Gastar's Q3 results were about what I expected. Low NGL prices were the primary reason for the somewhat lower than expected revenues. Cash lifting costs keep coming down, which helped to offset the impact of terrible NGL prices.
Good news on the Meramec well is that they did get it completed with 34 frac stages and they pumped in 12 million pounds of sand. It always takes about 30 days to get all of the frac fluid back, so I did not expect them to announce any production volumes. I'm sure there will be more on Friday's conference call.
I have updated my forecast (subject to change after I listen to the conference call). It has been posted to the EPG website.
At this point, it is impossible to forecast 2016 until the Mid-Continent acquisition and Marcellus/Utica sale are both closed. FWIW my valuation is now $3.80/share, compared to First Call's price target of $3.20.
4th quarter revenues should be approximately $25 million (net of cash settlements on hedges), which should result in cash flow from operations (before preferred stock dividends) of $6.5 to $7.0 million. Preferred stock dividends are $3.6 million per quarter.
Gastar Q3 results
Gastar Q3 results
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Gastar Q3 results
You should all listen to the replay of the GST conference call. A lot of questions during Q&A about the Meramec well. Completion of the well went off with no problems, flowback and initial pressures are very encouraging, and zone thickness is good. They won't know oil & gas production volumes for a few more weeks.
Newfield has drilled several very good Meramec wells that directly offset GST leasehold.
Newfield has drilled several very good Meramec wells that directly offset GST leasehold.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Gastar Q3 results
Just to see what it would do to my valuation. I took natural gas production to zero in 2016 for my GST valuation and it only lowered my valuation by $0.66 to $3.14/share.
From the conference call:
Meramec type curve is 300,000 to 350,000 BOE ultimate recovery (85% crude oil) < Over 50% recovered in first two years.
The first Meramec well cost $5.8 million to drill & complete
Future wells should cost ~$5.0 million (because they will not need to core and run extensive logs on those development wells)
Acquisition in OK should close by 11/30. I except that GST will have IP rate on the first Meramec at that time. During Q&A they said they expect 700-800 boepd IP. NFX is getting better IPs just to the south of the Gastar acreage in a thinner section of the Meramec, so I think Russ was just low balling the answer.
There are other productive zones outside of the Hunton and Meramec on the Gastar acreage.
After the closing with Husky, they will have over 150 locations for horizontal Meramec wells.
Sale of Marcellus/Utica
> TPH is handling the data room
> Lots of interest
> Gastar expects to announce a sale by year-end.
> This sale will SIGNIFICANTLY improve Gastar's balance sheet (IMO this will take their preferred stock prices back to par)
2016 Plan will be to confirm the Meramec and other zones. Keep one rig drilling Hunton oil wells.
Gastar has a lot of leasehold with Woodford potential, but will not drill it until oil prices improve.
Gastar hold over 1,000 low-risk drilling locations in Oklahoma today.
Chesapeake recently completed a 3,000 foot horizontal well near Gastar leasehold that IP'd at more than 2,000 boepd.
I urge all of you to listen to the replay of the Gastar conference call, which is now on their website.
From the conference call:
Meramec type curve is 300,000 to 350,000 BOE ultimate recovery (85% crude oil) < Over 50% recovered in first two years.
The first Meramec well cost $5.8 million to drill & complete
Future wells should cost ~$5.0 million (because they will not need to core and run extensive logs on those development wells)
Acquisition in OK should close by 11/30. I except that GST will have IP rate on the first Meramec at that time. During Q&A they said they expect 700-800 boepd IP. NFX is getting better IPs just to the south of the Gastar acreage in a thinner section of the Meramec, so I think Russ was just low balling the answer.
There are other productive zones outside of the Hunton and Meramec on the Gastar acreage.
After the closing with Husky, they will have over 150 locations for horizontal Meramec wells.
Sale of Marcellus/Utica
> TPH is handling the data room
> Lots of interest
> Gastar expects to announce a sale by year-end.
> This sale will SIGNIFICANTLY improve Gastar's balance sheet (IMO this will take their preferred stock prices back to par)
2016 Plan will be to confirm the Meramec and other zones. Keep one rig drilling Hunton oil wells.
Gastar has a lot of leasehold with Woodford potential, but will not drill it until oil prices improve.
Gastar hold over 1,000 low-risk drilling locations in Oklahoma today.
Chesapeake recently completed a 3,000 foot horizontal well near Gastar leasehold that IP'd at more than 2,000 boepd.
