Equitable Resources said its aggressive M&A strategy isbeginning to pay off, as the company revealed a 40% jump in firstquarter 2000 earnings to $39.1 million compared to the same periodlast year. The earnings were higher than Wall Street estimates andmay trigger purchase offers for the company, according to someanalysts.

“In this first quarter we are beginning to realize the earningsbenefits of the Carnegie Natural Gas and Statoil E&P propertyacquisitions. We anticipate that over the next several months wewill realize additional costs savings and operational improvementsas we complete the integration process of the Statoil oiloperations,” said Murry S. Gerber, Equitable’s CEO.

The lofty financials were not expected by PaineWebber analystRon Barone, who raised his earnings per share estimate forEquitable this year, as a result. Equitable’s earnings per sharefor the quarter was $1.23, 15 cents higher than barone’s estimate.”With a well-focused management team consistently delivering solidearnings growth, Equitable Resources remains one of the top growthand income plays…In addition, as the leading producer of naturalgas in the Northeast, Equitable has evolved into a primeacquisition candidate.”

Barone added that the location of Equitable’s reserves is thekey ingredient that will attract buyers. “[The company’sattractiveness as an acquisition candidate] is particularly truegiven that unregulated power generators are increasingly seekingaccess to strategically located natural gas reserves, pipelines andstorage.”

The earnings improvement, Equitable said, was primarilyattributable to increased natural gas production relating to theStatoil Appalachian property acquisition, improved natural gas andcrude oil prices, continuing benefit from cost structureimprovements, and increased industrial distribution throughputresulting from the Carnegie acquisition. These earnings increaseswere partially offset by weather that was 15% warmer than thehistorical average, higher accruals relating to provisions forincentive compensation, and costs related to a strategic refocusingof the NORESCO unit.

The Statoil purchase was announced last February. Equitablebought all of Statoil’s Appalachia assets for $630 million. Oncecomplete, the move will vault Equitable to the top of the list ofAppalachia producers in terms of size of reserves with more than 2Tcf.

Eqitable bought Carnegie Natural from USX-Marathon in June of1999. The purchase increased Equitable’s natural gas throughput 27%and increased its production in Appalachia 9%.

The company’s M&A activities have not stopped with these twomoves. “We also recently announced the combination of our Gulfoperations with Westport Oil and Gas for cash and a significantminority interest. This transaction gives us a market valuation,earnings recognition, and limits our Gulf of Mexico exposure.Equitable Resources has never enjoyed such significant growthopportunities on such a low risk business model,” Gerber added.

Equitable Production had earnings before interest and taxes(EBIT) for the first quarter of $31.5 million compared to $8.5million for the 1999 quarter. Volume of produced natural gas andcrude oil that was sold increased to 23.2 Bcfe, as compared to 16.9Bcfe for the same period last year.

John Norris

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