Hi Bordeauxman -
Re: Gastar Exploration Ltd New Ordi (AMEX: GST )
With many of the smaller E&P companies testing their lows, this one continues to hold it's value. The true value of their reserves should be confirmed over the next 12 months. All the drilling costs are pretty much all financed by their JV partner based on their 9/22/2010 agreement..
McNicoll Lewis & Vlak Starts Gastar Exploration Limited (GST) at Buy; Marshall & Wetzel Catalysts - Price Target is $6.00/share
streetinsider.com
From the article:"...MLV analyst says, "Gastar is highly levered to the Marcellus Shale play, and
its initial Marcellus wells had superb results. These two wells are located within its 6,700 net acre position in Marshall & Wetzel counties in West Virginia. The wells exhibited a surprisingly high condensate component now producing at a combined 720 b/d. The IP gas component was a strong combined 15.5 mmcf/d. Geologically, the Company believes results in this area should be consistent. Gastar has about 75 additional identified locations on this small acreage position in the liquids rich regime." ..."
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The company is still highly leveraged but analysts expect the stock to deliver 40% upside in the next one year with a buy rating of 80%. The stock is trading at 12 times its estimated 2012 earnings.
The value proposition is that they deliver on their drilling 2011 & 2012 program in the JV deal made with Atinum Partners Co., (a leading investment firm located in the Republic of Korea) announced 9/22/2010. The nice aspect of this deal is their JV partner will carry them on all of their drilling costs (over $40M) for a 50% interest in the 34,200 net acres of their Marcellus Shale rights ( I believe that reflects 44% of their total acreage).
The essence of their deal:
gastar.com
"...Pursuant to the agreement, Gastar will assign an initial 21.43% interest to Atinum in all of its existing Marcellus Shale assets in West Virginia and Pennsylvania, approximately 34,200 net acres, and certain producing shallow conventional wells in a transaction valued at approximately $70 million.
Under the terms of the transaction, Atinum will pay Gastar $30 million in cash upon closing and an additional $40 million in the form of a drilling carry. Upon the completion of the funding of the drilling carry, Atinum will own a 50% interest in the 34,200 net acres of Marcellus Shale rights currently owned by Gastar. Gastar will continue to serve as operator of all of the Marcellus Shale interests in the JV. The transaction is expected to close within 30 to 45 days and is contingent upon the receipt of certain required approvals from government agencies in the Republic of Korea and other customary closing conditions.
The terms of the drilling carry call for Atinum to fund its ultimate 50% share of drilling, completion and infrastructure costs along with 75% of Gastar's ultimate 50% share of those same costs until the $40 million carry has been satisfied. Gastar and Atinum are pursuing an initial three-year development program that calls for the partners to drill one horizontal Marcellus Shale well during the remainder of 2010 and a minimum of 12 horizontal wells in 2011 and 24 horizontal wells in each of 2012 and 2013....".
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Well results should be trickling in as they are completed.
Disclosure: I own a small position in their common shares and a fairly large position in their preferred GSTpA.
EKS |
