SOURCE: Gastar Exploration, Ltd.

August 12, 2005 16:20 ET

Gastar Announces Revised Note Terms and US GAAP Charge

HOUSTON, TX -- (MARKET WIRE) -- August 12, 2005 -- Gastar Exploration, Ltd. (TSX: YGA); (OTC: GSREF) announced that it has agreed with Geostar Corporation to cancel Gastar's $32.0 million unsecured subordinated note due January 31, 2006. In conjunction with the note cancellation, Gastar agreed to issue Geostar 6,373,694 common shares of Gastar ($17.0 million calculated at an assumed CDN$3.25 per share) and a new unsecured subordinated note in the original principal amount of $15.0 million. The new Geostar note bears interest, payable monthly commencing February 15, 2006, at three-month LIBOR plus 4.5% and matures November 15, 2006. The note requires monthly principal payments of $1.5 million commencing February 15, 2006 and continuing for nine months thereafter with a final principal payment of $1.5 million due on November 15, 2006. Gastar may elect to pay interest in kind through the issuance of additional notes with such notes maturing on January 15, 2007.

Gastar also announced today that in connection with the recent filing of a registration statement with the U.S. Securities and Exchange Commission it has prepared complete historical financial statements for the Company in accordance with generally accepted accounting principles in effect in the United States ("US GAAP"). Public filings made to date by Gastar with securities authorities in Canada have only included financial statements based on GAAP in effect in Canada ("Canadian GAAP"), which contained an abbreviated reconciliation of Canadian GAAP to US GAAP. In preparing the US GAAP financial statements for the U.S. registration statement, the Company determined that it will recognize in its US GAAP financial statements ceiling test impairment charges and depletion and depreciation adjustments related to its oil and gas properties for past periods that were not required under Canadian GAAP reporting. These ceiling test impairment and depletion and depreciation charges under US GAAP were $2.8 million cumulative to 2002, $43,000 for 2003 and $6.1 million for 2004. Gastar also recognized an impairment charge of $4.1 million in the first quarter of 2005 under US GAAP and may incur an additional impairment charge in the second quarter of 2005. These impairment charges do not affect the Company's results of operations or financial condition as reported under Canadian GAAP. While the information in the financial statements issued under Canadian GAAP remains unchanged, the disclosures in the US GAAP reconciliation note will need to be revised for these charges. The Company expects to file with securities authorities in Canada an amended note to its Canadian GAAP financial statements for the years ended December 31, 2004 and 2003 to reflect these impairment charges in the reconciliation of its Canadian GAAP results of operations and financial condition to US GAAP reporting after the registration statement is effective in the United States.

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 select higher risk, deep natural gas exploration prospects with low-risk coal bed methane (CBM) development. The Company owns and controls exploration and development acreage in the Deep Bossier gas play of East Texas and in the deep Trenton-Black River play in the Appalachian Basin. Gastar's CBM activities are conducted within the Powder River Basin of Wyoming and upon the approximate 3.5 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 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
    Michael Gerlich

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