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HOUSTON, August 11, 2008 - Gastar Exploration Ltd. (AMEX: GST and TSX: YGA) today reported financial and operational results for the three and six months ended June 30, 2008. Net income for the second quarter of 2008 was $546,000, or $0.00 per basic and diluted share, compared to net income of $4.4 million, or $0.02 per basic and diluted share, for the second quarter of 2007. The second quarter of 2008 included a $513,000 unrealized natural gas hedging loss. Net income for the second quarter of 2007 included a gain on the sale of unproved natural gas and oil properties of $38.9 million, which was partially offset by a non-cash full cost ceiling impairment of natural gas and oil properties of $28.5 million. Excluding the effect of these items in both years, Gastar would have had second quarter income of $1.1 million, or $0.01 per share, for 2008, compared to a loss of $6.0 million, or $0.03 per share, for the second quarter of 2007. During the second quarter of 2008, approximately 61% of our total natural gas production was hedged. The realized effect of hedging on natural gas sales was a decrease in revenues of $2.6 million, resulting in a decrease in the average price per Mcf received from $9.01 to $7.71, compared to an average realized price for natural gas of $5.75 per Mcf in the second quarter of 2007. The Company has approximately 50% of its remaining 2008 estimated natural gas production hedged and 24% of its 2009 estimated natural gas production hedged, as of June 30, 2008. Lease operating expense (LOE) was $2.4 million, or $1.18 per Mcfe, for the second quarter of 2008, compared to $1.5 million, or $1.10 per Mcfe, for the second quarter of 2007. The increase in total LOE was due to an increase in Texas workover costs, coupled with higher production volumes. During the 2008 second quarter, workover costs totaled $952,000, or $0.47 per Mcfe, as compared to $276,000, or $0.20 per Mcfe, for the same period in 2007. Excluding workover costs, LOE for the three months ended June 30, 2008 was $0.71 per Mcfe, as compared to $0.90 per Mcfe for the same period in 2007. Operations Review and Update During the quarter ended June 30, 2008, the Company completed two Bossier wells for a 100% success rate. For the three and six months ended June 30, 2008, net production from the Hilltop area averaged 16.4 MMcfe per day and 18.6 MMcfe per day, respectively. Capital expenditures for the second quarter of 2008 in East Texas were approximately $38.0 million, including $25.7 million related to the look-back litigation settlement allocated to unproved property costs. Currently, we are drilling one lower Bossier well, the Belin #1, (an offset to the Wildman #3) and one middle Bossier well, the Lone Oak Ranch #7, (an offset to the LOR #6). If successful, both of these wells are expected to begin producing natural gas in November 2008. For the balance of 2008, we anticipate a two-rig drilling program in East Texas focused on drilling Bossier wells offsetting recent successful wells. Gastar is pleased to announce a new strategic asset in the Marcellus Shale in northern West Virginia and southwestern Pennsylvania. In late 2007, the Company began acquiring acreage in the Marcellus Shale and to date has acquired approximately 31,200 net acres, with the intent, based on deals currently being finalized, of increasing our acreage position in this area to over 40,000 net acres by early September 2008. The Company's initial activities in this area will include drilling 12 to 18 shallow wells in 2008 that will allow us to hold a portion of our acreage with production. The held-by-production (HBP) acreage, plus the long-term leases comprising our remaining acreage position, will allow us time to further evaluate the optimal development and production strategy for this developing shale play. To date, we have drilled five shallow wells that we anticipate will be on production by late in the third quarter. In New South Wales, Australia, the 20-well exploration and appraisal corehole drilling program that Gastar and our joint venture partner on the PEL 238 concession initiated in early 2008 has met with early success. We have successfully completed the drilling of the first three test coreholes, the Dewhurst #2, #3 and #4, in a 20-corehole exploration and appraisal drilling program. The results of the coreholes confirmed the presence of a thick Bohena coal seam developed to the south and east of the Bibblewindi pilot production area. We are currently drilling the Dewhurst #7 corehole and expect to drill between four and six additional coreholes by year-end. Additionally, we plan to drill four to five production pilot wells in the next 12 months. "Gastar has been quite active over the past year positioning the company for further growth and for the creation of significant value for our shareholders," J. Russell Porter, Gastar's Chairman, President and CEO stated. "Our continued success in the deep Bossier play, along with the positive results in New South Wales and our new Marcellus Shale acreage, positions Gastar for significant reserve growth and coinciding increases in shareholder value. We have continued to refine our East Texas drilling program and just started a second Bossier well using the slim-hole drilling technology that significantly reduced our drilling costs in the LOR #6 well. "In New South Wales, we are excited to be moving our coal seam gas project towards first sales around year-end. The early results of our corehole pilot program have been very encouraging, and we are looking forward to getting the multi-lateral production program underway in September. Gastar Exploration Conference Call Gastar Exploration's management team will hold a conference call on Tuesday, August 12, 2008 at 9:30 a.m. Eastern Time (8:30 a.m. Central Time), to discuss these results. To participate in the call, dial (303) 262-2141 at least 10 minutes before the start of the call and ask for the Gastar Exploration conference call. A replay will be available approximately two hours after the call ends and will be accessible through August 19, 2008. To access the replay, dial (303) 590-3000 and enter the pass code 11116435#. The call will also be webcast live over the Internet at www.gastar.com. To listen to the live call on the Web, please visit Gastar's Web site at least 10 minutes before the start of the call to register and download any necessary audio software. An archive will be available shortly after the call. For more information, please contact Donna Washburn at DRG&E at (713) 529-6600 or e-mail at dmw@drg-e.com. About Gastar Exploration Gastar Exploration Ltd. is an exploration and production company focused on finding and developing natural gas assets in North America and Australia. The Company pursues a strategy combining select higher risk, deep natural gas exploration prospects with lower risk coal bed methane (CBM) development. The Company owns and operates exploration and development acreage in the deep Bossier gas play of East Texas and Marcellus Shale play in West Virginia and Pennsylvania. Gastar's CBM activities are conducted within the Powder River Basin of Wyoming and concentrated on over 6.0 million gross acres controlled by Gastar and its joint development partners in Australia's Gunnedah Basin (PEL 238, PEL 433 and PEL 434) located in New South Wales. For more information, visit our web site at www.gastar.com. Safe Harbor Statement and Disclaimer: This Press Release includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934. A statement identified by the words "expects", "projects", "plans", and certain of the other foregoing statements may be deemed forward-looking statements. Although Gastar believes that the expectations reflected in such forward-looking statements are reasonable, these statements involve risks and uncertainties that may cause actual future activities and results to be materially different from those suggested or described in this press release. These include risks inherent in the drilling of natural gas and oil wells, including risks of fire, explosion, blowout, pipe failure, casing collapse, unusual or unexpected formation pressures, environmental hazards, and other operating and production risks inherent in natural gas and oil drilling and production activities, which may temporarily or permanently reduce production or cause initial production or test results to not be indicative of future well performance or delay the timing of sales or completion of drilling operations; risks with respect to oil and natural gas prices, a material decline in which could cause the Company to delay or suspend planned drilling operations or reduce production levels; and risks relating to the availability of capital to fund drilling operations that can be adversely affected by adverse drilling results, production declines and declines in natural gas and oil prices and other risk factors described in the Company's Annual Report on Form 10-K, as filed on March 17, 2008 with the United States Securities and Exchange Commission at www.sec.gov and on the System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com. The American Stock Exchange and Toronto Stock Exchange have not reviewed and do not accept responsibility for the adequacy or accuracy of this release. - Tables to Follow - Company Contact: Investor Relations Counsel: |
