Denver-based Western Gas Resources Inc. signed an agreement with an undisclosed seller to buy about 40,000 acres of coalbed methane (CBM) properties and related gathering assets in the Big George fairway of the Powder River Basin of Wyoming for $136.7 million.
The agreement gives Western the drilling rights on the acreage and ownership of 110 drilled wells. Approximately 70 of the drilled wells are currently dewatering, and the remaining 40 wells are awaiting hookup. Western expects to drill an additional 145 Big George locations, including 75-80 this year. The acquisition also includes a 12-mile gathering line delivering into Fort Union Gas Gathering.
"These assets are an excellent fit with our existing leasehold and production in the Big George fairway of the Powder River Basin CBM play," said CEO Peter Dea. At the end of 2005, "we had drilling rights on 523,000 net acres in the Powder River Basin CBM play and had 120 MMcf/d of net production. This acquisition offers the same low-risk development that the company has been successfully drilling for the last eight years in the Powder River Basin."
The newly acquired acreage is located in two areas in the western portion of the Big George fairway and about 12 miles from Western's Kingsbury development area. Kingsbury is currently producing 72 MMcf/d (gross) from the Big George coal.
Gas production is expected to begin in 3Q2006. Net risked probable and possible reserves are estimated to be 109 Bcf. Western estimates an additional upside potential of 50-100 Bcf from other recompletion zones.
Closing is expected by March 15 and will be funded with amounts available under Western's revolving credit facility.
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