Gastar has closed its joint venture agreement funding with Atinum Marcellus I, an affiliate of Atinum Partners. Pursuant to the agreement, Gastar has assigned to Atinum an initial 21.43% interest in all of its existing Marcellus Shale undeveloped lease acreage in West Virginia and Pennsylvania, along with certain producing shallow conventional wells.
With the closing of the transaction, Atinum has paid Gastar $30 million in cash and now owns a 21.43% interest in the 34,200 net acres of Marcellus Shale rights previously owned by Gastar. Also under the terms of the agreement, Atinum has committed to an additional $40 million in the form of a drilling carry to Gastar by funding 75% of Gastar's 50% share of drilling completion and infrastructure costs in addition to its own 50% share of these same costs. Upon the completion of the funding of the $40 million drilling carry, Atinum will own a 50% interest in the acreage, making the transaction valued at approximately $70 million. A post-closing title review period could result in certain purchase price adjustments.
Gastar and Atinum have an initial three-year development program that calls for them to drill one horizontal Marcellus Shale well during the remainder of 2010 and a minimum of 12 horizontal wells in 2011 and 24 in each of 2012 and 2013. Gastar will continue to serve as operator of all of the Marcellus Shale interests in the joint venture.
J. Russell Porter, Gastar's President and CEO, commented, "We are excited to be moving forward with our partnership with Atinum, which will allow us to accelerate development of our Marcellus Shale assets. We have already spudded our first operated horizontal Marcellus Shale well in Marshall County, West Virginia -- the Wengerd #1. Under the terms of the partnership, Atinum will pay 87.5% of the cost of the well for a 50% interest. We expect to have the well completed by late first quarter 2011, and due to the close proximity of this well to existing pipelines, if successful, we should be able to place it on production quickly."
"Atinum is also participating with us in an agreement with an operator of adjacent acreage, to pool acreage in Butler County, Pennsylvania, and participate in the drilling of seven horizontal wells targeting the Marcellus Shale. Under terms of that agreement, collectively Atinum and GST own 38.4% of seven horizontal wells to be drilled. Atinum will pay 87.5% of our net cost (or 33.6% for a 19.2% working interest). Currently the other operator is completing the drilling of the vertical section of the seven wells from one pad and will return later this year with a larger rig to drill horizontal sections in all seven wells. Completion activity is expected to begin in the first quarter of 2011 with the wells scheduled to be fracture stimulated and put on production starting early in the second quarter," added Porter.
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