Chesapeake Agrees to Acquire Certain East Texas Leasehold Interests For
Cash and the Purchase of Additional Gastar Common Shares
HOUSTON & OKLAHOMA CITY, April 30 /CNW/ - Gastar Exploration Ltd.
(AMEX: GST) (TSX:YGA) and Chesapeake Energy Corporation (NYSE: CHK) jointly
announced today that they have executed a Letter of Intent ("LOI") outlining
the terms under which Chesapeake proposes to acquire all of Gastar's right,
title and interest in a portion of Gastar's East Texas undeveloped leasehold
for total consideration of approximately $92 million, including the purchase
of 10 million newly issued Gastar common shares at a price of $2.00 per share.
Gastar currently has 195.3 million common shares outstanding. With the
purchase of 10 million common shares in this transaction, Chesapeake will own
a total of approximately 42.2 million Gastar common shares, or 20.5% of
Gastar's basic shares outstanding. Chesapeake will be granted registration
rights for the shares issued pursuant to this transaction.
Gastar plans to use the proceeds from the sale of the leasehold interest
to continue its drilling activities in East Texas, the development of its
Australian coalbed methane properties and for general corporate purposes.
Chesapeake and Gastar expect to close the transaction within 12 days of
the execution of the LOI. The proposed transaction is subject to existing
rights of first refusal held by third parties through existing joint operating
J. Russell Porter, Gastar's President and CEO, stated, "This transaction
allows Gastar to implement our planned drilling activities in East Texas and
Australia for the balance of 2007 and into 2008 and continue to expose Gastar
to the significant upside associated with drilling in the deep Bossier play.
While the transaction does result in the sale of a portion of our East Texas
assets and potential upside, we believe this asset sale is more favorable to
our equity holders than the dilution that would result from an equity issuance
to raise a similar amount of total proceeds. Gastar's deep Bossier drilling
activities will be focused on areas covered by our recently acquired 3-D
seismic survey and near previous successful drilling activities."
Also commenting on the announcement, Aubrey K. McClendon, Chesapeake's
Chairman and CEO, commented, "We are pleased to announce this second
integrated transaction with Gastar. Through this transaction, we are acquiring
a larger stock position in Gastar and will continue to benefit from Gastar's
ongoing activities in the deep Bossier play. We are also significantly
enhancing our acreage position to the south and southwest of the Hilltop
Prospect in Leon County, Texas. This new acreage block is located several
miles northwest of our currently drilling 22,000 foot deep Bossier test, the
Theiss #1. It also is located on trend with two recently completed wells
drilled by Encana Corp. (NYSE: ECA) that are reportedly together producing more
than 100 million cubic feet of natural gas (MMcf) per day from deep Bossier
sands. The leading edge of the acquired acreage is located within 1.5 miles
from the nearest Encana well. During the past few years, Chesapeake has
amassed over 350,000 net acres in the deep Bossier play, and we will be
increasing our drilling activity from one operated rig currently to six rigs
by the end of 2007.
Onshore in the U.S. today, we believe the three best areas to explore for
wells that are capable of producing 25-50 MMcf per day are in the deep Bossier
play of East Texas, the deep Haley play of West Texas and the deep Anadarko
Basin of western Oklahoma. Chesapeake has acquired over one million net acres
in these three plays and we are the only company with a substantial presence
in each area. We hope to report significant new discoveries from each area in
2007 and beyond."
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 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. Gastar's CBM activities are conducted within
the Powder River Basin of Wyoming and upon the approximate 3.0 million acres
controlled by Gastar and its joint development partners in Australia's
Gunnedah Basin (PEL 238) located in New South Wales and the Gippsland Basin
located in Victoria.
Chesapeake Energy Corporation is the third 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, Barnett Shale, Permian Basin, Fayetteville
Shale, South Texas, Texas Gulf Coast, Ark-La-Tex and Appalachian regions of
the United States. The company's Internet address is www.chkenergy.com.
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 natural gas and oil wells, including risks of fire, explosion, blowouts,
pipe failure, casing collapse, unusual or unexpected formation pressures,
environmental hazards, and other operating and production risks inherent in
the natural gas and oil 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
natural gas and oil 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 natural gas and oil prices and other risk
factors described in the Company's Annual Report on Form 10-K, as filed on
March 31, 2006 with the SEC at www.sec.gov and on the System for Electronic
Document Analysis and Retrieval (SEDAR) at www.sedar.com.
Neither the American Stock Exchange nor the Toronto Stock Exchange has
not reviewed and does not accept responsibility for the adequacy or accuracy
of this release.
For further information:
For further information: Gastar Exploration Ltd., Houston J. Russell
Porter, 713-739-1800 Fax: 713-739-0458 email@example.com www.gastar.com