Gastar Exploration Reports First Quarter 2009 Financial and Operational Results



    


    Production increased 26% to 30 MMcfe per day from fourth quarter 2008

    
    HOUSTON, May 11 /CNW/ -- Gastar Exploration Ltd. (NYSE Amex:   GST and TSX:
YGA) today reported financial and operational results for the three months
ended March 31, 2009.

    Excluding impairment charges and unrealized hedging losses, the Company
reported a net loss of $1.3 million, or $0.01 per share, for the first quarter
of 2009.  Including the effect of a non-cash impairment of natural gas and oil
properties of $68.7 million and an unrealized hedging loss of $196,000, the
Company reported a net loss of $70.2 million, or $0.34 per share.  This
compares to adjusted net income of $2.5 million, or $0.01 per share, for the
first quarter of 2008, excluding a $1.4 million unrealized hedging loss.

    Net cash flows provided by operating activities for the three months
ended March 31, 2009 was $13.3 million, compared to $14.3 million for the
comparable period in 2008.

    Excluding the unrealized gas hedging loss, natural gas and oil revenues
in the first quarter of 2009 decreased 20% to $13.5 million, compared to the
first quarter of 2008.  This decrease was due to a 28% decline in realized
natural gas prices, partially offset by a 13% increase in total production. 
Average daily production for the first quarter of 2009 was 30.0 MMcfe,
compared to 26.5 MMcfe for the first quarter of 2008 and 23.9 MMcfe in the
fourth quarter of 2008.  The average price for natural gas, including realized
hedging activities, decreased in the first quarter of 2009 to $4.99 per Mcf,
from $6.96 per Mcf in the first quarter of 2008 and $5.23 in the fourth
quarter of 2008.  Excluding the benefit of the realized hedges, the average
realized price for natural gas in the first quarter of 2009 was $3.37 per Mcf.

    Lease operating expense (LOE) was $1.9 million in the first quarter of
2009, compared to $1.5 million in the first quarter of 2008.  LOE per Mcfe
increased 9% to $0.70 in the first quarter of 2009, compared to $0.64 per Mcfe
during the first quarter of 2008.  This increase per Mcfe was primarily due to
higher non-recurring 2009 workover costs in Texas of $0.13 per Mcfe.
    

    Operations Review and Update
    
    In East Texas, first quarter net production from the Hilltop area
averaged 25.3 MMcfe per day, up from 18.1 MMcfe per day in the fourth quarter
of 2008.  The majority of the production growth was from the Belin #1, which
was placed on production in late December 2008 and is the Company's best
producing well to date.  The Belin #1 came on production at an initial gross
rate of 41.2 MMcf per day and post quarter end is averaging approximately 16.5
MMcf per day.  Capital expenditures for the first quarter in East Texas were
$9.4 million to recomplete one well and to finish drilling and complete the
Lone Oak Ranch ("LOR") #7.  The LOR #7 was drilled and encountered two middle
Bossier zones and one upper Bossier zone and was completed in the deepest
zone.  Current gross production from the LOR #7 is approximately 3.0 MMcfd
after an initial gross sales rate of 6.9 MMcfd.

    As a result of our activity in East Texas, the field's average production
increased 40% from the fourth quarter of 2008 to the first quarter of 2009,
although it is expected to decline in the second quarter due to natural
decline rates.  Currently, we are drilling a deep Bossier well, the Wildman
#5, and we plan on releasing the drilling rig and deferring additional
drilling in East Texas until natural gas prices and capital markets improve.

    In Appalachia, we have assembled more than 41,000 net acres in the
Marcellus Shale play and have drilled 10 shallow wells, including three during
the first quarter.  Seven of these wells are on production, and the remaining
wells are scheduled to be on production during 2009.  These wells will allow
us to hold the leases with production, while we finalize a plan for
exploration and development of the deeper Marcellus objective.  We do not
expect to drill additional shallow wells until we secure a joint venture
partner or until natural gas prices improve.  We will continue to maintain our
leases through renewals, extensions and renegotiations of the few drilling
commitments related to our interests.  Net production from our Appalachia
properties averaged 500 Mcfe per day in the first quarter.

