GST Sale - Marcellus, Utica for $80M

[ddlopata084]

HOUSTON, Feb. 22, 2016 /PRNewswire/ -- Gastar Exploration Inc. (NYSE MKT: GST) ("Gastar") today announced that it has entered into a definitive purchase and sale agreement ("PSA") to sell certain Appalachian Basin assets primarily located in Marshall and Wetzel Counties, West Virginia. Gastar also provided a summary of the Company's year-end 2015 reserves, updated fourth quarter 2015 results, preliminary pro forma first quarter 2016 guidance and an update on its Meramec well activity.

Summary Highlights

Gastar has entered into a PSA with an affiliate of Tug Hill Inc. for the sale of certain of its Marcellus Shale and Utica/Point Pleasant properties for $80.0 million, subject to customary closing adjustments. The sale includes substantially all of Gastar's producing assets and proved reserves and a significant portion of its undeveloped acreage in the Appalachian Basin. The sale is expected to close on or before March 31, 2016, subject to customary closing conditions including certain required lessor consents to assign, with an effective date of January 1, 2016. Proceeds will be used to reduce borrowings under Gastar's revolving credit facility.
Gastar's year-end 2015 Securities Exchange Commission ("SEC") proved reserves decreased by 45% as a result of lower commodity prices to 55.9 million barrels of oil equivalent ("MMBoe"), which is comprised of 43% oil and condensate, 24% natural gas liquids ("NGLs") and 33% natural gas.
Gastar's Deep River 30-1H well, its first STACK Play formation Meramec Shale test, produced at a gross post-IP 60-day average sales rate of 803 Boe/d (63% oil). Gastar's second Meramec Shale well commenced drilling on February 10, 2016.
J. Russell Porter, Gastar's President and CEO, commented, "The continued decline in already low oil and natural gas prices created challenges in 2015 that persist in 2016. We will continue to focus on preserving liquidity by limiting and delaying expenditures on capital projects. The continued strong production rate of our first Meramec well further confirms the viability and value of our Mid-Continent holdings, and we are optimistic about the drilling of our second Meramec well located in Kingfisher County, Oklahoma."

[mkarpoff]

So gst is getting $80mm for the Marcellus properties. If my memory serves me, you expected significantly more. What's your current take, particularly as it affects the preferreds? Thx,

[mindtrek2]

Just read that GST has currently drawn $190M of their $200M revolver. The $80M from the sale will lessen that draw but it appears it will be the redetermination by the banks in March that is key. Let's see what happens with the preferreds today as the share price will signal if the market assesses this sale as sufficient to take the pressure off.

[bigtex]

looks like a panic sell to me