PostRock Reports Year-End Results

PostRock Reports Year-End Results

OKLAHOMA CITY, March 6, 2013 (GLOBE NEWSWIRE) -- PostRock Energy Corporation
(Nasdaq:PSTR) today announced its results for the year ended December 31,
2012. The Company identified the following as key factors that impacted 2012
results:

  *Realized gas prices, excluding hedges, declined nearly 33% year-over-year
    to $2.68 per Mcf
  *Drilled 15 new oil wells and completed 97 oil recompletions in the
    Cherokee Basin
  *Oil production increased 23% year-over-year and 37% quarter-over-quarter
  *Proved oil reserves increased 151% to 2.7 million barrels and represent
    19% of total proved reserves based on a traditional 6:1 conversion ratio
  *General and administrative and operating costs collectively decreased 10%
    year-over-year and 3% quarter-over-quarter
  *Sold the KPC pipeline in September 2012 for $53.4 million
  *Secured a new $200 million four-year revolving credit facility
  *Reduced debt $135.5 million, or 70.2%
  *Resolved the last remaining material liability associated with the
    predecessor entities

2012 Results

Natural gas revenue fell 39.7% from the prior year to $43.9 million. The
decline was caused by a 32.7% drop in realized gas prices to $2.68 per Mcf and
a 10.5% decline in gas production to an average of 44.8 MMcf per day. The
decline in gas production resulted from suspended gas development during the
low gas price environment in 2012 as well as the natural decline of our
existing wells. Beginning in early 2012, all development efforts were directed
towards oil projects. Oil revenue increased 22.1% from the prior year to $8.6
million. The increase was driven by a 22.8% increase in production to an
average of 262 Bbls per day. Production in December averaged 299 Bbls per day,
or a 72.5% increase from January. Gathering revenue fell by 53.3% to $2.4
million. The majority of the decline resulted from the impact of the royalty
settlement; however, 18% resulted from the Company's production decline
coupled with reduced third party volumes and lower prices.

Realized hedging gains increased to $73.2 million. The increase was primarily
due to the monetization of our 2013 NYMEX gas swap contracts in conjunction
with the decline in natural gas prices.

Production costs, consisting of lease operating expenses, gathering costs and
production taxes, totaled $42.2 million, a 10.4% decrease from the prior year.
Production costs in 2012 included a $368,000 charge related to our field
reorganization in March. Excluding this charge, production expense was 11.2%
lower than the prior year. The decrease was primarily a result of field
optimization projects. Labor costs decreased $2.0 million, vehicle and
equipment costs decreased $1.7 million and repair and maintenance costs
decreased $1.0 million. In addition, the Company saw a $2.7 million reduction
in production taxes driven by the decline in pricing and production. These
reductions were partially offset by a decline of $2.1 million in capitalized
costs. Excluding the field reorganization charge, production costs were $2.47
an Mcfe, down from $2.51 an Mcfe from the prior year.

General and administrative expenses totaled $14.8 million, a 7.4% decrease
from the prior year. During 2011, a $757,000 charge was recorded for the
closure of our Houston office. During 2012, a $503,000 severance charge was
recorded for the restructuring of our Oklahoma City office. Excluding these
charges, general and administrative expenses were $941,000, or 6.2%, lower
than the prior year. The decrease was due primarily to reduced wages and
benefits of $1.2 million and lower legal, accounting and audit fees of
approximately $1.1 million. The reductions were partially offset by higher
non-cash compensation expense of $837,000 and cash bonuses of $751,000.
Non-cash compensation was higher as a result of the forfeiture of unvested
grants in the prior-year period coupled with new award grants in the current
year. The increase in cash bonuses was primarily due to the growth in oil
production and reserves, benchmarked against various other year-end
performance metrics.

Each quarter PostRock is required to assess the recoverability of the carrying
value of its oil and gas properties against their present value utilizing a
first-of-the-month twelve-month average price for oil and natural gas. In the
third quarter, a $4.3 million impairment was recognized on the Company's oil
and gas properties. This impairment was driven by a decrease in third quarter
gas prices compared to the prior-year period. An additional $1.6 million
impairment was recognized in the fourth quarter as natural gas prices were
once again below prices from the year-ago period. The fourth quarter
impairment brings the total impairment recognized in 2012 to $5.9 million.

