U.S. Energy Corp. and Crested Corp. reported on Wednesday that their Rocky Mountain Gas Inc. (RMG) subsidiary has commenced drilling of developmental coalbed methane (CBM) wells on the company’s properties in the Powder River Basin in northeastern Wyoming. RMG currently holds 22 drilling permits on the properties and has surveyed and applied for an additional 32 permits within the project, the companies said.

“We are excited to commence this drilling program, and our objective is to establish natural gas production and expand our reserves by calendar year end,” said Peter G. Schoonmaker, president of RMG. “Location of the initial wells was influenced by their close proximity to gas transmission pipelines and successful wells on nearby properties. Target depths for the initial wells will range from 400 to 2,000 feet below the surface.”

Carrizo Oil & Gas Inc.’s wholly-owned subsidiary, CCBM Inc. of Houston, is funding the initial phase of the drilling program pursuant to an agreement between the parties dated July 10, U.S. Energy said. RMG is the operator of the project.

“Last month, we announced an agreement with Carrizo Oil & Gas, Inc. that provides financing for the further development of approximately 250,000 gross acres prospective for coalbed methane in Montana and Wyoming,” noted Keith G. Larsen, president of U.S. Energy. “Current plans call for the drilling and completion of up to 30 CBM wells on RMG’s Powder River Basin properties before winter weather restricts this year’s activities.”

U.S. Energy and Crested, through their subsidiary RMG, own a 50% working interest in approximately 185,000 acres of leases prospective for CBM and shallow gas in the Powder River Basin, of which 112,000 acres are subject to an option and farm-in Agreement with Suncor Energy (Natural Gas) America, Inc.

The companies also own various interests in about 6,000 gross acres in the Powder River Basin and a 100% working interest (subject to a 25% participation option held by Anadarko Petroleum) in 63,000 net mineral acres in the Oyster Ridge project in southwestern Wyoming. Drilling, completion and testing continues on wells in the project.

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