I am working on an updated forecast model for Gastar now. $80 million from the sale will help, but I thought they would get at least $100 million.
After the sale, Gastar will have a very high percentage of their production hedged at good prices for the remainder of 2016. The 2nd Meramec well is probably the only well they will drill this year. Most of their Oklahoma leasehold is now HBP, so they can "hunker down" until oil prices improve.
Gastar Exploration Update - Feb 22
Gastar Exploration Update - Feb 22
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Gastar Exploration Update - Feb 22
I have updated my forecast model for Gastar and posted it to the EPG website.
Assumptions:
> Marcellus/Utica sale closes at the end of March, with all proceeds used to pay down their bank credit facility
> The 2nd STACK well (drilling now) is the only well Gastar drills in 2016. I assume it is completed in April at 1,000 boepd (50% gas).
> Post sale Gastar keeps all of their current hedges (this is VERY IMPORTANT)
1. More than 100% of post-sale natural gas production will be hedged at $3.37/mmbtu, so Gastar can monetize the excess hedges.
2. ~57% of post-sale crude oil production is hedged at $77.71/bbl
3. Gastar's realized price for NGLs will go up because prices are better in Oklahoma.
First quarter will include all of the revenues from Marcellus/Utica. Properties change hands a "Closing", not at the "Effective Date".
Look at Row 59 (Revenues from Oil, gas and NGL sales). Note that they do not decline much after the Marcellus/Utica sale.
Assumptions:
> Marcellus/Utica sale closes at the end of March, with all proceeds used to pay down their bank credit facility
> The 2nd STACK well (drilling now) is the only well Gastar drills in 2016. I assume it is completed in April at 1,000 boepd (50% gas).
> Post sale Gastar keeps all of their current hedges (this is VERY IMPORTANT)
1. More than 100% of post-sale natural gas production will be hedged at $3.37/mmbtu, so Gastar can monetize the excess hedges.
2. ~57% of post-sale crude oil production is hedged at $77.71/bbl
3. Gastar's realized price for NGLs will go up because prices are better in Oklahoma.
First quarter will include all of the revenues from Marcellus/Utica. Properties change hands a "Closing", not at the "Effective Date".
Look at Row 59 (Revenues from Oil, gas and NGL sales). Note that they do not decline much after the Marcellus/Utica sale.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Gastar Exploration Update - Feb 22
RE: Preferred Stock Dividends
My SWAG is that they will temporarily suspend pfd dividend payments after March.
Keep in mind that the pfd stock is "cumulative", so all deferred dividend payments must be paid in the future.
If Gastar uses the sale proceeds to pay the credit facility down to $100 million, Wells Fargo should work with them. The other long-term debt is due in 2018 and that debt has no say so on dividend payments.
THIS IS VERY IMPORTANT: I think Gastar was able to keep all of their hedges, so going forward 100% of their natural gas is hedged at $3.37/mcf and ~57% of oil is hedged at $77.71.
Gastar may monetize their gas hedges to bring in more cash now.
Gastar is going to "Hunker Down" and they should easily survive until oil prices rebound. Post-sale their all-in production cash expenses are only $10-$12 per boe. They will generate EBITDA of $13 to $15 million per quarter after the sale. Interest expense should be around $6.5 million per quarter.
There is a long list of companies willing to joint venture with Gastar on STACK development, so Russ has many options. However, when I talked to him a couple weeks ago his goal is to hang onto all of their Oklahoma assets. One of the things that hurt them in Marcellus/Utica sales process was that they had a 50% joint venture partner on almost all of it. Buyers like to get close to a 100% working interest if they can.
STACK is very good at $50/bbl oil: Gastar has the potential for over 1,000 high-volume STACK wells in just their northern block. EURs are 500,000 to 1,000,000 boe and the D&C cost is $5.0 to $6.0 million. They call it "STACK" for a reason. Russ thinks their leasehold has up to five productive zones across most of their northern block, with the most potential in the Meramec, Osage and Oswego zones.
