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PRB Gas, Enterra to Jointly Develop CBM Properties in Wyoming, Montana

PRB Gas Transportation Inc. and Enterra Energy Trust last week signed a letter of intent to develop coalbed methane (CBM) properties in Wyoming and Montana. Under the arrangement, PRB will have the right to earn up to a 50% working interest in Enterra's recently acquired subsidiary Rocky Mountain Gas Inc. (RMG), which includes more than 130,000 net acres of CBM production rights.

Calgary-based Enterra bought RMG for $18.8 million in cash and stock earlier this year (see NGI, June 6). RMG's properties produced 728 MMcf of CBM in 2004. It has leaseholds in the Oyster Ridge area of southwestern Wyoming and in the Powder River Basin of Wyoming and southeastern Montana.

Denver-based PRB is expected to provide up to $21.8 million to acquire, drill and develop some of the RMG assets, and also will be the operator. Once PRB has spent the initial funding, it will earn the half interest in the developed acreage. For future properties purchased by PRB within the region, PRB and Enterra will jointly own the assets. By funding the drilling on this acreage, PRB also will have the opportunity to gather the production on all properties except those currently dedicated to other gatherers.

"With a working interest in the future natural gas production on the properties we acquire under this agreement, combined with the gathering systems we expect to build and operate, we are adding an important complementary dimension to our business and a potential catalyst for revenue, cash flow and earnings growth," said PRB CEO Robert Wright.

Enterra CEO Keith Conrad said the deal will give his company the opportunity to "develop and expand our existing CBM assets with an operator whose personnel have extensive production and gathering experience." He added that PRB would offer "considerable development and resulting cash flow without additional capital expenditures by Enterra."

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