Gastar Marcellus Operations Update – 19 Wells by Year’s End

Gastar Exploration, a Houston-based driller with operations in the Marcellus recently released its third quarter report. By the end of this year, Gastar says it will have nine Marcellus wells in full production and online with another 10 wells drilled and awaiting completion. Weather damage to a pipeline caused a decrease in output for two wells for about a month (end of September to end of October). Details of Gastar’s Marcellus operations in West Virginia and Pennsylvania follow:

In Marshall County, West Virginia, Gastar currently has two drilling rigs working in the Marcellus West area. By year-end 2011, the company expect to have nine horizontal Marcellus wells on sales and 10 horizontal Marcellus wells drilled and awaiting completion. All of its Marcellus Shale wells drilled in Marshall County are part of the joint venture with Atinum Partners Co. Ltd. After all drilling and completion costs have been incurred, working interest in these wells will range from 40% to 50%.

In mid-August 2011, Gastar began producing the Wengerd 1H and 7H horizontal wells at an initial combined 30-day average gross sales rate of approximately 7.1 MMcf per day of natural gas, 176 barrels of condensate and 347 barrels of natural gas liquids (NGLs). On September 23, 2011, the pipeline operator shut in the pipeline due to weather-related damage to the natural gas and condensate gathering system. While the pipeline was being repaired, Gastar installed tubing into the two Wengerd wells that would improve NGLs and condensate recovery and returned them to production on October 21, 2011. Initially, production was restricted due to excessively high line pressures following the pipeline repair, but this matter was recently resolved. The two wells’ most recent combined four day average gross sales rate is 8.1 MMcf per day of natural gas, 200 barrels of condensate per day and 490 barrels of NGLs per day.

Also in Marshall County, the company completed fracture stimulation operations on the Corley pad (four horizontal wells), with first sales anticipated in mid-November 2011. Currently, Gastar is commencing fracture stimulation operations on the three-well Simms pad with first production anticipated mid-December 2011. As of September 30, 2011, drilling operations have been completed on the Hendrickson 1H, 2H and 4H wells, and the company completed drilling operations on the Hendrickson 3H and 5H wells in late October 2011. Fracture stimulation operations on all five Hendrickson wells are anticipated to commence in March 2012, and first sales are anticipated in the second quarter of 2012. Currently, the company has commenced drilling operations from the Hall pad (three wells) and the Burch Ridge pad (five wells), and expects to commence drilling operations on the Accettolo pad (three wells) prior to year end.

On the Marcellus East position in Preston County, West Virginia, Gastar has drilled one horizontal well to test this acreage, which is 100% owned by the company. In August 2011, Gastar completed the Hickory Ridge 2H horizontal Marcellus well, a 2,500-foot lateral completed with a 10-stage fracture stimulation, and is currently flowing back completion fluids. First sales from the Hickory Ridge 2H are anticipated by year end. Focus for the remainder of 2011 and through 2012 in the Marcellus East acquisition area is to perform a 3-D seismic survey over a portion of the acreage, with no additional wells currently planned during that time frame.

In Butler County, Pennsylvania, Gastar and Atinum have been participating in seven wells with Rex Energy as operator. Three wells are expected to be on sales by year-end, with the remaining four wells expected to go online in early 2012.

For the third quarter 2011, net production from the Appalachia area averaged approximately 2.9 MMcfe per day, compared to 0.4 MMcfe per day for the third quarter of 2010.

Capital expenditures net to Gastar for the third quarter of 2011 in Appalachia were $15.3 million after realization of approximately $9.0 million of joint venture drilling carry benefit during the quarter.*

*Gastar Exploration Press Release/Oil & Gas Investor (Nov 7, 2011) – Gastar Details 3Q Appalachian, East Texas Operations