Attached files

file filename
EX-99.2 - EX-99.2 - Gastar Exploration Inc.gst-ex992_56.htm
EX-32.1 - EX-32.1 - Gastar Exploration Inc.gst-ex321_7.htm
EX-31.2 - EX-31.2 - Gastar Exploration Inc.gst-ex312_9.htm
EX-31.1 - EX-31.1 - Gastar Exploration Inc.gst-ex311_11.htm
EX-23.2 - EX-23.2 - Gastar Exploration Inc.gst-ex232_14.htm
EX-23.1 - EX-23.1 - Gastar Exploration Inc.gst-ex231_13.htm
EX-21.1 - EX-21.1 - Gastar Exploration Inc.gst-ex211_8.htm
EX-12.2 - EX-12.2 - Gastar Exploration Inc.gst-ex122_6.htm
EX-12.1 - EX-12.1 - Gastar Exploration Inc.gst-ex121_12.htm
10-K - 10-K - Gastar Exploration Inc.gst-10k_20171231.htm

                                             Exhibit 99.1                

January 24, 2018

 

 

 

Gastar Exploration Inc.

1331 Lamar, Suite 650

Houston, TX 77010

Attention:  Mr. J. Russell Porter

 

SUBJECT:Evaluation of Oil and Gas Reserves

To the Interests of Gastar Exploration Inc.

In Certain Properties Located in Oklahoma

Pursuant to the Requirements of the

Securities and Exchange Commission

Effective January 1, 2018

Job 17.1918

 

At the request of Gastar Exploration Inc. (Gastar), Wright & Company, Inc. (Wright) has performed an evaluation to estimate proved reserves and associated cash flow and economics from certain properties to the subject interests.  This evaluation was authorized by Mr. J. Russell Porter of Gastar.  Projections of the reserves and cash flow to the evaluated interests were based on specified economic parameters, operating conditions, and government regulations considered applicable at the effective date.  This reserves evaluation is pursuant to the financial reporting requirements of the United States (U.S.) Securities and Exchange Commission (SEC) as specified in Regulation S-X, Rule 4-10(a) and Regulation S-K, Rule 1202(a)(8).  It is the understanding of Wright that the purpose of this evaluation is for inclusion in relevant registration statements or other filings to the SEC for the fiscal year ended December 31, 2017.  The effective date of this report is January 1, 2018.  The report was completed January 24, 2018.  The following is a summary of the results of the evaluation.

 

Gastar Exploration Inc.

Pursuant to SEC

Proved Developed

Total

Proved Developed

(PDP & PDNP)

 

Proved

Undeveloped

(PUD)

Total

Proved

(PDP, PDNP & PUD)

Producing

(PDP)

Nonproducing (PDNP)

Net Reserves to the

 

 

 

 

 

  Evaluated Interests

 

 

 

 

 

    Oil, Mbbl:

7,863.746

275.912

8,139.658

14,716.349

22,856.008

    Gas, MMcf:

30,965.634

756.828

31,722.460

33,642.440

65,364.900

    NGL, Mbbl:

4,469.361

130.725

4,600.086

4,576.508

9,176.594

    Oil Equivalent, MBOE:

17,494.046

532.775

18,026.821

24,899.930

42,926.752

      (6 Mcf = 1 BOE)

 

 

 

 

 

Cash Flow (BTAX), M$

 

 

 

 

 

    Undiscounted:

277,140.128

3,987.013

281,127.168

268,927.392

550,054.272

    Discounted at 10%

 

 

 

 

 

      Per Annum:

180,524.976

2,148.006

182,673.008

105,737.288

288,410.304

Please note numbers in table may not add due to rounding techniques in the ARIES™ petroleum software program.

 

 


Mr. J. Russell Porter

Gastar Exploration Inc.

January 24, 2018

Page 2

 

 

 

The properties evaluated in this report are located in the state of Oklahoma.  According to Gastar, the total proved reserves included in this evaluation represent 100 percent of the reported total proved reserves of Gastar.  

 

Proved oil and gas reserves are those quantities of oil and gas that can be estimated with reasonable certainty to be economically producible under existing economic conditions, operating methods, and government regulations.  As specified by the SEC regulations, when calculating economic producibility, the base product price must be the 12-month average price, calculated as the unweighted arithmetic average of the first-day-of-the-month price for each month within the prior 12-month period.  The benchmark base prices used for this evaluation were $51.34 per barrel for West Texas Intermediate oil at Cushing, Oklahoma, and $2.976 per million British thermal units (MMBtu) for natural gas at Henry Hub, Louisiana.  These benchmark base prices were adjusted for energy content, quality, and basis differential, as appropriate.  The resultant average adjusted product prices are $48.60 per barrel of oil and $2.700 per thousand cubic feet (Mcf) of gas.  The Natural Gas Liquids (NGL) product price was estimated to range from approximately 38 to 50 percent of the base oil price, depending on area.  The overall resulting weighted average adjusted price is $22.21 per barrel of NGL.  The base product prices were held constant for the life of the properties.  

 

Oil and other liquid hydrocarbon volumes are expressed in thousands of U.S. barrels (Mbbl) of 42 U.S. gallons.  Gas volumes are expressed in millions of standard cubic feet (MMcf) at 60 degrees Fahrenheit and at the legal pressure base that prevails in the state in which the reserves are located.  For purposes of this report, volumes of natural gas are converted into equivalent quantities of oil at the ratio of 6 Mcf = 1 barrel of oil equivalent (BOE).  No adjustment of the individual gas volumes to a common pressure base has been made.  

