HOUSTON, Feb. 15, 2018 /PRNewswire/ -- Gastar
Exploration Inc. (NYSE American: GST) ("Gastar" or the "Company")
today provided a summary of the Company's year-end 2017 reserves,
preliminary fourth quarter 2017 production, operations update, 2018
capital budget and 2018 production guidance.
Summary Highlights
- Gastar's year-end 2017 Securities and Exchange Commission
("SEC") proved reserves increased 68% to 42.9 million barrels of
oil equivalent ("MMBoe").
- The pre-tax SEC-priced present value of future cash flows of
the total proved reserves discounted at 10% ("PV-10") (a non-GAAP
financial measure defined at the end of this release) increased
103% to $288.4 million compared to
2016.
- In 2017, excluding acquisitions and divestitures, we replaced
approximately 835% of our 2017 preliminary annual production of
approximately 2.3 MMBoe.
- Fourth quarter 2017 preliminary production averaged
approximately 6.9 thousand barrels of oil equivalent per day
("MBoe/d") and consisted of 72% liquids.
- The 2018 capital budget totals approximately $115 million, focused on drilling Osage and Meramec formation wells on our STACK
Play acreage.
J. Russell Porter, Gastar's
President and CEO, commented, "Our strong growth in proved reserves
is directly attributable to our continued successful drilling
program designed to de-risk and delineate the Meramec and
Osage formations on our STACK Play
acreage. Excluding WEHLU, our STACK Play reserves increased
184% year-over-year. Of the 17.4 MMBoe year-over-year
increase in our proved reserves, approximately 94% resulted from
additions attributable to our drilling success."
"During the second half of 2017, we made significant strides at
optimizing our drilling and completion techniques. As a
result, we were able to book initial proved undeveloped reserves
associated with the Osage
formation. Our Osage type curve, assuming a 4,950 foot
lateral length on a three-stream basis, is 500 thousand barrels of
oil equivalent ("MBoe"), 73% liquids, and yields a strong internal
rate of return."
"With the sale of our WEHLU assets scheduled to close at the end
of February, we should have ample liquidity to execute our 2018
capital program," added Porter.
Year-End 2017 Reserves
Gastar's year-end 2017 total SEC proved reserves increased by
17.4 million barrels of oil equivalent ("MMBoe") to 42.9 MMBoe.
Drilling activity in our Oklahoma STACK Play acreage generated net
proved reserve additions of approximately 16.4 MMBoe, compared to
2017 net production of 2.3 MMBoe, while an increase in SEC pricing
positively impacted reserves by approximately 2.6 MMBoe as compared
to 2016.
The following table summarizes Gastar's proved reserves and
corresponding PV-10 values as of December
31, 2017 by product and area of operation:
Area
|
Oil &
Condensate
|
Natural
Gas
|
NGLs
|
Total
|
PV-10
Value
|
|
(MBBL)
|
(MMcf)
|
(MBBL)
|
(Mboe)
|
($
MM)
|
STACK
Play
|
11,381
|
40,449
|
4,873
|
22,995
|
$137.5
|
WEHLU
|
11,475
|
24,916
|
4,304
|
19,932
|
$150.9
|
Total
|
22,856
|
65,365
|
9,177
|
42,927
|
$288.4
|
The Company entered into a definitive purchase and sale
agreement to divest its interest in the West Edmund Hunton Lime
Unit ("WEHLU") for $107.5
million. The transaction, subject to customary closing
conditions and adjustments, is expected to close on February 28, 2018, with a property sale effective
date of October 1, 2017.
Of the total year-end 2017 proved reserves, 42% were proved
developed, compared to 51% at year-end 2016 and were comprised of
53% oil and condensate, 26% natural gas and 21% NGLs, compared to
54% oil and condensate, 25% natural gas and 21% NGLs for year-end
2016. Excluding reserves associated with WEHLU, our STACK
Play 2017 proved developed reserves were 33% of total proved
reserves and were comprised of 50% oil and condensate, 29% natural
gas and 21% NGLs. Gastar had 96 proved undeveloped gross well
locations at year-end 2017, of which 46 were Meramec locations, 24
were Osage locations and 26 were a
combination of Upper and Lower Hunton WEHLU locations.
The pre-tax SEC-priced PV-10 value was $288.4 million, compared to $142.1 million at year-end 2016. The calculations
of the PV-10 value of our proved reserves for year-end 2017 used
SEC benchmark average 12‑month pricing of $51.34 per barrel of oil and $2.98 per MMBtu of natural gas before adjustments
for energy content, quality, transportation, compression and
gathering fees and regional price differentials as compared to 2016
prices of $42.75 per barrel of oil
and $2.48 per MMBtu of natural
gas.
Preliminary Fourth Quarter 2017 Production
Preliminary 2017 average daily fourth quarter 2017 production is
expected to be approximately 6.9 MBoe/d, up from 5.9 MBoe/d in the
fourth quarter of 2016 and 6.2 MBoe/d in the third quarter of
2017. Oil and condensate, NGLs and natural gas production as
a percentage of total equivalent production volumes for the fourth
quarter of 2017 is estimated to be approximately 49%, 23% and 28%,
respectively.
WEHLU production in the fourth quarter of 2017 was approximately
2.9 MBoe/d, or 42% of total production, comprised of 46% oil and
condensate, 29% NGLs and 25% natural gas as a percentage of total
equivalent production volumes.
