HOUSTON, Feb. 17, 2017 /PRNewswire/ -- Gastar
Exploration Inc. ("Gastar" or the "Company") (NYSE MKT: GST)
announced today that it has entered into a definitive securities
purchase agreement with funds managed by affiliates of Ares
Management, L.P. (NYSE: ARES) ("Ares") that provides for
$425 million in new financing to the Company in the form of a
$250 million secured term loan,
$125 million secured convertible
notes and a $50 million common stock
issuance (collectively, the "Ares Investment"). Proceeds from
the Ares Investment will be used to fully repay Gastar's existing
$70.4 million revolving credit
facility and redeem its $325 million
senior secured notes due May 2018. The closing and funding of
the Ares Investment, which is expected this month, is subject to
the finalization of security and collateral documentation and the
satisfaction of customary conditions precedent to
funding.
The Ares Investment key terms are as follows:
- $250 million first lien secured
term loan, 8.5% interest, maturing March
2022;
- $125 million second lien secured
convertible notes, 6.0% interest, convertible, upon receipt of
stockholder approval, at an initial conversion price of
$2.21 per share at the option of the
holder, maturing March 2022; and
- 29,408,305 common shares issued at $1.7002 per share representing the 30-day volume
weighted average sales price as of February
15, 2017.
If the conversion rights of the convertible notes are not
approved by Gastar's stockholders within four months, the
convertible notes will not become convertible and will begin
bearing interest at 15.0% as a straight high-yield debt
obligation. In connection with the closing of the Ares
Investment, Gastar expects to call for redemption of all of its
outstanding $325 million principal of
its 8.625% senior secured notes due May 15,
2018 in accordance with their terms.
Ares will be granted the right to nominate, following closing,
up to two directors to an expanded board of eight directors subject
to certain minimum stock ownership requirements.
Commenting on the transaction, J.
Russell Porter, Gastar's President and Chief Executive
Officer, said, "We are extremely pleased to welcome Ares as a
financing partner and as an equity sponsor. This transaction
will allow Gastar to fully delineate our STACK position across
multiple productive formations, as well as to pursue strategic
M&A opportunities in the Mid-Continent. While this new
capital structure does not provide an immediate, comprehensive
resolution to our leverage position, we believe it establishes a
very achievable path toward further de‑levering our balance sheet
through a combination of increasing cash flow from drilling
operations as well as the potential conversion of the $125 million secured convertible notes, which
were priced at an attractive premium to our current share
price."
Mr. Porter continued, "The fact that a firm with Ares'
experience and successful track record is choosing to invest
$425 million in Gastar is a testament
to the quality of our assets and our entire team. We are
pleased to welcome Nate Walton and
Ronnie Scott to Gastar's Board of
Directors in the near future and look forward to working with
them."
Mr. Walton, a partner at Ares, also commented on the
transaction, "Through this investment in Gastar, we look forward to
working together to unlock the value in its attractive STACK
assets. We believe that access to capital, combined with
Gastar's outstanding assets, management and staff, provides an
opportunity to create substantial value for all of Gastar's
stakeholders."
Seaport Global Securities LLC served as financial advisor
and placement agent and Vinson & Elkins L.L.P. served
as legal advisor to the Company. Tudor, Pickering, Holt & Co.
served as financial advisor and Latham & Watkins LLP served as
legal advisor to Ares.
Operations Update
Gastar also announced additional well results from recent STACK
drilling activities. Under its previously announced drilling
joint venture, Gastar has now drilled and completed eight Meramec
wells and has drilled, but not yet completed, seven Meramec wells
and one Osage well. Of the
eight wells, six wells are in various stages of initial flow back
prior to reaching their initial peak production rates.
Two of the Meramec wells, the Ingle 29-1H and the Geis 31-1H,
have achieved initial peak production ("IP") rates of 1,037 (81%
oil) and 877 (69% oil) barrels of oil equivalent ("BOE") per day,
respectively. Gastar is currently drilling the
15th and 16th wells in the initial 20‑well
tranche of the drilling joint venture and expects to release
additional results concurrent with its future quarterly earnings
announcements.
Outside Gastar's drilling joint venture, the Company has
recently drilled and completed one Osage well and one Oswego well. Gastar's
initial Osage well, the McGee
29-1H located in southern Garfield
County, Oklahoma, had an IP rate of 414 BOE per day (80%
oil) and a post-peak IP 30-day rate of 353 BOE per day (74%
oil). The McGee 29-1H well was drilled in the lower
Osage with its production rate
impacted by approximately 30% of the wellbore being completed
outside of the primary target zone. The McGee 29-1H well was
cored through the Osage and
Woodford formations and that
information was used to re-target the remaining 70% of the lateral
into the primary target zone. The core information also
confirmed the presence of an upper Osage target that will be tested in future
wells.
