Net income for the third quarter of 2009 was $112.3 million, or $2.29 per diluted share, and contained several special items, including a $127.6 million gain on the sale of the Company's Australian assets, a foreign transaction gain of $7.6 million related to the sale of the Australian assets, early debt extinguishment expense of $15.9 million, a $3.3 million unrealized natural gas hedging loss and a $495,000 non-cash warrant derivative loss. For the third quarter of 2008, net income was $3.0 million, or .07 per diluted share, including a $3.4 million unrealized natural gas hedging gain. Excluding the special items, as described above for both periods, the Company would have recorded a net loss of $3.2 million, or .07 per share, for the third quarter of 2009, versus a net loss of $426,000, or .01 per share, for the third quarter of 2008.
Net cash flow from operations for the third quarter of 2009 was a deficit of $2.7 million, down from $16.8 million of positive cash flow for the third quarter of 2008. Company cash flow from operations before working capital changes for the third quarter of 2009 was a deficit of $1.1 million, compared to $7.0 million of positive cash flow in the third quarter of 2008.
Operations Review and Update
In October 2009, the company commenced drilling its first vertical Marcellus Shale well, the Yoho #1, in West Virginia. The well was drilled to a depth of 6,600 feet and is waiting on fracture simulation and flow testing, which is scheduled to be completed during the first half of November. The company is currently seeking pipeline capacity for the well's anticipated production but do not expect any sales until at least mid-2010. For the remainder of 2009 and fiscal year 2010, the company anticipates drilling at least five additional vertical Marcellus wells.
In the third quarter, the company drilled five shallow vertical wells in Appalachia and now have a total of 15 shallow wells in the area. Currently, eight are on production, and the remaining wells are scheduled to be on production in the next 75 days. This shallow well drilling program continues to be conducted to hold certain leases by production. The company plans to drill up to 15 additional shallow wells by the end of 2010. For the three months ended September 30, 2009, net production from the Appalachia area averaged approximately 0.4 MMcfe per day.
Gastar Exploration Ltd. is an independent energy and production company focused on finding and developing natural gas assets in North America. For more information, visit www.gastar.com .
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