Filed Pursuant to Rule 424(b)(3)
Registration No. 333-217168
PROSPECTUS
169,933,626 Shares
Common Stock
This prospectus relates to the
resale or other disposition of up to 169,933,626 shares of our common stock par value $0.001 per share, which may be offered for sale from time to time by the selling stockholders named in this prospectus. We are not selling any shares of common
stock under this prospectus and will not receive any proceeds from the sale of any shares of common stock by the selling stockholders. The selling stockholders will bear all commissions and discounts, if any, attributable to the sale or other
disposition of the shares of common stock. We will bear all costs, expenses and fees in connection with the registration of the shares of common stock.
Our common stock trades on the NYSE American LLC (the NYSE American) under the symbol GST. The last reported sales price of our common
stock on March 14, 2018 was $0.70 per share. You are urged to obtain current market quotations for the common stock.
The selling stockholders may
from time to time sell, transfer or otherwise dispose of any or all of their shares of common stock in a number of different ways and at varying prices. See Plan of Distribution for more information.
We may amend or supplement this prospectus from time to time by filing amendments or supplements as required. You should read this entire prospectus and any
amendments or supplements carefully before you make your investment decision.
Investing in our securities
involves risk. Please see
Risk Factors
beginning on page 3 for a discussion of certain risks that you should consider in connection with an investment in the securities.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
This
prospectus is dated March 23, 2018.
TABLE OF CONTENTS
This prospectus is part of a registration statement that we have filed with the SEC pursuant to which the selling stockholders named herein
may, from time to time, offer and sell or otherwise dispose of the shares of our common stock covered by this prospectus. You should not assume that the information contained in this prospectus is accurate on any date subsequent to the date set
forth on the front cover of this prospectus or that any information we have incorporated by reference is correct on any date subsequent to the date of the document incorporated by reference, even though this prospectus is delivered or shares of
common stock are sold or otherwise disposed of on a later date. It is important for you to read and consider all information contained in this prospectus, including the documents incorporated by reference therein, in making your investment decision.
You should also read and consider the information in the documents to which we have referred you under the caption Where You Can Find More Information in this prospectus.
We have not authorized any dealer, salesman or other person to give any information or to make any representation other than those
contained or incorporated by reference in this prospectus. You must not rely upon any information or representation not contained or incorporated by reference in this prospectus. This prospectus does not constitute an offer to sell or the
solicitation of an offer to buy any of our shares of common stock other than the shares of our common stock covered hereby, nor does this prospectus constitute an offer to sell or the solicitation of an offer to buy any securities in any
jurisdiction to any person to whom it is unlawful to make such offer or solicitation in such jurisdiction.
This prospectus
contains forward-looking statements that are subject to a number of risks and uncertainties, many of which are beyond our control. See Risk Factors and Cautionary Note Regarding Forward-Looking Statements.
Industry and Market Data
The market data
and certain other statistical information used throughout this prospectus are based on independent industry publications, government publications and other published independent sources. Some data is also based on our good faith estimates. Although
we believe these third-party sources are reliable as of their respective dates, neither we nor the selling stockholders have independently verified the accuracy or completeness of this information. The industry in which we operate is subject to a
high degree of uncertainty and risk due to a variety of factors, including those described in the section entitled Risk Factors. These and other factors could cause results to differ materially from those expressed in these publications.
i
Trademarks and Trade Names
We own or have rights to various trademarks, service marks and trade names that we use in connection with the operation of our business. This
prospectus may also contain trademarks, service marks and trade names of third parties, which are the property of their respective owners. Our use or display of third parties trademarks, service marks, trade names or products in this
prospectus is not intended to, and does not imply a relationship with, or endorsement or sponsorship by us. Solely for convenience, the trademarks, service marks and trade names referred to in this prospectus may appear without the
®
, TM or SM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the right of the applicable
licensor to these trademarks, service marks and trade names.
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PROSPECTUS SUMMARY
This summary description about us and information contained elsewhere in this prospectus does not contain all the information you should
consider before investing in our securities. Important information is incorporated by reference into this prospectus. To understand this offering fully, you should read carefully the entire prospectus, including Risk Factors, together
with the additional information described under Information Incorporated By Reference.
Our Company
We are a pure-play
Mid-Continent
independent energy company engaged in the exploration, development and
production of oil, condensate, natural gas and natural gas liquids (NGLs). Our principal business activities include the identification, acquisition and subsequent exploration and development of oil and natural gas properties with an
emphasis on unconventional reserves, such as shale resource plays. We hold a concentrated acreage position in the normally pressured oil window of the STACK Play, an area of central Oklahoma which is home to multiple oil and natural
gas-rich
reservoirs, including the Oswego limestone, Meramec and Osage bench formations within the Mississippi Lime, the Woodford shale and Hunton limestone formations.
Corporate Information
Our principal
executive offices are located at 1331 Lamar Street, Suite 650, Houston, Texas 77010. Our telephone number at that address is (713)
739-1800.
Our website address is
http://www.gastar.com
. We make our
periodic reports and other information filed with or furnished to the SEC available, free of charge, through our website, as soon as reasonably practicable. Information contained on our website is not incorporated by reference into this prospectus
and you should not consider information contained on our website as part of this prospectus.
Risk Factors
An investment in our common stock involves a significant degree of risk. You should carefully consider the risk factors and all of the other
information included in this prospectus and the documents we have incorporated by reference into this prospectus, including those in Item 1A Risk Factors in our Annual Report on Form
10-K
for the
fiscal year ended December 31, 2017, before making an investment decision. Please see Risk Factors on page 3 of this prospectus for further information.
1
THE OFFERING
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Common stock that may be offered by the selling stockholders
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169,933,626 shares.
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Use of proceeds
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We will not receive any of the proceeds from the sale of shares of our common stock by the selling stockholders.
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Please read Use of Proceeds and Selling Stockholders.
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Dividend policy
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We have never declared or paid any cash dividends on our common stock. We anticipate that we will retain future earnings, if any, to satisfy our operational and other cash needs and do not anticipate paying any cash dividends on
our common stock in the foreseeable future. In addition, the agreements governing our Convertible Notes due 2022 (the Notes) and our senior secured first lien term loan facility prohibits us from paying cash dividends on our common stock
as long as any debt remains outstanding. As of the date of this prospectus, we have suspended the payment of dividends on our outstanding two series of preferred stock. Until all such accumulated and unpaid dividends are paid in full on our
preferred stock for the periods set forth in the preferred stock certificates of designations, we will be restricted from paying dividends in respect of our common stock.
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NYSE American Trading symbol
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GST.
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Risk Factors
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You should carefully read and consider the information beginning on page 3 of this prospectus set forth under the heading Risk Factors and all other information set forth in this prospectus before deciding to invest
in our common stock.
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2
RISK FACTORS
An investment in our common stock involves a significant degree of risk. You should carefully consider the risk factors and all of the other
information included in this prospectus and the documents we have incorporated by reference into this prospectus, including those in Item 1A. Risk Factors in our Annual Report on Form
10-K
for the
fiscal year ended December 31, 2017, before making an investment decision. Any of these risks and uncertainties could have a material adverse effect on our business, financial condition, cash flows and results of operations could be materially
adversely affected. If that occurs, the trading price of our common stock could decline materially, and you could lose all or part of your investment.
The risks included in this prospectus and the documents we have incorporated by reference into this prospectus are not the only risks we face.
We may experience additional risks and uncertainties not currently known to us, or as a result of developments occurring in the future. Conditions that we currently deem to be immaterial may also materially and adversely affect our business,
financial condition, cash flows and results of operations.
3
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Various statements contained in or incorporated by reference into this prospectus that express a belief, expectation, or intention, or that
are not statements of historical fact, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 (as amended, the Securities Act) and Section 21E of the Securities Exchange Act of 1934 (as
amended, the Exchange Act). These forward-looking statements include without limitation, all statements regarding future plans, business objectives, strategies, expected future financial position or performance, future covenant
compliance, expected future operational position or performance, budgets and projected costs, future competitive position or goals and/or projections of management for future operations. In some cases, you can identify a forward-looking statement by
terminology such as may, will, could, should, expect, plan, project, intend, anticipate, believe, estimate,
predict, potential, pursue, target or continue, the negative of such terms or variations thereon, or other comparable terminology. We have based these forward-looking statements on our
current expectations and assumptions about future events. These statements are based on certain assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions and expected future
developments as well as other factors we believe are appropriate under the circumstances. Actual results may differ materially from those implied or expressed by the forward-looking statements. These forward-looking statements speak only as of the
date of this prospectus, or if earlier, as of the date they were made. We disclaim any obligation to update or revise these statements unless required by law, and we caution you not to rely on them unduly. While our management considers these
expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties relating to, among other matters, the risks discussed in
Risk Factors, as well as those factors summarized below.
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Forward-looking statements may include statements about our: financial condition;
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cash flow and liquidity;
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timing and results of property divestitures;
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compliance with covenants under our indenture and credit agreements;
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business strategy and budgets;
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drilling of wells, including the scheduling and results of such operations;
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oil, natural gas and NGL reserves;
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timing and amount of future production of oil, condensate, natural gas and NGLs;
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operating costs and other expenses;
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availability of capital; and
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Although we believe such estimates and assumptions to be reasonable,
they are inherently uncertain and involve a number of risks and uncertainties that are beyond our control. As such, managements assumptions about future events may prove to be inaccurate. These cautionary statements qualify all forward-looking
statements attributable to us or persons acting on our behalf. Management cautions all readers that the forward-looking statements contained in this prospectus are not guarantees of future performance, and we cannot assure any reader that such
statements will be realized or that the events and circumstances they describe will occur. Factors that could cause actual results to differ materially from those anticipated or implied in the forward-looking statements herein include, but are not
limited to:
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the supply and demand for oil, condensate, natural gas and NGLs;
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4
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continued low or further declining prices for oil, condensate, natural gas and NGLs, including risks of low commodity prices;
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our financial condition, results of operations, revenues, cash flows and expenses;
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the potential need to sell certain assets, restructure our debt or raise additional capital;
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the need to take ceiling test impairments due to lower commodity prices;
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worldwide political and economic conditions and conditions in the energy market;
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the extent to which we are able to realize the anticipated benefits from acquired assets;
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our ability to monetize certain assets;
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our ability to raise capital to fund capital expenditures, service our indebtedness or repay or refinance debt upon maturity;
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the ability and willingness of our current or potential counterparties, third-party operators or vendors to enter into transactions with us and/or to fulfill their obligations to us;
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failure of our
co-participants
to fund any or all of their portion of any capital program;
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the ability to find, acquire, develop and produce new oil and natural gas properties;
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uncertainties about the estimated quantities of oil and natural gas reserves and in the projection of future rates of production and timing of development expenditures of proved reserves;
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strength and financial resources of competitors;
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availability and cost of material and equipment, such as drilling rigs and transportation pipelines;
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availability and cost of processing and transportation;
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changes or advances in technology;
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the risks associated with exploration, including cost overruns and the drilling of
non-economic
wells or dry wells, operating hazards inherent to the oil and natural gas business
and down hole drilling and completion risks that are generally not recoverable from third parties or insurance;
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potential mechanical failure or under-performance of significant wells or pipeline mishaps;
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possible new legislative initiatives and regulatory changes potentially adversely impacting our business and industry, including, but not limited to, national healthcare, hydraulic fracturing, state and federal
corporate income taxes, retroactive royalty or production tax regimes, changes in environmental regulations, environmental risks and liability under federal, state and local environmental laws and regulations;
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effects of the application of applicable laws and regulations, including changes in such regulations or the interpretation thereof;
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potential losses from pending or possible future claims, litigation or enforcement actions;
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potential defects in title to our properties or lease termination due to lack of activity or other disputes with mineral lease and royalty owners, whether regarding calculation and payment of royalties or otherwise;
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the weather, including the occurrence of any adverse weather conditions and/or natural disasters affecting our business;
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our ability to find and retain skilled personnel; and
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any other factors that impact or could impact the exploration of natural gas or oil resources, including, but not limited to, the geology of a resource, the total amount and costs to develop recoverable reserves, legal
title, regulatory, natural gas administration, marketing and operational factors relating to the extraction of oil and natural gas.
