Enterra Energy Trust has followed Provident Energy Trust across the Canadian border into the U.S. to buy reserves and production-and, especially, acquire a U.S. subsidiary. Calgary-based Enterra plans to buy Wyoming-based Rocky Mountain Gas Inc., which is owned in part by U.S. Energy Corp. and Crested Corp. and has a 17% interest in privately held, coalbed-methane (CBM) operator Pinnacle Gas Resources Inc. In this mix, Houston-based Carrizo Oil & Gas has a piece of Pinnacle too. (For more details on the Enterra deal, see "Company Briefs" in this issue.) A peer, Provident Energy Trust, swung through the U.S. last summer and bought California-based producer BreitBurn Energy LLC, marking the first Canadian trust deal for U.S. assets. Provident paid C$190 million for BreitBurn. Enterra's deal-valued at US$35 million-is of a starter size for a foray into the U.S., and the assets that will be gained are not the type a trust usually seeks. Rocky Mountain Gas has production rights to 130,000 net CBM-producing acres in Montana and Wyoming. While CBM development tends to be low-risk, it can also be low-margin if not run economically. The cash-prolific Canadian royalty trusts usually need more productive assets and ones that require less cash reinvestment. From BreitBurn, Provident gained production of 4,200 barrels of oil equivalent (BOE) per day. From the deal for Rocky Mountain Gas, Enterra will gain net daily production of 2.2 million cubic feet of gas or the equivalent of about 367 BOE. Enterra may be part of a new type of Canadian trust. "Many of the recently converted trusts are following a new model with lower payout ratios and higher-impact drilling activities, which should produce greater sustainability in a trust model," says analyst Jill Angevine with Calgary-based FirstEnergy Capital Corp. The trusts are estimated to pay out generally 75% of income during this and next year. U.S. Energy will continue to be involved with the Rocky Mountain Gas assets for a year after closing, Enterra reports. The expertise will be handy to Enterra, whose chief executive officer, chief financial officer and vice president of operations walked out recently in a dispute over 2004 bonuses. Enterra chairman Reg Greenslade is running the business for now, and suing each manager for repayment of the bonuses for 2004 that were paid. Enterra is among the E&P companies that have recently converted to the popular royalty trust format, and has done well so far for doing so-with the help of a general market upswing in energy stock prices. Enterra's stock price upon conversion in November 2003 was around C$14; it was C$26 in early March, which was improved from a C$22 range prior to management quitting. FirstEnergy Capital advised Enterra on an acquisition in 2004 but does not cover the trust. Other trusts it covers have production ranging from 80,000 BOE per day (Enerplus, which is the original Canadian energy trust) to 4,400 (Bonterra). Enterra's recent-quarter average daily output was 6,200 BOE, mostly oil. Greenslade says, "We believe that (Rocky Mountain Gas') assets will be a good fit and beneficial to Enterra's assets and business plan." Enterra currently operates only in western Canada. Its recent quarterly revenue was C$25 million and net earnings were C$4.1 million. It received an average C$46 per barrel for its oil and C$6.09 per thousand cubic feet of gas. Operating costs were C$10.42 per BOE. General and administrative costs were C$1.65 per BOE and operating netbacks were C$22.99 per BOE. Other royalty trusts' netbacks ranged from C$30 to C$17 per BOE, according to FirstEnergy Capital. Meanwhile, Provident Energy Trust continues to expand its U.S. position through subsidiary BreitBurn. The company is adding Nautilus Resources LLC to its asset base, taking in Wyoming production of 2,300 BOE per day for US$78 million. The reserve life is more than 15 years. Executive Editor