By OGJ editors
HOUSTON, Oct. 21 -- Black Hills Corp., Rapid City, SD., said it plans to initiate an expanded development and exploratory drilling program next year in the San Juan basin after it closes the acquisition of Mallon Resources Corp., Denver.
Black Hills signed a definitive agreement to acquire Mallon for $52 million, with closing is set for first quarter 2003. Both boards approved the deal. Mallon shareholders, which must still approve it, would receive 0.044 share of Black Hills stock for each Mallon share.
The purchase price included acquisition by Black Hills of Mallon's debt to Aquila Energy Capital Corp. and settlement of outstanding hedges, together $30.5 million.
Black Hills ranked 108 and Mallon 117 on the OGJ200 list of US public oil and gas companies at end-2001 (OGJ, Sept. 9, 2002, p. 70).
Black Hills had 4 million bbl and 24 bcf of gas reserves, all in the US, at the end of last year. Mallon's proved reserves as of last yearend were 53.3 bcf of gas equivalent .
Black Hills said it believes Mallon's current proved reserves could be substantially higher based on its review of the reserves and current oil and gas prices. The reserves are on the Jicarilla Apache Nation in the San Juan basin of New Mexico and are comprised almost entirely of gas in shallow sand formations.
The acquired leases total more than 66,500 gross (56,000 net) acres, most on a contiguous block that is in early development stage. Black Hills also believes it could recover additional gas from the shallow sands and more gas from deeper horizons that have yet to be explored but are productive elsewhere in the San Juan basin.
The Mallon properties produce about 13 MMcfed of gas. Mallon operates 149 of 171 total wells with 90-100% working interests in most wells and acreage.
Black Hills reported drilling no wells in 2001. The acquisition will give it operatorship of Mallon's exploration and development program.