Gastar

[cmm3rd]

Does anyone have any idea what company event/development might account for today's PPS strength (both common and pfds)?

TIA

cmm3rd

[dan_s]

IMO all of Gastar's STACK leasehold is Tier 2 or Tier 3. If they sold all of their assets today, I doubt if the proceeds would be enough to pay off the company's debt, much less take out the preferred stock at par ($25/share). So....today the common stock is probably under water.

That said, if oil prices go high enough their STACK leasehold does become more valuable. In this business, if a company can survive long enough and get VERY LUCKY there is always hope for a comeback.

Take a look at Chaparral Energy (CHPE). They are also in the Tier 2 areas of STACK and they seem to be getting good well results in the Osage formation.

Dividends on the Gastar pfd stock have been suspended.

[ddlopata084]

There is a pre-release of a positive article by popular Seeking Alpha author Long Player promoting GST’s positives, out today. This went out to subscribers of Long Player plus subscribers to other SA promoted services whose authors collaborate with Long Player. I suspect this could have impacted the incremental share trading.

[cmm3rd]

Thanks for the reply about the pre-release of the SA article.

Could you share one or two of the article's highlights? In particular, does the author address, even indirectly, whether GST is achieving well results sufficient to affect positively the value of their acreage such that it's value might exceed its debt level?

Thanks!

Scott

[ddlopata084]

LP reviews a recent GST investor slide set, commenting and adding some color to various slides. I’d say this one’s more qualitative than quantitative, does present the slides for Meremec and Osage type curves with a few comments relative to improved well results for the new well designs. I’m not a subscriber to his service. There’s a lot of junk on SA, but LP seems to put out some good analysis at times. I’m quantitative by nature, so I didn’t find this one all that valuable given my familiarity with GST.

Regards


Here’s the Summary from the prelim article:

Summary

Gastar Exploration management has positioned itself in an emerging play that appears extremely competitive with some of the better known industry basins. The increasing production and rising oil prices should combine to rapidly increase cash flow. That could lead to a rapid increase in drilling activity as long as oil prices remain relatively high.

The operating leverage exhibited by the company appears very strong without the risk of an untenable debt position. Management appears to be able to grow its way into properly servicing the debt load. However, cash flow progress and debt levels should be closely monitored with any highly leveraged company.

Still, the position in one of the lower cost basins has to be a long term competitive advantage. That advantage could temporarily magnify as Permian headwinds mount. However, money invested in commodity industries is generally very flexible. Therefore as Permian challenges render the area less competitive, money could flow to alternative basins such as this emerging play. In the future, operators in Oklahoma could face similar headwinds now facing the Permian operators. The financial leverage therefore calls for some careful forward planning ("just in case").

The stock trades well under $1 per share and could easily double over the next twelve months. The value of the leases could send the stock much higher as the company gains visibility from its rapid production and cash flow increase. In any event, an investment grade rating or at least access to cheap debt may not be more than a year into the future with the current industry environment.

[bobs]

Apparently lots of bigger very successful e and ps are drilling wells surrounding GSTs yet are they also in the tier 2 space?
Try to clarify if possible.

[dan_s]

Gastar's leasehold is in STACK and it is in the Northeast quadrant of Kingfisher County. The "Tier One" leasehold in Kingfisher is in the Southwest quadrant of the county.

The Sweet 16 companies in STACK are CLR, NFX and XEC. Devon Energy (DVN) is also very active in STACK and they are partners with CLR on lots of wells.

Go to the NFX website and look at their most recent presentation. It has some very good slides that should give you an idea where the good leasehold is. CLR and NFX are also getting some outstanding well results in Blaine County, west of Kingfisher.

Slide 19 of CLR's May Investor Update shows were the over-pressured area of STACK is. It is the REALLY GOOD part. Gastar's leasehold is all in the normal-pressured part.

CLR, NFX and XEC are primarily focused on the Meramec formation. I think Gastar is now focused on the Osage formation. There are five to eight "stacked pay zones" in STACK.

Read our recent profile on Chaparral Energy (CHPE) to get an idea of the potential in the Osage formation.