HOUSTON, Aug. 3, 2017 /PRNewswire/ -- Gastar
Exploration Inc. (NYSE MKT: GST) ("Gastar" or the "Company") today
reported financial and operating results for the three and six
months ended June 30, 2017.
Second quarter 2017 highlights include:
- Average daily production of 6,100 barrels of oil equivalent
("Boe") per day ("Boe/d"), exceeding high-end of guidance by
2%
- Production volumes comprised of 73% liquids, in line with
high-end of guidance
- Mid-year proved reserves increased 18% over year-end 2016
proved reserves
- Completion of the conversion of $37.5
million of convertible notes into 25,456,521 common
shares
J. Russell Porter, Gastar's
President and CEO, commented, "We continue to make progress
delineating the Meramec and Osage
formations across our acreage position. To date, we have
drilled a total of 21 Meramec and 13 Osage wells across our STACK
Play acreage. In addition, we have participated in numerous
third-party wells within our footprint with initial production
results that we believe confirm the quality of our acreage.
With our operated wells and non-operated well participation, we
have now accumulated a substantial amount of well and formation
data regarding the STACK Play."
"We have decided to delay additional well completions across our
acreage to allow Stephen Roberts,
our newly appointed Chief Operating Officer, and his team the time
necessary to evaluate recent results and determine the optimal
completion procedures for our most recently drilled wells.
This delay will allow us to implement refinements to our completion
approach that are expected to improve production performance.
We have already initiated enhancements and modifications to our
drilling practices that have improved drilling times, eliminated
certain drilling issues and reduced inefficiencies and costs.
As we make similar changes to our completions, I expect much
improved total drilling and completion costs as well as production
performance that should be evident over the second half of this
year."
"We are increasing our 2017 drilling capital budget by
approximately $40 million, excluding
land and other capitalized costs, to accommodate higher working
interests in our operated wells, partially as a result of the
termination of our drilling joint venture, more operated wells than
originally budgeted and increased non-operated drilling
activity. The higher drilling capital activity is resulting
in an increase in our full-year mid-point production guidance by
700 Boe/d," concluded Porter.
Financial Review
Net loss attributable to Gastar's common stockholders for the
second quarter of 2017 was $6.4 million, or a loss of $0.03 per share, compared to a second quarter
2016 net loss of $18.1 million,
or a loss of $0.17 per
share. Adjusted net loss attributable to common stockholders
(non-GAAP), which excludes non-cash and unusual items, for the
second quarter of 2017 was $9.8
million, or a loss of $0.05
per share, compared to an adjusted net loss attributable to common
stockholders of $12.5 million, or a
loss of $0.12 per share, for the
second 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
second quarter of 2017 was $9.8
million compared to adjusted EBITDA of $6.8 million for the second quarter of 2016
and $10.6 million for the first
quarter of 2017. (See the accompanying reconciliation of the
non-GAAP financial adjusted EBITDA at the end of this news
release.)
Total Company revenues were $22.6
million in the second quarter of 2017, an 86% increase from
$12.2 million in the second
quarter of 2016 and a 21% increase from $18.7 million in the first quarter of 2017.
Revenues from oil, condensate, natural gas and natural gas
liquids ("NGLs"), before the effects of commodity derivatives
contracts, totaled $17.3 million in
the second quarter of 2017, a 16% increase from $14.9 million in the second quarter of 2016 and a
slight decrease from $17.4 million in
the first quarter of 2017. The increase from second quarter
of 2016 in oil, condensate, natural gas and NGLs revenues primarily
resulted from a 21% increase in equivalent product pricing
partially offset by a 4% decrease in equivalent production
volumes. The slight decrease from first quarter 2017 revenues
was due to a 9% decrease in equivalent product pricing offset by a
9% increase in equivalent production volumes.
Commodity hedges were in place for approximately 61% of our oil
and condensate production, 59% of our natural gas production and
24% of our NGLs production for the second quarter of 2017.
Commodity derivative contracts settled during the period resulted
in a $2.0 million increase in revenue
compared to a $565,000 increase in
revenues in the second quarter of 2016.
