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Gastar Exploration Inc. – ‘424B5’ on 9/19/14

On:  Friday, 9/19/14, at 5:27pm ET   ·   Accession #:  1193125-14-347242   ·   File #:  333-193832

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 9/19/14  Gastar Exploration Inc.           424B5                  1:755K                                   RR Donnelley/FA

Document/Exhibit                   Description                      Pages   Size 

 1: 424B5       Prospectus                                          HTML    594K 

Table of Contents

Filed Pursuant to Rule 424(b)(5)
Registration No 333-193832

PROSPECTUS SUPPLEMENT

(To Prospectus dated February 24, 2014)

17,000,000 Shares

Gastar Exploration Inc.

Common Stock

This is an offering of 17,000,000 shares of the common stock of Gastar Exploration Inc.

Our common stock trades on the NYSE MKT LLC (“NYSE MKT”) under the symbol “GST.” The last reported trading price of our common stock on September 18, 2014 was $6.52 per share.

Investing in our common stock involves risks. See “Risk Factors” beginning on page S-17 of this prospectus supplement and page 7 of the accompanying base prospectus.

We have granted the underwriters a 30-day option to purchase up to 2,550,000 additional shares of common stock on the same terms and conditions as set forth above.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed on the adequacy or accuracy of this prospectus supplement. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the shares on or about September 24, 2014.

Prospectus Supplement dated September 18, 2014

Table of Contents

TABLE OF CONTENTS

Prospectus

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ABOUT THIS PROSPECTUS SUPPLEMENT

This document is in two parts. The first part is the prospectus supplement and the documents incorporated by reference herein, which describes the specific terms of this offering of our common stock. The second part is the accompanying base prospectus, which gives more general information, some of which may not apply to our common stock or this offering. If the information relating to the offering varies between the prospectus supplement and the accompanying base prospectus, you should rely on the information in this prospectus supplement.

You should rely only on the information contained in or incorporated by reference into this prospectus supplement, the accompanying base prospectus and any related free writing prospectus. We have not, and the underwriters have not, authorized any dealer, salesman or other person to provide you with additional or different information. If anyone provides you with different or inconsistent information, you should not rely on it. This prospectus supplement and the accompanying base prospectus are not an offer to sell or the solicitation of an offer to buy any securities other than the securities to which they relate and are not an offer to sell or the solicitation of an offer to buy securities in any jurisdiction to any person to whom it is unlawful to make an offer or solicitation in that jurisdiction. You should not assume that the information contained in this prospectus supplement is accurate as of any date other than the date on the front cover of this prospectus supplement, or that the information contained in any document incorporated by reference is accurate as of any date other than the date of the document incorporated by reference, regardless of the time of delivery of this prospectus supplement or any sale of a security.

CERTAIN TERMS USED IN THIS PROSPECTUS SUPPLEMENT

Unless indicated otherwise in this prospectus supplement or the context requires otherwise:

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WHERE YOU CAN FIND MORE INFORMATION

We have filed a registration statement with the Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “Securities Act”), that registers the offer and sale of the common stock covered by this prospectus supplement and the accompanying base prospectus. The registration statement, including the exhibits attached to the registration statement, contains additional relevant information about us.

We incorporate by reference information into this prospectus supplement. This means that we are disclosing important information to you by referring you to another document filed separately with the SEC. The information incorporated by reference is considered to be part of this prospectus supplement, except for any information superseded by information contained expressly in this prospectus supplement, and the information that we file later with the SEC will automatically supersede this information. We incorporate by reference the documents and financial statements (including related auditor’s reports) listed below, which were filed with the SEC by us, other than any portions of the respective filings that were furnished (pursuant to Item 2.02 or Item 7.01 of Current Reports on Form 8-K or other applicable SEC rules) rather than filed:

Any future filing we make with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (excluding any information furnished pursuant to Item 2.02 or Item 7.01 on any Current Report on Form 8-K), including all such documents or amendments we may file with the SEC before the termination of the offering of securities under this prospectus supplement will be deemed to be incorporated by reference into this prospectus supplement and will be a part of this prospectus supplement from the date of the filing of the document. Any statement contained in a document incorporated or deemed to be incorporated by reference into this prospectus supplement will be deemed to be modified or superseded for purposes of this prospectus supplement to the extent that a statement contained in this prospectus supplement or in any other subsequently filed document that also is

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or is deemed to be incorporated by reference into this prospectus supplement modifies or supersedes that statement. Any statement that is modified or superseded will not constitute a part of this prospectus supplement, except as modified or superseded.