Due to declines in the market price of Constellation Energy Partners in 2012,
a mark-to-market loss of $5.2 million was recorded.

Fourth Quarter Results

Natural gas revenue fell 18.5% from the prior-year period to $12.8 million.
The decline was caused by a 6.5% drop in realized gas prices to $3.26 per Mcf
and a 12.8% decline in gas production to an average of 42.8 MMcf per day. Oil
revenue increased 31.0% from the prior-year period to $2.4 million. The
increase was caused by a 37.4% increase in production to an average of 305
Bbls per day. Gathering revenue fell by 35.4% to $625,000. Most of the decline
resulted from the royalty settlement, however, 32% resulted from the Company's
production decline coupled with reduced third party volumes and lower prices.

Realized hedging gains increased to $39.8 million. The increase was primarily
the result of the monetization of our 2013 NYMEX gas swap contracts which
generated proceeds of $30.2 million.

Production costs totaled $10.1 million, an 11.8% decrease from the prior-year
period. Labor costs decreased $440,000, vehicle and equipment costs decreased
$207,000 and repair and maintenance costs decreased $451,000. In addition, the
Company saw a $404,000 reduction in production taxes driven by the decline in
pricing and production. These reductions were partly offset by an increase in
various other expenses of $147,000. In total, production costs were $2.46 an
Mcfe compared to $2.47 an Mcfe from the prior-year period.

General and administrative expenses totaled $3.5 million, a 33.1% increase
from the prior-year period. The increase was due primarily to a $511,000
increase in non-cash compensation and a $1.0 million increase in cash bonuses.
Non-cash compensation was higher as a result of the forfeiture of unvested
stock grants in the prior-year quarter coupled with new award grants in the
current year. The increase in cash bonuses was primarily due to the growth in
oil production and reserves, benchmarked against various other year-end
performance metrics. Partially offsetting the increase were lower wages and
benefits of $309,000 and lower licensing fees of $182,000 related to the sale
of KPC.

Due to the decline in the unit price of Constellation Energy Partners during
the fourth quarter, a mark-to-market loss of $596,000 was recorded.

Hedges

In November, PostRock monetized all of its 2013 NYMEX gas swaps for proceeds
of $30.2 million and used them to reduce debt. Simultaneously, the Company
entered into new NYMEX gas swaps for 2013 through 2016. In February 2013,
PostRock entered into additional NYMEX gas and oil swaps for 2013 through
2016. When combined with the Company's existing swaps, an average of 24 MMcf a
day and 231 Bbls a day is hedged in 2013 at weighted average prices of $4.01
per Mcf and $100.65 per Bbl, respectively. Additionally, because the Company
sells its gas at Southern Star index pricing, it has hedged its basis against
NYMEX. These Southern Star Basis swaps cover 25 MMcf a day for 2013 at a
weighted average price of ($0.71) per Mcf. The following table summarizes the
Company's positions at December 31, 2012 after giving effect to the new swap
contracts.

                             2013      2014       2015      2016
Natural Gas Hedges                                         
NYMEX Gas Swaps                                            
Volume (MMBtu)                 8,711,033 10,327,566 8,983,563 7,814,034
Weighted Average Price (MMBtu)  $ 4.01    $ 4.01     $ 4.01    $ 4.01
Southern Star Basis Swaps                                   
Volume (MMBtu)                 9,000,003 --         --        --
Weighted Average Price (MMBtu)  $ (0.71)  $ --       $ --      $ --
                                                         
Oil Hedges                                                
NYMEX Oil Swaps                                            
Volume (Bbls)                  84,442    79,548     71,568    65,568
Weighted Average Price (Bbl)    $ 100.65  $ 96.28    $ 92.73   $ 90.33

Debt

At December 31, 2012 PostRock had $57.5 million utilized under its revolving
credit facility, a decrease of $135.5 million from the prior year and a $45.4
million decrease from the third quarter of 2012. The reduction during the
fourth quarter was funded with proceeds from the monetization of the NYMEX gas
swaps and a $13 million investment by White Deer Energy in December. At March
1, 2013 PostRock had $63.5 million utilized on its revolving credit facility,
an increase of $6.0 million from year-end.The increase was primarily due to
the $4.5 million royalty settlement and $1.1 million in property tax payments
which were made in December and funded in early 2013.

