The Koch assets include approximately 40 billion cubic feet of proven gas reserves. The associated acreage position comprises leases covering more than 31,000 gross and 18,000 net acres, of which more than 48 percent of the lands are presently undeveloped. The acquisition includes 63 producing wells, 58 of which Koch operates, and majority interests in midstream and gathering assets, including a compressor and treatment facility currently awaiting final regulatory approvals for expansion through the addition of an amine processing plant.
In 2005, production from Koch Exploration's interests was approximately 0.7 billion cubic feet equivalent. The acquisition, when completed, would increase the Black Hills' natural gas and oil proven reserve position by approximately 24 percent and increase its average daily production by approximately five percent.
"This acquisition is well-suited for our exploration and production operations, both strategically and geographically," said David R. Emery, Black Hills' President and CEO. "The addition of Koch Exploration's Piceance Basin properties, adjacent to existing Black Hills-operated properties, nearly doubles our acreage position in the basin to about 60,000 gross and 36,000 net acres. About 40,000 gross and 26,000 net acres require delineation and further development. We expect to increase production and reserves by commencing a multi-year recompletion and drilling program later this year. The program represents a low-risk gas play targeting shallow, long-lived wells with multiple producing zones in a region where we've experienced success for several years."
Emery added that Black Hills plans to improve operational efficiency by integrating its Colorado-based corporate and field staff resources. "In addition, we expect to benefit from the marketing and gathering/processing expertise of Enserco Energy, our energy marketing arm located in Golden, Colorado," he said.
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