J. Russell Porter Chief Executive Officer

Transcription

1 J. Russell Porter Chief Executive Officer November 2012 E X P A N D I N G O U R H O R I Z O N S

2 Cautionary Statement CAUTIONARY STATEMENTS RELEVANT TO FORWARD-LOOKING INFORMATION FOR THE PURPOSE OF SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 This presentation of Gastar Exploration Ltd. contains forward-looking statements relating to Gastar s operations that are based on management s current expectations, estimates and projections about the petroleum, chemicals and other energy-related industries. Words such as anticipates, expects, intends, plans, targets, projects, believes, seeks, schedules, estimates, budgets and similar expressions are intended to identify such forwardlooking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, some of which are beyond the company s control and are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. The reader should not place undue reliance on these forward-looking statements, whether as a result of new information, future events or otherwise. Among the important factors that could cause actual results to differ materially from those in the forward-looking statements are: changing crude oil and natural gas prices; changing refining, marketing and chemical margins; actions of competitors or regulators; timing of exploration expenses; timing of crude oil liftings; the competitiveness of alternative-energy sources or product substitutes; technological developments; the results of operations and development activities; the potential failure to achieve expected net production from existing and future crude oil and natural gas development projects; potential delays in the development, construction or start-up of planned projects; the potential disruption or interruption of the company s net production or manufacturing facilities or delivery/transportation networks due to war, accidents, political events, civil unrest, sever weather or crude oil production quotas that might be imposed by the Organization of Petroleum Exporting Countries; the potential liability for remedial actions or assessments under existing or future environmental regulations and litigation; significant investment or product changes under existing or future environmental statutes, regulations and litigation; the potential liability resulting from other pending or future litigation; the company s future acquisition or disposition of assets and gains and losses from asset dispositions or impairments; government-mandated sales, divestitures, recapitalizations, industry-specific taxes, changes in fiscal terms or restrictions on scope of company operations; foreign currency movements compared with the U.S. dollar; the effects of changed accounting rules under generally accepted accounting principals promulgated by rule-setting bodies; and the factors set forth under the heading Risk Factors on pages 16 through 29 of the company s 2011 Annual Report on Form 10-K. In addition, such statements could be affected by general domestic and international economic and political conditions. Unpredictable or unknown factors not discussed in this presentation could also have material adverse effects on forward-looking statements. The company undertakes no obligation to publicly update or revise any forward-looking statements except as required by law. Certain terms, such as resources, resource base, undeveloped gas resources, oil in place, recoverable reserves, recoverable resources, EUR, probable, possible, and similar terms, may be used in this presentation to describe certain oil and gas properties that are not permitted to be used in filings with the U.S. Securities and Exchange Commission. These estimates are by their nature more speculative than estimates of proved reserves and accordingly are subject to substantially greater risk of being actually realized by the company. 2

3 Gastar Overview 65.7 million shares outstanding $48.6 million equity market capitalization (1) $195.9 million enterprise value (2) Focused on exploration, development and production of natural gas and oil in the U.S Bcfe of proved reserves; 14.3 R/P at mid-year 2012 Strategy built on organic growth through the drillbit 75% of planned capital allocated to drilling in core asset areas Marcellus Shale East Texas Mid-Continent Oil Play Track record of adding reserves and creating value Reserves have grown 242% from 2009 to 6/30/2012 PV-10 value of $239.5 million using 6/30/2012 NYMEX curve Capital to achieve our business plan (1) Market capitalization at November 23, (2) Includes preferred shares of $98.8 million face value as of November 23,

4 Asset Overview 3Q 2012 Net Production by Region Marcellus Shale 38.0 MMcfe/d June 30, 2012 Proved Reserves by Region Bossier Play Eaglebine Play 105,100 Net Acres (1) (1) Net acres as of 9/30/2012; includes 12,500 net acres in the Mid-Continent oil play Bcfe 4