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Should one or more of the risks or uncertainties described in this prospectus occur, or should underlying assumptions prove incorrect, our
actual results and plans could differ materially from those expressed in any forward-looking statements.
All forward-looking statements,
expressed or implied, included in this prospectus are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking
statements that we or persons acting on our behalf may issue.
Except as otherwise required by applicable law, we disclaim any duty to
update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this prospectus.
6
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of shares of our common stock by the selling stockholders.
7
SELLING STOCKHOLDERS
This prospectus relates to the offer and sale from time to time by the selling stockholders identified below of up to an aggregate 169,933,626
total shares of our common stock. This prospectus will not cover subsequent sales of common stock purchased from a selling stockholder named in this prospectus.
No offer or sale under this prospectus may be made by a stockholder unless that holder is listed in the table below, in a supplement to this
prospectus or in an amendment to the related registration statement that has become effective. We will supplement or amend this prospectus to include additional selling stockholders upon provision of all required information to us and subject to the
terms of the relevant agreement between us and the selling stockholders.
The following table sets forth the maximum number of shares of
our common stock to be sold by the selling stockholders. The table also sets forth the name of each selling stockholder, the nature of any position, office or other material relationship which the selling stockholder has had, within the past three
years, with us or with any of our predecessors or affiliates, and the number of shares of our common stock beneficially owned as of March 12, 2018 prior to any offering of common stock pursuant to this prospectus, and which would be
beneficially owned by each such selling stockholder after completion of the sale of all shares of common stock offered pursuant to this prospectus.
We prepared the table based on information provided to us by the selling stockholders as of a recent date. We have not sought to verify such
information. Other information about the selling stockholders may also change over time.
Except as otherwise indicated, each selling
stockholder has sole voting and dispositive power with respect to such shares.
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Names of Selling Stockholders (1)(2)
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Shares of Common Stock
Beneficially Owned Prior to the
Offering (3)(4)
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Shares of
Common Stock
Being Offered
Hereby(3)
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Shares of Common Stock
Beneficially Owned After
Completion of the Offering(3)
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Number
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Percent(5)
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Number
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Number
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Percent(5)
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AF V Energy I AIV A1 L.P.
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6,470,018
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2.9
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%
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6,378,242
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91,776
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*
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AF V Energy I AIV A2 L.P.
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6,411,512
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2.9
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%
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6,320,562
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90,950
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AF V Energy I AIV A3 L.P.
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6,420,317
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2.9
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%
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6,329,259
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91,058
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AF V Energy I AIV A4 L.P
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6,453,140
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2.9
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%
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6,361,600
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91,540
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AF V Energy I AIV A5 L.P.
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6,486,893
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2.9
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%
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6,394,883
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92,010
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AF V Energy I AIV A6 L.P.
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6,445,918
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2.9
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%
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6,354,484
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91,434
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AF V Energy I AIV A7 L.P.
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6,303,961
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2.8
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%
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6,214,541
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89,420
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AF V Energy I AIV A8 L.P.
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6,387,215
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2.8
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%
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6,296,617
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90,598
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AF V Energy I AIV A9 L.P.
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6,470,018
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2.9
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%
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6,378,242
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91,776
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AF V Energy I AIV A10 L.P.
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6,470,018
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2.9
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%
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6,378,242
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91,776
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AF V Energy I AIV A11 L.P.
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6,387,215
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2.8
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%
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6,296,617
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90,598
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AF V Energy I AIV A12 L.P.
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6,305,091
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2.8
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%
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6,215,671
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89,420
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AF V Energy I AIV A13 L.P.
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7,598,416
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3.4
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%
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7,490,640
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107,776
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*
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AF V Energy I AIV B1 L.P.
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45,623,125
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18.6
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%
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44,975,995
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647,130
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*
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Total
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130,232,857
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128,385,595
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1,847,262
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(1)
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According to, and based upon, the Schedule 13D/A filed by AF V Energy I AIV B1, L.P., ACOF Investment Management LLC, Ares Management LLC (Ares), Ares Management Holdings L.P., Ares Holdco LLC, Ares Holdings
Inc., Ares Management, L.P. (Ares Management), Ares Management GP LLC and Ares Partners Holdco LLC (collectively, the Ares Reporting Persons) with the SEC on May 25, 2017. The Ares Reporting Persons may be deemed to
share voting and dispositive power with respect to the shares, which are held by the selling stockholders. Each of the selling stockholders has informed us that (i) it purchased the securities in the ordinary course of business, and
(ii) at the time the securities were purchased, it had no agreements or understandings, directly or indirectly, with any person to distribute the securities. The address of each Ares Reporting Person and each selling stockholder is 2000 Avenue
of the Stars, 12th Floor, Los Angeles, California 90067.
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(2)
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The selling stockholders have nominated Nathan W. Walton and Ronald D. Scott to serve as directors on our board of directors (the Board). The selling stockholders also own an aggregate of 2,000 Special
Voting Shares (as defined below) that entitle the holders of a majority of such shares to elect up to two directors (including any nominees designated under the Purchase Agreements (as defined below)) to the Board for so long as the holders of such
shares meet certain common stock ownership thresholds.
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(3)
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Included as shares of common stock beneficially owned prior to the offering and shares of common stock being offered hereby are an aggregate of (i) 54,864,826 shares directly owned by selling stockholders and (ii)
73,520,769 shares of common stock issuable upon conversion at the option of selling stockholders of the Notes directly owned by selling stockholders based on an initial conversion rate of 452.4355 shares of common stock per $1,000 principal amount
of the Notes. Also covered by this prospectus is the offer and sale by the selling stockholders of an aggregate maximum of (i) 22,056,210 additional shares that may be issued to selling stockholders in respect of the original principal amount of the
Notes as make whole shares under certain circumstances described in the Indenture and (ii) 19,491,821 additional shares that may be issued to selling stockholders in respect of the conversion of additional principal of the Notes issued
at the option of the Company as pay in kind or PIK interest on the Notes upon the occurrence of certain registration defaults under the indenture (including the maximum issuance of additional related make whole
shares in respect of such PIK principal), which additional shares are issuable to each of the selling stockholders in respect of their Notes ownership, and offered and sold hereby, in the maximum amounts as follows:
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Names of Selling Stockholders
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Additional
Make-Whole
Shares
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Additional PIK
Interest Shares
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AF V Energy I AIV A1 L.P.
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1,095,786
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968,384
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AF V Energy I AIV A2 L.P.
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1,085,952
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959,693
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AF V Energy I AIV A3 L.P.
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1,087,217
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960,810
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AF V Energy I AIV A4 L.P
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1,092,977
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965,900
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AF V Energy I AIV A5 L.P.
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1,098,597
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970,867
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AF V Energy I AIV A6 L.P.
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1,091,712
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964,783
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AF V Energy I AIV A7 L.P.
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1,067,689
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943,553
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AF V Energy I AIV A8 L.P.
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1,081,738
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955,968
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AF V Energy I AIV A9 L.P.
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1,095,786
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968,384
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AF V Energy I AIV A10 L.P.
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1,095,786
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968,383
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AF V Energy I AIV A11 L.P.
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1,081,737
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955,968
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AF V Energy I AIV A12 L.P.
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1,067,689
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943,553
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AF V Energy I AIV A13 L.P.
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1,286,846
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1,137,230
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AF V Energy I AIV B1 L.P.
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7,726,698
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6,828,345
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Total
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22,056,210
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19,491,821
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(4)
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Beneficial ownership is determined in accordance with Rule
13d-3
under the Exchange Act.
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(5)
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Based on 220,895,069 shares of our common stock issued and outstanding as of March 12, 2018 and assuming full conversion of the remaining $162.5 million outstanding principal amount of Notes owned by selling
stockholders (excluding the issuance of any additional make whole shares or conversion of any additional Notes issued as PIK interest). Because the selling stockholders are not obligated to sell all or any portion of the shares of our
common stock shown as offered by them, we cannot estimate the actual number or percentage of shares of our common stock that will be held by any selling stockholder upon completion of this offering. However, for purposes of this table, we have
assumed that, after completion of the offering, none of the shares covered by this prospectus will be held by the applicable selling stockholder.
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Selling stockholders who are registered broker-dealers may be deemed to be underwriters within the meaning of the Securities Act. In addition,
selling stockholders who are affiliates of registered broker-dealers may be deemed to be underwriters within the meaning of the Securities Act if such selling stockholder (a) did not acquire its shares of common stock in the ordinary course of
business or (b) had an agreement or understanding, directly or indirectly, with any person to distribute the common stock. To our knowledge, no selling stockholder who is a registered broker-dealer or an affiliate of a registered broker-dealer
received any securities as underwriting compensation.
Any prospectus supplement reflecting a sale of common stock hereunder will set
forth, with respect to the selling stockholders:
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the name of the selling stockholders;
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the nature of the position, office or other material relationship that the selling stockholders will have had within the prior three years with us or any of our affiliates;
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9
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the number of shares of common stock owned by the selling stockholders prior to the offering;
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the amount or number of shares of common stock to be offered for the selling stockholders account; and
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the amount and (if 1.0% or more) the percentage of common stock to be owned by the selling stockholders after the completion of this offering.