The following table provides a summary of Gastar's overall
average commodity prices for the three and six months ended
June 30, 2017 and 2016:
|
|
For the Three
Months
Ended June 30,
|
|
|
For the Six
Months
Ended June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016(1)
|
|
|
|
|
|
Average sales price
per unit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and condensate per
Bbl, including impact of hedging activities
(1)
|
|
$
|
52.21
|
|
|
$
|
43.59
|
|
|
$
|
53.31
|
|
|
$
|
42.48
|
|
Oil and condensate per
Bbl, excluding impact of hedging activities
|
|
$
|
45.94
|
|
|
$
|
41.82
|
|
|
$
|
47.28
|
|
|
$
|
33.91
|
|
Natural gas per Mcf,
including impact of hedging activities (1)
|
|
$
|
2.51
|
|
|
$
|
1.84
|
|
|
$
|
2.85
|
|
|
$
|
1.65
|
|
Natural gas per Mcf,
excluding impact of hedging activities
|
|
$
|
2.54
|
|
|
$
|
1.84
|
|
|
$
|
2.76
|
|
|
$
|
1.40
|
|
NGLs per Bbl,
including impact of hedging activities (1)
|
|
$
|
19.41
|
|
|
$
|
12.62
|
|
|
$
|
21.74
|
|
|
$
|
9.38
|
|
NGLs per Bbl,
excluding impact of hedging activities
|
|
$
|
17.02
|
|
|
$
|
12.02
|
|
|
$
|
19.45
|
|
|
$
|
6.98
|
|
Average sales price
per Boe, including impact of hedging activities
(1)
|
|
$
|
34.49
|
|
|
$
|
26.57
|
|
|
$
|
36.02
|
|
|
$
|
20.60
|
|
Average sales price
per Boe, excluding impact of hedging activities
|
|
$
|
30.88
|
|
|
$
|
25.60
|
|
|
$
|
32.37
|
|
|
$
|
16.49
|
|
|
|
|
|
|
|
|
(1)
|
The impact of hedging
includes only the gain (loss) on commodity derivative contracts
settled during the periods presented.
|
For details on Gastar's current hedging position, please see our
Form 10-Q for the quarter ended June 30,
2017 filed with the U.S. Securities and Exchange Commission
("SEC").
Average daily Mid-Continent production for the second quarter of
2017 was 6,100 Boe/d as compared to 6,200 Boe/d in the second
quarter of 2016 and 5,700 Boe/d in the first quarter of 2017.
In the Mid-Continent area, average daily production in the
second quarter of 2017 decreased 2% compared to the second quarter
of 2016 and sequentially increased 7% primarily due to increased
well completion activity. Second quarter 2017 Mid-Continent
equivalent production consisted of approximately 73% liquids,
comprised of 50% oil and 23% NGLs, up 2% from second quarter 2016
production and up 1% from first quarter 2017.
Lease operating expenses ("LOE") per Boe of production were
$9.20 in the second quarter of 2017
versus $7.86 in the second quarter of
2016 and $9.93 in the first quarter
of 2017, including workover costs. Excluding workover
expense, LOE per Boe for the second quarter of 2017 was
$8.49 as compared to $8.24 per BOE in the second quarter of 2016 and
$7.73 per Boe for the first quarter
of 2017.
General and administrative ("G&A") expense was $4.6 million in the second quarter of 2017
compared to $6.3 million in the
second quarter of 2016 and $3.8
million in the first quarter of 2017. G&A expense for
the second quarter of 2017 included $1.2
million of non-cash stock-based compensation expense, versus
$702,000 in the second quarter of
2016 and $996,000 in the first
quarter of 2017. Increase in sequential cash G&A expense
was primarily due to additional legal and public company costs.
Liquidity
Gastar's net capital expenditures, excluding acquisitions, in
the second quarter of 2017 totaled $32.5 million, comprised of $24.6 million for drilling, completions and
infrastructure costs, $5.7 million
for unproved acreage extensions, renewals and additions and
$2.2 million of other capitalized
costs. For the remainder of 2017, our capital expenditure
budget, including other capitalized costs, is $71.8 million, comprised of $53.6 million for drilling, completion and
infrastructure costs, $11.9 million
for lease renewal and extension costs and $6.3 million of other capitalized
costs.
At June 30, 2017, Gastar had
approximately $38.7 million in
available cash and cash equivalents and $412.5 million in long-term borrowings
outstanding.
Series A and Series B Preferred Dividends Suspended
To preserve our liquidity in the current commodity price
environment, commencing August 2017,
we are suspending the declaration and payment of monthly cash
dividends on our outstanding Series A and Series B Preferred
Stock. Dividends on the Series A and Series B Preferred Stock
will accumulate regardless of whether any such dividends are
declared or not.
Term Loan Amendment
Pursuant to an amendment to Gastar's term loan, commencing
July 1, 2017 through December 31, 2018, the Company has elected to
pay-in-kind ("PIK") 100% of the term loan interest.
Effective January 1, 2019, the
Company may elect to continue to PIK up to 50% of the term loan
interest. The term loan interest increased to 10.25% per
annum with the election to PIK effective July 1, 2017 and the PIK interest will be paid
quarterly by issuing additional term loan notes.
