Tesoro Petroleum Corp. of San Antonio, TX, agreed to sell all ofits domestic exploration and production business to EEX Corp. ofHouston for $216 million.

The acquired properties, primarily gas fields in South Texas andthe Gulf Coast, are producing about 80 MMcfe/d from estimatedproved reserves of 204 Bcfe. With this acquisition, EEX willestablish an office in San Antonio, staffed largely by currentTesoro E&P employees, from which all of its domestic onshoreE&P operations will be managed.

In addition to proved reserves, the acquisition includes about157,000 (net) acres of non-producing leasehold with substantialexploitation and exploration potential in the form of awell-defined, multi-year program.

“This acquisition supplements our existing Gulf Coast and SouthTexas production, lengthens our reserve life and provides ourshareholders with a better balance between producing properties andexploration prospects, resulting in a stronger foundation fromwhich to pursue our growth strategy in the Gulf of Mexico, on theShelf and in the deep-water,” said Tom Hamilton, EEX CEO.

The transaction will be structured as a stock purchase and isscheduled to close on or about Nov. 30. Net after-tax cash proceedsto Tesoro are estimated to be $170 million. During the first sixmonths of 1999, Tesoro’s domestic E&P operations generated $21million in operating segment earnings before interest, taxes anddepreciation, depletion and amortization from production of 79MMcfe/d of gas and condensate.

“We are in the final phase of evaluating opportunities for ourupstream operations that are located in Bolivia,” said Bruce A.Smith, Tesoro CEO. “But with this transaction, we take another stepin the company’s long-term strategy to focus on downstreamoperations by improving our capital structure. The proceeds fromthis sale will be used to reduce Tesoro’s term debt under itssenior credit facility, which will decrease ourdebt-to-capitalization ratio to approximately 35%.”

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