Amidst major merger rumors, Phillips Petroleum focused on itsown operations yesterday, as it announced a 50% acquisition ofYates Petroleum Co.’s coalbed methane acreage in Wyoming’s PowderRiver Basin. Financial terms were not disclosed.

The agreement establishes a joint development partnershipbetween the two companies for 340,000 gross acres and 90 existingcoalbed methane wells. Yates will serve as operator for theproject. Phillips expects to see production from the acreagebeginning in 2000. The Oklahoma-based company would not discloseproduction forecasts, but did say it expects to drill as many as2,000 wells in the area depending upon the success of the program.

“This acquisition meets our strategy to target gas-producingareas where we can capitalize on our technical strengths in alow-cost commercial development with high growth potential,” saidJim Bowles, vice president of Phillips’ Americas division,exploration and production. “The partnership gives Phillips earlyentry into a basin-wide development that has significant productionand reserves potential.”

Although this marks the entry of Phillips into the Powder RiverBasin, it does not mark the beginning of its coalbed methaneproduction. The company has been producing coalbed methane from NewMexico’s San Juan Basin since 1989. The company currently producesapproximately 350 MMcf/d from more than 230 wells there. Inaddition, Phillips is actively exploring for coalbed methane inChina’s Shanxi Province.

The announcement comes a just after rumors circulated throughoutthe industry concerning a potential Chevron merger with Phillips (seeDaily GPI, Sept. 21). Although Phillipswould not comment on the rumor, its stock price was up sharply for thesecond straight day, rising 2.83% to finish at $54.56.

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