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Description of Transactions with the Selling Stockholders
Purchase Agreements
On
March 3, 2017, pursuant to a Securities Purchase Agreement dated February 16, 2017 (as amended, the February Purchase Agreement) among the Company and the selling stockholders, as purchasers, the Company issued and sold to the
selling stockholders (i) $125.0 million aggregate principal amount of its Notes at par for cash and (ii) 29,408,305 shares of common stock for $50.0 million cash. The Notes are governed by an Indenture dated March 3, 2017 (the
Original Indenture) by and among the Company, the subsidiary guarantor named therein, and Wilmington Trust, National Association, as trustee (the Trustee) and collateral trustee. On May 2, 2017, Requisite Stockholder
Approval (as defined in the Original Indenture) was obtained and the Notes became convertible into common stock or, in certain circumstances, cash in lieu of common stock or a combination of cash and shares of common stock as described below. In
addition, on March 3, 2017, a fund managed indirectly by Ares also loaned the Company $250.0 million pursuant to a first-lien secured term loan (the Term Loan). The proceeds from the sale of the Notes, the common stock and the
Term Loan were used to fully repay the $69.2 million outstanding on the Companys revolving credit facility, which was scheduled to mature on November 14, 2017, and to satisfy and discharge the Companys $325.0 million
8.625% senior secured notes due May 2018, which were redeemed in accordance with the governing indenture at a price of 102.156% of the principal amount, and to pay the expenses related to the Ares transactions.
The issuance of the shares of common stock to the selling stockholders on March 3, 2017 was priced based on a
30-trading
day volume weighted average trading price (the VWAP) of $1.7002 per share, determined as of February 15, 2017, the date immediately prior to the signing date of the February Purchase
Agreement. Under the February Purchase Agreement, for so long as the selling stockholders, collectively, beneficially own 10% or more of the common stock (including for this purpose all shares of common stock issuable upon conversion of the Notes),
the selling stockholders will have certain preemptive rights to purchase their pro rata share of any additional equity securities offered by the Company in the future on similar terms as are offered to others.
On March 22, 2017, the Company completed the acquisition of additional working and net revenue interests in approximately 66 gross (9.5
net) producing wells and 5,670 net acres of additional STACK oil and gas leasehold interests in Kingfisher County, Oklahoma from multiple sellers for an aggregate cash purchase price of approximately $51.4 million, subject to adjustment for a
transaction effective date of March 1, 2017 (the Acquisition).
In order to provide funding for the Acquisition and a
portion of the Companys 2017 capital budget, the Company entered into an additional Securities Purchase Agreement dated March 20, 2017 (the March Purchase Agreement and together with the February Purchase Agreement, the
Purchase Agreements) with the selling stockholders as purchasers, pursuant to which, on March 21, 2017, the Company issued and sold at par for cash to the selling stockholders an additional $75.0 million aggregate principal
amount of the Notes pursuant to a First Supplemental Indenture dated March 21, 2017 to the Original Indenture among the Company, the guarantor named therein and Wilmington Trust, National Association, as indenture trustee and collateral trustee
(the First Supplemental Indenture). On May 2, 2017, Requisite Stockholder Approval was obtained. As a result (i) the Notes became convertible at any time at the option of the holder into shares of common stock, or cash or a
combination of cash and shares of common stock in accordance with the terms of the Original Indenture, as amended and supplemented by the First Supplemental Indenture (the Indenture) and (ii) under the March Purchase Agreement,
$37.5 million principal of the Notes were repurchased by the Company pursuant to a mandatory repurchase obligation of the Company (the Mandatory Repurchase) in exchange for the issuance of (a) 25,456,521 newly issued shares of
common stock (the Repurchase Shares) and (b) 2,000 shares of the Companys Special Voting Preferred Stock, par value $0.01 per share, as described in more detail below. Under the Mandatory Repurchase, one Repurchase Share was issued
for $1.4731 of outstanding principal of the repurchased Notes, which was based on the
10-day
VWAP of the common stock for the period ended March 17, 2017.
10
Indenture
The principal terms of the Notes are governed by the Indenture. The Notes bear interest initially at 6.0% per annum and will mature on
March 1, 2022, unless earlier repurchased, redeemed or converted in accordance with the terms of the Indenture. Interest is payable on the Notes on each March 1, June 1, September 1 and December 1 of each year, commencing on
June 1, 2017.
Upon receipt of Requisite Stockholder Approval, the Notes became convertible at any time at the option of the holder
into shares of common stock based on an initial conversion rate of 452.4355 shares of common stock per $1,000 principal amount of the Notes (which is equivalent to an initial conversion price of $2.2103 per share), subject to certain adjustments and
the issuance of additional make-whole shares under circumstances specified in the Indenture. Subject to certain limitations, the Company will have the right to settle its conversion obligations on the Notes in cash, shares of common
stock or a combination of cash and shares of common stock. The Company has the right to redeem the Notes (i) on or after March 3, 2019, if the last reported sale price per share of common stock exceeds 150% of the conversion price for
periods specified in the Indenture and (ii) on or after March 1, 2021 without regard to such condition, in each case at cash redemption price equal to the principal amount of the Notes to be redeemed plus accrued interest, if any.
The Notes are secured by a second-priority lien, on substantially all of the assets of the Company. The Indenture restricts the ability of the
Company and certain of its subsidiaries to, among other things: (i) pay dividends or make other distributions in respect of the Companys capital stock or make other restricted payments; (ii) incur additional indebtedness and issue
preferred stock; (iii) make certain dispositions and transfers of assets; (iv) engage in transactions with affiliates; (v) create liens; (vi) engage in certain business activities that are not related to oil and gas; and
(vii) impair any security interest. These covenants are subject to a number of exceptions and qualifications.
The Indenture provides
that a number of events will constitute an Event of Default (as defined in the Indenture), including, among other things: (i) a failure to pay the Notes when due at maturity, upon redemption or repurchase; (ii) failure to pay interest for
30 days; (iii) the Companys failure to deliver certain notices; (iv) a default in the Companys obligation to convert the Notes; (v) the Companys failure to comply with certain covenants relating to merger,
consolidation or sale of assets; (vi) the Companys failure to comply, for 60 days following notice, with any of the other covenants or agreements in the Indenture; (vii) a default, which is not cured within 30 days, by the Company or
any Restricted Subsidiaries (as defined in the Indenture) with respect to any mortgages or any indebtedness for money borrowed of at least $15 million; (viii) one or more final judgments against the Company or any of its Restricted
Subsidiaries for the payment of at least $15 million; (ix) the Companys failure to make any payments required under that certain development agreement; (x) causing any Guarantee (as defined in the Indenture) to cease to be in
full force and effect; (xi) the cessation to be in full force and effect of any of the collateral agreements related to the transactions; and (xii) certain events of bankruptcy or insolvency. In the case of an Event of Default arising from
certain events of bankruptcy or insolvency with respect to the Company, all outstanding Notes will become due and payable immediately without further action or notice. If any other Event of Default occurs and is continuing, the Trustee or the
holders of at least 25% in aggregate principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately. If there is no Requisite Stockholder Approval, then upon any acceleration of the Notes following an
Event of Default, holders will be entitled to receive a make-whole premium in addition to principal and accrued interest.
If
at least a majority of the Notes issued cease to be held by affiliates of Ares, the liens securing the Notes will be released and substantially all of the restrictive covenants in the Indenture will terminate.
The description of the Original Indenture is qualified in its entirety by reference to the full text of the Original Indenture, a copy of
which was previously filed as Exhibit 4.1 to the Companys Current Report on Form
8-K
filed with the SEC on March 7, 2017. The description of the First Supplemental Indenture is qualified in its
entirety by reference to the full text of the First Supplemental Indenture, a copy of which was previously filed as Exhibit 4.2 to the Companys Current Report on Form
8-K
filed with the SEC on
March 22, 2017.
11
Special Voting Shares
On March 22, 2017, the Company filed a Certificate of Designation of Special Voting Preferred Stock of the Company (the Certificate
of Designation) with the Secretary of State of the State of Delaware with respect to the creation of a new series of 2,000 shares of the Companys authorized but unissued preferred stock, par value $0.01 (the Special Voting
Shares).
The Special Voting Shares were issued in connection with the Mandatory Repurchase in accordance with the March Purchase
Agreement. The Special Voting Shares may be redeemed in whole any time after the Initial Holders (as defined in the Certificate of Designation) Beneficially Own (as defined in the Certificate of Designation) less than 5% of the common stock subject
to the terms of the Certificate of Designation. There is no mandatory redemption of the Special Voting Shares. Holders of the Special Voting Shares are not entitled to receive any dividends declared and paid by the Company.
The Companys Special Voting Shares do not entitle the holders of such shares to any rights, other than the right to elect two
(2) members of the our Board for so long as the Initial Holders, any Subsequent Holders (as defined in the Certificate of Designation) and their respective affiliates Beneficially Own at least 15% of the outstanding common stock in the
aggregate and the right to elect one (1) member of the Board for so long as the Initial Holders, Subsequent Holders and their affiliates Beneficially Own at least 5% but less than 15% of the outstanding common stock in the aggregate. The
Certificate of Designation contains certain restrictions on transfer of the Special Voting Shares.
Other Matters Relating to the Purchase Agreement
Board Representation. Pursuant to the Purchase Agreements, and so long as the selling stockholders beneficially own at least 15%
of the common stock (excluding unissued shares that the selling stockholders only have the right to acquire), the selling stockholders will be entitled to nominate two individuals to serve on an expanded eight member Board. If the selling
stockholders beneficially own 5% or more, but less than 15% of the common stock (excluding unissued shares that the selling stockholders only have the right to acquire), the selling stockholders will be entitled to nominate one individual to serve
on our Board. The selling stockholders have designated Nathan W. Walton and Ronald D. Scott as selling stockholders nominees for directors to serve on the Board and the Board appointed Messrs. Walton and Scott to the Board on May 2, 2017.
Registration Rights Agreement. In connection with the transactions contemplated by the Purchase Agreements, the Company entered into a
Registration Rights Agreement (as amended, the Registration Rights Agreement) with the selling stockholders, pursuant to which the Company has agreed that the future resale of the common stock sold pursuant to the Purchase Agreements and
the shares of common stock issued upon conversion of the Notes will be subject to certain registration rights.
The Registration Rights
Agreement includes a plan of distribution permitting the selling stockholders to sell the covered common stock by various means, including in open market sales from time to time, pursuant to underwritten offerings or in negotiated sales. The failure
to maintain the effectiveness of the registration statement, with certain exceptions, will result in additional interest accruing on the Notes for so long as they are outstanding. In addition, under the Registration Rights Agreement, the Company
will be required to cooperate in a maximum of four underwritten offerings at the expense of the Company (other than underwriting discounts).
Relationships with the Selling Stockholders
As of March 12, 2018, the selling stockholders, which are funds managed indirectly by Ares, owned approximately 25.7% of our issued and
outstanding common stock and beneficially owned approximately 44.2% of our outstanding common stock based on our issued and outstanding shares at March 12, 2018 assuming full conversion of the remaining $162.5 million outstanding principal
amount of Notes owned by selling stockholders (excluding the issuance of any additional make whole shares or conversion of any additional Notes issued as PIK interest). The Notes became convertible upon receipt of Requisite Stockholder
Approval on May 2, 2017. Under the terms of the Purchase Agreements and as holders of the Special Voting Shares, the selling stockholders are currently entitled to nominate two directors to our Board. The selling stockholders nominated Nathan
W. Walton and Ronald D. Scott to serve as directors on the Board and on May 2, 2017, Messrs. Walton and Scott were appointed to the Board. Mr. Walton is a Partner in the Ares Private Equity Group and a member of the management committee of
Ares Management.
