Calgary-based Enterra Energy Trust (Nasdaq: EENC; Toronto: ENT.UN) plans to buy Riverton, Wyo.-based Rocky Mountain Gas Inc. from U.S. Energy Corp. (Nasdaq: USEG) and USE affiliate Crested Corp. (OTCBB: CBAG) in a US$35-million merger arrangement. Enterra will pay Rocky Mountain Gas shareholders some US$20 million in exchangeable Enterra Energy Corp. shares and approximately US$10 million in cash, plus assume approximately US$3.5 million of RMG debt. The shares will be exchangeable one-for-one for Enterra trust units 12 months after the closing. USE and Crested own approximately 92.7% of RMG. The deal may close by May 1. RMG has gas assets in Montana and Wyoming. A portion of the Wyoming assets currently generates net/net production of approximately 2.2 million cu. ft. per day. RMG has approximately 130,000 net acres of production rights to coalbed methane and owns approximately 17% of Pinnacle Gas Resources Inc., a privately held coalbed-methane E&P company. Under the deal, USE is to continue to provide personnel and advice to RMG under a consulting contract for 12 months after closing. "We believe that RMG's assets will be a good fit and beneficial to Enterra's assets and business plan," says Reg J. Greenslade, Enterra president and chief executive. Mark J. Larsen, RMG president, says, "The merger...makes good business sense for the RMG shareholders." Under the deal, USE will "remain in the gas business through its equity ownership in a larger, well-managed, well-financed oil and gas company that has substantial producing assets." Enterra Energy Trust currently operates only in western Canada and pays out monthly distributions of approximately 80% of cash flow, currently US$0.14 per unit.

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