HOUSTON, May 10, 2017 /PRNewswire/ -- Gastar
Exploration Inc. (NYSE MKT: GST) ("Gastar" or the "Company") today
reported financial and operating results for the three months ended
March 31, 2017.
First quarter 2017 highlights include:
- Average daily production 5,700 Boe per day, exceeding high-end
of guidance by 6%
- Production volumes comprised of 72% liquids, in line with
mid-point guidance
- Replaced revolving credit facility and redeemed senior secured
notes due 2018 with proceeds from new debt and equity financing
from Ares Management LLC ("Ares") with maturity of March 2022
- Completed the acquisition of additional interests in producing
wells and additional STACK oil and gas leasehold interests in
Kingfisher County, Oklahoma for
$51.4 million
J. Russell Porter, Gastar's
President and CEO, commented, "We are continuing to make progress
on the delineation of the Meramec and Osage formations across our STACK Play
acreage. The joint development agreement we established in
October 2016 combined with our
balance sheet refinancing has positioned us to execute an active
drilling program, both within the joint development area and
outside of it. To date, we have drilled and completed a total
of 17 Meramec wells, four Osage
wells and one Oswego well."
"With most of these wells recently being placed on line,
production history is limited and it is too early to draw
conclusions on a typical production profile of the Meramec and
Osage formations on our
acreage. Our planned drilling activity should allow us to
support and refine our estimates of ultimate recovery and the
production profiles for each formation in the coming
quarters."
"We are encouraged by early flow back results and are currently
running three drilling rigs, one within the joint development area
focused on drilling Meramec wells and two drilling Osage wells outside the joint development
area. Our current plan is to drill up to 14 gross
Osage locations on our acreage in
2017, however, we believe that we can effectively delineate and
de-risk the Osage formation across
our acreage with a smaller number of wells to test the viability of
multiple productive Osage
benches. Within the joint development agreement area, we have
drilled and completed a total of 16 gross wells under the first
20-well tranche of the agreement, and we anticipate that we will
have completed the remaining wells in the tranche by third quarter
of 2017. Assuming our partner elects to move forward, the
second group of 20 wells is anticipated to be a combination of
Meramec and Osage targets and
should be completed by early 2018. We will respond to
commodity price conditions and lower our rate of capital spending
if prudent," concluded Porter.
Financial Review
Net loss attributable to Gastar's common stockholders for the
first quarter of 2017 was $22.3 million, or a loss of $0.14 per share, compared to a first quarter 2016
net loss of $73.5 million, or a
loss of $0.93 per share.
Adjusted net loss attributable to common stockholders (non-GAAP),
which excludes non-cash and unusual items, for the first quarter of
2017 was $9.6 million, or a loss of
$0.06 per share, compared to
adjusted net loss attributable to common stockholders, which
excludes non-cash and unusual items, of $17.7 million, or a loss of $0.22 per share, for the first quarter 2016. (See
the accompanying reconciliation of the non-GAAP financial measure
adjusted net loss at the end of this news release.)
Adjusted earnings before interest, income taxes, depreciation,
depletion and amortization ("adjusted EBITDA") (non-GAAP) for the
first quarter of 2017 was $10.6
million compared to adjusted EBITDA of $10.7 million for the first quarter of 2016
and $10.6 million for the fourth
quarter of 2016. (See the accompanying reconciliation of the
non-GAAP financial adjusted EBITDA at the end of this news
release.)
Total Company revenues were $18.7
million in the first quarter of 2017, a 26% increase from
$14.8 million in the first
quarter of 2016 and a 2% increase from $18.3
million in the fourth quarter of 2016.
Revenues from oil, condensate, natural gas and natural gas
liquids ("NGLs"), before the effects of commodity derivatives
contracts, totaled $17.4 million in
the first quarter of 2017, a 20% increase from $14.5 million in the first quarter of 2016 and a
1% increase from $17.2 million in the
fourth quarter of 2016. The increase from first quarter of
2016 in oil, condensate, natural gas and NGLs revenues primarily
resulted from a 182% increase in equivalent product pricing
partially offset by a 58% decrease in equivalent production
volumes, which was primarily related to the sale of the Company's
Appalachian Basin assets in April 2016. The increase from
fourth quarter 2016 revenues was due to an 8% increase in
equivalent product pricing offset by a 6% decrease in equivalent
production volumes.
Commodity hedges were in place for approximately 67% of our oil
and condensate production, 56% of our natural gas production and
25% of our NGLs production for the first quarter of 2017.
Commodity derivative contracts settled during the period resulted
in a $1.9 million increase in revenue
compared to a $6.8 million increase
in revenues in the first quarter of 2016. For details on
Gastar's current hedging position, please see our Form 10-Q for the
quarter ended March 31, 2017 filed
with the U.S. Securities and Exchange Commission ("SEC").
Average daily Mid-Continent production for the first quarter of
2017 was 5,700 barrels of oil equivalent ("Boe") per day ("Boe/d")
as compared to 6,100 Boe/d in the first quarter of 2016 and 5,900
Boe/d in the fourth quarter of 2016.
In the Mid-Continent area, average daily production in the first
quarter of 2017 decreased 7% compared to the first quarter of 2016
and sequentially declined 4% primarily due to natural production
declines. First quarter 2017 Mid-Continent production
consisted of approximately 49% oil, 28% natural gas and 23%
NGLs.
