Gastar Exploration Inc.
Gastar Exploration Inc. (Form: 8-K, Received: 11/08/2017 16:36:36)

 

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of earliest event reported): November 8, 2017 (November 8, 2017)

 

GASTAR EXPLORATION INC.

(Exact Name of Registrant as Specified in its Charter)

DELAWARE

 

001-35211

 

38-3531640

(State or other jurisdiction

 

(Commission File Number)

 

(IRS Employer

of incorporation)

 

 

 

Identification No.)

1331 LAMAR STREET, SUITE 650

HOUSTON, TEXAS 77010

(Address of principal executive offices)

 

(713) 739-1800

(Registrant's telephone number, including area code)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

 

 

[   ]

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

 

[   ]

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

 

[   ]

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

 

[   ]

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

 

 

 

 


 

SECTION 2 – FINANCIAL INFORMATION

Item 2.02 Results of Operations and Financial Condition.

 

On November 8, 2017, Gastar Exploration Inc. (the “Company”) issued a press release announcing the Company’s financial results for the three and nine months ended September 30, 2017.  A copy of the Company’s press release, dated November 8, 2017, is furnished herewith as Exhibit 99.1 and is incorporated herein by reference.  

 

In accordance with General Instruction B.2 of Form 8-K, the information presented herein under Item 2.02 and set forth in the attached press release included as Exhibit 99.1 to this report is deemed to be “furnished” solely pursuant to Item 2.02 of this report and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall such information be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act.

 

SECTION 9 – FINANCIAL STATEMENTS AND EXHIBITS

Item 9.01  Financial Statements and Exhibits.

 

(d) Exhibits

 

The following is a list of exhibits furnished as part of this Form 8-K:

 

 

 


 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

Date: November 8, 2017

GASTAR EXPLORATION INC.

 

 

 

 

 

By:

/s/  J. Russell Porter

 

 

J. Russell Porter

 

 

 

President and Chief Executive Officer

 

 

 

 

 

 

 

Exhibit 99.1

 

For Immediate Release

 

   NEWS RELEASE

 

Contacts:

Gastar Exploration Inc.

Michael A. Gerlich, Chief Financial Officer

713-739-1800 / mgerlich@gastar.com

 

Investor Relations Counsel:
Lisa Elliott, Dennard▪Lascar Associates:                                                 713-529-6600 / lelliott@DennardLascar.com

 

 

Gastar Exploration reports third Quarter 2017 Results

HOUSTON , November 8, 2017 - Gastar Exploration Inc. (NYSE MKT: GST) (“Gastar” or the “Company”) today reported financial and operating results for the three and nine months ended September 30, 2017.

Third quarter 2017 highlights include:

 

Average daily production of 6,200 barrels of oil equivalent (“Boe”) per day (“Boe/d”)  

 

Production volumes comprised of 72% liquids

 

Operational and drilling efficiencies gained momentum

J. Russell Porter, Gastar's President and CEO, commented, “Following an initiative to re-evaluate operating practices in order to optimize well results while also reducing drilling and completion costs, we have made numerous operational refinements that appear to be having a positive impact.  We have reduced the average number of days needed to drill a well from approximately 19 days to 11 days.  Further, we have eliminated certain drilling difficulties, which has both lowered costs and created operating efficiencies.  With drilling time now nearly half of what it was previously, we can effectively execute our drilling plan with only one rig and expect to continue drilling with one rig into 2018.” 

“We have substantially improved our well completion processes and design.  Our improved “Gen 3” completion design appears to be generating better initial well performance, although it is still too early to accurately draw any firm conclusions. Our first Gen 3 well, the Bagwell 1808 24-1H, a Meramec well in Kingfisher County, Oklahoma, commenced flow back on September 21, 2017 and based on early performance appears to be on track with our Meramec type curve.  Since we resumed

 


completion operations on September 3, 2017, we have completed 5 wells using the new Gen 3 design, with most of them on flow back for less than 30 days.  Compared to wells completed with the previous design, these Gen 3 wells are producing significantly more total fluid volumes in the initial flow back stage with hydrocarbon volumes increasing.”

