2010-09-22-2010-09-22-2010-11-02

Closed Marcellus JV, earning an initial 21.43% interest in W VA and PA covering approximately 34,200 net acres.

Atinum Marcellus I LLC, an affiliate of Seoul, South Korea-based investment firm Atinum Partners Co. Ltd., has closed its joint-venture agreement with Gastar Exploration Ltd., Houston, (NYSE Amex: GST) for approximately $70 million.

Gastar will assign an initial 21.43% interest to Atinum in all of its existing Marcellus shale assets in West Virginia and Pennsylvania, approximately 34,200 net acres, and certain producing shallow conventional wells.

Atinum paid Gastar $30 million in cash at closing and will pay an additional $40 million in the form of a drilling carry. Following completion of the funding of the drilling carry, Atinum will own a 50% interest in the 34,200 net acres of Marcellus rights.

Gastar will remain operator of all of the Marcellus interests in the JV.

Atinum will fund its ultimate 50% share of drilling, completion and infrastructure costs along with 75% of Gastar's ultimate 50% share of those same costs until the $40-million carry has been satisfied. Gastar and Atinum are pursuing an initial three-year development program that calls for the partners to drill one horizontal Marcellus well during the remainder of 2010 and a minimum of 12 horizontal wells in 2011 and 24 horizontal wells in each of 2012 and 2013.

An initial area of mutual interests will be established for potential additional acreage acquisitions in Ohio and New York along with the counties in West Virginia and Pennsylvania with the existing interests. In the initial AMI, Gastar will be operator and offer any future lease acquisitions to Atinum on a 50/50 basis, while Atinum has agreed to pay Gastar on an annual basis an amount equal to 10% of lease bonuses and third-party leasing costs up to $20 million and 5% of the costs on activities more than $20 million.

Until June 30, 2011, Atinum will have the right to participate in any future leasehold acquisitions made by Gastar, outside of the initial AMI and within West Virginia or Pennsylvania, on terms identical to those governing the existing Marcellus JV.

Gastar president and chief executive J. Russell Porter says, "We have already spudded our first operated horizontal Marcellus Shale well in Marshall County, West Virginia, the Wengerd #1. Under the terms of the partnership, Atinum will pay 87.5% of the cost of the well for a 50% interest. We expect to have the well completed by late first quarter 2011, and due to the close proximity of this well to existing pipelines, if successful, we should be able to place it on production quickly."

Porter adds that Atinum is also participating in an agreement with an operator of adjacent acreage, to pool acreage in Butler County, Pennsylvania, and participate in the drilling of seven horizontal wells targeting the Marcellus shale. Collectively Atinum and GST own 38.4% of seven horizontal wells to be drilled. Atinum will pay 87.5% of Gastar's net cost (or 33.6% for a 19.2% working interest).

The other operator is completing the drilling of the vertical section of the seven wells from one pad and will return later this year with a larger rig to drill horizontal sections in all seven wells. Completion activity is expected to begin in the first quarter of 2011 with the wells scheduled to be fracture stimulated and put on production starting early in the second quarter.

Porter says the company may use the proceeds to fund Marcellus shale development plans, future drilling and development in East Texas, lease or property acquisition opportunities or debt reduction.

Antinum Partners president and chief executive Kyung Soo Chung says, "We are excited about the opportunity to invest in the Marcellus shale and to partner with an experienced operator such as Gastar. This is our third investment in the U.S. energy sector in the last 12 months, continuing our strategy to actively invest in significant growth opportunities."

BMO Capital Markets was financial advisor to Atinum. Skadden, Arps, Slate, Meagher & Flom LLP was legal advisor to Atinum. Vinson & Elkins LLP was legal advisor to Gastar.

Jefferies & Co. analyst Subash Chandra said the deal is not likely to be impressive, being weaker due to location and limited well history for the assets. Chanda has valued the deal at $4,100 per acre.