Gastar's Mid-Continent oil, condensate and NGLs as a percentage
of production volumes were 72% in the first quarter of 2017 and
fourth quarter of 2016, compared to 71% in the first quarter of
2016. Including Appalachian Basin production, oil, condensate
and NGLs as a percentage of production volumes were 56% in the
first quarter of 2016.
The following table provides a summary of Gastar's total net
production volumes and overall average commodity prices for the
three months ended March 31, 2017 and
2016:
|
|
For the Three
Months Ended March 31,
|
|
|
2017
|
|
|
2016(1)
|
|
|
(In thousands,
except per unit amounts)
|
Net
Production:
|
|
|
|
|
|
|
|
Oil and condensate
(MBbl)
|
|
|
250
|
|
|
|
323
|
Natural gas
(MMcf)
|
|
|
863
|
|
|
|
3,204
|
NGLs (MBbl)
|
|
|
117
|
|
|
|
346
|
Total net production
(MBoe)
|
|
|
511
|
|
|
|
1,203
|
Net Daily
production:
|
|
|
|
|
|
|
|
Oil and condensate
(MBbl/d)
|
|
|
2.8
|
|
|
|
3.6
|
Natural gas
(MMcf/d)
|
|
|
9.6
|
|
|
|
35.2
|
NGLs
(MBbl/d)
|
|
|
1.3
|
|
|
|
3.8
|
Total net daily
production (MBoe/d)
|
|
|
5.7
|
|
|
|
13.2
|
Average sales price
per unit:
|
|
|
|
|
|
|
|
Oil and condensate per
Bbl, including impact of hedging activities
(2)
|
|
$
|
54.53
|
|
|
$
|
41.56
|
Oil and condensate per
Bbl, excluding impact of hedging activities
|
|
$
|
48.78
|
|
|
$
|
27.27
|
Natural gas per Mcf,
including impact of hedging activities (2)
|
|
$
|
3.22
|
|
|
$
|
1.59
|
Natural gas per Mcf,
excluding impact of hedging activities
|
|
$
|
3.00
|
|
|
$
|
1.25
|
NGLs per Bbl,
including impact of hedging activities (2)
|
|
$
|
24.28
|
|
|
$
|
8.04
|
NGLs per Bbl,
excluding impact of hedging activities
|
|
$
|
22.11
|
|
|
$
|
4.90
|
Average sales price
per Boe, including impact of hedging activities
(2)
|
|
$
|
37.68
|
|
|
$
|
17.71
|
Average sales price
per Boe, excluding impact of hedging activities
|
|
$
|
34.00
|
|
|
$
|
12.07
|
_____________________________
|
(1)
|
Includes production
and pricing impact of our Appalachian Basin assets, substantially
all of which were sold on April 8, 2016.
|
(2)
|
The impact of hedging
includes only the gain (loss) on commodity derivative contracts
settled during the periods presented.
|
Lease operating expenses ("LOE") per Boe of production were
$9.93 in the first quarter of 2017
versus $5.05 in the first quarter of
2016 and $8.79 in the fourth quarter
of 2016, including workover costs. Excluding the Appalachian
Basin, LOE per Boe for the first quarter of 2016 was $9.84 and $8.67 per
Boe for the fourth quarter of 2016. Excluding the Appalachian
Basin, LOE decreased $385,000, or 7%,
for the first quarter of 2017 compared to the first quarter of 2016
due primarily to a $440,000 decrease
in recurring well LOE costs offset by a $63,000 increase in workover expense.
Depreciation, depletion and amortization ("DD&A") expense
per Boe in the first quarter of 2017 was $9.11 compared to $11.41 for the first quarter of 2016 and
$9.44 in the fourth quarter of 2016.
The decrease in DD&A expense in the first quarter of 2017 from
the comparable period in 2016 was the result of a lower DD&A
rate due to the impairment charge incurred in the first quarter of
2016 and the credit to the full cost pool for the net proceeds from
the sale of the Company's Appalachian Basin assets completed in
April 2016.
General and administrative ("G&A") expense was $3.8 million in the first quarter of 2017
compared to $5.7 million in the first
quarter of 2016 and $3.6 million in
the fourth quarter of 2016. G&A expense for the first quarter
of 2017 included $996,000 of non-cash
stock-based compensation expense, versus $1.6 million in the first quarter of 2016 and
$773,000 in the fourth quarter of
2016.
During the first quarter of 2017, the Company repaid in full all
outstanding borrowings under its revolving credit facility and
terminated the facility and redeemed all of its outstanding 8 5/8%
senior secured notes generating a loss on early extinguishment of
debt of $12.2 million.
