Included in the transaction are substantially all of Gasco’s Riverbend project midstream assets comprised of the company’s gathering system and related pipeline and equipment, and its two evaporation pits and related equipment used for the disposal of produced water from wells operated in the Riverbend area of Utah. JP Morgan Securities acted as financial advisor to Gasco in connection with the sale.
Pursuant to the purchase agreement, Gasco entered into a transition services agreement with Monarch 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.
Gasco and Monarch entered 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.
Concurrent with the closing of the sale, Gasco applied the entirety of the $23m cash proceeds to repay amounts outstanding under its credit agreement. The company also elected to reduce the borrowing base under its credit agreement to $16m.
King Grant, president and CFO of Gasco, said: “We have substantially and materially improved our balance sheet through this transaction. Our midstream assets were non-core to Gasco which focuses principally on exploring for and exploiting hydrocarbons.
“We believed that this asset reflected little or no value in our market capitalization and opted to monetize it in order to strengthen our overall financial condition. We look forward to a mutually profitable relationship with Monarch as we continue to develop our core Riverbend project.”
Denver-based Gasco is a natural gas and petroleum exploitation, development and production company engaged in locating and developing hydrocarbon resources, primarily in the Rocky Mountain region.