Operations Update
During the fourth quarter of 2017 we placed on production 8
Osage wells utilizing our Gen 3.0 completion design. Early
flow back results continue to show significant production
improvement as compared to our prior completion designs. Four
of the eight wells have reached a max 30 Boe/d rate average of 627
(68% oil) as compared to our type curve peak average of 502 Boe/d
(79% oil). The new completion production and review of offset
operator results are supportive of our three-stream Osage type curve reserves of 500 MBoe,
comprised of 53% oil, 27% natural gas and 20% NGLs.
To date, we have drilled a total of 24 gross Meramec and 20
gross Osage wells and have
participated in numerous third-party wells across our STACK Play
acreage. With the success of our drilling program and that of
offset operators, our 2018 drilling activity focus will continue to
be developing our estimated 221 net Meramec and 659 net
Osage locations within the STACK
Play.
2018 Capital Plan
Gastar's 2018 capital budget is approximately $115 million comprised of $69.5 million for a one‑rig STACK operated
drilling and completion program, $15.7
million for STACK non-operated drilling and completion
costs, $18.2 million in leasing costs
and $11.6 million for capitalized
interest and administration costs. Approximately 86% of the
2018 capital budget is operated.
The 2018 capital budget includes the drilling of 15 gross (11.5
net) operated Osage wells and 5
gross (4.1 net) operated Meramec wells in Kingfisher and Garfield Counties, Oklahoma. In
addition, we expect to participate in 2.9 net non-operated wells in
the STACK Play. We anticipate the average cost to drill and
complete an operated Osage and
Meramec well to be approximately $4.1
million and $4.5 million,
respectively. Well costs assume one well per unit as Gastar
continues to focus on holding its acreage position by
production. Based on current costs, future pad drilling costs
are anticipated to be approximately 7 to 10% lower than single unit
well costs.
The closing of the WEHLU sale coupled with cash on hand and
internally generated cash flows should allow the Company ample
liquidity to fund the proposed capital budget for
2018.
Additional details regarding the Company's operations, proved
reserves, estimated type curves and IRRs are presented in an
investor presentation posted today on the Company's website at
www.gastar.com.
Guidance for First Quarter and Full-Year 2018
Our guidance for the first quarter of and full-year 2018 is
provided in the table below and represents the Company's best
estimate of the range of likely future results. Guidance excludes
impact of the WEHLU assets, the sale of such is scheduled to close
on February 28, 2017 with an
effective date of October 1,
2017. Guidance could be affected by the factors described
below in "Forward Looking Statements."
Production
|
|
First
Quarter 2018
|
|
Full-Year
2018
|
|
|
|
|
|
|
|
Net average daily
(MBoe/d)(1)
|
|
4.7 – 5.0
|
|
5.0 – 6.0
|
|
Liquids percentage
(oil and NGLs)
|
|
71% – 73%
|
|
70% – 74%
|
|
|
|
|
|
|
|
Cash Operating
Expenses
|
|
|
|
|
|
Production taxes (%
of production revenues)
|
|
2.5% –
2.7%
|
|
2.5% –
2.9%
|
|
Direct lease
operating ($/Boe)
|
|
$8.60 –
$9.40
|
|
$8.40 –
$9.60
|
|
Transportation,
treating & gathering ($/Boe)(2)
|
|
$1.60 –
$1.80
|
|
$1.50 –
$1.80
|
|
Cash general &
administrative ($/Boe)
|
|
$6.90 –
$7.40
|
|
$6.00 –
$6.60
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Based on equivalent
of 6 thousand cubic feet (Mcf) of natural gas to one barrel of oil,
condensate or NGLs.
|
(2)
|
Pursuant to revenue
recognition accounting, fee will be applied as revenue deduction in
2018. Approximately 40% of fee is estimated to apply to NGLs
and 60% to natural gas.
|
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
in the United States. 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 the normally pressured oil window 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 years ended December 31,
2017 and 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
do not expect that our PV-10 will be materially different than our
Standardized Measure as of December
31, 2017.
The Company's 2017 and 2016 year-end total proved reserves
estimates were prepared by Wright & Company, Inc.
Type Curves
Type curves for our future Osage well locations are based upon third
party engineering estimates, assuming a lateral length of 4,950
feet, and are commensurate with the booking of our proved
undeveloped reserves at December 31,
2017. Type curves do not reflect "reserves" within the
meaning of the Society of Petroleum Engineer's Petroleum Resource
Management System or SEC rules until there is a development plan to
drill such well locations. Future production estimates for
individual well locations may vary.
Forward Looking Statements
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 include "guidance" and
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 regarding closing the sale of
Gastar's WEHLU assets; 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 first quarter and
full year 2018 are based upon the current 2018 planned capital
expenditures budget, which may be subject to revision and
reevaluation dependent upon future developments, including drilling
results, our liquidity position, availability of crews, supplies
and production capacity, weather delays, and significant changes in
commodities prices or drilling costs.
Unless otherwise stated herein, equivalent volumes of production
and reserves 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.
J. Russell Porter, Chief Executive
Officer
713-739-1800 / rporter@gastar.com
Investor Relations Counsel:
Lisa Elliott /
lelliott@DennardLascar.com
Dennard-Lascar Investor Relations: 713-529-6600
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SOURCE Gastar Exploration Inc.