PostRock (PSTR) Spends $11.9 Million on Development Projects

July 11, 2013

PostRock Energy Corporation (Nasdaq:PSTR) today provided an update on its operations. During the second quarter, the company spent approximately $11.9 million on development projects, primarily targeting oil development and infrastructure. The company's debt at June 30 totaled $77.5 million. Oil sales during the quarter averaged slightly more than 540 Bbls a day, a 50% increase from first quarter levels and more than double the prior year period.

Gas sales during the period declined 11.7% from the prior year period, to an average of 39.9 MMcf per day, as the company has not made material expenditures on gas development projects in the last 21 months. The gas decline rate is expected to moderate as the company's wells move down their decline curve and the fuel savings and increased reliability to be realized from the compression project materialize.  

Based on PostRock's realized oil to gas price equivalency ratio of 23:1, the company's production in the second quarter increased more than 5% from the first quarter and it rose more than 2% from the prior year period.  This marked the first quarter over prior year quarter increase in more than four years.  At June 30, approximately 25% of the company's production was oil based on the above price equivalency ratio.

During the quarter, 58 new wells and 19 recompletions, all focused on oil, were placed on production in the Cherokee Basin. Based on current prices and costs, the estimated average lease level IRR on these projects is believed to exceed 40%. During the second half of the year, an additional 80 oil wells are forecasted to be drilled. In addition, the company will continue to focus on building out the infrastructure required to efficiently handle its rising oil production.

Source: Petro Rock, 2013.