    In New South Wales, Australia, the PEL 238 development project continues
to progress, and we expect to begin first commercial sales of natural gas
early in the third quarter of 2009. In February 2009, we acquired a 35%
interest in the Wilga Park Power Station, which will initially be the market
for natural gas produced from PEL 238.  In late April 2009, we completed the
drilling of the first two dual-lateral horizontal production pilots, each
consisting of three vertical wells intersected by two horizontal well
sections, which are currently dewatering.  Early in the third quarter of 2009,
all the wells are expected to be on production, and it is expected that coal
bed methane produced from the pilot will be transported to the Wilga Park
Power Station and utilized for power generation.  An additional multi-lateral
horizontal production pilot is underway in the Dewhurst area of PEL 238, based
on the previous successful coring work.  Subsequent locations for two
additional pilots will be determined on the basis of results of planned
coreholes to be drilled during 2009.  In April 2009, we began a corehole
evaluation program in the Coonarah area to test coals found when shallow
conventional wells were drilled in the area.

    J. Russell Porter, Gastar's Chairman, President and CEO, stated, "We
produced higher volumes of natural gas in the first quarter, compared to the
fourth quarter of 2008, thanks to the outstanding performance of the Belin #1,
which came on production in late December in East Texas.  Additionally, we
experienced a boost in production from the completion of the Lone Oak Ranch
#7, which began producing in late January as well as from a workover in late
March in East Texas.  In New South Wales, we expect to realize first
commercial sales when we begin delivering natural gas to the Wilga Park Power
Station early in the third quarter of this year.

    "We are exploring all avenues to bolster liquidity.  We currently are
involved in numerous conversations at various stages of development with
potential partners and asset purchasers in each of our three primary asset
areas.  In the Marcellus Shale, we have identified a potential joint venture
partner, who is working through due diligence on our assets in the play.  In
New South Wales, where the merger and acquisition market continues to be
active, we are in discussion with several parties regarding our ownership
interests in PEL 238 and adjacent undeveloped acreage.  The outcomes of all of
these discussions are uncertain: however, we will provide additional updates
as they become available."
    

    Liquidity and Capital Budget
    
    At March 31, 2009, the Company had cash and cash equivalents of $18.9
million. Planned capital expenditures for our properties for the remainder of
2009 total $49.9 million, consisting of $14.7 million in East Texas, $4.0
million in Appalachia, $15.0 million in New South Wales, $800,000 in the
Powder River Basin and other capital costs, and an additional $15.4 million
for capitalized interest cost.  To supplement our cash flow and help fund this
capital budget, we are seeking joint venture partners for the development of
several of our properties, with immediate emphasis on securing a development
partner in our Marcellus Shale acreage, as well as the possibility of selected
asset sales.

    Based on our current capital plan, our current cash on hand and projected
internally generated cash flow, we project that we will need to raise an
additional $70.0 million to fund our remaining 2009 exploration and
development activities, working capital needs and meet scheduled debt
maturities in 2009.   See "Liquidity and Capital Resources" in our Quarterly
Report on Form 10-Q for the period ended March 31, 2009 for a discussion of
potential consequences resulting from an inability to raise the additional
$70.0 million necessary to fund our remaining 2009 exploration and development
activities, working capital needs and meet our 2009 debt service obligations.
    

    Gastar Exploration Conference Call
    
    Gastar Exploration's management team will hold a conference call on May
12, 2009, at 10:00 a.m. Eastern Time (9:00 a.m. Central Time), to discuss
these results.  To participate in the call, dial (480) 629-9692 at least 10
minutes early and ask for the Gastar Exploration conference call.  A replay
will be available approximately two hours after the call ends and will be
accessible until May 19.  To access the replay, dial (303) 590-3030 and enter
the pass code 4068694.

    The call will also be webcast live over the Internet at .  To listen to
the live call on the Web, please visit Gastar's Web site at least 10 minutes
early to register and download any necessary audio software.  An archive will
be available shortly after the call.  For more information, please contact
Donna Washburn at DRG&E at (713) 529-6600 or e-mail dmw@drg-e.com
    

    About Gastar Exploration
    
    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 strategy combining deep natural gas exploration and
development with lower risk CBM and shale resource development.  The Company
owns and operates exploration and development acreage in the deep Bossier gas
play of East Texas and Marcellus Shale play in West Virginia and Pennsylvania.
Gastar's CBM activities are conducted within the Powder River Basin of Wyoming
and concentrated on more than 6.0 million gross acres controlled by Gastar and
its joint development partners in Australia's Gunnedah Basin (PEL 238, PEL 433
and PEL 434) located in New South Wales.
    

