Gastar Exploration Announces Sale of Australian Assets for $240 Million
July 02 2009 - 5:10AM
PR Newswire (US)
Also Announces 1-for-5 Reverse Share Split and Voluntary De-Listing
from the Toronto Stock Exchange HOUSTON, July 2
/PRNewswire-FirstCall/ -- Gastar Exploration Ltd. (NYSE Amex: GST
and TSX: YGA) announced today that it has entered into definitive
agreements with Santos QNT Pty Ltd and Santos International
Holdings Pty Ltd, affiliates of Santos Ltd (ASX:STO) for the sale
of all of Gastar's interest in Petroleum Exploration Licenses 238,
433 and 434 in New South Wales, Australia, along with the sale of
the shares of Gastar Power Pty Ltd, the entity holding Gastar's 35%
interest in the Wilga Park Power Station. Gross pre-tax proceeds
from the transaction are expected to be approximately US $240
million (AU $300 million). Upon final closing, Gastar's net
proceeds, after payment of Australian income taxes, is expected to
be approximately US $175 million (AU $219 million). The Santos
transaction is expected to close on July 10, 2009, subject to
satisfaction of certain ordinary closing conditions, with an
initial payment before taxes of US $224 million (AU $280 million)
on that date and the balance to be remitted to Gastar upon the
receipt of certain governmental approvals. Gastar plans to use the
proceeds from this transaction to repay outstanding debt under its
secured revolving credit facility, to retire its $25 million
secured term loan and to pay in full Gastar's $30 million
convertible subordinated debentures upon their maturity in November
2009. Remaining proceeds are expected to be used to finance an
offer to repurchase any and all of Gastar's $100 million 12-3/4%
senior secured notes in accordance with the terms of the governing
indenture. Thus, the transaction is expected to provide sufficient
funds to repay substantially all of Gastar's outstanding debt and
reduce annual cash interest expense by as much as approximately US
$20 million. In addition, Gastar may be paid an additional US $16
million (AU $20 million) in early 2010 if the independently
certified gross 2P reserves (SPE proved plus probable) for the PEL
238 coalbed methane project are at least 1.3 Tcf at year-end 2009.
At Gastar's election, the reserve related payment, if applicable,
may be either in cash, shares of Santos, or a combination thereof.
In addition, Gastar has retained the right to receive up to US $10
million in future cash payments from Eastern Star Gas Ltd
(ASX:EGGASX:andASX:OTCQX:ASX:ESGLY) if certain previously
negotiated production thresholds are achieved. J. Russell Porter,
Gastar's President and Chief Executive Officer, commenting on the
transaction and related actions said, "This is clearly a
transformative transaction for Gastar. We pursued multiple avenues
in order to address upcoming debt maturities and to fund the future
capital expenditures necessary to continue the development of our
Australian assets and our North American assets. After examining
all alternatives available, we determined that the sale of the
Australian assets was the most prudent course and provided the most
attractive near term and future benefit to our shareholders.
"Gastar will maintain its current ownership in the East Texas Deep
Bossier and Marcellus Shale plays and plans to proceed with the
development of those assets while limiting capital expenditures to
excess cash flow generated by its producing assets. We will now
have the financial resources to be a substantially debt-free entity
holding high growth North American assets and will be financially
positioned to execute our strategy in both the Deep Bossier and
Marcellus Shale plays." Following the completion of the
transactions with Santos, Gastar intends to implement a 1-for-5
reverse share consolidation that was authorized by Gastar's
shareholders in June 2008. As a result of the consolidation, Gastar
would have approximately 49.6 million basic common shares
outstanding. The share consolidation is expected to be effected on
or about July 31, 2009, subject to further announcement. Gastar has
also elected to voluntarily de-list its shares from trading on the
Toronto Stock Exchange (TSX) following the completion of the
transaction with Santos. In 2009 to date, less than 1% of the total
daily trading volume in Gastar's common shares were executed on the
TSX. Trading on two exchanges has become unduly costly and
burdensome without providing any significant additional liquidity
for Gastar's shareholders. "The consolidation of the number of
outstanding shares and the de-listing from the Toronto Stock
Exchange are actions we have wanted to take for some time," added
Mr. Porter. "We believe that the consummation of these actions, on
the back of this transformative de-leveraging of the Company, will
benefit our shareholders in numerous ways in the future." Tudor,
Pickering, Holt & Co. Securities, Inc. acted as financial
advisor in connection with the transaction and, in that capacity,
provided a fairness opinion to the Board of Directors of Gastar.
About Gastar Exploration Gastar Exploration Ltd. is an exploration
and production company focused on finding and developing natural
gas assets in North America. The Company pursues a strategy
combining deep natural gas exploration and development with lower
risk CBM and shale resource development. The Company owns and
operates exploration and development acreage in the deep Bossier
gas play of East Texas and Marcellus Shale play in West Virginia
and Pennsylvania. Gastar's CBM activities are conducted within the
Powder River Basin of Wyoming. For more information, visit our web
site at http://www.gastar.com/. Safe Harbor Statement and
Disclaimer This news 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 news release. These include risks
related to unexpected adverse developments in the status of the
properties, the absence or delay in receipt of government approvals
or third party consents, or an unanticipated need for using a
portion of net cash proceeds from the announced transaction. The
NYSE Amex and Toronto Stock Exchange have not reviewed and do not
accept responsibility for the adequacy or accuracy of this release.
Company Contact: Gastar Exploration Ltd. J. Russell Porter, Chief
Executive Officer 713-739-1800 / Investor Relations Counsel: Lisa
Elliott / Anne Pearson DRG&E : 713-529-6600 / DATASOURCE:
Gastar Exploration Ltd. CONTACT: J. Russell Porter, Chief Executive
Officer of Gastar Exploration Ltd., +1-713-739-1800, ; or Investor
Relations Counsel, Lisa Elliott, , or Anne Pearson, , both of
DRG&E, +1-713-529-6600, for Gastar Exploration Ltd. Web Site:
http://www.gastar.com/
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