Production increased 26% to 30 MMcfe per day from fourth quarter
2008 HOUSTON, May 11 /PRNewswire-FirstCall/ -- Gastar Exploration
Ltd. (NYSE Amex: GST and TSX: YGA) today reported financial and
operational results for the three months ended March 31, 2009.
Excluding impairment charges and unrealized hedging losses, the
Company reported a net loss of $1.3 million, or $0.01 per share,
for the first quarter of 2009. Including the effect of a non-cash
impairment of natural gas and oil properties of $68.7 million and
an unrealized hedging loss of $196,000, the Company reported a net
loss of $70.2 million, or $0.34 per share. This compares to
adjusted net income of $2.5 million, or $0.01 per share, for the
first quarter of 2008, excluding a $1.4 million unrealized hedging
loss. Net cash flows provided by operating activities for the three
months ended March 31, 2009 was $13.3 million, compared to $14.3
million for the comparable period in 2008. Excluding the unrealized
gas hedging loss, natural gas and oil revenues in the first quarter
of 2009 decreased 20% to $13.5 million, compared to the first
quarter of 2008. This decrease was due to a 28% decline in realized
natural gas prices, partially offset by a 13% increase in total
production. Average daily production for the first quarter of 2009
was 30.0 MMcfe, compared to 26.5 MMcfe for the first quarter of
2008 and 23.9 MMcfe in the fourth quarter of 2008. The average
price for natural gas, including realized hedging activities,
decreased in the first quarter of 2009 to $4.99 per Mcf, from $6.96
per Mcf in the first quarter of 2008 and $5.23 in the fourth
quarter of 2008. Excluding the benefit of the realized hedges, the
average realized price for natural gas in the first quarter of 2009
was $3.37 per Mcf. Lease operating expense (LOE) was $1.9 million
in the first quarter of 2009, compared to $1.5 million in the first
quarter of 2008. LOE per Mcfe increased 9% to $0.70 in the first
quarter of 2009, compared to $0.64 per Mcfe during the first
quarter of 2008. This increase per Mcfe was primarily due to higher
non-recurring 2009 workover costs in Texas of $0.13 per Mcfe.
Operations Review and Update In East Texas, first quarter net
production from the Hilltop area averaged 25.3 MMcfe per day, up
from 18.1 MMcfe per day in the fourth quarter of 2008. The majority
of the production growth was from the Belin #1, which was placed on
production in late December 2008 and is the Company's best
producing well to date. The Belin #1 came on production at an
initial gross rate of 41.2 MMcf per day and post quarter end is
averaging approximately 16.5 MMcf per day. Capital expenditures for
the first quarter in East Texas were $9.4 million to recomplete one
well and to finish drilling and complete the Lone Oak Ranch ("LOR")
#7. The LOR #7 was drilled and encountered two middle Bossier zones
and one upper Bossier zone and was completed in the deepest zone.
Current gross production from the LOR #7 is approximately 3.0 MMcfd
after an initial gross sales rate of 6.9 MMcfd. As a result of our
activity in East Texas, the field's average production increased
40% from the fourth quarter of 2008 to the first quarter of 2009,
although it is expected to decline in the second quarter due to
natural decline rates. Currently, we are drilling a deep Bossier
well, the Wildman #5, and we plan on releasing the drilling rig and
deferring additional drilling in East Texas until natural gas
prices and capital markets improve. In Appalachia, we have
assembled more than 41,000 net acres in the Marcellus Shale play
and have drilled 10 shallow wells, including three during the first
quarter. Seven of these wells are on production, and the remaining
wells are scheduled to be on production during 2009. These wells
will allow us to hold the leases with production, while we finalize
a plan for exploration and development of the deeper Marcellus
objective. We do not expect to drill additional shallow wells until
we secure a joint venture partner or until natural gas prices
improve. We will continue to maintain our leases through renewals,
extensions and renegotiations of the few drilling commitments
related to our interests. Net production from our Appalachia
properties averaged 500 Mcfe per day in the first quarter. In New
South Wales, Australia, the PEL 238 development project continues
to progress, and we expect to begin first commercial sales of
natural gas early in the third quarter of 2009. In February 2009,
we acquired a 35% interest in the Wilga Park Power Station, which
will initially be the market for natural gas produced from PEL 238.
In late April 2009, we completed the drilling of the first two
dual-lateral horizontal production pilots, each consisting of three
vertical wells intersected by two horizontal well sections, which
are currently dewatering. Early in the third quarter of 2009, all
the wells are expected to be on production, and it is expected that
coal bed methane produced from the pilot will be transported to the
Wilga Park Power Station and utilized for power generation. An
additional multi-lateral horizontal production pilot is underway in
the Dewhurst area of PEL 238, based on the previous successful
coring work. Subsequent locations for two additional pilots will be
determined on the basis of results of planned coreholes to be
drilled during 2009. In April 2009, we began a corehole evaluation
program in the Coonarah area to test coals found when shallow
conventional wells were drilled in the area. J. Russell Porter,
Gastar's Chairman, President and CEO, stated, "We produced higher
volumes of natural gas in the first quarter, compared to the fourth
quarter of 2008, thanks to the outstanding performance of the Belin
#1, which came on production in late December in East Texas.