    Safe Harbor Statement and Disclaimer

    
    This news release includes "forward looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended.  A statement
identified by the words "may", "expects", "projects", "anticipates", "plans",
"believes", "estimate", "will", "should" 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 news release.  These include risks inherent in
the drilling of natural gas and oil wells, including risks of fire, explosion,
blowouts, pipe failure, casing collapse, unusual or unexpected formation
pressures, environmental hazards, and other operating and production risks
inherent in the 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
natural gas and oil prices, a material decline in which could cause Gastar to
delay or suspend planned drilling operations or reduce production levels,
risks relating to the receipt of a "going concern" statement in our auditor's
report on our 2008 consolidated financial statements, and risks relating to
the availability of capital to fund drilling operations that can be adversely
affected by adverse drilling results, production declines and declines in
natural gas and oil prices and other risk factors described in Gastar's Annual
Report on Form 10-K and other filings with the SEC at www.sec.gov and on the
System for Electronic Document Analysis and Retrieval (SEDAR) at
www.sedar.com.

    
    Contact:
    Gastar Exploration Ltd.
    J. Russell Porter, Chief Executive Officer
    713-739-1800 / rporter@gastar.com
    

    
    Investor Relations Counsel:
    Lisa Elliott / Anne Pearson
    DRG&E: 713-529-6600
    lelliott@drg-e.com / apearson@drg-e.com

    

    
        The NYSE Amex and Toronto Stock Exchange have not reviewed and do not
         accept responsibility for the adequacy or accuracy of this release.
    

    - Financial Tables Follow -



    
                     GASTAR EXPLORATION LTD. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                    (Unaudited)
    

    
                                                        For the Three Months
                                                           Ended March 31,
                                                           ---------------
                                                          2009          2008
                                                          ----          ----
                                                   (in thousands, except share
                                                         and per share data)
    REVENUES:
      Natural gas and oil revenues                   $  13,461     $  16,846
      Unrealized natural gas hedge loss                   (196)       (1,413)
                                                         ------       -------
        Total revenues                                  13,265        15,433
    

    
    EXPENSES:
      Production taxes                                     157           269
      Lease operating expenses                           1,877         1,542
      Transportation and treating                          493           459
      Depreciation, depletion and amortization           7,999         6,409
      Impairment of natural gas and oil properties      68,729             -
      Accretion of asset retirement obligation              87            82
      General and administrative expense                 2,958         4,275
                                                         -----         -----
        Total expenses                                  82,300        13,036
                                                        ------        ------
    

    INCOME (LOSS) FROM OPERATIONS                      (69,035)        2,397

    
    OTHER (EXPENSES) INCOME:
      Interest expense                                  (1,162)       (2,096)
      Investment income and other                           13           823
      Foreign transaction loss                              (3)          (37)
                                                            ---          ----
    

    
    INCOME (LOSS) BEFORE INCOME TAXES                  (70,187)        1,087
      Provision for income taxes                             -             -
                                                      --------         -----
    

    
    NET INCOME (LOSS)                                $ (70,187)    $   1,087
                                                     =========     =========
    

    
    NET INCOME (LOSS) PER SHARE:
      Basic                                          $   (0.34)     $   0.01
                                                     ==========     ========
      Diluted                                        $   (0.34)     $   0.01
                                                     ==========     ========
    

    
    WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
      Basic and diluted                            207,262,117   207,098,570
                                                   ===========   ===========
    



    
                     GASTAR EXPLORATION LTD. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
    

    ASSETS

    
                                                       March 31,  December 31,
                                                          2009          2008
                                                          ----          ----
                                                     (Unaudited)
                                                            (in thousands)
    

    
    Current Assets:
      Cash and cash equivalents                       $ 18,863      $  6,153
      Other                                             13,031        18,386
                                                        ------        ------
        Total current assets                            31,894        24,539
    

    
    Property, plant and equipment, net                 196,036       252,527
    Total other assets                                  10,197        11,371
                                                        ------        ------
        Total assets                                  $238,127      $288,437
                                                      ========      ========
    

