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GST > SEC Filings for GST > Form 8-K on 17-Feb-2017All Recent SEC Filings

Show all filings for GASTAR EXPLORATION INC.

Form 8-K for GASTAR EXPLORATION INC.


17-Feb-2017

Entry into a Material Definitive Agreement, Results of Operations and Fin


Item 1.01 Entry into a Material Definitive Agreement.

Securities Purchase Agreement

On February 16, 2017, Gastar Exploration Inc. (the "Company") entered into a Securities Purchase Agreement (the "Purchase Agreement") with certain purchasers (the "Purchasers") affiliated with Ares Management, L.P. ("Ares"), pursuant to which the Company will issue and sell for cash to the Purchasers
(i) $125,000,000 aggregate principal amount of its Convertible Notes due 2022 (the "Notes") sold at par, which Notes, subject to the receipt of approval of the Company's stockholders, will be convertible into common stock, par value $0.001 per share of the Company (the "Common Stock") or, in certain circumstances, cash in lieu of Common Stock or a combination thereof as described below and (ii) 29,408,305 shares of Common Stock for a purchase price of $50 million. In addition, an affiliate of Ares has agreed to concurrently loan the Company $250 million pursuant to a first-lien secured term loan (the "Term Loan") sold at par. The Company expects to complete the above financings later this month, subject to the finalization of security and collateral documentation and the satisfaction of customary closing conditions. Proceeds from the sale of the Notes, the Common Stock and the Term Loan will be used to fully repay and redeem the Company's existing $70.4 million revolving credit facility and its $325 million senior secured notes due May 2018.

The Common Stock was priced based on a 30-trading day volume weighted average trading price (the "VWAP") determined on the date immediately prior to the signing date of the Purchase Agreement. The 30-day VWAP as of February 15, 2017 was $1.7002, which resulted in the agreement to issue 29,408,305 shares of Common Stock to the Purchasers, or approximately 18.8% of the shares of the Company's 156,715,833 shares of Common Stock issued and outstanding as of January 31, 2017.

The Notes will be issued for cash at par and will bear interest at 6.0% per annum. Subject to receipt of stockholder approval within four months of the closing date (the "Closing") of the above financings (the "Requisite Stockholder Approval"), the Notes will be convertible at the option of the holder into shares of Common Stock based on an initial conversion rate of 452.4355 shares of Common Stock per $1,000 principal amount of the Notes (which is equivalent to an initial conversion price of $2.2103 per share, or 30% above the VWAP of the Common Stock for the 30 trading days prior to execution of the Purchase Agreement), subject to certain adjustments and the issuance of additional "make-whole" shares under circumstances specified in the Indenture governing the Notes (the "Indenture"). Subject to certain limitations, the Company will have the right to settle its conversion obligations on the Notes in Common Stock, or in cash or a combination thereof. If the Company obtains the Requisite Stockholder Approval, then the Company will have the right to redeem the Notes
(i) on or after the second anniversary of the Closing if the Common Stock trades above 150% of the conversion price for periods specified in the Indenture; and
(ii) on or after March 1, 2021 without regard to such condition, in each case at par plus accrued interest. The Notes will mature on March 1, 2022, unless earlier repurchased, redeemed or converted in accordance with the terms of the Indenture prior to such date. The interest rate, conversion rate and other financial terms of the Notes were determined by negotiations between the Company and the Purchasers. The interest rate on the Notes will be subject to an increase in certain circumstances if the Company fails to comply with certain obligations under the Registration Rights Agreement (as defined below), or in the case of certain issuances of Common Stock at below the initial reference price of $1.7002 per share.

If stockholders do not approve the conversion rights of the Notes into Common . . .



Item 2.02 Results of Operations and Financial Condition.

On February 17, 2017, the Company announced its total proved reserves as of December 31, 2016, certain operating results, certain information concerning year-end 2016 borrowings and its 2017 capital plan information. A copy of the Company's press release, dated February 17, 2017, 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 2.02 and set forth in the attached press release included in Exhibit 99.1 to this report is deemed to be "furnished" solely pursuant to Item 2.02 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 or the Exchange Act.


SECTION 2 - FINANCIAL INFORMATION



Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

The information disclosed in Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 2.03.



Item 3.02 Unregistered Sales of Equity Securities.

The information set forth under "Item 1.01 Entry into a Material Definitive Agreement" under the heading "Securities Purchase Agreement" of this Current Report on Form 8-K with respect to the unregistered sales of equity securities is incorporated into this Item 3.02 by reference.



Item 7.01 Regulation FD Disclosure.

On February 17, 2017, the Company issued a press release announcing the signing of the Purchase Agreement, certain year-end reserves information, operational results, year-end 2016 borrowings and its 2017 capital plan. A copy of the Company's press release, dated February 17, 2017, 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 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 or the Exchange Act.



Item 8.01 Other Items.

On February 17, 2017, the Company announced its 2017 capital plan. The Company's 2017 capital budget is approximately $84.0 million comprised of $46.0 million of drilling and completion costs, $30.8 million in leasing costs and $7.2 million for capitalized interest and administration costs. The Company currently operates approximately 92% of its drilling and completions budget. The Company expects to fund its 2017 capital program through existing cash balances, recent financing activities and internally generated cash flow from operating activities. The 2017 capital budget is subject to change and will be affected by many factors, including but not limited to changes in commodity prices and costs of drilling and completion, potential acquisition opportunities, well results and the availability of capital.

The Company ended 2016 with approximately $71.5 million of cash and $84.6 million of debt outstanding under the revolving credit facility. To date, the Company has issued approximately 24.0 million common shares under its at-the-market ("ATM") program for net proceeds of $32.8 million. The ATM proceeds were used primarily to catch-up preferred dividend payments and associated pay down of the revolving credit facility. There are no current plans to issue any additional common shares under the Company's ATM program. As of January 31, 2017, the Company had 156,715,833 shares of Common Stock outstanding.



Item 9.01 Financial Statements and Exhibits.

(d) Exhibits


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

Exhibit No. Description of Document

99.1 Press Release of Gastar Exploration Inc., dated February 17, 2017.


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