UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

 

Date of Report (Date of earliest event reported): March 29, 2016 (March 30, 2016)

 

 

GASTAR EXPLORATION INC.

(Exact Name of Registrant as Specified in its Charter)

DELAWARE

 

001-35211

 

38-3531640

(State or other jurisdiction

 

(Commission File Number)

 

(IRS Employer

of incorporation)

 

 

 

Identification No.)

 

1331 LAMAR STREET, SUITE 650

HOUSTON, TEXAS 77010

(Address of principal executive offices)

 

(713) 739-1800

(Registrant's telephone number, including area code)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

 

 

[   ]

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

 

[   ]

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

 

[   ]

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

 

[   ]

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

 

 

 

SECTION 1 – REGISTRANT’S BUSINESS AND OPERATIONS

 

Item 1.01 Entry into a Material Definitive Agreement.

 

As previously announced, on February 19, 2016, Gastar Exploration Inc. (the “Company”), entered into a purchase and sale agreement (the “Sale Agreement”) with an affiliate of Tug Hill Inc. to sell substantially all of its producing assets and proved reserves as well as a significant portion of its undeveloped acreage in the Appalachian Basin for $80.0 million, subject to certain adjustments and customary closing conditions, including certain lessor consents to assign (the “Appalachian Basin Sale”). On March 29, 2016, the parties to the Sale Agreement entered into the amendment of purchase and sale agreement (the “Amendment”) in order to extend the closing date to April 8, 2016.

The description of the Amendment set forth in this Item 1.01 is not complete and is qualified in its entirety by reference to the full text of the Amendment, which is included as Exhibit 2.1 to this Form 8-K and is incorporated herein by reference.

  

SECTION 7 - REGULATION FD

Item 7.01

Regulation FD Disclosure.

On March 30, 2016, the Company issued a press release announcing that the closing of the previously announced Appalachian Basin Sale has been extended to April 8, 2016. A copy of the Company’s press release, dated March 30, 2016, is furnished herewith as Exhibit 99.1 and is incorporated herein by reference.

       In accordance with General Instruction B.2 of Form 8-K, the information presented herein under Item 7.01 and set forth in the attached press release included as Exhibit 99.1 to this report is deemed to be “furnished” solely pursuant to Item 7.01 of this report and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall such information or the Exhibit be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act.

 

SECTION 9 – FINANCIAL STATEMENTS AND EXHIBITS

Item 9.01  Financial Statements and Exhibits.

 

(d) Exhibits

 

The following is a list of exhibits filed or furnished as part of this Form 8-K:

 

Exhibit No.

 

Description of Document

2.1

 

Amendment to Purchase and Sale Agreement, dated March 29, 2016, by and between Gastar Exploration Inc. and TH Exploration II, LLC.

99.1

 

Press release dated March 30, 2016.

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

Date: March 30, 2016

GASTAR EXPLORATION INC.

 

 

 

 

 

By:

/s/  J. Russell Porter

 

 

J. Russell Porter

 

 

 

President and Chief Executive Officer

 

 

 

EXHIBIT INDEX

 

Exhibit No.

 

Description of Document

2.1

 

Amendment to Purchase and Sale Agreement, dated March 29, 2016, by and between Gastar Exploration Inc. and TH Exploration II, LLC.

99.1

 

Press release dated March 30, 2016.

 

 

 

Exhibit 2.1

US 4092218 AMENDMENT TO PURCHASE AND SALE AGREEMENT

 

This Amendment (this “ Amendment ”), dated as of March 29, 2016, is made and entered into by and between Gastar Exploration Inc., a Delaware corporation (“ Seller ”), and TH Exploration II, LLC, a Texas limited liability company (as successor-in-interest to THQ Appalachia I, LLC, a Delaware limited liability company) (“ Buyer ”). Seller and Buyer are collectively referred to herein as the “ Parties ” and each, individually, as a “ Party .”  Capitalized terms used but not defined in this Amendment have the meanings given to such terms in the PSA (as hereinafter defined).

 

WHEREAS, Seller and THQ Appalachia I, LLC entered into that certain Purchase and Sale Agreement dated as of February 19, 2016 and effective as of 7:00 a.m. Houston time on January 1, 2016 (as amended, restated or modified from time to time, the “ PSA ”);

WHEREAS, THQ Appalachia I, LLC assigned its right, title, and interest in the PSA to TH Exploration II, LLC pursuant to that certain Assignment and Assumption Agreement by and between THQ Appalachia I, LLC and TH Exploration II, LLC dated March 28, 2016;

WHEREAS , Section 9.01 of the PSA provides that the Closing shall take place on March 31, 2016 or such earlier or later date as is mutually agreed by the Parties;

WHEREAS , the Parties desire to extend the Closing Date;

WHEREAS, the Parties desire to memorialize their agreement regarding the extension and certain other matters pursuant to the PSA as more specifically set forth in this Amendment.

NOW, THEREFORE, in consideration of the Closing of the transaction contemplated under the PSA and of the mutual promises and covenants set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:

1. Amendments to the PSA .  The Parties hereby amend the PSA as follows:

 

A.

