PostRock Energy (PSTR) 8-K PostRock Reports Third Quarter Results

Exhibit 99.1

For Immediate Release

PostRock Reports Third Quarter Results

OKLAHOMA CITY— November 10, 2010 —PostRock Energy Corporation (NASDAQ: PSTR)today announced its results for the third quarter of 2010. Revenues increased $1.4 million, or 5.7%, to $25.3 million during the quarter. The increase was primarily due to higher realized gas prices offset by lower production volume and a decline in pipeline revenue. Production volumes fell to 53.9 Mcfe a day, a 10% decline from the prior year period primarily due to a lack of drilling in late 2008 and 2009. With increasing capital expenditures starting in the second quarter of 2010, production has stabilized at approximately 54 Mcfe a day. Average prices for the period, excluding realized hedging gains, increased to $4.33 per Mcfe. Realized hedging gains in the quarter decreased to $6.8 million from $19.6 million a year earlier. Pipeline revenue decreased $1.8 million, or 31.8%, to $3.8 million primarily due to the loss of a significant interstate pipeline customer in late 2009.

     Production costs, including lease operating expenses (“LOE”), severance and ad valorem taxes, decreased $3.1 million, or 35.4%, to $5.6 million. The decline was primarily due to $2.7 million lower ad valorem taxes and $0.6 million lower LOE offset by $0.2 million higher severance taxes. The reduction in ad valorem taxes reflects reduced tax assessments. LOE decreased primarily as a result of improved labor utilization. Total production costs were $1.14 per Mcfe for the three months ended September 30, 2010, a sharp drop from the $1.59 per Mcfe reported in the prior year. Pipeline operating expense decreased $1.5 million, or 18.8%, to $6.7 million during the three months ended September 30, 2010. Contributing to the decrease in operating expense were lower ad valorem taxes. General and administrative expenses fell 58.9% in the quarter to $4.7 million. The decline reflected the absence of the reaudit and the cost of recombining our predecessor entities along with the related fees to financial advisors.

     At September 30, 2010, the Company had natural gas hedges in places covering 44.5 Mmcf a day for the remainder of 2010 at an average price of $6.14 per Mcf. It also held hedges covering the majority of its proved developed producing reserves through 2013. After the end of the quarter, new crude oil hedges were entered into covering 48,000 barrels of 2011 production at an average price of $85.90 a barrel and 42,000 barrels of 2012 production at an average price of $87.90. Hedging positions as of September 30, 2010, are shown below.

Hedging Position

	Q4-2010					2011					2012					2013
	Price			Volume		Price			Volume		Price			Volume		Price			Volume
Gas	($/Mmbtu)			(Mmbtu)		($/Mmbtu)			(Mmbtu)		($/Mmbtu)			(Mmbtu)		($/Mmbtu)			(Mmbtu)
Southern Star Swaps	$	6.18			3,150,448	$	6.43			5,000,304	$	6.72			2,000,004	$	—			—
NYMEX Swaps	$	6.71			948,141	$	7.02			8,549,998	$	7.22			9,000,000	$	7.28			9,000,003
Southern Star Basis Swaps	$	(0.69	)		948,141	$	(0.67	)		8,549,998	$	(0.70	)		9,000,000	$	(0.71	)		9,000,003
Oil	$/bbl			Bbls		$/bbl			Bbls		$/bbl			Bbls		$/bbl			(Bbls)
NYMEX Swaps	$	87.50			7,500	$	—			—	$	—			—	$	—			—

     At September 30, 2010, PostRock had $248.8 million of outstanding debt and $34.8 million of available liquidity. In the recent refinancing, the current portion of long-term debt was reduced from

$305.2 million at June 30^th to $9.0 million at September 30^th. The current portion represents the next twelve months of amortization on the Pipeline Loan. The first monthly payment on the Loan was made in October. At September 30, 2010, the Company was in compliance with all financial covenants.

