The acquisition also includes a 35% working interest in the PPL3 production license, which contains the Coonarah conventional gas field.
Gastar will pay $3 million upfront with the final $250,000 contingent upon the power station being successfully expanded to a capacity of 7MW. The facility currently has a capacity of 4MW, with plans in place to gradually increase capacity up to 40MW as coal seam gas production from the PEL238 exploration license increases.
Construction of a flowline to deliver gas from the PEL238 production pilots to the power station is expected to be completed by the end of 2008. Gastar will fund its share of the construction expenditures of the power station and pipeline, which is expected to total approximately $3.6 million over the next 12 months.
Russell Porter, Gastar’s chairman and CEO, said: Given our existing 35% working interest in the coal seam gas production from PEL238, this acquisition more fully aligns our interests with those of our joint venture partner, Eastern Star Gas, as we jointly benefit from the increasing production from the pilot programs. The Wilga Park power station will be the primary market for natural gas from PEL238 until we begin fulfilling our supply arrangements under the two previously announced memoranda of understanding.
