Denver-based PRB Energy Inc. has closed on the previously announced acquisition of 13 wells, consisting of 12 gas wells and one water disposal well, and approximately 330,000 net acres in northeast Colorado and southwest Nebraska for $11.7 million cash (see Daily GPI, Dec. 13).

Production and future development activities are in the Niobrara formation. The transaction was effective Dec. 1, and it will add to both the PRB’s production and reserve base. The seller’s identity was not disclosed.

In addition to the producing wells, the acquisition includes approximately 159 drilling locations as identified by 3D seismic. PRB plans to immediately begin an evaluation process to confirm the drill site locations, apply for drilling permits and begin a drilling program in the spring of 2007. Also included is the license to 85 square miles of proprietary 3D seismic and 115 miles of proprietary 2D seismic. PRB said it believes there is potential for several hundred wells on the acquired acreage.

“This conventional play provides diversification and reduces the risk to PRB as strictly a coalbed methane player,” said CEO Robert W. Wright. “In the future, we will be evaluating other potential zones of interest that lie below the Niobrara formation. Because the acquisition comes with a gathering system, we will, in the future, explore the possibility of consolidating gathering and processing systems in order to provide these services to other producers in the area.”

The company said production from the 12 existing gas wells will be optimized and is expected to increase. “In addition, our initial review leads us to believe that we can drill and complete between 40 and 70 wells before the end of 2007,” said COO William F. Hayworth. “Our operational personnel have extensive experience in the DJ Basin and are looking forward to this very exciting acquisition.”

In conjunction with the acquisition, PRB has closed a $15 million private placement for secured debt, a portion of which was used for the acquisition with the balance to be used for general corporate purposes. The loan matures Aug. 31, 2008, has an interest rate of 13% and is secured by PRB’s oil and gas assets and its Recluse area gathering assets. The lenders received 1.25 million PRB Energy common shares representing 14% of fully diluted shares. The securities purchase agreement requires the company to register the shares for resale on behalf of the investors. The loan can be prepaid at any time with a premium for early prepayment of 110% of the principal amount.

“The closing of this acquisition capped a very active year for PRB,” said Wright. “Starting in January with the assemblage of the Recluse gathering system (see Daily GPI, Aug. 7), the addition of the Pennaco properties in the summer (see Daily GPI, July 6) and, finally, this Niobrara acquisition, PRB is in a very strong position for 2007 and the future. We are exiting the year with approximately 5,000 Mcf/d of production, up from 300 Mcf/d in June, and our gathering volumes are in the range of 14,000 Mcf/d, of which approximately 4,000 Mcf/d is our own production, and growing. We are beginning to see our Dannar and Moyer wells responding and anticipate production in the near future.”

PRB operates in the Rocky Mountain States and provides gas gathering, processing and compression services on properties it operates and for third party producers.

©Copyright 2007Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.