Operations Review and Update
The following table provides a summary of Gastar's Mid-Continent
production volumes and average commodity prices for the three and
six months ended June 30, 2017 and
2016:
|
|
For the Three
Months Ended
June
30,
|
|
|
For the Six Months
Ended
June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Net
Production:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and condensate
(MBbl)
|
|
|
277
|
|
|
|
271
|
|
|
|
527
|
|
|
|
548
|
|
Natural gas
(MMcf)
|
|
|
923
|
|
|
|
970
|
|
|
|
1,784
|
|
|
|
1,920
|
|
NGLs (MBbl)
|
|
|
128
|
|
|
|
133
|
|
|
|
245
|
|
|
|
252
|
|
Total net production
(MBoe)
|
|
|
559
|
|
|
|
566
|
|
|
|
1,070
|
|
|
|
1,120
|
|
Net Daily
Production:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and condensate
(MBbl/d)
|
|
|
3.0
|
|
|
|
3.0
|
|
|
|
2.9
|
|
|
|
3.0
|
|
Natural gas
(MMcf/d)
|
|
|
10.1
|
|
|
|
10.7
|
|
|
|
9.9
|
|
|
|
10.5
|
|
NGLs
(MBbl/d)
|
|
|
1.4
|
|
|
|
1.5
|
|
|
|
1.4
|
|
|
|
1.4
|
|
Total net daily
production (MBoe/d)
|
|
|
6.1
|
|
|
|
6.2
|
|
|
|
5.9
|
|
|
|
6.2
|
|
Average sales price
per unit(1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and condensate
(per Bbl)
|
|
$
|
45.93
|
|
|
$
|
41.55
|
|
|
$
|
47.28
|
|
|
$
|
35.80
|
|
Natural gas (per
Mcf)
|
|
$
|
2.54
|
|
|
$
|
1.87
|
|
|
$
|
2.76
|
|
|
$
|
1.84
|
|
NGLs (per
Bbl)
|
|
$
|
17.01
|
|
|
$
|
14.53
|
|
|
$
|
19.45
|
|
|
$
|
12.57
|
|
Average sales price
per Boe(1)
|
|
$
|
30.88
|
|
|
$
|
26.54
|
|
|
$
|
32.37
|
|
|
$
|
23.50
|
|
|
|
|
|
(1)
|
Excludes the
impact of hedging activities
|
During the three and six months ended June 30, 2017, Gastar commenced flow back on
seven gross (0.8 net) and 13 gross (1.6 net) operated Meramec
wells, respectively, and three gross (2.7 net) and four gross (2.8
net) operated Osage wells,
respectively.
Subsequent to June 30, 2017
through July 31, 2017, Gastar
commenced flow back on four gross (2.6 net) operated Osage wells.
Subsequent to May 10, 2017 and
through July 31, 2017, nine gross
Meramec wells obtained a 24-hour average peak production rate of
614 Boe/d (79% oil) and one gross Osage well obtained a 24-hour average peak
production rate of 201 Boe/d (57% oil).
Joint Development Agreement
On July 31, 2017, pursuant to the
development agreement, the investor notified Gastar that it has
elected not to participate in the second 20-well tranche of the
joint development drilling program. The investor will
continue to participate in the completion and operation of the 20
wells drilled within the first tranche of the drilling program, of
which as of the date of this release, 19 have been completed and
are currently producing and one well is awaiting completion.
Capital Budget 2017
Gastar's Board of Directors has approved a revised 2017 capital
budget of $129.2 million, an increase
of $45.3 million comprised of
$40.5 million of drilling and
completion costs, $2.5 million for
leasing costs and $2.3 million of
other capitalized costs. Of the increase in budgeted drilling
and completion costs, $35.4 million
is in response to the termination of the joint development
agreement, overall higher operated working interests and well costs
to date and an increase in operated drilling activity of six
additional gross (4.5 net) wells and $5.1
million for increased non-operated well drilling activity on
the Company's acreage. The increase in the land budget
primarily reflects the costs related to additional working interest
acreage acquired from non-participating interest owners pursuant to
the Oklahoma forced pooling
process.
Guidance for Third Quarter 2017 and Full-Year 2017
We are updating our previously issued guidance for the full-year
2017.
Our guidance for the third quarter of and updated full-year 2017
is provided in the table below and represents the Company's best
estimate of the range of likely future results. Guidance could be
affected by the factors described below in "Forward Looking
Statements."
