Riverton, WY-based U.S. Energy Corp. (USE) and its majority-owned subsidiary, Crested Corp., said last week that their Rocky Mountain Gas Inc. (RMG) subsidiary has entered into an agreement to acquire coalbed methane (CBM) properties in the Powder River Basin of Wyoming from a undisclosed party for a combination of cash and equity. Financial terms of the transaction were not disclosed.

The acquisition includes 247 completed wells of which 237 are currently producing approximately 8.1 MMcf/d gross. RMG said the properties located near Gillette, WY, currently produce about 4.2 MMcf/d of gas. They cover 12,602 gross and 11,818 net acres, and include a gathering and transmission line to the Thunder Creek Pipeline. In addition, the purchase includes 40,000 net acres of undeveloped properties, which consists of about 28,000 net acres that are located in the Powder River Basin and are prospective for CBM development.

RMG noted that all of the acreage being acquired is in fee-based territory, which typically are the least restrictive lands to develop. Pinnacle Gas Resources Inc. (Pinnacle), a CBM company in which RMG currently owns a 22% equity interest, has a right of first refusal to acquire the undeveloped acreage portion of the acquisition.

“The existing production, combined with the upside potential from the undeveloped acreage, make this opportunity an ideal fit for RMG as we continue along the path of becoming a leading CBM exploration and production company in the Rocky Mountain Region,” said Mark J. Larsen, president of RMG. “If the agreement is successfully concluded, it will increase RMG’s interest in gross and net acreage holdings to approximately 365,000 and 124,000 acres, respectively.

“This acquisition would represent an increase of approximately 16% and nearly 70%, in RMG’s gross and net acreage holdings, respectively,” Larsen added. “Should Pinnacle exercise its option to purchase the undeveloped acreage, then RMG stands to benefit through both financing of the overall acquisition and through its ownership of Pinnacle.”

Through their subsidiary RMG, USE and Crested own interests in over 310,000 gross acres prospective for CBM in the Powder River Basin of Wyoming and Montana and acreage adjacent to the Greater Green River Basin in southwest Wyoming.

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