Gastar Exploration Ltd. said net production from its Marcellus Shale assets has increased more than 34-fold in a year, a result of ramped up drilling activity in the liquids-rich portion of the play during the second quarter of 2012.

Houston-based Gastar said net production from the Marcellus averaged 20.7 MMcfe/d during 2Q2012, compared with 0.6 MMcfe/d for the same quarter one year prior, a 3,350% increase. The latest net production figure is also a substantial increase, about 2,233%, from the 14.0 MMcfe/d realized in 1Q2012. Additionally, every MMcf of natural gas produced in the Marcellus in the second quarter yielded about 24 bbl of condensate and 47 bbl of natural gas liquids (NGL), Gastar noted.

Higher production totals were expected after the company announced in January that it would devote most of its 2012 capital expenditures (capex), $88.9 million, toward its liquids-rich holdings in the Marcellus (see NGI, Feb. 6). Gastar holds about 79,700 net acres in northern West Virginia and southwestern Pennsylvania, primarily in the wet-gas corridor of the Marcellus.

The dramatic increase in net production in the Marcellus helped offset a slight decline in East Texas, where the Hilltop area averaged 13.7 MMcfe/d, a 17.5% decrease from 2Q2011 (16.6 MMcfe/d) and nearly 3% lower from 1Q2011 (14.1 MMcfe/d).

In the Midcontinent, Gastar acquired 20,300 gross (9,900 net) acres for oil targets and it began drilling operations for the first of three horizontal, nonoperated wells in late July. The first well is expected to be completed by September, with the other wells drilled by the end of the year. Drilling and completion costs for the first well is expected to cost $4.3 million gross. Capex in the Midcontinent totaled $3.4 million during 2Q2012. The company has budgeted another $10.5 million for the remainder of the year for drilling, completion and lease acquisitions there.

Adjusted net losses totaled $4.1 million (minus 6 cents/diluted share) during 2Q2012, excluding one-time items. In the year-ago period Gastar lost $377,000 (minus 1 cent). Net cash from operating activities before working capital changes totaled $5.5 million (9 cents/share) in 2Q2012, up from $2.9 million (5 cents) from 2Q2011.

Revenue from natural gas, oil and NGLs increased 31%, to $11.1 million, during 2Q2012, up from $8.5 million earned during the same quarter one year earlier. The increase is revenue came from an 87% increase in production, minus 30% from lower commodity prices. Average daily production totaled 34.8 MMcfe/d for the second quarter, compared to 18.6 MMcfe/d in 2Q2011. Revenue from oil, condensate and NGLs represented about 40% of total revenues, compared to 12% in 2Q2011.

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