My SWAG is that they will temporarily suspend pfd dividend payments after March.
Keep in mind that the pfd stock is "cumulative", so all deferred dividend payments must be paid in the future.
If Gastar uses the sale proceeds to pay the credit facility down to $100 million, Wells Fargo should work with them. The other long-term debt is due in 2018 and that debt has no say so on dividend payments.
THIS IS VERY IMPORTANT: I think Gastar was able to keep all of their hedges, so going forward 100% of their natural gas is hedged at $3.37/mcf and ~57% of oil is hedged at $77.71.
Gastar may monetize their gas hedges to bring in more cash now.
Gastar is going to "Hunker Down" and they should easily survive until oil prices rebound. Post-sale their all-in production cash expenses are only $10-$12 per boe. They will generate EBITDA of $13 to $15 million per quarter after the sale. Interest expense should be around $6.5 million per quarter.
There is a long list of companies willing to joint venture with Gastar on STACK development, so Russ has many options. However, when I talked to him a couple weeks ago his goal is to hang onto all of their Oklahoma assets. One of the things that hurt them in Marcellus/Utica sales process was that they had a 50% joint venture partner on almost all of it. Buyers like to get close to a 100% working interest if they can.
STACK is very good at $50/bbl oil: Gastar has the potential for over 1,000 high-volume STACK wells in just their northern block. EURs are 500,000 to 1,000,000 boe and the D&C cost is $5.0 to $6.0 million. They call it "STACK" for a reason. Russ thinks their leasehold has up to five productive zones across most of their northern block, with the most potential in the Meramec, Osage and Oswego zones.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Gastar Exploration Update - Feb 22
I can accept your premise (SWAG as you would say) that preferred dividends will be suspended after March. If they choose this course of action, I see little in the way of catalysts to suggest dividend payments would resume before the looming bond issue in 2018 is settled. Am I missing something?
Re: Gastar Exploration Update - Feb 22
It all depends on oil prices and what Wells Fargo does with the bank credit facility. Results of the 2nd STACK well could add a lot of proven reserves.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Gastar Exploration Update - Feb 22
Keep in mind that they call it "preferred" stock for a reason. Plus, both Series A and Series B are "cumulative". Gastar must eventually catch up on the dividends.
I get the impression from talking to them that Gastar hopes to keep paying the preferred stock dividends. It will be up to Wells Fargo to allow it.
I get the impression from talking to them that Gastar hopes to keep paying the preferred stock dividends. It will be up to Wells Fargo to allow it.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Gastar Exploration Update - Feb 22
just suppose
what if GST never pays on the pref and they go into bankruptcy and the assets go to those bondholders first, right there could be a scenario where there is no $$ to pay off the pref
extreme case but am i correct??
what if GST never pays on the pref and they go into bankruptcy and the assets go to those bondholders first, right there could be a scenario where there is no $$ to pay off the pref
extreme case but am i correct??
Re: Gastar Exploration Update - Feb 22
Somebody's very pessimistic about Gastar: the GST-A = $2.52 this AM.
-
wilmawatts
- Posts: 685
- Joined: Fri Apr 01, 2011 10:12 am
Re: Gastar Exploration Update - Feb 22
Cumulative sounds so sweet to my ears.
Re: Gastar Exploration Update - Feb 22
Dan.........re your Monday 11:46 post you mention "STACK is very good at $50 oil".
Any thoughts on how they do at $30 oil???
I gather that NFX STACK wells are close to GST acerage and perhaps in the "over-pressured window"??
Also the GST 2-22 press release mentions spending "20m to maintain their OK leasehold position" any idea what that is about??
If you don't know this level of detail I can understand completely.
Any thoughts on how they do at $30 oil???
I gather that NFX STACK wells are close to GST acerage and perhaps in the "over-pressured window"??
Also the GST 2-22 press release mentions spending "20m to maintain their OK leasehold position" any idea what that is about??
If you don't know this level of detail I can understand completely.