Additionally, we experienced a boost in production from the
completion of the Lone Oak Ranch #7, which began producing in late
January as well as from a workover in late March in East Texas. In
New South Wales, we expect to realize first commercial sales when
we begin delivering natural gas to the Wilga Park Power Station
early in the third quarter of this year. "We are exploring all
avenues to bolster liquidity. We currently are involved in numerous
conversations at various stages of development with potential
partners and asset purchasers in each of our three primary asset
areas. In the Marcellus Shale, we have identified a potential joint
venture partner, who is working through due diligence on our assets
in the play. In New South Wales, where the merger and acquisition
market continues to be active, we are in discussion with several
parties regarding our ownership interests in PEL 238 and adjacent
undeveloped acreage. The outcomes of all of these discussions are
uncertain: however, we will provide additional updates as they
become available." Liquidity and Capital Budget At March 31, 2009,
the Company had cash and cash equivalents of $18.9 million. Planned
capital expenditures for our properties for the remainder of 2009
total $49.9 million, consisting of $14.7 million in East Texas,
$4.0 million in Appalachia, $15.0 million in New South Wales,
$800,000 in the Powder River Basin and other capital costs, and an
additional $15.4 million for capitalized interest cost. To
supplement our cash flow and help fund this capital budget, we are
seeking joint venture partners for the development of several of
our properties, with immediate emphasis on securing a development
partner in our Marcellus Shale acreage, as well as the possibility
of selected asset sales. Based on our current capital plan, our
current cash on hand and projected internally generated cash flow,
we project that we will need to raise an additional $70.0 million
to fund our remaining 2009 exploration and development activities,
working capital needs and meet scheduled debt maturities in 2009.
See "Liquidity and Capital Resources" in our Quarterly Report on
Form 10-Q for the period ended March 31, 2009 for a discussion of
potential consequences resulting from an inability to raise the
additional $70.0 million necessary to fund our remaining 2009
exploration and development activities, working capital needs and
meet our 2009 debt service obligations. Gastar Exploration
Conference Call Gastar Exploration's management team will hold a
conference call on May 12, 2009, at 10:00 a.m. Eastern Time (9:00
a.m. Central Time), to discuss these results. To participate in the
call, dial (480) 629-9692 at least 10 minutes early and ask for the
Gastar Exploration conference call. A replay will be available
approximately two hours after the call ends and will be accessible
until May 19. To access the replay, dial (303) 590-3030 and enter
the pass code 4068694. The call will also be webcast live over the
Internet at . To listen to the live call on the Web, please visit
Gastar's Web site at least 10 minutes early to register and
download any necessary audio software. An archive will be available
shortly after the call. For more information, please contact Donna
Washburn at DRG&E at (713) 529-6600 or e-mail About Gastar
Exploration Gastar Exploration Ltd. is an exploration and
production company focused on finding and developing natural gas
assets in North America and Australia. The Company pursues a
strategy combining deep natural gas exploration and development
with lower risk CBM and shale resource development. The Company
owns and operates exploration and development acreage in the deep
Bossier gas play of East Texas and Marcellus Shale play in West
Virginia and Pennsylvania. Gastar's CBM activities are conducted
within the Powder River Basin of Wyoming and concentrated on more
than 6.0 million gross acres controlled by Gastar and its joint
development partners in Australia's Gunnedah Basin (PEL 238, PEL
433 and PEL 434) located in New South Wales. 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. A statement identified by the words "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 the
drilling of natural gas and oil wells, including risks of fire,
explosion, blowouts, pipe failure, casing collapse, unusual or
unexpected formation pressures, environmental hazards, and other
operating and production risks inherent in the natural gas and oil
drilling and production activities, 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, 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
receipt of a "going concern" statement in our auditor's report on
our 2008 consolidated financial statements, and 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 and other risk factors