12
PRICE RANGE OF COMMON STOCK
Our common stock is listed on the NYSE American under the symbol GST. The following table shows, for the periods indicated, the
high and low reported sale prices for our common stock, as reported on the NYSE American.
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Sales Price
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High
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Low
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2016:
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First quarter
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$
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1.38
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$
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0.57
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Second quarter
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$
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2.21
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$
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0.83
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Third quarter
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$
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1.13
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$
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0.80
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Fourth quarter
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$
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1.80
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$
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0.82
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2017:
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First quarter
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$
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2.19
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$
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1.23
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Second quarter
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$
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1.66
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$
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0.83
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Third quarter
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$
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0.97
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$
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0.38
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Fourth quarter
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$
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1.14
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$
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0.67
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2018:
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First quarter (through March 14, 2018)
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$
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1.39
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$
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0.63
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On March 14, 2018, the last sales price of our common stock as reported on the NYSE American was $0.70
per share.
The number of shareholders of record of our common stock was approximately 248 as of March 12, 2018.
13
DIVIDEND POLICY
We have not paid, and do not intend to pay in the foreseeable future, cash dividends on our common stock. Covenants contained in the senior
secured first lien term loan facility and the indenture governing our Notes restrict the payment of dividends on our common stock. In August 2017, we ceased paying dividends on our outstanding Series A preferred stock and Series B preferred stock in
order to preserve liquidity in the current commodity pricing environment. Under the terms of our outstanding preferred stock, we cannot pay dividends on our common stock until we pay all of our accumulated and unpaid dividends on our preferred stock
for the periods set forth in the certificates of designations applicable to our outstanding preferred stock. We currently intend to retain all future earnings to fund the development and growth of our business. Any payment of future dividends will
be at the discretion of our board of directors and will depend on, among other things, our earnings, financial condition, capital requirements, level of indebtedness, statutory and contractual restrictions applying to the payment of dividends and
other considerations that our board of directors deems relevant.
In the event all accumulated and unpaid dividends on our outstanding
preferred stock are not paid in full in cash by April 30, 2018, unless and until all accrued and unpaid preferred stock dividends are paid in full in cash for the most recent two calendar quarters, (i) the fixed rate of dividends accruing
after such date on each of our two outstanding series of preferred stock will increase by 2.00% per annum (ii) dividends commencing in May 2018, if not paid in cash, will be required to be paid monthly in common stock and (iii) the holders
of Series A Preferred Stock and Series B Preferred Stock, voting as a single class, will have the right to elect up to two additional directors to our board of directors. As a result, a significant number of newly issued shares of common stock may
be issued as dividends on our outstanding preferred stock after April 30, 2018, which issuances will dilute the ownership of our common stockholders and may adversely affect the trading price of our common stock. If our common stock ceases to
be listed on a national securities exchange or a national securities market, pay in kind dividends of additional shares of Series A Preferred Stock and Series B Preferred Stock may be payable in lieu of cash or common stock dividends,
which would also have an dilutive effect on our common stock and may adversely affect the trading price of our common stock.
14
DESCRIPTION OF CAPITAL STOCK
General
The following descriptions are
summaries of material terms of our common stock, preferred stock, amended and restated certificate of incorporation (certificate of incorporation) and amended and restated bylaws (bylaws). These summaries are qualified by
reference to our certificate of incorporation, bylaws and the designations of our preferred stock, which are filed as exhibits to the registration statement of which this prospectus forms a part, and by the provisions of applicable law.
As of March 12, 2018, our authorized capital stock consisted of (a) 40,000,000 shares of preferred stock, $0.01 par value per share,
6,187,000 of which were issued and outstanding, and (b) 800,000,000 shares of common stock, $0.001 par value per share, 220,895,069 of which were issued and outstanding (which includes 10,644,146 shares of unvested restricted stock). In addition, as
of March 12, 2018, the number of shares of common stock potentially issuable pursuant to awards outstanding under our equity incentive plans is 2,805,367, of which (a) 164,400 shares were subject to options to purchase our common stock at a
weighted average exercise price of $3.01 per option and (b) 2,640,967 shares were subject to outstanding performance-based stock unit awards (assuming settlement at 100% of the target level of performance).
Common Stock
Shares of our common stock
have the following rights, preferences and privileges:
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Voting Rights
. Holders of our common stock are entitled to receive notice of any meeting of stockholders and to one vote for each share held of record on all matters at all meetings of stockholders, except at a
meeting where holders of a particular class or series of shares are entitled to vote separately. Our common stockholders have no cumulative voting rights and all members of our Board are to be elected annually by plurality of the votes of the shares
present in person or represented by proxy at the meeting and entitled to vote on the election of directors. Under our bylaws, subject to the rights of the holders of any series of preferred stock to elect directors under specified circumstances set
forth in any Preferred Stock Designation, each stockholder having the right to vote is entitled at every meeting of stockholders to vote one vote for every share standing in his name on the record date fixed by the Board pursuant to the bylaws.
Except as otherwise provided by law, the certificate of incorporation, any Preferred Stock Designation, the bylaws or any resolution adopted by a majority of the whole Board, all matters submitted to the stockholders at any meeting at which a quorum
is present (other than the election of directors) shall be decided by the affirmative vote of the majority of shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter.
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Dividends
. Holders of common stock are entitled to receive dividends if, as and when declared by the Board out of funds legally available therefor, subject to the limitations contained in the Delaware General
Corporation Law (the DGCL) and any dividend preferences of any outstanding shares of preferred stock.
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Liquidation
. If we liquidate, dissolve or wind up, voluntarily or involuntarily, holders of our common stock are entitled to share ratably in all net assets available for distribution to our stockholders, after
creditors of the corporation have been paid in full and after the payment in full of any preferential amounts to which holders of our preferred stock may be entitled.
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Other Rights and Preferences
. Other than as disclosed in this prospectus, no share of common stock affords any preemptive rights or is convertible, redeemable, assessable or entitled to the benefits of any
sinking or repurchase fund.
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Listing
. Our common stock is traded on the NYSE American under the symbol GST.
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Transfer Agent and Registrar
. The transfer agent and registrar for our common stock is American Stock Transfer and Trust Company, LLC.
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Shares of our common stock are validly issued, fully paid and
non-assessable.
15
Preferred Stock
As of the date of this prospectus, we had 40,000,000 shares of authorized preferred stock, 19,998,000 of which are undesignated.
At the direction of our Board, we may issue shares of preferred stock from time to time. Our Board may, without any action by holders of our
common stock:
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adopt resolutions to issue preferred stock in one or more classes or series;
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fix the number of shares constituting any class or series of preferred stock; and
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establish the rights of the holders of any class or series of preferred stock.
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The rights of
any class or series of preferred stock may include, among others:
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general or special voting rights;
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preferential liquidation or preemptive rights;
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preferential cumulative or noncumulative dividend rights;
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redemption or put rights; and
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conversion or exchange rights.
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We may issue shares of, or rights to purchase, preferred
stock, the terms of which might:
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adversely affect voting or other rights evidenced by, or amounts otherwise payable with respect to, the common stock;
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discourage an unsolicited proposal to acquire us; or
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facilitate a particular business combination involving us.
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Any of these actions could
discourage a transaction that some or a majority of our stockholders might believe to be in their best interests or in which our stockholders might receive a premium for their stock over its then market price.
8.625% Series A Cumulative Preferred Stock
As of the date of this prospectus, we had designated 10,000,000 shares to constitute our 8.625% Series A Preferred Stock (the Series A
Preferred Stock) and have 4,045,000 shares issued and outstanding. The terms of the Series A Preferred Stock are contained in a Certificate of Designation (the Series A Certificate), which is incorporated by reference to an exhibit
to the registration statement of which this prospectus forms a part. The following description is a summary of the material provisions of the Series A Preferred Stock as set forth in the Series A Certificate:
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Ranking
. The Series A Preferred Stock will rank: (i) senior to the common stock and any other equity
securities that we may issue in the future, the terms of which specifically provide that such equity securities rank junior to such Series A Preferred Stock, in each case with respect to payment of dividends and amounts upon liquidation, dissolution
or winding up, referred to as Junior Shares, (ii) equal to the Series B Preferred Stock (as defined below) and equal to any shares of equity securities that we may issue in the future, the terms of which specifically provide that such
equity securities rank on par with such Series A Preferred Stock, in each case with respect to payment of dividends and amounts upon liquidation, dissolution or winding up, referred to as Parity Shares, (iii) junior to all other equity
securities issued by us, the terms of which specifically provide that such equity securities rank senior to such Series A Preferred Stock, in each case with respect to payment of dividends and amounts upon liquidation, dissolution or
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winding up (any such issuance would require the affirmative vote of the holders of at least
two-thirds
of the outstanding shares of Series A Preferred
Stock), referred to as Senior Shares, and (iv) junior to all of our existing and future indebtedness.
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Voting Rights
. Holders of the Series A Preferred Stock will generally only be entitled to vote on certain acquisitions and share exchange transactions and changes that would be materially adverse to the rights of
holders of Series A Preferred Stock. However, if cash dividends on any outstanding Series A Preferred Stock have not been paid in full for any monthly dividend period for any four consecutive or
non-consecutive
quarterly periods, or if we fail to maintain the listing of the Series A Preferred Stock on a National Exchange for at least 180 consecutive days after the Series A Preferred Stock becomes
eligible for listing on the New York Stock Exchange, the NYSE Amex, a NASDAQ Stock Market or any comparable national securities exchange or national securities market (a National Exchange), the holders of the Series A Preferred Stock,
voting separately as a class with holders of all other series of Parity Shares upon which like voting rights have been conferred and are exercisable, will have the right to elect two directors to serve on our Board in addition to those directors
then serving on such board until such time as the Series A Preferred Stock becomes listed on a National Exchange or the dividend arrearage is eliminated. Additionally, the affirmative consent of holders of at least 66 2/3% of the outstanding Series
A Preferred Stock will be required for the issuance of any Senior Shares or for amendments to our certificate of incorporation by merger or otherwise that would affect adversely the rights of holders of the Series A Preferred Stock.
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Dividends
. Holders of our Series A Preferred Stock are entitled to receive cumulative cash dividends when and as declared by our Board out of funds legally available for the payment therefor, at a rate of 8.625%
per annum of the $25.00 liquidation preference per share (equivalent to $2.15625 per annum per share). Under certain conditions relating to
non-payment
of dividends on the Series A Preferred Stock or if the
Series A Preferred Stock are no longer listed on a National Exchange, the dividend rate on the Series A Preferred Stock may increase to 10.625% per annum. Dividends are generally payable monthly in arrears on the last day of each calendar month. In
August 2017, we ceased paying monthly cash dividends on our outstanding Series A Preferred Stock and Series B Preferred Stock in order to preserve liquidity in the current commodity pricing environment. See Dividend Policy.
