First Ecom.com, the Bermuda electronic card processing firm which saw its stock fall from $34 to $1 in less than a year, could soon merge with a US gas and oil exploration company.

First Ecom.com, which is partly owned by Bank of Bermuda and Lines Overseas Management, announced yesterday that it had signed a memorandum of understanding to merge with Denver-based Gasco Energy Inc, a company that acquires and explores petroleum and natural gas properties.

The merger, should the proposal go ahead, will result in First Ecom owning all of the outstanding shares of Gasco so that Gasco is wholly owned by First Ecom.

As part of the proposed transaction, First Ecom would transfer all of its e-commerce assets to a separate company and distribute all of its holdings in this company to First Ecom's shareholders of record as of a date to be determined.

At the conclusion the transactions, the survivor of the First Ecom - Gasco merger would have no interest in the new e-commerce company as the former shareholders of Gasco would own a majority of the merged company's shares, First Ecom said.

And the company said the name of the merged company would be changed to a name that better reflects the business of exploring for and developing natural gas resources.

The current shareholders of First Ecom would have shares in both the merged company and the new e-commerce company, but the proposed new company will not own any part of the e-commerce assets.

Gasco changed its name from San Joaquin Resources Inc. in March and trades on the over-the-counter Bulletin Board.

"The directors believe that a merger between First Ecom and Gasco will be a positive step in the evolution of First Ecom,'' said Gregory Pek, president and co-CEO of First Ecom.com. "Gasco is a company with a strong management team, significant petroleum and natural gas leases, and a great future.

"In the current market environment, the board and management of First Ecom believe that we have to look beyond the horizons of the Internet and payment processing in order to fulfil our obligations to provide our shareholders with good value for their investment. This said, the electronic payment processing initiatives that we started will continue to be pursued by a new company and the shareholders of First Ecom will own shares directly in that company and the newly merged company. This will create new shareholder value for First Ecom shareholders.'' First Ecom was launched on the Nasdaq at the end of 1999, and by February 2000, the stock reached an all-time high of $34. But by December 2000 the stock hit rock-bottom at $0.594 a share.

This had an impact on the money made by two major Bermuda investors -- Bank of Bermuda which owns more than ten percent of the company, and LOM, which owns more than 13 percent.

Both are believed to have bought into the company for around $7 a share.

In April the company reported that it had a strong cash position after ending its second full year in business, despite posting a loss of $17.8 million for 2000.

The company said that it was still at the development stage and was reducing staff numbers and moving to smaller offices in a bid to cut costs.

It said the downturn in the e-economy had made them look at ways of reducing the "burn rate''.

Revenues for 2000 were $854,871 compared to revenues of $2,634 during its first year.

The transaction is subject to the completion of due diligence, the negotiation of a definitive pact and regulatory approval.

Shares of First Ecom traded unchanged at $1.35. Gasco shares closed Friday at $3.10.