“We expect that our drilling program to delineate the Meramec and Osage formations across our acreage position will remain active through next year.  To date, we have drilled a total of 24 gross Meramec and 16 gross Osage wells and have participated in numerous third-party wells across our STACK Play acreage.  With the continuing success of our program and that of offset operators in the STACK Play, we intend to continue to focus on the STACK to create value for our shareholders. Currently we are actively evaluating opportunities to divest our WEHLU asset, a Hunton formation producing unit located primarily in Oklahoma County, Oklahoma.  If we are successful in divesting WEHLU, we intend to redeploy those proceeds into our core operations in the higher value STACK Play acreage.  We believe that the potential sale of our WEHLU assets would provide us with ample liquidity to execute our current one-rig drilling program through 2018.” 

Financial Review

Net loss attributable to Gastar’s common stockholders for the third quarter of 2017 was $15.9 million, or a loss of $0.08 per share, compared to a third quarter 2016 net loss of $3.8 million, or a loss of $0.03 per share.  Adjusted net loss attributable to common stockholders (non-GAAP), which excludes non-cash and unusual items, for the third quarter of 2017 was $11.2 million, or a loss of $0.05 per share, compared to an adjusted net loss attributable to common stockholders of $10.7 million, or a loss of $0.08 per share, for the third quarter 2016. (See the accompanying reconciliation of the non-GAAP financial measure adjusted net loss at the end of this news release.)

Adjusted earnings before interest, income taxes, depreciation, depletion and amortization (“adjusted EBITDA”) (non-GAAP) for the third quarter of 2017 was $10.4 million compared to adjusted EBITDA of $7.2 million for the third quarter of 2016 and $9.8 million for the second quarter of 2017. (See the accompanying reconciliation of the non-GAAP financial adjusted EBITDA at the end of this news release.)

Total Company revenues were $15.3 million in the third quarter of 2017, an 18% increase from $13.0 million in the third quarter of 2016 and a 32% decrease from $22.6 million in the second quarter

 


of 2017.  The reduction in revenues from the second quarter to the third quarter of 201 7 primarily resulted from the change in mark to market value for outstanding commodity derivative contracts.  

Revenues from oil, condensate, natural gas and natural gas liquids (“NGLs”), before the effects of commodity derivatives contracts, totaled $18.2 million in the third quarter of 2017, a 26% increase from $14.5 million in the third quarter of 2016 and a 6% increase from $17.3 million in the second quarter of 2017.  The increase from third quarter of 2016 in oil, condensate, natural gas and NGLs revenues primarily resulted from an 18% increase in equivalent product pricing and a 6% increase in equivalent production volumes.  The increase from second quarter 2017 revenues was due to a 3% increase in equivalent product pricing and a 2% increase in equivalent production volumes.

Commodity hedges were in place for approximately 48% of our oil and condensate production, 70% of our natural gas production and 18% of our NGLs production for the third quarter of 2017.  Commodity derivative contracts settled during the period resulted in a $1.8 million increase in revenue compared to a $1.6 million increase in revenues in the third quarter of 2016.    

The following table provides a summary of Gastar’s overall average commodity prices for the three and nine months ended September 30, 2017 and 2016:

 

For the Three Months Ended

September 30,

 

 

For the Nine Months Ended

September 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

 

 

 

Average sales price per unit:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oil and condensate per Bbl, including impact of hedging activities (1)

 

$

51.77

 

 

$

47.19

 

 

$

52.78

 

 

$

43.85

 

Oil and condensate per Bbl, excluding impact of hedging activities

 

$

46.56

 

 

$

42.55

 

 

$

47.03

 

 

$

36.41

 

Natural gas per Mcf, including impact of hedging activities (1)

 

$

2.69

 

 

$

2.76

 

 

$

2.80

 

 

$

1.86

 

Natural gas per Mcf, excluding impact of hedging activities

 

$

2.62

 

 

$

2.48

 

 

$

2.71

 

 

$

1.60

 

NGLs per Bbl, including impact of hedging activities (1)

 

$

22.55

 

 

$

15.02

 

 

$

22.02

 

 

$

10.55

 

NGLs per Bbl, excluding impact of hedging activities

 

$

20.64

 

 

$

13.22

 

 

$

19.87

 

 

$

8.28

 

Average sales price per Boe, including impact of hedging activities (1)

 

$

34.96

 

 

$

29.96

 

 

$

35.65

 

 

$

22.77

 

Average sales price per Boe, excluding impact of hedging activities

 

$

31.86

 

 

$

26.92

 

 

$

32.19

 

 

$

18.91

 

_____________________________

(1)

The impact of hedging includes only the gain (loss) on commodity derivative contracts settled during the periods presented.

