3SOF

GST – Gastar Explorations Ltd.

*** A full trade plan will be given in the next hour or so.***

We will be buying GST today around the open

Gastar Exploration Ltd. (GST)

Profile: Gastar Exploration Ltd.. The Group's principal activities are exploration, development and production of natural gas and oil in the United States and Australia. It owns and operates exploration and development acreage in the Deep Bossier natural gas play of East Texas and in the deep Trenton-Black River play in the Appalachian Basin. The Group's coal bed methane activities are conducted within the Powder River Basin of Wyoming..
Sector: Oil & Gas Drilling & Exploration
Market Cap: $493M
Website:  http://www.gastar.com

Technical Analysis:

In April, GST broke out a long term bearish trend, initiating not just a rebound but an all new up trend that maybe just on an embryonic phase yet.
The 50-EMA is already above the 200-EMA, both with positive leaning. Volume has been high and above average, especially during the while candles, this situation shows a lot of buying power in play.

Current volatility is high, giving some extra risk to this position, but in the other hand showing a big upside potential in play.
GST technical layout reminds me another stock, ROYL a while ago, before this new big rally.

Current support levels:
- $2.20 (possible reaction zone)
- $1.85 (50-EMA)
- $1.80 (possible reaction zone)
- $1.60 (200-EMA)

Fundamental Analysis:

GST is a more speculative play, actually we though about adding it to our Speculative Portfolio instead, but we decided to keep in the Diversified Portfolio since we wanted some exposure to this kind of play.

GST is a small $493M cap, fundamentals are improving, from net loses during the past few years to expected profits in 2008 and 2009. Current consensus estimates are a $0.065 EPS for 2008 and $0.125 for 2009 (this is a poll with only 2 research departments covering the company).

Dahlman Rose Research department, actually having the lower inputs in the estimates poll, projected a price target of $3.00 two months ago when the stock was trading at $1.38, here’s that note of research:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=46280;image) (http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=46281)

With the current developments within the sector, and commodities prices, I believe these targets and estimates will go up.

Trading Thesis:
Again this is a sector play, in this case a more speculative play, but with huge potential in play. Technical Analysis is bullish, and I wouldn’t be surprised to watch something like what happened in ROYL.

Trading Plan:
HOLD GST

Regards,

Update:

Yesterday was not a good day for oil related stocks in general, as the crude oil futures were down more than 3%, with that said our entry timing was a bit compromised, but even so nothing was changed on the current bullish layout.

GST had a very volatile session, but in this case this is normal, given the speculative nature of this stock in particular.

I'm setting a stop level slightly below the 50-EMA:

The trading plan is:

Trading Plan:
Hold GST with a stop @ $1.80

Best regards,

The natural gas ETF UNG is a good proxy to watch to see what will happen in GST.  Unfortunately there was a huge volume down day on Thursday, in fact the largest ever volume in UNG.  However Friday we saw a harami so moderate potential for trend not being reversed.  Energy was looking weak because of Saudi prodduction increase expectation, china dropping fuel subsidies, etc.  Also, nat gas inventory reports were very high, thus the selloff. 

But right now energy sounds like its going to stay strong from the news I heard this Saturday morning.  The Iraq/Iran tensions continue.  Saudis can raise production by 200,000 barrels, but Nigeria just lost 130,000 barrerls/day due to pipeline attacks, so that is almost nullified.  USO and UNG track each other fairly closely, so the correlation to oil is important.

GST does appear to have great potential, especially if natural gas stays around its current price, and even more so if it continues in its bullish channel (which is still intact espite recent down days).

what a nice breakout with drilling update  >:D

Update:

Yesterday GST jumped 16% ;)
The following news were in play:

Quote from Pritchard Capital Partners:

QuoteMonday, June 23, 2008
                                                                                 
Gastar Exploration Ltd. (GST-$2.23) - LOR #6 Looks Like a Big Winner             
                                                                                 
GST put out an operations update this morning, highlighted by the Lone Oak Ranch #6 Middle Bossier well in East Texas. The well encountered two productive sands and was completed in the deepest pay zone and placed on production on June 21 at a gross sales rate of 17.5 MMcf/d. Based on our discussions with the company, the rate is facilities restricted and could get to ~25 MMcf/d without drawing on the well too hard once the issue is resolved, which we expect to happen shortly.

