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Dynegy Buys Processing Assets in Alberta

Dynegy Buys Processing Assets in Alberta

Dynegy Canada Inc., a subsidiary of Houston-based Dynegy Inc., announced Friday that it has acquired the midstream gas processing facilities and gathering lines of Compton Petroleum Corp. for an estimated $39 million.

Included in the sale were the Mazeppa and Gladys gas plants in southern Alberta and about 78 miles of associated gathering lines. The two facilities have a combined capacity to process 97 MMcf/d of sour gas.

In addition, the two companies worked out an incentive payment arrangement under which Dynegy Canada will pay Compton between a total of $8 million and $16 million, depending on the productivity of the wells, to drill up to a maximum of 50 new wells in the Mazeppa/Nanton area. This would be in addition to the $39 million for the processing facilities. The gas would be processed through the Mazeppa and Gladys plants, according to a spokeswoman in Houston. Under the deal, Compton also was guaranteed set rates for processing and transporting its gas.

"The acquisition of these midstream assets is a key step in our strategy to re-establish Dynegy's Canadian asset base," said Dynegy Chairman Chuck Watson in Houston. "The Mazeppa facilities 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."

The deal has made Compton debt free and has given it an available line of credit in excess of C$52 million to "aggressively pursue its drilling program in southern Alberta," noted Compton President Ernie Sapieha. "The drilling arrangement with Dynegy and their planned expenditures will allow us to maintain low finding and development costs while actively pursuing exploration prospects."

Susan Parker

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