Bowling Green, KY-based Allied Energy Group Inc. and Mammoth Energy Group Inc. announced a joint venture in which Allied will invest $1.5 million in a Rogers County, OK, coalbed methane project in exchange for a 33% working interest, leaving Mammoth’s wholly owned subsidiary, KMV Consulting Inc., with a 49.5% net revenue interest. Under terms of the agreement, the two companies also will be working jointly on a shallow natural gas project in Colorado and a large project in northeastern Montana.

The two companies have agreed that the funds will be utilized to increase the net acres under lease in Oklahoma, Colorado, and Montana. They have already used some funds to drill, test, and complete three new wells in the Oklahoma play. The funding should be sufficient to drill another 20 or more wells, which, if all are successfully completed, would put the total well count at 35. Assuming 30 wells are completed and produce like the first 12 wells, this would put total daily production at about 1,500 Mcf/d. With production at these levels, management believes that it can renegotiate a better gas purchase price, lower its line charges, gain economies of scale on well operations, and increase the project’s overall gross profits.

“The company…is confident that the results from the first 20 to 30 program wells will warrant a more aggressive drilling program for the future,” said Steve Stengell, Allied senior vice president of operations. “The predictable nature of coalbed methane development in this area is important in developing the company’s reserve base.”

KMV Consulting will operate the project and manage the drilling of new wells, which typically cost significantly less than other larger scale drilling programs since the wells are shallow and can be drilled in a day or two. There are several wells that are shut-in and are just awaiting re-completion. After the $1.5 million is utilized, the two companies will each be responsible for their pro-rata working interest expenses on additional development of this area.

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