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): November 7, 2013 (November 5, 2013)

GASTAR EXPLORATION LTD.

GASTAR EXPLORATION USA, INC.

(Exact Name of Registrant as Specified in its Charter)

Alberta, Canada	001-32714	98-0570897
Delaware	001-35211	38-3531640
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(I.R.S. Employer Identification No.)

1331 Lamar Street, Suite 650 Houston, Texas	77010
(Address of principal executive offices)	(ZIP Code)

(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 1 – REGISTRANT’S BUSINESS AND OPERATIONS

Item 1.01. Entry into a Material Definitive Agreement.

Amendment to Underwriting Agreement

On November 5, 2013, Gastar Exploration USA, Inc. (“Gastar USA”), a direct subsidiary of Gastar Exploration Ltd. (the “Company”), entered into that certain Amendment of and understanding with respect to Underwriting Agreement (the “Amendment Agreement”), by and among the Company, Gastar USA and Barclays Capital Inc., Credit Suisse Securities (USA) LLC, MLV & Co. LLC and Sterne, Agee & Leach, Inc., as representatives (the “Representatives”) of the several underwriters named in that certain underwriting agreement, dated as of October 29, 2013 (the “Underwriting Agreement”). Pursuant to the Amendment Agreement, the Underwriting Agreement was amended to, among other things: (i) move the closing date from November 5, 2013 to November 7, 2013 and (ii) revise certain conditions to closing.

A copy of the Amendment Agreement is attached as Exhibit 1.1 to this Current Report on Form 8-K and is incorporated herein by reference and hereby filed. The description of the Amendment Agreement in this Current Report is a summary and is qualified in its entirety by reference to the complete text of the Amendment Agreement.

Guarantee Agreement

On November 7, 2013, the Company entered into a guarantee agreement (the “Guarantee Agreement”) with Gastar USA for the benefit of the holders, as registered on the books and records of either Gastar USA or the transfer agent, of any Series B Preferred Stock (the “Holders”). Pursuant to the Guarantee Agreement, the Company irrevocably and unconditionally agrees, to the extent set forth in the Guarantee Agreement, to pay to the Holders the Guarantee Payments (as such term is defined in the Guarantee Agreement) in the manner and to the extent set forth in the Guarantee Agreement.

The foregoing description of the Guarantee Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Guarantee Agreement, a copy of which is filed herewith as Exhibit 10.1 and is incorporated by reference herein.

SECTION 9 – FINANCIAL STATEMENTS AND EXHIBITS

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

Exhibit No.	Description of Document
1.1	Amendment of and understanding with respect to Underwriting Agreement, dated November 5, 2013, by and among Gastar Exploration USA, Inc., Gastar Exploration Ltd., Barclays Capital Inc., Credit Suisse Securities (USA) LLC, MLV & Co. LLC and Sterne, Agee & Leach, Inc.
5.1	Opinion of Vinson & Elkins L.L.P. dated November 7, 2013.
5.2	Opinion of Burnet, Duckworth & Palmer LLP dated November 7, 2013.
10.1	Guarantee Agreement, dated November 7, 2013, by and between Gastar Exploration Ltd. and Gastar Exploration USA Inc.
23.1	Consent of Vinson & Elkins L.L.P. (included in Exhibit 5.1).
23.2	Consent of Burnet, Duckworth & Palmer LLP (included in Exhibit 5.2).

2

SIGNATURES

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

Date: November 7, 2013	GASTAR EXPLORATION LTD.
	By:	/s/ J. Russell Porter
		J. Russell Porter
		President and Chief Executive Officer
	GASTAR EXPLORATION USA, INC.
	By:	/s/ J. Russell Porter
		J. Russell Porter
		President

3

EXHIBIT LIST

Exhibit No.	Description of Document
1.1	Amendment of and understanding with respect to Underwriting Agreement, dated November 5, 2013, by and among Gastar Exploration USA, Inc., Gastar Exploration Ltd., Barclays Capital Inc., Credit Suisse Securities (USA) LLC, MLV & Co. LLC and Sterne, Agee & Leach, Inc.
5.1	Opinion of Vinson & Elkins L.L.P. dated November 7, 2013.
5.2	Opinion of Burnet, Duckworth & Palmer LLP dated November 7, 2013.
10.1	Guarantee Agreement, dated November 7, 2013, by and between Gastar Exploration Ltd. and Gastar Exploration USA Inc.
23.1	Consent of Vinson & Elkins L.L.P. (included in Exhibit 5.1).
23.2	Consent of Burnet, Duckworth & Palmer LLP (included in Exhibit 5.2).