For details on Gastar’s current hedging positions, please see our Form 10-Q for the quarter ended September 30, 2017 filed with the U.S. Securities and Exchange Commission (“SEC”).

 


Average daily Mid-Continent production for the third quarter of 2017 was 6,200 Boe/d as compared to 5,800 Boe/d in the third quarter of 20 16 and 6,100 Boe/d in the second quarter of 2017.

In the Mid-Continent area, average daily production in the third quarter of 2017 increased 7% compared to the third quarter of 2016 primarily due to increased well completion activity and sequentially decreased 2% primarily due to a temporary suspension of well completion activity while we re-evaluated our operational processes to optimize our well results.  Third quarter 2017 Mid-Continent equivalent production consisted of approximately 72% liquids, comprised of 49% oil and 23% NGLs, up 4% from third quarter 2016 production and down 1% from second quarter 2017.

Lease operating expenses (“LOE”) per Boe of production were $10.80 in the third quarter of 2017 versus $9.59 in the third quarter of 2016 and $9.20 in the second quarter of 2017, including workover costs.  Excluding workover expense, LOE per Boe for the third quarter of 2017 was $8.80 as compared to $8.49 per BOE in the third quarter of 2016 and $8.49 per Boe for the second quarter of 2017.  

General and administrative (“G&A”) expense was $4.1 million in the third quarter of 2017 compared to $3.9 million in the third quarter of 2016 and $4.6 million in the second quarter of 2017. G&A expense for the third quarter of 2017 included $1.8 million of non-cash stock-based compensation expense, versus $810,000 in the third quarter of 2016 and $1.2 million in the second quarter of 2017.  

Liquidity and Capital Budget

Gastar’s net capital expenditures, excluding property sales proceeds, in the third quarter of 2017 totaled $37.1 million, comprised of $26.8 million for drilling, completions and infrastructure costs, $7.9 million for unproved acreage extensions, renewals and additions and $2.4 million of other capitalized costs.  Based on the current full-year capital budget of $129.2 million, our fourth quarter capital expenditures are currently estimated not to exceed $34.7 million comprised of $27.3 million for drilling, completion and infrastructure costs, $4.3 million for lease renewal and extension costs and $3.2 million of other capitalized costs.    

At September 30, 2017, Gastar had approximately $29.2 million in available cash and cash equivalents and $412.5 million of principal balance long-term borrowings outstanding.

 

 


Operations Review and Update

The following table provides a summary of Gastar’s Mid-Continent production volumes and average commodity prices for the three and nine months ended September 30, 2017 and 2016:

 

 

For the Three Months Ended

September 30,

 

 

For the Nine Months Ended September 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Net Production:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oil and condensate (MBbl)

 

 

278

 

 

 

242

 

 

 

805

 

 

 

790

 

Natural gas (MMcf)

 

 

962

 

 

 

997

 

 

 

2,746

 

 

 

2,917

 

NGLs (MBbl)

 

 

134

 

 

 

128

 

 

 

379

 

 

 

380

 

Total net production (MBoe)

 

 

572

 

 

 

537

 

 

 

1,642

 

 

 

1,656

 

Net Daily Production:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oil and condensate (MBbl/d)

 

 

3.0

 

 

 

2.6

 

 

 

3.0

 

 

 

2.9

 

Natural gas (MMcf/d)

 

 

10.5

 

 

 

10.8

 

 

 

10.1

 

 

 

10.6

 

NGLs (MBbl/d)

 

 

1.5

 

 

 

1.4

 

 

 

1.4

 

 

 

1.4

 

Total net daily production (MBoe/d)

 

 

6.2

 

 

 

5.8

 

 

 

6.0

 

 

 

6.0

 

Average sales price per unit (1) :

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oil and condensate (per Bbl)

 

$

46.56

 

 

$

42.56

 

 

$

47.03

 

 

$

37.87

 

Natural gas (per Mcf)

 

$

2.62

 

 

$

2.48

 

 

$

2.71

 

 

$

2.06

 

NGLs (per Bbl)

 

$

20.64

 

 

$

13.22

 

 

$

19.87

 

 

$

12.79

 

Average sales price per Boe (1)

 

$

31.86

 

 

$

26.98

 

 

$

32.19

 

 

$

24.63

 

_____________________________

(1)

Excludes the impact of hedging activities

During the third quarter of 2017, Gastar commenced flow back on one gross (0.2 net) operated Meramec well and four gross (2.8 net) operated Osage wells.  For the first nine months of 2017, Gastar commenced flow back on 14 gross (2.2 net) operated Meramec wells and eight gross (5.8 net) operated Osage wells.