described in Gastar's Annual Report on Form 10-K and other filings
with the SEC at www.sec.gov and on the System for Electronic
Document Analysis and Retrieval (SEDAR) at www.sedar.com. Contact:
Gastar Exploration Ltd. J. Russell Porter, Chief Executive Officer
713-739-1800 / Investor Relations Counsel: Lisa Elliott / Anne
Pearson DRG&E: 713-529-6600 / The NYSE Amex and Toronto Stock
Exchange have not reviewed and do not accept responsibility for the
adequacy or accuracy of this release. - Financial Tables Follow -
GASTAR EXPLORATION LTD. AND SUBSIDIARIES CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS (Unaudited) For the Three Months Ended
March 31, --------------- 2009 2008 ---- ---- (in thousands, except
share and per share data) REVENUES: Natural gas and oil revenues $
13,461 $ 16,846 Unrealized natural gas hedge loss (196) (1,413)
------ ------- Total revenues 13,265 15,433 EXPENSES: Production
taxes 157 269 Lease operating expenses 1,877 1,542 Transportation
and treating 493 459 Depreciation, depletion and amortization 7,999
6,409 Impairment of natural gas and oil properties 68,729 -
Accretion of asset retirement obligation 87 82 General and
administrative expense 2,958 4,275 ----- ----- Total expenses
82,300 13,036 ------ ------ INCOME (LOSS) FROM OPERATIONS (69,035)
2,397 OTHER (EXPENSES) INCOME: Interest expense (1,162) (2,096)
Investment income and other 13 823 Foreign transaction loss (3)
(37) --- ---- INCOME (LOSS) BEFORE INCOME TAXES (70,187) 1,087
Provision for income taxes - - -------- ----- NET INCOME (LOSS) $
(70,187) $ 1,087 ========= ========= NET INCOME (LOSS) PER SHARE:
Basic $ (0.34) $ 0.01 ========== ======== Diluted $ (0.34) $ 0.01
========== ======== WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic and diluted 207,262,117 207,098,570 =========== ===========
GASTAR EXPLORATION LTD. AND SUBSIDIARIES CONDENSED CONSOLIDATED
BALANCE SHEETS ASSETS March 31, December 31, 2009 2008 ---- ----
(Unaudited) (in thousands) Current Assets: Cash and cash
equivalents $ 18,863 $ 6,153 Other 13,031 18,386 ------ ------
Total current assets 31,894 24,539 Property, plant and equipment,
net 196,036 252,527 Total other assets 10,197 11,371 ------ ------
Total assets $238,127 $288,437 ======== ======== LIABILITIES AND
SHAREHOLDERS' EQUITY Current Liabilities: Other $ 26,353 $ 30,076
Current portion of long-term debt 174,717 151,684 ------- -------
Total current liabilities 201,070 181,760 Other long-term
liabilities 5,307 5,095 Total shareholders' equity 31,750 101,582
------ ------- Total liabilities and shareholders' equity $238,127
$288,437 ======== ======== PRODUCTION AND PRICES For the Three
Months Ended March 31, --------------- 2009 2008 ---- ----
Production: Natural gas (MMcf) 2,693 2,406 Oil (MBbl) 1 1 Total
(MMcfe) 2,698 2,413 Total (MMcfed) 30.0 26.5 Average sales prices:
Natural gas (per Mcf), including impact of realized hedging
activities $ 4.99 $ 6.96 Oil (per Bbl) $39.47 $96.84 CURRENT HEDGE
POSITION The following derivative transactions were outstanding
with associated notional volumes and hedge prices for the index
specified as of April 11, 2009: Notional Daily Total Base
Derivative Volume Volume Fixed Date Period Instrument(1) Average
Remaining Price (MMBtu) (MMBtu) 10/15/08 Cal 09 CC 5,000 1,375,000
10/15/08 Cal 09 (P) 5,000 1,375,000 01/29/09 Apr-Dec 09 P 14,994
4,123,453 05/05/09 Jan-Mar 10 CC 10,000 900,000 05/05/09 Jan-Mar 10
(P) 10,000 900,000 10/15/08 Cal 09 B 5,000 1,375,000 -$0.3825
10/15/08 Cal 09 I 5,000 1,375,000 02/12/09 Apr-Dec 09 B 2,000
550,000 -$0.3750 03/16/09 Apr-Oct 09 B 2,000 428,000 -$0.2800
03/25/09 Apr-Oct 09 B 2,000 428,000 -$0.2850 11/14/08 Cal 09 B
1,500 412,500 -$2.2200 11/21/08 Cal 09 B 1,000 275,000 -$2.0200
02/12/09 Apr-Dec 09 B 850 233,750 -$1.7500 04/07/09 Cal 10 B 1,000
365,000 -$1.3100 04/07/09 Cal 11 B 1,000 365,000 -$1.2100
Production Area Date Puts Call Index Hedged (MMBtu) (MMBtu)
10/15/08 $8.00 $12.05 Nymex-HH TX 10/15/08 $5.75 Nymex-HH TX
01/29/09 $5.00 Nymex-HH TX/WY 05/05/09 $5.00 $7.00 Nymex-HH TX
05/05/09 $3.50 Nymex-HH TX 10/15/08 HSC (2) TX 10/15/08 HSC (2) TX
02/12/09 HSC (2) TX 03/16/09 HSC (2) TX 03/25/09 HSC (2) TX
11/14/08 CIG (3) WY 11/21/08 CIG (3) WY 02/12/09 CIG (3) WY
04/07/09 CIG (3) WY 04/07/09 CIG (3) WY (1) CC = Costless collars.
(1) B = Basis Swaps. (1) I = Index swaps; Gas Daily to IFERC
Monthly Index. (1) P = Put purchased. (1) (P) = Put sold. (2)
East-Houston-Katy -- Houston Ship Channel. (3) Inside FERC Colorado
Interstate Gas, Rocky Mountains. DATASOURCE: Gastar Exploration
Ltd. CONTACT: J. Russell Porter, Chief Executive Officer of Gastar
Exploration Ltd., +1-713-739-1800, ; or Investor Relations Counsel,
Lisa Elliott, , or Anne Pearson, , both of DRG&E,
+1-713-529-6600, for Gastar Exploration Ltd. Web Site:
http://www.gastar.com/
Copyright