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): December 4, 2007 (November 29,
2007)
GASTAR
EXPLORATION LTD.
(Exact
Name of Registrant as Specified in Its Charter)
|
ALBERTA,
CANADA
|
001-32714
|
38-3324634
|
|
(State
or other jurisdiction of incorporation)
|
(Commission
File Number)
|
(IRS
Employer Identification No.)
|
1331
LAMAR STREET, SUITE 1080
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
On
November 16, 2007 and November 28, 2007, Gastar Exploration USA, Inc. (“Gastar
USA”); Gastar Exploration Ltd., parent of Gastar USA (the "Company"); and
each of Gastar USA’s domestic subsidiaries (collectively, the “Guarantors”)
entered into a purchase agreement and the First Amendment to Purchase
Agreement, under which Gastar USA agreed to sell $100 million aggregate
principal amount of its 12 ¾% Senior Secured Notes due 2012 (the “Notes”) to
Jefferies & Company, Inc., Johnson Rice & Company L.L.C. and Pritchard
Capital Partners, LLC (collectively, the “Initial Purchasers”). The
Notes were offered and sold in a private placement to qualified institutional
buyers pursuant to Rule 144A of the Securities Act of 1933, as amended (the
“Act”). The Notes mature on December 1, 2012 and bear interest at a rate of 12
¾% per year, payable semi-annually on June 1 and December 1 of each year,
commencing on June 1, 2008.
The
Notes
are governed by an indenture, dated as of November 29, 2007 (the “Indenture”),
between Gastar USA, Wells Fargo Bank, National Association, as trustee
(“Trustee”) and collateral agent and each of the Guarantors. The
Indenture contains customary terms, events of defaults and covenants relating
to, among other things, the incurrence of debt and limitations on asset
sales. On or after June 1, 2010, Gastar USA may redeem some or all of
the Notes at a purchase price equal to 106.375% of the principal amount of
the
Notes, plus accrued and unpaid interest, if any, with such optional redemption
prices decreasing to 103.188% and 100.00% of the principal amount of the
Notes
in 2011 and 2012, respectively. Prior to June 1, 2010, Gastar USA may
redeem up to 35% of the aggregate principal amount of the Notes with the
net
proceeds of certain equity offerings at 112.750% of the aggregate principal
amount thereof, plus accrued and unpaid interest. If Gastar USA
experiences a change of control, the holders of the Notes may require Gastar
USA
to purchase for cash all or a portion of their Notes at a purchase price
equal
to 101% of the principal amount of the Notes, plus accrued and unpaid interest,
if any. If Gastar USA experiences a change of control prior to
December 1, 2008, Gastar USA may redeem the Notes at a purchase price equal
to
112.750% of the principal amount of the Notes, plus accrued and unpaid interest
thereon. A copy of the Indenture is filed herewith as Exhibit 4.1 and
is incorporated herein by reference.
The
Notes
are fully and unconditionally guaranteed jointly and severally on a senior
secured basis by the Guarantors and future material domestic subsidiaries
of
Gastar USA. The Notes and the guarantees rank equal in right of
payment with all existing and future senior indebtedness of Gastar USA and
the
Guarantors, and senior in right of payment to any future subordinated
indebtedness of Gastar USA and the Guarantors, as applicable. The Notes are
secured by a second lien on Gastar USA’s and the Guarantors' primary oil and gas
assets and certain other property. The
collateral securing the Notes is subject to, and made subordinate to, the
lien
granted to Amegy Bank National Association under the Credit Agreement (as
disclosed below), as evidenced by that certain Intercreditor Agreement dated
November 29, 2007 among the Guarantors, Amegy Bank National Association,
as
First Priority Agent, and Wells Fargo Bank, National Association, as Second
Priority Agent, (the “Intercreditor Agreement”). A copy of the
Intercreditor Agreement is filed herewith as Exhibit 4.3 and is incorporated
herein by reference.
