Gastar Exploration (GST) Misses Q1 EPS by 4c, Sales Miss; May Need Waiver on Credit Facility

Gastar Exploration (NYSE: GST) reported Q1 EPS of ($0.22), $0.04 worse than the analyst estimate of ($0.18). Revenue for the quarter came in at $14.81 million versus the consensus estimate of $17.08 million.

The company said: "At March 31, 2016, we were in compliance with all financial covenants under the revolving credit facility. We may, however, need to request a waiver of compliance with, or amendment to, certain of our financial covenants by year-end 2016, which may not be received. The absence of such relief could result in significant adverse consequences and require us to pursue various alternatives."

J. Russell Porter, Gastar's President and CEO, commented, "The exceptionally poor price realizations for all of our first quarter 2016 production severely impacted our revenue and cash flow compared to a year ago, despite higher production volumes. Oil prices have improved in the second quarter of 2016, however we plan to maintain our current limited capital expenditure plan for 2016 until we see sustained improvement in oil prices or substantially enhance our liquidity position. Now that our second test of the Meramec Shale formation in the Mid-Continent STACK Play has been completed, our capital expenditures in 2016 will be focused on participating in select non-operated wells to further de-risk our acreage while preserving capital and maintaining our STACK Play leasehold position."

"We are encouraged by the early flow-back results of our recently completed Holiday Road 2-1H Meramec well in Kingfisher County, Oklahoma and the continued solid performance of our Deep River 30-1H well, our first operated Meramec Shale test well. The Holiday Road 2-1H has only been on flow-back since April 11, 2016, with oil production volumes slowly ramping up while continuing to produce high volumes of completion fluids. The movement of over 3,000 barrels per day of fluid should be an indication of strong reservoir characteristics. We expect the well will reach peak initial production rates 60 to 90 days after the initial flow-back operations began."

"With the Appalachian Basin sale now complete and recent improvements in oil prices and equity markets, we have re-assessed whether additional Mid-Continent divestitures are prudent. Accordingly, we have decided to withdraw our efforts to market a portion of our Mid-Continent acreage in Canadian and Kingfisher Counties, Oklahoma. Our sales process was impacted by competing acreage that is further developed and de-risked being offered for sale by third parties. In addition, future operated and non-operated drilling activity within and near our acreage could further de-risk our acreage position and define its value to potential buyers in the future. We will re-evaluate additional potential asset divestitures at a later date."

"We expect to have sufficient liquidity to make the upcoming May 2016 interest payment on our senior secured notes and carry out our remaining limited planned 2016 capital expenditure program," concluded Mr. Porter.

For earnings history and earnings-related data on Gastar Exploration (GST) click here.

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