The company is evaluating plans for completing the second zone and co-mingling the production. The second zone has similar porosity and resistivity to the first and could have a significant IP rate also. The well was drilled using a slim-hole casing design, and the $8.4 million cost to drill and complete the LOR #6 to date is significantly below the assumed average of $12 million for a Bossier well, which was expected. We believe the EUR for the well should be above the 7 Bcfe we use in our NAV model. We continue to like GST a lot at current levels and see substantial upside ($2 to $3) to our NAV over  the next 18 months (or sooner) as things unfold in both Australia and East Texas. (SB)

GST managed to drill LOR 6 for $8.4 million, below an expected cost average of $12 million, this is good news since one of the main risks on this kind of plays are over the budget costs causing more financial damage, etc.

With yesterday's  price action GST closed at $2.60, the highest close value of the current rally, but still below the $2.75 recent high.
This technical setup is nicely developing, reacting to both company news and commodities price increases, we can expect upside continuation at anytime soon.

Trading Plan:
Hold GST with a stop @ $1.80

Best regards,

GST: Acquires 35% Interest in Wilga Park Power Station
Monday , June 30, 2008 08:48ET


Gastar Exploration Ltd. (GST) announced that it is acquiring a 35% interest in the Wilga Park Power Station in New South Wales, Australia from its joint venture partner, Eastern Star Gas Limited (ASX:ESG). The acquisition also includes a 35% working interest in Petroleum Production License 3 (PPL3), which contains the Coonarah conventional gas field. Gastar will pay Eastern Star total consideration of US$3.25 million.

;)

to be bounced back this week ... ;)

here we are with the bounce back  ;D

GST July presentation:
http://files.shareholder.com/downloads/GST/355829391x0x211338/d406b3f1-11bf-4d78-a8b0-23ad087b3020/GastarJuly2008.pdf

chart:

Update:

Thanks for the news and analysis La-onda applaud.

After testing the highs around $2.70 a few days back GST pulled back and found solid support around the $2.20 zone which has been touched and tested multiple times since GST started trading above the $2 levels. A nice reversal of the support area looks set to push the stock to challenge the highs again.

Based on that support and reversal being found I will adjust the trailing stop up to $1.95. Positioned safely behind various support levels.

Trade Plan:

HOLD GST with NEW STOP $1.95

bullish charting with two hammers testing the 50MA support @ 2.16$

thats a bullish hammer  >:D

Quote from: la-onda on July 18, 2008, 11:16:53 PM
thats a bullish hammer  >:D

Too bad we got stopped out.....AGAIN!

Aussie,

I had 2,000 shares stopped in one account at 1.93 and my other account 2000 sold at 1.94/1.95


Can you supply me with some questions to ask my broker on this transaction?

Would they give back the shares?

Brad

Hi Basanlas,

Here is a transcript of my communication to broker:
---------------------------
Hi there,

I was shocked and disappointed to find my position in GST was stopped out on Friday.

Looking at Time and Sales data I see there was some irregular trading which occured causing what I consider to be an unacceptable fill on my position. GST opened at $2.17 and was trading normally for a few minutes then at 09:34 4 block trades went through for exactly the same volume 18,787 each, the first 2 went at $2.15 (normal), the 3rd went through at $1.90 (suspicious) the 4th at $2.03 (suspicious). After that there was never any transaction or bid/ask anywhere near $2.

I consider that block trade at $1.90 to be erroneous, it looks to me to be a manipulated trade designed with the express purpose of triggering unsuspecting traders stops. I suspect no one (except for the entity who manipulated the order) bought any shares below $2 rather everyone with a stop got sold out cheaply to this entity.
I am requesting you investigate this order on my behalf in light of the irregular way it appears in time and sales with a view to re-assesing the fill price or re-instating the position.

Thanks in advance
-----------------------------

Thanks Aussie !

Here's what Etrade said.
Attention Brokerage Customer


I have reviewed the trade inquiry that was filed on your behalf. Upon reviewing the data, you received an accurate fill. There will be no adjustment made. After your stop order was triggered by the NBBO at 1.95, you received execution within 1 second. You filled at the prevailing price listed.


bullsh**

Hey all,

Yep I had a similar answer from my broker. That said, whenever you have a question or an issue with any trade execution never be afraid to ask your broker to justify / explain. Sometimes it uncovers errors that otherwise would never be highlighted.

fyi:
Gastar Exploration: Hot property
Friday August 1, 6:20 am ET
Jennifer Allen

It's a beautiful day in Gastar Exploration Ltd.'s (AMEX:GST - News) neighborhood. The post-person delivers, dogs bark, the sun sparkles and the coal beds are full of methane. Not only that, the next-door neighbors find a fortune under their backyard patio. Like the realtors say: location, location, location.

