PostRock Reports First Quarter Results

PostRock Reports First Quarter Results

OKLAHOMA CITY, May 8, 2013 (GLOBE NEWSWIRE) -- PostRock Energy Corporation
(Nasdaq:PSTR) today announced its results for the quarter ended March 31,


  *During the quarter, 55 oil wells were drilled and 42 recompleted
  *Oil sales averaged 363 net Bbls a day, a 77.4% increase from the
    prior-year period
  *Production currently averages over 500 net Bbls a day
  *Due to an increase in proved reserves value, the borrowing base was
    increased to $95 million

Key Financial Results

  *Revenue reached to $16.1 million, 12.1% above the prior-year period
  *Oil contributed 18% of revenues, versus 13% in the prior-year period
  *Operating expenses (production costs plus G&A) fell to $13.3 million,
    15.5% below the prior-year period
  *Interest expense fell to $641,000, 76.2% below the prior-year period

Development and Leasing Activities

Cherokee Basin. In the quarter, 55 oil wells were drilled and 40 recompleted.
An additional 150 oil wells and 20 recompletions in the Basin should be
completed in the remainder of 2013.

Central Oklahoma. In the quarter, two oil wells were recompleted in Central
Oklahoma. Initial results indicate IRRs of more than 100%. During the period,
approximately 1,100 additional acres were acquired bringing leasehold to 2,500
net acres. PostRock plans to recomplete seven additional wells and drill five
wells, including two horizontals in Central Oklahoma, by year-end while
continuing to add leasehold. Individual projects in Central Oklahoma are
expected to have a more significant impact on production and reserves than
those in the Cherokee Basin.

Financial Results

Natural gas revenue, excluding hedges, rose 5.7% from the prior-year period to
$12.4 million. The increase was due to a 22.3% increase in realized gas
prices, which reached $3.34 per Mcf, partially offset by a 12.9% production
decline to 41.3 MMcf per day. The drop in gas production resulted from the
absence of gas development projects in the last 12 months as gas prices were
at uneconomic levels. Oil revenue rose 60.0% from the prior-year period to
$3.0 million. The increase was the result of a 77.4% increase in sales volume,
offset by an 8.8% decrease in realized prices to $90.49 per Bbl. The Company
received an average of $3.87 a barrel below the NYMEX price during the
quarter. Gathering revenue fell 6.4%, to $654,000, largely due to reduced

Production costs, including lease operating expenses, gathering costs and
production taxes, totaled $9.8 million, a 12.2% decrease from $11.1 million
during the prior-year period (excluding non-recurring field restructuring
costs of $368,000 in the prior-year). The decrease was driven by lower
maintenance, labor and electricity costs and higher capitalized operating
expenses. Recurring production costs were $2.50 per Mcfe versus $2.51 in the
prior-year period.

General and administrative expenses fell to $3.5 million, a 16.8% decrease
from the prior-year period, primarily due to lower compensation costs of
$482,000 and $231,000 lower legal and professional fees.

The Company had a realized loss from derivative financial instruments of
$873,000 compared to a realized gain of $12.1 million in the prior-year
period. The loss was due to $1.0 million of realized losses on Southern Star
basis swaps, partially offset by $128,000 of realized gains on NYMEX oil
swaps. The last of the Southern Star basis swaps, which had a mark-to-market
loss of $3.8 million at March 31^st, expire in December 2013.

Due to appreciation of Constellation Energy Partners' unit price during the
quarter, a mark-to-market gain of $3.6 million was recorded.


In February, PostRock entered into additional oil and gas swaps which took
effect in March and April, respectively. In combination with existing swaps,
an average of 32 MMcf and 240 Bbls a day are hedged for the remaining nine
months of 2013 at weighted average prices of $4.01 per Mcf and $100.49 per
Bbl. It is expected that the Southern Star basis swaps will have a loss of
roughly $420,000 per month from April through December.

                              Apr. - Dec.                      
                              2013        2014        2015       2016
NYMEX Gas Swaps                                                
Volume (MMBtu)                 8,711,037   10,327,572 8,983,560 7,814,028
Weighted Average Price (MMBtu) $4.01     $4.01     $4.01    $4.01
NYMEX Oil Swaps                                                
Volume (Bbls)                  66,114     79,548     71,568    65,568
Weighted Average Price (Bbl)   $100.49   $96.28    $92.73   $90.33


At March 31, 2013, $66.0 million was borrowed under the revolving credit
facility, an increase of $8.5 million from December 31, 2012. The increase was
driven primarily by the fact that $5.6 million of late December payments for
the royalty settlement and property taxes did not clear until early January.

