HOUSTON, March 22, 2017 /PRNewswire/ — Gastar Exploration Inc. (NYSE MKT: GST) (“Gastar”) announced today that it has completed the acquisition of additional working and net revenue interests in approximately 66 gross (9.5 net) producing wells and 5,670 net acres of additional STACK oil and gas leasehold in Kingfisher County, Oklahoma. Prior to the acquisition, Gastar held an interest in the majority of the acquired producing wells and leasehold. Current net production associated with the acquired well interests is approximately 330 barrels of oil equivalent per day (49% oil) and 57% of the acreage is currently held-by-production. The acquisition price of $51.4 million has an effective date of March 1, 2017 and is subject to customary final closing adjustments.
The acquisition was funded through a tack-on issuance, to funds managed by Ares Management, L.P. (“Ares”), of an additional $75 million principal amount, priced at par, of Gastar’s previously issued convertible notes due 2022, which increases the convertible notes issued to funds managed by Ares to $200 million. Upon the approval of the conversion rights of the convertible notes by Gastar’s shareholders at a special shareholders meeting currently scheduled to be held on May 2, 2017, $37.5 million principal of the recently issued convertible notes will be repurchased and retired by the Company in exchange for the issuance of 25,456,521 shares of Gastar’s common stock, issued at a price of $1.4731 per share, the 10-day volume weighted average price for Gastar’s common stock as of March 17, 2017. The remaining $162.5 million of the convertible notes will be eligible for conversion into Gastar common shares according to the terms of the indenture at an initial conversion price of $2.2103 per share. If the requisite shareholder approval of the conversion rights is not obtained on or before July 3, 2017, the convertible notes will not become convertible nor will they be repurchased, the notes will not be redeemable prior to their maturity except by payment of a “make whole” premium, and the interest rate on the notes will increase in increments to 15% per annum.
Commenting on the transaction, J. Russell Porter, Gastar’s President and Chief Executive Officer, said, “This acquisition further increases Gastar’s position in the STACK Play to a total of 62,370 net surface acres, excluding 27,100 net acres in the WEHLU and surrounding area. Acquiring additional working interest within our core STACK position in leases that Gastar currently owns and operates is an attractive approach to creating additional value. Approximately 48% of the additional interest is in leases that are within our joint development agreement area and as a result, Gastar will earn a 10% drilling promote on those additional interests that are drilled within the joint venture. Through our planned 2017 capital program, a large majority of the acquired leases will be held by production under our current drilling plan.”
About Gastar Exploration
Gastar Exploration Inc. is a pure play Mid-Continent independent energy company engaged in the exploration, development and production of oil, condensate, natural gas and natural gas liquids. Gastar’s principal business activities include the identification, acquisition, and subsequent exploration and development of oil and natural gas properties with an emphasis on unconventional reserves, such as shale resource plays. Gastar holds a concentrated acreage position in what is believed to be the core of the STACK Play, an area of central Oklahoma which is home to multiple oil and natural gas-rich reservoirs including the Meramec, Oswego, Osage, Woodford and Hunton formations. For more information, visit Gastar’s website at www.gastar.com.