Gastar Reports 3Q 2007 Net Loss of $5 Million
Gastar Exploration (AMEX:GST) (TSX:YGA) today reported financial and operational results for the three and nine months ended September 30, 2007.
Net loss for the third quarter of 2007 was $5.5 million, or $0.03 per share, compared to a net loss of $7.7 million, or $0.05 per share, for the third quarter of 2006. The third quarter 2006 net loss included a charge for litigation settlement expense of $465,000.
Revenues for the third quarter of 2007 increased 46% to approximately $9.8 million, compared to revenues of $6.7 million for the comparable period in 2006. The increase in revenue was primarily due to increased natural gas production from new wells in East Texas, partially offset by a 10% decrease in natural gas prices, mainly related to Wyoming production.
Net cash flows provided by operating activities for the three months ended September 30, 2007 were $5.5 million, compared to a cash loss of $2.3 million for the comparable period in 2006.
Weighted average shares of common stock outstanding on a basic and diluted basis increased 23% to 207.1 million shares for the third quarter of fiscal 2007 compared to the year-earlier period.
Average daily production for the third quarter of 2007 was 22.7 million cubic feet of natural gas equivalent per day (MMcfe/d) -- an increase of 66%, compared to 13.7 MMcfe/d for the third quarter of 2006 -- and a 50% increase over production levels of 15.1 MMcfe/d for the second quarter of 2007, due to three East Texas wells being brought on at high initial production rates. The average realized price for natural gas in the third quarter of 2007 was $4.65 per Mcf compared to $5.14 per Mcf in the third quarter of 2006.
Lease operating expense (LOE) was $1.7 million for both the third quarter of 2007 and 2006. LOE per Mcfe decreased 40% to $0.81 per Mcfe during the third quarter of 2007 from $1.35 per Mcfe for the comparable period in 2006 and decreased 26% from $1.10 per Mcfe for the second quarter of 2007. The decrease in LOE per Mcfe was primarily due to higher production volumes combined with lower ad valorem taxes and lower fixed costs associated with natural gas treatment plants in East Texas.
J. Russell Porter, Gastar's Chairman, President and CEO, stated, "We are making excellent progress toward further delineating the value of our East Texas and Australian assets. In East Texas the accumulated drilling and production data is helping us to improve drilling results, and we are now beginning to utilize our new 3-D seismic data to better identify future drilling locations.
"One of our best Deep Bossier wells to date, the Donelson #3, is maintaining a solid production rate at approximately 13.7 MMcf/d. We are currently drilling an offset well based on the new 3-D data, the Wildman Trust #3, which should reach the Deep Bossier formation in mid-December. Due to the success of our first horizontal Knowles Limestone well, the Lone Oak Ranch ("LOR") #4, we have secured a second rig which is currently drilling the LOR #3, another horizontal well targeting the Knowles Limestone formation that is expected to reach total depth in early December.
"In the fourth quarter we expect production levels will be slightly lower than what we averaged in the third quarter due to the natural decline in peak production from the new East Texas wells brought on in July and August. In addition, Wyoming production was curtailed during October due to low natural gas prices being realized in the area. We should see improvement in production volumes compared to the third quarter in the first quarter of 2008 as we complete the Wildman Trust #3 and the LOR #3, assuming these come on production as expected," added Porter.
"In Australia, we received the initial proved and probable (2P) gas reserve certification from our independent engineering firm, Netherland Sewell & Associates, for PEL 238 in New South Wales. A total 59 Bcf were certified, including 21 Bcf of gross proved (1P) reserves (6.6 Bcf net), although the evaluated acreage covers less than 1 percent of the acreage. These reserve estimates are made under the Society of Petroleum Engineers standards, and none of these yet meets the definition of proved reserves under SEC guidelines, primarily due to the early status of negotiations for contracts for infrastructure and gas sales. This is just the first step toward defining the value of our extensive acreage position in New South Wales. Our ongoing nine-well pilot program is continuing to perform well, and we are currently drilling a six-well corehole program designed to increase 2P reserve certification by mid-2008."
For the nine months ended September 30, 2007, Gastar reported a net loss of $12.1 million, or $0.06 per share, compared to a net loss of $57.3 million, or $0.34 per share, for the nine months ended September 30, 2006. Results for the nine months of 2007 included a gain on the sale of unproved natural gas and oil properties of $38.9 million, a non-cash full cost ceiling impairment of natural gas and oil properties of $28.5 million and a $5.0 million litigation settlement expense. Results for the first nine months of 2006 included a non-cash full cost ceiling impairment of natural gas and oil properties of $37.3 million and a charge for litigation settlement expense of $1.7 million. Excluding the effect of these items in both years, Gastar would have incurred a loss of $17.5 million, or $0.09 per share, for the nine months of 2007, compared to a loss of $18.4 million, or $0.11 per diluted share, for the same period in 2006.
Revenues for the nine months ended September 30, 2007 were $25.2 million, compared to revenues of $20.0 million for the comparable period in 2006. Average daily production for the nine months of 2007 was 17.3 MMcfe/d, up 37% from 12.7 MMcfe/d for the nine months of 2006.
Net cash flows provided by operating activities for the nine months ended September 30, 2007 were $11.2 million, (excluding $38.9 million of gain on sale and a $5.0 million litigation settlement accrual) compared to $415,000 for the comparable period in 2006 (including the payment of $1.7 million of litigation settlement expense).
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