Operations Review and Update
The following table provides a summary of Gastar's Mid-Continent
production volumes and average commodity prices for the three
months ended March 31, 2017 and
2016:
|
|
For the Three
Months Ended March 31,
|
|
|
2017
|
|
|
2016
|
Net
Production:
|
|
|
|
|
|
|
|
Oil and condensate
(MBbl)
|
|
|
250
|
|
|
|
277
|
Natural gas
(MMcf)
|
|
|
861
|
|
|
|
950
|
NGLs (MBbl)
|
|
|
117
|
|
|
|
119
|
Total net production
(MBoe)
|
|
|
511
|
|
|
|
554
|
Net Daily
Production:
|
|
|
|
|
|
|
|
Oil and condensate
(MBbl/d)
|
|
|
2.8
|
|
|
|
3.0
|
Natural gas
(MMcf/d)
|
|
|
9.6
|
|
|
|
10.4
|
NGLs
(MBbl/d)
|
|
|
1.3
|
|
|
|
1.3
|
Total net daily
production (MBoe/d)
|
|
|
5.7
|
|
|
|
6.1
|
Average sales price
per unit(1):
|
|
|
|
|
|
|
|
Oil and condensate
(per Bbl)
|
|
$
|
48.78
|
|
|
$
|
30.16
|
Natural gas (per
Mcf)
|
|
$
|
3.00
|
|
|
$
|
1.81
|
NGLs (per
Bbl)
|
|
$
|
22.11
|
|
|
$
|
10.39
|
Average sales price
per Boe(1)
|
|
$
|
34.01
|
|
|
$
|
20.40
|
_____________________________
|
(1)
|
Excludes the impact
of hedging activities
|
As of May 1, 2017, we had
production and drilling operations at various stages on the
following operated STACK wells on our acreage:
Well
Name
|
|
Current
Working
Interest(1)
|
|
Approximate
Lateral Length
(in
feet)
|
|
Peak
Production
Rates(2)
(Boe/d)
|
|
Boe/d(3)
|
|
%
Oil(4)
|
|
Date of First
Production
or Status
|
|
Approximate
Gross Costs to
Drill & Complete
($ millions)
|
Meramec
Completions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Holiday Road
2-1H(6)
|
|
|
78.3%
|
|
|
4,300
|
|
|
654
|
|
|
227
|
|
|
73%
|
|
04/11/16
|
|
$
|
4.0
|
Ingle
29-1H(5)
|
|
|
17.8%
|
|
|
4,900
|
|
|
1,037
|
|
|
246
|
|
|
73%
|
|
10/22/16
|
|
$
|
5.2
|
Geis
31-1H(5)
|
|
|
14.2%
|
|
|
4,900
|
|
|
877
|
|
|
288
|
|
|
72%
|
|
10/31/16
|
|
$
|
3.8
|
Katy
21-1H(5)
|
|
|
18.1%
|
|
|
4,900
|
|
|
638
|
|
|
306
|
|
|
60%
|
|
11/17/16
|
|
$
|
4.0
|
Lilly
28-1H(5)(6)
|
|
|
14.7%
|
|
|
4,400
|
|
|
N/A
|
|
|
409
|
|
|
86%
|
|
12/02/16
|
|
$
|
4.6
|
Mott
19-1H(5)
|
|
|
16.2%
|
|
|
4,500
|
|
|
N/A
|
|
|
488
|
|
|
72%
|
|
01/08/17
|
|
$
|
4.6
|
Mott
20-2H(5)
|
|
|
17.1%
|
|
|
5,000
|
|
|
N/A
|
|
|
475
|
|
|
73%
|
|
01/10/17
|
|
$
|
4.2
|
Victoria
25-1H(5)
|
|
|
12.0%
|
|
|
4,600
|
|
|
513
|
|
|
303
|
|
|
65%
|
|
01/11/17
|
|
$
|
5.1
|
Kramer
29-1H(5)
|
|
|
14.7%
|
|
|
4,400
|
|
|
697
|
|
|
371
|
|
|
78%
|
|
01/23/17
|
|
$
|
5.3
|
Ma Stucki
30-1H(5)
|
|
|
2.9%
|
|
|
4,800
|
|
|
N/A
|
|
|
127
|
|
|
73%
|
|
03/02/17
|
|
$
|
5.3
|
Eldon
34-1H(5)
|
|
|
7.7%
|
|
|
4,800
|
|
|
N/A
|
|
|
730
|
|
|
84%
|
|
04/09/17
|
|
$
|
4.7
|
Snowden
27-1H(5)
|
|
|
11.8%
|
|
|
5,100
|
|
|
N/A
|
|
|
562
|
|
|
88%
|
|
04/12/17
|
|
$
|
6.3
|
Bradbury
28-1H(5)
|
|
|
7.5%
|
|
|
7,300
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
Flow back
|
|
$
|
6.8
|
Pickle
33-1H(5)
|
|
|
6.2%
|
|
|
5,100
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
Flow back
|
|
$
|
4.8
|
Johnny
32-1H(5)
|
|
|
5.0%
|
|
|
4,900
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
Flow back
|
|
$
|
4.8
|
Best
20-1H(5)
|
|
|
3.9%
|
|
|
4,900
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
Flow back
|
|
$
|
5.5
|
Stitt
32-1H(5)
|
|
|
6.2%
|
|
|
5,100
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
Completing
|
|
$
|
4.8
|
Ohm
28-1H(5)
|
|
|
3.1%
|
|
|
4,700
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
Drilling
|
|
$
|
4.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Osage
Completions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
McGee
29-1H(6)
|
|
|
94.2%
|
|
|
4,200
|
|
|
414
|
|
|
180
|
|
|
69%
|
|
09/25/16
|
|
$
|
4.3
|
Great Divide
1-12H(5)
|
|
|
7.5%
|
|
|
5,000
|
|
|
510
|
|
|
277
|
|
|
79%
|
|
04/02/17
|
|
$
|
3.4
|
Hane 14-1H
|
|
|
32.0%
|
|
|
4,700
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
Flow back
|
|
$
|
3.8
|
Pedlik
10-1H
|
|
|
26.0%
|
|
|
4,800
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
Flow back
|
|
$
|
3.8
|
Gungoll
20-1H
|
|
|
68.0%
|
|
|
5,000
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
Completing
|
|
$
|
3.8
|
Pudge
28-1H
|
|
|
50.0%
|
|
|
4,800
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
Completing
|
|
$
|
3.8
|
Bennie Racer
14-1H
|
|
|
58.0%
|
|
|
5,000
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
Drilling
|
|
$
|
3.8
|
Harold Dorothy 1907
6-1H
|
|
|
45.0%
|
|
|
5,000
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
Drilling
|
|
$
|
3.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oswego
Completions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tomahawk
7-1H
|
|
|
88.6%
|
|
|
4,200
|
|
|
418
|
|
|
68
|
|
|
90%
|
|
09/24/16
|
|
$
|
2.7
|
_____________________________
|
(1)
|
Current estimated
working interest. Working interest subject to change based on
final force pooling orders.
