Phillips Petroleum announced yesterday that it has done somecoal-bed methane shopping recently. Phillips acquired River GasCorp., a privately held coal-bed methane producer, as well ascoal-bed methane positions of three other companies located in thePowder River Basin of Wyoming. The cost of the four transactionsfor was $123 million in cash.

As a result of the transactions, Phillips expects to initiallyadd about 215 Bcf of net reserves, 100 of which areproved/developed, and the remaining 115 Bcf are proved/undeveloped.Phillips estimates the reserves are being acquired at about 57cents per Mcf. Included in the deal, the company acquiredsignificant acreage in major coal-bed methane basins.

The River Gas Corp. acquisition includes 166,000 gross acres inthe Drunkards Wash field in Utah and the Whitson field in the BlackWarrior Basin of Alabama. Phillips will own a 25% interest in eachfield, which equates to a total combined production from bothfields of 40 MMcf/d. Phillips will only realize 10MMcf/d for thefirst three years due to overriding royalty interests. After threeyears, the company’s net production from the assets will move to 50MMcf/d. Phillips expects to drill 330 wells over the next sixyears.

The Powder River purchases will increase Phillips’ gross acreageby 90,000 acres, with more than a 90% working interest. This bringsPhillips position in the Powder River Basin to 430,000 gross acres.The assets bring the company’s total net U.S. coal-bed methaneproduction to 235 MMcf/d, which is expected to increase by almost50% in the next three years.

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