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Conversion Rights
. Our Series A Preferred Stock is not convertible into, or exchangeable for, any of our property or securities.
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Redemption Rights
. We may redeem the Series A Preferred Stock for cash at our option, from time to time, in whole or in part, at a redemption price of $25.00 per share, plus accrued and unpaid dividends (whether
or not earned or declared) to the redemption date.
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Liquidation
. If we liquidate, dissolve or wind up our operations, the holders of the Series A Preferred Stock will have the right to receive $25.00 per share, plus all accumulated and unpaid dividends (whether or
not earned or declared) to and including the date of payment, before any payments are made to the holders of our common stock and any other Junior Shares. The rights of the holders of the Series A Preferred Stock to receive the liquidation
preference will be subject to the proportionate rights of holders of each other future series or class of Parity Shares and subordinate to the rights of Senior Shares.
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Other Rights and Preferences
. No share of our Series A Preferred Stock affords any preemptive rights or is entitled to the benefits of any retirement or sinking fund.
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Listing
. Our Series A Preferred Stock is traded on the NYSE American under the symbol GST.PR.A.
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Transfer Agent, Registrar and Dividend Disbursing Agent
. The transfer agent, registrar and dividend disbursement agent for our Series A Preferred Stock is American Stock Transfer and Trust Company, LLC.
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Our Series A Preferred Stock is validly issued, fully paid and
non-assessable.
17
10.75% Series B Cumulative Preferred Stock
As of the date of this prospectus, we had designated 10,000,000 shares to constitute our 10.75% Series B Preferred Stock (the Series B
Preferred Stock) and have 2,140,000 shares issued and outstanding. The terms of the Series B Preferred Stock are contained in a Certificate of Designation (the Series B Certificate), which is incorporated by reference to an exhibit
to the registration statement of which this prospectus forms a part. The following description is a summary of the material provisions of the Series B Preferred Stock as set forth in the Series B Certificate:
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Ranking
. The Series B Preferred Stock will rank: (i) senior to the common stock and any other equity securities that we may issue in the future, the terms of which specifically provide that such equity
securities rank junior to such Series B Preferred Stock, in each case with respect to payment of dividends and amounts upon liquidation, dissolution or winding up, referred to as Junior Shares, (ii) equal to the Series A Preferred Stock
and any shares of equity securities that we may issue in the future, the terms of which specifically provide that such equity securities rank on par with such Series B Preferred Stock, in each case with respect to payment of dividends and amounts
upon liquidation, dissolution or winding up, referred to as Parity Shares, (iii) junior to all other equity securities issued by us, the terms of which specifically provide that such equity securities rank senior to such Series B
Preferred Stock, in each case with respect to payment of dividends and amounts upon liquidation, dissolution or winding up (any such issuance would require the affirmative vote of the holders of at least
two-thirds
of the outstanding shares of Series B Preferred Stock and all other series of Voting Preferred Shares (as defined in the Series B Certificate)), referred to as Senior Shares, and
(iv) junior to all of our existing and future indebtedness.
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Voting Rights
. Holders of the Series B Preferred Stock will generally only be entitled to vote on certain acquisitions and share exchange transactions and changes that would be materially adverse to the rights of
holders of Series B Preferred Stock. However, if cash dividends on any outstanding Series B Preferred Stock have not been paid in full for any monthly dividend period for any four consecutive or
non-consecutive
quarterly periods, or if we fail to maintain the listing of the Series B Preferred Stock on a National Exchange for at least 180 consecutive days after the Series B Preferred Stock becomes
eligible for listing on a National Exchange, the holders of the Series B Preferred Stock, voting separately as a class with holders of all other series of Parity Shares upon which like voting rights have been conferred and are exercisable, will have
the right to elect two directors to serve on our Board in addition to those directors then serving on such board until such time as the Series B Preferred Stock becomes listed on a National Exchange or the dividend arrearage is eliminated.
Additionally, the affirmative consent of holders of at least 66 2/3% of the outstanding Series B Preferred Stock will be required for the issuance of any Senior Shares or for amendments to our certificate of incorporation by merger or otherwise that
would affect adversely the rights of holders of the Series B Preferred Stock.
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Dividends
. Holders of our Series B Preferred Stock are entitled to receive cumulative cash dividends when and as declared by our Board out of funds legally available for the payment therefor, at a rate of 10.75%
per annum of the $25.00 liquidation preference per share (equivalent to $2.6875 per annum per share). Under certain conditions relating to
non-payment
of dividends on the Series B Preferred Stock or if the
Series B Preferred Stock is no longer listed on a National Exchange, the dividend rate on the Series B Preferred Stock may increase to 12.75% per annum. Dividends are generally payable monthly in arrears on the last day of each calendar month. In
August 2017, we ceased paying monthly cash dividends on our outstanding Series A Preferred Stock and Series B Preferred Stock in order to preserve liquidity in the current commodity pricing environment. See Dividend Policy.
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Conversion Rights
. Except under certain conditions, upon the occurrence of a Change of Ownership or Control (as defined in the Series B Certificate), each holder of Series B Preferred Stock will have the right to
convert some or all of such stock held by such holder into a number of shares of our common stock.
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Redemption Rights
. We may not redeem the Series B Preferred Stock prior to November 15, 2018 except pursuant to the special redemption upon a Change of Ownership or Control. On and after November 15,
2018, we may redeem the Series B Preferred Stock for cash at our option, from time to time, in whole or in part, at a redemption price of $25.00 per share, plus accrued and unpaid dividends (whether or not earned or declared) to the redemption date.
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Liquidation
. If we liquidate, dissolve or wind up our operation, the holders of the Series B Preferred Stock will have the right to receive $25.00 per share, plus all accumulated and unpaid dividends (whether or
not earned or declared) to and including the date of payment, before any payments are made to the holders of our common stock and any other Junior Shares. The rights of the holders of the Series B Preferred Stock to receive the liquidation
preference will be subject to the proportionate rights of holders of each other future series or class of Parity Shares and subordinate to the rights of Senior Shares.
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Other Rights and Preferences
. No share of our Series B Preferred Stock affords any preemptive rights or is entitled to the benefits of any retirement or sinking fund.
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Listing
. Our Series B Preferred Stock is traded on the NYSE American under the symbol GST.PR.B.
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Transfer Agent, Registrar and Dividend Disbursing Agent
. The transfer agent, registrar and dividend disbursement agent for our Series B Preferred Stock is American Stock Transfer and Trust Company, LLC.
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Our Series B Preferred Stock is validly issued, fully paid and
non-assessable.
Special Voting Preferred Stock
As
of the date of this prospectus, we had designated 2,000 shares to constitute our Special Voting Preferred Stock and have 2,000 shares issued and outstanding. The terms of the Special Voting Preferred Stock are contained in a Certificate of
Designation, which is incorporated by reference to an exhibit to the registration statement of which this prospectus forms a part. The following description is a summary of the material provisions of the Special Voting Preferred Stock as set forth
in the related Certificate of Designation:
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Ranking
. The Special Voting Preferred Stock rank, with respect to the distribution of assets, junior to all series of any other class of the corporations preferred stock (including, for the avoidance of
doubt, junior to any outstanding shares of the Corporations Series A Preferred Stock and Series B Preferred Stock).
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Voting Rights
. The Special Voting Preferred Stock have no voting rights other than that the Holders of the Special Voting Preferred Stock have the right to elect two (2) members of the Board for so long as
the Initial Holders, any Subsequent Holders (as defined in the Certificate of Designation) and their respective affiliates Beneficially Own (as defined in the Certificate of Designation) at least 15% of the outstanding Common Stock in the aggregate
and the right to elect one (1) member of the Board for so long as the Initial Holders, Subsequent Holders and their affiliates Beneficially Own at least 5% but less than 15% of the outstanding common stock in the aggregate. The Certificate of
Designation contains certain restrictions on transfer of the Special Voting Preferred Stock.
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Dividends
. Holders of the Special Voting Preferred Stock are not entitled to receive any dividends declared and paid by the Company.
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Redemption Rights
. The shares of Special Voting Preferred Stock may be redeemed by the Company, in whole and not in part, at a redemption price in accordance with the Certificate of Designation.
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Liquidation
. In the event of any liquidation, dissolution or winding up of the Company the holders of Special Voting Preferred Stock will be entitled to receive $0.01 for each such share.
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Other Rights and Preferences
. No share of our Special Voting Preferred Stock affords any preemptive rights or is entitled to the benefits of any retirement or sinking fund.
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Listing
. Our Special Voting Preferred Stock is not listed on a national securities exchange.
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Transfer Agent and Registrar
. The transfer agent and registrar for our Special Voting Preferred Stock is American Stock Transfer and Trust Company, LLC.
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Our Special Voting Preferred Stock is validly issued, fully paid and
non-assessable.
Anti-Takeover Provisions of our Certificate of Incorporation and Bylaws
The provisions of our certificate of incorporation and bylaws may have an anti-takeover effect and may delay, defer or prevent a tender offer
or takeover attempt that a stockholder might consider in his or her best interest, including those attempts that might result in a premium over the market price for the common stock. Among other things, our certificate of incorporation and bylaws:
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provide that any action taken by our stockholders must be taken (a) by a vote of stockholders at a meeting of stockholders duly noticed and called in accordance with the DGCL or (b) without a meeting, without
prior notice, and without a vote if a consent or consents, in writing or by electronic transmission, setting forth the action so taken shall be signed by all stockholders entitled to vote on the taking of such action;
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provide that stockholders seeking to present proposals before a meeting of stockholders or to nominate candidates for election as directors at a meeting of stockholders must provide notice in a timely manner, and also
specify requirements as to the form and content of such notice;
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provide that the Board or any individual director may be removed (i) with cause only by the affirmative vote of the holders of not less than a majority of the shares of our capital stock entitled to vote generally
in the election of directors voting together as a single class or (ii) without cause only by the affirmative vote of the holders of not less than
two-thirds
(66.66%) of the shares of our capital stock
entitled to vote generally in the election of directors voting together as a single class;
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authorize the Board to determine the number of directors and to fill vacancies on the Board;
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provide that only the Board or chief executive officer may call a special meeting of the stockholders;
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requires supermajority voting for some amendments to the certificate of incorporation; and
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provide for the issuance of blank check preferred stock.
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Limitation of Liability and
Indemnification Matters
Our certificate of incorporation limits, to the fullest extent permitted by Delaware law, the personal
liability of directors for monetary damages for breach of their fiduciary duties as a director. The effect of this provision is to eliminate our rights and those of our stockholders, through stockholders derivative suits on behalf of the
Company, to recover monetary damages against a director for breach of fiduciary duty as a director, including breaches resulting from grossly negligent behavior.
