UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest reported event): June 16, 2011
POSTROCK ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
Commission File No. 001-34635
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| DELAWARE
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27-0981065 |
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(I.R.S. Employer |
| Incorporation or organization)
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Identification No.) |
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| 210 Park Avenue
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73102 |
| Oklahoma City, Oklahoma
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(Zip Code) |
| (Address of Principal Executive Offices) |
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Registrant’s Telephone Number, including Area Code: (405) 600-7704
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy
the filing obligation of the registrant under any of the following provisions:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c)) |
TABLE OF CONTENTS
Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On June 17, 2011, in connection with Mr. David C. Lawler’s previously reported resignation as
Chief Executive Officer, President and director of PostRock Energy Corporation (the “Company”),
which is scheduled to become effective on July 15, 2011, the Board of Directors of the Company
elected Terry W. Carter as Interim President and Chief Executive Officer. Since 2007, Mr. Carter
has been a principal of a number of private oil and gas ventures. From 2003 to 2007, Mr. Carter
served as President and Chief Executive Officer of Ascent Energy, Inc., a private exploration and
production company. In 2001, Mr. Carter became Executive Vice President of Exploration and
Production at Range Resources Corporation, an exploration and production company, where he served
in that role until 2003.
Item 8.01 Other Events.
MHR Purchase Agreement
On June 16, 2011, Quest Eastern Resource LLC (“QER”), a wholly owned subsidiary of the
Company, closed the third phase of the sale of certain Appalachian oil and gas properties and
leasehold mineral interests and related assets, which in this phase were located in Braxton and
Lewis Counties, West Virginia (the “Assets”), to Triad Hunter, LLC (“Triad”), a wholly owned
subsidiary of Magnum Hunter Resources Corporation (“MHR”), pursuant to a Purchase and Sale
Agreement, dated as of June 16, 2011 (the “Purchase Agreement”), by and among QER, Triad and, for
the limited purposes of guaranty stated therein, the Company. The Purchase Agreement includes
customary representations, warranties, covenants and indemnities by the parties, and the closing of
the sale of the Assets occurred simultaneously with the execution of the Purchase Agreement.
QER Term Loan
The Assets were pledged as collateral under the Third Amended and Restated Credit Agreement
(the “Credit Agreement”) between QER, as borrower, and Royal Bank of Canada (“RBC”), as
administrative and collateral agent and lender. The aggregate consideration received by QER for the
Assets, after excluding approximately $564,000 placed in escrow, was $4.3 million in cash, which
was delivered to RBC in repayment of a portion of the term loan under the Credit Agreement and as
consideration for the release of RBC’s liens encumbering the Assets.
On June 17, 2011, the Company issued to RBC 141,186 shares (the “Shares”) of the Company’s
common stock, par value $0.01 per share, pursuant to the Asset Sale Agreement, dated September 21,
2010, between the Company and RBC (the “Asset Sale Agreement”), in lieu of payment in cash of the
approximately $840,000 amount of loss due under the Asset Sale Agreement. Upon receipt by RBC of
the Shares, all remaining obligations of QER and the Company under the Credit Agreement and the
Asset Sale Agreement were fully discharged, the Credit Agreement and all related loan documents,
including the Asset Sale Agreement, were terminated and RBC released all liens encumbering the
remaining assets of QER and its lien on the equity of QER. The Company expects to recover an
amount equal to its payment to RBC of the amount of loss through release of escrowed proceeds from
the first and second phases of the sale to Triad that closed in December 2010 and January 2011,
respectively.
The Shares issued to RBC were issued in reliance upon an exemption from registration pursuant
to Section 4(2) under the Securities Act of 1933, as amended, which exempts transactions by an
issuer not involving any public offering. The issuance was not a public offering for purposes of
Section 4(2) because of its being made only to one entity, that entity’s status as an accredited
investor and the manner of the issuance, including that the Company did not engage in general
solicitation or advertising with
regard to the issuance of the Shares and did not offer the Shares to the public in connection with
the issuance.
Settlement of Oklahoma Royalty Litigation
As further described in Note 14 of Part II, Item 8 in the Company’s annual report on Form 10-K
for the year ended December 31, 2010, the Company has been sued in two consolidated lawsuits filed
by approximately 56 royalty owners in the District Court of Nowata County, State of Oklahoma. On
June 15, 2011, an additional lawsuit was filed in the same court on behalf of a putative class
consisting of all Oklahoma royalty interest owners not covered by the consolidated lawsuits. In
each of the lawsuits, the plaintiffs allege that the Company has wrongfully deducted
post-production costs from the plaintiffs’ royalties and have engaged in self-dealing contracts and
agreements resulting in a less than market price for the gas production. A settlement agreement
has been entered resolving all claims in both the consolidated individual royalty owner action and
in the class action. On June 20, 2011, the District Court preliminarily certified the class and
approved the settlement. Following a 30-day period during which members of the class may opt out,
a hearing on final approval of the class settlement is scheduled to be held on July 28, 2011. A
total of $5.6 million will be paid to the claimants in the settlement, which was fully reserved as
of March 31, 2011.