West Virginia-based Trans Energy Inc., which recently announcedplans to focus on drilling for deep gas in the Appalachian Basin,is working to dispel rumors that it faces bankruptcy after acreditor filed a proceeding against it recently.

In a written statement, Trans Energy said that it had settledthe matter and that it was “surprised” by the filing, which itcalled “essentially a breakdown in communications.” Trans Energysaid it would file a motion to dismiss the lawsuit, and isrequesting an expedited hearing in the case.

“The bankruptcy proceeding filed in Houston against Trans Energyby a single creditor translates essentially to a breakdown incommunications,” said CEO Loren E. Bagley in a written statement.”The company has been in settlement negotiations in this matter,and the filing comes as a surprise, based upon a settlement havingbeen reached. We would like to assure stakeholders that we havetaken a positive, proactive stance on this issue.”

Trans Energy transports, markets and produces natural gas andoil and also conducts exploration and development activities. Itowns and operates three oil and gas wells in West Virginia, one oilwell in Wyoming and owns an interest in seven wells in Wyoming thatit does not operate. It also owns and operates an aggregate of morethan 100 miles of three-inch, four-inch and six-inch gastransmission lines within West Virginia. Along with its WestVirginia business, the company has approximately 22,000 acres underlease in the Powder River Basin.

In the third quarter, which ended in September, Trans Energy’srevenues increased 10% to $890,000. Net loss decreased 70% to $1.5million, and revenues came from increased energy prices. Justmonths ago, Trans Energy announced a successful debentureconversion from debt to equity, which it said “greatly enhanced itsfinancial position.” In October, it formed Trans Energy AcquisitionInc. to specialize in acquiring major oil and natural gas assets.”New and future energy acquisitions and mergers” are expected to”substantially add to the reserves of the company and to the bottomline,” said the company.

In August, it acquired 51% of the operations of Oil and GasInc., which operated in the Appalachian Basin. Because Trans Energyalready had property in the basin, it announced then that it wouldfocus its production activities there.

Earlier this month, Bagley said the company’s Appalachian Basinprogram, which includes a seven well re-entry program in TylerCounty, WV, was going well and was “interpreted to be a commercialsuccess.” Even though the company has a substantial stake in thebooming Powder River Basin, it has decided to focus only onAppalachian projects in the short term.

Bagley said that “while we are currently shifting our sole focusto the Appalachian Basin, we continue to evaluate prospects in thePowder River Basin, and are currently exploring several jointventure opportunities with relevant industry partners. At thistime, our maximum return on dollars expended is in the natural gasmarkets in the Appalachian Basin.”

Trans Energy’s statements yesterday appeared to do nothing tohelp its performance in the markets. At close yesterday, its stockhad lost 13.3%, and stood at $0.065. In the past 52 weeks, TransEnergy’s stock has been as high as $0.35, and as low as $0.021.

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