Gastar focuses on pure STACK play development, sells noncore assets

Gastar Exploration Inc., Houston, will develop 60 wells in its Kingfisher County, Okla., STACK play acreage. The drilling program will target the Meramec and Osage formations within the Mississippi Lime in three townships covering 18,000 net undeveloped acres.

A private global investment firm will fund 90% of Gastar’s working interest portion of drilling and completion costs to initially earn 80% of the company’s working interest in each new well. The drilling program is planned in three tranches of 20 wells each. The first 20-well tranche will target the Meramec in 18 wells with two wells targeting the Osage. According to the agreement, when the investor has achieved an aggregate 15% internal rate of return (IRR) for investment in the tranche, its interest will be reduced to 40% from 80%. Per tranche, the working interest will decrease to 10% once a 20% IRR is achieved through production.

Gastar will be the operator of all wells developed under the current agreement.

The company also agreed to sell certain noncore leasehold interests in northeast Canadian County, Okla., and in southeast Kingfisher County to a private third party. The sale was effective Oct. 14, and included 19,100 net acres with current production of 181 boe/d from 25 gross (11.2 net) wells. About 32% of this production is oil, Gastar said in a press release. The buyer will pay $71 million, of which up to $10 million is contingent upon the satisfaction of certain condition. The deal is expected to close on or before Nov. 18.

Gastar is focused on accelerating its core STACK delineation program in northern Kingfisher and southern Garfield counties, Okla., according Gastar President and Chief Executive Officer J. Russell Porter. Assuming completion of this transaction, Gastar’s midcontinent area will consist of 83,200 net surface acres, with “1,031 net STACK locations,” Porter said.

In 2015, OGJ reported Gastar’s search for a buyer for its Marcellus and Utica acreage concentrated in the West Virginia counties of Marshall and Wetzel (OGJ Online, Oct. 15, 2015).

On Feb. 22, 2016, Tug Hill Operating purchased Gastar’s 37,000-acre stake in the Marcellus and Utica plays for $80 million. Gastar cited low market prices for natural gas in the region and a lack of infrastructure as the reasons for selling off their “high-quality” acreage in West Virginia. The company’s latest acquisition in Oklahoma signifies Gastar’s move to becoming a “pure play” operator.

Contact Tayvis Dunnahoe at tayvisd@ogjonline.com.

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