Continuing an arrangement first forged in 1981, Conoco announced a definitive agreement last week to manage DuPont’s gas supply needs. DuPont is one of the largest U.S. industrial gas consumers and Conoco’s largest supply customer. Neither the financial terms nor energy volumes were disclosed.

“After taking a hard look at our natural gas supply requirements and evaluating several competing bids, we came to the conclusion Conoco provides the most competitively priced and reliable natural gas supply services available,” said Sam Hamdan, DuPont’s director-raw materials, energy and packaging.

The two-year agreement calls for Conoco Gas Marketing to provide all natural gas supply services for all 31 DuPont plants. Conoco has managed DuPont’s industrial natural gas needs for purchasing, scheduling, dispatching, transporting, balancing and accounting for 18 years. DuPont originally divested the energy company in May of 1998 (see NGI, May 18, 1998), and was officially separated from Conoco last August.

While Conoco’s energy management operations received a nice boost, the company’s core production operations also appear to be in good shape. The deal was announced just a few weeks after the company said stronger gas prices and increased production in 3Q99 will cause earnings to be in a range of about 4 to 7 cents higher than First Call’s current consensus estimate of 33 cents of underlying earnings per share. The company’s earnings are set to be released next week.

“Our ongoing goal is to deliver industry-leading production growth, which we estimate to be between 4 to 5%/year on average,” said Rob McKee, executive vice president for worldwide upstream operations. “Between 1998 and 2001, our growth plans will exceed this goal, reaching a total of about 22%. For the first nine months of 1999, our early production estimates indicate that our worldwide natural gas production will be up about 23%.”

John Norris

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