Topeka Notes Value in Gastar (GST) Oklahoma Assets

Topeka Capital reiterated a Buy rating on Gastar Exploration Limited (NYSE: GST) with a price target of $8. Analyst Gabriele Sorbara noted robust value in Oklahoma assets.

"Yesterday afternoon, a subsidiary of Aubrey McClendon’s American Energy Partners LP acquired 1,800 boe/d of non-operated production in the SCOOP and STACK resource plays in southern and central Oklahoma for a total consideration of ~$251 million. The assets, which are located in Canadian, Carter, Garvin, Grady, Kingfisher, Love and Stephens, were acquired from Double Eagle Energy Holdings LLC and several additional parties. We calculate the valuation at $139,444 per flowing boe of production. While GST’s assets do not have SCOOP potential, we believe a majority overlap in similar areas where GST potentially has upside to the STACK plays (Meramec and Woodford shales). More importantly, GST’s assets should ultimately garner a greater valuation should these zones be prospective, given their assets in Oklahoma are majority operated," said Sorbara.

"Excluding GST’s resource upside value, when applying these acquisition metrics ($139,444 per flowing boe of production) on GST’s estimated 4Q14 average production in Oklahoma and a conservative value of $10,000 per flowing Mcfe/d on GST’s Marcellus/Utica shale production, we arrive to more than $6/share of value (~47% above yesterday’s closing price). This figure is for production only! Given the growing interest in the multi-zone opportunities in Oklahoma, we would not be surprised if GST were to sell-down a portion of its acreage, particularly at current M&A valuation. Such a move would accelerate the value of its ~126,000 net acres in Oklahoma prospective for the Hunton Limestone oil play and ~84,200 net acres prospective for the Stack play. We reaffirm our Buy rating and $8 PT," he added.

For an analyst ratings summary and ratings history on Gastar Exploration Limited click here. For more ratings news on Gastar Exploration Limited click here.

Shares of Gastar Exploration Limited closed at $4.08 yesterday.

You May Also Be Interested In

• RBC Capital Downgrades Range Resources (RRC) to Sector Perform
• Jefferies Upgrades Husqvarna AB (HUSQB:SS) to Buy
• Stifel Upgrades LeMaitre Vascular (LMAT) to Buy