Teton Energy Corp. has agreed to exchange half of its 25% working interest in the Piceance Basin to fellow independent producer Delta Petroleum Corp. for $33 million in cash, proved producing oil and gas properties and undeveloped acreage in the Denver-Julesburg (D-J) Basin, the company said.

Denver-based Teton said it is selling to Delta approximately 2.5 MMcfe/d of its 5 MMcfe/d current net production in the Garden Gulch Field in Colorado and will gain approximately 1 MMcfe/d in current net production and approximately 419,000 net acres in the D-J Basin in Washington and Yuma counties, CO. Teton estimated that the reduced Piceance production volume of approximately 1.5 MMcfe/d will be made up by the end of 2008, based on the company's current estimated post transaction Piceance Basin production growth profile.

The transaction will increase to 31.1% Denver-based Delta's interest in the Garden Gulch field with an associated 24.5% net revenue interest. Delta will realize a net increase of 1.5 MMcf/d of production, and 75 Bcfe in proved and unproved reserves as a result of the transaction. The D-J Basin properties being transferred to Teton do not include Delta's Cowboy field in Laramie County, WY.

The cash proceeds from the sale as well as the cash flow generated from the acquired D-J Basin assets and other producing properties will be used to fund Teton's capital expenditure program through the 2008 calendar year, Teton said. Beyond 2008, Teton plans to fund its ongoing capex program from increased cash flows from operations associated with its development drilling programs and through anticipated increases in the company's borrowing base.

"By 'right sizing' our working interest in the Piceance Basin, we are now able to finance our ongoing capex program for our existing projects without additional dilution to our shareholders," said Teton CEO Karl Arleth. "We acquired proved producing oil and gas reserves and undeveloped acreage in a basin where we have a growing production base and currently hold approximately 266,000 gross nonoperated acres and 9,000 gross operated acres."

Closing on the deal is scheduled for Monday.

Teton concentrates its exploration in the Rocky Mountains and also holds interests in the Williston Basin in North Dakota. Teton initially acquired more than 180,000 net acres in the D-J Basin in April 2005.

Delta's core areas of operations are the Gulf Coast and Rocky Mountain regions.

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