4

EX-1.1

Exhibit 1.1

Gastar Exploration USA, Inc.

Series B Cumulative Preferred Securities

November 5, 2013

Gastar Exploration USA, Inc.

c/o Gastar Exploration Ltd.

1331 Lamar, Suite 650

Houston, TX 77010

Attention: J. Russell Porter, President and Chief Executive Officer

Re: Amendment of and understanding with respect to Underwriting Agreement (this “Amendment”)

Dear Mr. Porter:

Reference is made to that certain Underwriting Agreement, dated as of October 29, 2013 (the “Underwriting Agreement”), by and among Gastar Exploration USA, Inc. (the “Company”), Gastar Exploration Ltd. (the “Parent”) and Barclays Capital Inc., Credit Suisse Securities (USA) LLC, MLV & Co. LLC and Sterne, Agee & Leach, Inc., as representatives of the several underwriters named therein (the “Representatives”). The Company, the Parent, and the Representatives hereby desire and agree to set forth their understanding with respect to, and amend certain provisions of, the Underwriting Agreement as set forth below. All other provisions of the Underwriting Agreement shall remain in full force and effect. In the event of any inconsistency between the statements made herein and the Underwriting Agreement, the statements made herein will control. Capitalized terms used but not defined herein shall have the meanings assigned to them in the Underwriting Agreement.

WHEREAS, as described in the Prospectus, the Company’s pro forma combined statement of operations for the six months ended June 30, 2013 included a $43.7 million nonrecurring gain on acquisition of assets at fair value which was not consistent with Commission Regulation S-X, and the proper exclusion thereof would change pro forma net income for the six months in the two pro forma scenarios set forth on page S-31 of the Prospectus by, among other things, changing six months ended June 30, 2013 net income assuming closing of the WEHLU Acquisition from $57.9 million to $14.2 million, and assuming no WEHLU acquisition, from $50.2 million to $6.5 million; in addition, the $43.7 million nonrecurring gain impacted the ratio of earnings to fixed charges, which was previously disclosed as 3.5x for the six months ended June 30, 2013, and is now disclosed as 1.2x; and

WHEREAS, because of the aforementioned inclusion of the nonrecurring gain in the pro forma statements included in the Prospectus, the Auditor was unable to deliver the Bring-Down Letter and, therefore, failed to satisfy that certain condition as set forth in Section 7(a)(ii) of the Underwriting Agreement; and

WHEREAS, because of the aforementioned inclusion of the nonrecurring gain in the pro forma statements, Vinson & Elkins LLP was unable to deliver a written opinion in form and substance reasonably satisfactory to the Representatives and, therefore, failed to satisfy that certain condition as set forth in Section 7(i) of the Underwriting Agreement; and

WHEREAS, because of the failure to satisfy all conditions of the obligations of the Underwriters, as set forth in Section 7 of the Underwriting Agreement, the Underwriters are under no obligation to purchase the Securities; and

WHEREAS, the Company and Parent, with the consent of the Representatives, have prepared an Issuer Free Writing Prospectus dated November 5, 2013 that constitutes a Permitted Free Writing Prospectus under the Underwriting Agreement.

Accordingly, the Underwriting Agreement is hereby amended as follows:

A. Subject to (B) and (C) below, each of the First Closing Date and the first Option Closing Date shall be November 7, 2013, instead of November 5, 2013, or at such other date as the Representatives and the Company may agree upon in writing, but in no event shall the Closing Dates occur later than 4:00 p.m., New York City time, on November 7, 2013.

B. Prior to the Closing Dates, updated disclosure information with respect to the pro forma statement of operations will be prepared and circulated to investors by the Underwriters to reconfirm previous orders for the purchase of the Preferred Stock, the parties acknowledging that the size and pricing terms of the deal are subject to change.

C. The Underwriters are under no obligation to purchase the Securities, and if the Underwriters are unable, for any reason, to reconfirm such amounts of the previous orders for the purchase of the Preferred Stock to the satisfaction of the Underwriters, then the Underwriting Agreement will be terminable at the Underwriters’ discretion and would be of no force and effect, other than Sections 5(h), 8, and 10 of the Underwriting Agreement.

