hunton | Reminiscences of a Stockblogger

Dec 7

A Bad Day for Gastar

I ended the week on a sour note for a couple reasons, with one of those being that Gastar got shellacked, presumably on a report put out by a firm named Noble Financial. Noble downgraded the stock from Buy to Hold apparently because of concerns about valuation. I haven’t heard of Noble Financial before but apparently they have some clout if they can send a stock down nearly 10% on their musings. If anyone can get their hands on this report I would love a copy.

With the stock in the dumps I took yet another look at Gastar to make sure I hadn’t forgotten anything. The company has had a lot of transactions since the end of Q3, so below is my reconciliation of the current enterprise value and the company’s valuation on a few common metrics. This is a bit back of the envelope so the numbers might not be dead-on.

Very Pleased with Equal Energy sale of Lochend

On Friday Equal Energy announced the following:

Equal has sold its Lochend Cardium assets for cash consideration of $62 million, effective October 1^st 2012. The assets sold include current production of approximately 525 boe/d (93% light oil) based on the most recent 30 day average, related infrastructure and undeveloped land.

The sales price equates to $118,000 per flowing barrel. At the end of 2011 proven and probable reserves at Lochend were 1,621 mbbl of crude oil, 2.6 Bcf of natural gas, and 64.8 mbbl of NGL. Using those numbers, the disposition went for $29/boe of P&P. However successful drilling has been done at Lochend since that time so their will undoubtedly be higher reserves attributed to the area when the year end reserve report is completed, so take that number with a grain of salt.

The sale removes the last of the Canadian land assets. All that is remaining now are royalty interests that I would imagine will sold in short order. Together with the sale of the Mississippian interest, and the Viking land at Halkirk, Equal has reduced its debt down to a minimal amount.

When the facts change: Getting back into Equal Energy

I have been inching my way back into a position in Equal Energy over the last week and a half. On Thursday, with the stock dropping back to $3.40 (on the Canadian exchange) I increased my position significantly.

Of course I sold Equal at an even lower price. I began selling in May with a third of my position at $3.35, another third at $3.20, and the rest at $2.85.