Seeking out an investor to finance its coalbed methane (CBM) exploration in Wyoming, Galaxy Energy Corp. said last week that it has entered into a funding agreement with Horizon Exploitation Inc., a U.S. affiliate of the German-based Horizon Exploitation Fund GmbH & Co. KG, managed by Rhein Investors AG. in Basil, Switzerland.

Under the agreement, Horizon will finance the drilling of up to 120 wells on a “best efforts basis” on Galaxy’s acreage in the Powder River basin in Wyoming. Depending on the availability of funds, Horizon will fund a minimum 30-well pilot program that is expected to cost approximately $4.5 million. If Horizon decides to drill all 120 wells, its drilling commitment to Galaxy is estimated to be $18 million. With the deal in place, Horizon said it intends to begin the Powder River drilling program as soon as possible. The fund said it intends to raise $100 million for oil and gas exploration and production during the first half of 2003.

The agreement stipulates that if a preliminary investigation confirms that gas can be produced in commercial quantities from several layers of the coal seams within Galaxy’s Powder acreage, Horizon will pick up the tab for all costs relating to drilling and completion of up to 120 wells in exchange for an 85% working interest in each well, with Galaxy retaining the remaining 15%.

However, Galaxy also has the option to repurchase up to an additional 50% working interest from Horizon on a cost basis, up to two years from the completion of the pilot program. The wells will be drilled on the company’s 15,600 gross acres in the Powder River Basin, near Lieter, WY. Galaxy’s Powder River acreage is underlain by six coal seams at depths ranging from 600 feet to 3,200 feet below the surface.

“We are planning a very ambitious land lease program combined with an aggressive drilling program in the Powder River basin,” said Marc E. Bruner, CEO of Galaxy Energy. “This is a highly appealing method for Galaxy to finance its initial drilling program, as it allows the company to generate immediate cash flow and to begin to prove up reserves in the Powder while not diluting the capital structure of the company.”

Research has pegged the Powder River basin’s potential CBM reserves at approximately 39 Tcf. Galaxy said its acreage is located in proved geologic settings and is near developed properties held by larger coalbed developers and operators such as Devon Energy, ConocoPhillips, Western Gas Resources, Williams Companies, J.M. Huber and Marathon Oil Corp. By being so close to other operators, Galaxy said the company will greatly benefit from the established infrastructure of gathering systems and pipelines.

Last month, Galaxy Investments Inc. — now Galaxy Energy Corp. — announced the completion of its merger with Dolphin Energy Corp., a private Nevada-based natural gas exploration and production company with coalbed methane properties in Wyoming and conventional natural gas properties in Texas.

©Copyright 2002 Intelligence Press Inc. Allrights reserved. The preceding news report may not be republishedor redistributed, in whole or in part, in any form, without priorwritten consent of Intelligence Press, Inc.