    LIABILITIES AND SHAREHOLDERS' EQUITY

    
    Current Liabilities:
      Other                                           $ 26,353      $ 30,076
      Current portion of long-term debt                174,717       151,684
                                                       -------       -------
    

    Total current liabilities                      201,070       181,760

    
    Other long-term liabilities                          5,307         5,095
    Total shareholders' equity                          31,750       101,582
                                                        ------       -------
        Total liabilities and shareholders' equity    $238,127      $288,437
                                                      ========      ========
    


    PRODUCTION AND PRICES


    
                                                        For the Three Months
                                                           Ended March 31,
                                                           ---------------
    

    
                                                          2009          2008
                                                          ----          ----
    Production:
      Natural gas (MMcf)                                 2,693         2,406
      Oil (MBbl)                                             1             1
        Total (MMcfe)                                    2,698         2,413
    

    Total (MMcfed)                                        30.0          26.5

    
    Average sales prices:
      Natural gas (per Mcf), including
       impact of realized hedging activities            $ 4.99        $ 6.96
      Oil (per Bbl)                                     $39.47        $96.84


    

    CURRENT HEDGE POSITION

    
        The following derivative transactions were outstanding with associated
    notional volumes and hedge prices for the index specified as of April 11,
    2009:
    

    
                                        Notional
                                          Daily         Total           Base
                           Derivative    Volume         Volume          Fixed
     Date        Period   Instrument(1)  Average      Remaining         Price
                                         (MMBtu)       (MMBtu)
    

    
    10/15/08    Cal 09          CC        5,000       1,375,000
    10/15/08    Cal 09          (P)       5,000       1,375,000
    01/29/09    Apr-Dec 09       P       14,994       4,123,453
    05/05/09    Jan-Mar 10      CC       10,000         900,000
    05/05/09    Jan-Mar 10      (P)      10,000         900,000
    10/15/08    Cal 09           B        5,000       1,375,000       -$0.3825
    10/15/08    Cal 09           I        5,000       1,375,000
    02/12/09    Apr-Dec 09       B        2,000         550,000       -$0.3750
    03/16/09    Apr-Oct 09       B        2,000         428,000       -$0.2800
    03/25/09    Apr-Oct 09       B        2,000         428,000       -$0.2850
    11/14/08    Cal 09           B        1,500         412,500       -$2.2200
    11/21/08    Cal 09           B        1,000         275,000       -$2.0200
    02/12/09    Apr-Dec 09       B        850           233,750       -$1.7500
    04/07/09    Cal 10           B        1,000         365,000       -$1.3100
    04/07/09    Cal 11           B        1,000         365,000       -$1.2100
    



    
                                                    Production
                                                       Area
     Date         Puts        Call       Index        Hedged
                (MMBtu)     (MMBtu)
    

    
    10/15/08     $8.00      $12.05      Nymex-HH        TX
    10/15/08     $5.75                  Nymex-HH        TX
    01/29/09     $5.00                  Nymex-HH        TX/WY
    05/05/09     $5.00       $7.00      Nymex-HH        TX
    05/05/09     $3.50                  Nymex-HH        TX
    10/15/08                            HSC (2)         TX
    10/15/08                            HSC (2)         TX
    02/12/09                            HSC (2)         TX
    03/16/09                            HSC (2)         TX
    03/25/09                            HSC (2)         TX
    11/14/08                            CIG (3)         WY
    11/21/08                            CIG (3)         WY
    02/12/09                            CIG (3)         WY
    04/07/09                            CIG (3)         WY
    04/07/09                            CIG (3)         WY
    



    
    (1)  CC = Costless collars.
    (1)  B = Basis Swaps.
    (1)  I = Index swaps; Gas Daily to IFERC Monthly Index.
    (1)  P = Put purchased.
    (1)  (P) = Put sold.
    (2)  East-Houston-Katy -- Houston Ship Channel.
    (3)  Inside FERC Colorado Interstate Gas, Rocky Mountains.






    




For further information:

For further information: J. Russell Porter, Chief Executive Officer of
Gastar Exploration Ltd., +1-713-739-1800, rporter@gastar.com; or Investor
Relations Counsel, Lisa Elliott, lelliott@drg-e.com, or Anne Pearson,
apearson@drg-e.com, both of DRG&E, +1-713-529-6600, for Gastar Exploration
Ltd. Web Site: http://www.gastar.com

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