SOURCE: Gastar Exploration, Ltd.

June 20, 2005 08:00 ET

Gastar Announces Closing of $63 Million in Senior Secured Notes and Closing of Acquisition of Interests in East Texas and Powder River Basin Properties

HOUSTON, TX -- (MARKET WIRE) -- June 20, 2005 -- Gastar Exploration, Ltd. (TSX: YGA) (OTC: GSREF) announced today that it has closed the private placement of Senior Secured Notes on terms previously announced. A total of US $63 million of Senior Secured Notes were issued in the transaction along with 1,217,269 Common Shares (an aggregate CDN $4.5 million based upon a five day weighted average trading price of CDN $3.69 per share) that were granted to the purchasers of the notes. In connection with the sale of the Notes, Gastar has also agreed to issue to the purchasers of the Notes for no additional consideration Common Shares in CDN $4.5 million increments on each of the six, twelve and eighteen month anniversaries of the closing date valued on a five day weighted average trading price at the date of issuance.

Gastar also has the right on a quarterly basis to require the investors to purchase up to an aggregate additional US $20 million principal amount of additional Senior Secured Notes during the period from three months after Closing of the initial notes to 24 months after the same date, including the issuance of additional Common Shares on similar terms as those issued with the original Notes in a pro rata amount based on principal amount of the Notes.

Concurrently with the private placement of senior notes, the Company closed the previously announced acquisition of additional leasehold and working interest properties in East Texas and the Powder River basin from Geostar Corporation. Gastar paid a total of US $68.5 million for the interests acquired from Geostar consisting of US $30.5 million in cash, 1,650,133 common shares (US $6 million in Common Shares valued at CDN $4.50 per share) and US $32 million in unsecured subordinated notes expiring on January 31, 2006.

J. Russell Porter, Gastar's President & CEO, commented, "The acquisition of the additional interests in Gastar's Deep Bossier play in East Texas is an important step for Gastar in light of the fact that we will now have operational control over capital decisions involving drilling and leasing activities in the Deep Bossier play. In addition to operational control, the acquisition increases Gastar's working interest position in the leases to an average of over 90% and thus creates the ability for Gastar to bring in an industry partner if it so elects and to be in control of other strategic decisions involving these assets. The acquisition of the Powder River Basin interests provides Gastar with a larger interest in properties actively being developed through an existing joint-venture. Overall, the completion of this financing and the acquisition of the interests from Geostar provides Gastar with a focused operational plan moving forward and an opportunity to create significant value for our shareholders."

The Company intends to make copies of the material agreements related to the Senior Secured Notes, the related Common Share issuance and the Geostar acquisition available within a few days by filing under the System for Electronic Document Analysis and Retrieval under the Canadian Securities Laws ("SEDAR"), which filings can be reviewed when filed under the Company's profile at www.sedar.com.

Gastar Exploration, Ltd. is an exploration and production company focused on finding and developing natural gas assets in North America and Australia. The Company pursues a balanced strategy combining low-risk CBM development with select higher risk, deep natural gas exploration prospects. Gastar's CBM activities are conducted within the Powder River Basin of Wyoming and upon the approximate 4 million acres controlled by Gastar and its Joint Development partners in Australia's Gunnedah Basin, PEL 238 and Gastar's Gippsland Basins located in New South Wales and Victoria, respectively. The Company owns and controls development acreage in the Deep Bossier Sand gas play of East Texas and in the deep Trenton-Black River play in the Appalachian Basin.

THIS RELEASE SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO PURCHASE, NOR SHALL THERE BE ANY SALE OF THE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL. THE SENIOR SECURED NOTES AND COMMON SHARES HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933 OR APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES ABSENT REGISTRATION OR AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE LAWS.

Safe Harbor Statement and Disclaimer

This Press Release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934. A statement identified by the words "expects," "projects," "plans," and certain of the other foregoing statements may be deemed "forward-looking statements." Although Gastar believes that the expectations reflected in such forward-looking statements are reasonable, these statements involve risks and uncertainties that may cause actual future activities and results to be materially different from those suggested or described in this press release. These include risks inherent in the drilling of oil and natural gas wells, including risks of fire, explosion, blowout, pipe failure, casing collapse, unusual or unexpected formation pressures, environmental hazards, and other operating and production risks inherent in oil and natural gas drilling and production activities, which may temporarily or permanently reduce production or cause initial production or test results to not be indicative of future well performance or delay the timing of sales or completion of drilling operations; risks with respect to oil and natural gas prices, a material decline in which could cause the Company to delay or suspend planned drilling operations or reduce production levels; and risks relating to the availability of capital to fund drilling operations that can be adversely affected by adverse drilling results, production declines and declines in oil and gas prices and other risk factors as described in the Company's Annual Information Form filed as of March 30, 2005, on the System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com.

The Toronto Stock Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • Contact Information:
    Gastar Exploration, Ltd.
    1331 Lamar, Suite 1080
    Houston, TX 77010
    (713) 739-1800
    FAX (713) 739-0458
    Attention J. Russell Porter

    E-Mail: Email Contact
    Web Site: www.gastar.com