Gastar Exploration's CEO Discusses Q3 2012 Results - Earnings Call Transcript
November 8, 2012 10:44 PM ET
Gastar Exploration Limited (GST)
Q3 2012 Earnings Call
November 8, 2012 10:00 AM ET
Anne Pearson – IR
Russ Porter – President and CEO
Mike Gerlich – VP and CFO
Gabriele Sorbara – Imperial Capital
Ron Mills – Johnson Rice
Kim Pacanovsky – MLV & Company
Brad Pattarozzi – Tudor Pickering Holt
Neal Dingmann – SunTrust
Josh Young – Young Capital
Chad Mabry – KLR Group
Ladies and gentlemen, thank you for standing by and welcome to the Gastar Exploration’s Third Quarter Earnings Conference Call. During today’s presentation, all participants will be in a listen-only mode. Following the presentation, the conference will be open for your questions. (Operator Instructions) Today’s conference is being recorded, November 8, 2012. I would now like to turn the conference over to Anne Pearson of DRG&L Investor Relations. Please go ahead.
Thank you, Alicia, and good morning everyone. Sorry for the delay. Before I turn the call over to management, I do have a couple of things to go over. First, a replay of the call will be available shortly by webcast on the Gastar’s IR website and a telephone replay will be available for one week. The information you need to access these is in yesterday’s news release.
Also, today’s call will contain forward-looking statements, although management believes these statements are based on reasonable expectations, they have no assurance that they will prove to be correct. These statements are subject to certain risks, uncertainties and assumptions described in the company’s 2011 Form 10-K and subsequent Qs, which are also found on the IR section of Gastar’s website. Should one or more of these risks materialize or should underlying assumptions proved to be incorrect, actual results may vary materially.
Today’s call may also include a discussion of probable or possible reserves or use terms like potential reserve, upside or other descriptions of non-proved reserves, which are more speculative than estimates of proved reserves and accordingly are subject to greater risk. Information relayed on this call speaks only of today, November 8, 2012, so any time-sensitive information will no longer be accurate or may no longer be accurate at the time of the replay.
Now, I’d like to turn the call over to Russell Porter, Gastar’s President and CEO. Russ?
Thanks, Anne, and good morning, everyone. With me this morning is Mike Gerlich, our CFO. I’ll go through a review and update of our operations and Michael will follow up with a review of the third quarter financial results. Consistent with the last several quarters, we continue to deliver strong results from our operations.
Issues beyond our control like commodity prices, midstream interruptions, and meritless corporate litigation have created challenges, but we remain focused on the continued successful execution of our growth strategy and increasing the reserves production and cash flow.
Since the third quarter of 2011, we’ve grown our production 82% and continue to increase the percentage of production from higher value crude condensate and natural gas liquids. Again, this quarter, we exceeded the top end of our production guidance and produced an average of 38 million cubic feet equivalent per day.
We brought on production 9 gross or 4.5 net additional horizontal Marcellus Shale wells and we increased production volumes over 9% sequentially, even after factoring in Q3 2012 Marcellus midstream issues.
Our growth continues to be driven by the success we’re having in our liquids rich acreage in Marshall County, West Virginia. During the third quarter, approximately 33% of the production from our Marcellus wells was a combination of condensate and NGLs. Independent reservoir engineers have projected that the condensate yields will continue to increase the further west we move across our acreage.
The first 15 wells we drilled on the east side of our Marshall County acreage initially averaged approximately 25 barrels of condensate per million, compared to an average of 50 barrels of condensate per million from the last 12 wells we’ve drilled as we’ve moved west on our acreage. NGL yields continue to hold at approximately 50 barrels per million across our acreage position. This is very encouraging because we have at least 90 additional drilling locations identified on the western portion of our Marshall County leasehold acreage. We’ve been drilling these wells from pads with an average of four to six wells per pad. These wells have had an average lateral length of approximately 4,800 feet with spacing between wells of 600 feet.
After reviewing detailed core and reservoir analysis, we plan to commence drilling in December of this year on four wells on the Goudy pad with average 5,500 foot laterals, but these wells will be spaced 400 feet apart. If recoverable volumes compare favorably to our earlier wells, we may move our drilling program forward using this tighter spacing, which will allow us to drill as many as 20 to 25 additional wells on our Marshall County acreage.
We’re also experimenting with the orientation of our laterals to test if the wells will perform even better if drilled on a slightly different azimuth. This test is already underway with the five well Addison pad. We commenced drilling the top holes in October and we expect to have the five wells completed and fracked and on production by the second quarter of 2013. We’re planning to temporarily slowdown our drilling activity in Marshall County commencing late in the second quarter of 2013 to monitor the results of the tighter spacing test at the Goudy pad and the directional orientation test at the Addison pad.
Copyright 2012 Seeking Alpha
Copyright © 2013 Microsoft. All rights reserved.
Quotes are real-time for NASDAQ, NYSE and AMEX. See delay times for other exchanges.
Fundamental company data and historical chart data provided by Thomson Reuters (click for restrictions). Real-time quotes provided by BATS Exchange. Real-time index quotes and delayed quotes supplied by Interactive Data Real-Time Services. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by SIX Financial Information.