At December 31, 2012 PostRock elected to pay in-kind the quarterly dividend to
White Deer which increased the liquidation value of Series A Preferred Stock
outstanding by $2.5 million to $91.3 million. White Deer also received 1.7
million additional warrants with a weighted average strike price of $1.47 a
share. In total, White Deer holds 34.3 million warrants exercisable at an
average price of $2.66 a share and 9.8 million common shares.

                                             December 31,
                                             2011      2012
                                             (in thousands)
                                                      
Cash and equivalents                          $ 349     $ 525
                                                      
Long-term debt (including current maturities) 
Borrowing base facility                       $ 190,000 $ 57,500
Secured pipeline loan                         3,000     --
Total                                         $ 193,000 $ 57,500
                                                      
Redeemable preferred stock                    $ 56,736  $ 73,152
Stockholders' equity (deficit)                7,810     (21,008)
Total capitalization                          $ 257,546 $ 109,644

Significant Events

On December 20, 2012 White Deer invested an additional $13 million in PostRock
equity, comprised of 50% common and 50% preferred stock. In the transaction,
White Deer acquired 4,577,464 shares of common stock at a price of $1.42 per
share, $6.5 million of 12% cumulative redeemable preferred stock and 4,577,464
warrants to purchase common stock at a price of $1.42 a share. Proceeds from
the investment were used to reduce debt and provide working capital.

Also on December 20, 2012, the Company secured a new, four-year revolving
credit facility (the "Facility"). The Facility was structured as an amendment
to the existing facility to minimize costs. The Facility's initial borrowing
base was set at $90 million and will be redetermined on May 1, 2013. In the
future, if the value of the Company's oil and gas properties justifies it, the
borrowing base could be increased up to $200 million. With $57.5 million in
borrowings, availability at year-end was $32.5 million under the Facility.

Capital Expenditures

During the fourth quarter, capital expenditures totaled $4.8 million. This
included $4.0 million spent on oil directed drilling and recompletions, with
the remainder spent on vehicle and equipment replacement, compressor
optimization, information technology and other maintenance projects.

2012 expenditures totaled $17.5 million. This included $10.3 million spent on
oil directed drilling and recompletions, $2.1 million on vehicle and equipment
replacement, $1.2 million to connect two sections of the gathering system,
$3.0 million to complete facility, compressor optimization, IT and other
projects, $638,000 on the KPC pipeline and $219,000 to extend leases.

Reserves

Proved reserves decreased 31.1% to 85.8 Bcfe at year-end 2012. Gas reserves
declined 48.6 Bcf, or 40%. Of this amount, 16.4 Bcf was related to 2012
production, 34.7 Bcf was the result of a 33% decline in SEC pricing and 4.7
Bcf was due to revisions of previous estimates. These reductions were
partially offset by a 7.2 Bcf increase in gas reserves due to improved
operating costs. Oil reserves increased 1.6 million Bbls, or 151%. Of this
amount, 1.7 million Bbls were the result of additions to the reserve base and
positive revisions to previous estimates. This increase was offset by 95,863
Bbls produced in 2012 and other minor downward revisions. At year-end 2012,
approximately 93.8% of the Company's reserves were classified as proved
developed.