Summary Capitalization Table

				(Predecessor)
	September 30,			December 31,
	2010			2009
	(in thousands)
Cash and cash equivalents	$	1,262		$	20,884
Long-term debt (including current maturities)
Current Credit Agreements
Borrowing Base Facility	$	190,000		$	—
Pipeline Loan		15,000			—
QER Loan		43,760			—
Former Credit Agreements
Quest Cherokee Loan		—			145,000
Second Lien Loan		—			29,821
Midstream Loan		—			118,728
PESC Loan		—			35,658
Other Notes Payable		35			103
Total	$	248,795		$	329,310
Equity
Preferred Stock	$	49,217		$	—
Total stockholders’ deficit		(21,824	)		(148,377	)
Non-controlling interests		—			57,990
Total (deficit) equity	$	27,393		$	(90,387	)
Total capitalization	$	276,188		$	238,923

     In the first nine months of 2010, capital expenditures totaled $22.9 million, a sharp increase from the $6.4 million spent in the prior year period. Expenditures in 2010 included $17.2 million spent in the Cherokee Basin, $3.4 million in Appalachia and $2.3 million on our interstate pipeline and miscellaneous other items.

     Commenting, David C. Lawler, President and Chief Executive Officer of the Company, said, “During the third quarter we successfully recapitalized the Company. With $60 million of new capital from White Deer Energy, we reduced debt by $72.7 million over the quarter, restructured our remaining indebtedness and initiated an effort to sell most of our Appalachian assets. The restructuring eliminated our liquidity issues, greatly reduced our borrowing costs and freed us to pursue a more aggressive capital expenditure program.

     Also during the quarter, we drilled and completed 27 new wells and returned 42 wells to production in the Cherokee Basin, bringing our year to date totals to 141 and 232, respectively. Although the majority of our project work was delivered on schedule and under budget, a fair number of wells completed in Q1 and Q2 did not achieve peak production rate as expected. We have conducted a series of detailed engineering studies to determine the cause of the underperformance, and learned that our

historical approach to zonal fracture treatments is too standardized, and not as transferrable across the basin as we once believed. On future development projects, custom fracture treatments tailored to zone and region will be employed to maximize the effectiveness of each completion stage. We will keep you posted on our progress as we continue to develop and refine our fracture treatment program.

     At long last, we are positioned to create meaningful value for our stockholders and are optimistic about the Company’s potential. As we develop our 2011 budget, our focus will be on efficiently growing reserves and production, lowering costs and further reducing debt. We look forward to keeping you abreast of our progress in the year ahead.”

Webcast and Conference Call

     PostRock will host its quarterly webcast and conference call tomorrow, Thursday, November 11, 2010 at 9:00 a.m. (Central Time). The webcast will be accessible on the ‘Investors’ page atwww.pstr.com. Conference call numbers for participation are 866-516-1003 in the U.S. and 760-536-8545 internationally. The webcast will be available for replay on the Company’s website following the conference call.

     PostRock Energy Corporation is engaged in the acquisition, exploration, development, production and transportation of oil and natural gas, primarily in the Cherokee Basin of Kansas and Oklahoma. The Company owns and operates over 2,800 wells and nearly 2,200 miles of gas gathering lines in the Basin. It also owns a 1,100 mile of interstate gas pipeline systems serving parts of Oklahoma, Kansas and Missouri.

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. You can find the Company’s filings with the SEC at www.pstr.com or www.sec.gov. By making these forward-looking statements, the Company’s undertakes no obligation to update these statements for revisions or changes after the date of this release.