Production
|
|
Third
Quarter
2017
|
|
Full-Year
2017
|
|
|
|
|
|
|
|
Net average daily
(MBoe/d)(1)
|
|
6.3 – 6.8
|
|
6.2 – 6.8
|
|
Liquids percentage
(oil and NGLs)
|
|
72% – 74%
|
|
72% – 75%
|
|
|
|
|
|
|
|
Cash Operating
Expenses
|
|
|
|
|
|
Production taxes (%
of production revenues)
|
|
2.6% –
2.8%
|
|
2.5% –
2.8%
|
|
Direct lease
operating ($/Boe)
|
|
$8.20 –
$8.80
|
|
$8.50 –
$9.00
|
|
Transportation,
treating & gathering ($/Boe)
|
|
$0.80 –
$0.90
|
|
$0.80 –
$0.86
|
|
Cash general &
administrative ($/Boe)
|
|
$4.20 –
$4.50
|
|
$4.80 –
$5.00
|
|
|
|
|
|
|
(1)
|
Based on equivalent of 6 thousand cubic feet (Mcf) of natural gas
to one barrel of oil, condensate or NGLs.
|
Mid-Year 2017 Reserve Update
SEC proved reserve estimates as of June
30, 2017 totaled 30.1 MMBoe, an 18% increase over year-end
2016 proved reserves. The mid-year 2017 reserves were 47%
proved developed and comprised of 16.6 million barrels of crude oil
and condensate, 6.3 million barrels of NGLs and 43.1 billion cubic
feet of natural gas. The pre-tax SEC-priced present value of
future cash flows of these reserves, discounted at 10% ("PV-10") (a
non-GAAP financial measure defined below in "Information on
Reserves and PV-10 Value"), was $199.3
million, a 41% increase as compared to year-end 2016 as a
result of higher proved reserve volumes and SEC prices. In
accordance with SEC regulations, estimates of proved reserves as of
June 30, 2017 were calculated using
the 12-month unweighted arithmetic average of the
first-day-of-the-month price for each month in the period
July 1, 2016 through June 30, 2017. For oil, the average
12-month West Texas Intermediate price utilized was $48.95 per barrel, compared to $42.75 per barrel for year-end 2016 SEC proved
reserves, and for natural gas, the average 12-month Henry Hub price
utilized was $3.01 per million
British thermal unit ("MMBtu"), compared to $2.48 per MMBtu for year-end 2016 SEC proved
reserves. These benchmark oil and natural gas prices were
adjusted for energy content or quality, transportation and regional
price differentials by area.
For a discussion of PV-10 and the standardized measure of future
net cash flows, see "Information on Reserves and PV-10 Value."
Conference Call
Gastar has scheduled a conference call for 9:00 a.m.
Eastern Time (8:00 a.m. Central
Time) on Friday, August 4,
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 August 11 by dialing 1-201-612-7415 and using the
conference ID: 13666599.
|
|
|
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
At June 30, 2017, future cash
inflows were computed using the 12-month unweighted 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. The average benchmark base prices used in our
June 30, 2017 SEC compliant reserves
report are significantly above current market commodity prices.
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") which takes into account future income taxes and our
current tax structure. As a result of our current net
operating tax loss position, no future income taxes are anticipated
and the PV-10 value shown should be reflective of our Standardized
Measure.
The Company's June 30, 2017 total
proved reserves estimates were prepared by Wright & Company,
Inc.
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
June
30,
|
|
|
For the Six Months
Ended
June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
(in thousands,
except share and per share data)
|
|
REVENUES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and
condensate
|
|
$
|
12,744
|
|
|
$
|
11,345
|
|
|
$
|
24,934
|
|
|
$
|
20,158
|
|
Natural gas
|
|
|
2,345
|
|
|
|
1,876
|
|
|
|
4,933
|
|
|
|
5,894
|
|
NGLs
|
|
|
2,179
|
|
|
|
1,710
|
|
|
|
4,770
|
|
|
|
3,405
|
|