In
connection with the sale of the Notes, Gastar USA and the Guarantors entered
into a registration rights agreement, dated as of November 29, 2007, with
the
Initial Purchasers (the “Registration Rights Agreement”). Under the
Registration Rights Agreement, Gastar USA and the Guarantors have agreed
to use
their reasonable best efforts to register with the United States Securities
and
Exchange Commission (the “SEC”) a new issue of notes having substantially
identical terms as the Notes as part of an offer to exchange freely tradable
notes. Gastar USA and the Guarantors also agreed to file with the
SEC, within 150 days after the issue date of the Notes, a registration statement
respecting the exchange offer and to use their reasonable best efforts to
cause
that registration statement to be declared effective within 240 days after
the
issue date of the Notes. In certain circumstances, Gastar USA and the
Guarantors may be required to file a shelf registration statement to cover
resales of the Notes. If Gastar USA and the Guarantors fail to
satisfy these obligations, Gastar USA may be required to pay additional interest
to holders of the Notes under certain circumstances. A copy of the
Registration Rights Agreement is filed herewith as Exhibit 4.2 and is
incorporated herein by reference.
Concurrent
with the issuance of the Notes, on November 29, 2007, Gastar USA and the
Guarantors entered into a Credit Agreement with Amegy Bank National Association,
as Administrative Agent and Letter of Credit Issuer, and the other lenders
party
thereto (the “Credit Agreement”). The Credit Agreement provides for
an aggregate revolving line of credit and letter of credit facility of up
to
$250 million with an initial borrowing base of $19.375
million. Borrowings will bear interest, at Gastar USA’s election, at
the prime rate or Eurodollar rate, plus in each case an applicable
margin. The applicable interest rate margin varies from -0.75% to 0%
in the case of borrowings based on the prime rate and from 1.5% to 2.25%
in the
case of borrowings based on the Eurodollar rate, depending on the utilization
level in relation to the borrowing base and, in the case of Eurodollar
borrowings, ratings assigned to Gastar USA’s debt. The Credit
Agreement contains various customary covenants, including restrictions on
liens,
restrictions on incurring other indebtedness without lender’s consent,
restrictions on dividends and other restricted payments, and maintenance
of
various ratios. The Credit Facility is secured by a first priority
lien on Gastar USA’s and the Guarantors’ primary oil and gas assets and certain
other property and pledges of subsidiary stock. The Credit Agreement
matures on October 15, 2009. A copy of the Credit Agreement is filed
herewith as Exhibit 4.4 and is incorporated herein by reference.
The
foregoing summaries do not purport to be complete and are qualified in their
entirety by reference to the Indenture, Intercreditor Agreement, the
Registration Rights Agreement and the Credit Facility.
ITEM
1.02 TERMINATION OF MATERIAL DEFINITIVE AGREEMENT
On November
29, 2007, the Company fully discharged all of its obligations under the
Securities Purchase Agreement dated June 16, 2005, as amended, with Field
Point III, Ltd., Field Point IV, Ltd., SPF CDO I, Ltd., Cyrus Opportunities
Master Fund II, Ltd. and Wayzata Recovery Fund, LLC, under which the
Company issued its senior secured notes due 2010 (the “Senior Secured
Notes”). The total amount repaid by the Company in satisfaction of
its obligations was $78.0 million, representing the full outstanding commitment
of $73.0 million under the Senior Secured Notes, a prepayment penalty
equaling $3.6 million and accrued interest in the amount of $1.4
million. The Company repaid such amounts from the net proceeds from
the offering of the Notes (see disclosure elsewhere in this Current Report
under
“Item 1.01 - Entry Into a Material Definitive
Agreement”).
SECTION
2 - FINANCIAL INFORMATION
ITEM
2.03 CREATION OF A DIRECT FINANCIAL OBLIGATION
The
information in Item 1.01 is incorporated by reference.
