I talked to the CFO yesterday. My updated forecast model is posted to the EPG website.
Here is their plan:
1. Close the Marcellus/Utica sale that was announced on Monday. $80 million cash proceeds at closing, end of March.
2. Complete the 2nd STACK well, which is drilling now. It should be completed by the end of March. < Very important well, as it should prove up over 100 Meramec drilling locations
3. Meet with Wells Fargo to get new bank credit facility in April.
4. Hunker down until oil prices increase. Gastar has no drilling obligations this year beyond the 2nd STACK well. Most of their Oklahoma leasehold is HBP.
5. Cash on hand today and cash flow from operations should cover 100% of 2016 capital budget.
6. I confirmed that their hedges were not part of the Marcellus/Utica sale. After the sale above, Gastar will be over-hedged on natural gas. They can monetize their hedges to get more cash if necessary.
They will probably suspend dividends on the preferred stock, but I do not know this for sure. Both the Series A and Series B pfd stock is cumulative, so they must eventually make up the dividends if they are suspended. Only Wells Fargo can force the dividends to be suspended. The other long-term debt is not due until 2018.
We will know more when they release Q4 results in March. They should have logs on the 2nd STACK well by then.
Gastar
Re: Gastar
At a price of $2.50 for GST PrA, the market is saying there will be a long wait for any future dividends.
More to the point, the outlined plan suggests the company will survive 2016. What it does not address is how they are ever going to be able to develop the 100+ Meramec drilling locations which seem vital to the company's survival. It would seem at some point JV's will become part of the picture. Dan, you have often said it is something they don't want to do, but their credibility is sinking fast. I know nothing about how that affects a company's financial situation, so would appreciate any thoughts/comments.
More to the point, the outlined plan suggests the company will survive 2016. What it does not address is how they are ever going to be able to develop the 100+ Meramec drilling locations which seem vital to the company's survival. It would seem at some point JV's will become part of the picture. Dan, you have often said it is something they don't want to do, but their credibility is sinking fast. I know nothing about how that affects a company's financial situation, so would appreciate any thoughts/comments.
Re: Gastar
From the Continental Resources (CLR) Q4 release: "Three New STACK Completions Further Demonstrate the Potential of Continental's Over-Pressured Meramec Assets; Largest New Well Produces 3,508 Barrels of Oil Equivalent Per Day"
GST has over 500 Meramec locations
GST has over 500 Meramec locations
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Gastar
Details from CLR
Impressive New STACK Results Include 16-Mile Step-Out Well
The Company's new STACK completions were the Boden 1-15-10XH, the Compton 1-2-35XH and the Blurton 1-7-6XH, all extended lateral tests targeting the over-pressured Meramec formation in Blaine County.
The Boden is a significant step-out test located 16 miles southwest of Continental's first STACK well, the Ludwig 1-22-15XH. The Boden flowed at an impressive 24-hour initial production rate of 1,000 Bo and 15 MMcf of natural gas (3,508 Boe) from a 9,800-foot lateral. It is the Company's deepest test of the Meramec reservoir to date, with the lateral section of the well positioned at an average vertical depth of 12,550 feet. Through the first 80 days of production, the Boden has continued to exhibit strong flowing casing pressure of more than 5,000 psi on a 20/64" choke.
The Compton and Blurton wells were closer step-out tests located five miles southwest and three miles northwest, respectively, of the Ludwig. The Compton flowed at an initial 24-hour production rate of 1,817 Bo and 4.4 MMcf of natural gas (2,547 Boe) from a 9,800-foot lateral. The Blurton flowed at an initial 24-hour production rate of 1,818 Bo and 3.1 MMcf of natural gas (2,328 Boe) from a 9,600-foot lateral.
"Our over-pressured Meramec wells in STACK are delivering some of the highest returns in the Company. We clearly have another high impact, long-term platform for growth underlying our 155,000 net acres of leasehold in STACK," said Jack Stark, Continental's President and Chief Operating Officer. "The exceptional performance of these new wells supports our observation that over-pressured STACK wells produce on average three times more volume than wells in the normally-pressured STACK in their first 90 days, when normalized for a 9,800' foot lateral. This is significant, as almost all of Continental's STACK acreage is located in the over-pressured window."
