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Gastar Exploration Ltd.

Mon, 15 Dec 2008|


Automatically Generated Transcript (may not be 100% accurate)

Thank you and good morning everyone. Please be here -- pleased to see some folks here in the audience. It jump right into this guest stars a natural gas focused he MP company in the US. Our primary assets are in east Texas in the deep closure -- we've just announced. Some additional very good results the market -- and -- -- And that we also assets and Marcellus play in West Virginia Pennsylvania and Australia we've got a substantial position -- that methane in New South Wales about. Six million gross acres that 2.2 million net acres and -- project is. Rapidly advancing down there. Few there. He investment considerations. In east Texas we've got an ongoing very successful program is delivering very consistent and high return results. We didn't update the slide for this but we announced Vegas yesterday. Our best well to date the -- when number 150. Net -- to -- Up to 25% porosity in -- you know 17181000. Feet so of course it's grossly over pressured. And reserves we think an eternal testament are going to be north of 25 -- for them -- this is fantastic well. Probably worth more than the company trades for right now to be honest with him -- -- bases. So it's -- it's just another and a string of very good wells force in this plane of course people play. Saying -- and ConocoPhillips also continues him very good results. Our other wells. Excuse me -- performing continue to perform well -- by example. Who we we completed a well recently the whole well that it paid out five and half months and -- -- the -- completed new zone 21 million cubic feet today. So -- against second night. 12 -- obviously. So it's just been great. Project for us be involved in. As I mentioned and we've also had -- of Western Pennsylvania. We've built position there that's. From a cost perspective looks very good trusted exposes to a lot of reserves one point six TC -- -- resource potential there. Then Australia. That project. Is developing and it's also getting a lot of interest from larger national players that are coming and he structure -- -- for LNG and in our generation purposes. Quick look at our east Texas -- -- to those a little bit were here about halfway between Dallas and Houston and Leon and Robertson counties. In the -- there we've got about 33000 gross acres about 151000. Net acres. We're actively drilling there. We were completing you know well now would be number one and we're doing -- welcome veil worn number seven. The green. Activity -- in Canada and in our neighbors there that's on the interest they acquired friendly or for two point six billion. About two years ago and in the blues ConocoPhillips. Variants in that. One over here to the south -- -- has -- a couple of very at wells recently completed. 35 to forty million -- well down here by Hannah. There are also doing successfully on the other side of -- here so they've now got this on on three sides. And and we're hold our -- there in the middle. Just some of statistics on the play -- mention the acreage. Probably that the biggest improvement in this play and our our recent results has been the fact that drive down cost -- -- it was driver cost them of these wells from -- gross. About twelve million dollars to around nine million dollars -- -- and we've also at the same time. And it will increase our average UR's of these wells we budget about -- -- -- here gross per well we've been realizing closed today have. Without this without factoring in last well which is significantly higher than that. So our our cost are coming down a reserve realization for -- -- going up. And the market hates it evidently. I'm. This a couple of other quick -- here. This map has just shows one part of our acreage here the structure that controls the deepest set of -- the wells we have now the well we announced -- here. Close to the top of the structure. Interesting that we cut a couple of stands on the down from outside of this -- we've actually proven this fall productive now with this well. Which. We've drilled twelve well since -- -- thirteen wells now since January 2006 when we we're really integrated 3-D seismic we've got some success rate. So this this play you know his shoes it just keeps on given to us. We think we've got about a 13537. Additional locations to drill based on -- -- sixty Acre spacing to lose a lot of running room here. And we believe -- -- -- risks of significant portion of those with the drilling activity. -- the economics of these wells look like Aaron at seven our gas which. Three weeks ago is a good number talk about it six dollar gas. Give you the numbers instead. You know six we're generating about a seventy. Suddenly 5% IRR. With these wells. And that's assuming -- higher cost. And -- generated back to -- times return on investment. The play is is surprisingly insensitive to gas prices because he's wells come on. At very high rates he had very quick payouts. Gas price. Doesn't affect the economics is as much as you might think just from a cursory look. Now as I've mentioned you know these numbers are based on our last five wells again without -- -- the most recent well which will improve these. With average cost of ten million dollars average I appease the fifteen million cubic feet today and eight point three -- well. Moving over to the Marcellus Shale play this is an area that we sort of focusing on in late 2007. In order to build a position. We now have that over 42000 net acres. And we've acquired that all within the fairway which we defined as -- over pressured. Portion of the Marcellus Shale. Current skewed and we have on average -- 100% working interest in this very high in our eyes that 82% in RI. Com there's still a lot of competition for this type acreage. Especially