The reference to “March 31, 2016” in Section 9.01 is deleted and replaced with “April 8, 2016”.

 

B.

The reference to “March 29, 2016” in Section 9.02 is deleted and replaced with “April 4, 2016”.  

 

C.

The reference to “June 29, 2016” in Section 4.04(c) is deleted and replaced with “July 7, 2016”.

2. Entire Agreement; Amendment.   This Amendment, the Purchase Agreement, the Escrow Agreement, the Confidentiality Agreement, the documents to be executed pursuant hereto and the Annexes, Exhibits and Schedules attached hereto and thereto constitute the entire agreement between the Parties pertaining to the subject matter hereof and supersede all prior agreements, understandings, negotiations and discussions, whether oral or written, of the Parties pertaining to the subject matter hereof. The Parties acknowledge and agree that this Amendment constitutes an amendment contemplated by Section 15.11 of the Purchase Agreement.  The Parties hereby ratify and confirm the Purchase Agreement as amended hereby.  No supplement, amendment, alteration,

 

 

modification, waiver or termination of this Amendment shall be binding unless executed in writing by the Parties and specifically referencing this Amendment as being supplemented, amended, altered, modified, waived or terminated.  

3. Governing Law; Jurisdiction; Venue; Jury Waiver .  THIS AMENDMENT AND THE LEGAL RELATIONS AMONG THE PARTIES SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, EXCLUDING ANY CONFLICTS OF LAW RULE OR PRINCIPLE THAT MIGHT REFER CONSTRUCTION OF SUCH PROVISIONS TO THE LAWS OF ANOTHER JURISDICTION; PROVIDED THAT, AS TO MATTERS RELATING TO TITLE TO THE ASSETS AND REAL PROPERTY MATTERS, THE LAWS OF THE STATE OF WEST VIRGINIA OR PENNSYLVANIA, AS APPLICABLE SHALL APPLY AS TO THE PROPERTY LOCATED IN (OR OTHERWISE SUBJECT TO THE LAWS OF) THE APPLICABLE STATE. ALL OF THE PARTIES HERETO CONSENT TO THE EXERCISE OF JURISDICTION IN PERSONAM BY THE FEDERAL OR STATE COURTS SITUATED IN HOUSTON, HARRIS COUNTY, TEXAS FOR ANY ACTION ARISING OUT OF THIS ASSIGNMENT. ALL ACTIONS OR PROCEEDINGS WITH RESPECT TO, ARISING DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF, RELATED TO, OR FROM THIS ASSIGNMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY SHALL BE EXCLUSIVELY LITIGATED IN COURTS HAVING SITUS IN HOUSTON, HARRIS COUNTY, TEXAS. EACH PARTY HERETO WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO THIS ASSIGNMENT.

4. Severability.   If any term or other provision of this Amendment is invalid, illegal or incapable of being enforced by any rule of Law or public policy, all other conditions and provisions of this Amendment shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any adverse manner to either Party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties hereto shall negotiate in good faith to modify this Amendment so as to effect the original intent of the Parties as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.

5. Counterparts; Facsimiles; Electronic Transmission .  This Amendment may be executed in any number of counterparts, and each counterpart hereof shall be deemed to be an original instrument, but all such counterparts shall constitute but one instrument. Any signature hereto delivered by a Party by facsimile or electronic transmission shall be deemed an original signature hereto.

[ Signature page follows. ]

 

 

 

Signature Page to Amendment

 

IN WITNESS WHEREOF, Buyer has executed and delivered this Amendment as of the date first written above .

 

BUYER :

 

TH EXPLORATION II ,

a Texas limited liability company

 

 

 

By: /s/ M. Evan Radler

Name: M. Evan Radler

Title: Chief Operating Officer


Signature Page to Amendment

 

IN WITNESS WHEREOF, Seller has executed and delivered this Amendment as of the date first written above .

SELLER :

 

GASTAR EXPLORATION INC. ,

a Delaware corporation

 

 

 

By: /s/ Henry J. Hansen

Name: Henry J. Hansen

Title:  Vice President, Land

 

 

 

 

Signature Page to Amendment

Exhibit 99.1

 

      NEWS RELEASE

 

Contacts:

Gastar Exploration Inc.

J. Russell Porter, Chief Executive Officer

713-739-1800 / rporter@gastar.com

 

Investor Relations Counsel:

Lisa Elliott / lelliott@DennardLascar.com

Dennard ▪ Lascar Associates: 713-529-6600

 

Gastar Exploration Provides Operational Update

 

 

·

Closing date of Appalachian asset sale now scheduled on or before April 8, 2016

 

 

·

90-day post-peak production rate of first Meramec well was 713 Boe per day (61% oil)

 

 

·

Second Meramec well completed with 34 frack stages

 

HOUSTON, March 30, 2016 – Gastar Exploration Inc. (NYSE MKT: GST) (“Gastar” or the “Company”) today provided an update on its operations and other recent developments.  

