DENVER, May 24 /PRNewswire/ -- Pennaco Energy, Inc. (Amex: PN) today announced that it produced its first gas for sale in late April 1999 from wells drilled in the South Gillette Area. Current Pennaco working interest production is 8.5 MMcf per day and Pennaco anticipates working interest gas production of 11 MMcf per day by the end of May 1999. Approximately 51% of Pennaco's wells are producing while the remainder are undergoing completion, testing and hookup. Further production increases will be limited until the Fort Union Gas Gathering System commences operations, which is expected by September 1, 1999. Pennaco has now drilled a total of 175 wells (155 net wells), all operated by Pennaco, since beginning its drilling program in November 1998. This includes 157 wells (146 net wells) in its South Gillette Area with an average 93% working interest, as well as 18 wells (9 net wells) in the Pennaco/CMS joint venture area with an average 50% working interest. As previously announced, the Company plans to spend $18.4 million in 1999 on drilling operations and lease acquisition including the drilling of approximately 330 net CBM wells. Approximately 125 of the above 155 net wells have been drilled since December 31, 1998, leaving a net 205 wells still to be drilled during 1999. Pennaco currently has five drilling rigs operating. Pennaco had no revenues from operations in the three months ended March 31, 1999, but realized a gain on sale of properties of $11.9 million in connection with the closing of the CMS Transaction which occurred on January 15, 1999. During the three month period ended March 31, 1999, Pennaco reported net income of $7.0 million or $0.44 per diluted share. Expenses incurred during the three month period ended March 31, 1999 totaled $1.1 million including general and administrative expenses of $1.0 million. Pennaco had capital expenditures of approximately $6.7 million in the first quarter of 1999, including approximately $2.7 million for lease acquisitions and $3.9 million for drilling activities. Pennaco had approximately $10.4 million in cash, $25.0 million in total assets and no long-term debt as of March 31, 1999. Pennaco's management will be holding a teleconference call on Tuesday, May 25, 1999 at 12:00 p.m. Eastern Standard Time to present an operating update. If you would like to participate, please call 800-810-0924, no confirmation number needed. A replay of the conference call will be available for one week by dialing 888-203-1112, confirmation #699181. Pennaco Energy, Inc. is an emerging exploration and production company headquartered in Denver, Colorado. The Company is completely focused on the development and production of natural gas from coal bed methane properties in the Powder River Basin of northeastern Wyoming and southeastern Montana. Pennaco is one of the largest leaseholders in the play with approximately 315,000 net acres. This lease position includes approximately 290,000 net acres held by Pennaco in its previously announced joint venture with CMS Oil and Gas Company, a wholly owned subsidiary of CMS Energy Corporation (NYSE: CMS). This release contains forward-looking statements regarding future plans and expected performance based on assumptions believed to be reasonable. A number of risks and uncertainties could cause actual results to differ materially from these statements, including without limitation, fluctuations in the price of crude oil and natural gas, the success rate of drilling efforts, the timeliness of development, pipeline and gathering construction activities, as well as other risk factors described from time to time in the Company's disclosure and offering documents filed with the SEC. PENNACO ENERGY, INC -- FINANCIAL HIGHLIGHTS Statement of Operations (unaudited) Period from Three Months January 26, 1998 ended (inception) to March 31, 1999 March 31, 1998 Revenue: Interest Income $109,403 458 Total revenue 109,403 458 Expenses: Exploration 51,590 4,859 Depreciation and amortization 30,023 485 General and administrative 1,044,787 58,157 Interest expense -- -- Total expenses 1,126,400 63,501 Gain on sale of properties 11,945,557 -- Income (loss) before income taxes 10,928,560 (63,043) Income tax expense (3,916,000) -- Net income (loss) $7,012,560 (63,043) Basic income (loss) per share $.47 (0.01) Diluted income (loss) per share $.44 (0.01) Weighted average common shares outstanding-basic 14,943,512 4,348,333 Weighted average common shares outstanding-diluted 16,081,739 4,348,333 Condensed Balance Sheet March 31, 1999 December 31, 1998 Current assets: Cash $10,428,937 5,622,776 Other current assets 2,414,577 8,786,920 Total current assets 12,843,514 14,409,696 Net property and equipment 11,918,672 6,250,246 Other assets 276,795 1,365,795 Total assets $25,038,981 22,025,737 Current liabilities 4,214,717 8,182,814 Stockholders' equity 20,824,264 13,842,923 Total liabilities and equity $25,038,981 22,025,737 Condensed Statement of Cash Flows Period from Three months January 26, 1998 ended (inception) to March 31, 1999 March 31, 1998 Net cash provided (used) by operating activities $(2,216,210) 3,725 Cash flows from investing activities: Capital expenditures (6,657,370) (9,712,173) Proceeds from sale of properties 19,224,767 -- Other (666,687) 8,826,368 Net cash provided (used) by investing activities 11,900,710 (885,805) Net cash provided (used) by financing activities (4,878,339) 2,065,497 Net increase in cash 4,806,161 1,183,417 Cash at beginning of period 5,622,776 -- Cash at end of period $10,428,937 1,183,417  