You may request a copy of these filings, other than an exhibit to these filings unless we have specifically incorporated that exhibit by reference into the filing, at no cost, by writing or calling:

Gastar Exploration Inc.

1331 Lamar Street, Suite 650

Houston, TX 77010

Attention: Investor Relations

(713) 739-1800

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This prospectus supplement includes forward-looking information that is intended to be covered by the “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act and Section 21E of the Exchange Act. All statements other than statements of historical fact included or incorporated by reference in this prospectus supplement are forward-looking statements, including without limitation all statements regarding future plans, business objectives, strategies, expected future financial position or performance, expected future operational position or performance, budgets and projected costs, future competitive position or goals and/or projections of management for future operations. In some cases, you can identify a forward-looking statement by terminology such as “may,” “will,” “could,” “should,” “expect,” “plan,” “project,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “pursue,” “target” or “continue,” the negative of such terms or variations thereon, or other comparable terminology.

The forward-looking statements contained in this prospectus supplement are largely based on our expectations and beliefs concerning future developments and their potential effect on us, which reflect certain estimates and assumptions made by our management. These estimates and assumptions reflect our best judgment based on currently known market conditions, operating trends, and other factors. Forward-looking statements may include statements that relate to, among other things, our:

Although we believe such estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties that are beyond our control. As such, management’s assumptions about future events may prove to be inaccurate. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf. Management cautions all readers that the forward-looking statements contained in this prospectus supplement are not guarantees of future performance, and we cannot assure any reader that such statements will be realized or that the events and circumstances they describe will occur. Factors that could cause actual results to differ materially from those anticipated or implied in the forward-looking statements herein include, but are not limited to:

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You should not unduly rely on these forward-looking statements in this prospectus supplement, as they speak only as of the date of this prospectus supplement. Except as required by law, we undertake no obligation to publicly update, revise or release any revisions to these forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise, to reflect events or circumstances occurring after the date of this prospectus supplement or to reflect the occurrence of unanticipated events.

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SUMMARY

This summary highlights basic information about our business and this offering. It does not contain all of the information that may be important to you and your investment decision. The following summary is qualified in its entirety by the more detailed information and financial statements and notes thereto included or incorporated by reference in this prospectus supplement and the accompanying base prospectus. We urge you to read carefully the entire prospectus supplement, the accompanying base prospectus and the documents we have incorporated by reference, including our financial statements and the notes to those statements, before making an investment decision. We also encourage you to read “Risk Factors” and our discussion of other risks and uncertainties in our reports filed with the SEC under the Exchange Act, particularly our Annual Report on Form 10-K for the year ended December 31, 2013 and our Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2014 and June 30, 2014, which are incorporated by reference into this prospectus supplement and the accompanying base prospectus.

Unless otherwise indicated or required by the context, (i) for any date or period prior to January 31, 2014, “Gastar,” the “Company,” “we,” “us,” “our” and similar terms refer collectively to Gastar Exploration, Inc.(formerly known as Gastar Exploration Ltd.) and its subsidiaries, including Gastar Exploration Inc. (formerly known as Gastar Exploration USA, Inc.), and for any date or period after January 31, 2014, such terms refer collectively to Gastar Exploration Inc. and its subsidiaries, (ii) “Gastar USA” refers to Gastar Exploration USA, Inc., which until January 31, 2014 was a first-tier subsidiary of Gastar Exploration, Inc. and primary operating company as of December 31, 2013, (iii) “Parent” refers to Gastar Exploration, Inc., (iv) all dollar amounts appearing in this prospectus supplement and the accompanying base prospectus are stated in United States dollars (“U.S. dollars”) unless otherwise noted and (v) all financial data included in this prospectus supplement and the accompanying base prospectus have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”). On January 31, 2014, Gastar Exploration, Inc. merged with and into Gastar USA as part of a reorganization to eliminate the holding company corporate structure of Parent. Pursuant to the merger agreement, shares of Parent’s common stock were converted into an equal number of shares of common stock of Gastar USA and Gastar USA changed its name to “Gastar Exploration Inc.” Gastar Exploration Inc., together with its subsidiary, owns and will continue to conduct Gastar’s business in substantially the same manner as was being conducted by Parent and its subsidiaries prior to the merger.

