Oil and gas mining company moves to Longmont

LONGMONT ? There may or may not be gold in these Western hills these days, but there is definitely money to be made in oil and gas mining.

That is the philosophy of a reorganized startup operation that has recently relocated from Loveland to Longmont.

Desert Mining Inc. (OTCBB: DSRM.OB) has acquired more than 32,000 acres of oil and gas leases in the Powder River Basin, Green River Basin and Washakie Basin of Wyoming, as well as in the Denver-Julesburg Basin in Weld County.

?As a young startup, we have to be careful in how we proceed, but we are now to a point where we?re ready to start drilling these sites and developing them in order to turn into more of a traditional oil and gas company,? said Chief Executive Officer Randy Anderson.

Desert Mining was founded in 1979, but the company was revitalized last year when its financial backers, who have remained anonymous, brought in Anderson, a financial executive with years of experience at other petroleum companies, including Wolverine Energy and Paxton Resources LLC. The backers also hired Don L. Fort Jr. as vice president of drilling and operations.

Knowing that Desert Mining was confronting some growth, Anderson moved the company to a new office off Highway 66 in Longmont.

?Our office space just could no longer accommodate our needs. We found some very favorable office space that suits our operations. It?s very centrally located to get us out to the wells we may dig in Weld County,? Anderson said.

Desert Mining is focused primarily on alternative petroleum products, including natural gas as well as coal bed methane, a compound whose chemical composition is identical to natural gas but is more technically complex to acquire.

?Natural gas is more of a market-driven commodity, and it is where everybody in the company is more comfortable. Oil is a very political commodity, as we are all aware, and suffers the inherent indignities,? Anderson said. ?Natural gas is not subject to tensions in the Middle East, and it?s hard to move internationally except by way of pipelines through Canada and Mexico. That gives us a certain degree of predictability.?

In January, the company paid a record price of $4,950 per acre for its lease on 640 acres in the Pinedale Anticline in Sublette County, Wyo. More than 216 wells have been drilled in the field since its discovery in 1955, and Desert Mining?s geologists estimate that their company?s lease could produce as much as 48 billion cubic feet of recoverable natural gas.

?The Pinedale Anticline is one of the most significant natural gas fields in North America today,? Anderson said. ?There have been almost no dry holes dug there. It is only 640 acres out of the 32,000 acres that we currently own; however, it is the most significant acquisition that we have made given the price per acre that we paid.?

Meanwhile, the company is ready to take advantage of coal bed methane, which is obtained through a complex process of releasing gas trapped by water in coal fractures, as well as more traditional oil drilling.

?We see a mixed approach, trying to combine the gas business with an opportunity-driven oil business. As long as oil is this strong, it pays you to go out and drill for it,? Anderson said.
Desert Mining faces some challenges from within the industry as demand for people and equipment have dried up some physical resources in the Western U.S.

?A lot of people feel that it is an opportune time to drill because prices are going up, so it?s very hard to get a drilling rig right now. On our Maverick project in Weld County, we have been waiting almost two months for a rig,? Anderson said.

The company is also experiencing a shortage of qualified geologists and engineers, similar to the challenges being faced in gold mining and other exploration businesses. Because the mining industry was in a down cycle through most of the 1990s, many of the industry?s professionals changed careers, and students turned away from the industry to pursue mechanical or electrical engineering.

Because of Desert Mining?s limited initial resources, Anderson feels some pressure to make clear and levelheaded decisions about the company?s direction.

?When you have a larger company with existing cash flow properties, you can be a little more open to taking risks. In our case, we have to make sure that everything gets done right at the lowest possible cost. We can?t afford to have a science project,? he said.

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