Gastar Exploration Inc. (NYSE: GST) revealed that it priced a public offering of 50.0 million shares at $0.95 per share following an effective shelf registration statement previously filed with the SEC. According to the company, the offering was upsized from 40.0 million shares disclosed previously.
Gastar said that it granted the underwriters a 30-day option to acquire a maximum an additional 7.5 million shares. The company expects to receive net proceeds of about $44.6 million or about $51.4 million if the underwriters exercised their option to acquire the addition shares.
The company indicated it would use the net proceeds from the offering for general corporate purposes. That included funding of an expanded drilling program in Oklahoma. Also, the company expects to close the offering on May 17, subject to customary closing conditions.
Seaport Global Securities LLC and Johnson Rice & Company L.L.C. were the joint book-running managers for the offering.
Gastar common stock offering
Gastar common stock offering
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
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wilmawatts
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Re: Gastar common stock offering
You have to admit they are in a very very attractive area development wise. In fact the STACK is the most attractive area in the US as well as the SCOOP
If they survive they will do very well.
The question is will they survive?
If they survive they will do very well.
The question is will they survive?
Re: Gastar common stock offering
Hi Dan
The preferred looks better today than yesterday. Thank you Dan !!!!!!!!!!!!!!!!!!!!
The preferred looks better today than yesterday. Thank you Dan !!!!!!!!!!!!!!!!!!!!
Re: Gastar common stock offering
This stock offering is GREAT news for preferred stockholders and not really bad news for the common stockholders.
If this works out:
1. The Holiday Road well cleans up and ends up being a nice well. This would prove up a large chunk of leasehold for STACK development.
2. Oil prices ramp up to $60 by year-end (Raymond James is forecasting $75/bbl WTI in 2017). STACK well economics are FANTASTIC at $60 oil.
3. They use the proceeds to drill and complete several more STACK wells that prove up the Meramec, Osage and Oswego on their North Stack leasehold block.
4. Other companies are drilling around and within their South Stack leasehold block. If that acreage is proven up by year-end it could lead to a sale that solves all of their debt problems.
Without this stock sale, money was going to be very tight and Wells Fargo may have pulled the plug on the credit facility. That would force a Chapter 11 filing and sent the common stock to a few pennies. I know common stock holders are whining about the dilution, but dilution is better than Chapter 11 where anything can happen and the lawyers drag it out to get all the money they can get.
Go look at the new presentation on Gastar's website. Take a hard look at slide 9, which will give you an idea of the potential that Gastar has in Oklahoma.
If this works out:
1. The Holiday Road well cleans up and ends up being a nice well. This would prove up a large chunk of leasehold for STACK development.
2. Oil prices ramp up to $60 by year-end (Raymond James is forecasting $75/bbl WTI in 2017). STACK well economics are FANTASTIC at $60 oil.
3. They use the proceeds to drill and complete several more STACK wells that prove up the Meramec, Osage and Oswego on their North Stack leasehold block.
4. Other companies are drilling around and within their South Stack leasehold block. If that acreage is proven up by year-end it could lead to a sale that solves all of their debt problems.
Without this stock sale, money was going to be very tight and Wells Fargo may have pulled the plug on the credit facility. That would force a Chapter 11 filing and sent the common stock to a few pennies. I know common stock holders are whining about the dilution, but dilution is better than Chapter 11 where anything can happen and the lawyers drag it out to get all the money they can get.
Go look at the new presentation on Gastar's website. Take a hard look at slide 9, which will give you an idea of the potential that Gastar has in Oklahoma.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Gastar common stock offering
The big Question is, does this amount of money give them enough capital to survive?
Re: Gastar common stock offering
Yes it does. Go to their website and look at the capital program for this year, which is one of the slides in their most recent presentation.
Gastar does generate positive cash flow from operations, which you can see at the bottom of the forecast model. You can download it from the EPG website. Use the tools that I provide.