We have provided definitions for some of the natural gas and oil industry terms used or incorporated by reference in this prospectus supplement and the accompanying base prospectus in the “Glossary of Terms” on page A-1. We have provided definitions for certain other terms used in this prospectus supplement and the accompanying base prospectus on page S-ii under the heading “Certain Terms Used in this Prospectus Supplement.” Unless otherwise noted, all references to a well refer to a horizontal well. Unless another date is specified, all operational data presented in this prospectus supplement is as of August 31, 2014.

Company Overview

We are an independent energy company engaged in the exploration, development and production of oil, condensate, natural gas and NGLs in the United States. Our principal business activities include the identification, acquisition, and subsequent exploration and development of oil and natural gas properties with an emphasis on unconventional reserves, such as shale resource plays. In Oklahoma, we are currently pursuing development within the primarily oil-bearing reservoirs of the Hunton Limestone horizontal play and will test other prospective formations on the same acreage, including the Woodford Shale and the Meramec Shale (middle Mississippi Lime), which we refer to as the Mid-Continent Stack Play. In West Virginia, we are continuing the development of liquids-rich natural gas in the Marcellus Shale and are beginning to drill the dry gas Utica Shale play on our acreage. We believe that the quality and diversity of our properties reduces our development risk and allows us to take advantage of underlying economic and commodity pricing trends.

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As of June 30, 2014, our total proved reserves based on SEC pricing, as estimated by Wright & Company, Inc. (“Wright”), were 78.0 MMBoe (467.9 Bcfe), consisting of 20.4 MMBbl of oil, 253.7 Bcf of natural gas and 15.3 MMBbl of NGLs. The PV-10 value of these proved reserves as of June 30, 2014 was approximately $826.3 million based on SEC pricing. See “—Summary Historical Reserves and Historical and Pro Forma Production Data” for additional information regarding our reserves and a reconciliation of PV-10, a non-GAAP financial measure, to standardized measure of discounted future net cash flows relating to proved oil and natural gas reserves.

Since 2010, we have successfully utilized pad drilling techniques along with horizontal drilling technologies and multi-stage hydraulic fracture stimulation to increase our production and reserves. As of August 31, 2014, we have successfully drilled and completed a total of 25 gross (14.0 net) wells in the Hunton Limestone play, 57 gross (27.0 net) wells in the Marcellus Shale play and one gross (0.5 net) well in the Utica Shale play.

For the six months ended June 30, 2014, we placed on production 10 gross (5.6 net) wells in the Hunton Limestone play. During this same period, average daily production on our properties increased approximately 17% to 9.6 MBoe/d compared to the six months ended June 30, 2013 and increased approximately 8% compared to our annual average daily production for 2013. We have also increased our percentage of oil and NGLs production from 28% in the six months ended June 30, 2013 to 45% in the six months ended June 30, 2014. Since June 30, 2014, we have placed on production seven gross (4.1 net) wells in the Hunton Limestone play and one gross (0.5 net) well in the Utica Shale play. We are scheduled to bring on production an additional 11 gross (6.8 net) wells in the Hunton Limestone play and 10 gross (5.0 net) wells in the Marcellus Shale play by year-end.

Through recent expansions of our acreage position and drilling activity, we believe that we have created a multi-year inventory of drilling opportunities throughout our properties. We have identified 520.0 net potential drilling locations in the Hunton Limestone play, 512.0 net potential drilling locations in the Mid-Continent Stack Play, 106.0 net potential drilling locations in the Marcellus Shale play and 58.5 net potential drilling locations in the Utica Shale play.

As of June 30, 2014, our cash balance was $24.8 million and we had $20.0 million of debt outstanding under our revolving credit facility (the “Revolving Credit Facility”). The borrowing base for the Revolving Credit Facility was increased from $120 million to $145 million on August 13, 2014. We intend to use part of the net proceeds from this offering to repay all the outstanding borrowings under our Revolving Credit Facility as described under “Use of Proceeds.”

Our Properties

Unless otherwise indicated, the following table presents summary data for each of our primary areas of development as of June 30, 2014.

