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Dynegy Builds Canadian Midstream, Buys Compton Assets

July 13, 1998
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Dynegy Builds Canadian Midstream, Buys Compton Assets

Dynegy Inc., formerly NGC Corp. has purchased Compton Petroleum's Canadian midstream assets, including 78 miles of pipelines, and the 82 MMcf/d Mazeppa and 15 MMcf/d Gladys processing plants in southern Alberta, for C$60 million (US$42 million).

The deal also includes a transportation, processing and revenue sharing agreement whereby Dynegy committed to give Compton C$250,000 (US$178,000) a piece for up to 50 new wells in the area, or up to C$25 million (US$17.8 million).

"The acquisition of these midstream assets is a key step in our strategy to reestablish Dynegy's Canadian asset base," said Dynegy Chairman Chuck Watson. "The Mazeppa facilities will complement our existing gas marketing and trading business. In addition, our continuing relationship with Compton will generate future opportunities to add throughput to these facilities. We believe there are significant opportunities in the Canadian midstream business as this market continues to evolve."

Compton CEO Ernie Sapieha said the deal will eliminate Compton's debt and help create lines of credit in excess of C$52 million. The company now plans to pursue an accelerated drilling program in southern Alberta. Compton is planning an initial 18-month, minimum 60-well drilling program in the area, targeting deep gas reserves. "The drilling agreement with Dynegy and their planned expenditures in the area will allow us to maintain low finding and development costs while actively pursuing exploration prospects," said Sapieha.

Calgary-based Compton holds reserves in excess of 200 Bcf, 95% of which are gas and associated liquids.

Rocco Canonica

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