Gastar does generate positive cash flow from operations, which you can see at the bottom of the forecast model. You can download it from the EPG website. Use the tools that I provide.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Gastar common stock offering
From the filing made after today's close:
USE OF PROCEEDS
We expect the net proceeds from this offering to be approximately $44.6 million (or approximately $51.4 million if the underwriters exercise their option to purchase additional shares in full), after deducting estimated fees and expenses (including underwriting discounts and commissions). We intend to use net proceeds of the offering for general corporate purposes, including up to approximately $31.2 million of the net proceeds from this offering to fund a drilling program of up to nine wells that we believe could de-risk and delineate a substantial portion of our acreage position in the STACK Play. The actual amount of net proceeds we spend on drilling our STACK Play acreage and the scope of these drilling activities will depend upon several factors, including, but not limited to, initial well results, changes in commodity prices, costs of drilling and completion and leasehold acquisitions, results of any redeterminations made under the Revolving Credit Facility Agreement, and other liquidity needs of the Company.
The Company has agreed to an additional scheduled borrowing base redetermination in August 2016. In the event the Company’s borrowing base is reduced at the time of this redetermination, the Company may be required to immediately repay a portion or all amounts borrowed on the Revolving Credit Facility and proceeds from this offering may be used for the repayment of such borrowings.
USE OF PROCEEDS
We expect the net proceeds from this offering to be approximately $44.6 million (or approximately $51.4 million if the underwriters exercise their option to purchase additional shares in full), after deducting estimated fees and expenses (including underwriting discounts and commissions). We intend to use net proceeds of the offering for general corporate purposes, including up to approximately $31.2 million of the net proceeds from this offering to fund a drilling program of up to nine wells that we believe could de-risk and delineate a substantial portion of our acreage position in the STACK Play. The actual amount of net proceeds we spend on drilling our STACK Play acreage and the scope of these drilling activities will depend upon several factors, including, but not limited to, initial well results, changes in commodity prices, costs of drilling and completion and leasehold acquisitions, results of any redeterminations made under the Revolving Credit Facility Agreement, and other liquidity needs of the Company.
The Company has agreed to an additional scheduled borrowing base redetermination in August 2016. In the event the Company’s borrowing base is reduced at the time of this redetermination, the Company may be required to immediately repay a portion or all amounts borrowed on the Revolving Credit Facility and proceeds from this offering may be used for the repayment of such borrowings.
Re: Gastar common stock offering
Two questions: One, now that they are doing the secondary, do you think that pretty much eliminates a buy-out? Two, do you assume that the secondary implies a div catch-up on the preferreds? I'd have thought that they would have announced it, if that was the case.
Re: Gastar common stock offering
No, I do not think it eliminates the chance of a buyout. IMO Russ' goal is to sell the whole company eventually. To get the best price, he needs to prove up a lot more acreage. It appears that the proceeds from the common stock offering will fund 8-9 more STACK wells, probably spread out across the leasehold to prove up a lot of locations.
They cannot starting paying dividends on the preferred until Wells Fargo allows it. I doubt we see it happen this year. If all goes as planned, my guess is that dividends on the preferred start up again Q2 2017. Remember, the preferreds are "cumulative", so all dividends in arrears will eventually be paid unless they go out of business.
If oil drifts up to $60 by year, as forecast by Raymond James, then the outlook for Gastar will look a lot better. Especially, if they complete several more good Meramec, Osage and Oswego wells this year.
They cannot starting paying dividends on the preferred until Wells Fargo allows it. I doubt we see it happen this year. If all goes as planned, my guess is that dividends on the preferred start up again Q2 2017. Remember, the preferreds are "cumulative", so all dividends in arrears will eventually be paid unless they go out of business.
If oil drifts up to $60 by year, as forecast by Raymond James, then the outlook for Gastar will look a lot better. Especially, if they complete several more good Meramec, Osage and Oswego wells this year.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group