Gastar Exploration eliminates all outstanding debt, plans to tap revolver during second quarter

By Jennifer Lanning Drey

Portland, Ore., March 16 - Gastar Exploration Ltd. has no outstanding short- or long-term debt after using asset sale proceeds to retire its remaining $17 million of bank debt in early January, J. Russell Porter, chief executive officer of Gastar, said Tuesday during the company's fourth-quarter operating results conference call.

The company sold its Australian operations in 2009 and realized a pre-tax gain of $211 million.

Additionally, Gastar sold its East Texas High Pressure Gathering System for $22 million.

"These sales removed the pressure on our liquidity and enabled us to retire all of our debt," Porter said.

As a result, the company now has the financial flexibility to pursue additional exploitation opportunities in East Texas and to explore and develop its newer assets in the Marcellus shale and Appalachia, he said.

Gastar is projecting spending $58 million on capital expenditures in 2010.

The company expects to use about $20 million of borrowings under its revolving credit facility to fund any near-term cash shortfalls and to support its capital program.

The first of the revolver draws is expected to occur late in the second quarter, he said.

In 2009, low commodity prices impacted Gastar's cash flow, reserves and ability to fund drilling projects originally scheduled for the year, Porter said.

Ready for more price volatility

While price volatility remains present in 2010 - although on a lesser scale than in 2009 - Gastar is optimistic about its future, Porter said.

"It's impossible to predict the strength and timing of a commodity price upturn, specifically any natural gas price recovery, but considering our current financial strength and hedge position, I'm confident that we can weather almost any price volatility in 2010 and 2011," Porter said.

Gastar's natural gas and oil revenues, after the impact of realized hedging activity, decreased to $7.7 million in the fourth quarter. The figure compared to natural gas and oil revenues of $11.5 million in the same period of 2008.

The company said the decrease was due to a 31% decline in realized natural gas prices and a 4% decline in production volumes, primarily in Wyoming.

Gastar is a Houston-based exploration and production company focused on finding and developing natural gas assets.

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