|
(2)
|
Represents highest
daily gross Boe rate. N/A indicates that the well has not yet
reached its peak initial production rate.
|
(3)
|
Represents average
gross production for the most recent five (5) days through May 1,
2017.
|
(4)
|
Represents inception
to date percent of oil produced as compared to total oil production
on a two-stream basis.
|
(5)
|
Drilling Program
well. Working interest reflected is 20% of our total original
working interest.
|
(6)
|
Excludes one-time
fishing or coring costs.
|
In late March 2017, Gastar
completed the acquisition of additional working and net revenue
interests in approximately 66 gross (9.5 net) producing wells
and 5,670 net acres of additional STACK oil and gas leasehold
interests in Kingfisher County,
Oklahoma for approximately $51.4
million. Prior to the acquisition, Gastar held an
existing interest in the majority of the acquired producing wells
and leasehold.
Gastar's net capital expenditures, excluding acquisitions, in
the first quarter of 2017 totaled $24.9
million, comprised of $8.2 million for drilling, completions and
infrastructure costs, $15.7 million
for unproved acreage extensions, renewals and additions and
$1.0 million of other capitalized
costs. For the remainder of 2017, our capital expenditure
budget, including other capitalized costs, is $59.0 million, comprised of $37.7 million for drilling, completion and
infrastructure costs, $15.1 million
for lease renewal and extension costs and $6.2 million of other capitalized
costs.
Liquidity
In order to address near-term debt maturities and structure new
debt maturities to better match the timeframe needed to fully
delineate and de-risk its acreage, on March
3, 2017, the Company refinanced its revolving bank facility
and high-yield notes with a combination of term debt, convertible
debt and common stock provided by Ares. The transactions with
Ares included $425 million in new financing in the form of a
$250 million first lien secured term
loan, the issuance of $125 million
second lien secured convertible notes (the "Notes") and a
$50 million purchase of Gastar common
stock. On March 21, 2017, the
Company issued an additional $75
million of Notes to Ares. Stockholder approval for the
issuance of common stock upon the exercise of the conversion rights
of the Notes was obtained on May 2,
2017 at a special meeting of common stockholders.
Subsequent to that stockholder approval, $37.5 million of the additional Notes were
exchanged for 25,456,521 shares of the Company's common stock
resulting in common stock outstanding of 211,903,583 shares.
Stockholders also approved the issuance to Ares of 2,000 shares of
the Company's Special Voting Preferred Stock, pursuant to which
Ares will be entitled to elect up to two of the Company's directors
provided Ares meets certain ownership thresholds.
At March 31, 2017, Gastar had
approximately $64.6 million in
available cash and cash equivalents.
As of March 31, 2017, the Company
had received approximately $58.5
million of the proceeds from the south STACK Play acreage
sale. On April 24, 2017, the
Company received an additional $10.4
million of the proceeds from the south STACK Play acreage
sale and anticipates receiving the remaining balance of
proceeds of approximately $1.9
million by July 2017.
For the three months ended March 31,
2017, Gastar declared and paid dividends of $8.7 million for the Series A Preferred Stock and
$5.7 million for the Series B
Preferred Stock, including the accumulated and unpaid dividends for
April 2016 to December 2016.
Guidance for Second Quarter 2017 and Full-Year 2017
Our guidance for the second quarter of and full-year 2017 is
provided in the table below and represents the Company's best
estimate of the range of likely future results. Guidance could be
affected by the factors described below in "Forward Looking
Statements."
