Exhibit 99.1
Gastar Exploration Announces Results of Operations For the Quarter Ended March
31, 2006
HOUSTON--(BUSINESS WIRE)--May 12, 2006--Gastar Exploration Ltd. (AMEX:GST)
(TSX:YGA) reported a net loss attributable to common shares for the three months
ended March 31, 2006 of $42.9 million, or $0.26 per basic and diluted common
share, compared to a net loss of $7.6 million, or $0.07 per basic and diluted
common share for the three months ended March 31, 2005. The 2006 quarterly loss
included a non-cash full cost ceiling impairment of natural gas and oil
properties of $37.3 million, compared to a 2005 impairment of $4.4 million. The
first quarter 2006 impairment was primarily the result of a 34% decline in gas
prices from year end 2005, which significantly impacted the estimated future net
cash flows discounted at 10% before income taxes, or PV(10) value, of the
Company's Wyoming properties, together with limited first quarter drilling
results in East Texas and the related lag in proven reserve recognition due to
the small number of wells drilled on our acreage and the limited production
history on our recently drilled East Texas wells.
Total revenues for the three months ended March 31, 2006 were $6.6 million,
an increase of $1.9 million from revenues of $4.7 million reported for the
comparable period in 2005. Of the 2006 quarterly increase in revenues, 42% was
the result of increases in the quarterly production, and 58% was attributable to
higher prices. Average daily production for the three months ended March 31,
2006 was 11.1 million cubic feet of natural gas equivalents per day ("MMcfed"),
compared to 9.5 MMcfed for the three months ended March 31, 2005. EBITDA, as
defined on page 4 of this release, for the three months ended March 31, 2006 was
$2.5 million, up from EBITDA of $1.6 million for the three months ended March
31, 2005.
J. Russell Porter, Gastar's President and Chief Executive Officer, made the
following comment, "Though we are disappointed by the first quarter 2006
non-cash ceiling impairment, the charge is necessitated by the quarterly
application of the SEC full cost ceiling rules utilizing natural gas prices at
the period end held constant. The lower natural gas prices impacted the present
value of our Wyoming CBM properties. In addition, the non-cash charge is
partially due to the lag time in proven reserve recognition in our deep Bossier
play. Unfortunately from a timing perspective, the Wildman Trust #1 was the only
well drilled in East Texas during the first quarter and it is currently being
completed, limiting the recognition of additional PV(10) value during the
current quarter. We anticipate that the upcoming completion of the Wildman Trust
#1 well in the second quarter will create additional near-term reserve value.
Further, we currently are drilling two deep Bossier wells in East Texas that we
hope to have drilled to total depth and logged prior to the release of our
second quarter results. With these expected drilling results, the new 3-D
seismic data currently being permitted and acquired in the Hilltop area along
with the continued successful drilling results offsetting our acreage position,
Gastar is well positioned to create significant value for its shareholders in
the second half of 2006 and 2007."
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 balanced strategy combining select higher risk, deep natural
gas exploration prospects with lower risk coal bed methane (CBM) development.
The Company owns and controls exploration and development acreage in the deep
Bossier natural gas play of East Texas and in the deep Trenton-Black River play
in the Appalachian Basin. Gastar's CBM activities are conducted within the
Powder River Basin of Wyoming and upon the approximate 3.0 million acres
controlled by Gastar and its joint development partners in Australia's Gunnedah
Basin and Gippsland Basins, located in New South Wales and Victoria,
respectively.
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 unfavorable 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 31, 2006 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.