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Our identified net potential drilling locations in the Marcellus Shale and Utica Shale are actual surface locations that have been specifically identified by management for future drilling units based on an evaluation of applicable geological, seismic, engineering, production and reserve data on nearby acreage and geological formations, including successful drilling efforts by other operators in the area. In identifying net potential drilling locations in the Marcellus Shale, we have assumed 400-foot well spacing, which we have recently successfully tested. In identifying net potential drilling locations in the Utica Shale area, we have assumed 1,000-foot well spacing.

For more information about our proved reserves and production data, see “—Summary Historical Reserves and Historical and Pro Forma Production Data.”

Mid-Continent

We have recently focused on a new horizontally drilled oil play in Oklahoma primarily targeting the Hunton Limestone formation, which we refer to as our Mid-Continent area. The Hunton Limestone is a limestone formation stretching over approximately 2.7 million acres mainly in Oklahoma, but also in the neighboring states of Texas, New Mexico and Arkansas. Hunton Limestone economics are attractive due to the high quality oil production, the associated production of high Btu content natural gas in the area and low water volumes produced with the oil. We began building an acreage position in the Mid-Continent area in 2012 through a joint venture with a privately held third-party operator, which we refer to as our AMI Partner. Initial operations with our AMI Partner were focused in an AMI in Garfield and Kingfisher Counties, Oklahoma, but subsequently expanded to include additional AMIs covering portions of Garfield, Major and Blaine Counties in Oklahoma. On certain mutually-owned interests, our AMI Partner handles all drilling, completion and production activities, while we handle all leasing and permitting activities.

In 2013, we significantly expanded our Mid-Continent position through the acquisition of approximately 157,000 net acres of Oklahoma oil and gas leasehold interests, including production from 206 producing wells located in Oklahoma, from the Chesapeake Parties and the acquisition of a 98.3% working interest (80.5% net revenue interest) in 24,000 net acres in the WEHLU from the Lime Rock Parties. As of June 30, 2014, our consolidated position in the Mid-Continent area consisted of approximately 222,800 gross (126,000 net) acres and 520.0 net potential drilling locations in areas prospective for the Hunton Limestone horizontal oil play and 512.0 net potential drilling locations in the Mid-Continent Stack Play. We operate approximately 70% of our Mid-Continent net acreage.

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We and our AMI Partner have drilled, completed and placed on production 20 gross (9.4 net) wells in the AMI portion of our Mid-Continent area. We are in the process of completing or commencing flow back operations on six gross (2.5 net) wells and drilling five gross (2.3 net) wells. We have drilled, completed and placed on production five gross (4.7 net) wells on our operated acreage. We are in the process of completing two gross (2.0 net) operated wells and drilling one gross (1.0 net) operated well.

For the six months ended June 30, 2014, our average daily net production in the Mid-Continent area was 3.7 MBoe/d, approximately 68% of which was oil, condensate and NGLs.

Marcellus and Utica Shales

We own, develop and operate properties in West Virginia, and to a lesser extent Pennsylvania, where we target liquids-rich natural gas from the Marcellus Shale formation. The Marcellus Shale is a Devonian aged shale that underlies much of the Appalachian region of Pennsylvania, New York, Ohio, West Virginia and adjacent states. The depth of the Marcellus Shale and its low permeability make the Marcellus Shale an unconventional exploration target in the Appalachian Basin. Advancements in horizontal drilling and stimulation have enhanced results in the Marcellus Shale. These developments as well as the high liquids content of our Marcellus West acreage have resulted in increased leasing and drilling activity in the area. As of June 30, 2014, our acreage position in the play was approximately 81,600 gross (58,900 net) acres. We have approximately 31,400 gross (13,700 net) acres in West Virginia and Pennsylvania subject to the Atinum Joint Venture (described below), which we refer to as our Marcellus West acreage. We have approximately 50,200 gross (45,200 net) acres in Preston, Tucker, Pocahontas, Randolph and Pendleton Counties, West Virginia, which we refer to as our Marcellus East acreage. Our Marcellus West acreage is rich in NGLs and condensate with yields for the six months ended June 30, 2014 averaging approximately 48 barrels of NGLs and 24 barrels of condensate per MMcf of natural gas sold. Our Marcellus East acreage is expected to produce dry natural gas. The entirety of our West Virginia acreage is believed to be in the core, over-pressured area of the Marcellus Shale play. We continue to opportunistically swap acreage with adjacent operators in order to optimize our acreage and maximize horizontal lateral lengths. We estimate that we have 106.0 net remaining potential drilling locations in areas that are prospective for the Marcellus Shale.

