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Petroleum

Joint Venture to Develop Coal-Bed Methane in New Mexico

Strategic Insights

— 1 min read

PennzEnergy Co. and Sonat Exploration Co. have formed a joint venture to develop coal-bed methane on the 700,000-acre Vermejo Park Ranch near Raton, New Mexico. Under the agreement, Sonat Exploration will pay up to $10 million and underwrite the development for a 36-year lease on PennzEnergy's mineral properties. The project is expected to drill 35 wells in the current year, followed by 80 in 2000 and 150 each year after that, with the goal of developing over one trillion cubic feet of new natural gas reserves.

Key Takeaways:

  • The joint venture between PennzEnergy Co. and Sonat Exploration Co. will develop coal-bed methane on the 700,000-acre Vermejo Park Ranch near Raton, New Mexico.
  • Sonat Exploration will pay up to $10 million and underwrite the development for a 36-year lease on PennzEnergy's mineral properties.
  • The project is expected to drill 35 wells in the current year, followed by 80 in 2000 and 150 each year after that.
  • The project will develop over one trillion cubic feet of new natural gas reserves and bring significant new revenues to the state and local governments.
  • Sonat will build a gathering line north of the ranch to interconnect with a regional transportation pipeline.
  • The companies believe that the business climate in New Mexico is positive for this significant development project.
  • The project is expected to leave a minimal footprint in the scenic area.
  • PennzEnergy will start with a 25 percent interest and increase it to 50 percent as the project progresses.
  • The project is expected to create new jobs and stimulate economic growth in the region.

Statistics:

  • $10 million: Maximum amount Sonat Exploration will pay for the 36-year lease on PennzEnergy's mineral properties.
  • 35 wells: Number of wells expected to be drilled in the current year.
  • 80 wells: Number of wells expected to be drilled in 2000.
  • 150 wells: Number of wells expected to be drilled each year after 2000.
  • 1 trillion cubic feet: Estimated new natural gas reserves to be developed.
  • 36 years: Length of the lease agreement.

Sources:

  • "PennzEnergy Co. and Sonat Exploration Co. form joint venture", Unspecified publication date.
  • Jennifer Salisbury, secretary of the state Energy, Minerals and Natural Resources Department, quote from the same publication.
  • Stephen D. Chesebro, PennzEnergy president and CEO, quote from the same publication.

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