Edge Petroleum Corp., whose gas-rich operations up to now have been centered on the onshore Gulf Coast and northern Rocky Mountains, on Tuesday expanded its focus with an agreement to explore an area of southeastern New Mexico’s Permian Basin with partners Pure Energy Group and Chisos Ltd. The area of mutual interest (AMI) agreement covers all of Eddy and Lea counties, as well as a portion of southern Chaves County, where Pure and Chisos own approximately 47,000 gross (27,000 net) acres.

Edge, based in Houston, will act as operator and earn, subject to fulfillment of certain obligations, an undivided 50% working interest and a 37.5% net revenue interest, proportionately reduced, in all acreage owned in the AMI. In return, Edge will pay a fee of $2.7 million, which includes $1 million at closing and the balance in 17 equal monthly installments.

Along with the fee, Edge also has committed to drilling four Grayburg/San Andres and six Atoka/Morrow wells within a 12-month period. In addition to the fee, Edge will carry Pure and Chisos for certain costs in the obligation wells. All subsequent wells, new leasehold acreage and any other acquisitions will be done on a pro rata basis by all parties.

“This joint exploration opportunity adds an exciting new core area to Edge with enough critical mass to make a meaningful contribution to our future growth and will allow us to bring our technical and operating skills to an under exploited acreage position,” said John W. Elias, Edge’s CEO. “We expect drilling activity to begin late in the third quarter targeting the multiple pays in this area, particularly the Grayburg/San Andres, Wolfcamp, Strawn and Atoka/Morrow formations.”

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