Subsequent to September 30, 2017 through October 31, 2017, Gastar commenced flow back on four gross (3.2 net) operated Osage wells.


 


Guidance for Fourth Quarter 2017 and Full-Year 2017

Our guidance for the fourth quarter of and updated full-year 2017 is provided in the table below and represents the Company's best estimate of the range of likely future results. Guidance could be affected by the factors described below in "Forward Looking Statements."

Production

 

Fourth Quarter

2017

 

Full-Year 2017

 

 

 

 

 

 

 

Net average daily (MBoe/d) (1)

 

6.2 – 7.0

 

6.0 – 6.4

 

Liquids percentage (oil and NGLs)

 

72% 75%

 

72% – 75%

 

 

 

 

 

 

 

Cash Operating Expenses

 

 

 

 

 

Production taxes (% of production revenues)

 

3.0% – 3.4%

 

3.0% – 3.4%

 

Direct lease operating ($/Boe)

 

$9.00 – $9.75

 

$9.75 – $10.25

 

Transportation, treating & gathering ($/Boe)

 

$0.78 – $0.86

 

$0.75 – $0.80

 

Cash general & administrative ($/Boe)

 

$4.50 – $5.00

 

$5.00 – $5.30

 

________________

(1) Based on equivalent of 6 thousand cubic feet (Mcf) of natural gas to one barrel of oil, condensate or NGLs.

 

Conference Call

Gastar has scheduled a conference call for 10:00 a.m. Eastern Time (9:00 a.m. Central Time) on Thursday, November 9, 2017.  Investors may participate in the call either by phone or audio webcast.

By Phone:

Dial 1-412-902-0030 at least 10 minutes before the call. A telephone replay will be available through November 16 by dialing 1-201-612-7415 and using the conference ID: 13672652.

 

 

By Webcast:

Visit the Investor Relations page of Gastar's website at www.gastar.com under “Events & Presentations.” Please log on a few minutes in advance to register and download any necessary software. A replay will be available shortly after the call.

For more information, please contact Donna Washburn at Dennard-Lascar Associates at 713-529-6600 or e-mail  dwashburn@DennardLascar.com .

About Gastar Exploration

Gastar Exploration Inc. is a pure play Mid-Continent independent energy company engaged in the exploration, development and production of oil, condensate, natural gas and natural gas liquids.

 


Gastar’s principal business activitie s include the identification, acquisition and subsequent exploration and development of oil and natural gas properties with an emphasis on unconventional reserves, such as shale resource plays. Gastar holds a concentrated acreage position in what is believ ed to be the core of the STACK Play, an area of central Oklahoma which is home to multiple oil and natural gas-rich reservoirs including the Meramec, Oswego, Osage, Woodford and Hunton formations. For more information, visit Gastar's website at www.gastar.com .

 

Forward Looking Statements

 

