Evergreen Resources, the largest producer in the Raton Basin ofColorado, got a lot larger yesterday. The company bought 153 Bcf ofcoal-bed methane reserves in the basin from a subsidiary of KansasCity Power & Light for $176 million, or about $1.15/Mcf.

The transaction covers interests in 24,000 acres of producingcoal-bed methane properties that are adjacent to Evergreen’sexisting operations. It means Evergreen will be producing nearly90% of the basin’s existing gas production and will be the largestleaseholder with about 225,000 acres.

“This property purchase is a perfect fit to our existingoperations in the Raton Basin and will be accretive immediately toour per-share production, cash flow and earnings,” said EvergreenCEO Mark S. Sexton. “Upside potential exists in combined fieldoperating efficiencies, recompletion of existing wells, and shallowRaton coal completions. We also anticipate that the transactionwill significantly reduce our per-unit general and administrativecosts.

“In addition, we have established an important relationship withKansas City Power & Light Company, which is targeting coal-bedmethane properties for future development. We plan to pursue othercoal bed methane development projects with KLT [a KCPL subsidiary],along with potential future acquisitions.”

Evergreen is buying the properties with $70 million in cash,$100 million in mandatory redeemable preferred stock and $6 millionin Evergreen common stock. Properties representing 20% of thetransaction price are subject to a preferential right to purchase.The transaction is effective Sept. 1.

Sexton noted that the purchase price is higher than what thecompany had been paying for properties recently, but he said theseproperties are “relatively mature. I would describe them as at ornear peak production… We see a lot of synergies in theseproperties. One of the things we intend to do is tie the gatheringsystems together to help resolve some inefficiencies…”

The acquired properties currently produce 28 MMcf/d from a totalof 151 net wells. Prior to the acquisition, Evergreen’s daily netgas sales were 47 MMcf from 303 net producing wells. With theincremental production from the acquired properties, Evergreen’sdaily gas sales will increase from 55% to 88% of total daily gassales from the Raton Basin.

Of the reserves attributed to the acquired properties, 87% areclassified as proved developed producing, 4% are proved developednon-producing, and 9% are classified as proved undeveloped.

The present value of estimated future net revenues from theacquired proved reserves, discounted at 10%, was $211 million as ofSept. 1. This calculation is based on an unescalated average netgas price of $3.50/Mcf.

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