Denver-based Laramie Energy LLC management and staff are restarting, as Laramie Energy II LLC-and have already made their first acquisition.

"We'll be using the same business model as we did with Laramie Energy (I)," Bob Boswell, Laramie chairman and chief executive, told Houston Producers Forum members recently. Laramie was sold this spring to Plains Exploration & Production Co., Houston, (NYSE: PXP) for $900 million in cash, 1 million PXP shares and $58 million of closing adjustments.

Laramie had amassed some 55,000 net acres in the Piceance Basin of Colorado, more than 200 producing wells and more than 3,000 additional drilling locations.

"We already have 15 employees on board, with a significant percentage of the same people who worked with us last time. Others have retired or have gone on to other things," Boswell said. "We're looking at different areas, but in some of the same basins, such as the Piceance, Green River and San Juan."

Each Laramie employee had an equity interest in the company. "Everybody knew that at the end of the day, even though the life cycle might be only five years, there was a reward for being successful in accomplishing our mission," Boswell said.

The equity included A and B units: the former were purchased by employees on the same basis as private-equity investors; the B units were incentives toward achieving goals. Laramie was initially funded by EnCap Investments LP and Avista/Credit Suisse private equity, and with bank debt from JPMorgan Chase, Wells Fargo and BNP-Paribas. They are backing Laramie II.

"We started the company in May 2004. We were funded with an initial investment of about $150 million. Our initial investment was a $15-million acquisition in the Piceance Basin. We started with about 18,000 acres and less than 1 million cubic feet of daily production."

Boswell cited the right team as contributing to Laramie's success. "We were fortunate. We teamed up with a group who had been working in the basin we chose. We were able to hit the ground running with them and build rather quickly."

During the next three years, the company developed a 60,000-acreage position and drilled more than 200 wells. The company focused on tight-sand gas plays and used a five-rig drilling program to develop its acreage initially on 40-acre density, which was ultimately approved to 10 acres. It spent $150 million in 2006 on drilling and investments in gathering, processing and transportation assets, which totaled some 40 miles at the time of the sale to Plains.

"At the time we went out and looked for a capital source (for Laramie I), organic drilling programs were not particularly popular. Resource plays were recognized, but most of the private-equity investors at that time wanted to do acquisitions."

The perfect asset package is one that is repeatable, with high returns, long life, lots of running room, consistent growth, high working interest and operating control.

"Having just pure financial investors can work against you. They spook real easily. You drill a couple of dry holes and, if they aren't familiar with the industry, they can turn south on you quickly. It's vital to match the company's needs with an appropriate capital source. And you need commercial bankers who understand resource plays."

And divest when the time is right. "We consider ourselves as kind of a farm club to larger companies. We get in an area and develop it to the adolescent stage, and then sell it to a larger company that is able to ramp up development."

The key is to manage the company as a project with a fixed life cycle. His advice: focus on concentrated resource plays, capable of demonstrating rapid and full- scale development within five years and which generate returns greater than 25%.

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