Constellation Energy Partners LLC (CEP) expanded its coalbed methane (CBM) and gas shale holdings in the Cherokee Basin of Oklahoma by closing its previously announced acquisition of AMVEST Osage Inc, a subsidiary of privately held AMVEST Corp., for about $240 million.

The properties’ estimated proved reserves are 93 Bcfe; current net production is 16 MMcfe/d, and the assets have an estimated reserve life of 16 years. According to CEP, there are 370 producing wells with generally a 100% working interest, and more than 1,000 additional drilling and recompletion opportunities. Net production from the properties in the first year is estimated at 6.5-7 Bcfe and in the second year it is 8-9 Bcfe. CEP expects to drill about 65 wells net and 80 recompletions in the first year of production. As part of the transaction, CEP obtained a 13-year exclusive concession agreement from the Osage Indian Nation for CBM and shale rights on 560,000 net contiguous acres.

“This acquisition is immediately accretive to distributable cash flow per unit,” said CEP CEO Felix Dawson. “It is an excellent fit with our existing portfolio and enhances our position as one of the top producers in the Cherokee Basin.”

CEP completed the acquisition simultaneously with the closing of an approximate $210 million private placement of common and Class F units to third-party investors. The proceeds of the equity private placement, together with funds available under the company’s revolving credit facility, fully funded the purchase price of the acquisition, CEP said.

Baltimore-based Constellation Energy formed CEP in 2006 and is the majority owner (see Daily GPI, Aug. 14, 2006). Most of CEP’s gas holdings are in Alabama’s Black Warrior Basin; however, in April it completed a deal with EnergyQuest Resources LP to acquire CBM properties and more than 500 miles of pipeline gathering systems in the Cherokee Basin for $115 million (see Daily GPI, April 24).

©Copyright 2007Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.