Production
|
|
Second
Quarter 2017
|
|
Full-Year
2017
|
Net average daily
(MBoe/d)(1)
|
|
5.7 – 6.0
|
|
5.5 – 6.1
|
Liquids percentage
(oil and NGLs)
|
|
71% - 73%
|
|
72% - 75%
|
|
Cash Operating
Expenses
|
|
|
|
|
Production taxes (%
of production revenues)
|
|
2.6% -
2.8%
|
|
2.6% -
2.9%
|
Direct lease
operating ($/Boe)
|
|
$8.00 -
$8.50
|
|
$7.90 -
$8.50
|
Transportation,
treating & gathering ($/Boe)
|
|
$0.70 -
$0.85
|
|
$0.75 -
$0.85
|
Cash general &
administrative ($/Boe)
|
|
$5.90 -
$6.40
|
|
$5.40 -
$5.80
|
________________
|
(1)
|
Based on equivalent
of 6 thousand cubic feet (Mcf) of natural gas to one barrel of oil,
condensate or NGLs.
|
Conference Call
Gastar has scheduled a conference call for 10:00 a.m.
Eastern Time (9:00 a.m. Central
Time) on Thursday, May 11,
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 May 12 by dialing 1-201-612-7415 and using the
conference ID: 13661036.
|
|
|
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.
Forward Looking Statements
This news release 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 natural gas and oil
drilling and production activities, including risks with respect to
continued low or further declining prices for natural gas and oil
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 natural gas and oil; 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; risks relating to the absence or delay in
receipt of government approvals or third-party consents; risks
relating to our ability to integrate acquired assets with ours and
to realize the anticipated benefits from such acquisitions; and
other risks described in Gastar's Annual Report on Form 10-K and
other filings with the SEC, available at the SEC's website at
www.sec.gov. Our actual sales production rates can vary
considerably from tested initial production rates depending upon
completion and production techniques and our 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.
Targeted expectations and guidance for the second quarter and
full-year of 2017 are based upon the current 2017 planned capital
expenditures budget, which may be subject to revision and
reevaluation dependent upon future developments, including changes
in commodity prices, drilling results, our liquidity position,
availability of crews, supplies and production capacity, weather
delays and significant changes in drilling costs.
Unless otherwise stated herein, equivalent volumes of production
are based upon an energy equivalent ratio of six Mcf of natural gas
to each barrel of liquids (oil, condensate and NGLs), which ratio
is not reflective of relative value. Our NGLs are sold as
part of our wet gas subject to an incremental NGLs pricing formula
based upon a percentage of NGLs extracted from our wet gas
production. Our reported production volumes reflect
incremental post-processing NGLs volumes and residual gas volumes
with which we are credited under our sales contracts.
Contacts:
Gastar Exploration Inc.
Michael A. Gerlich, Chief Financial
Officer
713-739-1800 / mgerlich@gastar.com
Investor Relations Counsel:
Lisa Elliott, Dennard▪Lascar
Associates:
713-529-6600 / lelliott@DennardLascar.com
- Financial Tables Follow –
GASTAR EXPLORATION
INC.
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
|
For the Three
Months Ended
March 31,
|
|
|
2017
|
|
|
2016
|
|
|
(in thousands,
except share and per share data)
|
REVENUES:
|
|
|
|
|
|
|
|
Oil and
condensate
|
|
$
|
12,190
|
|
|
$
|
8,813
|
Natural gas
|
|
|
2,588
|
|
|
|
4,018
|
NGLs
|
|
|
2,591
|
|
|
|
1,695
|
Total oil and
condensate, natural gas and NGLs revenues
|
|
|
17,369
|
|
|
|
14,526
|
Gain on commodity
derivatives contracts
|
|
|
1,300
|
|
|
|
285
|
Total
revenues
|
|
|
18,669
|
|
|
|
14,811
|
EXPENSES:
|
|
|
|
|
|
|
|
Production
taxes
|
|
|
485
|
|
|
|
705
|
Lease operating
expenses
|
|
|
5,072
|
|
|
|
6,079
|
Transportation,
treating and gathering
|
|
|
311
|
|
|
|
613
|
Depreciation,
depletion and amortization
|
|
|
4,652
|
|
|
|
13,729
|
Impairment of natural
gas and oil properties
|
|
|
—
|
|
|
|
48,497
|
Accretion of asset
retirement obligation
|
|
|
51
|
|
|
|
105
|
General and
administrative expense
|
|
|
3,824
|
|
|
|
5,675
|
Total
expenses
|
|
|
14,395
|
|
|
|
75,403
|
INCOME (LOSS) FROM
OPERATIONS
|
|
|
4,274
|
|
|
|
(60,592)
|
OTHER (EXPENSE)
INCOME:
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(10,849)
|
|
|
|
(9,298)
|
Loss on early
extinguishment of debt
|
|
|
(12,172)
|
|
|
|
—
|
Investment and other
income
|
|
|
49
|
|
|
|
33
|
LOSS BEFORE PROVISION
FOR INCOME TAXES
|
|
|
(18,698)
|
|
|
|
(69,857)
|
Provision for income
taxes
|
|
|
—
|
|
|
|
—
|
NET LOSS
|
|
|
(18,698)
|
|
|
|
(69,857)
|
Dividends on preferred
stock
|
|
|
(3,618)
|
|
|
|
(3,618)
|
NET LOSS ATTRIBUTABLE
TO COMMON STOCKHOLDERS
|
|
$
|
(22,316)
|
|
|
$
|
(73,475)
|
NET LOSS PER SHARE OF
COMMON STOCK ATTRIBUTABLE TO
COMMON STOCKHOLDERS:
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.14)
|
|
|
$
|
(0.93)
|
Diluted
|
|
$
|
(0.14)
|
|
|
$
|
(0.93)
|
WEIGHTED AVERAGE
SHARES OF COMMON STOCK
OUTSTANDING:
|
|
|
|
|
|
|
|
Basic
|
|
|
162,829,221
|
|
|
|
78,788,133
|
Diluted
|
|
|
162,829,221
|
|
|
|
78,788,133
|
GASTAR EXPLORATION
INC.
