Denver-based United States Exploration Inc. (UXP), whose oil and gas assets are concentrated in northeastern Colorado, Tuesday said it is considering selling some assets to increase the value and liquidity of the company.

In a statement, the junior independent said it had instructed McDonald Investments Inc. to determine whether a transaction would provide increased value and liquidity to its shareholders, given the improved conditions in the oil and gas industry and the sale of the company’s non-core assets. “It is not possible to determine at this point whether a transaction will be completed, or, if so, what the terms of the transaction might be.”

In the first quarter, UXP’s net income was $1.03 million (5 cents per share), compared with net income of $127,561 (1 cent per share) in the first quarter of 2002. Revenues from the sale of oil and gas increased from approximately $2 million in the first quarter of 2002 to nearly $4.3 million this year.

Production in the quarter was 1.05 Bcfe, compared with 754 MMcfe in Q102. At the end of 2002, UXP was operating 84 of the wells in which it owns an interest.

“By the end of the first quarter, most of the 29 new wells we drilled in the Kersey (Colorado) area in 2002 were selling gas,” said CEO Bruce D. Benson. “We own 100% of the working interest in these wells, and we expect them to contribute more significantly to production in future quarters when they are on line for the entire period. We intend to continue the development of our properties.”

Benson said that based on the company’s current borrowing base, the funding for the development program is available under a $15 million bank line of credit. “We continue to explore alternatives to translate the increases in our reserves and revenues into increased value for our shareholders.”

The company, which began its oil and gas operations in 1998, originally entered into an exploration agreement with Union Pacific Resources Co. (UPR), giving it the right to explore and develop parts of UPR’s undeveloped acreage in the Denver-Julesburg Basin, excluding certain acreage already committed to other agreements.

The agreement covers 400,000 gross acres and also will cover any undeveloped acreage committed to other agreements that revert to UPR during the agreement’s term. Initially, the term was for 18 months, ending in November 1999, and the independent then had the right to renew its agreement for up to five 12-month option periods, assuming it had drilled the required number of commitment wells during the preceding period. UXP also does not have to extend the agreement for any 12-month option period unless it chooses to do so.

To preserve its right to extend, UXP was required to drill, deepen or re-enter 15 commitment wells during the initial 18-month term and is required to drill 20 commitment wells during each extended 12-month option term. UXP has so far fulfilled each of its commitments.

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