Chesapeake Energy Corp., Oklahoma City, (NYSE: CHK) has closed the acquisition of 19.9% of the common shares of Houston-based Gastar Exploration Ltd. (Toronto: YGA; Pink Sheets: GSREF) and the 33% working interest in Gastar's Deep Bossier play in the Hilltop prospect area of Leon and Robertson counties, East Texas. The companies have also formed an area of mutual interest to explore 13 counties in East Texas. Chesapeake acquired for cash newly issued common shares equal to 19.9% of Gastar's outstanding for approximately US$2.80 each, equal to approximately 26.9 million new shares. This allows Gastar to raise approximately US$72 million, which it will use to accelerate drilling in East Texas, reduce short-term debt and for general corporate purposes. The purchase price for the Deep Bossier play acreage is approximately US$8.6 million in cash. Chesapeake also paid some drilling costs on Gastar's retained 66.7% leasehold working interest on the Deep Bossier play for a 33.33% working interest. Gastar will be the operator of all wells drilled in the Hilltop prospect. Gastar and Chesapeake have also formed an area of mutual interest covering all of Leon, Robertson, Houston, Cherokee, Madison, Anderson, Angelina, Nacogdoches, Trinity, Polk, Shelby, San Augustine and Sabine counties, Texas. For three years after closing, Gastar will offer Chesapeake the right to purchase up to an undivided 50% of any leasehold/working interest rights acquired by Gastar in the area of mutual interest. Aubrey K. McClendon, Chesapeake's chairman and chief executive, says, "We are pleased to have closed this transaction and now look forward to working closely with Gastar in the years ahead to more fully develop the Hilltop Prospect property and to participate in new prospects in the 13-county AMI." J. Russell Porter, Gastar's president and CEO, says, "We believe that entering into this transaction with Chesapeake creates significant value for Gastar through Chesapeake's contribution of expertise, capital and access to drilling rigs and services. With Chesapeake's involvement we will be able to accelerate exploration and development drilling of the Hilltop area resulting in the creation of that value sooner, and hopefully in greater amounts, than had Gastar continued exploration and development of the Hilltop area independently."
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