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U.S. Energy Corp. Subsidiary Closes on the Acquisition of Producing Coalbed Methane Properties in Wyoming
February 02, 2004 11:01:00 (ET)
RIVERTON, Wyo., Feb 2, 2004 /PRNewswire-FirstCall via COMTEX/ -- U.S. Energy Corp. (USEG, Trade) and Crested Corp. (CBAG, Trade), d/b/a USECC announced today that on January 30, 2004, their subsidiary, Rocky Mountain Gas, Inc. (RMG), closed on the previously announced purchase and sale agreement to acquire Wyoming coalbed methane (CBM) properties from a non-disclosed party. The effective date of the acquisition is November 1, 2003.
The purchase price of $6.8 million was paid with $5.0 million of cash, $500,000 in a 30 day secured note, $600,000 in restricted USEG stock (RMG's parent company) and $700,000 in restricted RMG stock. RMG financed $3.7 million of the cash component from a recently established $25 million credit facility arranged by Petrobridge Investment Management, LLC (Petrobridge), a mezzanine lender headquartered in Houston, TX.
The properties acquired include 247 completed wells of which 138 wells are currently producing approximately 6.0 million cubic feet of gas per day (mmcfd) (approximately 3.2 mmcfd net to RMG) and 40,120 undeveloped fee acres. RMG will operate 89% of the wells and owns an average 58% working interest in the producing wells and a 100% working interest in all of the undeveloped acreage. With the acquisition, RMG's gross and net acreage holdings increase to approximately 365,000 and 130,000, respectively.
RMG plans to immediately drill 5 proven undeveloped locations and to begin a remedial workover program on a number of existing wells and on the gas gathering and pipeline facilities included in this purchase. This program is estimated to cost approximately $640,000 and is also being funded from the Petrobridge credit facility. The program is designed to quickly enhance production from current levels. Subject to adequate financing, RMG will then proceed to initiate exploration activities on other prospective coals.
As provided for under a previous agreement, Pinnacle Gas Resources, Inc. (a CBM company in which RMG owns a 22% equity interest) has opted not to exercise its option to acquire the undeveloped acreage portion of this acquisition.
Mark J. Larsen, president of RMG commented, "We are pleased to close on this acquisition of producing CBM properties and we look forward to fueling RMG's growth by acquiring additional proven reserves in the future through our association with Petrobridge. This acquisition, coupled with the arrangement of the Petrobridge credit facility, is a significant step toward our goals to further grow RMG's portfolio of CBM properties and to once again become a producer of natural gas. Since the acquisition is effective as of November 1, 2003, we have the additional benefit of realizing natural gas revenues from the effective date," he concluded.
RMG also announced today that Hobart A. (Hobie) Smith will join the company's board of directors on February 1, 2004. Mr. Smith is a customer relations and industry affairs consultant to Smith International, an international products and services provider to the oil and gas and petrochemicals industries.
Mr. Larsen further stated, "We are very pleased to have an experienced industry veteran like Hobie join our company. His experience and expertise will play a valuable role as we continue to build RMG into an industry recognized leader in developing the Rocky Mountain Regions coalbed methane resources."
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