February 28, 2008
Aspen Pipeline Announces Definitive Agreements for Yates Gas Production, Market and Development of West Texas Pipeline for High Nitrogen Gas Project
Aspen Pipeline L.P., through an affiliate, Odessa Fuels Marketing LLC, a Houston based mid-stream acquisition and development company, announced today it has signed a definitive agreement with Arena Resources, Inc. ("Arena") of Tulsa, OK. to purchase gas from Arena's Fuhrman Mascho ("Fuhrman Mascho") properties in Andrews County, Texas. The gas, produced from the Yates formation at an approximate depth of 3,000 feet, has a high nitrogen content and is often considered too costly to produce because of the need to remove the nitrogen before transporting.
In concert with the Arena Resources, Inc. transaction, Aspen has signed a definitive agreement with Odessa-Ector Power Partners, L.P., a wholly-owned subsidiary of PSEG Texas, L.P. (Dallas, TX), which in turn is a subsidiary of Public Service Enterprise Group, Incorporated, to deliver Yates formation gas in a dedicated pipeline to the PSEG Texas 1,000-megawatt energy generation facility just outside Odessa, Texas, which can consume a gas blend containing Yates formation gas without removing the excess nitrogen. Aspen plans to construct a 20-inch pipeline with an initial length of 65 miles to gather Yates formation gas, inclusive of re-completions and new drilling opportunities from Ector and Andrews counties in Phase I and later from Gaines County in Phase II. The agreements call for primary terms of 15 years for both Arena and Odessa-Ector Power Partners."Aspen is very pleased to be involved with both of these quality companies in the region," said Russ Bourquein, Sr. Vice President, Managing General Partner of Aspen Pipeline L.P. "The Odessa-Ector Power Partners 1000 MW facility is a relatively new (2001) facility with gas needs as a feedstock that are significant."
Arena's Fuhrman Mascho properties comprise in excess of 22,000 acres with drilling rights to the Yates formation on approximately 18,000+ acres and Arena has agreed to dedicate the gas reserves to the project for the life of the reserves. Arena estimates there are 450 potential locations including approximately 100 idle or temporarily abandoned well bores. These wells that were drilled to the deeper, oil-bearing formation can be excellent candidates to be re-completed at the shallower Yates formation. The agreement with Arena requires that they drill or re-complete 60-90 wells per year for the first four years and strive on a best efforts basis to attain a volumetric goal of 30,000 Mmbtu per day or more.
"Given the shallow depth and relative easy access to this formation for the producer, an advantageous market fuel source in addition to a new pipeline gathering installation in the region, this project is a win-win for all parties involved," said Bourquein.
"As a final note, Aspen is pursuing expanding its footprint in the region through current negotiations with incremental end user markets. In addition, Aspen has co-development partners looking to participate in contracting and drilling Yates formation acreage along the proposed pipeline route with Aspen."
Aspen Pipeline L.P. www.aspenpipeline.com is a Delaware Limited Partnership engaged in the acquisition and development of mid-stream energy assets inclusive of behind the fence power generation projects, biomass generation, natural gas pipeline, gathering and natural gas storage projects. The Company owns and operates a 31-mile gathering system in the Barnett Shale region of North Texas and is currently engaged in the development of a biomass (wood-chip fueled) power plant project in East Texas.