• Canadian royalty trust Enerplus Resources Fund, Calgary, (NYSE: ERF; Toronto: ERF.UN) will take a stake in the Marcellus shale through a joint venture with Trevor Rees-Jones’ Chief Oil & Gas LLC and a limited partnership managed by Fort Worth, Texas-based investment firm Tug Hill Inc. The deal is valued at US$406 million.

It involves a 30% nonoperated interest (21.5% average working interest; 82% average net revenue interest) in approximately 540,000 gross acres (116,000 net) primarily in Pennsylvania, concentrated in the northeastern and southwestern areas of the state, with additional acreage in West Virginia and Maryland. Much of the acreage is contiguous with an average primary lease term of approximately five years. Chief currently owns an average 72% working interest in the holdings and will continue as operator.

Enerplus will pay US$162.4 million in cash at closing and US$243.6 million as a carry of 50% of drilling and completion costs in the Marcellus, which it expects will be invested over the next four years. Enerplus will also enter into an area of mutual interest with Chief for additional acquisitions in the Marcellus. Enerplus estimates it paid approximately US$3,500 per net acre.

Since 2007, Chief has drilled 31 Marcellus shale wells, 10 vertical and 21 horizontal. Current total production is approximately 8.7 million cu. ft. equivalent per day gross (1.8 million per day net to Enerplus). Enerplus estimates it is acquiring approximately 8 billion cu. ft. of gross proved plus probable reserves.

Enerplus expects to participate in the drilling of approximately 750 gross wells over the next five years with production volumes expected to increase to approximately 100 million cu. ft. per day of gas before royalties. Enerplus has also entered a long-term agreement with Chief Gathering LLC, an affiliate of Chief Oil & Gas, for the gathering, dehydration and compression of Enerplus’ share of production.

Enerplus will issue 9.25 million trust units through a Canadian bought-deal financing at a price of C$21.65 per trust unit for gross proceeds of C$200 million. A portion of the net proceeds are expected to be used to pay for the upfront cash portion of the acquisition and the remainder will initially be used to repay bank debt and capex.

Rees-Jones sold his Barnett shale portfolio—some 20 years in the making—to Devon Energy Corp. and Crosstex Energy in 2006 for $2.6 billion, and rolled some of the proceeds into the Marcellus.

RBC Capital Markets and Tudor, Pickering, Holt & Co. Securities LLC are financial advisors to Enerplus. BoA Merrill Lynch is advisor to Chief and Tug Hill.

• Facing near-term lease expirations in its Rough Rider project area in Williams and McKenzie counties, North Dakota, Austin, Texas-based Brigham Exploration Co. (Nasdaq: BEXP) has farmed out an interest in up to 15 units to U.S. Energy Corp., Riverton, Wyoming, (Nasdaq: USEG) for an estimated $17.6 million for drilling the initial six wells. (For more on the Bakken see “Bakken Breakout” in this issue.)

The terms of the agreement involve drilling up to 15 initial Bakken wells in 15 separate 1,280-acre spacing units. The ultimate number of wells to be drilled in the units could reach 90. U.S. Energy has committed to drilling six initial wells with the option to drill more.

Brigham will serve as operator and will drill the first six initial wells during the remainder of 2009 using two drilling rigs.

SMH Capital is financial advisor to U.S. Energy.