Energen to acquire San Juan coalbed methane properties for $273 million

Ray Tyson

Petroleum News Houston correspondent

Energen Corp. said its oil and gas acquisition and development subsidiary, Energen Resources, has signed a purchase and sale agreement to buy San Juan Basin coalbed methane properties from an undisclosed private company for about $273 million. The effective date of the sale is Aug. 1, the company said June 29.

Located in the under-pressured Fruitland coal play, more than half of the estimated 250 billion cubic feet equivalent of proved natural gas and natural gas liquids reserves are behind pipe and undeveloped, Energen said, adding that natural gas accounts for about 80 percent of the reserves.

The company also estimates that there are up to 60 billion cubic feet of probable reserves.

“The properties represent an important expansion in one of our core areas of operation, the San Juan Basin,” said James McManus, Energen Resources’ president and chief operating officer.

Production from the acquired properties is expected to total 2.3 billion cubic feet of gas equivalent in 2004, 8.6 billion cubic feet in 2005, and 11.7 billion cubic feet in 2006.

The current net production rate is about 14 million cubic feet of equivalent per day. The company said production is expected to continue to build through 2009 and then decline gradually.