Hi Paul -
Thank you for the link to Josh Young's interview (California-based Young Capital Management). Based on the article, I started a position in Gastar Exploration, Ltd. (GST).
From his interview:"...You mentioned Gastar earlier. That’s an exploration and production (E&P) company with a market cap of about $200 million. A recent Canaccord Adams research report said, “Gastar is an attractively priced Marcellus producer given its relative growth potential.” Canaccord has a buy rating of $4.50 on it. Meanwhile, Rodman & Renshaw has a target of $5.50 on Gastar. What are some of the catalysts there?
JY: Well, Gastar just did an acquisition but the stock doesn’t seem to have priced in the value creation from that acquisition. The company hasn’t announced the metrics on the transaction; but, based on the understanding of some of the research analysts that I’ve spoken with and some back-of-the-envelope math, Gastar just bought north of 50,000 acres at $1,000 an acre or less in the Marcellus. They bought it in the dry gas area, but in a very good area of West Virginia. That’s tremendously positive for the company. There are some big questions, though. What is the exact price Gastar paid? How will they finance the acreage acquisition and development? And did their existing JV partner decide to participate with it in the acquisition, or will they seek an additional JV partner?
Gastar recently sold acreage to its joint venture partner at more than $4,000 an acre, and here it is buying similarly high-quality acreage at $1,000 an acre or even less. That’s huge, especially for a company as small as Gastar. Gastar is now likely the most levered company in the Marcellus by enterprise value, at least among those that are publicly traded.
Gastar has really transformed itself to a certain extent into a Marcellus acreage play, and an extremely attractively priced one at that. This catalyst has already played out and it’s just a question of the price the company is paying. I think the market will be further surprised by other additional upcoming catalysts, such as the results from their oily Eagle Ford and Glen Rose wells in East Texas—you could see upside to the $5.50 price target that Rodman & Renshaw put out, and I really respect the analysts at both Rodman and Canaccord. Rodman recently upgraded RAME and raised their price target, and I suspect that could happen for Gastar as these catalysts play out...".
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Gastar acquires 59,000 acres in W. Virginia
Gastar acquires right to drill on 59,000 acres in West Virginia for natural gas production
finance.yahoo.com
From the article above, GST may have acquired this acreage for around $1,000/acre. That's good enough for me to start a tracking position.
Peeled off a few shares of HON to fund the purchase.
EKS |
