Energy Prospectus

We sent out a video on the STACK play yesterday and we are sending out a second one today.

You can download the slides from our website if you need to have more time to get into the details. There is a lot of information on some of the slides.

Slides used during all of our luncheon presentations, including Raymond James oil price forecast, can be downloaded from the EPG website. Half the way down the Home Page there is a link that says "Luncheon Presentations and Specials". Just click on it.

I guess the fact that GST was able to big raise private placement $ @ .95 with no haircut when their situation was looking so bleak validates their STACK position after not having the new well results and not selling the other acreage. How do we know who bought the shares??

I have no idea who is buying the new stock.

Here is the way I explained Gastar's situation to a friend the other day.

This is a VERY CAPITAL INTENSIVE BUSINESS and Gastar may have one heck of an asset, but they are cut off from the funding needed harvest the value.

This is like a Gold Miner that goes to a venture capital group and convinces them to fund his idea that there is major gold find on a big lease he holds in the Rockies. The VC gives him $10 million to get a team together and drill dozens of cores. The Gold Miner comes back to them with great news that the cores prove his theory that there are tons of recoverable gold in them there hills, but now he needs $200 million to get it out. He estimates that there is recoverable gold that will sell for over $10 Billion at today's gold price.

But the VC doesn't have that kind of money and the market is down because of FEAR.

Does the lack of funding mean the Gold Miner is wrong about the potential his lease has?
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Gastar's Oklahoma leasehold has an estimated ~3,795 gross, ~1,555 net undrilled horizontal locations in STACK (Meramec-Oswego-Osage-Woodford-Hunton).
If just half of those locations are good and the EUR's average 700,000 boe per well*, Gastar is sitting on a lot of recoverable oil and gas.
Let's do the math.
1,555 wells X 50% X 700,000 boe X 80% NRI = 435,400,000 boe of recoverable oil & gas net to Gastar's interest.

Now let's say that those boe's are 50% oil and 50% natural gas (ignoring the NGLs to keep it simple)
435,400,000 X 50% X $50/bbl = $10,885,000,000 gross revenues net to Gastar's interest just for the oil
435,400,000 X 6 X 50% X $2.50/mcf = $3,265,500,000 gross revenues net to Gastar's interest for the natural gas

The horizontal wells will cost approximately $4 million each to drill and complete (assuming they are all 5,000 laterals)
1,555 wells X 50% X $4 million per well = $3,110,000,000 for D&C costs

Lifting costs, production taxes, gathering, process and marketing should run about $8 to $10 per boe, but we are still talking about the potential for a heck of a lot of money AND I think we can assume that oil and gas prices will move over the prices above during the next few years.

Add all of this up and you are talking about $8 to $10 Billion net revenues to Gastar's interest.

The people (probably hedge funds) that buy the common stock in this equity raise will own about 40% of GST. For $50 million, they get a shot at $3 to $4 BILLION. There are people in this world that think long-term and make those kinds of bets.
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*CLR, NFX, DVN and XEC are now estimating EURs (Estimated Ultimate Recoveries) over a million boe per well and some areas up to 2 million.

Gastar still has lot so RISK even after they close the stock sale, but the short-term problem is solve. If they take the money and drill several wells to prove up a lot of their leasehold AND oil & gas prices move higher, they should be able to get the money to develop the leasehold or they can sell it.

Personally, I think if oil prices move up to $60 some other company will buy Gastar with a combination of stock and cash. CLR, DVN, NFX, XEC and several well funded private companies are active in the immediate area. Or it could be another large-cap that wants to get into the STACK play.

A buyer would be wise to buy up as much debt and preferred stock as possible before making a move to acquire the company.

This is not going to play out quickly.