The Utica Shale is an Ordovician aged shale that underlies much of the Appalachian region of Pennsylvania, Ohio and West Virginia. The depth of the Utica Shale and its low permeability make it an unconventional exploration target in the Appalachian Basin. Based on log analysis of offsetting wells, our well and other operators’ recent Utica Shale well completions, we believe that approximately 22,500 gross (9,600 net) acres of our Marcellus West acreage should be prospective for high-pressure, high-deliverability dry natural gas development in the Utica Shale. We recently completed our first Utica Shale well, the Simms U-5H, to a total vertical depth of 11,500 feet and drilled a 4,400-foot lateral and completed it with a 25-stage fracture stimulation. The Simms U-5H well initial 48-hour gross sales rate was 29.4 MMcf/d with flowing casing pressure on a 30/64ths choke of approximately 6,700 psi. We estimate that we have 58.5 net remaining potential drilling locations in areas that are prospective for the Utica Shale.

In September 2010, we entered into a joint venture (the “Atinum Joint Venture”), pursuant to which certain of our Marcellus Shale assets are owned on a 50/50 basis with Atinum Partners Co. Ltd. (“Atinum”), and Atinum has the right to participate in any future leasehold acquisition made by us within Ohio, New York, Pennsylvania and West Virginia, excluding certain counties.

The Atinum Joint Venture drilled and completed 57 gross wells by June 30, 2014. All of our current and future Marcellus Shale and Utica Shale well operations in the Marcellus West area will be under the Atinum Joint Venture.

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For the six months ended June 30, 2014, our average daily net production in the Marcellus Shale was 5.9 MBoe/d, approximately 30% of which was oil, condensate and NGLs.

Our Strengths

We possess a number of strengths that we believe will help us successfully execute our business strategy, including:

As of June 30, 2014, the combined PV-10 value of our proved reserves was approximately $826.3 million based on SEC pricing. See “—Summary Historical Reserves and Historical and Pro Forma Production Data” for additional information regarding our reserves and a reconciliation of PV-10, a non-GAAP financial measure, to standardized measure. Of our proved reserve volumes, 54% were natural gas and 46% were oil, condensate and NGLs.

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Our Strategies

Our objective is to create shareholder value by assembling a portfolio of assets with attractive economic profiles and cost effectively growing our reserves, production and cash flows. We seek to achieve this objective by executing the following strategies:

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Recent Developments

Capital Budget

Total capital expenditures for the second half of 2014 are currently projected to be approximately $146.5 million. During the second half of 2014, in the Appalachia Basin and Mid-Continent area, we expect to spend approximately $58.5 million and $63.4 million, respectively, for drilling, completion and infrastructure costs. In addition, we have allocated approximately $21.3 million for land and seismic expenditures and $3.3 million for capitalized interest and other costs. Full-year 2014 total capital expenditures are currently projected to be approximately $224.4 million, comprised of $85.0 million in the Appalachian Basin, $133.4 million in the Mid-Continent area and $6.0 million of capitalized interest and other costs.

Our 2015 capital budget includes approximately $222.7 million of drilling, completion and infrastructure costs, which is expected to provide for 44 gross (27.1 net) wells in the Hunton Limestone play, six gross (3.0 net) wells in the Marcellus Shale play, two gross (1.5 net) wells total in the Utica Shale play, including one gross (0.5 net) horizontal well and one gross (1.0 net) vertical well, and two gross (1.5 net) wells in the Mid-Continent Stack Play. Our 2015 capital budget also includes approximately $28.0 million of land and seismic expenditures and other capitalized costs of approximately $6.6 million, resulting in a total 2015 capital budget of approximately $257.3 million.

We believe that our future lower Hunton Limestone wells will be completed at an average gross cost of approximately $5.5 million with an average 4,200-foot lateral, Marcellus Shale wells will be completed at an average gross cost of approximately $7.8 million with an average 5,000-foot lateral, Utica Shale horizontal wells will be completed at an average gross cost of approximately $16.0 million with an average 6,700-foot lateral, Mid-Continent Stack Play wells will be completed at an average gross cost of approximately $12.0 million with an average 10,500-foot lateral and the Utica Shale vertical well will be completed for approximately $3.0 million. Adjustments to the capital budget may be required based on drilling results or changes in actual or forecasted costs or commodities prices. We are projected to operate approximately 76% and 74% of our budgeted drilling and completion capital expenditures for the remainder of 2014 and the full-year 2015, respectively. As such, we could reduce a significant portion of capital expenditures if necessary to better match available capital resources.

