Gastar Exploration Ltd. and Chesapeake Energy Corporation Announce Closing of Transaction
Market Wire - November 7, 2005 8:06 AM (EDT)
HOUSTON, TX AND OKLAHOMA CITY, OK, Nov 07, 2005 (MARKET WIRE via COMTEX) -- Gastar Exploration Ltd. (TSX: YGA) (OTC: GSREF) and Chesapeake Energy Corporation (NYSE: CHK) jointly announced today that they have closed the previously announced inter-dependent transactions under which Chesapeake acquired newly issued Gastar common shares equivalent to 19.9% of Gastar's common stock and a 33% interest in Gastar's Hilltop Prospect and the companies formed a 13-county area of mutual interest ("AMI") in East Texas.
Under the terms of the agreements executed between Gastar and Chesapeake, Chesapeake acquired 27,151,641 newly issued common shares of Gastar common stock at a price of CDN $3.31 per share for a total of approximately USD $76 million. Chesapeake also acquired 33% of Gastar's leasehold interest in the Hilltop Prospect area of Leon and Robertson Counties, Texas (less and except 160 acre units surrounding each of Gastar's existing wells) for a payment of approximately $5.6 million at closing and an additional $2.1 million payment within 90 days of closing subject to post-closing title and due diligence completion. Chesapeake has also agreed to pay a disproportionate amount of the drilling costs to casing point on the first six wells drilled by the parties to a depth sufficient to test the Deep Bossier Formation (an approximate depth of 19,000'). Under this arrangement, Chesapeake will pay 44.44% of the costs through casing point on an 8/8ths basis for a 33.33% working interest. Gastar will be designated the operator of the wells drilled in the Hilltop Prospect. In addition, Gastar and Chesapeake also formed an area of mutual interest ("AMI") covering 13 counties in East Texas under which Chesapeake shall have a first right to purchase up to an undivided 50% of any leasehold/working interest rights acquired by Gastar within the AMI on pre-determined terms.
In connection with the transaction, Gastar has notified Chesapeake of a recent claim made by a third party that it has a right to purchase 33.33% of Gastar's interest in certain oil and gas leases located in Leon and Robertson Counties, Texas pursuant to a preferential right provision of an Operating Agreement dated July 7, 2000. This claim is set forth in a certain petition for breach of contract and declaratory judgment filed as Cause No. 0-05-451, Navasota Resources, L.P., Plaintiff vs. First Source Texas, Inc., First Source Gas L.P., and Gastar Exploration, Ltd. in the District Court of Leon County, Texas 12th Judicial District on October 31, 2005. Gastar contends, among other things, that the claimant, neither properly nor timely exercised any preferential right election it may have had with respect to the inter-dependent transactions. Accordingly, Gastar intends to vigorously defend the claims.
Aubrey K. McClendon, Chesapeake's Chairman and CEO, commented, "We are pleased to have closed this transaction and now look forward to working closely with Gastar in the years ahead to more fully develop the Hilltop Prospect property and to participate in new prospects in the 13-county AMI."
Also commenting on the closing, J. Russell Porter, Gastar's President and CEO, stated, "We believe that entering into this transaction with Chesapeake creates significant value for Gastar through Chesapeake's contribution of expertise, capital and access to drilling rigs and services. We look forward to working with Chesapeake to create additional value for both entities. With Chesapeake's involvement we will be able to accelerate exploration and development drilling of the Hilltop area resulting in the creation of that value sooner, and hopefully in greater amounts, than had Gastar continued exploration and development of the Hilltop area independently."
Pro forma for its pending acquisition of Columbia Natural Resources, LLC, Chesapeake Energy Corporation is the second largest independent producer of natural gas in the U.S. Headquartered in Oklahoma City, the company's operations are focused on exploratory and developmental drilling and property acquisitions in the Mid-Continent, Permian Basin, South Texas, Texas Gulf Coast, Ark-La-Tex, Barnett Shale and Appalachian Basin regions of the United States. The company's Internet address is www.chkenergy.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 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.
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 2005, on the System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com and has disclosed in the Company's registration statement on Form S-1 filed with United States Securities and Exchange Commission.
The Toronto Stock Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.
Distributed by Filing Services Canada and retransmitted by Market Wire
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: Contact via http://www.marketwire.com/mw/emailprcntct?id=305800E0035029CC
Website: www.gastar.com
SOURCE: Gastar Exploration Ltd.
http://www.gastar.com
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