This news release includes “forward looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  Forward looking statements give our current expectations, opinion, belief or forecasts of future events and performance.  A statement identified by the use of forward looking words including “may,” “expects,” “projects,” “anticipates,” “plans,” “believes,” “estimate,” “will,” “should,” and certain of the other foregoing statements may be deemed forward-looking statements.  Although Gastar believes that the expectations reflected in such forward-looking statements are reasonable, these statements involve risks and uncertainties that may cause actual future activities and results to be materially different from those suggested or described in this news release.  These include risks inherent in natural gas and oil drilling and production activities, including risks with respect to continued low or further declining prices for natural gas and oil that could result in further downward revisions to the value of proved reserves or otherwise cause Gastar to further delay or suspend planned drilling and completion operations or reduce production levels which would adversely impact cash flow; risks relating to the availability of capital to fund drilling operations that can be adversely affected by adverse drilling results, production declines and continued low or further declining prices for natural gas and oil; risks of fire, explosion, blowouts, pipe failure, casing collapse, unusual or unexpected formation pressures, environmental hazards, and other operating and production risks, which may temporarily or permanently reduce production or cause initial production or test results to not be indicative of future well performance or delay the timing of sales or completion of drilling operations; delays in receipt of drilling permits; risks relating to unexpected adverse developments in the status of properties; risks relating to the absence or delay in receipt of government approvals or third-party consents; risks relating to our ability to integrate acquired assets with ours and to realize the anticipated benefits from such acquisitions; and other risks described in Gastar’s Annual Report on Form 10-K and other filings with the SEC, available at the SEC’s website at www.sec.gov.  Our actual sales production rates can vary considerably from tested initial production rates depending upon completion and production techniques and our primary areas of operations are subject to natural steep decline rates. In addition, production information from our recently completed wells completed using our Gen 3 design is preliminary based on limited flow back history and therefore may not be fully indicative of sustained production rates or predictive of ultimate hydrocarbon

 


recoveries.  By issuing forward looking statements based on current expectations, opinions, views or beliefs, Gastar has no obligation and, except as required by law, is not undertaking any obligation, to update or revise these statements or provide any other information relating to such statements.

Targeted expectations and guidance for the fourth quarter and full-year of 2017 are based upon the current 2017 planned capital expenditures budget, which may be subject to revision and reevaluation dependent upon future developments, including changes in commodity prices, drilling results, our liquidity position, availability of crews, supplies and production capacity, weather delays and significant changes in drilling costs.

Unless otherwise stated herein, equivalent volumes of production are based upon an energy equivalent ratio of six Mcf of natural gas to each barrel of liquids (oil, condensate and NGLs), which ratio is not reflective of relative value.  Our NGLs are sold as part of our wet gas subject to an incremental NGLs pricing formula based upon a percentage of NGLs extracted from our wet gas production.  Our reported production volumes reflect incremental post-processing NGLs volumes and residual gas volumes with which we are credited under our sales contracts.

 

 

- Financial Tables Follow –

 


 

GASTAR EXPLORATION INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

For the Three Months Ended

September 30,

 

 

For the Nine Months Ended September 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

 

(in thousands, except share and per share data)

 

REVENUES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oil and condensate

 

$

12,952

 

 

$

10,306

 

 

$

37,886

 

 

$

30,464

 

Natural gas

 

 

2,519

 

 

 

2,500

 

 

 

7,452

 

 

 

8,394

 

NGLs

 

 

2,757

 

 

 

1,695

 

 

 

7,527

 

 

 

5,100

 

Total oil and condensate, natural gas and NGLs revenues

 

 

18,228

 

 

 

14,501

 

 

 

52,865

 

 

 

43,958

 

Gain (loss) on commodity derivatives contracts

 

 

(2,896

)

 

 

(1,498

)

 

 

3,782

 

 

 

(3,991

)

Total revenues

 

 

15,332

 

 

 

13,003

 

 

 

56,647

 

 

 

39,967

 

EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Production taxes

 

 

721

 

 

 

400

 

 

 

1,675

 

 

 

1,469

 

Lease operating expenses

 

 

6,178

 

 

 

5,166

 

 

 

16,396

 

 

 

15,829

 

Transportation, treating and gathering

 

 

436

 

 

 

338

 

 

 

1,187

 

 

 

1,346

 

Depreciation, depletion and amortization

 

 

6,059

 

 

 

5,223

 

 

 

16,762

 

 

 

24,543

 

Impairment of natural gas and oil properties

 

 

 

 

 

 

 

 

 

 

 

48,497

 

Accretion of asset retirement obligation

 

 

62

 

 

 

92

 

 

 

171

 

 

 

286

 

General and administrative expense

 

 

4,067

 

 

 

3,925

 

 

 

12,482

 

 

 

15,872

 

Litigation settlement benefit

 

 

 

 

 

(10,100

)

 

 

 

 

 

(10,100

)

Total expenses

 

 

17,523

 

 

 

5,044

 

 

 

48,673

 

 

 

97,742

 

INCOME (LOSS) FROM OPERATIONS

 

 

(2,191

)

 

 

7,959

 