Total oil and
condensate, natural gas and NGLs revenues
|
|
|
17,268
|
|
|
|
14,931
|
|
|
|
34,637
|
|
|
|
29,457
|
|
Gain (loss) on
commodity derivatives contracts
|
|
|
5,378
|
|
|
|
(2,778)
|
|
|
|
6,678
|
|
|
|
(2,493)
|
|
Total
revenues
|
|
|
22,646
|
|
|
|
12,153
|
|
|
|
41,315
|
|
|
|
26,964
|
|
EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production
taxes
|
|
|
469
|
|
|
|
364
|
|
|
|
954
|
|
|
|
1,069
|
|
Lease operating
expenses
|
|
|
5,146
|
|
|
|
4,584
|
|
|
|
10,218
|
|
|
|
10,663
|
|
Transportation,
treating and gathering
|
|
|
440
|
|
|
|
395
|
|
|
|
751
|
|
|
|
1,008
|
|
Depreciation,
depletion and amortization
|
|
|
6,051
|
|
|
|
5,591
|
|
|
|
10,703
|
|
|
|
19,320
|
|
Impairment of natural
gas and oil properties
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
48,497
|
|
Accretion of asset
retirement obligation
|
|
|
58
|
|
|
|
89
|
|
|
|
109
|
|
|
|
194
|
|
General and
administrative expense
|
|
|
4,591
|
|
|
|
6,272
|
|
|
|
8,415
|
|
|
|
11,947
|
|
Total
expenses
|
|
|
16,755
|
|
|
|
17,295
|
|
|
|
31,150
|
|
|
|
92,698
|
|
INCOME (LOSS) FROM
OPERATIONS
|
|
|
5,891
|
|
|
|
(5,142)
|
|
|
|
10,165
|
|
|
|
(65,734)
|
|
OTHER (EXPENSE)
INCOME:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(8,736)
|
|
|
|
(9,263)
|
|
|
|
(19,585)
|
|
|
|
(18,561)
|
|
Loss on early
extinguishment of debt
|
|
|
—
|
|
|
|
—
|
|
|
|
(12,172)
|
|
|
|
—
|
|
Investment and other
income
|
|
|
66
|
|
|
|
(76)
|
|
|
|
115
|
|
|
|
(43)
|
|
LOSS BEFORE PROVISION
FOR INCOME TAXES
|
|
|
(2,779)
|
|
|
|
(14,481)
|
|
|
|
(21,477)
|
|
|
|
(84,338)
|
|
Provision for income
taxes
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
NET LOSS
|
|
|
(2,779)
|
|
|
|
(14,481)
|
|
|
|
(21,477)
|
|
|
|
(84,338)
|
|
Dividends on preferred
stock
|
|
|
(3,619)
|
|
|
|
—
|
|
|
|
(7,237)
|
|
|
|
(3,618)
|
|
Undeclared cumulative
dividends on preferred stock
|
|
|
—
|
|
|
|
(3,619)
|
|
|
|
—
|
|
|
|
(3,619)
|
|
NET LOSS ATTRIBUTABLE
TO COMMON STOCKHOLDERS
|
|
$
|
(6,398)
|
|
|
$
|
(18,100)
|
|
|
$
|
(28,714)
|
|
|
$
|
(91,575)
|
|
NET LOSS PER SHARE OF
COMMON STOCK ATTRIBUTABLE
TO
COMMON STOCKHOLDERS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.03)
|
|
|
$
|
(0.17)
|
|
|
$
|
(0.16)
|
|
|
$
|
(1.00)
|
|
Diluted
|
|
$
|
(0.03)
|
|
|
$
|
(0.17)
|
|
|
$
|
(0.16)
|
|
|
$
|
(1.00)
|
|
WEIGHTED AVERAGE
SHARES OF COMMON
STOCK
OUTSTANDING:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
199,547,446
|
|
|
|
104,009,337
|
|
|
|
181,430,409
|
|
|
|
91,398,735
|
|
Diluted
|
|
|
199,547,446
|
|
|
|
104,009,337
|
|
|
|
181,430,409
|
|
|
|
91,398,735
|
|
GASTAR EXPLORATION
INC.
|
CONSOLIDATED
BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
June
30,
|
|
|
December
31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
(in thousands, except share data)
|
|
ASSETS
|
|
|
|
|
|
|
|
|
CURRENT
ASSETS:
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
38,686
|
|
|
$
|
71,529
|
|
Accounts receivable,
net of allowance for doubtful accounts of
$1,953,respectively
|
|
|
56,273
|
|
|
|
26,883
|
|
Commodity derivative
contracts
|
|
|
7,463
|
|
|
|
6,212
|
|
Prepaid
expenses
|
|
|
725
|
|
|
|
755
|
|
Total current
assets
|
|
|
103,147
|
|
|
|
105,379
|
|
PROPERTY, PLANT AND
EQUIPMENT:
|
|
|
|
|
|
|
|
|
Oil and natural gas
properties, full cost method of accounting:
|
|
|
|
|
|
|
|
|
Unproved properties,
excluded from amortization
|
|
|
126,501
|
|
|
|
67,333
|
|
Proved
properties
|
|
|
1,277,551
|
|
|
|
1,253,061
|
|
Total natural gas and
oil properties
|
|
|
1,404,052
|
|
|
|
1,320,394
|
|
Furniture and
equipment
|
|
|
3,015
|
|
|
|
2,622
|
|
Total property, plant
and equipment
|
|
|
1,407,067
|
|
|
|
1,323,016
|
|
Accumulated
depreciation, depletion and amortization
