Kentucky Blue Gas Co.

Kentucky Blue Gas Co. has engaged Energy Capital Solutions to evaluate the company’s strategic alternatives, including a potential sale of all or part of its assets.

Kentucky Blue Gas Co. is a private oil and gas exploration and production company based in Western Kentucky. Its assets include approximately 53,000 net acres of leasehold, producing oil and gas wells, 6.3 Bcfe of proved reserves, and a 3.0 MMcf/d refrigeration gas processing plant and associated 40-mile pipeline infrastructure.

It has a comprehensive development drilling plan for its acreage position prospective for the liquids-rich New Albany shale, with more than 100 drilling locations identified with 36.2 Bcfe of possible reserves identified.

The company’s midstream assets include a 3.0 MMcf/d capacity refrigeration and NGL stripping plant, which processed an average of 523.8 gal/d of NGLs and 485.0 Mcf/d of gas in 2011, and a 40+ mile gas gathering system consisting of 4” and 6” diameter pipe. The gathering system, which represents the only gas processing and sales infrastructure in Warren County, connects all of KBGC’s gas wells and third party gas wells in the service area to its gas plant.

The company’s upstream operations consist of 32 active oil wells with average oil production of 21.1 Bbl/d in 1Q 2012 with improved current production of 30.0 bbl/d. Of KBGC’s gas wells, 3 are active and 37 have been shut-in. With modest economic improvements, it can quickly bring these shut-in wells back on-line.

KBGC has drilled 19 vertical New Albany Shale and 11 other oil and gas wells since 2009 and holds an additional 44,909 lease acres with liquids-rich New Albany Shale development potential. KBGC’s New Albany Shale development plan targets 100 drilling locations with per well AFEs less than $700k.

The company holds 3,952 acres by production in Warren County. The majority of KBGC’s acreage was leased under 5 or 10 year terms with expirations in 2016 and beyond. Re-lease opportunities exist at approximately $20/acre on much of the current acreage. Additionally, given KBGC’s control of the only midstream infrastructure, no other entrant is able to economically compete with KBGC.

For additional information, please contact Scott Trulock, Energy Capital Solutions LLC, at 214-219-8204 or strulock@nrgcap.com.