D. The Time of Sale, as set forth in Section 2(b)(7) of the Underwriting Agreement shall mean a date and time following the availability of that certain Permitted Free Writing Prospectus dated November 5, 2013 which shall be the first date and time of reaffirmation of purchase commitments, which date and time will be provided by the Underwriters to the Company.

E. For the avoidance of doubt, under no circumstances shall the Underwriters have any obligation to purchase the Securities for their own account.

F. Nothing contained in this Amendment shall be deemed to be a waiver by the Underwriters of the conditions set forth in Sections 7(i) and 7(a)(ii) of the Underwriting Agreement, it being the intent of the parties that such conditions shall be satisfied upon delivery of documents satisfying the requirements of each of such Sections on the First Closing Date and each Option Closing Date, as such dates have been amended.

This Amendment may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same agreement.

This Amendment shall be governed by, and construed in accordance with, the laws of the State of New York.

[Signature Page Follows]

If the foregoing correctly sets forth the understanding among the Company, the Parent, and the Representatives, please so indicate in the space provided below for that purpose, whereupon this Amendment shall constitute a binding agreement among the Company, the Parent, and the Representatives.

Very truly yours,
For themselves and as Representatives of the several underwriters named on Schedule I of the Underwriting Agreement
BARCLAYS CAPITAL INC.
By:	/s/ David Levin
Name: David Levin
Title: Managing Director
CREDIT SUISSE SECURITIES (USA) LLC
By:	/s/ Randy Bayless
Name: Randy Bayless
Title: Managing Director
MLV & CO. LLC
By:	/s/ Dean Colucci
Name: Dean Colucci
Title: President
STERNE, AGEE & LEACH, INC.
By:	/s/ Joseph J. Zabik
Name: Joseph J. Zabik
Title: Head of Investment Banking

[Signature page to Amendment to Underwriting Agreement]

ACCEPTED as of the date first-above written:
GASTAR EXPLORATION USA, INC.
By:	/s/ J. Russell Porter
Name: J. Russell Porter
Title: President
GASTAR EXPLORATION LTD.
By:	/s/ J. Russell Porter
Name: J. Russell Porter
Title: President and Chief Executive Officer

[Signature page to Amendment to Underwriting Agreement]

EX-5.1

Exhibit 5.1

November 7, 2013

Gastar Exploration Ltd.

Gastar Exploration USA, Inc.

1331 Lamar Street, Suite 650

Houston, Texas, 77010

Re: Registration and Issuance of Securities of Gastar Exploration Ltd. and Gastar Exploration USA, Inc.

Ladies and Gentlemen:

We have acted as counsel for Gastar Exploration Ltd., a corporation organized under the laws of the Province of Alberta, Canada (the “Company”) and Gastar Exploration USA, Inc., a Delaware corporation (“Gastar USA”) with respect to certain legal matters in connection with the preparation by the Company and Gastar USA of a registration statement (the “Registration Statement”) on Form S-3 (File No. 333-174552) of the Company and Gastar USA that became effective on June 8, 2011, the related base prospectus, which form a part of and is included in the Registration Statement, the preliminary prospectus supplement filed with the Securities and Exchange Commission (the “Commission”) on October 28, 2013, the free writing prospectus filed with the Commission on October 29, 2013 pursuant to Rule 433 of the Securities Act of 1933, as amended (the “Securities Act”), the final prospectus supplement filed with the Commission on October 31, 2013, pursuant to Rule 424(b) of the Securities Act and the free writing prospectus filed with the Commission on November 5, 2013 pursuant to Rule 433 of the Securities Act of 1933 (collectively, the “Prospectus”), in connection with the registration under the Securities Act of the offer and sale pursuant to the Underwriting Agreement, dated as of October 29, 2013 (the “Underwriting Agreement” and together with the Underwriting Agreement, the “Amended Underwriting Agreement”), among Gastar USA, the Company, Barclays Capital Inc., Credit Suisse Securities (USA) LLC, MLV & Co. LLC and Sterne, Agee & Leach, Inc., as representatives (the “Representatives”) of the several underwriters named therein (the “Underwriters”), as amended by that certain Amendment of and understanding with respect to Underwriting Agreement by and among the Company, Gastar USA and the Representatives, dated November 5, 2013, and the Certificate of Designation of Rights and Preferences with respect to the Series B Preferred Stock, dated October 31, 2013 (the “Amendment Agreement”) , (the “Certificate of Designation”), in an offering of an aggregate of 2,140,000 shares (such shares, the “Preferred Shares”) of Gastar USA’s 10.75% Series B Cumulative Preferred Stock, par value $0.01 per share and liquidation preference of $25.00 per share, which will be fully and unconditionally guaranteed by the Parent (the “Guarantee”) to the extent set forth in the Guarantee Agreement, dated November 7, 2013, entered into between the Company and Gastar USA (the “Guarantee Agreement”). The Preferred Shares and Guarantees are collectively referred to herein as the “Securities.”