|
|
|
(1,141,715)
|
|
|
|
(1,131,012)
|
|
Total property, plant
and equipment, net
|
|
|
265,352
|
|
|
|
192,004
|
|
OTHER
ASSETS:
|
|
|
|
|
|
|
|
|
Restricted
cash
|
|
|
369
|
|
|
|
—
|
|
Commodity derivative
contracts
|
|
|
1,973
|
|
|
|
1,638
|
|
Deferred charges,
net
|
|
|
—
|
|
|
|
676
|
|
Advances to operators
and other assets
|
|
|
54
|
|
|
|
102
|
|
Other
|
|
|
405
|
|
|
|
405
|
|
Total other
assets
|
|
|
2,801
|
|
|
|
2,821
|
|
TOTAL
ASSETS
|
|
$
|
371,300
|
|
|
$
|
300,204
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
15,064
|
|
|
$
|
8,867
|
|
Revenue
payable
|
|
|
14,933
|
|
|
|
6,690
|
|
Accrued
interest
|
|
|
812
|
|
|
|
3,515
|
|
Accrued drilling and
operating costs
|
|
|
6,786
|
|
|
|
2,615
|
|
Advances from
non-operators
|
|
|
2,895
|
|
|
|
3,504
|
|
Commodity derivative
contracts
|
|
|
—
|
|
|
|
338
|
|
Commodity derivative
premium payable
|
|
|
1,492
|
|
|
|
1,654
|
|
Asset retirement
obligation
|
|
|
—
|
|
|
|
89
|
|
Other accrued
liabilities
|
|
|
2,858
|
|
|
|
2,462
|
|
Total current
liabilities
|
|
|
44,840
|
|
|
|
29,734
|
|
LONG-TERM
LIABILITIES:
|
|
|
|
|
|
|
|
|
Long-term
debt
|
|
|
330,841
|
|
|
|
404,493
|
|
Commodity derivative
premium payable
|
|
|
281
|
|
|
|
969
|
|
Asset retirement
obligation
|
|
|
4,399
|
|
|
|
5,443
|
|
Total long-term
liabilities
|
|
|
335,521
|
|
|
|
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 June 30, 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 June 30, 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 and 800,000,000
shares authorized at June
30, 2017 and December 31, 2016, respectively;
213,947,634 and 150,377,870
shares issued and outstanding at June 30, 2017
and December 31, 2016,
respectively
|
|
|
214
|
|
|
|
150
|
|
Additional paid-in
capital
|
|
|
815,842
|
|
|
|
644,306
|
|
Accumulated
deficit
|
|
|
(825,179)
|
|
|
|
(784,953)
|
|
Total stockholders'
equity
|
|
|
(9,061)
|
|
|
|
(140,435)
|
|
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
$
|
371,300
|
|
|
$
|
300,204
|
|
GASTAR EXPLORATION
INC.
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
For the Six
Months Ended
June
30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
(in
thousands)
|
|
CASH FLOWS FROM
OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(21,477)
|
|
|
$
|
(84,338)
|
|
Adjustments to
reconcile net loss to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation,
depletion and amortization
|
|
|
10,703
|
|
|
|
19,320
|
|
Impairment of natural
gas and oil properties
|
|
|
—
|
|
|
|
48,497
|
|
Stock-based
compensation
|
|
|
2,199
|
|
|
|
2,335
|
|
Total (gain) loss on
commodity derivatives contracts
|
|
|
(6,678)
|
|
|
|
2,493
|
|
Cash settlements of
matured commodity derivative contracts, net
|
|
|
3,553
|
|
|
|
9,581
|
|
Cash premiums paid for
commodity derivatives contracts
|
|
|
—
|
|
|
|
(565)
|
|
Amortization of
deferred financing costs and debt discount
|
|
|
4,927
|
|
|
|
2,825
|
|
Accretion of asset
retirement obligation
|
|
|
109
|
|
|
|
194
|
|
Loss on sale of
furniture and equipment
|
|
|
—
|
|
|
|
97
|
|
Loss on early
extinguishment of debt
|
|
|
12,172
|
|
|
|
—
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(29,115)
|
|
|
|
4,260
|
|
Prepaid
expenses
|
|
|
30
|
|
|
|
175
|
|
Accounts payable and
accrued liabilities
|
|
|
6,983
|
|
|
|
570
|
|
Net cash (used in)
provided by operating activities
|
|
|
(16,594)
|
|
|
|
5,444
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Development and
purchase of oil and natural gas properties
|
|
|
(48,274)
|
|
|
|
(23,370)
|
|
(Acquisition of)
refund for oil and natural gas properties
|
|
|
(54,462)
|
|
|
|
1,664
|
|
Proceeds from sale of
oil and natural gas properties
|
|
|
26,780
|
|
|
|
77,621
|
