J. Russell Porter, Gastar's Chairman, President and CEO, said,"We are pleased that we were able to reach a mutually agreeable resolution with GeoStar and put this litigation behind us. Gastar will continue its business plan without delay focusing on the continued development of our East Texas properties and our Australian coal bed methane assets located in New South Wales."

Gastar Exploration Ltd. and GeoStar jointly have settled all outstanding disputes. The settlement resolves significant uncertainty related to Gastar's common equity and potential dilution of existing shareholders.

The settlement includes an upfront cash payment by Gastar of approximately $25.7 million plus the issuance to GeoStar of a warrant to purchase 10 million Gastar common shares. GeoStar is assigning to Gastar all of GeoStar's oil and gas interests in West Virginia and Pennsylvania while Gastar is acknowledging GeoStar's clear title in an exploration license (EL 4416) and assigned its interest to GeoStar's Australian subsidiary in an exploration license application (EL 4968) in the Gippsland Basin of Victoria, Australia.

GeoStar is also being offered a right to farm-in Gastar's interest in two to four well locations in the East Hilltop area of East Texas that are not included in Gastar's future Bossier or Knowles drilling plans. In addition, Gastar will surrender or release claims to GeoStar on approximately 500 acres that were in dispute in East Texas, subject to a pre-existing obligation to offer a portion of that acreage to another property owner.

Depending on the amount of that acreage acquired by the other property owner, Gastar may be obligated to make additional payments to GeoStar of up to $2.03 million (net of payments from the acquirer). Certain other corrective lease assignments and releases are being made between the parties. The parties have mutually agreed to release all claims against each other, their affiliates and current and past officers and directors.

The warrant issued to GeoStar is exercisable for $2.75 per share in the event that on or before June 11, 2011, Gastar sells up to all or substantially all of its present oil and gas interests located in Leon and Robertson Counties in East Texas for net proceeds exceeding $500 million. A sale, or a series of sales, of all or substantially all of the present East Texas properties prior to June 11, 2011 for less than $500 million will terminate the warrant.

If Gastar does not sell all or substantially all of these properties by June 11, 2011, the warrant will be exercisable for a six month period commencing on that date at $3.00 per share. Gastar is not obligated to sell any of its East Texas properties, nor is it presently pursuing any sale of its East Texas assets.

Tags: Gastar Exploration Ltd., GeoStar