In the news release, Gastar Exploration Announces 138% Increase in Proved Reserves and Provides 2012 Capital Budget and First Quarter Production Guidance, issued 31-Jan-2012by Gastar Exploration Ltd. over PR Newswire, we are advised by the company that the first paragraph under Preferred Share Issuances has been updated. The complete, corrected release follows:
Gastar Exploration Announces 138% Increase in Proved Reserves and Provides 2012 Capital Budget and First Quarter Production GuidanceHOUSTON, Jan. 31, 2012/PRNewswire/ -- Gastar Exploration Ltd. (NYSE Amex: GST) ("Gastar" or the "Company") today announced its total proved Securities Exchange Commission ("SEC") reserves as of December 31, 2011and approved its 2012 capital budget.
Proved Reserves
Gastar reported year-end 2011 proved natural gas, oil and
condensate and natural gas liquids (NGLs) reserves of 119.7
Bcfe estimated in accordance with SEC regulations. This
represents an increase of 138% over year-end 2010 proved
reserves of 50.3 Bcfe. Of the 119.7 Bcfe, 76.6% were
attributable to natural gas, 9.6% to oil and condensate and
13.8% to NGLs. The pre-tax present value discounted
at 10% ("PV-10") of the estimated proved reserves
increased to $217.1 millionfrom $67.3
millionat year-end 2010. The Appalachian Basin
represented 70% of proved reserve volumes and 80% of the
PV-10 value with East Texascomprising the
majority of the remainder of proved reserves and PV-10
value.
Proved undeveloped reserves at year-end 2011 represented approximately 34% of total proved reserves compared to approximately 17% at year-end 2010. Proved undeveloped reserves at year-end 2011 were comprised of 41.2 Bcfe of Appalachia Basin reserves having a PV-10 value of $67.3 million.
In accordance with SEC regulations, estimates of proved reserves as of December 31, 2011were made using the 12-month unweighted arithmetic average of the first-day-of-the-month price for each month in the period January through December 2011. For natural gas volumes, the average Henry Hub price utilized was $4.12per MMbtu, and for oil volumes, the average West Texas Intermediate price utilized was $92.71per barrel. The natural gas and oil prices are adjusted for energy content or quality, transportation and regional price differentials by area.
The Appalachian Basin proved reserves estimates as of December 31, 2011were prepared by Wright & Company, Inc.Netherland Sewell& Associates, Inc. prepared the East Texasand other areas reserves as of December 31, 2011.
2012 Capital Budget
Gastar's Board of Directors has approved a 2012 capital
budget totaling $134.2 million. In
Appalachia, the Company expects to spend $103.0
millionfor drilling, completion, infrastructure,
lease acquisition and seismic costs. In East Texas,
the Company has budgeted $6.5 million.
In addition, the Company has allocated $19.8
millionfor a new Mid-Continent oil-focused venture
and $4.9 millionfor capitalized interest and
other costs. Drilling and completion costs represent
approximately $100.5 millionof the total
capital budget, of which $88.9 million, or
89%, will be spent on activities in the liquids-rich window
of the Marcellus Shale, and an additional $7.8
million, or 8%, will be directed to drilling the new
oil venture. Gastar anticipates funding this
capital activity through existing cash balances, internally
generated cash flow from operating activities, borrowings
under the revolving credit facility and possible future
at-the-market issuances of Series A Preferred Stock by
Gastar ExplorationUSA, Inc. ("Gastar
USA"), Gastar's first tier subsidiary
and primary operating company. Gastar exited 2011
with $30 millionoutstanding under its
revolving credit facility and $10.6 millionin
cash.
Included in the 2012 capital budget are plans to drill and complete 20 gross (10 net) operated new Marcellus horizontal wells in Marshall County, West Virginia, along with the completion of 10 gross (4.5 net) additional operated Marcellus horizontal wells that were drilled and awaiting completion as of December 31, 2011. Gastar exited 2011 with 9 gross (4.0 net) operated Marcellus wells completed.
