OKLAHOMA CITY, Oct. 1, 2012 (GLOBE NEWSWIRE) -- PostRock Energy Corporation (Nasdaq:PSTR) ("PostRock" or the "Company") today announced that on Friday, September 28, 2012, it sold PostRock KPC Pipeline, LLC ("KPC") to MV Pipelines, LLC ("MV Pipelines") for $53.5 million in cash. Of this amount, $500,000 will be placed in escrow pending cleanup of a former KPC site. PostRock may receive additional payments of $1 million a year in each of the next four years if KPC's EBITDA (as defined in the agreement) exceeds a target amount. The sale is subject to a working capital adjustment. After approximately $2 million in estimated transaction costs, the Company will record a loss on the sale of approximately $6 million.
Net proceeds from the sale will be used to repay borrowings under the Company's credit facility. The Company's borrowing base has been reduced to $120 million. PostRock's next borrowing base redetermination will be based on its reserves at June 30, 2012 and become effective October 31 st. After applying the sales proceeds, PostRock's debt totaled $104.3 million.
Commenting, Terry W. Carter, PostRock's President and CEO, said, "After reviewing strategic alternatives, we concluded that a sale offered the greatest value to our shareholders. Although the sale will result in a loss in the third quarter, we believe the price is attractive to the Company. The sale of KPC comes at a time when PostRock is seeking to become a pure-play oil and gas production and development company. In addition, the transaction will reduce our cost structure and improve our balance sheet. "KPC is a 1,120 mile interstate pipeline, which transports natural gas from northern Oklahoma and western Kansas to Wichita and Kansas City. PostRock Energy Corporation is engaged in the acquisition, exploration, development, production and transportation of oil and natural gas, primarily in the Cherokee Basin of Kansas and Oklahoma. The Company owns and operates over 3,000 wells and nearly 2,200 miles of gas gathering lines in the Basin. It also owns and operates minor oil producing properties in central Oklahoma and oil and gas producing properties in the Appalachian Basin.