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GASTAR EXPLORATIONWhat is the Utica worth?

Union Square Research Group

646-706-7633info@unionsquareresearch.com 3/13/14

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Disclaimer

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As of the publication date of this report, the author, employees of Union Square Research

Group, LLC (USRG)and their families hold long positions and may own option interest in

Gastar Exploration. Clients of USRG may also hold long or short positions in the securitiesmentioned and may buy or sell such securities at any time and without the knowledge of

USRG. This report represent the opinions of USRG. The Author has obtained all information

herein from sources we believe to be accurate and reliable. However, such information is

presented asis,without warranty of any kind whether express or implied. All expressions of

opinion are subject to change without notice, and the Author does not undertake to update or

supplement this presentation or any information contained herein. This document is forinformational purposes only. The Authors opinions and estimates constitute a best efforts

judgment and should be regarded as indicative, preliminary and for illustrative purposes only.

Any investment involves substantial risks. This reports estimated fundamental value only

represents a best efforts estimate of the potential fundamental valuation of a specific security,

and is not expressed as, or implied as, assessments of the quality of a security, a summary of

past performance, or an actionable investment strategy for an investor. This document does not

in any way constitute an offer or solicitation of an offer to buy or sell any investment or security.

To the best of the Authorsabilities and beliefs, all information contained herein is accurate

and reliable. Investors should conduct independent due diligence on all securities and

companies discussed in this document and develop a stand-alone judgment of the relevant

markets prior to making any investment decision.

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Investment OpportunityRapid run-up in share price overshadows a dramatic

increase in NAV during 2013.

We believe the current share price is below the private

market value of the two major producing assets.

The sell side hasnt yet given the company credit for Uticashale upside potentially worth an incremental $5/share

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Operations

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West Virginia

Contiguous blocked up land

position across roughly 16,000net acres in the super rich

Marcellus shale (Utica rights

across 13,000+ net acres)

Oklahoma

120,000+ net acre position in the

high-return emerging Hunton

Limestone oil play

Two high-IRR development areas

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West Virginia High-return Marcellus shale

development project

~35 MMcfe/day production (1/3 liquids)

~16,000 net acres in the liquids rich

fairway

40% IRRs, 57+ net undrilled locations

Utica shale upside potential Potential 100% IRRs, 80+ net locations

Significant near term upside from

exploration largely funded by others

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Oklahoma Non-shale oil reservoir

~18 MMcfe/day production (2/3 liquids)

120,000+ net acres (200+ future locations)

Horizontal wells access natural fractures in

oil impregnated limestone reservoir

Lower cost & lower risk

High IRR play (60%+ IRR) is less variable

than Miss Lime

No large wastewater disposal costs

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Valuation Methodology

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Union Square Research Group has been at the forefront ofunconventional oil and gas resource valuation. For more

information see: Getting Ahead by Drilling Down.

Evaluation of geological aspects of a petroleum

system and reservoir predict ultimate recoveries,

consistency of results, and geographic sweet spots.

Evaluation of both the legal and geographic details of a

companys leasehold position is a crucial step, without

which it is impossible to build an accurate development

model.

Building conservative type-curves based on all relevant

producing wells as well as analogous historic results (whereappropriate) and state production data allows the creation of a

realistic development model.

If accurate information is gathered in the first three steps, it is

possible using conservative assumptions to build a discounted

cash flow model of field development. This is the methodology

used by sophisticated acquirers of assets of this type.

DCF

MODEL

TYPE-CURVE

GEOLOGY

LEASEHOLD

https://sumzero.com/sp/shaleassetshttps://sumzero.com/sp/shaleassets

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Valuation

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What is the Utica exposure worth? Two major data points:

American Energy Partners (Aubrey McClendon)recent acquisition from Hess

McClendon paid $924 million to purchase 74,000 net acres in thedry gas Utica shale from Hess (January 29th, 2014)

$12,486 per net acre deal metric (no significant production)

Two December 2013 dry gas wells brought online at ~18MMcf/day

Recent Operator Results

Gulfport (GPOR) reported its first dry gas Utica well came online at30.3 MMcf/day (November 5th, 2013)

Magnum Hunter (MHR) reported its first dry gas Utica well came

online at 32.5MMcf/day (February 14th, 2014)

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Valuation

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Dry gas Utica well results improve to the South and areexpected to improve to the West (deeper/higher pressure)

HessCross Creek A 2H-20

17.7 MMcf/day

HessSmithfield A 1H-2718.1 MMcf/day

Gulfport

Irons 1-4H30.3 MMcf/day

Magnum HunterStadler #3UH32.5 MMcf/day

AEP/Hess

acquisition area

shown in yellow

($12,486/acre)

Indicated dry

gas Utica sweet

spot shown ingreen

Gastar acreage

shown in blue

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Valuation

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Marcellus + Hunton Liabilities + Utica Upside

We value the Marcellus and Hunton Limestone assetson a risked development basis

Utica upside potentially adds $2.645.28 per share

At AEP/Hess metric, GastarsUtica is worth an incremental $162.3million or $2.64 per share ($9.61 per share total60% upside)

Well results and geology suggest Gastarsacreage may be twice asvaluable as the acreage Hess sold, which would add $325 million or

$5.28 per share ($12.25 per share total104% upside)

Value ($MMs) Per Share

Marcellus $455.5 $7.39

Hunton Limestone $451.0 $7.32

Long Term Debt ($325.0) ($5.28)

Perpetual Preffered Shares ($152.0) ($2.47)

Total equity value: $429.5 $6.97

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