At March 31, 2013, the quarterly preferred dividend to White Deer was
paid-in-kind increasing its liquidation value by $2.7 million to $94.1
million. As part of the dividend, White Deer also received 1.6 million
additional warrants with an average exercise price of $1.75 a share. White
Deer currently holds 9.8 million common shares and 35.9 million warrants
exercisable at prices between $1.42 and $6.39 per share.

On May 8^th, the Company's borrowing base was increased by $5 million to $95
million based on year-end reserves. This was the Company's first borrowing
base increase in more than five years.

                                         December 31, March 31,
                                         2012         2013
                                         (in thousands)
Cash and equivalents                     $525       $65
Long-term debt (incl. current maturities) $57,500    $66,000
Redeemable preferred stock                $73,152    $75,732
Stockholders' deficit                     (21,008)    (27,571)
Total capitalization                      $109,644   $114,161

Capital Expenditures

During the quarter, capital expenditures totaled $10.1 million. This included
$8.9 million on oil directed drilling and recompletions, $791,000 on
maintenance related projects, including trucks and compressor optimization and
$378,000 for leasehold.

Management Comment

Terry W. Carter, PostRock's President and Chief Executive Officer, said, "We
are very pleased with our early progress in oil development. However, we
recognize that our gas decline continues to be significant as gas prices have
not reached a point where we can profitably invest in drilling. While we await
a better gas market, the ongoing reconfiguration of our compression fleet will
result in significant fuel savings and other cost reductions. This should
begin to moderate our gas production decline.

"Our recent Central Oklahoma successes, give me confidence that we can
significantly increase our oil production in the region. At year end, Central
Oklahoma represented less than 1% of our acreage but more than 50% of our oil
reserves. Our leasehold position in the area is slowly but steadily
increasing.We plan additional recompletions in the second and third quarters
and we plan to begin development in this area in the third quarter. These
projects are expected to have a more significant impact on the Company's
overall reserves and production per project. As we build on our recent oil
production and development trend, we believe we will materially enhance the
value of our shareholders' investment."

Webcast and Conference Call

PostRock will host a webcast and conference call tomorrow, May 9, 2013, at
10:00 a.m. Central Time. The webcast will be accessible on the 'Investors'
page at, 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, exploration,
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 minor oil and gas
producing properties in the Appalachian Basin.

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 such expectations will prove correct. Actual results may differ
materially due to a variety of factors, some of which may not be foreseen.
These risks and other risks are detailed in the Company's filings with the
Securities and Exchange Commission, including risk factors listed in the
Annual Report on Form 10-K and other filings. The Company's SEC filings may be
found at or By making these forward-looking
statements, the Company undertakes no obligation to update these statements
for revisions or changes.

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 March 31,
                                               2012          2013
                                               (in thousands)               
Net income (loss) from continuing operations    $6,008      $(7,894)
Adjusted for:                                                
Interest expense, net                          2,696        641
Depreciation, depletion, and amortization      6,162        6,428
EBITDA                                          $14,866     $(825)
Other income, net                              (11)         (13)
Gain on equity investment                       (4,169)      (3,582)
Unrealized loss from derivative financial       60           6,248
(Gain) loss on disposal of assets               (104)        31
Stock-based compensation                        442          719
Other non-cash compensation                     --           209
Adjusted EBITDA                                 $11,084     $2,787

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.