 

 

7,974

 

 

 

(57,775

)

OTHER (EXPENSE) INCOME:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(10,159

)

 

 

(8,178

)

 

 

(29,744

)

 

 

(26,739

)

Loss on early extinguishment of debt

 

 

 

 

 

 

 

 

(12,172

)

 

 

 

Investment income and other (expense)

 

 

51

 

 

 

41

 

 

 

166

 

 

 

(2

)

LOSS BEFORE PROVISION FOR INCOME TAXES

 

 

(12,299

)

 

 

(178

)

 

 

(33,776

)

 

 

(84,516

)

Provision for income taxes

 

 

 

 

 

 

 

 

 

 

 

 

NET LOSS

 

 

(12,299

)

 

 

(178

)

 

 

(33,776

)

 

 

(84,516

)

Dividends on preferred stock

 

 

(1,206

)

 

 

 

 

 

(8,443

)

 

 

(3,618

)

Undeclared cumulative dividends on preferred stock

 

 

(2,412

)

 

 

(3,618

)

 

 

(2,412

)

 

 

(7,237

)

NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS

 

$

(15,917

)

 

$

(3,796

)

 

$

(44,631

)

 

$

(95,371

)

NET LOSS PER SHARE OF COMMON STOCK ATTRIBUTABLE

   TO COMMON STOCKHOLDERS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.08

)

 

$

(0.03

)

 

$

(0.23

)

 

$

(0.92

)

Diluted

 

$

(0.08

)

 

$

(0.03

)

 

$

(0.23

)

 

$

(0.92

)

WEIGHTED AVERAGE SHARES OF COMMON

   STOCK OUTSTANDING:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

209,072,232

 

 

 

129,301,817

 

 

 

190,745,688

 

 

 

104,125,317

 

Diluted

 

 

209,072,232

 

 

 

129,301,817

 

 

 

190,745,688

 

 

 

104,125,317

 

 


GASTAR EXPLORATION INC.

CONSOLIDATED BALANCE SHEETS

 

 

September 30,

 

 

December 31,

 

 

 

2017

 

 

2016

 

 

 

(in   thousands, except share and per share data)

 

ASSETS

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

29,229

 

 

$

71,529

 

Accounts receivable, net of allowance for doubtful accounts of $1,953, respectively

 

 

40,353

 

 

 

26,883

 

Commodity derivative contracts

 

 

4,400

 

 

 

6,212

 

Prepaid expenses

 

 

1,167

 

 

 

755

 

Total current assets

 

 

75,149

 

 

 

105,379

 

PROPERTY, PLANT AND EQUIPMENT:

 

 

 

 

 

 

 

 

Oil and natural gas properties, full cost method of accounting:

 

 

 

 

 

 

 

 

Unproved properties, excluded from amortization

 

 

135,945

 

 

 

67,333

 

Proved properties

 

 

1,303,165

 

 

 

1,253,061

 

Total natural gas and oil properties

 

 

1,439,110

 

 

 

1,320,394

 

Furniture and equipment

 

 

3,031

 

 

 

2,622

 

Total property, plant and equipment

 

 

1,442,141

 

 

 

1,323,016

 

Accumulated depreciation, depletion and amortization

 

 

(1,147,774

)

 

 

(1,131,012

)

Total property, plant and equipment, net

 

 

294,367

 

 

 

192,004

 

OTHER ASSETS:

 

 

 

 

 

 

 

 

Restricted cash

 

 

370

 

 

 

 

Commodity derivative contracts

 

 

416

 

 

 

1,638

 

Deferred charges, net

 

 

 

 

 

676

 

Advances to operators and other assets

 

 

100

 

 

 

102

 

Other

 

 

405

 

 

 

405

 

Total other assets

 

 

1,291

 

 

 

2,821

 

TOTAL ASSETS

 

$

370,807

 

 

$

300,204

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

Accounts payable

 

$

11,411

 

 

$

8,867

 

Revenue payable

 

 

16,428

 

 

 

6,690

 

Accrued interest

 

 

7,271

 

 

 

3,515

 

Accrued drilling and operating costs

 

 

12,100

 

 

 

2,615

 

Advances from non-operators

 

 

1,589

 

 

 

3,504

 

Commodity derivative contracts

 

 

326

 

 

 

338

 