In rendering the opinions set forth below, we have examined and relied upon (i) the Delaware General Corporation Law (the “DGCL”), (ii) the Registration Statement, including the Prospectus, (iii) the Amended and Restated Articles of Amalgamation of the Company, (iv) the Amended Bylaws of the Company, (v) the Amended and Restated Certificate of Incorporation of Gastar USA filed with the Secretary of State of Delaware pursuant to the DGCL, (vi) the Certificate of Designation of Rights and Preferences with respect to the Series B Preferred Stock filed with the Secretary of State of Delaware pursuant to the DGCL, (vii) the Second Amended and Restated Bylaws of Gastar USA, (viii) resolutions of the board of directors of the Company, dated as of June 13, 2011 and October 25, 2013, and Gastar USA, dated as of June 8, 2011 and October 25, 2013, approving and authorizing, among other things, the Registration Statement and other matters relating to the offering of the Securities, (xi) the Underwriting Agreement, (xi) the Amendment Agreement, (xii) the Guarantee Agreement, and (xiii) such other certificates, statutes and other corporate records, agreements, instruments and documents as we considered appropriate for purposes of the opinions hereafter expressed. In addition, we have reviewed certain certificates of public officials, and we have relied on such certificates with respect to certain factual matters that we have not independently established.

Vinson & Elkins LLP Attorneys at Law Abu Dhabi Austin Beijing Dallas Dubai Hong Kong Houston London Moscow New York Palo Alto Riyadh San Francisco Shanghai Tokyo Washington 1001 Fannin Street, Suite 2500 Houston, TX 77002-6760 Tel +1.713.758.2222 Fax +1.713.758.2346 www.velaw.com

November 7, 2013 Page 2

In connection with this opinion, we have assumed that:

(1) each document submitted to us for review, and the information contained in each such document, is accurate and complete, each such document that is an original is authentic, each such document that is a copy conforms to an authentic original;

(2) each certificate from governmental officials reviewed by us is accurate, compete and authentic, and all public records are accurate and complete; and

(3) the Securities are being issued and sold in compliance with applicable federal and state securities laws and in the manner stated in the Registration Statement and the Prospectus.

Based on the foregoing, and subject to the assumptions, qualifications, limitations, and exceptions set forth herein, we are of the opinions that:

(1) The Preferred Shares are duly and validly authorized for issuance by Gastar USA and, upon payment and delivery of the Preferred Shares in accordance with the Amended Underwriting Agreement, the Prospectus and the Certificate of Designation, will be duly and validly issued, fully paid and non-assessable.

(2) the Guarantee constitutes valid and legally binding obligations of the Company, enforceable against the Company in accordance with their respective terms, except as such enforceability may be limited by (a) applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws relating to or affecting creditors’ rights and remedies generally (regardless of whether such enforceability is considered in a proceeding in equity or at law) and (b) public policy, applicable law relating to fiduciary duties and indemnification and an implied covenant of good faith and fair dealing.

We do not by this letter express any other opinion with respect to the Securities or any other matter.

The opinions expressed herein are qualified in the following respects:

(1) We express no opinions concerning the validity or enforceability of any provisions contained in the Guarantee that purport to waive or not give effect to rights to notices, defenses, subrogation or other rights or benefits that cannot be effectively waived under applicable law.

