Gastar’s Marcellus Production has Huge Increase in Q411

Gastar Exploration released fourth quarter 2011 results yesterday. The fourth quarter was very good for Gastar in the Marcellus, with a 1700 percent increase in average daily gas production from fourth quarter 2010, and a 179 percent increase from just the previous (third) quarter 2011. As is typical of other companies, Gastar is dedicating $88.9 million of a planned $103 million Marcellus budget (86 percent) for drilling in the liquids-rich area of the Marcellus.

Here’s the Marcellus play update from the Gastar press release:

For the fourth quarter 2011, net production from the Marcellus Shale area averaged approximately 5.2 MMcfe per day, compared to 0.3 MMcfe per day for the fourth quarter of 2010 and 2.9 MMcfe per day in the third quarter of 2011.       

In late November 2011 in Marshall County, West Virginia, the four-well Corley pad (40.5% working interest) was placed on production and in late December 2011, the three-well Simms pad (50.0% working interest) commenced production.  As a result of the new wells, the net year-end exit rate for the Marcellus Shale area was approximately 10.4 MMcfe per day.  Liquids production yields continue to average about 20 to 25 barrels of condensate and 45 to 50 barrels of natural gas liquids (NGLs) per million cubic feet of natural gas produced.  Production from Marshall County continues to be constrained by third party gathering system issues related to condensate handling, dehydration limitations and high line pressures.  The condensate handling issue was resolved in early March 2012 and the dehydration and high line pressure issues are expected to be resolved some time in April 2012. 

Fracture stimulation operations have now been completed on the three-well Hall pad (40.2% working interest) and on the five-well Hendrickson pad (40.2% working interest).  First production from the Hall wells commenced mid-January 2012 and the Hendrickson wells are anticipated to be on production in April 2012.  Drilling operations are now complete on the five-well Burch Ridge pad (50.0% working interest) and the three-well Accettolo pad (50% working interest).  Fracture stimulation operations are scheduled to commence on the Accettolo pad in April 2012 to be followed by the Burch Ridge pad. 

In Butler County, Pennsylvania, we participated in seven non-operated wells (19.2% working interest).  Three of the seven wells were placed on sales on December 1, 2011 but were subsequently shut-in to accommodate the fracture stimulation of the remaining four wells in January 2012.  Fracture stimulation operations have been completed and the four wells were placed on production in February 2012.  The remaining three wells should be returned to production by April 2012.

Our year-end 2011 proved reserves attributable to the Marcellus Shale were approximately 84.0 Bcfe, a significant increase from year-end 2010 reserves of 2.8 Bcfe.  Marcellus Shale proved reserves at year-end 2011 represented approximately 70% of our total proved reserves and were comprised of approximately 33% of oil and NGLs reserves.  Approximately 51% of the Marcellus Shale year-end 2011 reserves are proved developed.

Capital expenditures net to Gastar for the fourth quarter of 2011 in the Marcellus Shale were $19.9 million after realization of approximately $22.4 million of joint venture drilling carry benefit during the quarter associated with the Atinum Joint Venture.  As of December 31, 2011, Atinum had funded its entire $40.0 million drilling carry obligation, resulting in Atinum earning a 50% interest in the joint venture assets.

For 2012, we have budgeted $103.0 million for drilling, completion, infrastructure, lease acquisition and seismic costs in the Marcellus Shale.  Of that amount, $88.9 million will be devoted to drilling activities in the liquids-rich window of the Marcellus Shale and is expected to fund drilling and completion costs of 20 gross (10 net) new operated Marcellus Shale horizontal wells in Marshall County, along with the completion of 10 gross (4.5 net) additional operated Marcellus horizontal wells that were drilled and awaiting completion as of year-end 2011.*

*Gastar Exploration (Mar 8, 2012) – Gastar Exploration Ltd. Reports Fourth Quarter 2011 Results