|
CONSOLIDATED
BALANCE SHEETS
|
|
|
March
31,
|
|
|
December
31,
|
|
|
2017
|
|
|
2016
|
|
|
(in thousands, except share data)
|
ASSETS
|
|
|
|
|
|
|
|
CURRENT
ASSETS:
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
64,595
|
|
|
$
|
71,529
|
Accounts receivable,
net of allowance for doubtful accounts of $1,953
|
|
|
36,979
|
|
|
|
26,883
|
Commodity derivative
contracts
|
|
|
6,293
|
|
|
|
6,212
|
Prepaid
expenses
|
|
|
652
|
|
|
|
755
|
Total current
assets
|
|
|
108,519
|
|
|
|
105,379
|
PROPERTY, PLANT AND
EQUIPMENT:
|
|
|
|
|
|
|
|
Oil and natural gas
properties, full cost method of accounting:
|
|
|
|
|
|
|
|
Unproved properties,
excluded from amortization
|
|
|
125,940
|
|
|
|
67,333
|
Proved
properties
|
|
|
1,259,201
|
|
|
|
1,253,061
|
Total natural gas and
oil properties
|
|
|
1,385,141
|
|
|
|
1,320,394
|
Furniture and
equipment
|
|
|
2,663
|
|
|
|
2,622
|
Total property, plant
and equipment
|
|
|
1,387,804
|
|
|
|
1,323,016
|
Accumulated
depreciation, depletion and amortization
|
|
|
(1,135,664)
|
|
|
|
(1,131,012)
|
Total property, plant
and equipment, net
|
|
|
252,140
|
|
|
|
192,004
|
OTHER
ASSETS:
|
|
|
|
|
|
|
|
Restricted
cash
|
|
|
369
|
|
|
|
—
|
Commodity derivative
contracts
|
|
|
1,445
|
|
|
|
1,638
|
Deferred charges,
net
|
|
|
-
|
|
|
|
676
|
Advances to operators
and other assets
|
|
|
87
|
|
|
|
102
|
Other
|
|
|
405
|
|
|
|
405
|
Total other
assets
|
|
|
2,306
|
|
|
|
2,821
|
TOTAL
ASSETS
|
|
$
|
362,965
|
|
|
$
|
300,204
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
8,034
|
|
|
$
|
8,867
|
Revenue
payable
|
|
|
11,173
|
|
|
|
6,690
|
Accrued
interest
|
|
|
933
|
|
|
|
3,515
|
Accrued drilling and
operating costs
|
|
|
5,224
|
|
|
|
2,615
|
Advances from
non-operators
|
|
|
2,775
|
|
|
|
3,504
|
Commodity derivative
contracts
|
|
|
184
|
|
|
|
338
|
Commodity derivative
premium payable
|
|
|
1,544
|
|
|
|
1,654
|
Asset retirement
obligation
|
|
|
0
|
|
|
|
89
|
Other accrued
liabilities
|
|
|
3,414
|
|
|
|
2,462
|
Total current
liabilities
|
|
|
33,281
|
|
|
|
29,734
|
LONG-TERM
LIABILITIES:
|
|
|
|
|
|
|
|
Long-term
debt
|
|
|
365,066
|
|
|
|
404,493
|
Commodity derivative
contracts
|
|
|
1,077
|
|
|
|
—
|
Commodity derivative
premium payable
|
|
|
626
|
|
|
|
969
|
Asset retirement
obligation
|
|
|
4,282
|
|
|
|
5,443
|
Total long-term
liabilities
|
|
|
371,051
|
|
|
|
410,905
|
Commitments and
contingencies
|
|
|
|
|
|
|
|
STOCKHOLDERS'
EQUITY:
|
|
|
|
|
|
|
|
Preferred stock, par
value $0.01 per share, 40,000,000 shares authorized
|
|
|
|
|
|
|
|
8.625% Series A
Cumulative Preferred stock, 10,000,000 shares designated; 4,045,000 shares issued and outstanding
at March 31, 2017 and December 31,
2016, respectively, with liquidation preference of $25.00 per share
|
|
|
41
|
|
|
|
41
|
10.75% Series B
Cumulative Preferred stock, 10,000,000 shares designated; 2,140,000 shares issued and outstanding
at March 31, 2017 and December 31,
2016, respectively, with liquidation preference of $25.00 per share
|
|
|
21
|
|
|
|
21
|
Common stock, par
value $0.001 per share; 550,000,000 shares authorized; 186,147,733 and 150,377,870 shares issued
and outstanding at March 31, 2017
and December 31, 2016, respectively
|
|
|
186
|
|
|
|
150
|
Additional paid-in
capital
|
|
|
777,166
|
|
|
|
644,306
|
Accumulated
deficit
|
|
|
(818,781)
|
|
|
|
(784,953)
|
Total stockholders'
equity
|
|
|
(41,367)
|
|
|
|
(140,435)
|
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
$
|
362,965
|
|
|
$
|
300,204
|
GASTAR EXPLORATION
INC.
