What type of reserves cost comparatively little money toproduce, a few days to complete, have years of production growth inareas once thought to be depleted and offer nearly instant success?If you were thinking coal-bed methane wells, collect your $200 andadvance to Go.

For a few of the smaller independents in North America, thesuccess found from coal bed methane (CBM) well drilling is givingthem instant and substantial gratification. Three of the mostsuccessful, Evergreen Resources Inc., Prima Energy Corp. andPennaco Energy shared their strategies for analysts in Houston atthe Dain Rauscher Wessels Energy Conference yesterday.

The all-around leader, Denver-based Evergreen Resources, ties allof its success now and into the future into its CBM drilling programin the Raton Basin of Colorado (see relatedstory). Two days ago, analysts were estimating that if only 50% ofits unproved acreage in the basin proved commercial, it would haveanother 800 Bcf of reserves to still book. But that was two days ago.

Yesterday, Evergreen announced it would pay $70 million in cash,$100 million in redeemable preferred stock and $6 million inEvergreen common stock to acquire the rights to nearly 24,000 moreacres of producing CBM properties in the Raton Basin from KLT GasInc., a subsidiary of Kansas City Power & Light Co. Already themost active operator and largest leaseholder in the basin,Evergreen will boost its production to 88% of the total coming outof the Raton.

“We’re almost exclusively in coal-bed methane production,” saidEvergreen CEO Mark Sexton. With some holdings in the UnitedKingdom, Evergreen stays primarily focused on the Raton, and keepsits holdings close to the cuff, owning the lines, installing themand drilling “where we need to” he said.

For those wondering if Evergreen’s strategy is working, checkthe sheet: its CBM drilling success since 1993 has been 98%, and itwas making money when everyone else was going bust.

What’s going on with CBM? A lot. Ask any of the companiesoperating there. Most of them will share their own version of ahappy ending.

Prima, which sees “significant coal bed potential” has nowcompleted drilling on 110 CBM wells in Wyoming’s Powder RiverBasin, and plans to add another 75 before the end of the year.Pennaco, which was the most active CBM operator in Powder River in1999, drilled 473 wells last year. This year, it expects tocomplete about 600.

“We operate a very lightweight fleet,” said Pennaco CEO PaulRady. “We can complete a well in one to two days…drive across thegrass, lay the pipe and we’re in and out in a day or so.” Tocomplete a well costs around $600,000, he said. Its finding anddevelopment costs are about 24 cents. “Its terrific economics.”

Prima’s Richard H. Lewis said that while its historical growthhas been amazing — earnings over 11 years have grown 36%, cashflow is up 33% and yearly production has grown 30%, it’s only nowbeginning to really benefit from the groundwork. In the first sixmonths of 2000, Lewis said that the company is “within a penny ofmaking what we made all of last year,” and its funding all of itswork from cash flow alone – and tremendous success from its CBMwells. Expecting record results this year too, Lewis said that itnow has $18 million in liquid assets and no debt.

“We’re just beginning to ramp up for continued growth from coalbed methane production in the Powder River Basin,” Lewis said, with143,000 net acres there and 28 prospect areas.

Evergreen’s Sexton put it a little more succinctly, summing upthe philosophy of the CBM opportunists. “Our priority is to keepdrilling.”

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