Gastar, a natural gas explorer and producer operating onshore in the United States and Australia, has its share of prime real estate. Its domestic drilling focus is on exploiting its multi-year inventory of locations in the Deep Bossier sands and Knowles Limestone plays in the Hilltop area of East Texas. The company also is continuing to exploit its coal bed methane, or CBM, assets in the Powder River Basin of Wyoming and Montana. In Australia, it is developing more than 2.9 million net acres of CBM rights in New South Wales and Victoria, Australia.

Gastar's plan is to generate high initial production and strong cash flow from wells in East Texas and to gain significant reserves through the development of its Australia resources. Its core East Texas properties included 18 producing wells at the end of 2007, which the company plans to grow to 25 this year. In key Deep Bossier, Gastar had a total of 16,300 net acres at the end of December 2007.

East Texas holds a cache of worldly goods, a treasure of oil and gas resources that big-time rollers are paying big bucks to buy. Operators are swarming around the Deep Bossier hive, buzzing about its long-lived resources, high initial production and favorable decline rates.

Last November, EnCana Corp. (NYSE:ECA - News), with market capitalization of $53 billion, paid $2.55 billion to acquire all of the Deep Bossier natural gas and land interests of privately owned Leor Energy in Texas. EnCana now owns 100% of the Amoruso Field, which, in 24 months, went from zero production to more than 215 million gross cubic feet per day.

Let the wealth spread beyond the Amoruso Field to Gastar's property. "Gastar's neighbor in the Deep Bossier has seen huge wells, giving us confidence that even bigger wells for Gastar are around the corner," said analyst Neil Dingmann at Dahlman Rose and Co.

"We believe it is only a matter of time until Gastar begins to find 'sweet spots' on its acreage like EnCana, providing company changing production results from the play," Dingmann said in an April research note.

Dingmann noted that Gastar continues to report positive results from Deep Bossier and to generate drilling locations there. The Knowles section is evolving from an unknown play into an economically viable opportunity, he said, and he also looks for more reserve acreage to be added in Australia. "First production in Australia is a nice step for Gastar, but the big picture of the Australia play is the large scale gas sales to power projects beginning in 2010," Dingmann said.

Dingmann carries Gastar as a "buy" and has a $3 target price based on net asset value. Shares of Gastar settled Wednesday at $2.06 each, within a 52-week range of $0.87 to $2.75. Investors must really be undervaluing Gastar, because Dingmann said: "We believe we are being conservative with Gastar's assets considering the huge potential of the Deep Bossier and Australia assets."

The East Texas assets are already proving their worth. Gastar is expected to turn a profit of $0.06 per share this year, according to the average estimate from two analysts, up from a loss of $0.15 in 2007. In 2009, earnings are seen doubling to $0.13. Revenues are expected to more than double this year to $87.7 million, from $34.6 in 2007. In 2009, they are seen at $108.4 million.

In the first quarter through March, Gastar's net revenues were $15.43 million, doubling last year's $7.52 million, and the company earned a penny per share, compared with a loss of $0.06 for the same quarter in 2007.

At the end of the first quarter, Gastar had $79 million in cash and equivalents, and $14.3 million of net cash were provided by operations. Long term debt was 58.2% of capitalization, in line with peers.

But Gastar — like the rest of the intensely competitive and speculative natural gas and oil industry — is at the mercy of market forces. If prices turn lower, well, then there goes the neighborhood. As a smaller company, Gastar also may have difficulty in other cutthroat aspects of the business, such as acquiring leases and more acreage, and getting the most favorable transportation costs.

The company had 23 employees at the end of 2007, and uses various professionals to perform services such as engineering and regulatory reporting. It relies on outside operators to drill and market its natural gas and oil. Gastar, headquartered in Houston, has market capitalization of $429 million.

Still, it's a beautiful day, all right. And there's a party on Gastar's block.