Section 145 of the DGCL provides that a corporation may indemnify a director, officer, employee or agent made a party to an action by
reason of the fact that he or she was a director, officer, employee or agent of the corporation or was serving at the request of the corporation against expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by
him or her in connection with such action if he or she acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the corporation and, with respect to any criminal action, had no reasonable
cause to believe his or her conduct was unlawful.
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MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS FOR
NON-U.S.
HOLDERS
The following is a summary of the material U.S. federal income tax considerations
related to the purchase, ownership and disposition of our common stock by a
non-U.S.
holder (as defined below), that holds our common stock as a capital asset (generally property held for
investment). This summary is based on the provisions of the Internal Revenue Code of 1986, as amended (the Code), U.S. Treasury regulations, administrative rulings and judicial decisions, all as in effect on the date hereof, and all of
which are subject to change, possibly with retroactive effect. We have not sought any ruling from the Internal Revenue Service (IRS) with respect to the statements made and the conclusions reached in the following summary, and there can
be no assurance that the IRS or a court will agree with such statements and conclusions.
This summary does not address all aspects of
U.S. federal income taxation that may be relevant to
non-U.S.
holders in light of their personal circumstances. In addition, this summary does not address the Medicare tax on certain investment income, U.S.
federal estate or gift tax laws, any state, local or
non-U.S.
tax laws or any tax treaties. This summary also does not address tax considerations applicable to investors that may be subject to special
treatment under the U.S. federal income tax laws, such as:
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banks, insurance companies or other financial institutions;
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tax-exempt
or governmental organizations;
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qualified foreign pension funds (or any entities, all of the interests of which are held by a qualified foreign pension fund);
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dealers in securities or foreign currencies;
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persons whose functional currency is not the U.S. dollar;
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controlled foreign corporations, passive foreign investment companies, and corporations that accumulate
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earnings to avoid U.S. federal income tax;
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traders in securities that use the
mark-to-market
method of accounting for U.S. federal income tax purposes;
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persons subject to the alternative minimum tax;
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partnerships or other pass-through entities for U.S. federal income tax purposes or holders of interests therein;
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persons deemed to sell our common stock under the constructive sale provisions of the Code;
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persons that acquired our common stock through the exercise of employee stock options or otherwise as compensation or through a
tax-qualified
retirement plan;
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certain former citizens or long-term residents of the United States; and
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persons that hold our common stock as part of a straddle, appreciated financial position, synthetic security, hedge, conversion transaction or other integrated investment or risk reduction transaction.
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PROSPECTIVE INVESTORS ARE ENCOURAGED TO CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE APPLICATION OF THE U.S. FEDERAL
INCOME TAX LAWS TO THEIR PARTICULAR SITUATION, AS WELL AS ANY TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF OUR COMMON STOCK ARISING UNDER THE U.S. FEDERAL ESTATE OR GIFT TAX LAWS OR UNDER THE LAWS OF ANY STATE, LOCAL,
NON-U.S.
OR OTHER TAXING JURISDICTION OR UNDER ANY APPLICABLE INCOME TAX TREATY.
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Non-U.S.
Holder Defined
For purposes of this discussion, a
non-U.S.
holder is a beneficial owner of our common
stock that is not for U.S. federal income tax purposes a partnership or any of the following:
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an individual who is a citizen or resident of the United States;
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a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia;
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an estate the income of which is subject to U.S. federal income tax regardless of its source; or
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a trust (i) the administration of which is subject to the primary supervision of a U.S. court and which has one or more United States persons who have the authority to control all substantial decisions of the trust
or (ii) which has made a valid election under applicable U.S. Treasury regulations to be treated as a United States person.
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If a partnership (including an entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds our common stock,
the tax treatment of a partner in the partnership generally will depend upon the status of the partner, upon the activities of the partnership and upon certain determinations made at the partner level. Accordingly, we urge partners in partnerships
(including entities or arrangements treated as partnerships for U.S. federal income tax purposes) considering the purchase of our common stock to consult their tax advisors regarding the U.S. federal income tax considerations of the purchase,
ownership and disposition of our common stock by such partnership.
Distributions
We do not expect to pay any distributions on our common stock in the foreseeable future. However, in the event we do make distributions of cash
or other property on our common stock, such distributions will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles.
To the extent those distributions exceed our current and accumulated earnings and profits, the distributions will be treated as a
non-taxable
return of capital to the extent of the
non-U.S.
holders tax basis in our common stock and thereafter as capital gain from the sale or exchange of such common stock. See Gain on Disposition of Common Stock. Subject to the
withholding requirements under FATCA (as defined below) and with respect to effectively connected dividends, each of which is discussed below, any distribution made to a
non-U.S.
holder on our common stock
generally will be subject to U.S. withholding tax at a rate of 30% of the gross amount of the distribution unless an applicable income tax treaty provides for a lower rate. To receive the benefit of a reduced treaty rate, a
non-U.S.
holder must provide the applicable withholding agent with an IRS Form
W-8BEN
or IRS Form
W-8BEN-E
(or other applicable or successor form) certifying qualification for the reduced rate.
Dividends paid to a
non-U.S.
holder that are effectively connected with a trade or business conducted
by the
non-U.S.
holder in the United States (and, if required by an applicable income tax treaty, are treated as attributable to a permanent establishment maintained by the
non-U.S.
holder in the United States) generally will be taxed on a net income basis at the rates and in the manner generally applicable to United States persons (as defined under the Code). Such effectively
connected dividends will not be subject to U.S. withholding tax if the
non-U.S.
holder satisfies certain certification requirements by providing the applicable withholding agent with a properly executed IRS
Form
W-8ECI
certifying eligibility for exemption. If the
non-U.S.
holder is a corporation for U.S. federal income tax purposes, it may also be subject to a branch
profits tax (at a 30% rate or such lower rate as specified by an applicable income tax treaty) on its effectively connected earnings and profits (as adjusted for certain items), which will include effectively connected dividends.
Gain on Disposition of Common Stock
Subject to the discussions below under Backup Withholding and Information Reporting and Additional Withholding
Requirements under FATCA, a
non-U.S.
holder generally will not be subject to U.S. federal income or withholding tax on any gain realized upon the sale or other disposition of our common stock unless:
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the
non-U.S.
holder is an individual who is present in the United States for a period or periods aggregating 183 days or more during the calendar year in which the sale or
disposition occurs and certain other conditions are met;
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the gain is effectively connected with a trade or business conducted by the
non-U.S.
holder in the United States (and, if required by an applicable income tax treaty, is
attributable to a permanent establishment maintained by the
non-U.S.
holder in the United States); or
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our common stock constitutes a United States real property interest by reason of our status as a United States real property holding corporation (USRPHC) for U.S. federal income tax purposes and as a result
such gain is treated as effectively connected with a trade or business conducted by the
non-U.S.
holder in the United States.
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A
non-U.S.
holder described in the first bullet point above will be subject to U.S. federal income tax
at a rate of 30% (or such lower rate as specified by an applicable income tax treaty) on the amount of such gain, which generally may be offset by U.S. source capital losses.
A
non-U.S.
holder whose gain is described in the second bullet point above or, subject to the
exceptions described in the next paragraph, the third bullet point above, generally will be taxed on a net income basis at the rates and in the manner generally applicable to United States persons (as defined under the Code) unless an applicable
income tax treaty provides otherwise. If the
non-U.S.
holder is a corporation for U.S. federal income tax purposes whose gain is described in the second bullet point above, then such gain would also be
included in its effectively connected earnings and profits (as adjusted for certain items), which may be subject to a branch profits tax (at a 30% rate or such lower rate as specified by an applicable income tax treaty).
Generally, a corporation is a USRPHC if the fair market value of its United States real property interests equals or exceeds 50% of the sum of
the fair market value of its worldwide real property interests and its other assets used or held for use in a trade or business. We believe that we currently are, and expect to remain for the foreseeable future, a USRPHC for U.S. federal income tax
purposes. However, as long as our common stock continues to be regularly traded on an established securities market (within the meaning of the U.S. Treasury regulations), only a
non-U.S.
holder
that actually or constructively owns, or owned at any time during the shorter of the five-year period ending on the date of the disposition or the
non-U.S.
holders holding period for the common stock,
more than 5% of our common stock will be treated as disposing of a U.S. real property interest and will be taxable on gain realized on the disposition of our common stock as a result of our status as a USRPHC. If our common stock were not considered
to be regularly traded on an established securities market, such holder (regardless of the percentage of stock owned) would be treated as disposing of a U.S. real property interest and would be subject to U.S. federal income tax on a taxable
disposition of our common stock (as described in the preceding paragraph), and a 15% withholding tax would apply to the gross proceeds from such disposition.
Non-U.S.
holders should consult their tax advisors with respect to the application of the foregoing
rules to their ownership and disposition of our common stock.
Backup Withholding and Information Reporting
Any dividends paid to a
non-U.S.
holder must be reported annually to the IRS and to the
non-U.S.
holder. Copies of these information returns may be made available to the tax authorities in the country in which the
non-U.S.
holder resides or is established.
Payments of dividends to a
non-U.S.
holder generally will not be subject to backup withholding if the
non-U.S.
holder establishes an exemption by properly certifying its
non-U.S.
status on an IRS Form
W-8BEN
or IRS Form
W-8BEN-E
(or other applicable or
successor form).
Payments of the proceeds from a sale or other disposition by a
non-U.S.
holder
of our common stock effected by or through a U.S. office of a broker generally will be subject to information reporting and backup withholding (at the applicable rate) unless the
non-U.S.
holder establishes an
exemption by properly certifying its
non-U.S.
status on an IRS Form
W-8BEN
or IRS Form
W-8BEN-E
(or other applicable or successor form) and certain other conditions are met. Information reporting and backup withholding generally will not apply to any
payment of the proceeds from a sale or other disposition of our common stock effected outside the United States by a
non-U.S.
office of a broker. However, unless such broker has documentary evidence in its
records that the
non-U.S.
holder is not a
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United States person and certain other conditions are met, or the
non-U.S.
holder otherwise establishes an exemption, information reporting will apply to a
payment of the proceeds of the disposition of our common stock effected outside the United States by such a broker if it has certain relationships within the United States.
Backup withholding is not an additional tax. Rather, the U.S. federal income tax liability (if any) of persons subject to backup withholding
will be reduced by the amount of tax withheld. If backup withholding results in an overpayment of taxes, a refund may be obtained, provided that the required information is timely furnished to the IRS.
