Black Hills Corp. said Thursday it purchased 40 Bcf of Piceance Basin gas reserves from Koch Exploration for an undisclosed sum. The company said the deal nearly doubles its acreage position in the Piceance of western Colorado, which has become one of the Rocky Mountain region’s hottest drilling areas and a major supply source for proposed gas pipeline expansions out of the region.

Black Hills said the assets cover more than 31,000 gross and 18,000 net acres, of which more than 48% are undeveloped. The acquisition includes 63 producing wells, 58 of which are operated by Koch, and majority interests in midstream and gathering assets, including a compressor and treatment facility currently awaiting final regulatory approvals for expansion through the addition of an amine processing plant.

In 2005, production from the assets totaled 0.7 Bcfe. The acquisition increases Black Hills’ natural gas and oil proven reserve position by 24% and increase’s average daily production by 5%.

“This acquisition is well-suited for our exploration and production operations, both strategically and geographically,” said Black Hills Chairman David R. Emery. “The addition of Koch Exploration’s Piceance Basin properties, adjacent to existing Black Hills operated properties, nearly doubles our acreage position in the basin to about 60,000 gross and 36,000 net acres. About 40,000 gross and 26,000 net acres require delineation and further development.

“We expect to increase production and reserves by commencing a multi-year recompletion and drilling program later this year,” Emery added. “The program represents a low-risk gas play targeting shallow, long-lived wells with multiple producing zones in a region where we’ve experienced success for several years.”

Emery also said that the company intends to improve operational efficiency by integrating its Colorado-based corporate and field staff resources.

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