                                  Gas (Mcf)    Oil (Bbls) Total Mcfe (6:1)
Balance, December 31, 2011           118,220,188  1,073,921  124,663,714
2012 Production                     (16,388,878) (95,863)   (16,964,056)
Revisions/Additions to Previous       (4,668,315)  1,758,002  5,879,697
Estimates
Changes to Operating Costs           7,223,064    (43,661)   6,961,098
Changes in Commodity Price           (34,724,786) (831)      (34,729,772)
Balance, December 31, 2012           69,661,273   2,691,568  85,810,681

Management Comment

Terry W. Carter, PostRock's President and Chief Executive Officer, said, "2012
was an eventful and transitional year for PostRock. As gas prices declined in
early 2012, we quickly refocused our efforts on developing oil projects on our
existing leasehold. The results of this development have been very encouraging
with over 23% year-over-year oil production growth. Year-to-date our
production has averaged 333 Bbls per day, which represents a 71% increase over
the prior-year period. Additionally, the work we performed in 2012 resulted in
over a 150% increase to our oil reserves. While total proved reserves declined
31% to 85.8 Bcfe on a traditional 6:1 equivalency basis, reserves on a 25:1
price equivalency were 137 Bcfe. As natural gas prices remain at levels
unprofitable for new development, we will continue to develop and add to our
multi-year inventory of high return oil projects in the Cherokee Basin and
central Oklahoma.

"One of our most significant achievements over the year was reducing debt by
$135.5 million. This was accomplished through a combination of investments
from our private equity sponsor, White Deer Energy, selling the KPC pipeline
for $53.4 million, monetizing 2013 hedges and cash from operations. This debt
reduction set the stage for the Company to close on a new four-year revolving
credit facility with Citibank in December. This new facility, combined with
the final royalty settlement payment made at the end of 2012, essentially
eliminated the last liabilities associated with our predecessor entities. With
the past behind us, we have begun 2013 entirely focused on creating
shareholder value as a renewed, pure-play oil and gas company."

Webcast and Conference Call

PostRock will host its quarterly webcast and conference call tomorrow,
Thursday, March 7, 2013, at 10:00 a.m. Central Time. The live webcast will be
accessible on the 'Investors' page at www.pstr.com, where it will also be
available for replay. The conference call number for participation is (866)
516-1003.

PostRock Energy Corporation is engaged in the acquisition, development and
production of oil and natural gas, primarily in the Cherokee Basin of Kansas
and Oklahoma. The Company owns and operates over 3,000 wells and nearly 2,200
miles of gas gathering lines in the Basin. It also owns and operates oil
producing properties in central Oklahoma and oil and gas producing properties
in Appalachian.

The PostRock Energy Corp. logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=7221

Forward-Looking Statements

Opinions, forecasts, projections or statements, other than statements of
historical fact, are forward-looking statements that involve risks and
uncertainties. Forward-looking statements in this announcement are made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Although the Company believes that the expectations
reflected in such forward-looking statements are reasonable, it can give no
assurance that such expectations will prove to be correct. Actual results may
differ materially due to a variety of factors, some of which may not be
foreseen by PostRock. These risks and other risks are detailed in the
Company's filings with the Securities and Exchange Commission, including risk
factors listed in the Company's Annual Report on Form 10-K and other filings
with the SEC. The Company's filings with the SEC may be found at www.pstr.com
or www.sec.gov. By making these forward-looking statements, the Company
undertakes no obligation to update these statements for revisions or changes
after the date of this release.

Reconciliation of Non-GAAP Financial Measures

The following table represents a reconciliation of net income (loss) to EBITDA
and adjusted EBITDA, as defined, for the periods presented.

                                      Three Months Ended  Year to Date Ended
                                       December 31,        December 31,
                                      2011     2012       2011     2012
                                      (in thousands)              
                                                                
Net income (loss) from continuing      $ 8,664  $ (11,386) $ 19,387 $ (44,717)
operations
Adjusted for:                                                    
Income taxes                           --       --         --       --
Interest expense, net                  2,677    2,617      10,151   10,452
Depreciation, depletion, and           6,308    7,246      24,088   27,669
amortization
EBITDA                                 $ 17,649 $ (1,523)  $ 53,626 $ (6,596)
Other income, net                      (14)     (31)       (207)    (111)
Loss on equity investment              3,748    596        4,607    5,174
Unrealized (gain) loss from derivative (8,208)  41,348     (1,737)  66,708
financial instruments
Impairment of oil and gas properties   --       1,610      --       5,919
Gain on forgiveness of debt            --       --         (1,647)  (255)
(Gain) loss on disposal of assets      1,829    69         (10,557) 295
Litigation reserve                     --       --         11,592   --
Office Closure Costs                   --       --         757      --
Stock-based compensation               74       670        1,258    2,224
Adjusted EBITDA                        $ 15,078 $ 42,739   $ 57,692 $ 73,358

