8-K

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 event reported): July 29, 2010 (July 28, 2010)

GASTAR EXPLORATION LTD.

(Exact Name of Registrant as Specified in Its Charter)

ALBERTA, CANADA	001-32714	98-0570897
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

1331 LAMAR STREET, SUITE 1080

HOUSTON, TEXAS 77010

(Address of principal executive offices)

(713) 739-1800

(Registrant’s telephone number, including area code)

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 (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

SECTION 4 - MATTERS RELATED TO ACCOUNTANTS AND FINANCIAL STATEMENTS

Item 4.02(a) Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review.

On July 28, 2010, the Audit Committee of the Board of Directors of Gastar Exploration Ltd (the “Company”), in consultation with the Company’s management, concluded that the Company’s Condensed Consolidated Balance Sheet and Statement of Operations as of and for the three months ended March 31, 2010 included in the Company’s previously issued unaudited condensed consolidated financial statements and included in the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2010 (the “Quarterly Report”) filed with the Securities and Exchange Commission (the “SEC”) on May 6, 2010, should no longer be relied upon due to an accounting error (described below) and that action should be taken to prevent future reliance.

The error was related to the presentation of commodity derivative assets and unrealized natural gas hedge gain for the period ended March 31, 2010 within the Company’s Condensed Consolidated Balance Sheet and Statement of Operations. The commodity derivative premium payables were inappropriately netted with the receivables from commodity derivative contracts resulting in an incorrect marked to market value for commodity derivative assets and understated unrealized natural gas hedge gain for the period. As a result, the current receivables from commodity derivative contracts, the long-term receivables from commodity derivative contracts and the unrealized natural gas hedge gain were understated by $1.9 million, $7.5 million and $9.4 million, respectively, and total equity was understated by $9.4 million for the three months ended March 31, 2010.

The Company’s Audit Committee and management conducted a review of the Company’s accounting treatment of the matters relating to the restatement and it was concluded that the error described above existed and required correction through the filing of this Current Report on Form 8-K and an amendment to the Quarterly Report. Simultaneous with the filing of this Current Report, the Company filed Amendment No. 1 on Form 10-Q/A to the Quarterly Report to restate its financial statements and related disclosures included therein and otherwise reflect the adjustments described above. The adjustments have no impact on the Company’s net cash provided by operating activities or on any other aspect of the Company’s business, nor will it impact any of the Company’s previously issued financial statements other than as identified herein.

The following tables display the Company’s as adjusted Condensed Consolidated Balance Sheet, Statement of Operations and Statement of Cash Flows for March 31, 2010 as if the Company had included the appropriate adjustments to the commodity derivative assets and the unrealized natural gas hedge gain:

Condensed Consolidated Balance Sheet

	As of March 31, 2010
	As Reported			Adjustment		Restated
				(in thousands)
CURRENT ASSETS:
Receivables from commodity derivative contracts	$	8,499		$	1,918	$	10,417
Total current assets		104,757			1,918		106,675
OTHER ASSETS:
Receivables from commodity derivative contracts	$	4,564		$	7,448	$	12,012
Total other assets		5,382			7,448		12,830
TOTAL ASSETS	$	284,259		$	9,366	$	293,625
SHAREHOLDERS’ EQUITY:
Accumulated deficit	$	(119,668	)	$	9,366	$	(110,302	)
Total shareholders’ equity		165,642			9,366		175,008
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	284,259		$	9,366	$	293,625

Condensed Consolidated Statement of Operations

	For the Three Months Ended March 31, 2010
	As Reported			Adjustment			Restated
	(in thousands, except per share data)
REVENUES:
Unrealized natural gas hedge gain (loss)	$	12		$	9,366		$	9,378
Total revenues		6,770			9,366			16,136
INCOME (LOSS) FROM OPERATIONS	$	(2,003	)	$	9,366		$	7,363
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES	$	(822	)	$	9,366		$	8,544
NET INCOME (LOSS)	$	27		$	9,366		$	9,393
NET INCOME (LOSS) PER SHARE:
Basic	$	0.00		$	0.19		$	0.19
Diluted	$	0.00		$	0.19		$	0.19
Condensed Consolidated Statement of Cash Flows
	For the Three Months Ended March 31, 2010
	As Reported			Adjustment			Restated
				(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	27		$	9,366		$	9,393
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Unrealized natural gas hedge (gain) loss	$	(12	)	$	(9,366	)	$	(9,378	)
Net cash provided by operating activities	$	7,370		$	—		$	7,370

The Audit Committee and authorized officers of the Company discussed this matter and conclusion with the Company’s independent auditors.

SECTION 7 – REGULATION FD

ITEM 7.01 REGULATION FD DISCLOSURE

On July 29, 2010, the Company announced that it would be restating its previously issued unaudited condensed consolidated financial statements for the period ended March 31, 2010.

In accordance with General Instruction B.2 of Form 8-K, the information presented herein under Item 7.01 and set forth in the attached Exhibit 99.1 is deemed to be “furnished” solely pursuant to Item 7.01 of this report and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall such information or the Exhibit be deemed incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, each as amended.