Company Contacts
Jack Collins
Chief Financial Officer
(405) 702-7460

North Whipple
Manager, Corporate Development & Investor Relations
(405) 702-7423

Reconciliation of Non-GAAP Financial Measures

PostRock defines adjusted EBITDA as net income (loss) before income taxes; interest expense, net; depreciation, depletion and amortization; other (income) expense; change in fair value of derivative instruments; loss (recovery) from misappropriation of funds; stock based compensation and impairments. The following table represents a reconciliation of net income (loss) to EBITDA and adjusted EBITDA for the period presented:

				(Predecessor)						(Predecessor)			(Predecessor)
	Three Months			Three Months			March 6, 2010 to						Nine Months
	Ended September			Ended September			September 30,			January 1, 2010			Ended September
	30, 2010			30, 2009			2010			to March 5, 2010			30, 2009
							(in thousands)
Net income (loss) attributable to controlling interest	$	28,189		$	(11,527	)	$	35,612		$	11,778		$	(80,932	)
Adjusted for:
Net income (loss) attributable to non-controlling interest		—			(5,197	)		—			9,958			(45,362	)
Income tax expense		—			—			—			—			—
Interest expense, net		8,602			6,920			17,025			5,336			20,666
Depreciation, depletion, accretion and amortization		4,874			14,068			10,882			4,164			39,274
EBITDA	$	41,665		$	4,264		$	63,519		$	31,236		$	(66,354	)
Other (income) expense, net		(67	)		140			163			4			1
Unrealized (gain) loss from derivative financial instruments		(25,445	)		10,864			(32,804	)		(21,573	)		52,018
Recovery of misappropriated funds, net of liabilities assumed		(997	)		(9	)		(997	)		—			(3,406	)
Stock based compensation		353			324			987			808			1,143
Impairment of oil and gas properties		—			—			—			—			102,902
Adjusted EBITDA	$	15,509		$	15,583		$	30,868		$	10,475		$	86,304

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, amortization and accretion, 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 AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)

				(Predecessor)						(Predecessor)			(Predecessor)
													Nine Months
	Three Months			Three Months			March 6, 2010			January 1,			Ended
	Ended September			Ended September			to September			2010 to March			September 30,
	30, 2010			30, 2009			30, 2010			5, 2010			2009
Revenue
Oil and gas sales	$	21,484		$	18,329		$	50,075		$	18,659		$	56,711
Gas pipeline revenue		3,839			5,633			8,902			2,825			21,022
Total revenues		25,323			23,962			58,977			21,484			77,733
Costs and expenses
Oil and gas production		5,644			8,739			15,173			5,266			23,699
Pipeline operating		6,691			8,243			15,586			4,489			22,264
General and administrative		4,658			11,337			15,772			5,735			29,705
Depreciation, depletion and amortization		4,874			14,068			10,882			4,164			39,274
Impairment of oil and gas properties		—			—			—			—			102,902
Recovery of misappropriated funds, net of liabilities assumed		(997	)		(9	)		(997	)		—			(3,406	)
Total costs and expenses		20,870			42,378			56,416			19,654			214,438
Operating income (loss)		4,453			(18,416	)		2,561			1,830			(136,705	)
Other income (expense)
Gain (loss) from derivative financial instruments		32,271			8,752			50,239			25,246			31,078
Other income (expense), net		67			(140	)		(163	)		(4	)		(1	)
Interest expense, net		(8,602	)		(6,920	)		(17,025	)		(5,336	)		(20,666	)
Total other income (expense)		23,736			1,692			33,051			19,906			10,411
Income (loss) before income taxes and non-controlling interests		28,189			(16,724	)		35,612			21,736			(126,294	)
Income tax expense		—			—			—			—			—
Net income (loss)		28,189			(16,724	)		35,612			21,736			(126,294	)
Net (income) loss attributable to non-controlling interest		—			5,197			—			(9,958	)		45,362
Net income (loss) attributable to controlling interest	$	28,189		$	(11,527	)	$	35,612		$	11,778		$	(80,932	)
Preferred stock dividends		209			—			209			—			—
Net income (loss) attributable to common stockholders	$	27,980		$	(11,527	)	$	35,403		$	11,778		$	(80,932	)
										��
Net income (loss) per common share
Basic	$	3.47		$	(0.36	)	$	4.40		$	0.37		$	(2.54	)
Diluted	$	3.21		$	(0.36	)	$	4.22		$	0.36		$	(2.54	)
Weighted average shares outstanding
Basic		8,063			31,885			8,053			32,137			31,828
Diluted		8,719			31,885			8,381			32,614			31,828

