DENVER, June 4, 2014 /PRNewswire/ -- Escalera Resources Co. (NASDAQ: ESCR) today announced that it has entered into a letter agreement (the "Letter Agreement') to jointly initiate the development, construction and operations of a gas-to-liquids ("GTL") plant to be located in Cheyenne, Wyoming (the "GTL Plant"). Escalera Resources Co. ("Escalera" or the "Company") and Wyoming GTL, LLC ("WYGTL") will jointly own Escalera GTL, LLC ("EGTL"), through which the initial phase of the GTL Plant will be executed. Under the Letter Agreement, WYGTL will assign all development and engineering plans, contracts, rights, technical relationships, among other rights (collectively, the "Rights") to EGTL, and the Company will fund up to $2 million to EGTL, subject to Board approval. These funds will be used for feasibility studies and completion of the initial engineering and development plans for the GTL Plant.

The Letter Agreement will terminate within 180 days (or on November 26, 2014) if a definitive agreement between the Company and WYGTL has not been completed. In the event a definitive agreement is not executed within the required period, WYGTL will reimburse the Company for any portion of the $2 million funded to EGTL, and EGTL will assign all Rights to WYGTL. Under the Letter Agreement, WYGTL will own 90% of EGTL, with Escalera owning the remaining 10%.

For its participation in EGTL, the Company has the right to supply up to 75% of the natural gas feedstock for the GTL Plant once it is operational. Based on WYGTL's plans for the GTL Plant, the estimated amount of gas to be supplied by Escalera would be up to approximately 35-38 Bcf annually. Additionally, the Company will participate in the net margin generated from the conversion of the gas it supplies to the GTL Plant in return for entering into a long-term gas supply contract. The Company intends to provide the natural gas supply to the GTL Plant from its current producing properties, and the future acquisition and development of producing properties.

The Letter Agreement also provides for initial ownership percentages for the Company and WYGTL for any other future GTL plants to be developed and constructed by EGTL. The Company's initial ownership percentage in any other future GTL plants will vary based on its involvement in initiating such project and will range between 5% and 55%. The Company will have the right to supply up to 75% of the natural gas feedstock for all future plants and will participate in the net margin generated from the conversion of its supplied natural gas feedstock.

Management Comments

Mr. Charles Chambers, President, CEO and Chairman of the Board of Escalera said, "This is an important step for Escalera as we move to implement the new business strategy announced earlier this year. Escalera will continue to be focused on natural gas and on creating value for our shareholders. The technology which will be used in this venture is proven and already in use in several very large scale operations in other parts of the world. It converts natural gas to diesel fuel that is much cleaner and more environmentally friendly than diesel derived from crude oil.

Mr. Chambers went on to say, "The project uses commercially proven and economically efficient technology, is backed by world-class partners with world-class expertise and it is scalable to meet regional fuel needs." The GTL Plant will be designed to produce approximately 15,000 barrels of fuel per day using 135 MMcf of natural gas per day.

Mr. Gene Humphrey, President of WYGTL, said, "I've been involved in studying alternative fossil fuel opportunities since the 70's. The energy industry's importance to the global economies and the need to have environmental solutions for energy fueled growth has evolved to a point that there are new exciting value creation processes around natural gas. The venture with Escalera is an important "first mover" opportunity for the country."

About Escalera Resources Co.

Escalera Resources Co. ("Escalera") is headquartered in Denver, CO, with executive offices in Houston, TX and a regional office in Casper, WY. Escalera explores, develops and transports natural gas in the U.S., and is seeking to own and operate similar assets internationally. These efforts are accomplished through three operating groups: 1) Escalera owns and operates various domestic natural gas producing assets, 2) Escalera transports natural gas, currently through its wholly owned subsidiary, Eastern Washakie Midstream LLC, which owns and operates a midstream pipeline in Wyoming, and 3) Escalera Resources International Co. LLC seeks to own and operate both upstream E&P assets and midstream assets located internationally, with a current focus on Eastern Europe.

All statements included in this release relating to future plans, projects, events or conditions and all other statements other than statements of historical fact included in this release, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements in this press release relate to, among other things, the planned development, construction and operation of the GTL Plant and Escalera's participation in supplying the GTL Plant with natural gas. No assurances can be given that these statements will prove to be accurate. A number of risks and uncertainties could cause actual results to differ materially from these statements, including, without limitation, decreases in prices for natural gas and crude oil, unexpected decreases in gas and oil production, the timeliness, costs and results of development and exploration activities, unanticipated delays and costs resulting from regulatory compliance, and other risk factors described from time to time in the Company's Forms 10-K and 10-Q and other reports filed with the Securities and Exchange Commission. Escalera undertakes no obligation to publicly update these forward-looking statements, whether as a result of new information, future events or otherwise.

Company Contact:
John Campbell, IR
(303) 794-8445
www.escaleraresources.com

SOURCE Escalera Resources Co.