|
Application of
proceeds from non-operators
|
|
|
(609)
|
|
|
|
(162)
|
|
Advances to
operators
|
|
|
—
|
|
|
|
(69)
|
|
(Purchase) sale of
furniture and equipment
|
|
|
(393)
|
|
|
|
82
|
|
Net cash (used in)
provided by investing activities
|
|
|
(76,958)
|
|
|
|
55,766
|
|
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)
|
|
|
|
(100,370)
|
|
Loss on early
extinguishment of debt
|
|
|
(7,011)
|
|
|
|
—
|
|
Proceeds from issuance
of common shares, net of issuance costs
|
|
|
56,367
|
|
|
|
45,069
|
|
Dividends on preferred
stock
|
|
|
(18,092)
|
|
|
|
(3,618)
|
|
Deferred financing
charges
|
|
|
(9,971)
|
|
|
|
(893)
|
|
Increase in restricted
cash
|
|
|
(369)
|
|
|
|
—
|
|
Tax withholding
related to restricted stock and PBU vestings
|
|
|
(585)
|
|
|
|
(711)
|
|
Net cash provided by
(used in) financing activities
|
|
|
60,709
|
|
|
|
(60,523)
|
|
NET (DECREASE)
INCREASE IN CASH AND CASH EQUIVALENTS
|
|
|
(32,843)
|
|
|
|
687
|
|
CASH AND CASH
EQUIVALENTS, BEGINNING OF PERIOD
|
|
|
71,529
|
|
|
|
50,074
|
|
CASH AND CASH
EQUIVALENTS, END OF PERIOD
|
|
$
|
38,686
|
|
|
$
|
50,761
|
|
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 Loss Excluding Special Items:
|
|
|
|
For the Three
Months Ended
June
30,
|
|
|
For the Six Months
Ended
June
30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
(in thousands,
except share and
per share data)
|
|
|
|
|
|
|
|
|
|
NET LOSS ATTRIBUTABLE
TO COMMON STOCKHOLDERS
|
|
$
|
(6,398)
|
|
|
$
|
(18,100)
|
|
|
$
|
(28,714)
|
|
|
$
|
(91,575)
|
|
SPECIAL
ITEMS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Gains) losses related
to the change in mark to market value for outstanding commodity
derivatives contracts
|
|
|
(3,356)
|
|
|
|
3,343
|
|
|
|
(2,774)
|
|
|
|
9,840
|
|
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
|
|
|
—
|
|
|
|
124
|
|
|
|
—
|
|
|
|
399
|
|
Non-recurring
severance costs related to property divestments
|
|
|
—
|
|
|
|
140
|
|
|
|
—
|
|
|
|
677
|
|
Allowance for bad
debt
|
|
|
—
|
|
|
|
1,953
|
|
|
|
—
|
|
|
|
1,953
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ADJUSTED NET LOSS
ATTRIBUTABLE TO COMMON STOCKHOLDERS
|
|
$
|
(9,754)
|
|
|
$
|
(12,540)
|
|
|
$
|
(19,316)
|
|
|
$
|
(30,209)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ADJUSTED NET LOSS PER
SHARE OF COMMON STOCK ATTRIBUTABLE TO COMMON
STOCKHOLDERS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.05)
|
|
|
$
|
(0.12)
|
|
|
$
|
(0.11)
|
|
|
$
|
(0.33)
|
|
Diluted
|
|
$
|
(0.05)
|
|
|
$
|
(0.12)
|
|
|
$
|
(0.11)
|
|
|
$
|
(0.33)
|
|
WEIGHTED AVERAGE
SHARES OF COMMON STOCK
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
199,547,446
|
|
|
|
104,009,337
|
|
|
|
181,430,409
|
|
|
|
91,398,735
|
|
Diluted
|
|
|
199,547,446
|
|
|
|
104,009,337
|
|
|
|
181,430,409
|
|
|
|
91,398,735
|
|
Reconciliation of
Cash Flows before Working Capital Changes and as Adjusted for
Special Items:
|
|
|
|
|
|
|
|
|
|
For the Three
Months Ended
June
30,
|
|
|
For the Six Months
Ended
June
30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
(in thousands,
except share and
per share data)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM
OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(2,779)
|
|
|
$
|
(14,481)
|
|
|
$
|
(21,477)
|
|
|
$
|
(84,338)
|
|
Adjustments to
reconcile net loss to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation,
depletion and amortization
|
|
|
6,051
|
|
|
|
5,591
|
|
|
|
10,703
|
|
|
|
19,320
|
|
Impairment of oil and
natural gas properties
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
48,497
|
|
Stock-based
compensation
|
|
|
1,203
|
|
|
|
702
|
|
|
|
2,199
|
|
|
|
2,335
|
|
Mark to market of
commodity derivatives contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total (gain) loss on
