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- Holders of administrative and priority claims, as well as general unsecured claims, will be paid in full in cash
- Amounts outstanding under the Company’s debtor-in-possession (“DIP”) financing (to be provided by Ares) will roll over into a new exit facility, with undrawn commitments remaining available to the Company
- Prepetition hedge fund counterparties will be paid in cash in equal monthly installments through December 2019
- Ares will receive $200 million in new take-back term loans and 100 percent of the common equity of reorganized Gastar (subject to any warrants for current equity) as a result of their obligations under the Company’s DIP financing and first lien term loan and all of the Company’s second lien convertible note obligations
- Holders of existing preferred and common equity will together receive new warrants exercisable for up to 5% of the common equity of reorganized Gastar; so long as they do not object to, or otherwise attempt to interfere with, the Company’s restructuring.
These macro-economic forces were further exacerbated by the failure of a Joint JV following a disastrous switch to a new completion provider and fracking method. The Gerlich Declaration continues, “In late 2016, the primary oilfield services completions provider for the Debtors and the DrillCo Venture elected to cease operating in the area. As a result, completion costs significantly increased due to fewer completion service providers in the area. The Debtors switched to a different completion provider and transitioned to a fracking method that eliminated a number of special additives, which was not anticipated to affect production performance….These operational changes resulted in a marked decrease in well production performance….Due to the decrease in production performance, coupled with higher drilling and completion costs, the DrillCo Partner exercised its right to terminate the DrillCo Venture in July 2017, after the initial 20 wells were drilled. Without the participation of the DrillCo Partner (who bore 90 percent of the costs), the Debtors were forced to proceed with their drilling program…without a partner to pay a promoted share of the drilling and completion costs for the next 20 well tranche….The termination of the DrillCo Venture meant that the Debtors went from bearing 10 percent to 100 percent of the cost for any previously budgeted future second tranche wells….In mid-2017, the Debtors…corrected their drilling and completion technique deficiencies, and resumed limited operated drilling activities. While the Debtors were ultimately able to achieve the production levels consistent with what they had modelled…they were only able to do so through substantially higher-than-projected capital expenditures. The resulting capital burn was nearly $90 million greater than originally projected.”
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