Explosions & Fires Occur in Marcellus Operations

Gastar to Sell Leases & Wells in Wetzel & Marshall Counties to Concentrate on Oklahoma

From an Article in the Marcellus Drilling News, October 15, 2015

What a difference a few months, or even a week, can make. In August, Gastar Exploration, which owns roughly 60,000 acres of leases in the Marcellus/Utica mostly in Marshall and Wetzel counties in West Virginia, was talking up their drilling program in the northeast.

Just last week we reported on Gastar CEO Russ Porter’s talk at OGIS in San Francisco about the Marcellus/Utica and what’s ahead for his company. Lately it seems like Gastar, which also drills in the Mid-Continent region of the country, has been giving a little more love to Mid-Continent area because gas prices in the northeast remain stubbornly low. Looks like the Mid-Continent is about to get all of Gastar’s love.

The company announced yesterday they’ve put all of their Marcellus/Utica assets up for sale, including leases and drilled/producing wells …

The press release is mostly about Gastar’s Mid-Continent operations, with just a small mention at the end about the Marcellus/Utica – but wow, what a mention!  More like a bombshell:

Gastar Exploration Inc  today announced that it has entered into a definitive purchase and sale agreement to acquire additional working and net revenue interests in 103 gross (10.2 net) producing wells and certain undeveloped acreage in the STACK and Hunton Limestone formations in its Area of Mutual Interest (“AMI”) from its AMI partner, Husky Ventures, Inc. (“Husky”), and certain other parties (collectively “Sellers”). The purchase price is approximately $43.3 million, subject to certain adjustments and customary closing conditions, and the conveyance of approximately 11,000 net non-core, non-producing acres in Blaine and Major Counties, Oklahoma to the Sellers. The transaction is expected to close on or about November 30, 2015, with an effective date of July 1, 2015. After closing, the AMI joint venture with Husky will be dissolved. The acquisition will be funded with borrowings under Gastar’s revolving credit facility.

In order to allow the Company to concentrate on the significant opportunities identified in its existing Oklahoma assets and to improve the strength of its balance sheet, the Company has engaged Tudor, Pickering, Holt & Co. to market its Marcellus Shale and Utica/Point Pleasant acreage, which are primarily focused in Marshall and Wetzel Counties, West Virginia. These assets include producing wells and acreage located in the liquids-rich Marcellus Shale and high-deliverability, dry-gas Utica Shale/Point Pleasant plays.

“With this strategic Mid-Continent transaction, we are consolidating our working interest in our core Mid-Continent acreage and will be able to operationally control development decisions going forward,” said J. Russell Porter, Gastar’s President and CEO. “We believe this acreage is not only productive for the Hunton Limestone formation but also very prospective for the Meramec Shale and Woodford Shale STACK play, with additional upside from the Oswego and Osage formations. In addition, the contemplated sale of certain of our Marcellus and Utica assets should allow us to further reduce leverage while enhancing our liquidity position to allow for the future development of our extensive Mid-Continent position.”

Gastar Exploration Inc. is an independent energy company engaged in the exploration, development and production of oil, condensate, natural gas and natural gas liquids in the United States. In West Virginia, Gastar has developed liquids-rich natural gas in the Marcellus Shale and has drilled and completed its first two successful dry gas Utica Shale/Point Pleasant wells on its acreage. Gastar has engaged Tudor, Pickering, Holt & Co. to market its Marcellus Shale and Utica Shale/Point Pleasant assets in West Virginia.*

*Gastar Exploration Inc. (Oct 14, 2015) – Gastar Exploration Announces Acquisition of Mid-Continent Interests and Marketing of Appalachian Basin Assets

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See additional information about Explosions & Fires in Wetzel and Marshall Counties, etc.

Marshall County WV

GASTAR PUMPING LARGE QUANTITIES
Company Spent $200 Million In Marshall County

From Article By CASEY JUNKINS, The Wheeling Intelligencer, January 20, 2013

PROCTOR, WV – With large trucks traveling on narrow roads, Michael McCown knows the process of drilling and fracking a $7 million Marcellus Shale well can create plenty of disruption for a community. However, once the process is complete, natural gas producers leave behind a well head cap they refer to as a “Christmas tree.”

“It is pretty quiet out here now. This is what is left when we are finally done with the wells,” said McCown, who serves as vice president-northeast for Houston-based Gastar, while inspecting the well head at one of the company’s producing wells.

