Gastar Exploration (GST) Update

[dan_s]

An updated Net Income & Cash Flow Forecast model has been posted under the Watch List Tab.

The company reported solid Q3 results. I am lowering my Fair Value Estimate by $0.25 to $9.00/share of common stock only because they lowered their capital expenditure budget for 2015, which also lowered their production guidance. I have known Russ Porter for years. He hates debt and he is determined to live within cash flow. That is very good news for any of your that own the pfd stock.

First Call's Price Target is $8.87 and I think most analysts will like the Q3 results, so that may go up.

Note that my forecast model treats the pfd stock dividends like interest expense (I net them out of earnings). The First Call EPS forecasts (which you see on Yahoo Finance) are before pfd stock dividends.

Gastar has a lot of running room up in Oklahoma. They did not mention it in the press release, but they do have some of the same zones under their acreage that CLR, NFX, XEC and UNT are having great success in. As the SCOOP/STACK/SOHOT plays get more press, it should draw more attention to GST. Gastar is staying focused on the shallower Hunton oil play, where they are completing some very good wells.

[mkarpoff]

I am confused. You say he hates debt, which is good for preferred stock holders. Seems to me that preferred stock is actually more debt than equity and, that distinction aside, it seems to me that lack of debt would be more important to equity holders than preferred holders. No?

[wilmawatts]

Sweet report and call. This company is a keeper IMO

[dan_s]

If you hold the pfd stock you do not want the company to have a lot of debt. Debt service comes before dividends on the pfd. Yes, pfd stock is a hybrid (kind of like debt and equity).