By Saabira Chaudhuri
Gastar Exploration Ltd. (GST) has agreed to acquire certain
assets in Oklahoma from Chesapeake Energy Corp. (CHK), buyback
Chesapeake's entire stake in Gastar, and settle all litigation with
the natural gas producer for $85 million.
The acquisition--of proven reserves and undeveloped leasehold
interests in Kingfisher and Canadian counties, Oklahoma--includes
drilling rights for about 157,000 net acres that adjoin Gastar's
existing Mid-Continent acreage and about 2.8 million barrels of oil
equivalent of proven reserves. The purchase agreement includes 176
producing wells--half to be operated by Gastar--with an estimated
present value of proved reserves of $32.4 million.
"This acquisition of undeveloped acreage and producing
properties in our Mid-Continent 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," Gastar Chief
Executive J. Russell Porter said. "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."
The transaction is expected to close on or before June 7 of this
year. The property purchase will be effective Oct. 1, 2012.
Gastar, a natural gas and oil producer and developer focuses on
unconventional reserves, such as shale resource plays. The company
is currently pursuing the development of liquids-rich natural gas
in the Marcellus Shale in the Appalachia area of West Virginia and,
to a lesser extent, central and southwestern Pennsylvania.
Monday, the company also said it would buy back about 9.9% of
its shares from Chesapeake--representing the natural gas producer's
entire stake in Gastar--at a price of $1.44 a share, an 18%
discount to Thursday's closing price.
The company also said that it and Chesapeake have agreed to
settle all current litigation between the two companies,
conditioned upon the closing of the stock purchase.
Chesapeake filed a lawsuit against Gastar in October in the 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.
Gastar noted that the closing of the proposed property
acquisition, stock repurchase and settlement for $85 million
depends on the satisfaction of customary closing conditions and
delivery of the total acquisition purchase of $75.2 million and
stock repurchase price of $9.8 million.
Gastar noted that it will fund the deals through its revolving
credit facility, proceeds from the possible sale of East Texas
assets and the issuance of debt or preferred stock. After the deals
close, Gastar also intends to pursue a joint venture partner for
the new acreage to reduce debt and help fund its planned
exploration and development program.
Shares of Gastar closed Thursday at $1.76, while those of
Chesapeake closed at $20.41. Both company's stocks were inactive
premarket.
Write to Saabira Chaudhuri at saabira.chaudhuri@dowjones.com
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