SECTION
8 - OTHER EVENTS
ITEM
8.01 OTHER EVENTS
On
November 29, 2007, Gastar Exploration Ltd. issued a press release entitled
“Gastar Exploration Announces Closing of $100,000,000 12 ¾% Senior Secured Notes
and Senior Secured Credit Facility,” which announced that its wholly owned
subsidiary, Gastar Exploration USA, Inc. (“Gastar USA”) completed its previously
announced private placement of $100 million of 12 ¾% senior secured notes due
2012 (the “Notes”). The press release also announced that concurrent
with the issuance of the Notes, Gastar USA also entered into a bank revolving
credit facility and letter of credit facility with an initial borrowing base
of
$19.375 million. This press release is attached as Exhibit 99.1 and
is incorporated herein by reference.
SECTION 9 - FINANCIAL STATEMENTS AND
EXHIBITS
ITEM
9.01 FINANCIAL STATEMENTS AND EXHIBITS
The
information in Item 1.01 is incorporated by reference.
|
Exhibit
No.
|
|
Description
of Document
|
|
|
|
|
|
4.1
|
|
Indenture
related to the 12 ¾% Senior Secured Notes due 2012, dated as of November
29, 2007, between Gastar Exploration USA, Inc., Gastar Exploration
Ltd.,
Wells Fargo Bank, National Association, as Trustee and Collateral
Agent
and each of the other Guarantors party thereto (including the
form of 12
¾% Senior Secured Note due 2012).
|
| |
|
|
|
4.2
|
|
Registration
Rights Agreement, dated as of November 29, 2007, among Gastar
Exploration
USA, Inc., Gastar Exploration Ltd., each of the other Guarantors
party
thereto, Jefferies & Company, Inc., Johnson Rice & Company L.L.C.
and Pritchard Capital Partners, LLC.
|
| |
|
|
|
4.3
|
|
Intercreditor
Agreement dated November 29, 2007 among Gastar Exploration
USA, Inc.,
Gastar Exploration Ltd., each of the Guarantors party thereto,
Amegy Bank
National Association, as First Priority Agent, and Wells Fargo
National
Association, as Second Priority Agent.
|
| |
|
|
|
4.4
|
|
Credit
Agreement, dated November 29, 2007, among Gastar Exploration
USA, Inc.,
the Guarantors party thereto and Amegy Bank National Association
as
Administrative Agent and Letter of Credit Issuer.
|
| |
|
|
|
99.1
|
|
Press
release dated November 29,
2007.
|
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.
| |
GASTAR
EXPLORATION LTD.
|
| |
|
| |
|
|
Date: December
4, 2007
|
/s/
J. RUSSELL PORTER
|
| |
J.
Russell Porter
|
| |
Chairman,
President and Chief Executive
Officer
|
EXHIBIT
INDEX
|
Exhibit
No.
|
|
Description
of Document
|
|
|
|
|
|
|
|
Indenture
related to the 12 ¾% Senior Secured Notes due 2012, dated as of November
29, 2007, between Gastar Exploration USA, Inc., Gastar Exploration
Ltd.,
Wells Fargo Bank, National Association, as Trustee and Collateral
Agent
and each of the other Guarantors party thereto (including the
form of 12
¾% Senior Secured Note due 2012).
|
| |
|
|
|
|
|
Registration
Rights Agreement, dated as of November 29, 2007, among Gastar
Exploration
USA, Inc., Gastar Exploration Ltd., each of the other Guarantors
party
thereto, Jefferies & Company, Inc., Johnson Rice & Company L.L.C.
and Pritchard Capital Partners, LLC.
|
| |
|
|
|
|
|
Intercreditor
Agreement dated November 29, 2007 among Gastar Exploration
USA, Inc.,
Gastar Exploration Ltd., each of the Guarantors party thereto,
Amegy Bank
National Association, as First Priority Agent, and Wells
Fargo National
Association, as Second Priority Agent.
|
| |
|
|
|
|
|
Credit
Agreement, dated November 29, 2007, among Gastar Exploration
USA, Inc.,
the Guarantors party thereto and Amegy Bank National Association
as
Administrative Agent and Letter of Credit Issuer.
|
| |
|
|
|
|
|
Press
release dated November 29,
2007.
|