5 Historical Reserve Growth Proved Reserves PDP PDNP PUD % Bcfe % 15% 15% 37% 38% 17% 27% 13% 18% 14% 50% 39% 35% 22% 28% 50% 59% 66% 40% 36% /30/2012 5

6 Historical Reserve Growth Proved Reserves Gas Liquids % Bcfe % % 0.1% 0.8% 0.7% 73% % 99.4% 99.9% 99.9% 99.2% 99.3% 77% /30/2012 Note: Liquids include oil, condensate and natural gas liquids. 6

7 Historical Production Growth Daily Production 40.0 Gas Oil NGLs % % 6.7% MMcfe/d % 0.3% 0.8% 1.6% 3.2% % 99.3% 99.7% 99.7% 99.2% 95.2% 81.3% % /30/2012 7

8 Accelerating Liquids Growth Barrels of Liquids/day ,107 1,068 1, Q11 4Q11 1Q12 2Q YTD E 8

9 Major 2011 Accomplishments Gastar utilized the promote from its Marcellus JV to accelerate development: More than doubled proved reserves to 120 Bcfe (1) Increased PV-10 by 223% to $217 million (1) Increased production by 13% to 21.1 mmcfe/d Liquids increased to 8% of production in 4Q And began to further diversify: Announced new Mid-Continent oil play (1) Based on year-end 12/31/2011 SEC reserve report. 9

10 Setting the Stage for capital budget of $152 million Production projected to grow materially 4Q production guidance of MMcfe/d with liquids comprising 23% - 26% of volumes Increase liquids portion of total production Majority of capex dedicated to liquids-rich Marcellus Shale wells Drill 26 wells Complete 29 wells Initiated oil and NGL hedging program 100% increase in borrowing base From $100 million to $110 million (1) $33 million available under senior revolver (2) Additional $49.3 million net proceeds raised YTD from 8.625% Cumulative Preferred Stock (2) (1) $110 million borrowing base effective September 30, (2) As of November 23,

11 Aggressively Shifting Capital to Liquids ($ in millions) Area Capital Marcellus $124 Mid-Continent 23 East Texas 4 Capitalized Costs (1) 1 Total $ Capital Investment East Texas $4 2% Mid-Continent $23 15% Capitalized Costs & Other $1 1% Capital investment program of $152 million 98% of drilling and recompletion costs target liquids-rich wells 82% of planned capital dedicated to drilling in 2012 Marcellus $124 82% $152 million (1) Includes capitalized interest and G&A costs. 11

12 Great Assets with Room to Grow

13 Strong Position in the Marcellus Shale Near-term activity concentrated in highly prospective liquids-rich portion of the play 75,500 net acres with Marcellus exposure Two rigs currently operating Marshall & Wetzel Counties JV partner Atinum 11,400 net acres Focus of initial development program Condensate and ultra-rich gas Pennsylvania JV partner Atinum 9,700 net acres Butler County 3 wells completed in wells completed in 2012 Marcellus East 54,400 net acres De-risked acquisition Tested two vertical Marcellus wells prior to closing Drilled, completed and begun production test on one horizontal well Hickory Ridge 2H 2,500 foot lateral o o o Marshall & Wetzel Counties Pennsylvania Marcellus East 13

14 Liquids-Rich Window of Marshall & Wetzel Counties High Btu gas and condensate yields bbls/mmcf condensate bbls/mmcf NGLs 38 horizontal wells drilled to date in Marshall County 29 completed and producing 9 drilled, completing or awaiting completion 2 drilling rigs running $124 million capital budget for 2012 Average drilling time down to < 20 days per well Additional savings being realized on completion costs GST and JV partner Atinum have over 90 additional Marcellus horizontal wells planned in Marshall and Wetzel Counties for 2013 and beyond 26 operated horizontal wells planned in wells scheduled to be on production at year end 2012 Dedicated midstream capacity with increasing throughput and major new gathering system owner (Williams) Active development program 14

