MT. PLEASANT, Mich., June 24, 2003 (PRIMEZONE) -- Gastar Exploration, Ltd. (TSX Venture Exchange:YGA) is pleased to announce that it has closed on the previously announced Powder River Basin Earn-In Joint Venture with Pinnacle Gas Resources, Inc., (Pinnacle) a new company formed by affiliates of Rocky Mountain Gas, Inc. (RMG, a subsidiary of U.S. Energy Corp. (Nasdaq:USEG) and Crested Corp. (OTCBB:CBAG), d/b/a USECC), and CCBM, Inc. a wholly-owned subsidiary of Carrizo Oil & Gas, Inc. (Nasdaq:CRZO) and Credit Suisse First Boston Private Equity fund.
Under the terms of the agreements, Gastar received approximately USD $6.2 million in cash at closing. As a part of the joint venture, Pinnacle will provide up to an additional USD $14.5 million on behalf of itself and Gastar for further development of the joint venture properties prior to December 31, 2005. At closing, Gastar assigned Pinnacle a 50% working interest position in all existing producing and non-producing leases within the Area of Mutual Interest ('AMI') in consideration for the cash payment and the additional spending commitment. The agreements provide for any undeveloped leases to be re-assigned to Gastar subject to penalty provisions should Pinnacle fail to complete the $14.5 million spending commitment. These leases are currently producing at a gross rate of approximately 2 MMCFD.
Pinnacle will hold a 60% revenue interest until it has recovered from production the $14.5 million spending commitment amount and a 50% working interest thereafter. Gastar and Pinnacle shall be 50/50 joint venture partners for CBM exploration and development activity within the AMI after Pinnacle's $14.5 million spending commitment has been satisfied.
Commenting on the closing of the Purchase and Sale Agreement and the formation of the Earn-In Joint Venture between the Parties, J. Russell Porter, Gastar's COO, said, 'This is an important development for Gastar. We are pleased to be partners with Pinnacle Gas Resources, Inc. and believe that the financial backing of Credit Suisse First Boston Private Equity along with the talents of the Pinnacle management team and the high-quality CBM properties contributed by Gastar to the Earn In Joint Venture will allow Pinnacle to be successful immediately. This transaction allows Gastar to accelerate development of these CBM assets at a time when realized gas prices are strong and projected to remain strong. In addition, this transaction also provides funding for Gastar's continued exploration and development including its Deep Bossier Sand assets in East Texas and funding for its CBM assets in New South Wales (PEL 238) and Victoria (the Gippsland Basin), Australia. Gastar is currently in the final stages of planning its second Deep Bossier exploration well, following the geologic success realized in its first Deep Bossier well.'
Gastar Exploration is an exploration and production company focused on finding and developing natural gas in North America and Australia. The Company pursues a balanced strategy combining low-risk CBM development with select higher risk, deep natural gas exploration prospects. Gastar's CBM activities are conducted within the Powder River Basin of Wyoming and upon the approximate 4 million acres controlled by Gastar in Australia's Gunnedah and Gippsland Basins located in New South Wales and Victoria respectively. The Company owns prospective acreage in the Deep Bossier Sand gas play of East Texas, in the deep Trenton -- Black River play of Appalachia and in the deep Temblor gas play in the East Lost Hills field within the San Joaquin Basin of California.
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. Although Gastar believes that its expectations are based on reasonable assumptions, it can give no assurance that its goals and assumptions will be achieved. Important factors that could cause actual results to differ materially from those in the forward-looking statements contained herein, include, among others, the success and timing of certain projects, the success in drilling and producing oil and gas properties, changes in commodity prices for oil and natural gas, operating risks, the uncertainty associated with estimating underground quantities of crude oil and natural gas reserves and other risk factors as described in the Company's Annual Information Form filed as of May 2003, on the System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com.
The Toronto Stock Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.