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
For the Three
Months Ended March 31,
|
|
|
2017
|
|
|
2016
|
|
|
(in
thousands)
|
CASH FLOWS FROM
OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(18,698)
|
|
|
$
|
(69,857)
|
Adjustments to
reconcile net loss to net cash provided by operating activities:
|
|
|
|
|
|
|
|
Depreciation,
depletion and amortization
|
|
|
4,652
|
|
|
|
13,729
|
Impairment of natural
gas and oil properties
|
|
|
—
|
|
|
|
48,497
|
Stock-based
compensation
|
|
|
996
|
|
|
|
1,633
|
Total gain on
commodity derivatives contracts
|
|
|
(1,300)
|
|
|
|
(285)
|
Cash settlements of
matured commodity derivative contracts, net
|
|
|
1,683
|
|
|
|
8,158
|
Amortization of
deferred financing costs and debt discount
|
|
|
1,710
|
|
|
|
990
|
Accretion of asset
retirement obligation
|
|
|
51
|
|
|
|
105
|
Loss on early
extinguishment of debt
|
|
|
12,172
|
|
|
|
—
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(9,897)
|
|
|
|
636
|
Prepaid
expenses
|
|
|
103
|
|
|
|
100
|
Accounts payable and
accrued liabilities
|
|
|
972
|
|
|
|
11,475
|
Net cash (used in)
provided by operating activities
|
|
|
(7,556)
|
|
|
|
15,181
|
CASH FLOWS FROM
INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
Development and
purchase of oil and natural gas properties
|
|
|
(21,613)
|
|
|
|
(12,825)
|
(Acquisition of)
refund for oil and natural gas properties
|
|
|
(54,498)
|
|
|
|
127
|
Proceeds from sale of
oil and natural gas properties
|
|
|
13,150
|
|
|
|
—
|
Application of
proceeds from non-operators
|
|
|
(729)
|
|
|
|
(20)
|
Advances to
operators
|
|
|
—
|
|
|
|
(69)
|
Purchase of furniture
and equipment
|
|
|
(41)
|
|
|
|
(4)
|
Net cash used in
investing activities
|
|
|
(63,731)
|
|
|
|
(12,791)
|
CASH FLOWS FROM
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
Proceeds from term
loan
|
|
|
250,000
|
|
|
|
—
|
Proceeds from
convertible notes
|
|
|
200,000
|
|
|
|
—
|
Repayment of senior
secured notes
|
|
|
(325,000)
|
|
|
|
—
|
Repayment of revolving
credit facility
|
|
|
(84,630)
|
|
|
|
(20,370)
|
Loss on early
extinguishment of debt
|
|
|
(7,011)
|
|
|
|
—
|
Proceeds from issuance
of common shares, net of issuance costs
|
|
|
56,366
|
|
|
|
—
|
Dividends on preferred
stock
|
|
|
(14,473)
|
|
|
|
(3,618)
|
Deferred financing
charges
|
|
|
(9,945)
|
|
|
|
(815)
|
Increase in restricted
cash
|
|
|
(369)
|
|
|
|
—
|
Tax withholding
related to restricted stock and PBU vestings
|
|
|
(585)
|
|
|
|
(711)
|
Net cash provided by
(used in) financing activities
|
|
|
64,353
|
|
|
|
(25,514)
|
NET DECREASE IN CASH
AND CASH EQUIVALENTS
|
|
|
(6,934)
|
|
|
|
(23,124)
|
CASH AND CASH
EQUIVALENTS, BEGINNING OF PERIOD
|
|
|
71,529
|
|
|
|
50,074
|
CASH AND CASH
EQUIVALENTS, END OF PERIOD
|
|
$
|
64,595
|
|
|
$
|
26,950
|
NON-GAAP FINANCIAL INFORMATION AND
RECONCILIATION
We use both GAAP and certain non-GAAP financial measures to
assess performance. Generally, a non-GAAP financial measure
is a numerical measure of a company's performance, financial
position or cash flows that either excludes or includes amounts
that are not normally excluded or included in the most directly
comparable measure calculated and presented in accordance with
GAAP. Our management believes that these non-GAAP measures
provide useful supplemental information to investors in order that
they may evaluate our financial performance using the same measures
as management. These non-GAAP financial measures should not
be considered as a substitute for, or superior to, measures of
financial performance prepared in accordance with GAAP. In
evaluating these measures, investors should consider that the
methodology applied in calculating such measures may differ among
companies and analysts. A reconciliation is provided below
outlining the differences between these non-GAAP measures and their
most directly comparable financial measure calculated in accordance
with GAAP.