Additional Withholding Requirements under FATCA
Sections 1471 through 1474 of the Code, and the U.S. Treasury regulations and administrative guidance issued thereunder (FATCA),
impose a 30% withholding tax on any dividends paid on our common stock and on the gross proceeds from a disposition of our common stock (if such disposition occurs after December 31, 2018), in each case if paid to a foreign financial
institution or a
non-financial
foreign entity (each as defined in the Code) (including, in some cases, when such foreign financial institution or
non-financial
foreign entity is acting as an intermediary), unless (i) in the case of a foreign financial institution, such institution enters into an agreement with the U.S. government to withhold on
certain payments, and to collect and provide to the U.S. tax authorities substantial information regarding U.S. account holders of such institution (which includes certain equity and debt holders of such institution, as well as certain account
holders that are
non-U.S.
entities with U.S. owners), (ii) in the case of a
non-financial
foreign entity, such entity certifies that it does not have any
substantial United States owners (as defined in the Code) or provides the applicable withholding agent with a certification identifying the direct and indirect substantial United States owners of the entity (in either case, generally on
an IRS Form
W-8BEN-E),
or (iii) the foreign financial institution or
non-financial
foreign entity otherwise qualifies for an
exemption from these rules and provides appropriate documentation (such as an IRS Form
W-8BEN-E).
Foreign financial institutions located in jurisdictions that have an
intergovernmental agreement with the United States governing these rules may be subject to different rules. Under certain circumstances, a holder might be eligible for refunds or credits of such taxes.
Non-U.S.
holders are encouraged to consult their own tax advisors regarding the effects of FATCA on an investment in our common stock.
INVESTORS CONSIDERING THE PURCHASE OF OUR COMMON STOCK ARE URGED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE APPLICATION OF THE U.S.
FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AND THE APPLICABILITY AND EFFECT OF U.S. FEDERAL ESTATE AND GIFT TAX LAWS AND ANY STATE, LOCAL OR
NON-U.S.
TAX LAWS AND TAX TREATIES.
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CERTAIN ERISA CONSIDERATIONS
The following is a summary of certain considerations associated with the purchase, ownership and disposition of our common stock by employee
benefit plans that are subject to Title I of the Employee Retirement Income Security Act of 1974, as amended (ERISA), plans, individual retirement accounts and other arrangements that are subject to Section 4975 of the Code or
employee benefit plans that are governmental plans (as defined in Section 3(32) of ERISA), certain church plans (as defined in Section 3(33) of ERISA),
non-U.S.
plans (as described in
Section 4(b)(4) of ERISA) or other plans that are not subject to the foregoing but may be subject to provisions under any other federal, state, local,
non-U.S.
or other laws or regulations that are
similar to such provisions of ERISA or the Code (collectively, Similar Laws), and entities whose underlying assets are considered to include plan assets of any such plan, account or arrangement (each, a Plan).
This summary is based on the provisions of ERISA and the Code (and related regulations and administrative and judicial interpretations)
as of the date of this Post-Effective Amendment. This summary does not purport to be complete, and no assurance can be given that future legislation, court decisions, regulations, rulings or pronouncements will not significantly modify the
requirements summarized below. Any of these changes may be retroactive and may thereby apply to transactions entered into prior to the date of their enactment or release. This discussion is general in nature and is not intended to be all inclusive,
nor should it be construed as investment or legal advice.
General Fiduciary Matters
ERISA and the Code impose certain duties on persons who are fiduciaries of a Plan subject to Title I of ERISA or Section 4975 of the Code
(an ERISA Plan) and prohibit certain transactions involving the assets of an ERISA Plan and its fiduciaries or other interested parties. Under ERISA and the Code, any person who exercises any discretionary authority or control over the
administration of an ERISA Plan or the management or disposition of the assets of an ERISA Plan, or who renders investment advice for a fee or other compensation to an ERISA Plan, is generally considered to be a fiduciary of the ERISA Plan.
In considering an investment in shares of common stock with a portion of the assets of any Plan, a fiduciary should consider the Plans
particular circumstances and all of the facts and circumstances of the investment and determine whether the acquisition and holding of shares of common stock is in accordance with the documents and instruments governing the Plan and the applicable
provisions of ERISA, the Code, or any Similar Law relating to the fiduciarys duties to the Plan, including, without limitation:
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whether the investment is prudent under Section 404(a)(1)(B) of ERISA and any other applicable Similar Laws;
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whether, in making the investment, the ERISA Plan will satisfy the diversification requirements of Section 404(a)(1)(C) of ERISA and any other applicable Similar Laws;
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whether the investment is permitted under the terms of the applicable documents governing the Plan;
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whether the acquisition or holding of the shares of common stock will constitute a prohibited transaction under Section 406 of ERISA or Section 4975 of the Code (please see the discussion under
Prohibited Transaction Issues below); and
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whether the Plan will be considered to hold, as plan assets, (i) only shares of common stock or (ii) an undivided interest in our underlying assets (please see the discussion under Plan Asset
Issues below).
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None of us, the selling stockholders or any of their respective affiliates is acting as a fiduciary of
any Plan, nor are any such persons providing advice, with respect to any decision to acquire and hold the common stock. Any decision by a Plan to purchase or hold our common stock should be made at the recommendation or direction of an
independent fiduciary (Independent Fiduciary) within the meaning of US Code of Federal Regulations 29 C.F.R. Section 2510.3 21(c), as amended from time to time (the Fiduciary Rule) who (i) is independent
of us and the selling stockholders; (ii) is capable of evaluating investment risks independently, both in general and with respect to particular transactions and investment strategies (within the meaning of the Fiduciary Rule); (iii) is a
fiduciary (under ERISA and/or Section 4975 of the Code) with respect to the Plans purchase of the common stock
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and is responsible for exercising independent judgment in evaluating the purchase; (iv) is either (a) a bank as defined in Section 202 of the Investment Advisers Act of 1940, as
amended (the Advisers Act) or similar institution that is regulated and supervised and subject to periodic examination by a state or federal agency of the United States; (b) an insurance carrier which is qualified under the laws of
more than one state of the United States to perform the services of managing, acquiring or disposing of assets of such a Plan; (c) an investment adviser registered under the Advisers Act or, if not registered an as investment adviser under the
Advisers Act by reason of paragraph (1) of Section 203A of the Advisers Act, is registered as an investment adviser under the laws of the state (referred to in such paragraph (1)) in which it maintains its principal office and place of
business; (d) a broker dealer registered under the Securities Exchange Act of 1934, as amended; and/or (e) an Independent Fiduciary (not described in clauses (a), (b), (c) or (d) above) that holds or has under management or control
total assets of at least $50 million, and will at all times that the Plan holds the common stock or have under management or control, total assets of at least $50 million; and (v) is aware that (1) neither us, the selling
stockholders nor any of their respective affiliates is undertaking to provide impartial investment advice, or to give advice in a fiduciary capacity, in connection with a Plans purchase of our common stock, and (2) the selling
stockholders and their respective affiliates have a financial interest in Plans purchase of the common stock on account of the remuneration they expect to receive in connection with transactions contemplated hereunder.
Prohibited Transaction Issues
Section 406 of ERISA and Section 4975 of the Code prohibit ERISA Plans from engaging in specified transactions involving plan assets
with persons or entities who are parties in interest, within the meaning of ERISA, or disqualified persons, within the meaning of Section 4975 of the Code, unless an exemption is available. A party in interest or
disqualified person who engages in a
non-exempt
prohibited transaction may be subject to excise taxes and other penalties and liabilities under ERISA and the Code. In addition, the fiduciary of the ERISA Plan
that engages in such a
non-exempt
prohibited transaction may be subject to penalties and liabilities under ERISA and the Code. The acquisition and/or holding of shares of common stock by an ERISA Plan with
respect to which the issuer, the initial purchaser, or a guarantor is considered a party in interest or a disqualified person may constitute or result in a direct or indirect prohibited transaction under Section 406 of ERISA and/or
Section 4975 of the Code, unless the investment is acquired and is held in accordance with an applicable statutory, class or individual prohibited transaction exemption.
Because of the foregoing, shares of common stock should not be acquired or held by any person investing plan assets of any Plan,
unless such acquisition and holding will not constitute a
non-exempt
prohibited transaction under ERISA and the Code or a similar violation of any applicable Similar Laws.
Plan Asset Issues
Additionally, a
fiduciary of a Plan should consider whether the Plan will, by investing in us, be deemed to own an undivided interest in our assets, with the result that we would become a fiduciary of the Plan and our operations would be subject to the regulatory
restrictions of ERISA, including its prohibited transaction rules, as well as the prohibited transaction rules of the Code and any other applicable Similar Laws.
The Department of Labor (the DOL) regulations provide guidance with respect to whether the assets of an entity in which ERISA
Plans acquire equity interests would be deemed plan assets under some circumstances. Under these regulations, an entitys assets generally would not be considered to be plan assets if, among other things the equity
interests acquired by ERISA Plans are publicly offered securities (as defined in the DOL regulations)i.e., the equity interests are part of a class of securities that is widely held by 100 or more investors independent of the
issuer and each other, are freely transferable, and are either registered under certain provisions of the federal securities laws or sold to the ERISA Plan as part of a public offering under certain conditions.
Due to the complexity of these rules and the excise taxes, penalties and liabilities that may be imposed upon persons involved in
non-exempt
prohibited transactions, it is particularly important that fiduciaries, or other persons considering acquiring and/or holding shares of our common stock on behalf of, or with the assets of, any Plan,
consult with their counsel regarding the potential applicability of ERISA, Section 4975 of the Code and any Similar Laws to such investment and whether an exemption would be applicable to the acquisition and holding of shares of common stock.
Purchasers of shares of common stock have the exclusive responsibility for ensuring that their acquisition and holding of shares of common stock complies with the fiduciary responsibility rules of ERISA and
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does not violate the prohibited transaction rules of ERISA, the Code or applicable Similar Laws. The sale of shares of common stock to a Plan is in no respect a representation by us or any of our
affiliates or representatives that such an investment meets all relevant legal requirements with respect to investments by any such Plan or that such investment is appropriate for any such Plan.
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PLAN OF DISTRIBUTION
The selling stockholders, including their pledgees, donees, transferees, distributees, beneficiaries or other successors in interest, may from
time to time offer some or all of the shares of common stock (collectively, the Securities) covered by this prospectus. To the extent required, this prospectus may be amended and supplemented from time to time to describe a specific plan
of distribution.
The selling stockholders will not pay any of the costs, expenses and fees in connection with the registration and sale
of the shares of common stock covered by this prospectus, but they will pay any and all underwriting discounts, selling commissions and stock transfer taxes, if any, attributable to sales of the shares of common stock. We will not receive any
proceeds from the sale of the shares of common stock by the selling stockholders.