(2) The foregoing opinion is limited in all respects to the U.S. federal laws and the DGCL, each as interpreted by federal courts and the courts of the State of Delaware, and we are expressing no opinion as to the effect of the laws of any other jurisdiction, domestic or foreign. With respect to matters dependent upon the laws of Alberta, we have assumed the correctness of, and have not made any independent examination of the matters covered by, and our opinion is in all respects subject to, the opinion to you dated the date hereof of Burnet, Duckworth & Palmer LLP.

We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the use of our name in the Prospectus forming a part of the Registration Statement under the caption “Legal Matters”. By giving such consent, we do not admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act and the rules and regulations thereunder.

Very truly yours

/s/ Vinson & Elkins L.L.P

EX-5.2

Exhibit 5.2

November 7, 2013

Gastar Exploration USA, Inc.

1331 Lamar Street, Suite 1080

Houston, Texas 77010

and

Vinson & Elkins

First City Tower

1001 Fannin Street

Suite 2500

Houston, TX 77002-6760

Ladies and Gentlemen:

Re: Gastar Exploration Ltd. (the “Parent”)

1. INTRODUCTION

1.1 We have acted as agent counsel in the Province of Alberta to the Parent in connection with execution of a guarantee agreement (the “Guarantee”) dated November 7, 2013 by the Parent and Gastar Exploration USA, Inc. (“Gastar”) in connection with an offering of 10.75% Series B cumulative preferred stock of Gastar. This opinion is delivered in connection with the filing of a registration statement on Form S-3 with the United States Securities and Exchange Commission with respect to such Series B cumulative preferred stock (the “Registration Statement”).

2. EXAMINATION OF DOCUMENTS

2.1 In our representation of the Parent, we have not participated in the preparation or negotiation of, but have examined an executed facsimile or electronic counterpart of the Guarantee.

2.2 We have also made such investigations and examined originals or copies, certified or otherwise identified to our satisfaction, of such certificates of public officials and of such other certificates, documents and records as we considered necessary or relevant for purposes of the opinions expressed below, including:

(a) a certificate of status dated as of November 6, 2013 issued in respect of the Parent (the “Certificate of Status”) by the Alberta Registrar of Corporations, pursuant to the Business Corporations Act (Alberta); and

Burnet, Duckworth & Palmer LLP	November 7, 2013
	Page 2

(b) certificate of an officer of the Parent dated as of November 7, 2013 with respect to its constating documents, directors’ resolutions, incumbency and certain factual matters (the “Officer’s Certificate”).

2.3 As to matters of fact material to the opinions hereinafter expressed, we have relied solely and without independent verification upon the Officer’s Certificate referred to above.

2.4 For the purposes of the opinions expressed in paragraph 5.1 we have relied exclusively upon the Certificate of Status.

3. ASSUMPTIONS

3.1 In making such examinations, we have, with your permission, assumed:

(a) the genuineness of all signatures to the Guarantee and the legal capacity at all relevant times of individuals signing any documents;

(b) the authenticity of all documents submitted to us as originals and the conformity to authentic original documents of all documents submitted to us as certified, conformed, telecopied, electronic or photocopied copies and the truthfulness and accuracy of the corporate records of the Parent and all certificates of public officials and officers of the Parent;

(c) Gastar is authorized and has the power to enter into and perform its obligations under the Guarantee; and

(d) the due authorization, execution and delivery of the Guarantee by Gastar.

4. LAWS ADDRESSED

4.1 The opinions expressed herein are limited solely to laws of the Province of Alberta and the federal laws of Canada applicable therein.

5. OPINIONS

Based upon the foregoing and subject to the qualifications set forth herein, we are of the opinion that:

5.1 The Parent is a corporation amalgamated and existing under the laws of the Province of Alberta.

5.2 The execution and delivery by the Parent of the Guarantee and the performance of its obligations thereunder are within the corporate power and authority of the Parent and have been duly authorized by all necessary action by the Parent.

5.3 The Guarantee has been duly executed by the Parent as a matter of corporate law in compliance with the laws of Alberta and in accordance with the provisions of its articles and bylaws.

5.4 Neither the execution, delivery or performance by Parent of the Guarantee nor the consummation of any transactions contemplated therein will:

(a) conflict with, violate, constitute a breach of or a default (with the passage of time or otherwise); or

Burnet, Duckworth & Palmer LLP	November 7, 2013
	Page 3

(b) require the consent of any person (other than consents already obtained),

under or pursuant to the articles and by-laws of the Parent.