Although adjusted EBITDA is not a measure of performance calculated in
accordance with generally accepted accounting principles, or GAAP, management
considers it an important measure of performance. Adjusted EBITDA is not a
substitute for the GAAP measures of earnings or cash flow and is not
necessarily a measure of the Company's ability to fund its cash needs. In
addition, it should be noted that companies calculate adjusted EBITDA
differently, and therefore adjusted EBITDA as presented herein may not be
comparable to adjusted EBITDA reported by other companies. Adjusted EBITDA has
material limitations as a performance measure because it excludes, among other
things, (a) interest expense, which is a necessary element of business to the
extent that an entity incurs debt, (b) depreciation, depletion and
amortization, which are necessary elements of any business that uses capital
assets, (c) impairments of oil and gas properties, which may at times be a
material element of an independent oil company's business, and (d) income
taxes, which may become a material element of the Company's operations in the
future. Because of its limitations, adjusted EBITDA should not be considered a
measure of discretionary cash available to us to invest in the growth of
PostRock's business.

POSTROCK ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
                                                            
                      Three Months Ended December Year to Date Ended December
                       31,                         31,
                      2011         2012           2011         2012
Revenue                                                      
Natural gas sales      $15,760    $12,842      $72,812    $43,911
Crude oil sales        1,822       2,386         7,075       8,640
Gathering             967         625           5,239       2,444
Total                 18,549      15,853        85,126      54,995
Costs and expenses                                           
Production expense    11,451      10,096        47,136      42,213
General and            2,615       3,481         16,005      14,810
administrative
Litigation reserve     --          --            11,592      --
Depreciation,
depletion and          6,308       7,246         24,088      27,669
amortization
Impairment of oil and  --          1,610         --          5,919
gas properties
Loss (gain) on         1,829       69            (10,557)    295
disposal of assets
Total                 22,203      22,502        88,264      90,906
                                                            
Operating loss         (3,654)     (6,649)       (3,138)     (35,911)
                                                            
Other income (expense)                                       
Realized gain from
derivative financial   10,521      39,793        33,692      73,162
instruments
Unrealized gain (loss)
from derivative        8,208       (41,348)      1,737       (66,708)
financial instruments
Loss on equity         (3,748)     (596)         (4,607)     (5,174)
investment
Gain on forgiveness of --          --            1,647       255
debt
Other income, net      14          31            207         111
Interest expense, net (2,677)     (2,617)       (10,151)    (10,452)
Total                 12,318      (4,737)       22,525      (8,806)
Income (loss) from
continuing operations  8,664       (11,386)      19,387      (44,717)
before income taxes
Income taxes           --          --            --          --
Income (loss) from     8,664       (11,386)      19,387      (44,717)
continuing operations
Income (loss) from
discontinued           689         149           643         (2,855)
operations
Net income (loss)      9,353       (11,237)      20,030      (47,572)
Preferred stock        (2,032)     (2,494)       (7,779)     (9,083)
dividends
Accretion of
redeemable preferred   (439)       (698)         (1,580)     (2,238)
stock
Net income (loss)
available to common    $6,882     $(14,429)    $10,671    $(58,893)
stock
Income (loss) per                                            
common share
Basic income (loss)
per share - continuing $0.65      $(0.90)      $1.14      $(4.12)
operations
Basic income (loss)
per share -            0.07        0.01          0.07        (0.21)
discontinued
operations
Basic income (loss)    $0.72      $(0.89)      $1.21      $(4.33)
per share
                                                            
Diluted income (loss)
per share - continuing $0.62      $(0.90)      $0.67      $(4.12)
operations
Diluted income (loss)
per share -            0.07        0.01          0.04        (0.21)
discontinued
operations
Diluted income (loss)  $0.69      $(0.89)      $0.71      $(4.33)
per share
                                                            
