SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 and 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported): June 10, 2002
(February 15, 2002)
CRESTED CORP.
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Exact Name of Registrant as Specified in its Charter)
Colorado 0-8773 84-0608126
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File No.) Identification No.)
Glen L. Larsen Building
877 North 8th West
Riverton, WY 82501
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (307) 856-9271
Not Applicable
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(Former Name, Former Address or Former Fiscal Year,
if Changed From Last Report)
ITEM 5. OTHER EVENTS
Dates of Events: February 15, 2002 (Nonexercise of Suncor Option)
April 12, 2002 (Purchase of Bobcat Property)
A. NONEXERCISE OF THE SUNCOR OPTION. As of February 15, 2002, Suncor Energy
(Natural Gas) America Inc. ("Suncor"), a subsidiary of Suncor Energy Inc.,
notified the company that Suncor elected not to exercise its option to continue
in the exploration and development of the Castle Rock project located in the
northeastern part of the Powder River Basin, in Montana. The Castle Rock project
consists of 123,840 gross and 111,567 net acres held 50% by the company's
subsidiary Rocky Mountain Gas, Inc. and 50% by RMG's partner Quaneco LLC. The
project is being explored for coalbed methane, and also for natural gas in tight
sandstone formations.
As a result of Suncor not exercising its option, RMG will retain its
original 50% working interest in the Castle Rock project, which would have been
reduced to 12.50% if Suncor had exercised its option. By other agreement between
RMG and Carrizo Oil & Gas, Inc.'s subsidiary company, CCBM, Inc., CCBM will
purchase a 6.25% working interest in the property if it meets its payment
requirement of $7,500,000 pursuant to an agreement between RMG and CCBM dated
July 10, 2001, therefor reducing RMG's working interest to 43.75% in the Castle
Rock project. Additionally, CCBM now has a 6.25% working interest in eight wells
owned by RMG as a result of Suncor's drilling program at the Castle Rock project
(see below). Further, CCBM has a right to acquire a total of 50% of RMG's 50%
working interest (or a 25% total working interest) in the Castle Rock project
under the same terms as Suncor. This first right of refusal option expires on
May 1, 2002. CCBM continues to participate in RMG's other projects located in
Wyoming. For information on agreements with CCBM, please see the company's Form
10-K report for the fiscal year ended May 31, 2001.
Had Suncor exercised the option, RMG would have received $2,760,000 from
Suncor in payment for the working interest in the Castle Rock project.
Suncor has completed the initial $2,500,000 exploration drilling program on
the properties pursuant to its original agreement with RMG, drilling a total of
19 exploration wells on various portions of the Castle Rock properties, designed
to evaluate coals in the Fort Union formation down to about 1,300 feet.
Extensive core, mud and electric log data, and coalbed formation water analysis,
were obtained from this program. RMG continues to evaluate this data provided by
Suncor. The drilling program confirmed RMG's interpretation of the distribution
and thickness of Fort Union coals in the properties. RMG plans to more
thoroughly evaluate the deeper prospective coals in the future, as well as
several gas-charged sandstone formations, which were encountered in the
drilling. RMG acquired eight of the 19 wells from Suncor and has now a 93.75%
working interest in each of these wells. CCBM holds the remaining 6.25% working
interest in these wells.
For information on the Suncor option, please see the company's Form 10-K
report for the fiscal year ended May 31, 2001.
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B. AGREEMENT FOR PURCHASE OF THE BOBCAT PROPERTY. On April 12, 2002 the
company and Rocky Mountain Gas, Inc. signed an agreement to purchase working
interests in approximately 1,940 gross acres of coalbed methane properties in
the Powder River Basin of Wyoming. The properties are located approximately 25
miles north of Gillette, Wyoming, in Campbell County. To date, 18 coalbed
methane wells have been drilled; 13 wells are currently hooked up and producing
at a combined rate of approximately 900 mcf per day from the two primary coals
on the property: the Cook coal (11 wells) at 650 feet, and the Canyon coal (2
wells) at 450 feet. Production began in late December 2001 and appears to be
increasing significantly, as would be expected from other Powder River Basin
coalbed methane wells' early production history.
Permits have been issued to the seller for drilling 36 more wells on 80
acre spacing. The permits will allow multiple coal seam production. These
permits will be transferred to RMG if the agreement is closed.
The purchase price for the properties is $1,300,000: $200,000 cash paid,
$800,000 cash to be paid at closing (scheduled for May 27, 2002), and $300,000
to be paid with delivery of 75,000 restricted shares of common stock of the
company. Closing may be extended up to four weeks with weekly payments of
$50,000, applied to the cash balance due at closing.
CCBM, Inc. (a subsidiary of Carrizo Oil and Gas, Inc.) has a 30 day option
to participate in purchase of the Bobcat property for up to 50% of the interests
in the property subject to the agreement. CCBM has not indicated whether it will
exercise its option as of the filing of this report. For information on
agreements with CCBM, please see the company's Form 10-K report for the fiscal
year ended May 31, 2001.
The seller will be entitled to keep as an overriding royalty interest all
net revenue interest in the properties in excess of 80%.
Closing is subject to RMG's title examination and satisfaction of other
customary representations and warranties. If the agreement is closed, the seller
will be responsible for all operating and property expenses through May 1, 2002,
or the first day of the month after May, 2002 if the agreement is closed in a
month after May, 2002, and RMG will be entitled to all gas revenues from that
date forward. If the agreement is closed, RMG will be the operator of the
properties.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
10.62 Purchase and Sale Agreement - Bobcat Property
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CRESTED CORP.
Dated: June 10, 2002 By: /s/ Daniel P. Svilar
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DANIEL P. SVILAR, Secretary
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