Continuing its strategy of snatching up prime oil and gas producing assets since the company went public earlier this year, Houston-based Rocky Mountain Energy Corp. (RMEC) said it has purchased the Trinidad Coalbed Methane Project for $150,000 or $9.13 per acre.

The acquisition includes 16,438 acres in Las Animas County, CO, and Colfax County, NM, in the resource-rich Raton Basin. The company said the Raton Basin is estimated to hold some 12 Tcf of coalbed methane gas.

“The Trinidad project is an ideal acquisition for us since it is geographically favorable to us and has a great deal of potential for generating sizable production income for 2003,” said John N. Ehrman, RMEC CEO. “In addition, the lease itself will be used for development financing, so we have been able to be fairly creative in structuring this particular acquisition. Upon development this field should produce in excess of $3.5 million per month to Rocky Mountain Energy. We are building quite a large position in gas in the Rockies with these long-term low-decline gas supplies, which is exactly what we intend to build our company on.”

Attaching numbers to the company’s latest acquisition, Ehrman said reserves of the Trinidad Coalbed Methane Project are estimated at 200 Bcf, with 100 wells drilled on 160-acre spacing producing an average of 2 Bcf per well. Under the purchase agreement, RMEC said the seller has agreed to provide development capital to produce and maximize cash flow on the lease.

“We have the gas in the ground and the capital to get it out. We are well situated to post significant earnings per share due to this project,” said Ehrman. “Our focus is on sound fundamentals. We want to produce gas and increase revenues. This is custom-tailored for our goals.”

The company’s acquired acreage is located between the Trinidad gas field, which has produced over 150 Bcf to date, and the Garcia field. Drilling will be done in “five spot” patterns, being four gas wells drilled around a saltwater disposal well, because coal gas wells produce water along with the gas.

The company also announced that it has entered an agreement to have gas from project marketed through the El Paso Corp. gas line running near the field.

After dewatering, RMEC said each well of the 100-well drilling program is expected to produce 400 Mcf/d, or $35,000 per month net at today’s prices. After completion, cash flow, assuming a 10% decline rate per year, would be $3.5 million per month, assuming current gas prices. Development drilling is expected to begin in March 2003 and extend to 2006.

“This is an aggressive program,” Ehrman added. “However, we believe we can achieve it by use of our plan to use our own drilling equipment and joining a major well service company in a strategic alliance to provide our completion work. This not only lets us stay on schedule with drilling, but also keeps our costs down by an estimated 35%, thus providing more shareholder value.”

The Trinidad project is just the latest addition to RMEC’s stable of producing properties. In August, RMEC closed on the acquisition of the 8,000-acre Ten Mile and Desert Spring Fields located in Sweetwater County, WY. The company said there are five current wells producing 1,000 Mcf/d of natural gas and 67 bbl/d of oil. In addition, the company in July purchased the assets of BC&D Oil and Gas Corp. for $4.5 million. The company paid $2.5 million in cash and $2 million in Rocky Mountain stock. BC&D’s assets were located in Hospah, NM, 75 miles southeast of Farmington, NM. Rocky Mountain estimated BC&D’s net current production at 300 bbl/d, with 11 gas wells slated for completion, which have been tested at rates ranging from 4,000-6,000 Mcf/d.

Going forward, RMEC said its strategy includes a property mix of producing and non-producing assets. The producing properties provide immediate net income and cash flow while non-producing assets will provide Rocky Mountain Energy with future development opportunities and, ultimately, reserves at a reduced cost.

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