I urge all of you to listen to the replay of the Gastar conference call, which is now on their website.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Gastar Q3 results
Direct quote from Newfield conference call:
We are highly encouraged with the results we're seeing today in the Anadarko Basin. There is a comprehensive update in today's @NFX publication. You will see that our teams continue to advance learnings to deliver superior well results, optimize completions, and improve returns.
It's important to note that for the first time our net daily production from the Anadarko Basin has now eclipsed the combined production from the remainder of our domestic assets. This is quite a milestone, considering that the SCOOP and STACK plays literally started from scratch just four years ago.
Due to the strong growth from the Anadarko Basin and our efforts to maximize base production across the Company, we today raised our full-year expectations for 2015 production, and we will enter 2016 with strong operational momentum.
In STACK, we have now drilled nearly 70 wells and have seen strong well results across our acreage. With each well we gain increased confidence in the play.
Although the primary focus of our STACK drilling program today is to HBP our acreage, we are learning about well spacing, both on the surface and subsurface, and we will be ready to enter full field development in 2017. Our growing Anadarko Basin assets provide us with a deep inventory of high-return drilling locations that will lead Newfield's growth and profitability for many years to come.
Several of Newfield's STACK wells drilled this year are direct offsets to Gastar leasehold.
We are highly encouraged with the results we're seeing today in the Anadarko Basin. There is a comprehensive update in today's @NFX publication. You will see that our teams continue to advance learnings to deliver superior well results, optimize completions, and improve returns.
It's important to note that for the first time our net daily production from the Anadarko Basin has now eclipsed the combined production from the remainder of our domestic assets. This is quite a milestone, considering that the SCOOP and STACK plays literally started from scratch just four years ago.
Due to the strong growth from the Anadarko Basin and our efforts to maximize base production across the Company, we today raised our full-year expectations for 2015 production, and we will enter 2016 with strong operational momentum.
In STACK, we have now drilled nearly 70 wells and have seen strong well results across our acreage. With each well we gain increased confidence in the play.
Although the primary focus of our STACK drilling program today is to HBP our acreage, we are learning about well spacing, both on the surface and subsurface, and we will be ready to enter full field development in 2017. Our growing Anadarko Basin assets provide us with a deep inventory of high-return drilling locations that will lead Newfield's growth and profitability for many years to come.
Several of Newfield's STACK wells drilled this year are direct offsets to Gastar leasehold.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Gastar Q3 results
A big plus for STACK is how close it is to Cushing, Oklahoma (the #1 hub for oil).
NFX: "In addition, our future realized prices are expected to improve in STACK through better oil price differentials. We're seeing great demand for our STACK barrels today, due to both API gravity, crude quality, and geographic location."
NFX: "In addition, our future realized prices are expected to improve in STACK through better oil price differentials. We're seeing great demand for our STACK barrels today, due to both API gravity, crude quality, and geographic location."
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Gastar Q3 results
To learn more about SCOOP and STACK, I highly recommend that you read the transcripts of both the NFX and CLR conference calls.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Gastar Q3 results
You should also listen to the Cimarex Q3 conference call and look at the November presentation slides on their website. It is clear from the CC that they are very excited about the Meramec. They have an important pilot program drilling today in SW Kingfisher county.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Gastar Q3 results
MHR is going BK. They have acreage very similar and in some cases, in close proximity to GST's Marcellus/Utica acreage. I wonder what makes management confident that they can get a decent price for their holdings in this region? I would think there will be a large chunk of MHR's property available at fire sale prices. Where am I going wrong? Porter maintains that they should have a deal done by year end. Does that still seem reasonable? I would certainly appreciate any insight you have as to the progress of a potential deal.
Re: Gastar Q3 results
is not MHR mainly dry gas???
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bearcatbob
Re: Gastar Q3 results
MHR going BK would not necessarily put their properties on the open market for sale. Would it not depend on what the creditors who split the assets decide to do with the properties?kenm wrote:MHR is going BK. They have acreage very similar and in some cases, in close proximity to GST's Marcellus/Utica acreage. I wonder what makes management confident that they can get a decent price for their holdings in this region? I would think there will be a large chunk of MHR's property available at fire sale prices. Where am I going wrong? Porter maintains that they should have a deal done by year end. Does that still seem reasonable? I would certainly appreciate any insight you have as to the progress of a potential deal.