BPI Energy Holdings, Inc. (Amex: BPG), an independent energy company engaged in the exploration, production and commercial sale of coalbed methane (CBM) in the Illinois Basin, has entered into a lease agreement with Western Fuels of Illinois, Inc., for the rights to Herrin and Springfield coalbed methane (CBM) and coal mine methane (CMM) gas over an area of approximately 5,600 acres. The newly acquired acreage is contiguous, with 2,320 acres overlapping BPI's Delta field in Saline County, Ill., where it currently has wells and is producing CBM from lower coal seams. This lease provides access to two new seams in those wells. The new acreage increases BPI's leasehold assets in Saline County to approximately 13,280 acres, and BPI's gross leasehold interest to approximately 534,280 acres.
"The Herrin and Springfield coal seams are the two thickest seams in the Delta area and offer uncommonly high methane saturation for the Illinois Basin," said James G. Azlein, BPI president and CEO. "Furthermore, the area is the site of previous exploration, and our existing production and gas-gathering systems are already in place.
"In the area where we currently produce and sell CBM at our Delta Project, both the Herrin and Springfield surface seams have typically been mined," Azlein continued. "On the acreage related to this new lease, however, only underground mining has occurred, creating mine voids where gas gathers in sealed chambers. Mine wells will be drilled to exploit this 'gob gas,' which has accumulated and will continue to desorb into these voids.
"There are also some areas on this new acreage where we will drill and produce gas from the Herrin and Springfield seams where no mining has taken place. The wells we plan to drill on this acreage are shallow, and with our current infrastructure already in place, the wells will be low-cost contributors to sales volume in the near term," Azlein concluded.
At April 30, 2008, BPI had 120 producing wells. Current plans call for BPI to drill a total of 24 new CBM and CMM wells on the new lease. The Company will additionally initiate production from the new seams in 10 of its existing Delta wells. BPI internal analysis estimates that the Western Fuels lease has a pv 10 value of $1.87 million to the Company. BPI has made a funding request for this development from its advancing term credit facility with GasRock Capital.
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