Gastar Exploration Inc (NYSEMKT:GST) announced a slew of company initiatives on Thursday, with the highlight being an agreement with a large private global investment fund to jointly develop up to 60 Gastar operated wells in the STACK Play in Kingfisher County, Oklahoma.
Gastar also agreed to sell some of its non-core leasehold interests in north-east Canadian County as well as in south-east Kingfisher County, Oklahoma, for about $71 million, which transaction is expected to close by November 18.
The stock shot up by a huge 25.23% to close at $1.39 on volume of 33.61 million shares, many times its usual average volume of 963.81K shares.
Gastar Exploration Inc (NYSEMKT:GST)’s development agreement
“This Development Agreement greatly expands our ability to delineate and hold our acreage in the STACK Play without putting undue pressure on our balance sheet or requiring equity issuances in the current market,” said J. Russell Porter, Gastar’s President and CEO. “The structure of this Drilling Program, which allows us to revert to 90% of Gastar’s original interest after our partner receives a 20% return, reflects our confidence in the quality of our acreage.”
Gastar Exploration Inc (NYSEMKT:GST) asset sale
The sale of the non-core leasehold interests will improve the company’s liquid assets and enable it to boost its STACK delineation program in northern Kingfisher and southern Garfield Counties.
It will also enable the company to adequately fund its capex plans for what remains of 2016 and for 2017.
Gastar Exploration Inc (NYSEMKT:GST) confirms revolver credit base, has rating improved
The company also was able to negotiate the status quo on the borrowing base for its revolving credit facility at $100 million on condition that 20% of the proceeds from the above mentioned asset sale would be used to pay down outstanding debt as well as certain other stipulations.
Analysts at Williams Capital Group appreciated these moves by the company and upgraded the stock from Hold to Buy and its price target from $1.25 to $2.
Technically, the stock looks very bullish having recently penetrated its 200-day moving average on rising volume.