6. RELIANCE LIMITATION

6.1 This opinion is furnished solely for the benefit of the addressees hereof and is not to be quoted in whole or in part or otherwise referred to or disclosed to any other Person or in any other transaction, other than filing of this opinion as an Exhibit to the Registration Statement with the United States Securities and Exchange Commission. This opinion is given as of the date hereof and we disclaim any obligation or undertaking to advise you of a change in law or fact affecting or bearing upon the opinions rendered herein occurring after the date hereof which may come or be brought to our attention.

Yours very truly,

/S/ BURNET, DUCKWORTH & PALMER LLP

EX-10.1

Exhibit 10.1

GUARANTEE AGREEMENT

OF GASTAR USA SERIES B PREFERRED STOCK

Gastar Exploration Ltd.

Dated as of November 7, 2013

TABLE OF CONTENTS

		Page
Section 1	Definitions and Interpretation.		1
Section 2	Guarantee.		2
Section 3	Waiver of Notice and Demand.		2
Section 4	Obligations Not Affected.		2
Section 5	Rights of Holders.		3
Section 6	Guarantee of Payment.		3
Section 7	Subrogation.		3
Section 8	Independent Obligations.		3
Section 9	Subordination.		4
Section 10	Termination.		4
Section 11	Successors and Assigns.		4
Section 12	Amendments.		4
Section 13	Notices.		4
Section 14	Third Party-Beneficiaries.		5
Section 15	Governing Law; Waiver of Trial by Jury.		5

i

GUARANTEE AGREEMENT

OF GASTAR USA SERIES B PREFERRED STOCK

This GUARANTEE AGREEMENT (the “Guarantee Agreement”), dated as of November 7, 2013, is executed and delivered by Gastar Exploration Ltd., a corporation subsisting under the Business Corporations Act (Alberta) (the “Guarantor”), and Gastar Exploration USA, Inc., a Delaware corporation (the “Issuer”), for the benefit of the Holders (as defined herein) from time to time of the Series B Preferred Stock (as defined herein) of the Issuer.

WHEREAS, pursuant to the Certificate of Designation of Rights and Preferences of 10.75% Series B Cumulative Preferred Stock (the “Certificate of Designation”), dated as of October 29, 2013, of the Issuer, the Issuer is authorized to issue up to 10,000,000 shares of preferred stock, par value $0.01 per share, designated as the 10.75% Series B Cumulative Preferred Stock (the “Series B Preferred Stock”);

WHEREAS, as incentive for the Holders to purchase the Series B Preferred Stock, the Guarantor desires irrevocably and unconditionally to agree, to the extent set forth in this Guarantee Agreement, to pay to the Holders the Guarantee Payments (as defined herein) in the manner and to the extent set forth in this Guarantee Agreement; and

WHEREAS, the Guarantee Agreement inures to the benefit of, and is intended to be for, the Holders, who are intended third-party beneficiaries of this Guarantee Agreement.

NOW, THEREFORE, in consideration of the purchase by each Holder of Series B Preferred Stock, which purchase the Guarantor hereby agrees shall benefit the Guarantor, the Guarantor executes and delivers this Guarantee Agreement for the benefit of the Holders.

Section 1 Definitions and Interpretation.

In this Guarantee Agreement, unless the context otherwise requires: (a) a term defined anywhere in this Guarantee Agreement has the same meaning throughout; (b) all references to “the Guarantee Agreement,” “this Guarantee Agreement” or “this Preferred Stock Guarantee” are to this Guarantee Agreement as modified, supplemented or amended from time to time; (c) all references in this Guarantee Agreement to “Sections” are to Sections of this Guarantee Agreement, unless otherwise specified; and (d) a reference to the singular includes the plural and vice versa.

“Dividends” means any accumulated and unpaid dividends (as described in the Certificate of Designation) with respect to the Series B Preferred Stock.

