By a News Reporter-Staff News Editor at Energy Weekly News -- Gastar Exploration Inc. (NYSE MKT: GST) ("Gastar") reported financial and operating results for the three and six months ended June 30, 2014.
Net income attributable to Gastar's common stockholders for the second quarter of 2014 was $2.0 million, or $0.03 per diluted share. Excluding the impact of a $5.4 million loss resulting from the mark-to-market of outstanding hedge positions, adjusted net income attributable to common stockholders was $7.5 million, or $0.12 per diluted share. Second quarter 2014 net income and adjusted net income include a net benefit of $8.6 million, or $0.14 per diluted share, related to an arbitration settlement. This compares to second quarter 2013 net income of $51.8 million, or $0.81 per diluted share, and adjusted net income of $3.4 million, or $0.05 per diluted share, excluding the impact of a $7.5 million gain resulting from the mark-to-market of outstanding hedge positions, non-recurring charges of $2.8 million and a $43.7 million non-cash fair value gain on the acquisition of assets. (See the accompanying reconciliation of net income to net income excluding special items at the end of this news release.)
Adjusted earnings before interest, income taxes, depreciation, depletion and amortization ("adjusted EBITDA") for the second quarter of 2014 was $29.4 million, an increase of 75% compared to $16.8 million for the second quarter of 2013 and a 13% increase over the first quarter 2014 results. (See the accompanying reconciliation of net income to adjusted EBITDA at the end of this news release.)
Revenues from oil, condensate, natural gas and natural gas liquids ("NGLs") before the impact of hedging activities increased 88% to $44.8 million in the second quarter of 2014, up from $23.9 million for the same period of 2013. Current quarter oil, condensate, natural gas and NGLs revenues include a gross revenue benefit of $10.6 million related to a West Virginia natural gas contract arbitration settlement. Excluding the arbitration settlement, second quarter 2014 oil, condensate, natural gas and NGLs revenues increased 43% over the second quarter 2013. The increase in oil, condensate, natural gas and NGLs revenues was primarily the result of substantially higher weighted average equivalent realized prices due to increased liquids production. Excluding the benefit of the arbitration settlement, weighted average realized prices increased 45% for the second quarter of 2014 compared to the same period in 2013.
Revenues from liquids (oil, condensate and NGLs) represented approximately 61% of total production revenues in the second quarter, or 72% of revenues excluding the benefit from the arbitration settlement. This compares to 48% for the second quarter of 2013 and 60% for the first quarter of 2014. We had hedges in place covering approximately 99% of our natural gas production, 60% of our oil and condensate production and 82% of our NGLs production for the second quarter of 2014. Commodity derivative contracts settled during the periods resulted in a $3.5 million reduction in revenue for the second quarter of 2014 compared to a $449,000 decrease in revenue for the second quarter of 2013 and a first quarter of 2014 decrease in revenue of $3.4 million. We continue to maintain an active hedging program covering a portion of our estimated future production, which is reported in our periodic filings with the U.S. Securities and Exchange Commission ("SEC").
Average daily production for the second quarter of 2014 was 9.5 thousand barrels of oil equivalent per day ("MBoe/d"), a 1% decrease compared to the same period in 2013 and a 2% decrease compared to the first quarter of 2014. Oil, condensate and NGLs as a percentage of production volumes were 48% in the second quarter of 2014 compared to 30% in the second quarter of 2013 and 41% in the first quarter of 2014. The arbitration settlement had no impact on production volumes.
J. Russell Porter, Gastar's President and CEO, stated, "During the second quarter, we spud several important wells that, if successful, could substantially increase both our remainder of the year 2014 production and year-end proved reserves, while also increasing our drilling inventory. On our Mid-Continent WEHLU acreage that we acquired in November 2013, we completed our first horizontal well, the Easton 22-1H, in the Lower Hunton oil formation. After less than two weeks on flow back operations and the recovery of less than 2% of the completion fluids, the well's most recent five day average gross production is 460 barrels of oil equivalent per day (Boe/d), of which 88% is oil. We are optimistic that this well could be the first step in significantly de-risking the Lower Hunton formation on a portion of our 24,000 WEHLU net acres and allow us to start booking additional proved undeveloped oil reserves. We also completed our first Upper Hunton well, the Easton 22-2H, on our WEHLU acreage. Early results from the flow back of the Easton 22-2H are also encouraging, as the well has been on for less than two days and is currently producing 224 Boe/d, of which 93% is oil. In West Virginia, we just completed the fracture stimulation of our first Utica/Point Pleasant well, the Simms U-5H, with a 25-stage fracture stimulation. We are very encouraged by how the 92 feet of high porosity pay zone in the well responded to fracture stimulation. We are currently allowing the well to soak and anticipate commencing flow back operations in about three weeks. If successful, this well could confirm our first Utica/Point Pleasant proved reserve potential and value and also add significantly to our West Virginia drilling inventory."
Keywords for this news article include: Energy, Finance, Oil & Gas, Natural Gas, Gastar Exploration Inc..
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