SECTION 9 – FINANCIAL STATEMENTS AND EXHIBITS

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS

(d) Exhibits

The following is a list of exhibits furnished as part of this Form 8-K:

Exhibit No.	Description of Document
99.1	Press release dated July 29, 2010.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	GASTAR EXPLORATION LTD.
Date: July 29, 2010	/s/ J. Russell Porter
	J. Russell Porter
	President and Chief Executive Officer

EX-99.1

Exhibit 99.1

NEWS RELEASE   Company Contact: Gastar Exploration Ltd. J. Russell Porter, Chief Executive Officer 713-739-1800 / rporter@gastar.com   Investor Relations Counsel: Lisa Elliott / Anne Pearson DRG&E : 713-529-6600 lelliott@drg-e.com / apearson@drg-e.com

Gastar Exploration Announces Restatement of First Quarter 2010 Earnings and

March 31, 2010 Financial Statements Related to Unrealized Hedge Derivative Gain

Earnings Increased $9.4 million

HOUSTON, July 29, 2010 – Gastar Exploration Ltd. (NYSE Amex: GST) announced today that its Condensed Consolidated Balance Sheet, Statement of Operations, and Statement of Cash Flows as of and for the three months ended March 31, 2010 should be restated due to an understatement of its commodity derivative assets and unrealized natural gas hedge gain as of the end of and for such period. The Company will file an amendment to its Quarterly Report on Form 10-Q for the quarter ended March 31, 2010 to reflect these revisions.

As of and for the three months ended March 31, 2010, the current receivables from commodity derivative contracts, the long-term receivables from commodity derivative contracts and the unrealized natural gas hedge gain were understated by $1.9 million, $7.5 million and $9.4 million, respectively, and total equity was understated by $9.4 million. The adjustments have no impact on the Company’s net cash provided by operating activities or on any other aspect of the Company’s business, nor will it impact any of the Company’s previously issued financial statements other than as described herein.

The following tables display the Company’s restated Condensed Consolidated Balance Sheet, Statement of Operations and Statement of Cash Flows as of and for the three months ended March 31, 2010 to appropriately reflect the adjustments to the commodity derivative assets and the unrealized natural gas hedge gain:

Condensed Consolidated Balance Sheet

	As of March 31, 2010
	As Reported			Adjustment		Restated
	(in thousands)
CURRENT ASSETS:
Receivables from commodity derivative contracts	$	8,499		$	1,918	$	10,417
Total current assets		104,757			1,918		106,675
OTHER ASSETS:
Receivables from commodity derivative contracts	$	4,564		$	7,448	$	12,012
Total other assets		5,382			7,448		12,830
TOTAL ASSETS	$	284,259		$	9,366	$	293,625
SHAREHOLDERS' EQUITY:
Accumulated deficit	$	(119,668	)	$	9,366	$	(110,302	)
Total shareholders’ equity		165,642			9,366		175,008
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	284,259		$	9,366	$	293,625

Condensed Consolidated Statement of Operations

	For the Three Months Ended March 31, 2010
	As Reported			Adjustment		Restated
	(in thousands, except per share data)
REVENUES:
Unrealized natural gas hedge gain (loss)	$	12		$	9,366	$	9,378
Total revenues		6,770			9,366		16,136
INCOME (LOSS) FROM OPERATIONS	$	(2,003	)	$	9,366	$	7,363
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES	$	(822	)	$	9,366	$	8,544
NET INCOME (LOSS)	$	27		$	9,366	$	9,393
NET INCOME (LOSS) PER SHARE:
Basic	$	0.00		$	0.19	$	0.19
Diluted	$	0.00		$	0.19	$	0.19

Condensed Consolidated Statement of Cash Flows

	For the Three Months Ended March 31, 2010
	As Reported			Adjustment			Restated
	(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	27		$	9,366		$	9,393
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Unrealized natural gas hedge (gain) loss	$	(12	)	$	(9,366	)	$	(9,378	)
Net cash provided by operating activities	$	7,370		$	—		$	7,370

About Gastar Exploration

Gastar Exploration Ltd. is an independent company engaged in the exploration, development and production of natural gas and oil in the United States. Our principal business activities include the identification, acquisition, and subsequent exploration and development of natural gas and oil properties with an emphasis on prospective deep structures identified through seismic and other analytical techniques as well as unconventional natural gas reserves, such as shale resource plays. We are pursuing natural gas exploration in the deep Bossier gas play in the Hilltop area in East Texas and the Marcellus Shale in West Virginia and central and southwestern Pennsylvania. We also conduct coal bed methane development activities within the Powder River Basin of Wyoming and Montana. For more information, visit our web site at www.gastar.com.

Safe Harbor Statement and Disclaimer

This news release includes “forward looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward looking statements give our current expectations, opinion, belief or forecasts of future events and performance. A statement identified by the use of forward looking words including “may”, “expects”, “projects”, “anticipates”, “plans”, “believes”, “estimate”, “will”, “should”, and certain of the other foregoing statements may be deemed forward-looking statements. Although Gastar believes that the expectations reflected in such forward-looking statements are reasonable, these statements involve risks and uncertainties that may cause actual future activities and results to be materially different from those suggested or described in this news release. These include risk inherent in natural gas and oil drilling and production activities, including risks of fire, explosion, blowouts, pipe failure, casing collapse, unusual or unexpected formation pressures, environmental hazards, and other operating and production risks, which may temporarily or permanently reduce production or cause initial production or test results to not be indicative of future well performance or delay the timing of sales or completion of drilling operations; risks with respect to natural gas and oil prices, a material decline in which could cause Gastar to delay or suspend planned drilling operations or reduce production levels; risks relating to the availability of capital to fund drilling operations that can be adversely affected by adverse drilling results, production declines and declines in natural gas and oil prices; risks relating to unexpected adverse developments in the status of properties; risks relating to the absence or delay in receipt of government approvals or third party consents; and other risks described in Gastar’s Annual Report on Form 10-K and other filings with the SEC, available at the SEC’s website at www.sec.gov. By issuing forward looking statements based on current expectations, opinions, views or beliefs, Gastar has no obligation and, except as required by law, is not undertaking any obligation, to update or revise these statements or provide any other information relating to such statements.

The NYSE Amex LLC has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

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