commodity derivatives contracts
|
|
|
(5,378)
|
|
|
|
2,778
|
|
|
|
(6,678)
|
|
|
|
2,493
|
|
Cash settlements of
matured commodity derivatives contracts, net
|
|
|
1,870
|
|
|
|
1,423
|
|
|
|
3,553
|
|
|
|
9,581
|
|
Cash premiums paid for
commodity derivatives contracts
|
|
|
—
|
|
|
|
(565)
|
|
|
|
—
|
|
|
|
(565)
|
|
Amortization of
deferred financing costs and debt discount
|
|
|
3,217
|
|
|
|
1,835
|
|
|
|
4,927
|
|
|
|
2,825
|
|
Accretion of asset
retirement obligation
|
|
|
58
|
|
|
|
89
|
|
|
|
109
|
|
|
|
194
|
|
Loss on sale of
assets
|
|
|
—
|
|
|
|
97
|
|
|
|
—
|
|
|
|
97
|
|
Loss on early
extinguishment of debt
|
|
|
—
|
|
|
|
—
|
|
|
|
12,172
|
|
|
|
—
|
|
Cash flows from
operations before working capital changes
|
|
|
4,242
|
|
|
|
(2,531)
|
|
|
|
5,508
|
|
|
|
439
|
|
Dividends on preferred
stock(1)
|
|
|
(3,619)
|
|
|
|
(3,619)
|
|
|
|
(7,237)
|
|
|
|
(7,237)
|
|
Non-recurring general
and administrative costs related to acquisition of
assets
|
|
|
—
|
|
|
|
124
|
|
|
|
—
|
|
|
|
399
|
|
Non-recurring
severance costs related to property divestments
|
|
|
—
|
|
|
|
140
|
|
|
|
—
|
|
|
|
677
|
|
Allowance for bad
debt
|
|
|
—
|
|
|
|
1,953
|
|
|
|
—
|
|
|
|
1,953
|
|
Adjusted cash flows
from operations
|
|
$
|
623
|
|
|
$
|
(3,933)
|
|
|
$
|
(1,729)
|
|
|
$
|
(3,769)
|
|
|
|
|
|
|
(1)
|
Excludes $10.9
million of accumulated dividends for the period April 2016 to
December 2016 declared and paid in January 2017. The three
and six months ended June 30, 2016 includes accumulated undeclared
and unpaid dividends for preferred stock of $3.6
million.
|
Reconciliation of
Net Loss to Adjusted Earnings Before Interest, Income Taxes,
Depreciation, Depletion
and Amortization ("Adjusted EBITDA"):
|
|
|
|
|
|
|
|
|
|
For the Three
Months Ended
June
30,
|
|
|
For the Six Months
Ended
June
30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
(in thousands,
except share and
per share data)
|
|
|
|
|
|
|
|
|
|
NET LOSS ATTRIBUTABLE
TO COMMON STOCKHOLDERS
|
|
$
|
(6,398)
|
|
|
$
|
(18,100)
|
|
|
$
|
(28,714)
|
|
|
$
|
(91,575)
|
|
Interest
expense
|
|
|
8,736
|
|
|
|
9,263
|
|
|
|
19,585
|
|
|
|
18,561
|
|
Loss on early
extinguishment of debt
|
|
|
—
|
|
|
|
—
|
|
|
|
12,172
|
|
|
|
—
|
|
Depreciation,
depletion and amortization
|
|
|
6,051
|
|
|
|
5,591
|
|
|
|
10,703
|
|
|
|
19,320
|
|
Impairment of oil and
natural gas properties
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
48,497
|
|
EBITDA
|
|
|
8,389
|
|
|
|
(3,246)
|
|
|
|
13,746
|
|
|
|
(5,197)
|
|
Dividends on preferred
stock
|
|
|
3,619
|
|
|
|
—
|
|
|
|
7,237
|
|
|
|
3,618
|
|
Undeclared cumulative
dividends on preferred stock
|
|
|
—
|
|
|
|
3,619
|
|
|
|
—
|
|
|
|
3,619
|
|
Accretion of asset
retirement obligation
|
|
|
58
|
|
|
|
89
|
|
|
|
109
|
|
|
|
194
|
|
Losses related to the
change in mark to market value for outstanding commodity
derivatives contracts
|
|
|
(3,356)
|
|
|
|
3,343
|
|
|
|
(2,774)
|
|
|
|
9,840
|
|
Non-cash stock-based
compensation expense
|
|
|
1,203
|
|
|
|
702
|
|
|
|
2,199
|
|
|
|
2,335
|
|
Investment income and
other
|
|
|
(66)
|
|
|
|
76
|
|
|
|
(115)
|
|
|
|
43
|
|
Non-recurring general
and administrative costs related to acquisition of
assets
|
|
|
—
|
|
|
|
124
|
|
|
|
—
|
|
|
|
399
|
|
Non-recurring
severance costs related to property divestments
|
|
|
—
|
|
|
|
140
|
|
|
|
—
|
|
|
|
677
|
|
Allowance for bad
debt
|
|
|
—
|
|
|
|
1,953
|
|
|
|
—
|
|
|
|
1,953
|
|
ADJUSTED
EBITDA
|
|
$
|
9,847
|
|
|
$
|
6,800
|
|
|
$
|
20,402
|
|
|
$
|
17,481
|
|
View original
content:http://www.prnewswire.com/news-releases/gastar-exploration-announces-second-quarter-2017-results-300499412.html
SOURCE Gastar Exploration Inc.