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AEC Shopping for U.S. Gas Storage Facility

AEC Shopping for U.S. Gas Storage Facility

Alberta Energy Co. Ltd. wants to buy or lease another U.S. natural gas storage facility, but is remaining mum on what region it is targeting and which companies it may be negotiating with. CEO Gwyn Morgan would only say last week that his company is negotiating to buy a storage unit for less than C$100 million, and hopes to complete the deal before year's end.

AEC, which operates the 85 Bcf-capacity AECO-C storage hub in southeastern Alberta, already has a deal on the table to buy TransCanada PipeLine Ltd.'s half interest in the Alberta-Wyoming Express oil line, and also to expand its Cold Lake, AL heavy oil pipeline. However, Morgan has indicated that natural gas is AEC's strength, already running gas storage facilities in California, Texas and Alberta.

Following a conference in San Francisco last week, Morgan said AEC is "looking at both acquisitions and situations where we can move in and, in effect, manage the assets to add value and take some of the incremental value that we can add."

One clue as to where the new storage facility might be may be found is its recent acquisition of McMurray Oil (see NGI, May 8). In that deal, AEC put its stake in the Rocky Mountain region, obtaining acreage in the Jonah Field in the Green River Basin in southwest Wyoming - situated near the Opal gas hub.

In the McMurray deal, AEC netted the 245-mile Jonah Field gas gathering system, which now transports 320 MMcf/d of gas, and is considered ready for expansion to 440 MMcf/d.

Morgan said the McMurray deal gave AEC "a substantial new growth platform in the U.S. Rockies, something we have been looking to do for some time. It's an area that we have been exploring in and of course, now our exploration programs will be expanded." Its net exploration acreage in Wyoming to about 135,000 net acres.

In the United States, AEC has the main transportation link to the Opal hub with its purchase of a 92.5% stake in the Green River Pipeline LLC, which owns the Jonah Gas Gathering Co. Morgan said the company would like to buy the other 7% of that pipeline.

Morgan said that his company is expected to generate a cash flow of about C$8 per share this year, double 1999 numbers. That would put earnings estimates in the C$4 a share range, which is nearly four times last year's earnings.

Carolyn Davis, Houston

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