Denver’s Key Production Co. has agreed to acquire all of theoutstanding common stock of Columbus Energy Corp. in exchange for1.3 million shares of Key common stock. When complete, Columbusshareholders will own about 10% of the combined company, with Keyshareholders owning the rest.

Under the two independents’ merger terms, which were approved byboth boards of directors yesterday, Columbus shareholders willreceive 0.3555 of a share of Key common stock for each Columbusshare in a tax-free reorganization. Columbus will hold a specialshareholder meeting this fall to vote on the proposal following areview of it by the Securities and Exchange Commission.

“While combining the operations of Key and Columbus under oneroof should be additive to our cash flow per share, we have alsoenhanced our ability to grow net asset value,” said Key CEO Francis”Mick” H. Merelli. “The combined company will have a strongerbalance sheet and a larger base of cash flow from which to funddrilling, acquisitions, or debt reduction.”

Columbus’ total proved reserves are nearly 21 Bcfe, including2.4 Bcfe classified as proved undeveloped. About two-thirds of theproved reserves are natural gas. Key also estimates that averagedaily production during 2001 from the proved reserves should benearly 6 MMcf and 350 boe.

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