Production Guidance

Based on our approved capital budget and anticipated drilling activity, we estimate average net daily production for the full-year 2015 will range from 15.5 MBoe/d to 18.0 MBoe/d and the percentage of liquids will range from 44% to 48%.

Our estimates are based upon a number of assumptions. Although we believe such estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties that are beyond our control, including uncertainties about the estimated quantities of oil and natural gas reserves and in the projection of future rates of production and timing of development expenditures of proved reserves. Additional information regarding the risks and uncertainties that affect our business is contained in the Risk

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Factors set out on page S-17 of this prospectus supplement and in “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2013, and the guidance provided above should be read in conjunction with the section entitled “Cautionary Statement Regarding Forward-Looking Statements” on page S-v of this prospectus supplement.

Corporate Information

Gastar is a Delaware corporation. Our executive offices are located at 1331 Lamar Street, Suite 650, Houston, Texas 77010. Our telephone number is (713) 739-1800. We maintain a website at http://www.gastar.com. The information on our website is not part of this prospectus supplement or the accompanying base prospectus, and you should rely only on the information contained in this prospectus supplement and the accompanying base prospectus and the documents we incorporate by reference herein when making an investment decision.

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THE OFFERING

Shares of common stock outstanding

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SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA

The following tables set forth summary historical consolidated financial data for the years ended December 31, 2011, 2012 and 2013, the six months ended June 30, 2013 and 2014 and pro forma consolidated financial data for the year ended December 31, 2013. The annual historical financial data are derived from our audited consolidated financial statements and the notes thereto incorporated by reference in this prospectus supplement and the accompanying base prospectus. The data for the six months ended June 30, 2013 and 2014 are derived from our unaudited condensed consolidated financial statements incorporated by reference in this prospectus supplement and the accompanying base prospectus. This data should be read in conjunction with, and is qualified in its entirety by reference to, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and the notes thereto appearing in our Annual Report on Form 10-K for the year ended December 31, 2013 and our Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2014 and June 30, 2014, each of which has been incorporated by reference in this prospectus supplement and the accompanying base prospectus.

The summary pro forma financial data presented for the year ended December 31, 2013 is derived from our unaudited pro forma condensed consolidated financial statements incorporated by reference in this prospectus supplement and the accompanying base prospectus.

The pro forma statements of operations data for the year ended December 31, 2013 has been prepared assuming the Chesapeake Acquisition, the repurchase of 6,781,768 shares of Parent’s common stock from Chesapeake Energy Corporation, the settlement of litigation with Chesapeake Exploration, L.L.C. and Chesapeake Energy Corporation, the AMI Election Disposition, the East Texas Disposition, the offering of our 8 5/8% Senior Secured Notes due 2018 (the “Notes”) and the application of the proceeds therefrom, the WEHLU Acquisition and the issuance and sale of our 10.75% Series B Cumulative Preferred Stock (the “Series B Preferred Stock”) and the application of the proceeds therefrom, were consummated on January 1, 2013. The Newfield Disposition was a disposition of undeveloped oil and gas leasehold interests and is accounted for as an adjustment of capitalized costs, with no gain recognized as such adjustment would not significantly alter the relationship between capitalized costs and proved reserves of oil and natural gas attributable to our full cost pool. Therefore, the Newfield Disposition has no impact on the pro forma statement of operations.

The pro forma financial data have been prepared for illustrative purposes only and do not purport to be indicative of the actual results for the period indicated or that may be realized in the future. Although management believes the assumptions used in preparing these pro forma financial results are reasonable, these assumptions may not be correct, and do not purport to be indicative of statements of financial position or results of operations as of any future date or for any future period. These pro forma financial statements should be read in conjunction with, and are qualified in their entirety by reference to, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and the notes thereto appearing in our Annual Report on Form 10-K for the year ended December 31, 2013, our Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2014 and June 30, 2014 and the unaudited pro forma combined statement of operations for Gastar Exploration, Inc. for the year ended December 31, 2013 filed as Exhibit 99.1 to our Current Report on Form 8-K filed with the SEC on March 25, 2014, each of which has been incorporated by reference in this prospectus supplement and the accompanying base prospectus.

