Denver-based Gasco Energy Inc. on Wednesday agreed to purchase Brek Energy Corp. for equity consideration of approximately 11 million shares of Gasco common stock, which were estimated to be worth $30 million based on the closing price on Sept. 20. The acquisition is expected to simplify Gasco’s acreage portfolio by absorbing a working interest partner that previously owned 14% of its working interest in undeveloped acreage in both Utah and Wyoming.

Brek’s year-end 2005 proved reserves totaled 5.8 Bcfe, of which 98% is natural gas. About 80% of the reserves are proven undeveloped. At year-end 2005, Gasco’s proven reserves totaled 76.7 Bcfe. Current net production included in the transaction is estimated at 170 Mcf/d. Gasco will not incur any additional overhead expenses as a result of the acquisition.

“The acquisition is consistent with our strategy of consolidating acreage in our core areas from other operators and industry partners,” said Gasco CEO Mark Erickson. He said the transaction is accretive on a net asset value per-share basis and increases the company’s existing acreage position by 20%. “The transaction is a natural fit and one that we have targeted for some time. The undeveloped acreage represents the bulk of the value in this transaction.”

Because the properties “are a direct overlay to the leases we already hold in Utah and Wyoming, we are in a unique position to evaluate Brek,” said Erickson. “The resource and reserve potential of Brek’s properties are nearly proportionate to our own properties. Increased ownership furthers our conviction and dedication to best developing the Uinta Basin while reinforcing our bullishness on the Rockies as one of the most important areas for future development of natural gas.”

The acquisition will increase Gasco’s reserves, production and net leasehold acreage in Utah’s Uinta Basin and in Wyoming’s Green River Basin where the two companies share leasehold acreage in common. The deal gives Gasco 17,095 net acres in the Uinta Basin, increasing its average working interest in properties there to 74% from its current average working interest of 60%. It also gives Gasco 12,495 net acres in the Green River Basin, increasing its average working interest there to 63% from its current average working interest of 49%.

Pro forma for the transaction, Gasco will own or control 124,281 gross acres (91,565 net) in the Uinta Basin and 92,212 gross acres (57,718 net) in the Green River Basin. Once the transaction is completed, Gasco expects to operate 52 gross wells and own more than 100 miles of gathering system, plus a gas processing plant. Gasco also will own or control 216,493 gross and 149,283 net leasehold acres in its core areas of operations.

The boards of directors of Gasco and Brek have approved the terms of the transaction, which is expected to close near the end of 2006. The completion of the acquisition is subject to the approval of the stockholders of Brek and the completion of a distribution of certain subsidiaries of Brek to its stockholders. Under the terms of the transaction, a wholly owned subsidiary of Gasco will merge with and into Brek. As a result of the merger, Brek will become a wholly owned subsidiary of Gasco.

Before the merger is completed, Brek has to distribute its ownership of Vallenar Energy Corp., which owns oil and gas properties in Texas that are noncore to Gasco’s operating strategy, together with other noncore assets.

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