The Rockies region spotlighted here encompasses the majority of Colorado, Utah, Wyoming and Montana. It is an area containing some 185 trillion cubic feet of gas equivalent (Tcfe) of resource potential or roughly 31% of the total remaining onshore U.S. resource potential. It holds some 22% of the onshore U.S. proved reserves (64 Tcfe) and some 17% of current production-10.6 billion cubic feet equivalent (Bcfe) per day.

The region is characterized by numerous unconventional tight-gas, multiple-stacked-pay and coalbed-methane basins, resulting in long-life reserves-more than 16 years-and facilitating repeatable drilling campaigns.

The greatest future potential for natural gas resides in the Greater Green River Basin of southwestern Wyoming and the Uinta and Piceance basins of northeastern Utah and northwestern Colorado.

Operations. Operational issues include gathering capacity in undeveloped areas, and interstate takeaway capacity. The latter has historically been an issue, however, the construction of the Rockies Express Pipeline, which will have daily capacity of 1.8 Bcfe, will be a significant mitigating factor in reducing price differentials starting in 2008.

Additional operational issues include access and permitting challenges on federal lands, water handling and difficult terrain in some areas.

Transaction activity. The number of transactions and transaction dollar volume in the Rockies has fluctuated greatly during the past five years, and acquisitions have changed the landscape.





Corporate takeovers include Anadarko Petroleum Corp.'s purchases last year of Western Gas Resources and Kerr-McGee Corp., ConocoPhillips' purchase of Burlington Resources, EnCana Corp.'s acquisition of Tom Brown Inc., and the Petro-Canada purchase of Prima Energy Corp. Other deals include Kerr-McGee's purchase of Westport Resources, Pioneer Natural Resources' purchase of Evergreen Resources, Noble Energy's purchase of Patina Oil & Gas, and Newfield Exploration's acquisition of Inland Resources.





Due to the long reserve/production (R/P) ratios and operational/commercial issues associated with most Rockies oil and gas assets, proved reserve valuations of Rockies transactions have historically been lower than those for other onshore U.S. transactions. However, large, high-quality assets are fetching strong multiples.

-Shaun Finnie (832-476-6407) and Adrian Goodisman (713-437-5050)

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