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Reconciliation of Non-GAAP Financial Measures

The following table reconciles net loss in accordance with GAAP to EBITDA and Adjusted EBITDA:

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SUMMARY HISTORICAL RESERVES AND HISTORICAL AND PRO FORMA PRODUCTION DATA

The following tables summarize our historical oil and natural gas proved reserves and production data as of the dates indicated. Our historical reserve information has been derived from reserve reports prepared by Wright. Wright has made the proved reserve estimates for our Marcellus and Utica Shales and our Mid-Continent area as of December 31, 2013 and June 30, 2014.

SEC Case Reserves

Definitions and guidelines established by the SEC regarding the present value of future net cash flows were utilized to prepare the estimates in the table below. Estimates of reserves and their value are inherently imprecise and are subject to constant revision and change, and they should not be construed as representing the actual quantities of future production or cash flows to be realized from oil and natural gas properties or the fair market value of such properties.

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Summary Historical and Pro Forma Production Data

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RISK FACTORS

An investment in our common stock involves a high degree of risk. You should carefully consider the risk factors and all of the other information included in this prospectus supplement, the accompanying base prospectus and the documents we have incorporated by reference into this prospectus supplement, including “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2013, in evaluating an investment in our common stock. If any of these risks were to occur, our business, financial condition or results of operations could be adversely affected. In that case, the trading price of our common stock could decline and you could lose all or part of your investment.

Our expected well results in the Utica Shale and Mid-Continent Stack Play are subject to more uncertainties than those in more established plays.

Our expected drilling results in the Utica Shale and Mid-Continent Stack Play are more uncertain than drilling results in areas that are more developed and have a greater number of producing wells. Since we have limited experience drilling in these plays, we are unable to use past drilling results in those areas to help predict our future drilling results. As a result, our cost of drilling, completing and operating wells in these areas may be higher than initially expected, and the value of our undeveloped acreage will decline if drilling results are unsuccessful. Additionally, we cannot assure you that we will achieve similar results to other wells drilled in these plays, that all prospects will be economically viable or that we will not abandon our investments. We cannot assure you that unproved property acquired by us or undeveloped acreage leased by us will be profitably developed, that wells drilled by us in prospects that we pursue will be productive or that we will recover all or any portion of our investment in such unproved property or wells.

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USE OF PROCEEDS

We expect the net proceeds from this offering to be approximately $101.2 million (or approximately $116.4 million if the underwriters exercise their option to purchase additional shares in full), after deducting estimated fees and expenses (including underwriting discounts and commissions). We intend to use the net proceeds from this offering to repay the outstanding borrowings under our Revolving Credit Facility, to fund our drilling and development program and for general corporate purposes.

As of August 31, 2014, we had $35.0 million of outstanding borrowings under our Revolving Credit Facility, which matures in November 14, 2017 and bears interest at a variable rate, which was approximately 2.16% as of August 31, 2014. The borrowings to be repaid were incurred primarily for our drilling and development program, acquisitions and for general corporate purposes. We may at any time re-borrow amounts repaid under our Revolving Credit Facility.

We will use a portion of the net proceeds of this offering to repay indebtedness owed by us to affiliates of the underwriters that are lenders under our Revolving Credit Facility. As such repayment may constitute more than 5% of the net proceeds, this offering will be made in compliance with the applicable provisions of Rule 5121 of the Financial Industry Regulatory Authority, Inc. The appointment of a “qualified independent underwriter” is not required in connection with this offering as a “bona fide public market,” as defined in Rule 5121, exists for our common stock. See “Underwriting (Conflicts of Interest) — Conflicts of Interest.”

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CAPITALIZATION

The following table sets forth our consolidated cash and cash equivalents and our consolidated capitalization as of June 30, 2014 on: (i) an actual basis; and (ii) an as adjusted basis to give effect to this offering and the application of the estimated net proceeds of this offering in the manner described under “Use of Proceeds.”

This table should be read together with, and is qualified in its entirety by reference to, our historical consolidated financial statements incorporated by reference in this prospectus supplement and the accompanying base prospectus and “Use of Proceeds.”