MCN Energy Group warned investors Friday it’s not likely to meetanalysts’ 1998 and 1999 earnings expectations of $1.64/share and$2.02/share, respectively, and reiterated its plan to sell itsexploration and production business. The E&ampP operations includemore than 1.3 Tcf of proved reserves, making the company among thetop 20 largest independent producers in the nation.

Following an announcement in June that it would record a netloss of $210.1 million, or $2.67 per share, related to low oil andgas prices and poor performance of certain Midcontinent and Gulf ofMexico producing properties, the company announced plans to sellits E&ampP assets.

“Although sales in today’s industry environment are uncertain, acomplete exit from the E&ampP business is possible,” MCN ChairmanAlfred R. Glancy III said again last week. “In the meantime, wewill significantly reduce drilling and acquisition activities.These actions will reduce anticipated production levels. Clearly,lower production combined with lower prices equates to reducedearnings expectations from this business.”

Based on “recent gas and oil prices and basis differentials, weexpect to incur a ceiling test write-down of $50 million, aftertax, for the third quarter. Any such write-down would be non-cash,”Glancy added. Delays in achieving anticipated production from thecompany’s coal fines briquetting project also are having a negativeimpact on earnings. The coal fines project recovers particles ofcoal that have been a wasted by-product of the mining process. Theplants chemically process these fines, creating briquettes for saleinto existing coal markets.

Aside from its E&ampP woes and coal fines delay, Glancy saidMCN’s other non-regulated businesses are performing well.”Furthermore, the regulated gas distribution segment is performingvery well and has better growth opportunities today than we haveseen in many years. Fundamentally, MCN remains sound, and we aredetermined to achieve solid financial performance.”

MCN stock prices, which have been tumbling down from near$38/share prior to the June announcement, plummeted $8/share (31%)on Friday to close at $17.50/share. The 52-week high on thecompany’s stock, reached in late December, was $40.50/share.

MCN is a diversified energy holding company with more than $4billion of assets, and with markets and investments throughoutNorth America and in Asia. Michigan Consolidated Gas, its gasdistribution and transmission company, serves 1.2 million customersin more than 500 communities throughout Michigan.

Rocco Canonica

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