History
Gasco Energy built a Utah gas business on debt and equity raisings, sold assets to survive, was delisted in 2013, and ended up controlled by its noteholders.
2001-2004: Building the Riverbend base
The company began as San Joaquin Resources Inc. On March 30, 2001 it bought Pannonian Energy in an all-stock merger, issuing 14,000,000 shares and leaving 24,050,000 outstanding. It renamed itself Gasco Energy and traded on the OTC Bulletin Board as GASE. Pannonian's leaders, Marc Bruner, Mark Erickson and Howard Sharpe, took over the board and management. Pannonian's Riverbend Project in Utah's Uinta Basin, with a joint venture with Phillips Petroleum, was the only asset, and drilling depended on funding.
In May 2002 Gasco added leases over 62,276 net acres in Sublette County, Wyoming, paying with 9,500,000 new shares valued at $18,525,000. In July 2002 it sold Brek Energy and other shareholders 25% of its working interests in its undeveloped acreage, taking back 6,250,000 common shares and 500 preferred shares, which cleared all preferred stock and left 35,188,800 common shares outstanding.
In March 2004 Gasco bought more Riverbend working interests and gathering assets for $3,175,000 and became operator. In August and September 2004 it sold net profits interests in eight Riverbend wells to Red Oak Capital Management and its partners for $4,314,984 in total, keeping its working interest and operatorship. The big step came on October 20, 2004: a private placement of $65 million of 5.50% Convertible Senior Notes due 2011, with net proceeds of $62,075,000. Its $2.5 million of debentures converted into shares. The notes were Gasco's first significant debt. The company had a 2003 net loss of $2,526,525 and an accumulated deficit of $26,556,828 at June 30, 2004. By December 2004 its stock was cleared to list on the American Stock Exchange.
2005-2009: Bank debt and a squeeze
The record is quiet in 2005. In March 2006 Gasco signed a $250 million credit agreement with JPMorgan Chase, with an initial borrowing base of $17 million and nothing drawn at signing. In August 2006 it bought Utah working interests in 24 wells and a gathering pipeline from Dominion E&P for $4,875,000. In September 2006 it agreed to buy Brek Energy, its partner in the Riverbend acreage, for 11 million Gasco shares, and in July 2007 it filed the registration for those shares. No closing or termination of that merger appears in the record.
The bank facility tightened. A December 2008 amendment extended maturity to March 2011 and lifted the borrowing base to $45.0 million. By May 2009 the base was cut to $35 million, leaving Gasco about $9 million over the limit, which it repaid using $8.5 million from selling hedges plus cash. In June 2009 NYSE Amex warned that Gasco fell short of listing standards on stockholders' equity and losses, and in September it accepted a plan giving until December 27, 2010 to comply.
2010-2012: Selling assets to pay the bank
In early 2010 the bank pressure forced sales. Gasco agreed to sell its Riverbend gas gathering system to Monarch Natural Gas for about $23 million, and a February 2010 amendment cut the borrowing base from $35 million to $16 million, with failure to sell assets by April 1, 2010 an event of default. The Monarch sale closed on February 26, 2010, and all the cash repaid borrowings. Gasco then paid Monarch to gather its gas.
In 2011 Gasco turned to shareholders. In June it sold 25,000,000 units at $0.24 for $6.0 million gross, and in July 16,000,000 units at $0.25 for $4.0 million gross. Each unit carried a warrant at $0.35, adding potential dilution. Shares on issue rose from 121,182,048 at the end of 2010 to 168,010,815 at the end of 2011. In September 2011 it signed a ten-year processing agreement with Chipeta Processing LLC; the record does not show whether the plant was built.
On March 22, 2012 the Wapiti Oil & Gas II deal closed. Gasco sold 50% of certain Uinta Basin producing assets for $18.0 million cash plus a $1.19 million note, and Wapiti took 50% of the non-producing assets in return for a drilling program. The proceeds repaid all borrowings under the JPMorgan facility, which matured in June 2012 with no replacement obtained. Gasco also signed an amended Monarch agreement through February 2025.
2012-2014: Delisting and a change of control
In December 2012 NYSE MKT demanded a reverse stock split by June 2013 because of the low share price. In January 2013 it questioned whether Gasco could meet its obligations, and in March it said it would begin delisting. Gasco first planned to appeal, then decided on April 23 not to. Trading moved to the OTCQB as GSXN on April 26, 2013.
Gasco missed interest payments on its 5.5% convertible notes in April and October 2013, owing about $47.8 million. On October 17, 2013 Markham LLC and Orogen Energy bought $45,168,000 of the notes and all the Series C preferred. On October 18 the notes were cancelled in exchange for 393,550,372 new common shares and 50,000 Series D preferred shares convertible into 7,295,744,128 common shares. This explains the rise in shares on issue to 563,532,352 by the end of 2013. The buyers also provided a $5 million revolving credit line. They held about 97.9% of the stock as-converted, four directors resigned, and the board was cut to three.
On February 12, 2014 Gasco and Wapiti amended the drilling agreement to 15 named gas wells. Gasco would pay $3.75 million of its $18.75 million share, and Wapiti would fund the other $15 million. Richard S. Langdon signed as President and CEO. As of February 24, 2014, Gasco had drawn $4.0 million of the $5 million revolver, due to end May 19, 2014. It still carried going-concern doubt, the authorized share increase to 9 billion needed stockholder consent, and the Brek merger remained unresolved.
Written from the 35 story beats below (2001 to 31 Mar 2014), which come from the company's own announcements and filings.