SOURCE: Gastar Exploration, Ltd.

May 20, 2005 12:46 ET

Gastar Exploration, Ltd. Updates Recent Developments Effecting Its Australian Coal Bed Methane Operations

HOUSTON, TX -- (MARKET WIRE) -- May 20, 2005 -- Gastar Exploration, Ltd. (TSX: YGA) (OTC: GSREF) is pleased to provide an update on operational and infrastructure issues effecting its interests in the PEL 238 CBM concession and the EL 4416 concession in New South Wales and Victoria, Australia, respectively.

PEL 238 -- Gunnedah Basin, New South Wales, Australia

Eastern Star Gas Limited (ASX: ESG), Gastar's joint venture partner and the operator of the PEL 238 Gunnedah Basin Coal Seam Gas Project in New South Wales, Australia, issued a press release on May 12, 2005, providing an update on recent workover projects on six existing CBM wells and the expansion of water-handling facilities associated with two of the recent CBM completions. Four wells (the Bohena-3, Bohena-9, Bohena South-1 and the Bibbliwindi-1) were re-worked to replace failed pumps, lower pumps in the wells or to install larger capacity pumps. One horizontal well, the Bohena-4L was flushed to remove coal fines. In addition, new larger water storage and handling facilities were constructed and placed into service for the Bohena South-1 and Bibbliwindi-1 wells. Two wells drilled in previous work programs, the Bohena-3 and the Bohena-7, have been returned to production. The Eastern Star Gas Limited press release can be found on their website (www.easternstar.com.au).

Test results on these wells to date are encouraging, with the measured gas and water production rates performing as expected for "unconfined" wells and supporting a reservoir and production model interpretation indicative of a major CBM province with the potential for 3 to 5 BCF in recoverable reserves per well and projected peak production rates of over 1 MMCFD per well.

Another recent development positively effecting the PEL 238 concession is the fact that the area of known coal deposits within the concession area was significantly increased as a result of the drilling of the Maules Creek coal formation in the Conarah-7 well, a conventional well drilled by ESG in April 2005. The confirmation of the Maules Creek coal formation in the Coonarah-7 well extends the known aerial extent of the coals north and west and provides further confidence that the coal seam can be accurately mapped using existing seismic data.

Of particular importance to the potential commerciality of the PEL 238 concession is the recent announcement by an Australian pipeline company (Central Ranges Natural Gas) that it is planning to build a AU $120 million, 303 kilometer natural gas pipeline to an area approximately 125 kilometers south the current area of activity in PEL 238. Besides eliminating the need for Gastar and its JV partners to solely develop infrastructure to get CBM production from PEL 238 to major gas markets in Sydney and Newcastle, the existence of a viable market for PEL 238 CBM production could result in an acceleration of the booking of proved, probable and possible reserves associated with the PEL 238 concession. Netherland, Sewell & Associates, Inc., Gastar's independent third-party reservoir engineering firm, has previously projected recoverable CBM reserves for the PEL 238 concession of approximately 8.7 trillion cubic feet (TCF) or approximately 2.6 TCF net to Gastar's ultimate 35% working interest position.

Finally, recent announcements by two other Australian CBM companies, Queensland Gas Company (ASX: QGC) and Arrow Energy NL (ASX: AOE), that they have booked 1.0 TCF and 2.0 TCF of 3P (Proved, Probable and Possible) CBM reserves (certified by Netherland, Sewell & Associates, Inc.) in their respective Australian CBM projects has provided additional comfort to Australian gas users that CBM will be a reliable resource and has established large scale commercial success for CBM in basins immediately north of the Gunnedah Basin (PEL 238).

EL 4416, Gippsland Basin, Victoria, Australia

Gastar, owner of a 75% working interest, along with its joint venture partner, CBM Resources Pty, Ltd. (a subsidiary of Geostar Corporation, a significant shareholder in Gastar), have recently completed the drilling of the first dedicated CBM pilot well, the Burong #2, on the EL 4416 concession area in the Gippsland Basin of Victoria, Australia. The well was drilled to a depth of 692 meters (2270 feet) and will be completed in approximately 45 feet of coal. The well was drilled in this location in order to allow the testing of a portion of the coals that had previously been drilled and showed signs of being gas bearing and permeable in nearby conventional exploratory wells.

Gastar and CBM Resources Pty, Ltd. have initiated operations on a second well, the Burong #3. The Burong #3 is located approximately 250 meters from the Burong #2 and is designed to test the same coal section as the Burong #2 The Burong #3 is expected to reach total depth in approximately 3 weeks. Following the drilling of the Burong #3 well, the company plans to complete both wells using completion techniques commonly used in the Powder River Basin of Wyoming and Montana. The open-hole completions will be stimulated with water enhancements to flush away coal fines and will be put on production to gauge water and gas rates.

Gastar Exploration, Ltd. is an exploration and production company focused on finding and developing natural gas assets in North America and Australia. The Company pursues a balanced strategy combining low-risk CBM development with select higher risk, deep natural gas exploration prospects. Gastar's CBM activities are conducted within the Powder River Basin of Wyoming and upon the approximate 4 million acres controlled by Gastar and its Joint Development partners in Australia's Gunnedah Basin, PEL 238 and Gastar's Gippsland Basins located in New South Wales and Victoria respectively. The Company owns and controls exploration and development acreage in the Deep Hilltop Sand gas play of East Texas as well as in the deep Trenton-Black River play in the Appalachian Basin.

Safe Harbor Statement and Disclaimer

This Press Release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934. A statement identified by the words "expects," "projects," "plans," and certain of the other foregoing statements may be deemed "forward-looking statements." Although Gastar believes that the expectations reflected in such forward-looking statements are reasonable, these statements involve risks and uncertainties that may cause actual future activities and results to be materially different from those suggested or described in this press release. These include risks inherent in the drilling of oil and natural gas wells, including risks of fire, explosion, blowout, pipe failure, casing collapse, unusual or unexpected formation pressures, environmental hazards, and other operating and production risks inherent in oil and natural gas drilling and production activities, which may temporarily or permanently reduce production or cause initial production or test results to not be indicative of future well performance or delay the timing of sales or completion of drilling operations; risks with respect to oil and natural gas prices, a material decline in which could cause the Company to delay or suspend planned drilling operations or reduce production levels; and risks relating to the availability of capital to fund drilling operations that can be adversely affected by adverse drilling results, production declines and declines in oil and gas prices and other risk factors as described in the Company's Annual Information Form filed as of March 30, 2005, on the System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com.

The Toronto Stock Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • Contact Information:
    Gastar Exploration, Ltd.
    1331 Lamar, Suite 1080
    Houston, TX 77010
    (713) 739-1800
    FAX (713) 739-0458
    Attention J. Russell Porter

    E-Mail: rporter@gastar.com
    Web Site: www.gastar.com