As previously announced, the Company entered into an agreement with an affiliate of Tug Hill Inc. to sell substantially all of its assets and proved reserves as well as a significant portion of its undeveloped acreage in the Appalachian Basin for $80.0 million, subject to certain adjustments and customary closing conditions, including certain lessor consents to assign.  Due to a delay in obtaining one required lessor consent, the transaction is now expected to close on or before April 8, 2016. The effective date remains January 1, 2016, and proceeds will be used to reduce borrowings under Gastar's revolving credit facility.  

Gastar also reported updated production data from its Deep River 30-1H well, its first operated test well of the STACK formation Meramec Shale play in Kingfisher County, Oklahoma.  The Deep River 30-1H produced for the first 90 days of post-peak production at a gross average sales rate of 713 barrels of oil equivalent (“Boe”) per day (61% oil), which was in-line with initial production rates in the independent reservoir engineers’ estimated ultimate recovery of 705 MBoe, with oil comprising 50%of total oil equivalent volumes on a wet gas basis.  Gastar has a 100% working (80% net revenue) interest in the well.

The Company also announced that it has completed its second Meramec Shale well, the Holiday Road 2-1H, with 34 frack stages using approximately 12 million pounds of proppant. The Holiday Road 2-1H is also located in Kingfisher County and has a lateral length of 4,300 feet.  Initial flow back is expected to commence in the next two weeks.    

 

 

About Gastar Exploration

Gastar Exploration Inc. is an independent energy company engaged in the exploration, development and production of oil, condensate, natural gas and natural gas liquids in the United States. 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. In Oklahoma, Gastar is developing the primarily oil-bearing reservoirs of the Hunton Limestone horizontal play and is testing other prospective formations on the same acreage, including the Meramec Shale and the Woodford Shale, which is referred to as the STACK Play and emerging prospective plays in the shallow Oswego formation and in the Osage formation, a deeper bench of the Mississippi Lime located below the Meramec Shale. In West Virginia, Gastar has developed liquids-rich natural gas in the Marcellus Shale and has drilled and completed two successful dry gas Utica Shale/Point Pleasant wells on its acreage.  Gastar has entered into a definitive PSA to sell substantially all of its assets and proved reserves and a significant portion of its undeveloped acreage in the Appalachian Basin.  For more information, visit Gastar's website at www.gastar.com .

Forward Looking Statements

This news release includes “forward looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward looking statements give our current expectations, opinion, belief or forecasts of future events and performance. A statement identified by the use of forward looking words including “may,” “expects,” “projects,” “anticipates,” “plans,” “believes,” “estimate,” “will,” “should,” 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 news release. These include risks inherent in oil and natural gas drilling and production activities, including risks with respect to continued low or further declining prices for oil and natural gas that could result in further downward revisions to the value of proved reserves or otherwise cause Gastar to further delay or suspend planned drilling and completion operations or reduce production levels which would adversely impact cash flow; risks relating to the availability of capital to fund drilling operations that can be adversely affected by adverse drilling results, production declines and continued low or further declining prices for oil and natural gas; risks regarding closing the sale of Gastar’s Appalachian Basin Assets; risks regarding our ability to meet financial covenants under our indenture or credit agreements or the ability to obtain amendments or waivers to effect such compliance; risks of fire, explosion, blowouts, pipe failure, casing collapse, unusual or unexpected formation pressures, environmental hazards, and other operating and production risks, 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; delays in receipt of drilling permits; risks relating to unexpected adverse developments in the status of properties; borrowing base redeterminations by our banks; risks relating to the absence or delay in receipt of government approvals or third-party consents; risks relating to our ability to realize the anticipated benefits from acquired assets; and

 

 

other risks described in Gastar’s Annual Report on Form 10-K and other filings with the U.S. Securities and Exchange Commission (“SEC”), available at the SEC’s website at www.sec.gov. Our actual sales production rates can vary considerably from tested initial production rates depending upon completion and production techniques and our primary areas of operations are subject to natural steep decline rates. By issuing forward looking statements based on current expectations, opinions, views or beliefs, Gastar has no obligation and, except as required by law, is not undertaking any obligation, to update or revise these statements or provide any other information relating to such statements.

 

Statement on Hydrocarbon Quantities

In this new release, we use terms such as “estimated ultimate recovery” and “EUR” to describe potentially recoverable oil and gas hydrocarbon quantities that are not permitted to be used in filings with the SEC.  We include these estimates to demonstrate what we believe to be the potential for future drilling and production on our properties.  These estimates are by their nature much more speculative than estimates of proved reserves and would require substantial additional capital spending over significant number of years to implement recovery.  Actual quantities that may be ultimately recovered from our properties will differ substantially.

EURs included in this news release remain subject to change as more well data is analyzed and are not reflective of SEC proved undeveloped estimates.  Ultimate recoveries will be dependent upon numerous factors including actual encountered geological conditions, the impact of future oil and gas pricing, exploration and development costs, and our future drilling decisions and budgets based upon our future evaluation of risk, returns and the availability of capital and, in many areas, the outcome of negotiation of drilling arrangements with holders of adjacent or fractional interest leases.

 

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