The Coastal Corp benefited from its mix of producer and pipelineoperations, announcing a 17% jump from 3Q 1997 on a per-sharebasis. Coastal earned $89.5 million, or 41 cents/share, compared to$80.4 million, or 35 cents/share in 3Q 1997. Along with earnings,the company reiterated its commitment to the North American gassector, calling it the best energy investment opportunity anywhere.

“Coastal’s natural gas production for the third quarter was up20% over last year’s quarter, despite turbulent weather whichseverely restricted production and drilling operations in the Gulfof Mexico,” said David A. Arledge, CEO. “Contrary to recentindustry trends influenced primarily by depressed oil prices,Coastal announced a $100 million increase in its exploration andproduction budget for 1998. We intend to capitalize on decreasedcosts of services and equipment to further boost our natural gasproduction, as we believe the North American natural gas sectoroffers the best investment opportunity of any energy market in theworld.”

A Coastal spokeswoman said the company can now hire rigs andequipment for $20,000 per day that would have cost $75,000 per dayin the first quarter. “We’re seeing somewhat of a recovery inprices although we anticipate oil prices won’t rise that much.Natural gas prices probably will,” said spokeswoman VickiGuennewig.

“Coastal is structured financially to benefit from the veryenvironment — a worldwide economic slowdown with reduced energydemand — that causes lower energy prices,” Arledge said. “Loweroil prices, for example, require less borrowing for workingcapital, while lower interest rates further reduce financing costs.In addition, sharply constrained industry spending in a low-priceenvironment creates tremendous investment opportunities forcompanies with financial flexibility.”

However, Coastal’s exploration and production segment earnedbefore interest and taxes $15.9 million in the third quarter, lessthan half the $33.1 million EBIT in 3Q 1997. Despite increased gasproduction, significantly lower gas and oil prices hit the companyhard. Realized prices for gas in the third quarter were $1.85/Mcf,compared to $2.09/Mcf in 3Q 1997. Third quarter gas production was504.2 MMcf/d, up from 421.3 MMcf/d despite storms and hurricanes inthe Gulf of Mexico.

Coastal’s 3Q EBIT for the natural gas segment was nearly flat at$109.1 million, compared to $110.8 million in 3Q 1997. Marketingearnings declined due to a slight loss in Engage Energy – Coastal’s marketing joint venture with Westcoast Energy, which iscurrently being restructured – and ongoing weakness in liquidsprices, according to analysis by PaineWebber’s natural gas group.

In reporting a Q3 net loss of $6 million, or 6 cents/share,compared with a gain of $17 million, or 17 cents/share in Q3 1997,Westcoast noted “operating results continue to be negativelyaffected by losses from the company’s 50% interest in EngageEnergy. The decrease reflects a loss incurred by Engage Energyrelating to the default of two customers in conjunction withelectricity trading transactions in the second quarter of 1998,amounting to approximately $14 million, combined with operatinglosses incurred in the energy marketing business.”

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