15 Liquids-Rich Window of Marshall & Wetzel Counties 15

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25 Marcellus West Economics 6.4 Bcfe EUR 63% Gas 37% Liquids 38% IRR (1) Cost $7.3MM (5000 lateral) $1.52/MMcfe F&D Costs (1) Based on third party reservoir engineering curve and the NYMEX futures curve on August 20,

26 Operational Excellence with Pad Drilling 26

27 Production Mix of Marcellus West Wells Gas Oil NGLs 80% 70% 74% 71% 66% 69% 67% 66% 60% 50% 40% 30% 20% 10% 14% 12% 6% 22% 23% 20% 11% 11% 11% 22% 21% 13% 0% 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12E 27

28 Pennsylvania Consolidating in two core areas. Butler County 2,400 net acres 4,800 JV net acres 3 wells completed in wells completed in 2012 Btu-rich wet gas Fayette & Somerset Counties 3,500 net acres 7,000 JV net acres Development underway in the area by other operators o o Butler County Fayette & Somerset Counties Note: JV partner with Atinum. Acreage as of 6/30/12. 28

29 Marcellus East Large position Low entry price Acquired assets in November % WI, 80% NRI Tested Marcellus potential in 2 wells Preston/Tucker tested 1.1 MMcf/d Pendleton tested MMcf/d First horizontal has been drilled Hickory Ridge 2H 2,500 foot lateral Completed and beginning production test Existing gathering infrastructure 41 miles of gathering pipeline 14 MMcf/d of current capacity 3D seismic shoot being considered for 2013 Increased activity in the area Chevron Carrizo Chief Tenaska Novus Enerplus - acreage acquisition offsets our position Preston County Tucker County Pendleton County 29

30 Mid-Continent Horizontal Oil Play Play de-risked by partner activity and historic vertical production Current lease position approximately 30,900 gross (12,500 net) acres Operations commenced in July on the first of three wells to be drilled in 2012: Targeted horizontal lateral of 4,200 feet; completed late September 2012 Costs to drill and complete ~ $4.6 million gross ($2.9 million net) Drilling operations on the second well commenced Nov 23 rd The third well should be spud by December 2012 Ultimate 50% WI (approximate 39% NRI) 30

31 Mid-Continent Horizontal Oil Play Economics Risked 236 MBOE EUR 43% Gas 57% Liquids 25% IRR Cost $4.3MM (4500 lateral) Un-risked 321 MBOE EUR 43% Gas 57% Liquids 63% IRR Cost $4.3MM (4500 lateral)

32 Shallow Potential Combined With Proven Success in East Texas Combination of Eagle Ford/Woodbine liquids and Bossier gas. Substantial Shallow Potential Identified Eagle Ford/Woodbine ( Eaglebine ) becoming more active Encana and EOG drilling in immediate area with Encana reporting success Consolidated Acreage Position 17,100 net acres 50-67% WI 100% operated Call on Natural Gas Prices Well IPs >20 MMcfe/d Multiple stacked pay sands Upper, Middle, Lower Bossier, & Knowles Upper Bossier horizontals enhance recovery/economics Large Resource Potential Remaining Net Bossier potential of ~0.5 Tcfe Oil Potential??? Robertson Leon 32

33 Solid Acreage Position in the Emerging Eagle Ford Trend Actively monitoring and evaluating as our peers de-risk the play. 17,100 Net Acres 33

34 Abundant Supply of Eagle Ford/Woodbine Opportunities Potential for 100+ horizontal drilling locations. First Class Neighbors 34

35 Financial Strength

36 Liquidity to Execute Our Plan Base capital program funded from internally-generated cash flow supplemented by borrowings under current credit facility and remaining issuance of 8.625% Cumulative Preferred Stock $9.1 million cash on hand at 9/30/2012 $40 million available under senior revolver at 9/30/12 (1) $49.3 million net proceeds raised YTD from 8.625% Cumulative Preferred Stock (2) $1.2 million face value (48,746 shares) remaining to be issued 4Q 2012 (1) $110 million borrowing base effective September 30, (2) 3,951,254 shares sold inception to date as of November 23,