The selling stockholders may sell the Securities
covered by this prospectus from time to time, and may also decide not to sell all or any of the Securities that they are allowed to sell under this prospectus. The selling stockholders will act independently of us in making decisions regarding the
timing, manner and size of each sale. These dispositions may be at fixed prices, at market prices prevailing at the time of sale, at prices related to such prevailing market prices, at varying prices determined at the time of sale, or at privately
negotiated prices. Sales may be made by the selling stockholders in one or more types of transactions, which may include:
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Purchases by underwriters, dealers and agents who may receive compensation in the form of underwriting discounts, concessions or commissions from the selling stockholders and/or the purchasers of the Securities for whom
they may act as agent;
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one or more block transactions, including transactions in which the broker or dealer so engaged will attempt to sell the Securities as agent but may position and resell a portion of the block as principal to facilitate
the transaction, or in crosses, in which the same broker acts as an agent on both sides of the trade;
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ordinary brokerage transactions or transactions in which a broker solicits purchases;
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purchases by a broker-dealer or market maker, as principal, and resale by the broker-dealer for its account;
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the pledge of Securities for any loan or obligation, including pledges to brokers or dealers who may from time to time effect distributions of the Securities;
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short sales or transactions to cover short sales relating to the Securities;
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one or more exchanges or over the counter market transactions;
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through distribution by a selling stockholder or its successor in interest to its members, general or limited partners or shareholders (or their respective members, general or limited partners or shareholders);
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privately negotiated transactions;
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the writing of options, whether the options are listed on an options exchange or otherwise;
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distributions to creditors and equity holders of us or the selling stockholders; or
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any combination of the foregoing, or any other available means allowable under applicable law.
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A selling stockholder may also resell all or a portion of the Securities in open market transactions in reliance upon Rule 144 under the
Securities Act provided it meets the criteria and conforms to the requirements of Rule 144.
The selling stockholders may enter into sale,
forward sale and derivative transactions with third parties, or may sell securities not covered by this prospectus to third parties in privately negotiated transactions. If the applicable prospectus supplement indicates, in connection with those
sales, forward sales or derivative transactions, the third parties may sell securities covered by this prospectus and the applicable prospectus supplement, including in short sale transactions and by issuing securities that are not covered by this
prospectus but are exchangeable for or
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represent beneficial interests in the common stock. The third parties also may use shares received under those sale, forward sale or derivative arrangements or shares pledged by the selling
stockholder or borrowed from the selling stockholders or others to settle such third-party sales or to close out any related open borrowings of common stock. The third parties may deliver this prospectus in connection with any such transactions. Any
third party in such sale transactions will be an underwriter and will be identified in the applicable prospectus supplement (or a post-effective amendment to the registration statement of which this prospectus is a part).
In addition, the selling stockholders may engage in hedging transactions with broker-dealers in connection with distributions of the
Securities or otherwise. In those transactions, broker-dealers may engage in short sales of securities in the course of hedging the positions they assume with selling stockholders. The selling stockholders may also sell securities short and
redeliver securities to close out such short positions. The selling stockholders may also enter into option or other transactions with broker-dealers which require the delivery of securities to the broker-dealer. The broker-dealer may then resell or
otherwise transfer such securities pursuant to this prospectus. The selling stockholders also may loan or pledge shares, and the borrower or pledgee may sell or otherwise transfer the Securities so loaned or pledged pursuant to this prospectus. Such
borrower or pledgee also may transfer those Securities to investors in our securities or the selling stockholders securities or in connection with the offering of other securities not covered by this prospectus.
To the extent necessary, we may amend or supplement this prospectus from time to time to describe a specific plan of distribution. We will
file a supplement to this prospectus, if required, upon being notified by the selling stockholders that any material arrangement has been entered into with a broker-dealer for the sale of shares through a block trade, offering or a purchase by a
broker or dealer. The applicable prospectus supplement will set forth the specific terms of the offering of securities, including:
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the number of the Securities offered;
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the price of such Securities;
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the proceeds to the selling stockholders from the sale of such Securities;
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the names of the underwriters or agents, if any;
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any underwriting discounts, agency fees or other compensation to underwriters or agents; and
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any discounts or concessions allowed or paid to dealers.
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The selling stockholders may, or may
authorize underwriters, dealers and agents to, solicit offers from specified institutions to purchase Securities from the selling stockholders at the public offering price listed in the applicable prospectus supplement. These sales may be made under
delayed delivery contracts or other purchase contracts that provide for payment and delivery on a specified future date. Any contracts like this will be described in and be subject to the conditions listed in the applicable prospectus
supplement.
Broker-dealers or agents may receive compensation in the form of commissions, discounts or concessions from us or the selling
stockholders. Broker-dealers or agents may also receive compensation from the purchasers of Securities for whom they act as agents or to whom they sell as principals, or both. Compensation as to a particular broker-dealer might be in excess of
customary commissions and will be in amounts to be negotiated in connection with transactions involving securities. In effecting sales, broker-dealers engaged by the selling stockholders may arrange for other broker-dealers to participate in the
resales.
In connection with sales of Securities covered hereby, the selling stockholders and any underwriter, broker-dealer or agent and
any other participating broker-dealer that executes sales for the selling stockholders may be deemed to be an underwriter within the meaning of the Securities Act. Accordingly, any profits realized by the selling stockholders and any
compensation earned by such underwriter, broker-dealer or agent may be deemed to be underwriting discounts and commissions. Because the selling stockholders may be deemed to be underwriters under the Securities Act, the selling
stockholders must deliver this prospectus and any prospectus supplement in the manner required by the Securities Act. This prospectus delivery requirement may be satisfied through the facilities of the NYSE American in accordance with Rule 153 under
the Securities Act or satisfied in accordance with Rule 174 under the Securities Act.
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We and the selling stockholders have agreed to indemnify each other against certain liabilities,
including liabilities under the Securities Act. In addition, we or the selling stockholders may agree to indemnify any underwriters, broker-dealers and agents against or contribute to any payments the underwriters, broker-dealers or agents may be
required to make with respect to, civil liabilities, including liabilities under the Securities Act. Underwriters, broker-dealers and agents and their affiliates are permitted to be customers of, engage in transactions with, or perform services for
us and our affiliates or the selling stockholders or their affiliates in the ordinary course of business.
The selling stockholders will
be subject to applicable provisions of Regulation M of the Exchange Act and the rules and regulations thereunder, which provisions may limit the timing of purchases and sales of any of the Securities or the selling stockholders. Regulation M may
also restrict the ability of any person engaged in the distribution of the Securities to engage in market-making activities with respect to the Securities. These restrictions may affect the marketability of such Securities.
In order to comply with applicable securities laws of some states, the Securities may be sold in those jurisdictions only through registered
or licensed brokers or dealers. In addition, in certain states the Securities may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirements is
available. In addition, any Securities covered by this prospectus that qualify for sale pursuant to Rule 144 under the Securities Act may be sold in open market transactions under Rule 144 rather than pursuant to this prospectus.
In connection with an offering of the Securities under this prospectus, the underwriters may purchase and sell securities in the open market.
These transactions may include short sales, stabilizing transactions and purchases to cover positions created by short sales. Short sales involve the sale by the underwriters of a greater number of securities than they are required to purchase in an
offering. Stabilizing transactions consist of certain bids or purchases made for the purpose of preventing or retarding a decline in the market price of the securities while an offering is in progress.
The underwriters also may impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the
underwriting discount received by it because the underwriters have repurchased securities sold by or for the account of that underwriter in stabilizing or short-covering transactions.
These activities by the underwriters may stabilize, maintain or otherwise affect the market price of the Securities offered under this
prospectus. As a result, the price of the Securities may be higher than the price that otherwise might exist in the open market. If these activities are commenced, they may be discontinued by the underwriters at any time. These transactions may be
effected on the NYSE American or another securities exchange or automated quotation system, or in the
over-the-counter
market or otherwise.
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LEGAL MATTERS
The validity of our common stock offered by this prospectus will be passed upon for us by Vinson & Elkins L.L.P., Houston, Texas.
EXPERTS
The consolidated financial statements as of December 31, 2017 and 2016 and for each of the three years in the period ended
December 31, 2017 and managements assessment of the effectiveness of internal control over financial reporting as of December 31, 2017 incorporated by reference in this prospectus and in the Registration Statement have been so
incorporated in reliance on the reports of BDO USA, LLP, an independent registered public accounting firm, incorporated herein by reference, given on the authority of said firm as experts in auditing and accounting.
The information included in or incorporated by reference into this prospectus regarding our estimated quantities of proved reserves, the
future net revenues from those reserves and their present value is based, in part, on the estimated reserve evaluations and related calculations of Wright & Company, Inc., independent petroleum engineering consultants. These estimates are
aggregated and the sums are included in or incorporated by reference into this prospectus in reliance upon the authority of each firm as experts in petroleum engineering.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form
S-1
(including the exhibits, schedules and
amendments thereto) under the Securities Act, with respect to our common stock offered hereby. This prospectus does not contain all of the information set forth in the registration statement and the exhibits and schedules thereto. For further
information with respect to us and the common stock offered hereby, we refer you to the registration statement and the exhibits and schedules filed therewith. Statements contained in this prospectus as to the contents of any contract, agreement or
any other document are summaries of the material terms of this contract, agreement or other document and are not necessarily complete. With respect to each of these contracts, agreements or other documents filed as an exhibit to the registration
statement, reference is made to the exhibits for a more complete description of the matter involved. A copy of the registration statement, and the exhibits and schedules thereto, may be inspected without charge at the public reference facilities
maintained by the SEC at 100 F Street NE, Washington, D.C. 20549. Copies of these materials may be obtained, upon payment of a duplicating fee, from the Public Reference Section of the SEC at 100 F Street NE, Washington, D.C. 20549. Please call the
SEC at
1-800-SEC-0330
for further information on the operation of the public reference facility. The SEC maintains a website that
contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. The address of the SECs website is
www.sec.gov
.
We also make available free of charge on our internet website at
www.gastar.com
our Annual Reports on Form
10-K,
our Quarterly Reports on Form
10-Q,
our Current Reports on Form
8-K
and any amendments to those reports, as soon as reasonably
practicable after we electronically file such material with, or furnish it to, the SEC. Information contained on our website is not incorporated by reference into this prospectus and you should not consider information contained on our website as
part of this prospectus.
INFORMATION INCORPORATED BY REFERENCE
The SEC allows us to incorporate by reference the information we file with the SEC. This means we can disclose important
information to you without actually including the specific information in this prospectus by referring to those documents. The information incorporated by reference is an important part of this prospectus.
If information in incorporated documents conflicts with information in this prospectus, you should rely on the most recent information. If
information in an incorporated document conflicts with information in another incorporated document, you should rely on the most recent incorporated document.
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The documents listed below have been filed by us pursuant to the Exchange Act and are
incorporated by reference in this prospectus:
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our Annual Report on Form
10-K
for the fiscal year ended December 31, 2017;
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our Current Report on Form
8-K,
January 29, 2018, February 27, 2018 and March 5, 2018 (in each case excluding any information furnished pursuant to Item 2.02 or
Item 7.01); and
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You may request a copy of any document incorporated by reference in this prospectus, at no cost, by writing
or calling us at the following address:
Gastar Exploration Inc.
1331 Lamar Street, Suite 650
Houston, Texas 77010
Attention:
Michael A. Gerlich
Telephone: (713)
739-1800
You should rely only on the information incorporated by reference or provided in this prospectus. We have not authorized anyone else to
provide you with any information. You should not assume that the information incorporated by reference or provided in this prospectus is accurate as of any date other that the date on the front of each document.
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Prospectus
March 23,
2018