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 55,000MMBtu natural gas processing plant, dehydrators and other above-ground facilities in addition to the salt water evaporative facilities.
As part of the agreement, Gasco will enter into a transition services agreement whereby the company 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.
King Grant, president and CFO of Gasco, 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 $35m 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.”
The closing of the transactions is subject to the satisfaction of some conditions. Gasco expects closing to occur during the first quarter of 2010. JP Morgan Securities acted as financial advisor to Gasco in connection with the sale.
Gasco is a natural gas and petroleum exploitation, development and production company. It is engaged in locating and developing hydrocarbon resources, primarily in the Rocky Mountain region.