Based on early production from recent Continental completions and other non-operated wells in the over-pressured oil window, the Company is estimating an average estimated ultimate recovery (EUR) of 1.7 MMBoe per well. Continental is targeting a completed operated well cost of $10 million for a 9,800-foot lateral well, which would generate a 55% rate of return at $40 per barrel WTI and $2.25 per thousand cubic feet (Mcf) of natural gas.
The Company plans to average four-to-five operated drilling rigs in STACK in 2016, which would enable it to drill approximately 15 net (25 gross) operated wells and complete approximately nine net (15 gross) operated wells this year in the play. Continental's STACK leasehold is primarily in Blaine, Dewey and Custer counties, and the Company anticipates more than 70% of it will be held by production by year-end 2016
Impressive New STACK Results Include 16-Mile Step-Out Well
The Company's new STACK completions were the Boden 1-15-10XH, the Compton 1-2-35XH and the Blurton 1-7-6XH, all extended lateral tests targeting the over-pressured Meramec formation in Blaine County.
The Boden is a significant step-out test located 16 miles southwest of Continental's first STACK well, the Ludwig 1-22-15XH. The Boden flowed at an impressive 24-hour initial production rate of 1,000 Bo and 15 MMcf of natural gas (3,508 Boe) from a 9,800-foot lateral. It is the Company's deepest test of the Meramec reservoir to date, with the lateral section of the well positioned at an average vertical depth of 12,550 feet. Through the first 80 days of production, the Boden has continued to exhibit strong flowing casing pressure of more than 5,000 psi on a 20/64" choke.
The Compton and Blurton wells were closer step-out tests located five miles southwest and three miles northwest, respectively, of the Ludwig. The Compton flowed at an initial 24-hour production rate of 1,817 Bo and 4.4 MMcf of natural gas (2,547 Boe) from a 9,800-foot lateral. The Blurton flowed at an initial 24-hour production rate of 1,818 Bo and 3.1 MMcf of natural gas (2,328 Boe) from a 9,600-foot lateral.
"Our over-pressured Meramec wells in STACK are delivering some of the highest returns in the Company. We clearly have another high impact, long-term platform for growth underlying our 155,000 net acres of leasehold in STACK," said Jack Stark, Continental's President and Chief Operating Officer. "The exceptional performance of these new wells supports our observation that over-pressured STACK wells produce on average three times more volume than wells in the normally-pressured STACK in their first 90 days, when normalized for a 9,800' foot lateral. This is significant, as almost all of Continental's STACK acreage is located in the over-pressured window."
Based on early production from recent Continental completions and other non-operated wells in the over-pressured oil window, the Company is estimating an average estimated ultimate recovery (EUR) of 1.7 MMBoe per well. Continental is targeting a completed operated well cost of $10 million for a 9,800-foot lateral well, which would generate a 55% rate of return at $40 per barrel WTI and $2.25 per thousand cubic feet (Mcf) of natural gas.
The Company plans to average four-to-five operated drilling rigs in STACK in 2016, which would enable it to drill approximately 15 net (25 gross) operated wells and complete approximately nine net (15 gross) operated wells this year in the play. Continental's STACK leasehold is primarily in Blaine, Dewey and Custer counties, and the Company anticipates more than 70% of it will be held by production by year-end 2016
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Gastar
why were these preferreds never taken out of the income portfolio.????
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wilmawatts
- Posts: 685
- Joined: Fri Apr 01, 2011 10:12 am
Re: Gastar
Great news, thanks. A steal for long term investors.
Re: Gastar
Just curious if you are still holding the preferred? i'm glad I sold that one last year at $10/share but really took a hit.
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bearcatbob
Re: Gastar
Topeka Capital's favorite O&G's
Investors' Soapbox PM
Top Picks and Favorites in Oil & Gas Explorers
Pioneer Natural, Parsley Energy and Diamondback Energy are the top picks. Four others are recommended for healthy beta.
March 1, 2016 3:38 p.m. ET
Topeka Capital Markets
http://www.investorvillage.com/groups.a ... d=15803892
"Gastar Exploration ( GST ) is our favorite name on the microcap side, but they need bank covenant relief (expected by March 10), which we are confident they will receive after selling its core Appalachia assets for $80.0 million. Following the sale of its Appalachia assets, Gastar will transition to a pure-play Stack (Sooner Trend Anadarko Canadian and Kingfisher) company and, we continue to see a solid setup for a rerating as commodity prices recalibrate."
