Canaccord analyst Stephen Berman offers insight into Gastar Exploration Inc (NYSEMKT:GST) after visiting the energy company’s Katy 21-1H Meramec well, which drills in Kingfisher County, close proximity to GST’s first operated stack well, the “successful” Deep River 30-1H. Berman notes that Deep River 30-1H “continues its strong performance,” highlighting a recent post-peak 230-day gross average daily rate of 513 Boe/d (53% oil).
In reaction, Berman reiterates a Buy rating on shares of GST with a $1.50 price target, which represents a 47% increase from where the stock is currently trading.
Other Meramacel wells are in progress, with The Holiday Road 2-1H continuing in “flowback.” The analyst notes, “This is the shallowest Meramec well GST has drilled, and should it not be successful, the company believes only ~700 net acres to the north and east would be compromised. GST now has two STACK rigs drilling, with a third likely to be brought on in late 2016/early 2017.”
“With the sale of its Appalachian assets, GST has become the only pure Mid-Continent player in Oklahoma, with 109K net acres having STACK potential in the Meramec, Osage, Oswego, Woodford, and/or Hunton. Proceeds from GST’s successful equity raise in May 2016 are partly being used for an expanded drilling program to prove out its STACK acreage. We expect to get news regarding liquidity enhancements in the short term, which could be a nice catalyst for the stock,” Berman concludes.
As usual, we recommend taking analyst notes with a grain of salt. According to TipRanks, analyst Stephen Berman is ranked #4,065 out of 4,183 analysts. Berman has a 39% success rate and faces a loss of 14.4% in his annual returns. When recommending GST, Berman loses 21.4% in average profits on the stock.
TipRanks analytics indicate GST as a Buy. Based on 3 analysts polled in the last 3 months, 2 rate a Buy on GST, while 1 maintains a Hold. The 12-month price target stands at $1.33, marking a 33% upside from where the shares last closed