Gastar Exploration Ltd. is bolting on another 24,000 acres to its estimable leasehold in the Hunton Limestone in Oklahoma and is continuing to scout for a partner to help develop the property, now estimated to be about 132,400 net acres, the producer said late Thursday.

The $187.5 million transaction includes a 98.3% working interest and 80.5% net revenue stake in the West Edmund Hunton Lime Unit in Kingfisher, Logan, Oklahoma and Canadian counties. The acreage is adjacent to some property acquired from former part-owner Chesapeake Energy Corp. earlier this year (see Shale DailyApril 2). That transaction handed it drilling rights in 157,000 net acres, also adjoining existing acreage.

At the end of June Gastar held an estimated 300,300 gross, or 183,400 net acres in the limestone play, but in early July it sold about 76,000 net acres to sharpen its focus (see Shale DailyJuly 5).

"This transaction is another important step in our program to further balance Gastar's production profile between liquids and natural gas, while also expanding our presence in the Hunton play," said CEO J. Russell Porter of the latest purchase. "This strategic 'tack-on' acquisition provides a stable producing asset base and meaningful upside potential. With this acquisition, we now have over 380 net potential drilling locations in our Midcontinent oil play."

All of the acreage being acquired is held by production (HBP) and currently is producing about 2,078 boe/d, including 1,200 b/d of oil, 2.7 MMcf/d of natural gas and 428 b/d of natural gas liquids. Based on internal estimates, total proved reserves are 11.1 million boe, 66% weighted to oil and 43% proved developed.

"In addition to the existing reserves and production included in this package, we see significant, low-cost, low-risk upside potential from the development of the upper Hunton Limestone -- Bois d'Arc formation-- where proved undeveloped [PUD] reserves booked to date cover less than 30% of the total acreage we are acquiring," Porter said.

Gastar management also sees "substantial, low-risk high-return drilling opportunities in the deeper lower Hunton Limestone, Chimney Hill formation, that has not yet been developed on this property," said the CEO. "We believe the 'probable' Chimney Hill resource could be proved up with limited drilling capital, given the recent nearby offsetting activity by other operators that is rapidly derisking the play."

The operator has identified 62 PUD locations in the Bois d'Arc, along with 44 more probable locations in Chimney Hill within a 7,000-acre northern portion of the block, said Porter. "Beyond this 7,000-acre initial development area, we've cataloged an additional 60 Bois d'Arc and 40 Chimney Hill well locations that could be developed in the southern portion of the HBP acreage."

Gastar estimates that the Upper Hunton wells may be produced open-hole at a cost of about $2.3 million each, which would generate an estimated internal rate of return of more than 50%. "We will also evaluate the use of multilateral wellbores in this formation to further enhance the economics," said Porter. "The lower Hunton wells cost an estimated $4.5 million each, with internal rates of return projected to exceed 60%."

The company said it still is pursuing a partner to hep acquire an develop the acreage, something it has planned since the April acquisition. The present value, or PV, of the proved reserves, discounted at 10% using New York Mercantile Exchange futures pricing is about $191.3 million as of Aug. 28, according to Gastar.

Recent drilling results on two wells in the limestone play "have further bolstered our confidence in the northern portion of our Hunton holdings, while successful results from other operators continues to confirm our type curve in the central portion of our leasehold," said Porter.

 The transaction is to be funded from a variety of potential sources, the company said, including debt, stock and proceeds from the sale of East Texas properties. from the potential issuance of additional debt under our 8.625% senior secured notes due in 2018, the potential issuance of perpetual preferred stock, borrowings under the existing revolving credit facility, cash on hand and the expected proceeds from selling its East Texas assets (see Shale DailyApril 23).