Commodity derivative premium payable

 

 

1,337

 

 

 

1,654

 

Asset retirement obligation

 

 

 

 

 

89

 

Other accrued liabilities

 

 

2,791

 

 

 

2,462

 

Total current liabilities

 

 

53,253

 

 

 

29,734

 

LONG-TERM LIABILITIES:

 

 

 

 

 

 

 

 

Long-term debt

 

 

333,593

 

 

 

404,493

 

Commodity derivative contracts

 

 

129

 

 

 

 

Commodity derivative premium payable

 

 

34

 

 

 

969

 

Asset retirement obligation

 

 

4,574

 

 

 

5,443

 

Total long-term liabilities

 

 

338,330

 

 

 

410,905

 

Commitments and contingencies

 

 

 

 

 

 

 

 

STOCKHOLDERS' EQUITY:

 

 

 

 

 

 

 

 

Preferred stock, par value $0.01 per share, 40,000,000 shares authorized

 

 

 

 

 

 

 

 

8.625% Series A Cumulative Preferred stock, 10,000,000 shares

   designated; 4,045,000 shares issued and outstanding at September 30,

   2017 and December 31, 2016, respectively, with liquidation preference

   of $25.00 per share

 

 

41

 

 

 

41

 

10.75% Series B Cumulative Preferred stock, 10,000,000 shares

   designated; 2,140,000 shares issued and outstanding at September 30,

   2017 and December 31, 2016, respectively, with liquidation preference

   of $25.00 per share

 

 

21

 

 

 

21

 

 


Common stock, par value $0.001 per share; 550,000,000 and 800,000,000

   shares authorized at September 30, 2017 and December 31, 2016,

   respectively; 218,946,763 and 150,377,870 shares issued and outstanding

   at September 30, 2017 and December 31, 2016, respectively

 

 

219

 

 

 

150

 

Additional paid-in capital

 

 

817,627

 

 

 

644,306

 

Accumulated deficit

 

 

(838,684

)

 

 

(784,953

)

Total stockholders' equity

 

 

(20,776

)

 

 

(140,435

)

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

 

$

370,807

 

 

$

300,204

 

 

 


GASTAR EXPLORATION INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

For   the Nine Months Ended

September 30,

 

 

 

2017

 

 

2016

 

 

 

(in thousands)

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net loss

 

$

(33,776

)

 

$

(84,516

)

Adjustments to reconcile net loss to net cash provided by

   operating activities:

 

 

 

 

 

 

 

 

Depreciation, depletion and amortization

 

 

16,762

 

 

 

24,543

 

Impairment of natural gas and oil properties

 

 

 

 

 

48,497

 

Stock-based compensation

 

 

3,990

 

 

 

3,145

 

Total (gain) loss on commodity derivatives contracts

 

 

(3,782

)

 

 

3,991

 

Cash settlements of matured commodity derivative contracts, net

 

 

5,602

 

 

 

10,690

 

Cash premiums paid for commodity derivatives contracts

 

 

 

 

 

(565

)

Amortization of deferred financing costs and debt discount

 

 

8,218

 

 

 

3,812

 

Accretion of asset retirement obligation

 

 

171

 

 

 

286

 

Settlement of asset retirement obligation

 

 

 

 

 

(87

)

Loss on sale of furniture and equipment

 

 

 

 

 

97

 

Loss on early extinguishment of debt

 

 

12,172

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(13,466

)

 

 

3,861

 

Prepaid expenses

 

 

(412

)

 

 

362

 

Accounts payable and accrued liabilities

 

 

13,657

 

 

 

7,656

 

Net cash provided by operating activities

 

 

9,136

 

 

 

21,772

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Development and purchase of oil and natural gas properties

 

 

(81,906

)

 

 

(43,175

)

(Acquisition of) refund for oil and natural gas properties

 

 

(54,462

)

 

 

1,149

 

Proceeds from sale of oil and natural gas properties

 

 

28,798

 

 

 

77,499

 

Application of proceeds from non-operators

 

 

(1,915

)

 

 

(57

)

(Advances to) reimbursements from operators

 

 

(22

)

 

 

211

 

(Purchase) sale of furniture and equipment

 

 

(409

)

 

 

80

 

Net cash (used in) provided by investing activities

 

 

(109,916

)

