Gasco Energy, Inc.(fka GSXN)

[Timothy Smith]

Dakota, There are various reasons this could turn around but I think the upside is another move into the 20's or 30's. Hard to say if it could be a long term hold at this point but I do like the holdings and potential of unleashing the reserves they have already secured.

The production results will be a driving force but keep an eye on the capital resources.

Liquidity and Capital Resources

General

We generate cash from operations from the sale of oil and natural gas, and have relied in the past primarily on the issuance of equity, borrowings under our revolving credit facility and farm-out and other similar types of transactions to fund working capital and the acquisition of our prospects and leases. For the quarter ended March 31, 2012, we incurred a net loss of $5,038,133. As of March 31, 2012, we had an accumulated deficit of $227,633,909.

On March 22, 2012, we closed the Uinta Basin Transaction, pursuant to which we (i) sold to Wapiti an undivided 50% interest in certain of our Uinta Basin producing oil and gas assets for $18.0 million in cash and $1.19 million in the form of a promissory note receivable from Wapiti and (ii) transferred to Wapiti an undivided 50% of our interest in our Uinta Basin non-producing oil and gas assets in exchange for, among other agreements, Wapiti’s commitment to fund $30.0 million of the drilling and completion costs associated with the exploration and development of the subject assets.

Of Wapiti’s $30.0 million funding commitment, $15.0 million will be paid on our behalf, and we have agreed to provide an additional $7.5 million of drilling and completion costs. Accordingly, the total program will be $37.5 million; provided that, if on February 23, 2013, the five-year New York Mercantile Exchange (“NYMEX”) natural gas strip pricing is at least $5.00/MMBtu, the drilling and completion program will be expanded by $6.25 million to $43.75 million with Wapiti paying for $5.0 million and us paying for $1.25 million of the additional costs.

We used approximately $10.5 million of the proceeds from the Uinta Basin Transaction to repay outstanding borrowings under our revolving credit facility, and we will use the remaining proceeds for capital expenditures consisting approximately $5.0 million for our drilling program which includes the drilling of 13 wells, our continued up-hole recompletion program targeting natural gas and for additional investment in existing and new California oil and gas prospects in the San Joaquin Basin as well as for working capital, acquisitions of oil and natural gas properties and other general corporate purposes.

Our revolving credit facility will mature in June 2012, at which time we will be required to repay all of the outstanding borrowings thereunder. We are discussing alternative borrowing arrangements with other lenders and while we currently believe that we will be able to find a replacement lender, there can be no assurance that we will be able to obtain adequate alternative financing on acceptable terms or at all. For example, our recent results of operations and volatility in oil and gas prices, as well as in the domestic credit and capital markets generally, may negatively affect the availability and terms of financing. If we were to secure an alternative borrowing arrangement, we expect that such arrangement will include less favorable terms, including with respect to the cost of borrowing and financial covenants, than those of our current revolving credit facility. If we are unable to secure an alternative borrowing arrangement, we will lose a primary source of liquidity and be required to fund our business and operations going forward without outside capital.

We believe that cash on hand (including proceeds from the Uinta Basin Transaction) as well as future cash flow from operations will be sufficient to fund our anticipated cash requirements for working capital purposes and normal capital expenditures through the first quarter of 2013. However, there can be no assurance regarding these matters given that we will require significant additional capital to fund our future drilling activities and to meet our future debt maturities. Failure to generate operating cash flow or to obtain additional financing for the development of our properties could result in substantial dilution of our property interests or delay or cause indefinite postponement of further exploration and development of our prospectus with the possible loss of our properties. This could cause us to alter our business plans, including further reducing our exploration and development plans.

In particular, we face uncertainties relating to our ability to generate sufficient cash flows from operations to fund the level of capital expenditures required for oil and gas exploration and production activities and for working capital purposes. We intend to fund our anticipated cash requirements through the first quarter of 2013, including our 2012 capital budget of $5.0 million, primarily through cash on hand and cash flows from operations, although we cannot assure you that cash on hand and cash flows from operations will be sufficient to fund such requirements.

Our inability to secure replacement financing for the revolving credit facility or otherwise access future borrowings will significantly limit our ability to fund or increase our operating budget and to execute our growth plans, and our liquidity and results of operations may be materially adversely affected. If we need additional liquidity for future activities, we may be required to consider several options for raising such funds, such as selling additional securities, selling assets or executing farm-out or similar arrangements, but we may be unable to complete any of these transactions on terms acceptable to us or at all. Any financing obtained through the sale of our equity will likely result in substantial dilution to our stockholders.