Gastar Exploration Ltd. has agreed to sell its East Texas assets to Cubic Energy Inc. for $46 million and will redeploy capital to higher-return projects in the Marcellus Shale and Hunton Limestone. Meanwhile, Cubic views its acquisition as an entry point to the oil-rich Eagle Ford and Woodbine formations.
The assets to be sold include 31,800 gross (16,300 net) acres in the Hilltop area of East Texas in Leon and Robertson counties. During the fourth quarter, net production from the Hilltop area averaged 12.4 MMcfe/d, Gastar said. At year-end, proved reserves attributable to the Hilltop area were 27.4 Bcfe, of which 100% are classified as proved developed and represented about 15% of Gastar's total proved reserves. According to Cubic, production of 2,050 boe/d from the assets has been 97% natural gas and 3% oil.
Dallas-based Cubic is active mainly in Texas and Louisiana. "We are excited to take the first step in transitioning Cubic to a diversified oil and natural gas company," said CEO Calvin A. Wallen. "As Cubic moves forward with additional acquisitions, the East Texas Eaglebine assets will prove to be a critical first step with its upside in the oil-rich Cretaceous Zone, including the Eagle Ford and Woodbine intervals. The asset also gives us great flexibility with the deeper Bossier, a prolific and highly commercial play that we have the option to develop as natural gas pricing improves."
Proceeds from the sale will initially be used by Gastar to reduce debt, and management said it expects the deal will result in a net increase in the company's liquidity position of about $25 million. Closing is expected by June 5 with an effective date of Jan. 1, 2013.
"In conjunction with our previously announced Hunton Limestone acquisition [see Shale Daily, April 2], this transaction furthers our planned transition to a liquids-rich asset portfolio," said Gastar CEO Russell Porter.