if you're in the in the core areas there and in the northwestern portion of Pennsylvania. She's -- -- north -- some portion of West Virginia and in southwest Pennsylvania. And of course the the recent announcements from from Chesapeake and range and -- and the others continue to support services. Probably the premier shale play in North America wants. Once you shake it all out look at comparative economics. -- part of our plan here is also take advantage of the other opportunities. We can drill -- shallow wells here. Wells -- -- three to 5000 feet in depth. That costs maybe 40450000. Dollars drew -- complete and and with almost no drop -- risk we've -- I guess we've drilled six of these now and we -- another 45 this year we'll probably true ten -- twelve next year. The resort drilling -- is that what you put some production you've captured the marshals resource are new vertical -- causes of these leases if you -- well 2000 feet produce it you hold. The marshals writes well so that allows us to manage our position. And capture this resource on -- much longer term basis. And also then deal with some of the delays with infrastructure and -- -- services that we know we're gonna experience. I just some of the metrics on this and these are a little bit outdated but we're assuming our economics three point 75 BC -- for well. About three half million dollar cost. And if you look at the the -- the -- in the -- -- -- Economics these are very strong -- we're looking at. Generating 20% IR all the way down to. Below four dollars programs -- so we think that this. If you get too low price gas environment this is one of the best place to the end it will -- holed up. Better than any other -- that we're aware of this in a little the price gas environment. If you look at our acreage position. Just she is 40000 acres here we've got you know roughly 500 wells we can put on this. That Aggies felt one half TCO -- -- risked resource potential. And I think really on weekly basis you you really have to lower your risk assumptions on -- -- because it's. Be improved out very quickly within the areas that we've -- -- at least position. Finally get around Australia talk about -- I think this is going to be a big driver for the valuation against -- going forward as I mentioned earlier we have six million gross acres that 2.2 million net acres in the state of New South Wales. Our primary property is. Is -- -- license to 38. That's a 2.2 million Acre property that we've got a lot of on going activity there. And we think we're dealing with about seventeen TCF of gas in place. That's announcement from netherland -- That would give us about eight TCF recoverable on the property. That's based on some now outdated mapping. Which. With the recent -- results shows we actually have more -- than those estimates. -- when they were made but anyway that's enough gas to work with. Santos has come into the area and and gotten the rest of the base -- that we don't know. In their use in about forty TCF. Gas in place for their testament. As you can see down here on the bottom we had a target of 400 BCF for the end of this year in grossed two. We announced. Earlier this week that as of September 30 where -- 336. BC two. So we feel very comfortable that we'll make not only a year in 2009 target. She's a year in 2008 target four to -- that our year end 2009 target of one point three TC enough on certified two. And if you look at at the recent emanate transactions in Australia. And use the low end of the ranges there are 35% of that is worth. Over three dollars a share against -- Or sent to say almost ten times. -- Markey cap it's depressing to think about. Some compared is here. If you look at this -- -- played -- that people here in the rumor probably more familiar with. The San Juan basin. We just took the outline of our holes our primary polls semen -- it with the outline in San Juan basin development fairway. You can see from an aerial extent -- roughly the same side -- more importantly looking coal thickness from the ability gas content. The critical factors for successful -- -- nothing play and we are on par. -- certainly a world class -- asset. Are colder are not exactly. The same as -- and that there's are our highly clean vehicles and ours are highly fractured coal. And that just really leases to very good applications horizontal drilling. Which we're actually starting. Any day now we're we're going to be -- -- our first horizontal. Production pilot. Our production project we've got a couple of production pilots that are on screen now they're successful. But we've embarked upon a program of twenty core holes to explore some of this some of -- -- -- have not been looked at before the first. Six core holes when -- this Dewhurst area here in that area we've identified. Thick about fifty foot primary coal -- that extends over -- very large area that's very high gas contents very high probability. And very good gas composition. Averaging about 80% methane in those samples. So that's we believe identified about one and a half TCF -- recoverable gas in the Dewhurst area. And then we just announced. -- well up here called -- number one which is an area. -- was we we don't show -- in the mapping system right there. That -- -- 33 feet -- the same -- justice primeval yes as gas rich and -- even better gas composition. So that was a 26 miles stepped out that prove successful so we're very pleased with. With what that's gonna do is -- -- -- find additional additional reserves as we move forward. Just little quick -- so -- map to show you that the cold we're dealing with here and our -- -- -- The hottest. Color there is twenty meters of -- -- -- you know six stories of coal. You know it's just a huge. Resource we got there and the fact is from evil and gas rich really does he of this project but huge amount of I mentioned at the -- there