Amerada Hess agreed to buy gas and power marketer Statoil Energy ServicesInc. of Alexandria, VA, for what a Hess spokesman said was less than $25million. Statoil Energy Services serves industrial and commercial customers,mainly in New York, Pennsylvania, Maryland, Virginia and Washington, D.C.

The deal is intended to expand Hess’ customer base and strengthen itsposition as an independent energy marketer, Hess said. About 120 Statoilemployees will join Hess. “The combination of Statoil’s electricity capabilitieswith Hess’ expertise and experience in fuel oil and natural gas will makeHess one of the only total energy providers of fuel oil, natural gas andelectricity on the East Coast,” Hess said in a brief statement. The purchaseis expected to close in the first quarter. Hess’ spokesman would not revealvolumes of gas and power marketed by the company but said, “we’re a majormarketer of natural gas, particularly in the New York metropolitan area.”An industry observer said the deal should bolster Hess’ back office administration.

Last month Statoil Energy agreed to sell its Appalachian Basin gas explorationand production subsidiaries, Eastern States Exploration Co. and EasternStates Oil and Gas, for $630 million to Equitable Resources Inc. (see NGIJan. 10). The deal, which closed Feb. 15, combines Pittsburgh, PA-basedEquitable’s 930 Bcfe of reserves and 6,100 wells with Statoil’s 1.1 Tcfof reserves and 6,500 wells. Statoil was the largest reserve holder inthe Appalachian Basin. The wells are in Kentucky, West Virginia, Pennsylvaniaand Ohio.

Statoil Energy was put on the auction block in October (see NGI Oct.18). Norwegian government-owned Statoil Group hired Credit Suisse FirstBoston for the divestiture. “In order to effectively execute its businessplan, Statoil Energy needs to substantially increase the scale of its operations,”said Statoil Group Executive Vice President Johan Nic Vold at the time.”The resources required to achieve such scale cannot realistically be suppliedby the Statoil Group alone as there are numerous international investmentopportunities competing for our limited capital.”

Before Statoil Energy hung up the for sale sign the company said itwas looking for a partner to bolster its resource base (see NGI May3). “Our parent group, Statoil, has invested $700 million in StatoilEnergy,” a spokesman said at the time. “The search has been misconstruedas a selling of interest. Statoil is not looking for someone to come buy$350 million of the company. They are searching for someone to come inand add to what already exists.”

No deal was struck, however, and Statoil Group was faced with the prospectof heavily investing in the business to make it viable. “We needed a muchstronger presence in the power market, and the level of investment neededto be competitive there was into the multiple billion dollars,” said DaveDresner, Statoil Energy’s chief operating officer, who is departing thecompany. He said Statoil Group will continue to pursue energy marketingoperations but closer to its core business in the North Sea. “They wereable to take some good lessons home.”

Statoil Energy was founded in 1981 and evolved from a small gas explorationand production company to a full-service energy company with 1998 revenueexceeding $3.5 billion. It traded 600 Bcf of gas per year as of 1998 andsupplied 100 Bcf/year of retail gas. The company also sold 66 million MWhof electricity per year and ranked 11th in U.S. electricity trading.

Power Systems, which is expected to be sold shortly to an eastern U.S.electric utility, has assets that include a 50% interest in two Long Island,NY, plants; a coal-fired plant in Dover, DE; as well as distributed generationand field services operations. Power Systems assets were valued at $107.8million at the end of 1998 compared to $21 million two years earlier.

The Statoil Group is one of the world’s largest energy companies andhas revenue of about $20 billion. Proceeds from the sale of the businesseswill help reduce debt at the parent company, which is refocusing its business.

Joe Fisher, Houston

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