 

Net income to the evaluated interests is the cash flow after consideration of royalty revenue payable to others, standard state and county taxes, operating expenses, investments, salvage values, and abandonment costs, as applicable.  The cash flow is before federal income tax (BTAX) and excludes consideration of any encumbrances against the properties if such exist.  The cash flow (BTAX) was discounted monthly at an annual rate of 10.0 percent in accordance with the reporting requirements of the SEC.

 

The estimates of reserves contained in this report were determined by accepted industry methods, and the procedures used in this evaluation are appropriate for the purpose served by the report.  Where sufficient production history and other data were available, reserves for producing properties were determined by extrapolation of historical production or sales trends.  Analogy to similar producing properties was used for development projects and for those properties that lacked sufficient production history to yield a definitive estimate of reserves.  When appropriate, Wright may have also utilized volumetric calculations and log correlations in the determination of estimated ultimate recovery (EUR).  These calculations are often based upon limited log and/or core analysis data and incomplete formation fluid and rock data.  Since these limited data must frequently be extrapolated over an assumed drainage area, subsequent production performance trends or material balance calculations may cause the need for significant revisions to the estimates

 


Mr. J. Russell Porter

Gastar Exploration Inc.

January 24, 2018

Page 3

 

 

of reserves.  Wright has used all methods and procedures as it considered necessary under the circumstances to prepare this report.

 

Oil, gas, and other liquid hydrocarbon reserves were evaluated for the proved developed producing (PDP), proved developed nonproducing (PDNP), and proved undeveloped (PUD) categories.  The summary classification of total proved developed reserves combines the PDP and PDNP categories, and the summary classification of total proved reserves combines the total proved developed and PUD categories.  In preparing this evaluation, no attempt has been made to quantify the element of uncertainty associated with any category.  Reserves were assigned to each category as warranted.  Wright is not aware of any local, state, or federal regulations that would preclude Gastar from continuing to produce from currently active wells or to fully develop those properties included in this report.

 

There are significant uncertainties inherent in estimating reserves, future rates of production, and the timing and amount of future costs. The estimation of oil and gas reserves must be recognized as a subjective process that cannot be measured in an exact way, and estimates of others might differ materially from those of Wright.  The accuracy of any reserves estimate is a function of the quantity and quality of available data and of subjective interpretations and judgments.  It should be emphasized that production data subsequent to the date of these estimates or changes in the analogous properties may warrant revisions of such estimates.  Accordingly, reserves estimates are often different from the quantities of oil and gas that are ultimately recovered.

 

All data utilized in the preparation of this report were provided by Gastar.  No inspection of the properties was made as this was not considered to be within the scope of this evaluation. Wright has not independently verified the accuracy and completeness of information and data furnished by Gastar with respect to ownership interests, oil and gas production or sales, historical costs of operation and development, product prices, or agreements relating to current and future operations and sales of production.  Wright requested and received detailed information allowing Wright to check and confirm any calculations provided by Gastar with regard to product pricing, appropriate adjustments, lease operating expenses, and capital investments for drilling the undeveloped locations.  Furthermore, if in the course of Wright’s examination something came to our attention that brought into question the validity or sufficiency of any information or data, Wright did not rely on such information or data until we had satisfactorily resolved our questions relating thereto or independently verified such information or data.  In accordance with the requirements of the SEC, all operating costs were held constant for the life of the properties.

 

In accordance with the instructions of Gastar, abandonment costs net of salvage values were included, as appropriate.  Wright has not performed a detailed study of the abandonment costs nor the salvage values and offers no opinion as to Gastar's calculations.  

 

Wright is not aware of any potential environmental liabilities that may exist concerning the properties evaluated.  There are no costs included in this evaluation for potential property restoration, liability, or clean up of damages, if any, that may be necessary due to past or future operating practices.

 

 


Mr. J. Russell Porter

Gastar Exploration Inc.

January 24, 2018

Page 4

 

 

Wright is an independent petroleum consulting firm founded in 1988 and owns no interests in the oil and gas properties covered by this report.  No employee, officer, or director of Wright is an employee, officer, or director of Gastar, nor does Wright or any of its employees have direct financial interest in Gastar.  Neither the employment of nor the compensation received by Wright is contingent upon the values assigned or the opinions rendered regarding the properties covered by this report.

 

This report is prepared for the information of Gastar, its shareholders, and for the information and assistance of its independent public accountants in connection with their review of and report upon the financial statements of Gastar, and for reporting disclosures as required by the SEC.  This report is also intended for public disclosure as an exhibit in filings made to the SEC by Gastar.

 

Based on data and information provided by Gastar, and the specified economic parameters, operating conditions, and government regulations considered applicable at the effective date, it is Wright’s conclusion that this report provides a fair and accurate representation of the oil and gas reserves to the interests of Gastar in those certain properties included in this report.

 

The professional qualifications of the petroleum consultants responsible for the evaluation of the reserves and economics information presented in this report meet the standards of Reserves Estimator as defined in the Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information as promulgated by the Society of Petroleum Engineers.

 

It has been a pleasure to serve you by preparing this evaluation. All related data will be retained in our files and are available for your review.

 

Very truly yours,

 

Wright & Company, Inc.

TX Reg. No. F-12302

 

 

 

By:

/s/ D. Randall Wright

 

D. Randall Wright

 

President

 

 

 

 

DRW/JDS/SLM/cd

03_Letter 17.1918 (SEC)