Powder River Basin Gas Corp. (PRBG) said Tuesday it has signed a letter of intent to acquire CKG Energy’s New Mexico operation in the Tucumcari Field with an estimated 500 Bcf in reserves.

Under the agreement Powder River Gas would purchase a 46,000-acre gas field near Tucumcari, NM. The financial terms of the transaction are for PRBG to deliver to CKG Energy Inc., 3,000,000 shares of Powder River’s common stock and $500,000 in cash payable over a year from the closing date. In return, Powder River will receive a 74.5% net revenue lease with a guaranteed override in the area referred to as the “Randals Ranch Prospect.” The transaction is scheduled to close within thirty days.

The Tucumcari field contains an estimated 500 Bcf at zones from 6,650 feet to 6,825 feet, based on three test wells drilled in the 1980’s. The wells tested: (a) 12,500 Mcf/d on 1910 psi perforations at 6,746 feet to 6,819 feet, (b) 12,700 Mcf/d on 1,820 psi perforations at 6,650 feet to 6,774 feet, (c) 16,000 Mcf/d on 1,290 psi with perforations at 6,742 feet to 6,803 feet. The gas tested 2% helium, which sells at approximately $40 per Mcf, bringing net gas content to $5.50 net price per Mcf at current prices.

“The Tucumcari gas field, with proper development and investment, could produce in excess of $3 million per month net to Powder River,” said Chairman Greg Smith. “This is in addition to the income from our Wyoming operations, which could include another $250,000 per month once the coal bed methane wells are completed in the Zulling field.

“The key business component of the Tucumcari gas field is that we now have access to a pipeline less than five miles from where our drilling will commence,” Smith said, advising that the A-T-A Products Pipeline was abandoned and is being retrofitted as a natural gas pipeline.

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