Gasco Energy to sell Riverbend midstream assets

Gasco Energy (GSX) has entered into an asset purchase agreement with Monarch Natural Gas, LLC, a portfolio company of Metalmark Capital Partners, in which Gasco has agreed to sell substantially all of its Riverbend midstream assets, and its salt water evaporative facilities, for total cash consideration of $23 million subject to certain adjustments. The closing of the transactions is subject to the satisfaction of a number of conditions. Gasco expects closing to occur during the first quarter of 2010. J.P. Morgan Securities acted as financial advisor to Gasco in connection with the sale. 

Included in the transaction is the Company's 100% interest in its wholly owned gathering system and related assets in the Uinta Basin of Utah. The asset purchase agreement includes 105 miles of large-diameter mainline gathering lines, related compression equipment, a 55,000 MMBtu natural gas processing plant, dehydrators and other above-ground facilities in addition to the salt water evaporative facilities. As part of the asset purchase agreements, Gasco will enter into a transition services agreement whereby Gasco will provide certain services relating to the operation of the midstream assets to Monarch for a six-month term commencing at the time of closing. Also at closing, Gasco and Monarch will enter into separate gas gathering and salt water disposal services agreements with Monarch which in the case of the gas gathering agreement provides for an initial gathering rate of $0.435 per MMBtu, plus 5% of the proceeds from the sale of natural gas and natural gas liquids. 

Commenting on the midstream asset sale, King Grant, Gasco's President & Chief Financial Officer said: "The proceeds of this transaction with Monarch will allow us to strengthen our balance sheet through using the proceeds to repay a portion of our outstandings under our $35 million reserve-based revolving line of credit. At the same time the gas gathering agreement that we are entering into as part of this transaction will assure us that our natural gas will be able to move to market. After closing, Monarch, whose management team consists of skilled and veteran operators, will process and move our gas to market at what we believe to be competitive rates. Our Board of Directors is currently evaluating our 2010 capital expenditure budget for Riverbend Mancos shale completions and recompletions, which we expect to announce, along with 2009 proved reserves, in the coming weeks."

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