GST Notes


(GST) Hits Big Deep Bossier Well - 01/05/09

  • Belin #1, 
    • deep Bossier well (18,000 foot), (about 130 days to drill and complete so not cheap but I don’t have the well cost)
    • completed in 2 zones at a combined 41.2 MMcfepd gross. They have a 40% net revenue interest before or an IP rate of 16,500.
    • management indicated the well has further uphole potential which could stretch the deliverability here 
    • previous estimates put these wells at a little over 8 Bcfe EUR
    • prior to this, the best well at their E. Texas Hill Top area was the 23 MMcfepd IP Wildman well.
    • GST had previously indicated they had logged 150 feet of pay here but had not flow rates at the time (
  • The net production from this well roughly doubles the company’s production from Texas (17.2 MMcfepd through the first nine months of 2008) and greatly increases total company volumes (23 MMcfepd through the 9 months)
  • Reserve: as of mid year 2008, Netherland-Sewell (arguable the #1 or #2 reserve engineers out there) put total company reserves at 70.2 Bcfe.  That’s not a lot of reserves to support the current valuation but when these names can move on big news for short stints and it has been hammerd of late.
  • Hedges: about 40% of 2009 volumes at $8.75
  • Net debt to total cap of 46% which is high.
  • Other plays: Marcellus shallow CBM in the Powder River of Wyoming and in Australian.
  • Capex - like everyone else, the 2009 capital budget falls sharply (down 68% to $43mm if they get a proposed JV in Appalachia done)
  • I see no Street estimates for the name, it looks as if most coverage has been dropped.
  • Technically the stock has been basing with the group after having been abaondoned in the back half of 2008, though the stock did rally in Friday’s "rising tide" environment
  • Nutshell: At 42 cents per share this is below even single digit midget status with pure option like value in a common share. (CHK) has partnered with them in East Texas and made moves in the past like they wanted to buy them but this looks doubtful in the current environment. I may buy a little in an IRA this morning.

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