During a tour of the site and Gastar’s Marshall County operations, McCown said the company currently is producing about 65 million cubic feet of natural gas per day from West Virginia’s Northern Panhandle. McCown said Gastar now has 47 wells in Marshall and Wetzel counties that are pumping gas or will be soon. “In 2012, our company invested $200 million – all in Marshall County,” he said, noting the amount was probably about $70 million in 2011.

McCown said this year and in future years, his company will probably look to work more in Wetzel County. Gastar also is planning to acquire more acreage, working out of the company’s leasing office on Warden Run Road near Oglebay Park. “All of our gas goes to Williams” Partners, McCown said of the company that operates the Fort Beeler processing facility along U.S. 250 near Cameron, as well as a fractionation facility along the Ohio River south of Moundsville.

“The one thing that is slowing us down a little bit right now is that it is taking Williams a little bit of time to catch up to us with their infrastructure, but we are very confident in them,” McCown said.

Last year, Williams spent $2.5 billion to purchase the Fort Beeler plant and associated processing facilities and pipelines from Caiman Energy. Once Gastar’s gas goes to Williams, the wet natural gas liquids are separated from the dry methane gas so that all products can be sent to market.

“The liquids-rich Marcellus is here. That makes the operations here so valuable,” McCown said. “This is not going to be a short-term rush. We are in this for the long haul.”

Gastar also is reinvesting in infrastructure, as the company repaved Rines Ridge and Burch Ridge in Marshall County, which suffered damage from heavy equipment traveling to drilling sites. Gastar also spent about $5 million to build a private road exclusively for drilling truck traffic, relieving much of the truck traffic from the other roads.

“The terrain is a significant challenge for drilling here in West Virginia,” McCown said. “By having our own road, we are able to keep our trucks off the public roads, which is especially good when school buses need to use those roads.” In another move to help reduce traffic and potential pollution, McCown said Gastar spent $4.5 million to construct facilities to pump fresh water from the Ohio River up to the drilling sites.

“We are continuing to refine our drilling and completion techniques in an effort to achieve maximum efficiency, well economics and estimated ultimate recoveries,” said J. Russell Porter, Gastar president and chief executive officer.

McCown said part of this efficiency effort is to drill as many wells as possible on a single well pad, noting the company plans to have 10 wells on a single pad soon. Though the exact numbers will vary for each well, McCown said one particular well currently being drilled will go roughly 6,000 feet deep before turning to go 5,000 more feet horizontally. Slightly different equipment is used to drill the vertical and horizontal portions of the well.

“We are realizing improving internal rates of return in our Marcellus (Shale) program from increased yields of high-value liquids the further west that we develop the play, combined with lower drilling and completion costs and shorter drilling times. We are also seeing increasing reserves per well and declining total well costs,” added Porter.

While McCown sees a prosperous future in Gastar’s Marcellus activity, he said the potential of increased scrutiny from the U.S. Environmental Protection Agency could curtail operations.

“We feel that West Virginia’s (Department of Environmental Protection) is a fair and capable regulatory agency,” McCown said. “And as an industry, we are finding ways to be more environmentally friendly every day.”

Gastar Exploration plans to invest about $200 million in West Virginia’s Marcellus shale field in 2012, with virtually all of the money directed to Marshall County. Gastar is a Canadian company with revenues last year of $42.76 million.

With about 79,000 acres leased in WV, the company will drill about 20 Marcellus wells on the acreage this year and perhaps 25 more next year. Eighty percent of the company’s capital investments next year will be in WV, with almost all in Marshall County. All the gas goes to Caiman Energy, with a gas processing plant on US Route 250 near Cameron. [The ethane will likely go via pipeline to a cracker plant in Canada.]

Of the Gastar spending, about $2.5 million will repave Rines Ridge and Burch Ridge, both suffered damage from heavy equipment traveling to Gastar drilling sites. An additional $2.5 million is to refurbish an old state road that is not currently in use. This road will be exclusively for drilling truck traffic. It connects WV Route 2 to Waynes Ridge, relieving much of the truck traffic from the other two roads.

Generally, the WV State Road Commission requires drillers to repair roads damaged by their operations when heavy equipment destroys the pavement or causes other damages.  A year or more can pass before damaged roads are repaired.