are fractured. More so -- pleaded. What that means is that horizontal drilling is almost a perfect application here as we know the fracture orientations. And we know that you control perpendicular to -- fracture orientations and connect -- Literally hundreds of fractures in every well. And and access the the gas that way. One of these projects like we showed here on the cartoon which is two horizontal wells each with an additional lateral off -- -- well. We'll develop about five BCF of gas and was gonna costs -- about five million dollars Australian to drill. Which you know given the the movement in the Australian dollar versus the US dollar. It's gonna put our. Our cost. I guess about 20% lesson we've -- it. What are we gonna do -- this gas that was the other question here is if you looked at this play. I became involved with this play in 19961990. Sevenths. It was only nine years too early on this but it's it's -- the value of perseverance. What are we gonna do at this gas we've got to existing memorandums of understanding. One with Babcock and brown and one with -- generation for power generation projects. And these the -- generations for an existing. Coal fired plant there and and natural gas component to. And then the Babcock and brown is four additional. Power generation and New South -- is. Is power short right now 9% of their power generated with coal. They are talking about implementing. Fairly draconian carbon trading scheme is gonna make coal fired plants very expensive so. The government and everyone else is very focused on natural gas being in the sport for new power generation. -- -- we've got to him -- -- each for 500 BC have to be delivered over about twenty years if you look at the at the contract rates one is for forty BCF annually. It -- for 32 BC of mainly that I used that a 190 million cubic feet today. The demands come us -- power generation. And this is not even getting into the potential answer for export in the form elegy just of the north of -- there's a huge amount of activity. All driven off -- methane reserves is focused on LNG export. In to show you who the players aren't that for the you know British gas has -- points and gas. ConocoPhillips came in JV with origin. -- not switches the Indonesian elegy -- their national company -- come on Santos. -- -- there's been a lot of activity. All driven by trying to capture hope that methane resources to feed these LNG projects. If you look at the valuations for these you -- in it on -- two. Valuations ranging from a dollar 25 for MC. Awfully two over four dollars for CO. So we clearly think that we can create a tremendous amount of asset value with with our interest in Australia. And we think that yes it can be recognized by the market either through our stock price sir we're through transactions -- take the -- -- portions of this. Quick financial overview. -- -- our numbers here for for the nine months ended September 30. And you can see here that the trans all look like to go on in the right direction net production is growing. Our production chart if you look at it is a bit -- because these. These high IP closure wells we'll come on line. They decline very rapidly about 65. 7% the first year but but they're started very high rates and we -- pay outs but they take -- hundred days ago completes. But I mean you've got a couple of -- you've got some decline in the previous -- your chart looks a bit -- but the trend is definitely -- And likewise RR Crandall lifting costs on me volume basis is downwards we've been able to improve our lifting cost. And as you can see here gas prices had been help in the south this year are nine month revenue. I can't read exactly number I think forty 46 million dollars is exceeds our full year revenue from last year and that's really. As much volume driven as price -- And importantly in this market we do have a good portion of our production -- for next year for 2009 we've got. In east Texas about to many cubic -- today -- was enough. With -- collars with floors of a twenty twenty ceilings. 960 in 1210. So and we are looking to add to that his position at the -- gives us an opportunity to. Quick look at the balance sheet we had about fourteen million in cash at the end of September. Undrawn credit facility of about twenty million dollars there. Hundred million dollars of senior secured notes -- -- and 2012. Thirty million dollars of convertible notes that mature in November of 09 which we're already taking definitive action to to address the refinancing of those. You can see market capitalization that captures the -- old -- number. Based on three weeks ago. Our capital plan that this is yes of we have been getting a lot of questions about we've got a plan here that. About 88 million dollars from the you know you can take that number and -- about seven million dollars off of it right off the top as the change in the value of the Australian dollar versus the US dollar. If you look at that even further we -- have the abilities to to cut back a good portion east Texas in the Marcellus activity if we needed to so. We're very focused on liquidity we're very focused on managing the capital budget. And we know that that everyone is very focused on that. -- -- -- -- We've got a plan that that does allow us to grow but it has a lot of flexibility in it we can manage you know whatever the capital market situation turns out to be. So that's the overview of gas start -- we think that on the basis of this these successes were having east Texas. The assets we've acquired in the valiant and within those assets in the Marcellus and certainly the success and the value increase -- -- Australia than that. Our stock is. A very good opportunity for Anglican right now. Appreciate your time and -- were available for questions in a breakout session.

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