POSTROCK ENERGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)

				(Predecessor)
	September 30,			December 31,
	2010			2009
	(unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	1,262		$	20,884
Restricted cash		388			718
Accounts receivable — trade, net		9,320			13,707
Other receivables		858			2,269
Other current assets		2,193			8,141
Inventory		6,799			9,702
Current derivative financial instrument assets		36,103			10,624
Total current assets		56,923			66,045
Oil and gas properties under full cost method of accounting, net		49,233			40,478
Pipeline assets, net		141,503			136,017
Other property and equipment, net		17,859			19,433
Other assets, net		6,543			2,727
Long-term derivative financial instrument assets		47,255			18,955
Total assets	$	319,316		$	283,655
LIABILITIES AND EQUITY
Current liabilities
Accounts payable	$	8,675		$	10,852
Revenue payable		5,959			5,895
Accrued expenses		12,087			11,417
Current portion of notes payable		9,032			310,015
Current derivative financial instrument liabilities		2,525			1,447
Total current liabilities		38,278			339,626
Long-term derivative financial instrument liabilities		6,893			8,569
Other liabilities		6,989			6,552
Notes payable		239,763			19,295
Total liabilities		291,923			374,042
Commitments and contingencies
Series A Preferred Stock		49,217			—
Equity
Preferred stock		2			—
Common stock		82			33
Additional paid-in capital		378,115			299,010
Treasury stock, at cost		—			(7	)
Accumulated deficit		(400,023	)		(447,413	)
Total stockholders’ deficit before non-controlling interests		(21,824	)		(148,377	)
Non-controlling interests		—			57,990
Total equity		(21,824	)		(90,387	)
Total liabilities and equity	$	319,316		$	283,655

POSTROCK ENERGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)

				(Predecessor)			(Predecessor)
							Nine Months
	March 6, 2010			January 1, 2010			Ended
	to September			to March 5,			September 30,
	30, 2010			2010			2009
Cash flows from operating activities
Net income (loss)	$	35,612		$	21,736		$	(126,294	)
Adjustments to reconcile net income (loss) to cash provided by operations
Depreciation, depletion and amortization		10,882			4,164			39,274
Stock-based compensation		987			808			1,143
Impairment of oil and gas properties		—			—			102,902
Amortization of deferred loan costs		5,339			2,094			4,109
Change in fair value of derivative financial instruments		(32,804	)		(21,573	)		52,018
Loss (gain) on disposal of property and equipment		131			—			83
Other non-cash changes to items affecting net income		111			—			(977	)
Change in assets and liabilities
Accounts receivable		4,624			(237	)		6,154
Other receivables		397			1,014			5,960
Other current assets		(501	)		466			1,215
Other assets		(6	)		2			153
Accounts payable		(2,942	)		(83	)		(20,221	)
Revenue payable		221			(157	)		(4,140	)
Accrued expenses		4,033			983			3,211
Other long-term liabilities		1			—			—
Other		—			—			(2	)
Cash flows from operating activities		26,085			9,217			64,588
Cash flows from investing activities
Restricted cash		331			(1	)		(143	)
Proceeds from sale of oil and gas properties		110			—			8,846
Equipment, development, leasehold and pipeline		(20,588	)		(2,282	)		(6,363	)
Cash flows from investing activities		(20,147	)		(2,283	)		2,340
Cash flows from financing activities
Proceeds from issuance of preferred stock and warrants		60,000			—			—
Proceeds from bank borrowings		2,100			900			2,930
Repayments of bank borrowings		(88,976	)		(41	)		(49,126	)
Refinancing and equity offering costs		(6,477	)		—			(569	)
Cash flows from financing activities		(33,353	)		859			(46,765	)
Net increase (decrease) in cash		(27,415	)		7,793			20,163
Cash and cash equivalents beginning of period		28,677			20,884			13,785
Cash and cash equivalents end of period	$	1,262		$	28,677		$	33,948