Weighted average
common shares                                                
outstanding
Basic                 9,550       16,258        8,786       13,596
Diluted               10,018      16,258        15,050      13,596


POSTROCK ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands)
                                              December 31,
                                              2011       2012
ASSETS
Current assets                                           
Cash and equivalents                          $349     $525
Restricted cash                                --       1,500
Accounts receivable - trade, net              7,785     7,207
Other receivables                             1,164     180
Inventory                                     1,681     990
Other                                          7,455     2,100
Derivative financial instruments              42,803    1,771
Assets of discontinued operations              1,585     --
Total                                         62,822    14,273
Oil and gas properties, full cost, net        124,068   107,531
Other property and equipment, net             14,465    14,244
Equity investment                              12,994    7,820
Other, net                                     2,812     2,180
Derivative financial instruments              29,516    615
Assets of discontinued operations              60,034    --
Total assets                                  $306,711 $146,663
                                                        
LIABILITIES AND EQUITY (DEFICIT)
Current liabilities                                      
Accounts payable                              $5,723   $9,373
Revenue payable                               4,972     4,447
Accrued expenses and other                     8,327     4,928
Litigation reserve                             3,081     --
Current portion of long-term debt              3,000     --
Derivative financial instruments              5,223     4,449
Liabilities of discontinued operations         936       --
Total                                         31,262    23,197
Derivative financial instruments              4,611     2,638
Long-term debt                                 190,000   57,500
Asset retirement obligations                   10,087    10,868
Other                                          4,559     316
Liabilities of discontinued operations         1,646     --
Total liabilities                              242,165   94,519
                                                        
Commitments and contingencies                            
Series A cumulative redeemable preferred stock 56,736    73,152
                                                        
Stockholders' equity                                     
Preferred stock                                2         3
Common stock                                   99        213
Additional paid-in capital                    378,093   396,732
Accumulated deficit                           (370,384) (417,956)
Total equity (deficit)                         7,810     (21,008)
Total liabilities and equity (deficit)         $306,711 $146,663



POSTROCK ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
                                                            
                                              Year to Date Ended December 31,
                                              2011           2012
Cash flows from operating activities                       
Net income (loss)                            $20,030      $(47,572)
Adjustments to reconcile net income (loss) to               
net cash from operations
Depreciation, depletion and amortization     27,662        30,206
Stock-based compensation                     1,258         2,224
Impairment of oil and gas properties         --            5,919
Amortization of deferred loan costs          1,709         2,820
Change in fair value of derivative financial  (1,737)       67,186
instruments
Litigation reserve                           6,042         --
Loss (gain) on disposal of assets            (10,560)      5,735
Gain on forgiveness of debt                  (1,647)       (255)
Loss from equity investment                  4,607         5,174
Other non-cash changes                       618           409
Change in assets and liabilities                           
Accounts receivable                          2,696         1,519
Other current assets                         (1,281)       5,020
Other assets                                 (649)         33
Accounts payable                             (2,521)       2,453
Accrued expenses                             (3,502)       (11,701)
Other                                        (17)          (51)
Net cash flows from operating activities     42,708        69,119
                                                            
Cash flows from investing activities                       
Restricted cash                              28            (1,500)
Proceeds from sale of equity securities      1,634         --
Equity investment                            (12,883)      --
Proceeds from sale of assets                 12,723        53,893
Equipment, development, leasehold and         (29,338)      (16,759)
pipeline
Net cash flows from (used in) investing       (27,836)      35,634
activities
                                                            
Cash flows from financing activities                       
Proceeds from issuance of preferred stock and --            12,500
warrants
Proceeds from debt                           3,000         57,500
Repayments of debt                           (18,319)      (193,000)
Proceeds from issuance of common stock       --            20,724
Proceeds from stock option exercise          66            --
Debt and equity financing costs              --            (2,301)
Net cash flows used in financing activities  (15,253)      (104,577)
Net increase (decrease) in cash and           (381)         176
equivalents
Cash and equivalents - beginning of period   730           349
Cash and equivalents - end of period         $349         $525

CONTACT: North Whipple
         Director, Finance & Investor Relations
         nwhipple@pstr.com
         (405) 702-7423

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