Calgary independent CanScot Resources Ltd., which agreed in early August to a takeover by crosstown independent APF Energy Inc., reported record third quarter earnings and income on Friday, boosted by its coalbed methane (CBM) production in North America.

APF, whose reserves are split to 51% natural gas and 49% oil and liquids, will acquire CanScot by the end of September, after offering C$34.9 million in cash or units of APF Energy Trust, or about C$2.60 a share. APF also is assuming about C$4.6 million in debt.

According to CanScot, the third quarter brought a “strong recovery in U.S. Rocky Mountain natural gas prices,” which resulted in the company significantly increasing its level of activity in Wyoming. CanScot recently acquired an additional 53.3% working interest in its Big Bend CBM project in Wyoming, giving it a 70% working interest and control of the project. CanScot also plans to “rapidly accelerate activity” at the Kane and North Carson CBM project areas.

In Alberta, CanScot focused its attention on CBM exploration and development in the third quarter. The Corbett Creek CBM pilot project, which consists of four wells, began dewatering in late March and gas production began in April. CanScot has also been active in delineating other prospective areas for development and has drilled several test wells on those projects, and expects a second pilot project will begin on one of these other areas before the end of the year.

For the period, CanScot tripled cash flow compared with 3Q02 because of a 105% increase in gross revenues. More than 80% of CanScot’s sales volumes is natural gas, and the company experienced a 31% increase in gas sales volumes relative to the 2002 period. Natural gas prices also improved dramatically, almost doubling for both Canadian and U.S.-sourced production.

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