Shares of Houston-based Gastar Exploration Ltd. plunged Tuesday after the company said it intends to offer 12,000,000 common shares in an underwritten offering.

Gastar stock dropped nearly 18% to $4.34/share from its previous close of $5.27/share in heavy trading on the American Stock Exchange. The stock's 52-week range is $2.85-5.77/share.

Gastar said it would use net proceeds from the offering to fund the $28.8 million purchase price for its recently announced Marcellus Shale leasehold acquisition, $18 million for settlement payments with respect to the recently announced settlement of the seven In re ClassicStar Mare Lease litigation matters, and working capital and general corporate purposes.

Last month Gastar said it would buy another 59,000 net acres in the West Virginia portion of the Marcellus (see Shale Daily, Nov. 11).

The offering is being made pursuant to an effective shelf registration statement filed with the U.S. Securities and Exchange Commission. The company also intends to grant the underwriters a 30-day option to purchase up to 1,800,000 additional common shares to cover over-allotments, if any.