Gastar to acquire majority working interest in WEHLU block for $187.5m

US-based oil and natural gas explorer Gastar Exploration will acquire a 98.3% working interest (80.5% net revenue interest) in 24,000 acres of the West Edmund Hunton Lime Unit (WEHLU) block in Oklahoma for $187.5m.

Located in Logan and Canadian counties in Oklahoma, WEHLU currently produces 1,200 barrels of oil, 2.7 million cubic feet of natural gas and 428 barrels of natural gas liquids at a daily net sales rate.

As per internal estimates by Gastar, WEHLU has total proved reserves of 11.1 million boe, of which 66% is oil and 43% is proved developed, while the current value of proved reserves is estimated to be $191.3m.

Gastar president and CEO Russell Porter said that the transaction will expand the company's presence in the Hunton play.

"With this acquisition, we now have over 380 net potential drilling locations in our mid-continent oil play," Porter added.

Gastar expects a low-cost, low-risk upside potential from the development of the upper Hunton limestone (Bois d'Arc formation). Furthermore, it also sees potential for substantial, low-risk high-return drilling opportunities in the deeper lower Hunton limestone (Chimney Hill formation) that is yet to be developed.

Moreover, Gastar has found 62 Bois d'Arc PUD locations plus an additional 44 Chimney Hill probable drilling locations within a 7,000-acre northern portion of the block. The company has also listed an additional 60 Bois d'Arc and 40 Chimney Hill well locations that could be developed in the southern portion of the HBP acreage.

The company estimates that the Upper Hunton wells can be drilled at a cost of about $2.3m each, while the lower Hunton wells are estimated to cost $4.5m each.

The first operated horizontal Hunton Limestone well on the acreage is scheduled to be spud this month. The transaction is expected to close in late November.