Gastar's preliminary 2017 capital budget includes the drilling
of 14 additional Osage wells in
Kingfisher and Garfield Counties, Oklahoma outside of the drilling joint venture
area.
Gastar's initial Oswego well, the Tomahawk 7-1H, located in
Kingfisher County, Oklahoma,
realized an IP rate of 418 BOE per day (100% oil) and a post-peak
IP 30-day rate of 262 BOE per day (98% oil). Gastar's 2017
preliminary drilling budget currently does not include additional
operated Oswego wells, however, Gastar is participating in one
Oswego well being drilled by another operator in the area.
Additional details regarding Gastar's well results are available
on its website.
Year-End Reserves
Gastar's year-end 2016 Securities and Exchange Commission
("SEC") proved reserves totaled 25.6 million BOE comprised of 54%
oil and condensate, 25% natural gas and 21% natural gas
liquids. Total proved reserves declined from year-end 2015 by
30.3 million BOE, of which 14.8 million BOE was related to the sale
of the Company's assets in the Appalachian Basin. The
remainder of the reserve decline was primarily the result of the
removal of Hunton proved undeveloped locations as the Company now
focuses its current and future capital activity on drilling Meramec
and Osage wells to hold acreage by
production and delineate its STACK position. Proved developed
reserves represented 51% of total proved reserves and declined from
2015 by approximately 594,000 BOE, excluding the impact of the sale
of the Company's assets in the Appalachian Basin.
The SEC-priced pre-tax PV-10 (a non-GAAP financial measure
defined at the end of this news release) was $141.3 million. The calculation of the PV-10
value of Gastar's proved reserves for year-end 2016 used the SEC
benchmark average 12-month pricing of $42.75 per barrel of oil and $2.48 per MMBtu of natural gas.
2017 Capital Plan and Liquidity
Gastar's 2017 capital budget is approximately $84.0 million comprised of $46.0 million of drilling and completion costs,
$30.8 million in leasing costs and
$7.2 million for capitalized interest
and administration costs. The Company currently operates
approximately 92% of its drilling and completions budget.
Additional details regarding Gastar's capital budget are available
on its website.
Gastar ended 2016 with approximately $71.5 million of cash and $84.6 million of debt outstanding under the
revolving credit facility. To date, the Company has issued
approximately 24.0 million common shares under its at-the-market
("ATM") program for net proceeds of $32.8
million. The ATM proceeds were used primarily to
catch-up preferred dividend payments and associated pay down of the
revolving credit facility. There are no current plans to
issue any additional common shares under the ATM program.
Gastar expects to fund its 2017 capital program through existing
cash balances, recent financing activities and internally generated
cash flow from operating activities.
Additional details regarding the Ares Investment, year-end 2016
reserves, 2017 capital plan and recent well results are available
for download from the Events & Presentations section of
Gastar's website at www.gastar.com.
Gastar has scheduled a conference call for 10:00 a.m.
Eastern Time (9:00 a.m. Central
Time) today, Friday, February
17, 2017. Investors may participate in the call either
by phone or audio webcast.
By
Phone:
|
Dial 1-412-902-0030
at least 10 minutes before the call. A telephone replay will be
available through February 23 by dialing 1-201-612-7415 and using
the conference ID: 13655655.
|
|
|
By
Webcast:
|
Visit the Investor
Relations page of Gastar's website at www.gastar.com under "Events
& Presentations." Please log on a few minutes in advance to
register and download any necessary software. A replay will be
available shortly after the call.
|
For more information, please contact Donna
Washburn at Dennard-Lascar Associates at 713-529-6600 or
e-mail dwashburn@dennardlascar.com.
About Gastar Exploration
Gastar Exploration Inc. is a pure play Mid-Continent independent
energy company engaged in the exploration, development and
production of oil, condensate, natural gas and natural gas liquids.
Gastar's principal business activities include the identification,
acquisition, and subsequent exploration and development of oil and
natural gas properties with an emphasis on unconventional reserves,
such as shale resource plays. Gastar holds a concentrated acreage
position in what is believed to be the core of the STACK Play, an
area of central Oklahoma which is
home to multiple oil and natural gas-rich reservoirs including the
Meramec, Oswego, Osage,
Woodford and Hunton formations.
For more information, visit Gastar's website at www.gastar.com.