As mentioned above, Gastar has acquired an initial lease position in a new oil play located in the Mid-Continent region and plans to build the position, along with its partner, to approximately 25,000 gross (12,500 net to Gastar) acres in 2012. Drilling is planned to commence in the second half of 2012 in hopes of developing a program focused on low-cost, repeatable horizontal development of conventional oil-bearing formations. Three gross (1.5 net) initial horizontal wells are planned to be drilled and completed in this area during 2012. The Company will provide additional details on this new oil play after Gastar and its partner have acquired sufficient acreage to allow a multi-year development plan to be undertaken.
Production Guidance
Based on the approved capital expenditure budget, Gastar
expects first quarter 2012 production to range from 26
MMcfe/d to 28 MMcfe/d. Gastar's operated
production and sales in West Virginiacontinues
to be impacted by issues with high line pressures on the
third-party operated gathering system. The operator
of the gathering system anticipates having the line
pressure issues alleviated by early February. The
continued focus on condensate and oil and NGL-rich projects
should result in Gastar's first quarter 2012 production
profile containing approximately 12% to 16% liquids.
Preferred Share Issuances
During the fourth quarter ended December 31,
2011, Gastar USAissued 554,044
preferred shares for net proceeds of $10.5
millionresulting in year-end 2011 total preferred
shares issued of 1,364,543 for net proceeds of $27.4
million. To date during January
2012, Gastar USAhas issued an
additional 499,387 preferred shares for net proceeds of
$9.4 million, resulting in inception to date
net proceeds of $36.8 million.
J. Russell Porter, Gastar's President and CEO, commented: "This 138% increase in our proved reserves in 2011, and the 223% increase in the PV-10 value of those reserves, reflects the significant success we achieved developing our Marcellus acreage. It also reflects the benefit of the $40 milliondrilling carry we utilized during the year in the Marcellus Shale and the benefit of strong oil and liquids prices.
"By concentrating on developing our liquids-rich acreage, we are raising the percentage of oil, condensate and NGLs in our production profile. As we test and potentially develop our new oil play in the Mid-Continent, we may have an opportunity to further increase the liquids content of our reserves and production even more substantially."
About Gastar Exploration
Gastar Exploration Ltd. is an independent company engaged
in the exploration, development and production of natural
gas and oil in the United States. Our principal
business activities include the identification,
acquisition, and subsequent exploration and development of
natural gas and oil properties with an emphasis on
prospective deep structures identified through seismic and
other analytical techniques as well as unconventional
natural gas reserves, such as shale resource plays.
We are pursuing natural gas exploration in the Marcellus
Shale in the Appalachian area of West
Virginiaand central and southwestern
Pennsylvaniaand in the deep Bossier gas play
in the Hilltop area of East Texas. We also conduct
limited coal bed methane development activities within the
Powder River Basin of Wyomingand
Montana. For more information, visit our web site at
www.gastar.com.
Safe Harbor Statement and Disclaimer
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 risk
inherent in natural gas and oil drilling and production
activities, including 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 with respect to natural gas and oil prices, a
material decline in which could cause Gastar to delay or
suspend planned drilling operations or reduce production
levels; risks relating to the availability of capital to
fund drilling operations that can be adversely affected by
adverse drilling results, production declines and declines
in natural gas and oil prices; risks relating to unexpected
adverse developments in the status of properties; risks
relating to the absence or delay in receipt of government
approvals or fourth party consents; 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.
Gastar's capital budget is subject to revision and reevaluation dependent upon future developments including drilling results, availability of crews, supplies and production capacity, weather delays, significant changes in commodities prices or drilling costs.
Year-end pre-tax discounted present value of proved reserves, or PV-10, is a non-GAAP financial measure as defined by the SEC. It differs from Standardized Measure of Discounted Future Net Cash Flows ("SMOG") in that PV-10 excludes the discounted value of estimated future income taxes. 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 proved 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 and value of our reserves as compared with other companies. The discounted value of future income taxes is being evaluated and estimated in connection with completion of Gastar's 2011 financial statements and a reconciliation of PV-10 to SMOG will be included in Gastar's Form 10-K.
Contacts: Gastar Exploration Ltd. J. Russell Porter, Chief Executive Officer 713-739-1800 / rporter@gastar.com Investor Relations Counsel: Lisa Elliott DRG&L: 713-529-6600 |
SOURCE Gastar Exploration Ltd.
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