While enjoying continued success in the Midcontinent, Gastar Exploration Inc.’s (NYSE: GST) exit from the Appalachia Basin has been pushed back—and the delay could prove costly.

The divestiture puts Gastar under pressure as the heavily levered company faces a 45% cut in its borrowing base on April 10.

A deal to sell 11,000 net acres of Marcellus Shale and Utica/Point Pleasant properties was originally expected to wrap up in the first quarter of 2016. It is now set to close April 8 in order to obtain a required lessor consent.

That gives Gastar just two days to spare before its borrowing base is automatically reduced to $100 million from $180 million, according to regulatory filings.

Gastar has “little room for error,” said Gordon Douthat, senior analyst at Wells Fargo Securities.

“However, in the event of further delays in closing, we believe GST could potentially negotiate an extension to the scheduled borrowing base reduction pending the receipt of proceeds,” Douthat said in a March 30 report.

Gastar plans to use proceeds from the $80 million deal to reduce the $180 million outstanding borrowings on its revolver. As of March 9, the company’s cash balance was about $28.8 million, according to filings with the Securities and Exchange Commission (SEC).

The company has also agreed to an additional scheduled borrowing base redetermination in August, SEC filings said. This is in addition to its regular semiannual redetermination in November.

“We are highly leveraged and may not be able to generate sufficient cash or cash flows as applicable to service all of our indebtedness or to meet financial covenants under our debt agreements, and may be forced to take other actions to satisfy our obligations under such agreements, which may not be successful, or if successful, could be highly dilutive to existing holders of our common and preferred stock,” the company said in SEC filings.

Gastar entered into an agreement in February with an affiliate of investment firm Tug Hill Inc. for the sale. The deal includes substantially all of the company's producing Appalachia assets, proved reserves and a significant portion of its undeveloped acreage primarily in Marshall and Wetzel counties, W.Va.

RELATED: Gastar’s Basin Swap Nearing Completion Following Marcellus, Utica Deal

Upon closing, the Houston company, which has a field office in Oklahoma City, will emerge as the “only public ‘pure play’ company” focused on the Stack Play, according to J. Russell Porter, Gastar’s president and CEO.

Gastar’s exposure to the Stack Play is about 62,300 net acres in the Meramec Shale play and 48,900 net acres in the Woodford Shale play. The company also owns about 110,400 net acres in the Hunton Limestone Play, of which 45% is HBP.

The effective date of the company’s Appalachia sale remains Jan. 1, the release said.

Stacking Up

On March 30, Gastar reported it completed its second Meramec test well, the Holiday Road 2-1H.

The Holiday Road well was completed with 34 frack stages using about 12 million pounds of proppant on a 4,300-foot lateral. The well is also located in Kingfisher County.

The company expects initial flowback to commence on the Holiday Road well in the next couple of weeks and should have IP results not long after, Douthat said.

The company also reported its first operated test well of the Stack’s Meramec Shale continues to track in-line with estimates.

That well, Deep River 30-1H, produced for the first 90 days of post-peak production at a gross average sales rate of 713 barrels of oil equivalent per day (boe/d), with 61% oil. The results are in-line with third-party reservoir engineer estimates of 705 Mboe EUR, with 50% oil on a wet gas basis.

Gastar has a 100% working interest and 80% net revenue interest in the Deep River well, which is located in Kingfisher County, Okla.

Emily Moser can be reached at emoser@hartenergy.com.