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Calpine Boosts Stake in Sacramento Basin

Calpine Boosts Stake in Sacramento Basin

San Jose, CA-based independent power producer Calpine Corp. made a major investment in upstream gas supply for its current and future gas-fired power plants in California. The company bought 90 Bcf of proven gas reserves in the Sacramento Basin from Vintage Petroleum for $71.5 million. The transaction will make Calpine the largest gas producer in the basin, raising its production to 43 MMcf/d. The Vintage reserves currently produce 14.3 MMcf/d.

"Vintage's long-life reserves will help lower fuel costs for Calpine's northern California natural gas-fired plants," said Bill Berligen, Calpine senior vice president.

As a result of this acquisition, Calpine will add the remaining 58% interest in the Rio Vista Gas Unit and certain deep rights to its northern California gas portfolio. This new production will utilize Calpine's extensive Sacramento Basin gas pipeline system. Discovered in 1936 the field has been one of the largest and most prolific in California. Calpine received a 42% interest through last year's Sheridan Energy acquisition.

Vintage Petroleum also executed a large asset purchase last week. It bought producing properties and facilities in the Ventura basin of Southern California from Nuevo Energy for $29.6 million in cash.

In a separate sales transaction last week with an undisclosed buyer, Vintage sold certain royalty interests in Los Angeles County, CA, for $8.2 million. These sales are expected to result in after- tax gains totaling $28 million, or $0.43 a share, a portion of which was used to purchase the properties from Nuevo. The remaining proceeds will be used to reduce Vintage debt.

Vintage has realized $88 million from divestitures since beginning its sell-off program in second quarter1999. The company plans to continue to identify and sell $30 million to $55 million of non-strategic property interests by year-end to aid in achieving its goal of lowering its debt-to-book capitalization ratio to the low-to-mid 50% range. After utilizing proceeds from the current sales, it debt-to-book capitalization ratio is expected to be 60%.

Rocco Canonica

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