Gastar Exploration has signed an agreement for the sale of certain of its Marcellus Shale and Utica/Point Pleasant properties in West Virginia, US, to an affiliate of Tug Hill, in a deal worth $80m.
Under the agreement, Gastar will offload all of its producing assets and proved reserves in addition to a portion of its undeveloped acreage in the Appalachian Basin.
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The sale is subject to customary closing conditions and is expected to close on or before 31 March 2016.
Gastar plans to use the proceeds to reduce borrowings under its revolving credit facility.
The company’s Deep River 30-1H well produced at a gross post-IP 60-day average sales rate of 803 Boe/d and its second Meramec Shale well commenced drilling on 10 February 2016.
Gastar president and CEO Russell Porter said: "With the pending divestiture of our Appalachian Basin acreage, we are able to improve our overall leverage without issuing equity in this depressed commodity price environment.
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By GlobalData"The assets being divested, which we believe are high-quality Marcellus and Utica properties, are generating limited cash flow due to poor realised pricing in the Appalachian Basin."
The company plans to address additional drilling plans after closing the announced sale of its Appalachian Basin properties.
For 2016, Gastar has kept aside preliminary capital budget of about $37m, excluding other capitalised costs, which considers the drilling and completion of a second Meramec well for about $5.5m.
