Mt. Pleasant, MI-based Gastar Exploration Ltd. said last week that it has closed on its previously announced Powder River Basin earn-in joint venture with Pinnacle Gas Resources Inc., a new company formed by affiliates of Riverton, WY-based Rocky Mountain Gas Inc. (RMG), Houston-based CCBM Inc. and Credit Suisse First Boston Private Equity fund.

First announced in late April (see NGI, May 5), the joint venture will develop nearly 37,000 acres of Gastar’s coalbed methane (CBM) properties in the Powder River Basin of Wyoming and Montana. Gastar received approximately $6.2 million in cash at closing. As part of the joint venture, Pinnacle will provide up to an additional $14.5 million on behalf of itself and Gastar for further development of the joint venture properties prior to Dec. 31, 2005.

At closing, Gastar assigned Pinnacle a 50% working interest position in all existing producing and non-producing leases within the area of mutual interest in consideration for the cash payment and the additional spending commitment. Gastar said the agreements also provide for any undeveloped leases to be re-assigned to Gastar subject to penalty provisions should Pinnacle fail to complete the $14.5 million spending commitment. Currently, these leases are producing at a gross rate of approximately 2 MMcf/d.

The deal allows Pinnacle to hold a 60% revenue interest until it has recovered from production the $14.5 million spending commitment amount and a 50% working interest thereafter. After Pinnacle’s spending commitment is satisfied, Gastar and Pinnacle will be 50/50 joint venture partners for CBM exploration and development activity within the mutual interest area.

“This is an important development for Gastar,” said J. Russell Porter, Gastar’s COO. “We are pleased to be partners with Pinnacle Gas Resources Inc. and believe that the financial backing of Credit Suisse First Boston Private Equity along with the talents of the Pinnacle management team and the high-quality CBM properties contributed by Gastar to the Earn In Joint Venture will allow Pinnacle to be successful immediately.

“This transaction allows Gastar to accelerate development of these CBM assets at a time when realized gas prices are strong and projected to remain strong,” he added. “In addition, this transaction also provides funding for Gastar’s continued exploration and development including its Deep Bossier Sand assets in East Texas and funding for its CBM assets in New South Wales (PEL 238) and Victoria (the Gippsland Basin), Australia. Gastar is currently in the final stages of planning its second Deep Bossier exploration well, following the geologic success realized in its first Deep Bossier well.”

RMG is a subsidiary of U.S. Energy and Crested Corp., while CCBM is a wholly owned subsidiary of Carrizo Oil & Gas, Inc.

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