 

 

35,707

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Proceeds from term loan

 

 

250,000

 

 

 

 

Proceeds from convertible notes

 

 

200,000

 

 

 

 

Repayment of senior secured notes

 

 

(325,000

)

 

 

 

Repayment of revolving credit facility

 

 

(84,630

)

 

 

(100,370

)

Loss on early extinguishment of debt

 

 

(7,011

)

 

 

 

Proceeds from issuance of common shares, net of issuance costs

 

 

56,366

 

 

 

44,815

 

Dividends on preferred stock

 

 

(19,298

)

 

 

(3,618

)

Deferred financing charges

 

 

(10,991

)

 

 

(930

)

Increase in restricted cash

 

 

(370

)

 

 

 

Tax withholding related to restricted stock and PBU vestings

 

 

(586

)

 

 

(711

)

Net cash provided by (used in) financing activities

 

 

58,480

 

 

 

(60,814

)

NET DECREASE IN CASH AND CASH EQUIVALENTS

 

 

(42,300

)

 

 

(3,335

)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

 

 

71,529

 

 

 

50,074

 

CASH AND CASH EQUIVALENTS, END OF PERIOD

 

$

29,229

 

 

$

46,739

 

 


NON-GAAP FINANCIAL INFORMATION AND RECONCILIATION

 

We use both GAAP and certain non-GAAP financial measures to assess performance.  Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP.  Our management believes that these non-GAAP measures provide useful supplemental information to investors in order that they may evaluate our financial performance using the same measures as management.  These non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP.  In evaluating these measures, investors should consider that the methodology applied in calculating such measures may differ among companies and analysts.  A reconciliation is provided below outlining the differences between these non-GAAP measures and their most directly comparable financial measure calculated in accordance with GAAP.

 

Reconciliation of Net Loss to Net Loss Excluding Special Items:

 

 

 

For the Three Months Ended

September 30,

 

 

For the Nine Months Ended

September 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

 

(in thousands, except share and per share data)

 

 

 

 

 

 

 

 

 

NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS

 

$

(15,917

)

 

$

(3,796

)

 

$

(44,631

)

 

$

(95,371

)

SPECIAL ITEMS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Losses related to the change in mark to market value for outstanding commodity derivatives contracts

 

 

4,672

 

 

 

3,134

 

 

 

1,898

 

 

 

12,974

 

Impairment of oil and natural gas properties

 

 

 

 

 

 

 

 

 

 

 

48,497

 

Loss on early extinguishment of debt

 

 

 

 

 

 

 

 

12,172

 

 

 

 

Non-recurring general and administrative costs related to acquisition of assets

 

 

 

 

 

71

 

 

 

 

 

 

470

 

Non-recurring severance costs related to property divestments

 

 

 

 

 

 

 

 

 

 

 

677

 

Allowance for bad debt

 

 

 

 

 

 

 

 

 

 

 

1,953

 

Litigation settlement benefit

 

 

 

 

 

(10,100

)

 

 

 

 

 

(10,100

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ADJUSTED NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS

 

$

(11,245

)

 

$

(10,691

)

 

$

(30,561

)

 

$

(40,900

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ADJUSTED NET LOSS PER SHARE OF COMMON STOCK ATTRIBUTABLE TO COMMON STOCKHOLDERS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.05

)

 

$

(0.08

)

 

$

(0.16

)

 

$

(0.39

)

Diluted

 

$

(0.05

)

 

$

(0.08

)

 

$

(0.16

)

 

$

(0.39

)

WEIGHTED AVERAGE SHARES OF COMMON STOCK

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

209,072,232

 

 

 

129,301,817

 

 

 

190,745,688

 

 

 

104,125,317

 

Diluted

 

 

209,072,232

 

 

 

129,301,817

 

 

 

190,745,688

 

 

 

104,125,317

 

  

 


Reconciliation of Cash Flows before Working Capital Changes and as Adjusted for Special Items:

 

 

 

For the Three Months Ended

September 30,

 

 

For the Nine Months Ended

September 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

 

(in thousands, except share and per share data)

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(12,299

)

 

$

(178

)

 

$

(33,776

)

 

$

(84,516

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation, depletion and amortization

 

 

6,059

 

 

 

5,223

 

 

 

16,762

 

 

 

24,543