Gastar Exploration Inc. (NYSE MKT: GST) has entered into a definitive purchase and sale agreement to acquire additional working and net revenue interests in 103 gross (10.2 net) producing wells and certain undeveloped acreage in the STACK and Hunton Limestone formations in its Area of Mutual Interest (AMI) from its AMI partner, Husky Ventures Inc. and certain other parties (collectively, the sellers).
The purchase price is $43.3 million, subject to certain adjustments and customary closing conditions, and the conveyance of approximately 11,000 net non-core, nonproducing acres in Blaine and Major counties, Oklahoma, to the sellers. The transaction is expected to close on or about Nov. 30, with an effective date of July 1. After closing, the AMI joint venture with Husky will be dissolved. The acquisition will be funded with borrowings under Gastar's revolving credit facility.
The transaction includes the acquisition of approximately 15,700 net acres in Kingfisher and Garfield counties, Oklahoma, of which 42% is held by production. After closing, Gastar will own approximately 110,400 net acres in the Hunton Limestone play, of which 45% is held by production. Gastar's exposure to the STACK play will be approximately 62,300 net acres in the Meramec shale play and 48,900 net acres in the Woodford shale play.
Current net production of the wells being acquired is 625 barrels of oil equivalent (BOE) per day, of which 46% is oil, 26% is natural gas liquids, and 28% is natural gas. Gastar will assume operatorship of 70 of the 103 gross wells being acquired. Based on Gastar’s third-party reserve report at June 30, estimated proved reserves being purchased are approximately 1.2 million BOE, of which 43% is oil, 28% is natural gas liquids, and 29% is natural gas.
In order to allow the company to concentrate on the opportunities identified in its existing Oklahoma assets and to improve the strength of its balance sheet, Gastar has engaged Tudor, Pickering, Holt & Co. to market its Marcellus shale and Utica/Point Pleasant acreage, which are primarily focused in Marshall and Wetzel counties, West Virginia. These assets include producing wells and acreage located in the Marcellus shale play and Utica/Point Pleasant plays.