Investors' Soapbox PM
Top Picks and Favorites in Oil & Gas Explorers
Pioneer Natural, Parsley Energy and Diamondback Energy are the top picks. Four others are recommended for healthy beta.
March 1, 2016 3:38 p.m. ET
Topeka Capital Markets
http://www.investorvillage.com/groups.a ... d=15803892
"Gastar Exploration ( GST ) is our favorite name on the microcap side, but they need bank covenant relief (expected by March 10), which we are confident they will receive after selling its core Appalachia assets for $80.0 million. Following the sale of its Appalachia assets, Gastar will transition to a pure-play Stack (Sooner Trend Anadarko Canadian and Kingfisher) company and, we continue to see a solid setup for a rerating as commodity prices recalibrate."
Re: Gastar
Someone knows something about GST.PB. Seven X average volume already today. Perhaps not suspending dividends anytime soon?
Re: Gastar
Someone is also aggressively buying up their debt.
Here's the deal:
1. Based on my forecast, which you can download from the EPG website, Gastar is not going bankrupt. Cash flow from operations, net of interest expense, should be more than $30 million in 2016.
2. When they sit down with Wells Fargo to negotiate their credit facility in April, Gastar will have about $100 million in cash. $80 million from the Marcellus/Utica sale that should close by the end of March.
3. Today the credit facility is $200 million. Wells Fargo may cut it to $100 million, but my SWAG is that it will be higher. Wells Fargo is not a fool. They would be crazy to push Gastar over the edge. Energy sector banks will not call debt as long as the company can pay interest and shows they have the cash flow to do it. Gastar clearly has the interest payments covered.
4. The only well Gastar plans to drill this year is the 2nd STACK well, which has probably reached TD and will be completed in March. If this well is anywhere close to the first STACK well, it will prove up hundreds of Meramec locations. NFX has already proven up a lot of Gastar's leasehold to the south. Go look at the NFX presentation to confirm this.
5. The other debt holders cannot call the debt until 2018. If oil prices do not rebound by then, the entire industry is toast. Only Wells Fargo can force Gastar to stop paying the pfd stock dividends. However, the company may decide to do it anyway since the market already assumes they will.
6. Gastar has a extremely valuable leasehold block in the STACK play. All you need to do is read what CLR, NFX, XEC and DVN are saying about STACK.
7. Russ does not want to dilute Gastar's interest in the STACK play, but that does not mean he can't or won't if it means saving the company. Gastar has 46,000 acres of prime STACK leasehold, most of which is HBP from all the Hunton wells they have drilled.
Today's buyer of the pfd is smart enough to know what the word "cumulative" means.
Here's the deal:
1. Based on my forecast, which you can download from the EPG website, Gastar is not going bankrupt. Cash flow from operations, net of interest expense, should be more than $30 million in 2016.
2. When they sit down with Wells Fargo to negotiate their credit facility in April, Gastar will have about $100 million in cash. $80 million from the Marcellus/Utica sale that should close by the end of March.
3. Today the credit facility is $200 million. Wells Fargo may cut it to $100 million, but my SWAG is that it will be higher. Wells Fargo is not a fool. They would be crazy to push Gastar over the edge. Energy sector banks will not call debt as long as the company can pay interest and shows they have the cash flow to do it. Gastar clearly has the interest payments covered.
4. The only well Gastar plans to drill this year is the 2nd STACK well, which has probably reached TD and will be completed in March. If this well is anywhere close to the first STACK well, it will prove up hundreds of Meramec locations. NFX has already proven up a lot of Gastar's leasehold to the south. Go look at the NFX presentation to confirm this.
5. The other debt holders cannot call the debt until 2018. If oil prices do not rebound by then, the entire industry is toast. Only Wells Fargo can force Gastar to stop paying the pfd stock dividends. However, the company may decide to do it anyway since the market already assumes they will.
6. Gastar has a extremely valuable leasehold block in the STACK play. All you need to do is read what CLR, NFX, XEC and DVN are saying about STACK.
7. Russ does not want to dilute Gastar's interest in the STACK play, but that does not mean he can't or won't if it means saving the company. Gastar has 46,000 acres of prime STACK leasehold, most of which is HBP from all the Hunton wells they have drilled.
Today's buyer of the pfd is smart enough to know what the word "cumulative" means.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group