“Guarantee Payments” means the following payments or distributions, without duplication, with respect to the Series B Preferred Stock, to the extent not paid or made by or on behalf of the Issuer: (a) any Dividends that have been declared by the board of directors of Issuer to be paid on the Series B Preferred Stock out of funds legally available for such Dividends, (b) the applicable redemption price (as stated in the Certificate of Designation), plus all accrued and unpaid Dividends to the date of redemption (the “Redemption Price”), with respect to any Series B Preferred Stock called for redemption by the Issuer or required to be redeemed by the

1

terms of the Certificate of Designation and (c) upon a voluntary or involuntary dissolution, winding-up or termination of the Issuer, the aggregate of the liquidation amount of $25.00 per Series B Preferred Share and all accrued and unpaid Dividends on the Series B Preferred Stock, whether or not declared, without regard to whether the Issuer has sufficient assets to make full payment as required on liquidation (the “Liquidation Distribution”).

“Holder” shall mean any holder, as registered on the books and records of either the Issuer or the transfer agent, of any Series B Preferred Stock.

“Person” means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature.

Section 2 Guarantee.

The Guarantor irrevocably and unconditionally agrees to pay in full to the Holders the Guarantee Payments (without duplication of amounts theretofor paid by or on behalf of the Issuer), as and when due, regardless of any defense, right of set-off or counterclaim that the Issuer may have or assert. The Guarantor’s obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by the Guarantor to the Holders or by causing the Issuer to pay such amounts to the Holders.

Section 3 Waiver of Notice and Demand.

The Guarantor hereby waives notice of acceptance of this Guarantee Agreement and of any liability to which it applies or may apply, presentment, demand for payment, any right to require a proceeding first against the Issuer or any other Person before proceeding against the Guarantor, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands.

Section 4 Obligations Not Affected.

The obligations, covenants, agreements and duties of the Guarantor under this Guarantee Agreement shall in no way be affected or impaired by reason of the happening from time to time of any of the following:

(a) the release or waiver, by operation of law or otherwise, of the performance or observance by the Issuer of any express or implied agreement, covenant, term or condition relating to the Series B Preferred Stock to be performed or observed by the Issuer;

(b) the extension of time for the payment by the Issuer of all or any portion of the Dividends, Redemption Price, Liquidation Distribution or any other sums payable under the terms of the Series B Preferred Stock or the extension of time for the performance of any other obligation under, arising out of, or in connection with, the Series B Preferred Stock;

(c) any failure, omission, delay or lack of diligence on the part of the Holders to enforce, assert or exercise any right, privilege, power or remedy conferred on the Holders pursuant to the terms of the Series B Preferred Stock, or any action on the part of the Issuer granting indulgence or extension of any kind;

2

(d) the voluntary or involuntary liquidation, dissolution, sale of any collateral, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of debt of, or other similar proceedings affecting, the Issuer or any of the assets of the Issuer;

(e) any invalidity of, or defect or deficiency in, the Series B Preferred Stock;

(f) the settlement or compromise of any obligation guaranteed hereby or hereby incurred; or

(g) any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a guarantor, it being the intent of this Section 4 that the obligations of the Guarantor hereunder shall be absolute and unconditional under any and all circumstances.

There shall be no obligation of the Holders to give notice to, or obtain consent of, the Guarantor with respect to the happening of any of the foregoing.

Section 5 Rights of Holders.

A Holder may also directly institute a legal proceeding against the Guarantor to enforce such Holder’s right to receive payment under this Guarantee Agreement without first instituting a legal proceeding directly against the Issuer or any other Person or entity.

Section 6 Guarantee of Payment.

This Guarantee Agreement creates a guarantee of payment and not of collection.

Section 7 Subrogation.

The Guarantor shall be subrogated to all (if any) rights of the Holders against the Issuer in respect of any amounts paid to such Holders by the Guarantor under this Guarantee Agreement; provided, however, that the Guarantor shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any right that it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Guarantee Agreement, if, at the time of any such payment, any amounts are due and unpaid under this Guarantee Agreement. If any amount shall be paid to the Guarantor in violation of the preceding sentence, the Guarantor agrees to hold such amount in trust for the Holders and to pay over such amount to the Holders.

Section 8 Independent Obligations.

The Guarantor acknowledges that its obligations hereunder are independent of the obligations of the Issuer with respect to the Series B Preferred Stock, and that the Guarantor shall be liable as principal and as debtor hereunder to make Guarantee Payments pursuant to the terms of this Guarantee Agreement notwithstanding the occurrence of any event referred to in subsections (a) through (g), inclusive, of Section 4 hereof.

3

Section 9 Subordination.

