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MCN Sells Midcontinent, Gulf E&P Assets

MCN Sells Midcontinent, Gulf E&P Assets

MCN Energy Group said it has agreed to sell the second of its four exploration and production (E&P) packages to an unnamed buyer(s). The second package is made up of 150 Bcfe of proved reserves in the Midcontinent and Gulf Coast regions and drew a total of $115 million. The assets sold represent about 13% of the total assets MCN put up for sale last year. About 80% of the reserves sold in the second package were gas. Not included were MCN's seismic data and exploratory leasehold interests in the Cotton Valley Pinnacle Reef play in east Texas, the company said. Those assets apparently will be included in a later sale.

Last month, the company sold its first package of western E&P assets, including 220 Bcfe of reserves, for $165 million. Williams' exploration and production division bought most of the western assets, including 184 Bcfe of proved reserves and 192,000 undeveloped acres in the Rocky Mountain region for $106 million. MCN's total E&P assets prior to the sales included 1.2 Tcf of proved gas reserves with a book value of about $800 million. Still to be sold are assets in Michigan and the Appalachian region. MCN intends to complete its E&P divestiture by mid-year.

The company announced plans to exit the E&P business last summer and took at $273 million one-time charge last year related to the plan. "Exiting the E&P business is a key element of our refocused strategic direction, which entails a lower risk profile," MCN Chairman Alfred R. Glancy III said. "We expect to complete the sale of the Midcontinent/Gulf Coast package as well as the remaining two packages around mid-year. Proceeds from these sales will allow us to strengthen MCN's balance sheet by reducing our debt level and will help fund 1999 capital investments that are expected to total approximately $650 million to $750 million."

Glancy noted that each of the four packages has its own attributes and will therefore sell at different proved reserve multiples. The Midcontinent/Gulf Coast package includes E&P properties primarily dispersed throughout Texas and Oklahoma.

Negotiations continue with the lead bidders on the Michigan package, which primarily includes Antrim Shale gas, and the Appalachian package, which consists of coal-bed methane properties. Both of these packages have long-lived reserves.

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