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Gastar Ups Reserves Across Marcellus, Hunton Lime Plays

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   |    Monday,February 02,2015

Gastar Exploration Inc. has reported an investor update that includes a summary of the Company's year-end 2014 reserves and preliminary fourth quarter 2014 production results.

Summary Highlights

  • Year-end 2014 Securities Exchange Commission proved reserves increased 87% to 102.1 million barrels of oil equivalent (MMBoe), of which 53% is liquids (oil, condensate, and natural gas liquids (NGLs)) and 47% is natural gas. The pre-tax SEC-priced present value of future cash flows of these reserves discounted at 10% grew 67% to $988.7 million.
  • In 2014, excluding acquisitions and divestitures, we replaced approximately 1,284% of our 2014 preliminary annual production of 3.7 MMBoe.
  • Fourth quarter 2014 preliminary production averaged approximately 11.7 thousand barrels of oil equivalent per day (MBoe/d) and consisted of 53% liquids and 47% natural gas.

J. Russell Porter, Gastar's President and CEO, commented, "2014 was another successful year for Gastar as we built upon our strong track record of production and reserve growth. Over the last three years, we have increased our proved reserves by 412%, balanced our product mix from over 75% natural gas to just over 50% crude oil and NGLs and built a multi-year inventory of quality drilling opportunities while maintaining a solid balance sheet.  Of particular note in 2014, we added significant proved reserves and production from our West Edmond Hunton Lime Unit (WEHLU) property in Oklahoma and confirmed the productivity of the Utica/Point Pleasant formation on our assets in West Virginia."

Year-End 2014 Reserve Report

Gastar's year-end 2014 total proved reserves increased by 47.4 MMBoe to 102.1 MMBoe, of which 36% is proved developed.  The total proved reserve increase of 87% from year-end 2013 was primarily attributable to organic reserve additions from successful drilling activity in both of our focus areas.  The Company's reserve life (reserves/production ratio) of its proved reserves based on 2014 annual production is approximately 27.5 years.

The following table summarizes Gastar's proved reserves as of December 31, 2014 by region and by product:

Of the total 2014 year-end proved reserves, 47% are natural gas, 28% are oil and condensate and 25% are NGLs, compared to 55%, 27% and 18%, respectively, for year-end 2013. 

The SEC-priced pre-tax PV-10 (a non-GAAP financial measure defined at the end of this news release) was $988.7 million, versus $592.5 million at year-end 2013, a 67% increase. This significant increase is due to growth in our reserves, particularly in higher value oil and condensate reserves, slightly offset by a 2% decline in the average price per BOE used in the PV-10 calculation. The calculations of the PV-10 value of our proved reserves for year-end 2014 used SEC benchmark average 12-month pricing of $94.99 per barrel of oil and $4.35 per MMBtu of natural gas as compared to 2013 prices of $96.78 per barrel of oil and $3.67 per MMBtu of natural gas. 

The Mid-Continent represents 33% of proved reserve volumes and 64% of the PV-10 value at year-end 2014, with the Appalachian Basin comprising the remainder of proved reserves and PV-10 value.

Proved undeveloped ("PUD") reserves at December 31, 2014 account for approximately 64% of total proved reserves, compared to approximately 44% at year-end 2013.  Mid-Continent PUD reserves at year-end 2014 total 22.8 MMBoe with a PV-10 value of $381.1 million.  Appalachian Basin PUD reserves total 42.5 MMBoe with a PV-10 value of $163.3 million.  Gastar's total PUD ratio to proven developed locations was 1.7 in 2014 as compared to 1.4 in 2013.

Based on Gastar's third-party engineer's year-end 2014 reserve evaluation, the estimated ultimate recoveries ("EURs") for our WEHLU Lower and Upper Hunton wells increased by 27% and 43%, respectively.  The WEHLU Lower and Upper Hunton EURs are now estimated to be 317 MBoe and 238 MBoe with oil comprising 87% and 78%, respectively.  There was no significant change in the third-party EURs for the AMI and other areas of the Hunton formation.  In the Marcellus Shale, Gastar's EUR average increased approximately 21% to an EUR of 9.7 Bcfe of which 47% is liquids.      

2014 Production

Preliminary fourth quarter 2014 average daily production was 11.7 MBoe/d, up 27% from the same period in 2013 and up 19% from the third quarter of 2014, due to our successful drilling programs in the Mid-Continent and in the Appalachian Basin. Oil and condensate, NGLs and natural gas production as a percentage of total equivalent production volumes for the fourth quarter of 2014 was 29%, 24% and 47%, respectively.  This compares to 16% from oil and condensate, 17% from NGLs and 66% from natural gas in the fourth quarter of 2013. 

For the full-year 2014, preliminary production averaged 10.2 MBoe/d, an increase of 15% over full-year 2013 daily production, while total liquids production increased 76% during that same period to 48%.

Operations

During the fourth quarter of 2014 in the Appalachian Basin, ten gross (5.0 net) Marcellus Shale wells were completed and put on production in mid to late December, of which seven gross wells were on the Armstrong pad and three gross wells were on the Hansen pad.  During the fourth quarter of 2014 in the Mid-Continent, seven gross (2.3 net) Hunton wells were brought on production in our AMI.  Additionally, we completed and brought on production two lower Hunton wells on our WEHLU acreage.  An updated schedule of producing Mid-Continent wells has been posted on the investor relations page on our website. 


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