Calgary-based Progress Energy Trust last week acquired some natural gas-rich assets adjacent to its core properties in northeastern British Columbia and northwestern Alberta from the Canadian unit of BG Group for C$526 million. Subsequent to the transaction, Progress sold a partial interest in the Foothills assets to affiliate ProEx Energy Ltd. for C$134.3 million.

Both transactions are expected to close by April 2.

The properties, which are located in the Deep Basin and Foothills, have estimated current production of 6,400 boe/d, which is 95% weighted to gas. Proved plus probable reserves are estimated at 17 million boe. The transaction, which includes 250,000 net undeveloped acres in Progress’ core regions, will bring its total land position to more than 600,000 net undeveloped acres.

“We have demonstrated discipline while the acquisition market was relatively overheated and concentrated on drilling which has resulted in three-year average finding and development cost efficiencies of C$10.63/boe,” said CEO Michael Culbert. “We have consistently told unitholders that we would be patient and wait for the right acquisition opportunity where the assets had a similar pedigree to what we own at present. This opportunity meets our criteria because of its gas-focused assets, which hold significant growth potential in large contiguous land blocks within our operating areas.”

Progress said 3-D seismic coverage has been done on more than 1,700 square kilometers, and 2-D data is available on more than 4,200 square kilometers. More than 90% of the production is operated. The acquisition is projected to be accretive to Progress on cash flow and production per unit in 2007, but the full accretive impact will be realized in 2008 on a per-unit of reserves, production and cash flow.

“We have developed an extensive working knowledge of the Deep Basin and Foothills regions, which gives us the confidence in the tremendous upside potential of these assets,” said Culbert.

With the purchase, Progress expects its 2007 average production to increase by 25% to 22,000-24,000 boe/d. Exit production in 2007 is expected to be 24,000-26,000 boe/d, up 35% from the exit rate in 2006.

ProEx was formed by Progress in 2004, and it has a technical services agreement that allows full access to Progress management. ProEx CEO David Johnson, who also is chairman of Progress, said its new assets complement existing operations in the BC Foothills.

“Since our inception, our focus has been on building the underlying value of each share of ProEx and to this point we have accomplished this entirely through the drill bit,” said Johnson. “The assets we are acquiring today are a hand-in-glove fit with our existing producing assets in northeast British Columbia and will expand our exploration inventory and growth potential substantially.”

ProEx estimates current production of the BC assets is 2,200 boe/d, 95% weighted to gas. Proved plus probable reserves are 6.6 million boe. The deal will add 80,000 net undeveloped acres to ProEx’s leasehold, bringing total undeveloped land under control to 365,000 acres. The acquisition includes more than 800 square kilometers of 3-D seismic coverage and 2,000 square kilometers of 2-D data. Exit production this year is expected to be 12,000-13,000 boe/d. With the acquisition, ProEx will increase its 2007 exploration and development budget by C$30 million to C$150 million.

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