Gastar Exploration Ltd. ("Gastar") provided an update on results of its 2012 operating activities.
Gastar currently has 34 gross (15.5 net) operated horizontal Marcellus Shale wells on production in Marshall County, West Virginia and is on track to achieve its guidance target of 38 gross (17.5 net) operated horizontal Marcellus wells on production by year-end. Gastar also has 19 operated horizontal Marcellus wells in various stages of drilling or awaiting completion, of which four gross (2.0 net) wells are expected to be on production by year end.
Total net production from the operated horizontal Marcellus Shale play for the first 16 days of December has averaged approximately 29.4 million cubic feet equivalent (MMcfe) per day. The liquids yields for these wells during this period averaged approximately 33 barrels of condensate and 48 barrels of NGLs per million cubic feet (MMcf) of natural gas produced, or a liquids percentage to net production of approximately 33%. This compares to average September 2012 operated horizontal Marcellus net production of 22.7 MMcfe per day with liquids yields of approximately 42 barrels of condensate and 46 barrels of NGLs per MMcf of net natural gas produced, or a liquids percentage of 35%.
"We are continuing to refine our drilling and completion techniques in an effort to achieve maximum efficiency, well economics and estimated ultimate recoveries (EURs)," said J. Russell Porter, Gastar President and Chief Executive Officer. "As previously announced, we are using a different horizontal lateral orientation for the five well Addison pad, and tighter spacing for the first four wells on the nine well Goudy pad. Once these wells are brought on-line, we intend to pause our drilling activity in this area to evaluate the results. If the down spacing is successful, we will develop the remainder of the field on the tighter spacing, which will give us approximately 29 additional wells to be drilled in Marshall and Wetzel counties, bringing the total number of potential gross wells remaining to be drilled on this acreage to approximately 125."
Based on a third party engineer's estimate of our 34 producing operated wells, our average operated Marcellus 5,000-foot horizontal lateral well EUR has been confirmed and increased modestly from 6.4 Bcfe to 6.5 Bcfe, of which 34% is liquids, while current estimated gross drilling and completion costs have decreased from $7.3 million to $7.0 million. Utilizing the third party reservoir engineering curve, current NYMEX futures curve and estimated gross drilling and completion costs, results in an internal rate of return of 40% and finding and development costs of $1.30 per Mcfe.