Reconciliation of
Net Loss to Net Income Loss Excluding Special Items:
|
|
|
|
For the Three
Months Ended March 31,
|
|
|
2017
|
|
|
2016
|
|
|
(in thousands,
except share and per share data)
|
NET LOSS ATTRIBUTABLE
TO COMMON STOCKHOLDERS
|
|
$
|
(22,316)
|
|
|
$
|
(73,475)
|
SPECIAL
ITEMS:
|
|
|
|
|
|
|
|
Losses related to the
change in mark to market value for outstanding commodity
derivatives contracts
|
|
|
582
|
|
|
|
6,497
|
Impairment of oil and
natural gas properties
|
|
|
—
|
|
|
|
48,497
|
Loss on early
extinguishment of debt
|
|
|
12,172
|
|
|
|
—
|
Non-recurring general
and administrative costs related to acquisition of
assets
|
|
|
—
|
|
|
|
275
|
Non-recurring
severance costs related to property divestments
|
|
|
—
|
|
|
|
537
|
|
|
|
|
|
|
|
|
ADJUSTED NET LOSS
ATTRIBUTABLE TO COMMON STOCKHOLDERS
|
|
$
|
(9,562)
|
|
|
$
|
(17,669)
|
|
|
|
|
|
|
|
|
ADJUSTED NET LOSS PER
SHARE OF COMMON STOCK ATTRIBUTABLE TO COMMON
STOCKHOLDERS:
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.06)
|
|
|
$
|
(0.22)
|
Diluted
|
|
$
|
(0.06)
|
|
|
$
|
(0.22)
|
WEIGHTED AVERAGE
SHARES OF COMMON STOCK
|
|
|
|
|
|
|
|
Basic
|
|
|
162,829,221
|
|
|
|
78,788,133
|
Diluted
|
|
|
162,829,221
|
|
|
|
78,788,133
|
Reconciliation of
Cash Flows before Working Capital Changes and as Adjusted for
Special Items:
|
|
|
|
For the Three
Months Ended March 31,
|
|
|
2017
|
|
|
2016
|
|
|
(in thousands,
except share and per share data)
|
CASH FLOWS FROM
OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(18,698)
|
|
|
$
|
(69,857)
|
Adjustments to
reconcile net loss to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
Depreciation,
depletion and amortization
|
|
|
4,652
|
|
|
|
13,729
|
Impairment of oil and
natural gas properties
|
|
|
—
|
|
|
|
48,497
|
Stock-based
compensation
|
|
|
996
|
|
|
|
1,633
|
Mark to market of
commodity derivatives contracts:
|
|
|
|
|
|
|
|
Total gain on
commodity derivatives contracts
|
|
|
(1,300)
|
|
|
|
(285)
|
Cash settlements of
matured commodity derivatives contracts, net
|
|
|
1,683
|
|
|
|
8,158
|
Amortization of
deferred financing costs and debt discount
|
|
|
1,710
|
|
|
|
990
|
Accretion of asset
retirement obligation
|
|
|
51
|
|
|
|
105
|
Loss on early
extinguishment of debt
|
|
|
12,172
|
|
|
|
—
|
Cash flows from
operations before working capital changes
|
|
|
1,266
|
|
|
|
2,970
|
Dividends on preferred
stock(1)
|
|
|
(3,618)
|
|
|
|
(3,618)
|
Non-recurring general
and administrative costs related to acquisition of
assets
|
|
|
—
|
|
|
|
275
|
Non-recurring
severance costs related to property divestments
|
|
|
—
|
|
|
|
537
|
Adjusted cash flows
from operations
|
|
$
|
(2,352)
|
|
|
$
|
164
|
________________
|
(1)
|
Excludes $10.9
million of accumulated dividends for the period April 2016 to
December 2016 declared and paid in January 2017.
|
Reconciliation of
Net Loss to Adjusted Earnings Before Interest, Income Taxes,
Depreciation, Depletion and Amortization ("Adjusted
EBITDA"):
|
|
|
|
For the Three
Months Ended March 31,
|
|
|
2017
|
|
|
2016
|
|
|
(in thousands,
except share and per share data)
|
NET LOSS ATTRIBUTABLE
TO COMMON STOCKHOLDERS
|
|
$
|
(22,316)
|
|
|
$
|
(73,475)
|
Interest
expense
|
|
|
10,849
|
|
|
|
9,298
|
Loss on early
extinguishment of debt
|
|
|
12,172
|
|
|
|
—
|
Depreciation,
depletion and amortization
|
|
|
4,652
|
|
|
|
13,729
|
Impairment of oil and
natural gas properties
|
|
|
—
|
|
|
|
48,497
|
EBITDA
|
|
|
5,357
|
|
|
|
(1,951)
|
Dividends on preferred
stock
|
|
|
3,618
|
|
|
|
3,618
|
Accretion of asset
retirement obligation
|
|
|
51
|
|
|
|
105
|
Losses related to the
change in mark to market value for outstanding commodity
derivatives contracts
|
|
|
582
|
|
|
|
6,497
|
Non-cash stock
compensation expense
|
|
|
996
|
|
|
|
1,633
|
Investment income and
other
|
|
|
(49)
|
|
|
|
(33)
|
Non-recurring general
and administrative costs related to acquisition of
assets
|
|
|
—
|
|
|
|
275
|
Non-recurring
severance costs related to property divestments
|
|
|
—
|
|
|
|
537
|
ADJUSTED
EBITDA
|
|
$
|
10,555
|
|
|
$
|
10,681
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/gastar-exploration-announces-first-quarter-2017-results-300455545.html
SOURCE Gastar Exploration Inc.