Gastar Closes On Oklahoma Purchase

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Closed on the acquisition of undeveloped acreage and proven reserves.

Gastar Exploration Ltd. (NYSE MKT: GST) has closed on the previously-announced acquisition of undeveloped leasehold acreage and proven reserves in Kingfisher and Canadian counties, Oklahoma from Chesapeake Energy Corp. (NYSE: CHK) for $84 million.

In addition, the deal includes the repurchase of 6.78 million shares of Gastar’s shares currently held by Chesapeake.

The acquisition also includes drilling rights in about 157,000 net acres that adjoin Gastar’s existing Midcontinent acreage and about 2.8 million barrels of oil equivalent (BOE) of proven reserves. "This acquisition of undeveloped acreage and producing properties in our Midcontinent area will provide us a tremendous opportunity to secure a much larger position in what we believe has the potential to be a highly prolific new oil play," said J. Russell Porter, Gastar's president and chief executive.

"Based on existing data, nearly half of the acquired acreage lies within what we expect to be the most prospective area for horizontal drilling of the Hunton Limestone formation. Found at depths of 8,000 to 9,000 feet, this formation is the horizontal target of our previously undisclosed Midcontinent oil play.”

Included in the transaction are 176 producing wells (half to be operated by Gastar) with an estimated present value of proved reserves (discounted at 10% using NYMEX futures pricing as of March 8, 2013) of $32.4 million, which holds approximately 19% of the acreage by production.

Current net daily production is about 177 Bbls of crude oil, 54 Bbls of NGLs and 3.5 MMcf of natural gas. Net proved reserves associated with the transaction include 494,269 barrels of oil, 270,508 barrels of natural gas liquids (NGLs) and 12.5 Bcf of natural gas, for a total of 2.8 MMBoe. These reserves are all classified as proved developed producing.

The 6.78 million Gastar shares in the agreement represent about 9.9% of the company’s outstanding common shares are assessed at a value of $1.44 per share based on a twenty-day moving average price as of Friday, March 22.

Chesapeake filed a lawsuit against Gastar in October 2012 in U.S. District Court for the Southern District of Texas seeking rescission of certain 2005 transactions with Gastar and reimbursement of additional well costs stated to have been expended by them. The transaction this week settles all litigation between the two companies.

The Midcontinent acquisition, share repurchase and litigation settlement were funded with proceeds from the $200 million private placement of debt securities closed on May 15. Gastar Exploration Ltd. is an independent energy company based in Houston. Chesapeake is based in Oklahoma City.