Gastar Exploration Inc. (NYSE MKT: GST) has entered into a purchase and sale agreement to sell certain non-core assets in Oklahoma to an undisclosed private third party for approximately $46.2 million. The transaction is expected to close on or before June 22, with a property sale effective date of April 1.
J. Russell Porter, Gastar's president and CEO, said, "The sale of these assets will allow us to continue focusing on our Hunton Limestone exploration and development programs in our core Oklahoma acreage within and around our West Edmond Hunton Lime Unit and AMI joint venture area while retaining a substantial acreage position with STACK Play potential. Following the completion of this transaction, in our Mid-Continent area, we will have approximately 103,600 net acres with Hunton Limestone Oil Play reserves or potential, approximately 41,500 net acres with Meramec Shale/Mississippi Lime potential and 44,200 net acres with Woodford Shale potential.”
"GST had (and retains) a large acreage position in the Mid-Continent, more acres than the company can develop in the near term. Selling some acres at an attractive valuation (~$2K/acre backing out production at $40K/boepd) boosts liquidity and helps the balance sheet (keeps debt/EBITDA comfortably below 4x at YE15), giving the company a better platform to develop the remaining acreage (104K net acres)," noted Global Hunter Securities analysts following the announcement.
The assets to be sold include approximately 29,300 gross (19,000 net) acres in Kingfisher County, Oklahoma. For the most recent three months ended March 31, net production from the associated acreage averaged approximately 170 boe/d from 38 gross (16.7 net) wells, of which 57% was natural gas. As of Dec. 31, 2014, proved reserves attributable to the acreage were 379,000 boe, of which 63% was natural gas.
Transaction proceeds will initially be used to reduce Gastar's outstanding balance under its revolving credit facility and other general corporate purposes, including a possible initial operated test of the Meramec Shale potential on a portion of its holdings later in 2015.