GeoMet Inc., Houston, (Nasdaq: GMET) has executed definitive agreements with a privately-held company to purchase coalbed methane (CBM) assets in Alabama and West Virginia, certain natural gas hedge positions, and a license to use a certain drilling technology. 

The effective date of the transaction is July 1, 2011 and is subject to customary closing conditions and purchase price adjustments, including the exercise, waiver or expiration of the preferential purchase rights described below. The company also announced a new amended and restated bank credit agreement which it intends to use to finance the acquisition.

Under the agreement, GeoMet will purchase:

• Approximately 50 Bcf of estimated net proved CBM reserves (calculated in accordance with SEC guidelines) as of the Effective Date.
• Net daily gas sales volumes which averaged approximately 22 MMcf per day for the first six months of 2011.
• Natural gas hedge positions totaling approximately 6.5 Bcf from the Effective Date through December 2012 with an average fixed price of $6.44/Mcf.
• A royalty free license to use a certain drilling technology in nine counties in West Virginia and one county in Virginia.
• Approximately 70,000 net acres of undeveloped leasehold in West Virginia.

Total consideration for the acquired assets is $90.2 million, subject to adjustment for net proceeds of production after the Effective Date, realized hedging gains subsequent to the Effective Date, any exercise of preferential purchase rights and other customary purchase price adjustments. Closing of this transaction is expected within the next four to eight weeks dependent on the timing of the exercise, waiver or expiration of the preferential purchase rights described below.

Preferential Purchase Rights

A portion of the CBM properties to be acquired in Alabama, subject to two separate preferential rights to purchase by a single party, have an allocated value of $30.8 million. These preferential rights to purchase are expected to expire on or about October 31, 2011, if not earlier exercised or waived. A portion of the CBM properties to be acquired in West Virginia, subject to a preferential right to purchase by a single party, have an allocated value of $23.4 million. The preferential right to purchase is expected to expire on or about December 6, 2011, if not earlier exercised or waived.

In the event that any one or all of these preferential purchase rights are exercised and the other conditions to closing are satisfied or waived, the company is obligated to close on the remainder of the transaction.