GASTAR EXPLORATION LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months
Ended March 31,
--------------------------
2006 2005
------------- ------------
(in thousands, except
share and per share data)
REVENUES $6,623 $4,731
EXPENSES:
Lease operating, transportation and
selling expenses 1,960 1,315
Depreciation, depletion and
amortization 4,309 2,690
Impairment of natural gas and oil
properties 37,301 4,410
Accretion of asset retirement
obligation 57 19
Mineral resource properties 157 29
General and administrative expenses 2,519 1,765
------------- ------------
Total expenses 46,303 10,228
------------- ------------
LOSS FROM OPERATIONS (39,680) (5,497)
OTHER (EXPENSES) INCOME:
Interest expense (3,758) (2,153)
Investment income and other 527 40
Foreign exchange gain (loss) 1 (26)
------------- ------------
LOSS BEFORE INCOME TAXES (42,910) (7,636)
Provision for income taxes - -
------------- ------------
NET LOSS $(42,910) $(7,636)
============= ============
NET LOSS PER SHARE:
Basic and diluted $(0.26) $(0.07)
============= ============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic and diluted 164,796,868 113,788,198
============= ============
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2006 2005
------------- ------------
(in thousands)
(unaudited)
ASSETS
Current assets $54,360 $69,468
Deferred charges 4,564 4,922
Cash call receivable 2,065 391
Property and equipment, net 136,677 165,347
------------- ------------
Total assets $197,666 $240,128
============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities $13,000 $13,942
Long-term debt 91,394 90,631
Asset retirement obligation 3,615 3,558
Liability to be settled by issuance of
common shares 8,498 11,221
Shareholders' equity 81,159 120,776
------------- ------------
Total liabilities and shareholders'
equity $197,666 $240,128
============= ============
GASTAR EXPLORATION LTD.
PRODUCTION, PRICES, OPERATING EXPENSES AND EBITDA
(Unaudited)
For the Three Months
Ended March 31,
---------------------
2006 2005
---------- ----------
Production:
Natural gas (MMcf) 993.3 849.0
Oil (MBbls) 0.3 0.7
Total (MMcfe) 994.9 853.2
MMcfe per day 11.1 9.5
Average sales prices:
Natural gas (per Mcf) $6.65 $5.53
Oil (per Bbl) $62.49 $48.80
Lease operating, transportation and selling
expense per Mcfe $1.97 $1.54
DD&A per Mcfe (pre-impairment) $4.33 $3.15
EBITDA (in thousands) $2,515 $1,636
EBITDA represents earnings before interest expense, accretion of asset
retirement obligations, depletion, depreciation and amortization (DD&A),
impairment of natural gas and oil properties and provision for income taxes. We
have reported EBITDA because we believe EBITDA is a measure commonly reported
and widely used by investors as an indicator of a company's operating
performance and ability to incur and service debt. We believe EBITDA assists
investors in comparing a company's performance on a consistent basis without
regard to depreciation, depletion and amortization, impairment of natural gas
and oil properties and exploration expenses, which can vary significantly
depending upon accounting methods. EBITDA is not a calculation based on U.S.
generally accepted accounting principles and should not be considered an
alternative to net income (loss) in measuring our performance or used as an
exclusive measure of cash flow because it does not consider the impact of
working capital growth, capital expenditures, debt principal reductions and
other sources and uses of cash, which are disclosed in our statements of cash
flows. Investors should carefully consider the specific items included in our
computation of EBITDA. While we have disclosed our EBITDA to permit a more
complete comparative analysis of our operating performance and debt servicing
ability relative to other companies, investors should be cautioned that EBITDA
as reported by us may not be comparable in all instances to EBITDA as reported
by other companies. EBITDA amounts may not be fully available for management's
discretionary use, due to requirements to conserve funds for capital
expenditures, debt service, preferred stock dividends and other commitments.
A reconciliation of net loss to EBITDA for the periods indicated is
presented below.
For the Three Months
Ended March 31,
---------------------
2006 2005
---------- ----------
(in thousands)
Net loss for the period $(42,910) $(7,636)
Interest expense 3,758 2,153
Accretion of asset retirement obligations 57 19
Depreciation, depletion and amortization 4,309 2,690
Impairment of natural gas and oil properties 37,301 4,410
Provision for income taxes - -
---------- ----------
EBITDA $2,515 $1,636
========== ==========
CONTACT: Gastar Exploration Ltd., Houston
J. Russell Porter, 713-739-1800
Fax: 713-739-0458
rporter@gastar.com
www.gastar.com