Information on Reserves and PV-10 Value
For the year ended December 31,
2016, future cash inflows were computed using the 12-month
un-weighted arithmetic average of the first-day-of-the-month prices
for natural gas and oil (the "benchmark base prices") adjusted by
lease in accordance with sales contracts and for energy content,
quality, transportation, compression and gathering fees and
regional price differentials, relating to the Company's proved
reserves. Benchmark base prices are held constant in
accordance with SEC guidelines for the life of the wells but are
adjusted by lease in accordance with sales contracts and for energy
content, quality, transportation, compression, and gathering fees
and regional price differentials.
PV-10 represents the present value, discounted at 10% per annum,
of estimated future net revenue before income tax of our estimated
proved reserves. PV-10 is a non-GAAP financial measure as defined
by the SEC. We believe that the presentation of PV-10 is
relevant and useful to our investors because it presents the
discounted future net cash flows attributable to our reserves prior
to taking into account corporate future income taxes and our
current tax structure. We further believe investors and
creditors use PV-10 as a basis for comparison of the relative size
of our reserves as compared with other companies.
The financial measure most directly comparable to PV-10 is the
standardized measure of future net cash flows ("Standardized
Measure"). We are not yet able to provide a reconciliation of
PV-10 to Standardized Measure because the discounted future income
taxes associated with our reserves is not yet calculable. We
expect to report, however, that our PV-10 will be equal to our
Standardized Measure as of December 31,
2016 due to the absence of projected income tax expense
estimated in future net cash flows.
The Company's 2016 year-end total proved reserves estimates were
prepared by Wright & Company, Inc.
Forward Looking Statements
In this press release, Gastar provides estimated year-end 2016
proved reserves information, a well results update and its
preliminary capital plan for 2017. Gastar has prepared the
summary preliminary data in this release based on the most current
information available to management. Gastar's normal closing
and financial reporting processes with respect to the preliminary
data herein have not been fully completed and, as a result, its
actual results could be different from this summary preliminary
information presented herein, and any such differences could be
material.
This news release also includes "forward looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Forward looking statements give our current
expectations, opinion, belief or forecasts of future events and
performance. A statement identified by the use of forward
looking words including "may," "expects," "projects,"
"anticipates," "plans," "believes," "estimate," "will," "should,"
and certain of the other foregoing statements may be deemed
forward-looking statements. Although Gastar believes that the
expectations reflected in such forward-looking statements are
reasonable, these statements involve risks and uncertainties that
may cause actual future activities and results to be materially
different from those suggested or described in this news
release. These include risks inherent in oil and natural gas
drilling and production activities, including risks with respect to
continued low or further declining prices for oil and natural gas
that could result in further downward revisions to the value of
proved reserves or otherwise cause Gastar to further delay or
suspend planned drilling and completion operations or reduce
production levels, which would adversely impact cash flow; risks
relating to the availability of capital to fund drilling operations
that can be adversely affected by adverse drilling results,
production declines and continued low or further declining prices
for oil and natural gas; risks regarding Gastar's ability to meet
financial covenants under its indenture or credit agreements or the
ability to obtain amendments or waivers to effect such compliance;
risks of fire, explosion, blowouts, pipe failure, casing collapse,
unusual or unexpected formation pressures, environmental hazards,
and other operating and production risks, which may temporarily or
permanently reduce production or cause initial production or test
results to not be indicative of future well performance or delay
the timing of sales or completion of drilling operations; delays in
receipt of drilling permits; risks relating to unexpected adverse
developments in the status of properties; borrowing base
redeterminations by Gastar's banks; risks relating to the absence
or delay in receipt of government approvals or third-party
consents; risks relating to Gastar's ability to realize the
anticipated benefits from acquired assets; risks related to the
completion of any refinancing; and other risks described in
Gastar's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q
and other filings with the SEC, available at the SEC's website at
www.sec.gov. Gastar's actual sales production rates can vary
considerably from tested initial production rates depending upon
completion and production techniques and its primary areas of
operations are subject to natural steep decline rates. By
issuing forward looking statements based on current expectations,
opinions, views or beliefs, Gastar has no obligation and, except as
required by law, is not undertaking any obligation, to update or
revise these statements or provide any other information relating
to such statements.
Contacts:
Gastar Exploration Inc.
J. Russell Porter, Chief Executive
Officer
713-739-1800 / rporter@gastar.com
Investor Relations Counsel:
Lisa Elliott, Dennard▪Lascar
Associates:
713-529-6600 / lelliott@DennardLascar.com
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/gastar-exploration-announces-capital-transaction-with-funds-managed-by-ares-management-updated-stack-play-well-results-2016-year-end-reserves-and-2017-capital-plan-300409307.html
SOURCE Gastar Exploration Inc.