Gasco Energy Closes Midstream Transaction
DENVER, March 2 /PRNewswire-FirstCall/ -- Gasco Energy (NYSE Amex: GSX) today announced that it has consummated its previously announced sale of its Riverbend Project midstream assets to Monarch Natural Gas LLC, a portfolio company of Metalmark Capital Partners, for cash consideration of $23 million. Included in the transaction are substantially all of Gasco's Riverbend Project midstream assets comprised of the Company's gathering system and related pipeline and equipment and its two evaporation pits and related equipment used for the disposal of produced water from wells operated in the Riverbend area of Utah. The sale closed on February 26, 2010. J.P. Morgan Securities acted as financial advisor to Gasco in connection with the sale.
Pursuant to the purchase agreement, Gasco entered into a transition services agreement with Monarch whereby Gasco will provide certain services relating to the operation of the midstream assets to Monarch for a six-month term commencing at the time of closing. Effective March 1, 2010, Gasco and Monarch entered into separate gas gathering and salt water disposal services agreements with Monarch, which in the case of the gas gathering agreement provides for an initial gathering rate of $0.435 per MMBtu, plus 5% of the proceeds from the sale of natural gas and natural gas liquids.
Concurrent with the closing of the sale, on February 26, 2010, Gasco applied the entirety of the $23 million cash proceeds to repay amounts outstanding under its credit agreement. The Company also elected to reduce the borrowing base under its credit agreement to $16 million effective immediately. As previously disclosed, on February 1, 2010, the Company's credit agreement was amended to, among other things, incrementally reduce the borrowing base by a fixed amount in connection with certain contemplated asset sales, including the sale of these Riverbend Project midstream assets described above, and, effective as of April 1, 2010, to automatically reduce to $16 million, regardless of whether any of the contemplated asset sales were consummated. For additional information regarding the amendment to the Company's credit agreement, please see the Company's Current Reports on Form 8-K filed with the SEC on February 5, 2010.
"We have substantially and materially improved our balance sheet through this transaction," said King Grant, Gasco's President and Chief Financial Officer. "Our midstream assets were non-core to Gasco which focuses principally on exploring for and exploiting hydrocarbons. We believed that this asset reflected little or no value in our market capitalization and opted to monetize it in order to strengthen our overall financial condition. We look forward to a mutually profitable relationship with Monarch as we continue to develop our core Riverbend project."About Gasco Energy Denver-based Gasco Energy, Inc. is natural gas and petroleum exploitation, development and production company engaged in locating and developing hydrocarbon resources, primarily in the Rocky Mountain region. Gasco's principal business is the acquisition of leasehold interests in petroleum and natural gas rights, either directly or indirectly, and the exploitation and development of properties subject to these leases. Gasco currently focuses its drilling efforts in the Riverbend Project located in the Uinta Basin of northeastern Utah, targeting the Wasatch, Mesaverde, Blackhawk, Mancos, Dakota and Morrison formations. To learn more, visit http://www.gascoenergy.com. Contact for Gasco Energy, Inc.: Investor Relations: 303-483-0044
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