(in thousands, except per share data)
                                                 Three Months Ended March 31,
                                                 2012          2013
Natural gas sales                                 $11,774     $12,442
Crude oil sales                                   1,848        2,957
Gathering                                        699          654
Total                                            14,321       16,053
Costs and expenses                                             
Production expense                               11,501       9,775
General and administrative                        4,263        3,546
Depreciation, depletion and amortization         6,162        6,428
Loss (gain) on disposal of assets                 (104)        31
Total                                            21,822       19,780
Operating loss                                    (7,501)      (3,727)
Other income (expense)                                         
Realized gains (losses) from derivative financial 12,085       (873)
Unrealized loss from derivative financial         (60)         (6,248)
Gain on equity investment                        4,169        3,582
Other income, net                                 11           13
Interest expense, net                            (2,696)      (641)
Total                                            13,509       (4,167)
Income (loss) from continuing operations before   6,008        (7,894)
income taxes
Income taxes                                      --           --
Income (loss) from continuing operations          6,008        (7,894)
Income from discontinued operations               1,339        --
Net income (loss)                                 7,347        (7,894)
Preferred stock dividends                         (2,093)      (2,740)
Accretion of redeemable preferred stock           (471)        (778)
Net income (loss) available to common             $4,783      $(11,412)
Income (loss) per common share                                 
Basic income (loss) per share - continuing        $0.31       $(0.50)
Basic income (loss) per share - discontinued      0.12         --
Basic income (loss) per share                    $0.43       $(0.50)
Diluted income (loss) per share - continuing      $0.27       $(0.50)
Diluted income (loss) per share - discontinued    0.10         --
Diluted income (loss) per share                  $0.37       $(0.50)
Weighted average common shares outstanding                     
Basic                                            11,206       22,763
Diluted                                          12,786       22,763

(in thousands)

                                              December 31, March 31,
                                              2012         2013
Current assets                                             
Cash and equivalents                          $525       $65
Restricted cash                                1,500       1,500
Accounts receivable - trade, net              7,207       6,944
Other receivables                             180         459
Inventory                                     990         854
Other                                          2,100       1,069
Derivative financial instruments              1,771       266
Total                                         14,273      11,157
Oil and gas properties, full cost, net        107,531     112,000
Other property and equipment, net             14,244      13,450
Other, net                                     2,180       2,091
Equity investment                              7,820       11,402
Derivative financial instruments              615         644
Total assets                                  $146,663   $150,744
Current liabilities                                        
Accounts payable                              $9,373     $5,765
Revenue payable                               4,447       4,324
Accrued expenses and other                     4,928       3,165
Derivative financial instruments              4,449       5,723
Total                                         23,197      18,977
Derivative financial instruments              2,638       6,136
Long-term debt                                 57,500      66,000
Asset retirement obligations                   10,868      11,190
Other                                          316         280
Total liabilities                              94,519      102,583
Commitments and contingencies                              
Series A cumulative redeemable preferred stock 73,152      75,732
Stockholders' deficit                                      
Preferred stock                                3           3
Common stock                                   213         237
Additional paid-in capital                    396,732     398,039
Accumulated deficit                           (417,956)   (425,850)
Total stockholders' deficit                    (21,008)    (27,571)
Total liabilities and stockholders' deficit    $146,663   $150,744

(in thousands)
                                                  Three Month Ended March 31,
                                                  2012          2013
Cash flows from operating activities                          
Net income (loss)                                $7,347      $(7,894)
Adjustments to reconcile net income (loss) to net              
cash from (used in) operations
Depreciation, depletion and amortization         7,013        6,428
Stock-based compensation                         442          719
Other non-cash compensation                      --           209
Amortization of deferred loan costs              409          104
Change in fair value of derivative financial      60           6,248
Loss (gain) on disposal of assets                (109)        31
Gain from equity investment                      (4,169)      (3,582)
Other non-cash changes to items affecting net     130          (15)
Changes in assets and liabilities                             
Receivable                                       3,356        153
Payables                                         (555)        (5,559)
Other                                            (3,489)      329
Net cash flows from (used in) operating           10,435       (2,829)
Cash flows from investing activities                          
Proceeds from sale of assets                     232          12
Expenditures for equipment, development,
leasehold and                                      (4,491)      (9,211)
Net cash flows used in investing activities      (4,259)      (9,199)
Cash flows from financing activities                          
Proceeds from debt                               --           8,500
Repayments of debt                               (14,000)     --
Debt and equity financing costs                  --           (224)
Proceeds from issuance of common stock           7,500        3,292
Net cash flows from (used in) financing           (6,500)      11,568
Net decrease in cash and equivalents             (324)        (460)
Cash and equivalents - beginning of period       349          525
Cash and equivalents - end of period             $25         $65

CONTACT: David J. Klvac
         EVP & Chief Financial Officer
         (405) 815-4304

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