Summary Highlights

• Gastar has entered into a PSA with an affiliate of Tug Hill Inc. for the sale of certain of its Marcellus Shale and Utica/Point Pleasant properties for $80.0 million, subject to customary closing adjustments. The sale includes substantially all of Gastar’s producing assets and proved reserves and a significant portion of its undeveloped acreage in the Appalachian Basin. The sale is expected to close on or before March 31, 2016, subject to customary closing conditions including certain required lessor consents to assign, with an effective date ofJanuary 1, 2016. Proceeds will be used to reduce borrowings under Gastar’s revolving credit facility.
• Gastar’s year-end 2015 Securities Exchange Commission (“SEC”) proved reserves decreased by 45% as a result of lower commodity prices to 55.9 million barrels of oil equivalent (“MMBoe”), which is comprised of 43% oil and condensate, 24% natural gas liquids (“NGLs”) and 33% natural gas.
• Gastar’s Deep River 30-1H well, its first STACK Play formation Meramec Shale test, produced at a gross post-IP 60-day average sales rate of 803 Boe/d (63% oil). Gastar’s secondMeramec Shale well commenced drilling on February 10, 2016.

Focus on mid-continent projects

J. Russell Porter, Gastar’s president and CEO, commented, “The continued decline in already low oil and natural gas prices created challenges in 2015 that persist in 2016.  We will continue to focus on preserving liquidity by limiting and delaying expenditures on capital projects. The continued strong production rate of our first Meramec well further confirms the viability and value of our mid-continent holdings, and we are optimistic about the drilling of our second Meramec well located in Kingfisher County, Oklahoma.”

“With the pending divestiture of our Appalachian Basin acreage, we are able to improve our overall leverage without issuing equity in this depressed commodity price environment. The assets being divested, which we believe are high-quality Marcellus and Utica properties, are generating limited cash flow due to poor realized pricing in the Appalachian Basin. This sale results in Gastar emerging as the only public “pure play” company focused on the Oklahoma STACK Play and enhances our ability to emphasize further exploration and development of our STACK Play acreage.  We continue to believe that de-risking and developing the STACK Play can create significant value for our shareholders and achieve solid returns, even at current prices.”

“Our SEC proved reserve volumes for year-end 2015 were significantly impacted by the dramatic decline in SEC commodity prices from 2014.  We do not believe that the true value of Gastar’s resources are reflected in the current proved reserve report, since it does not capture the upside opportunity or the value of our extensive acreage holdings within the STACK Play in Oklahoma.”

“Due to uncertainty concerning commodity prices and our 2016 capital resources, Gastar’s Board of Directors has not yet approved a full-year 2016 capital plan.  We are presently deferring all proved undeveloped (“PUD”) reserve drilling until 2017. Our preliminary capital budget for 2016 is approximately $37.0 million, excluding other capitalized costs, which contemplates the drilling and completion of a second operated Meramec well for approximately $5.5 million (gross), $3.5 million net for recompletion projects on producing operated wells in Oklahoma, $8.0 million for our participation in non-operated STACK Play drilling and $20.0 million for maintaining our current Oklahoma leasehold position.  Upon the closing of the announced sale of ourAppalachian Basin properties and the results of our spring borrowing base redetermination, we will be in a better position to address additional drilling plans.”

“The overriding objective of our 2016 capital budget is to maintain our balance sheet, liquidity and extensive Mid-Continent acreage position until commodity prices improve,” added Porter.

Tudor, Pickering, Holt & Co. served as financial advisor to Gastar for the sale of the Marcellus Shale and Utica/Point Pleasant properties.

Read the rest of the report here.