Gastar Exploration has signed an agreement with a global investment fund (investor) to jointly develop up to 60 wells in the Stack Play in Kingfisher County, Oklahoma, US, operated by Gastar.
The drilling programme will target the Meramec and Osage formations within the Mississippi Lime on a contract area within three townships and cover about 18,000 undeveloped net mineral acres under leases held by Gastar.
The company will serve as the operator of all wells that would be jointly developed.
Under the agreement, 90% of Gastar's working interest portion of drilling and completion costs will be funded by the investor to initially earn 80% of the company’s working interest in each new well.
The company will pay 10% of its working interest portion of such costs for 20% of its original working interest in the well.
The proposed wells will be mutually developed in three tranches of 20 wells each and the locations of the first 20 wells have been mutually agreed upon.
Eighteen wells will target the Meramec formation and two wells will target the Osage formation.
The investor will decide on the locations of the second tranche of 20 wells, while the third tranche of 20 wells will require mutual consent.
The agreement is aimed at improving Gastar's ability to hold acreage by production and the increased drilling activity allows for delineation of the company’s Stack acreage.
Gastar Exploration president and CEO Russell Porter said: "This development agreement greatly expands our ability to delineate and hold our acreage in the Stack Play without putting undue pressure on our balance sheet or requiring equity issuances in the current market.
“The structure of this drilling programme, which allows us to revert to 90% of Gastar's original interest after our partner receives a 20% return, reflects our confidence in the quality of our acreage.
“We have already commenced drilling five of the initial 20 wells that will be included in the first tranche of the drilling programme.”