Energy Prospectus

26,000 acre sale could bring in $150m-$230m
Gastar Exploration (NYSE MKT: GST) is in the early stages of an effort to sell 26,000 acres of Oklahoma’s STACK play, said a source close to the company.

Houston-based Gastar has mandated Citigroup to advise on the process and aims to reach an agreement by early April, the source said.

Divesting the STACK assets will improve Gastar's liquidity as it prepares for a spring borrowing base redetermination, said the source, and it would help assure its lenders that the company is able to operate within its cash balance until 2017.

Gastar could fetch $150m to $230m from the divestiture of the 26,000 acres in Oklahoma, or $6,000 – $9,000 per acre, said an industry banker.

The STACK (Sooner Trend Anadarko Canadian and Kingfisher County) oil play includes multiple potential resource zones. In December, Devon Energy (NYSE: DVN) acquired Felix Energy, a private equity backed company with 80,000 acres in the STACK formation, for $2.5bn.

Likely buyers of Gastar's Kingfisher and Canadian County acreages include Cimarex (NYSE: XEC) and Continental Resources (NYSE:CLR) because both of the large-cap E&Ps have a large exposure to the subsection within the Mid-Continent region, said an industry analyst. Other likely buyers include Encap Investments-backed Payrock Energy and CCMP Capital-backed Chaparral Energy, a second industry banker said. However, Chaparral may also be too levered to do a deal after recently drawing down on its JPMorgan-led credit facility, said the second industry banker.

March 13, 2016 Analyst News 0 Comments

Gastar Exploration Receives a Buy from Canaccord Genuity
By George Macdonald

Canaccord Genuity analyst Stephen Berman reiterated a Buy rating on Gastar Exploration (NYSE MKT: GST) on March 11 and set a price target of $1.50. The company’s shares closed last Friday at $1.11.

Berman wrote, “With the announced sale of most of its Appalachian assets, GST will become an almost pure Mid-Continent player, with oily assets in some of the best emerging areas of Oklahoma. The company has had strong drilling results in the Hunton Limestone, and its first STACK well in the emerging Meramec play had a solid result. The ~$80M in proceeds from the Appalachia sale will be used to delever the balance sheet. Investment highlights GST reported Q4 adjusted EPS/CFPS of $(0.16)/$0.12 vs. our estimates of $(0.15)/ $0.11 and consensus of $(0.14)/$0.09. The company took a ~$145M non-cash ceiling test impairment charge during the quarter. Q4/15 production was 14.0 MBoe/d vs. our estimate of 14.0 MBoe/d, consensus of 13.9 MBoe/d, and recent guidance of 13.8-14.0 MBoe/d.”

Gastar Exploration has an analyst consensus of Strong Buy.

The company has a one year high of $3.79 and a one year low of $0.57. Currently, Gastar Exploration has an average volume of 832.7k.

Like Canaccord Genuity`s latest rating, based on the recent corporate insider activity of 21 insiders, corporate insider sentiment is positive on the stock. This means that over the past quarter there has been an increase of insiders buying their shares of GST in relation to earlier this year.

Dan, You have oft stated the value of the Stack properties for GST. Since they have already cut their dividends - why in the world would they want to sell those properties now? The Marcellus sale value was not what you expected - but perhaps it was necessary. Why sell now if it is not necessary?

Bob

n explain this please

Gastar will be participating in up to 15 STACK wells operated by these Sweet 16 companies and some high quality private companies in 2016.


tia

These questions were answered by Russ on the conference call. You should all listen to it carefully.

By selling the Canadian county leasehold they can shore up the balance sheet. They will use a lot of the money to buy back their publicly traded debt at less than 50 cents on the dollar.

On the conference call, Russ said $20 million of this year's capex will be used to participate in up to 15 outside operated STACK wells. Several will be operated by Newfield and Devon.
This year's primary goal is to define the STACK development drilling program for 2017. Data from these 15 wells will help a lot. All working interest owners get the data from wells they participate in. Gastar has a good relationship already with Newfield.

My guess is that Newfield has a team looking at the Canadian county block now.