The obligations of the Guarantor under this Guarantee Agreement will constitute unsecured obligations of the Guarantor and will rank subordinate and junior in right of payment to all existing and future indebtedness of the Guarantor. The obligations of the Guarantor hereunder do not constitute indebtedness of the Guarantor.

Section 10 Termination.

This Guarantee Agreement shall terminate upon the first to occur of (a) Guarantor ceases to own a majority of the common stock of the Issuer, (b) full payment of the Redemption Price of all Series B Preferred Stock or (c) full payment of the amounts payable in accordance with the Certificate of Designation upon liquidation of the Issuer. Notwithstanding the foregoing, this Guarantee Agreement will continue to be effective or will be reinstated, as the case may be, if at any time any Holder must restore payment of any sums paid under the Series B Preferred Stock or under this Guarantee Agreement.

Section 11 Successors and Assigns.

(a) Neither this Guarantee Agreement nor any right, remedy, obligation nor liability arising hereunder or by reason hereof shall be assignable by any party hereto without the prior written consent of the other party, and any attempt to assign any right, remedy, obligation or liability hereunder without such consent shall be void, unless the successor or assignee agrees in writing to perform the Guarantor’s obligations hereunder.

(b) This Guarantee Agreement shall be binding upon and shall inure to the benefit of any successor or permitted assign of the Guarantor.

Section 12 Amendments.

The Guarantor may amend this Guarantee Agreement at any time for any purpose without the consent of any Holder; provided, however, that if such amendment adversely affects the rights of any Holder, the prior written consent of each Holder affected shall be required.

Section 13 Notices.

Any notice, request, instruction or other document to be given hereunder by any party to the other will be in writing and will be deemed to have been duly given (a) on the date of delivery if delivered personally, or by facsimile, upon confirmation of receipt, or (b) on the second business day following the date of dispatch if delivered by a recognized next day courier service. All notices shall be delivered, telecopied or sent by a recognized next day courier service, as set forth below, or pursuant to such other instructions as may be designated by the Guarantor or the Holders:

4

(a) If given to the Guarantor, at the Guarantor’s mailing address set forth below (or such other address as the Guarantor may give notice of to the Holders and the Issuer):

Gastar Exploration Ltd.

1331 Lamar Street, Suite 650

Houston, Texas 77010

Attention: Chief Financial Officer

(b) If given to the Issuer, at the Issuer’s mailing address set forth below (or such other address as the Issuer may give notice of to the Holders and the Guarantor):

Gastar Exploration USA, Inc.

1331 Lamar Street, Suite 650

Houston, Texas 77010

Attention: Chief Financial Officer

(c) If given to any Holder, at the address set forth on the books and records of the Issuer.

Section 14 Third Party-Beneficiaries.

This Guarantee Agreement inures to the benefit of, and is intended to be for the benefit of the Holders, who are intended third-party beneficiaries of this Guarantee Agreement.

Section 15 Governing Law; Waiver of Trial by Jury.

THIS PREFERRED STOCK GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS, AND ALL RIGHTS AND REMEDIES SHALL BE GOVERNED BY SUCH LAWS WITHOUT REGARD FOR THE PRINCIPLES OF ITS CONFLICTS OF LAWS. EACH OF THE PARTIES HERETO AGREES (A) TO SUBMIT TO THE EXCLUSIVE JURISDICTION AND VENUE OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS FOR ANY AND ALL CIVIL ACTIONS, SUITS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS PREFFERED STOCK GUARANTEE OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, AND (B) THAT NOTICE MAY BE SERVED UPON THE GUARANTOR AT THE ADDRESS AND IN THE MANNER SET FORTH FOR NOTICES TO THE GUARANTOR IN SECTION 13. TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES HERETO HEREBY UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY CIVIL LEGAL ACTION OR PROCEEDING RELATING TO THIS GUARANTEE AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

5

This GUARANTEE AGREEMENT is executed as of the day and year first above written.

GASTAR EXPLORATION LTD., as Guarantor
By:	/s/ J. Russell Porter
Name:	J. Russell Porter
Title:	President and Chief Executive Officer
GASTAR EXPLORATION USA, INC., as Issuer
By:	/s/ J. Russell Porter
Name:	J. Russell Porter
Title:	President

Signature Page to

Guarantee Agreement

6