SOURCE: Gastar Exploration, Ltd.

April 19, 2005 08:43 ET

Gastar Exploration, Ltd. Announces Letter of Intent to Acquire Additional Interests in East Texas and Wyoming

Transaction Includes an Option to Acquire Brown Coal Rights in Australia

HOUSTON, TX -- (MARKET WIRE) -- April 19, 2005 -- Gastar Exploration, Ltd. (TSX: YGA) (OTC: GSREF) announced today that it has signed a Letter of Intent with Geostar Corporation, a significant shareholder in Gastar, to acquire Geostar's oil and gas reserves and operating working interests in the Hilltop area of East Texas and certain coal bed methane reserves in the Powder River Basin of Wyoming. The transaction also involves the purchase of an option to acquire brown coal mining rights in the Gippsland Basin located in Victoria, Australia.

The Letter of Intent calls for Gastar to acquire Geostar's oil and gas reserves, operating and working interest in the East Texas Basin and Powder River Basin assets for approximately $37.5 million in cash at closing, $25 million in cash in January 2006 and approximately $6 million in Gastar common stock paid at closing. In addition, a look-back provision on the East Texas assets, based on a required number of wells, will result in the issuance of Gastar common shares (less a certain number of shares pre-paid at closing) to Geostar in the first quarter of 2006 based upon net reserve additions, valued at $1.75/Mcf less attributable capital expenditures, associated with Geostar's former position in the East Texas assets.

Included in the transaction is an option for Gastar to acquire up to 50% interest in the brown coal mining rights to existing and future mining licenses held by a Geostar subsidiary in the Gippsland Basin of Victoria, Australia. Gastar currently owns a 75% working interest in the CBM and Mineral Sands rights to these licenses. The price of the option is $2.5 million at closing and $2.5 million in January 2006 for up to 25% interest and another $5 million payable on or before January 31, 2006 for an additional 25% interest. The option is exercisable for 90 days following the delivery to Gastar of a final feasibility study on the initial coal mining and processing facility. If exercised, the option cost will be $1.00 US per ton of coal reserves to be mined and processed in the initial facility related to the feasibility study. The option will be payable in a combination of cash and stock, not to exceed 50% in cash.

Gastar plans on financing the transaction through a combination of senior secured debt issued upon closing, previously announced asset sales and proceeds from a potential equity issuance later in 2005 if market conditions are favorable. Gastar will continue with its planned divestiture of the Powder River Basin assets and intends to use the proceeds to reduce debt.

Gastar's President and CEO, J. Russell Porter, commenting on the acquisition said, "The acquisition of Geostar's interests in the Deep Bossier Hilltop play gives Gastar full operational control of this important asset and increased flexibility to possibly bring in larger industry partners as this play continues to expand. The acquisition of the Wyoming reserves increases the size of the planned divestiture making it more attractive to potential buyers and generates additional cash for debt repayment upon the completion of a sale. Finally, the option to acquire the brown coal mining rights in the Gippsland Basin gives Gastar the ability to participate in potentially high-margin projects that could ultimately involve the mining and sale of several billion tons of coal reserves. Initial studies of the near surface economic coal reserves indicate a resource base of approximately five (5) billion metric tons of brown coal. The application of new and developing technologies to upgrade these coals as well as the potential for 'Coal to Liquids' technology applications makes this opportunity for Gastar potentially extremely attractive from both an economic and environmental perspective. In addition, there also exists the possibility for synergies with Gastar's developing CBM assets in the Gippsland Basin. Gastar's decision on fully exercising the option is expected to be related to the feasibility of the applications of technologies related to upgrading the brown coals."

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.

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
    (713) 739-0458 FAX
    Attention J. Russell Porter

    E-Mail: rporter@gastar.com
    Web Site: www.gastar.com