Revenues
    
    $
    2,617,680
    
    
    $
    3,455,375
    
    
    $
    4,375,657
    
    
    $
    8,743,992
    
    
    $
    19,192,704Income before income taxes
    
    
    604,524
    
    
    
    914,864
    
    
    
    2,050,332
    
    
    
    4,798,476
    
    
    
    8,368,196Net income
    
    
    604,524
    
    
    
    914,864
    
    
    
    2,050,332
    
    
    
    3,586,376
    
    
    
    7,156,096Net income applicable to
common stock
    
    
    604,524
    
    
    
    914,864
    
    
    
    2,050,332
    
    
    
    3,586,376
    
    
    
    7,156,096Basic earnings per share1
    
    
    0.07
    
    
    
    0.11
    
    
    
    0.20
    
    
    
    0.35
    
    
    
    0.81Diluted earnings per share1
    
    
    0.07
    
    
    
    0.11
    
    
    
    0.20
    
    
    
    0.33
    
    
    
    0.79
 
 1
    
    The sum of the per share amounts per quarter does not
equal the year due to the changes in the average number of common shares
outstanding
 NOTE N  SUBSEQUENT EVENT  COMMON STOCK OFFERING
   F-29




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##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Description3.1
    
    Amended and Restated Certificate
of Incorporation of GMX Resources
Inc. (Incorporated by reference
to Exhibit 3.1 to the Registration
Statement on Form SB-2, File No.
333-49328)3.2
    
    Amended Bylaws of GMX Resources
Inc. (Incorporated by reference to
Exhibit 3.2 to Annual Report on
Form 10-QSB for the quarter ended
September 30, 2004)3.3
    
    Certificate of Designation of
Series A Junior Participating
Preferred Stock of GMX Resources
Inc. dated May 17, 2005
(incorporated by reference to
Exhibit 3.1 to Form 8-K filed May
18, 2005)3.4
    
    Certificate of Designation of
9.25% Series B Cumulative
Preferred Stock (incorporated by
reference to Exhibit 4.1 to Form
8-A12B filed on August 8, 2006)4.4
    
    Rights Agreement dated May 17,
2005 by and between GMX Resources
Inc. and UMB Bank, N.A., as Rights
Agent (Incorporated by reference
to Exhibit 4.1 to Form 8-K filed
May 18, 2005)10.1
    
    Stock Option Plan, as amended
(Incorporated by reference to
Exhibit 10.2 to the Registration
Statement on Form SB-2, File No.
333-49328)10.2
    
    Form of Director Indemnification
Agreement (Incorporated by
reference to Exhibit 10.5 to the
Registration Statement on Form
SB-2, File No. 333-49328)10.3
    
    Participation Agreement dated
December 29, 2003 by and among
Penn Virginia Oil & Gas Company,
the Company and its wholly owned
subsidiaries (Incorporated by
reference to Exhibit 10.1 to
Current Report on Form 8-K dated
December 29, 2003)10.3(a)
    
    First Amendment dated February 27,
2004 to Participation Agreement
between GMX Resources Inc. and
Penn Virginia Oil & Gas
Corporation (Incorporated by
reference to Exhibit 10.1 to
Current Report on Form 8-K filed
September 14, 2004)10.3(b)
    
    Second Amendment dated May 9, 2004
to Participation Agreement between
GMX Resources Inc. and Penn
Virginia Oil & Gas Corporation
(Incorporated by reference to
Exhibit 10.2 to Current Report on
Form 8-K filed September 14, 2004)




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##### Table of Contents



Exhibit No.
    
    Description10.3(c)
    
    Third Amendment dated April 6,
2004 to Participation Agreement
between GMX Resources Inc. and
Penn Virginia Oil & Gas
Corporation (Incorporated by
reference to Exhibit 10.3 to
Current Report on Form 8-K filed
September 14, 2004)10.3(d)
    
    Fourth Amendment dated August 11, 2004 to Participation Agreement between
GMX Resources Inc. and Penn Virginia Oil & Gas Corporation (Incorporated by
reference to Exhibit 10.4 to Current Report on Form 8-K filed September 14,
2004)10.3(e)
    
    Fifth Amendment dated effective January 1, 2005 to Participation Agreement
between GMX Resources Inc. and Penn Virginia Oil & Gas L.P., successor to
Penn Virginia Oil & Gas Corporation (Incorporated by reference to Exhibit
10.6(e) to Quarterly Report on Form 10-QSB for the quarter ended March 31,
2005, filed May 12, 2005)10.3(f)
    
    Sixth Amendment dated effective January 1, 2006, to Participation Agreement
between GMX Resources Inc. and Penn Virginia Oil & Gas L.P., successor to
Penn Virginia Oil & Gas Corporation (Incorporated by reference to Exhibit
10.1 to Form 8-K filed January 20, 2006)10.4
    
    Amended and Restated Loan Agreement dated June 7, 2006 between GMX
Resources Inc., Capital One, National Association, and Union Bank of
California, N.A.. (Incorporated by reference to Exhibit 10.1 to Current
Report on Form 8-K filed on June 9, 2006)10.4(a)
    
    Amended and Restated Texas Deed of Trust, Mortgage, Assignment, Security
Agreement, Fixture Filing and Financing Statement dated as of June 7, 2006
from GMX Resources Inc. to Capital One, National Association, as Agent
(Incorporated by reference to Exhibit 10.2 to Current report on Form 8-K
filed June 9, 2006)10.4(b)
    
    Security Agreement (Stock) dated June 7, 2006 between GMX Resources Inc.
and Capital One, National Association (Incorporated by reference to Exhibit
10.3 to Current report on Form 8-K filed June 9, 2006)10.4(c)
    
    Security Agreement (Promissory Note) dated June 7, 2006 between GMX
Resources Inc. and Capital One, National Association (Incorporated by
reference to Exhibit 10.4 to Current report on Form 8-K filed June 9, 2006)10.4(d)
    
    Security Agreement dated June 7, 2006 between Endeavor Pipeline, Inc. and
Capital One, National Association (Incorporated by reference to Exhibit
10.5 to Current report on Form 8-K filed June 9, 2006)10.4(e)
    
    First Amendment to Loan Agreement dated August 4, 2006, between GMX
Resources Inc., Capital One, National Association and Union Bank of
California, N.A. (Incorporated by reference to Exhibit 10.1 to Current
Report on Form 8-K filed August 7, 2006)10.5
    
    Asset Purchase Agreement dated December 8, 2005 between GMX Resources Inc.
and McLachlan Drilling Co. (Incorporated by reference to Exhibit 10.1 to
Form 8-K filed December 12, 2005)14
    
    Code of Business Conduct and Ethics (Incorporated by reference to Exhibit
14 to Annual Report on Form 10-KSB for the year ended December 31, 2003)




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##### Table of Contents



Exhibit No.
    
    Description21
    
    List of Subsidiaries (Incorporated by reference to Exhibit 21 to Annual
Report on Form 10-KSB for the year ended December 31, 2005)23.1
    
    Consent of Independent Accountants23.2
    
    Consent of MHA Petroleum Consultants23.3
    
    Consent of Sproule Associates, Inc.31.1
    
    Rule 13a-14(a) Certification of Chief Executive Officer31.2
    
    Rule 13a-14(a) Certification of Chief Financial Officer32.1
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. § 1350.32.2
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C. § 1350.