Southern Star Closes $25MM Revolver

Southern Star Energy Inc. has closed on a $25 million Senior First Lien Secured Revolving Credit Agreement (Revolver) with Macquarie Bank Limited. Proceeds from this facility will be used to fund the development of Southern Star's Sentell Field as well as other oil and natural gas interests acquired subsequent to this financing.

The initial borrowing base is $5 million. At closing, $2.5 million will be drawn and outstanding, leaving $2.5 million available. The Revolver's interest rate is prime plus 200 basis points, calculated and payable on a monthly basis. Concurrent with the closing, Macquarie Americas Corp., an affiliate of Macquarie Bank, will have a five-year warrant to purchase 5% of Southern Star's diluted common share count at a strike price of $1.00. The term of the Revolver is 36 months.

David Gibbs, Southern Star President and CEO, said, "With the establishment of a proved and probable asset base, and a rising production profile, this Revolver provides Southern Star with the appropriate structure and amount of capital to fuel our growth for our shareholders. The Macquarie Bank financing will be used for our upcoming 10-well drilling program.

"Near-term, we have a rig commitment from Nabors Drilling for our 10-well drilling program to develop our Cotton Valley reserves. Beginning in September, we will drill vertical Haynesville shale delineation wells on our acreage to test their potential. Recent competitor-announced leasehold transactions and drilling results into the Haynesville offer excellent signposts for Southern Star's future," said Gibbs.


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