Evergreen Locks Up Raton Basin With KCPL Deal
Evergreen Resources, the largest producer in the Raton Basin of
Colorado, got a lot larger last week. The company bought 153 Bcf of
coal-bed methane reserves in the basin from a subsidiary of Kansas
City Power & Light for $176 million, or about $1.15/Mcf.
The transaction covers interests in 24,000 acres of producing
coal-bed methane properties that are adjacent to Evergreen's
existing operations. It means Evergreen will be producing nearly
90% of the basin's existing gas production and will be the largest
leaseholder with about 225,000 acres.
"This property purchase is a perfect fit to our existing
operations in the Raton Basin and will be accretive immediately to
our per-share production, cash flow and earnings," said Evergreen
CEO Mark S. Sexton. "Upside potential exists in combined field
operating efficiencies, recompletion of existing wells, and shallow
Raton coal completions. We also anticipate that the transaction
will significantly reduce our per-unit general and administrative
"In addition, we have established an important relationship with
Kansas City Power & Light Company, which is targeting coal-bed
methane properties for future development. We plan to pursue other
coal bed methane development projects with KLT [a KCPL subsidiary],
along with potential future acquisitions."
Evergreen is buying the properties with $70 million in cash,
$100 million in mandatory redeemable preferred stock and $6 million
in Evergreen common stock. Properties representing 20% of the
transaction price are subject to a preferential right to purchase.
The transaction is effective Sept. 1.
Sexton noted that the purchase price is higher than what the
company had been paying for properties recently, but he said these
properties are "relatively mature. I would describe them as at or
near peak production... We see a lot of synergies in these
properties. One of the things we intend to do is tie the gathering
systems together to help resolve some inefficiencies..."
The acquired properties currently produce 28 MMcf/d from a total
of 151 net wells. Prior to the acquisition, Evergreen's daily net
gas sales were 47 MMcf from 303 net producing wells. With the
incremental production from the acquired properties, Evergreen's
daily gas sales will increase from 55% to 88% of total daily gas
sales from the Raton Basin.
Of the reserves attributed to the acquired properties, 87% are
classified as proved developed producing, 4% are proved developed
non-producing, and 9% are classified as proved undeveloped.
The present value of estimated future net revenues from the
acquired proved reserves, discounted at 10%, was $211 million as of
Sept. 1. This calculation is based on an unescalated average net
gas price of $3.50/Mcf.
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