37 Balance Sheet Assets ($ in millions) September 30, 2012 Cash and cash equivalents $ 9.1 Other current assets 20.5 Total current assets 29.6 Total property, plant and equipment, net Other assets 3.9 Total assets $ Liabilities and Shareholders Equity Current portion of debt $ - Other current liabilities(1) 52.4 Total current liabilities 52.4 Long-term debt 70.0 Other long-term liabilities 9.2 Preferred stock of subsidiary 76.6 Common shareholders' equity 46.2 Total liabilities and shareholders' equity $ (1) Includes $18.4 million of advances from non-operators 37

38 Strong Balance Sheet and Liquidity Borrowing Base Bank Debt $120 $110 $100 $MM $80 $60 $48 $50 $70 $40 $31 $30 $20 $- $- $ /30/2012 September 30, 2012 Bank Debt Outstanding $70.0 MM Total Liquidity (1) $49.0 MM Net Debt / Proved Mcfe (2) $0.56 (1) Liquidity calculated as sum of cash and availability under borrowing base at September 30, (2) Net debt per Proved Mcfe calculated as total debt less working capital at September 30, 2012 divided by proved reserves at June 30,

39 8.625% Cumulative Preferred Stock is Being Well Received By The Market $98.8 million issued to date (1). Issuer: Symbol: Guarantor: Gastar Exploration USA, Inc. NYSE Amex: GST.PRA Gastar Exploration Ltd. Annual Rate: 8.625% Face Value: up to $100,000,000 (4,000,000 shares) Guarantee: Gastar Exploration Ltd. will fully and unconditionally guarantee the payment of dividends that have been declared by the board of directors of Gastar Exploration USA, Inc., amounts payable upon redemption or liquidation, dissolution or winding up, or any other amount due. Dividends: Holders are entitled to receive cumulative cash dividends of 8.625% per annum of the $25.00 liquidation preference per share ($2.16 per annum per share). Dividends will be payable monthly in arrears on the last day of each calendar month. Tax Treatment: Distributions will be treated as dividends to the extent of Gastar s current and accumulated earnings and profits as determined under the U.S. Tax Code. Any portion of the distributions that exceeds Gastar s current and accumulated earnings and profits (currently anticipated to be 100% of future distributions) will first be applied to reduce a U.S. holder s tax basis in the Series A Preferred Securities. (1) Face value comprised of 3,951,254 shares sold as of November 23, 2012 at $25 face value. 39

40 Responsible Hedging Program Natural Gas 40

41 Responsible Hedging Program Crude Oil and NGLs 41

42 Summary 2012 is an active, pivotal year for Gastar. Aggressively shifting to liquids Focusing on liquids-rich Marcellus acreage New Mid-Continent oil play Capital investment program fully funded Realized a 120% increase in our borrowing base From $50 million to $110 million $33 million currently available under senior revolver 2012 production projected to grow materially over 2011 Increased 4Q production guidance to MMcfe/d Achieve record levels of liquids production of 20-25% Majority of capex dedicated to liquids-rich Marcellus Shale wells $23 million dedicated to new Mid-Continent oil play in

43 Gastar Exploration Ltd. General Information Gastar Exploration is an independent energy company engaged in the exploration, development and production of natural gas and oil in the U.S. Our principal business activities include the identification, acquisition, and subsequent exploration and development of natural gas and oil properties with an emphasis on unconventional reserves, such as shale resource plays. Publicly Traded Securities CUSIP Ticker Common Stock GST 8.625% Cumulative Preferred Stock (Series A) 36729P207 GST.PRA Investor Contacts J. Russell Porter President and Chief Executive Officer (713) Michael A. Gerlich Vice President and Chief Financial Officer (713)

44 Q&A