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Industry Briefs

Industry Briefs

Unocal said last week that its expected earnings be about between 90-95 cents per share, or about 20-25 cents more than its prior estimates and 11 cents more than First Call/Thomson Financial's consensus estimate of 79 cents. The updated earnings estimate can be attributed to rising natural gas and oil prices, the company said. The new estimate took into account the expected average price for West Texas Intermediate (WTI) crude oil of $31.60 per barrel and a Henry Hub natural gas price of $4.35 per Mcf. The July 27 forecast was based on a WTI price of $29.75 per barrel and a Henry Hub price of $4.00 per Mcf. Unocal said the latest estimate does not include "miscellaneous special items," such as an expected $36 million aftertax charge for what it called a derivatives accrual. Last year Unocal posted earnings of 17 cents per share for the third quarter.

In the good news department: Chevron Canada Resources said that its reported natural gas production volumes from its Fort Liard K-29 well in the southwestern part of the Northwest Territories are about 25 MMcf/d more than it had estimated. Chevron determined last week that the well actually was producing gas at 85 MMcf/d between Sept. 9 and Oct. 3, not 60 MMcf/d as it had reported during the month of September, attributing the erroneous data to a flow calculation error involving the amount of water produced in conjunction with the gas. It said it was investigating ways to ensure it does not happen again. Chevron holds a 43% stake in the well and is the operator. Partners include Purcell Energy Ltd., Berkley Petroleum Corp., Anderson Exploration Ltd. and Paramount Resources Ltd. The well is in an area that has been called one of Canada's largest onshore gas discoveries. The news could not come at a better time for Purcell, which holds a 24% stake in the project. Two weeks ago, shares of the Canadian company were stopped after falling for several days. Purcell management said at the time that the well was pumping more water than expected but called the situation manageable. "We thought it was doing the speed of a Volkswagen and actually we had a Lamborghini," said Purcell's COO Bruce Murray.

Deaths related to pipeline ruptures and/or explosions rose by eight to 26 last year, said a new National Transportation Safety Board (NTSB) report, which noted that most of the fatalities occurred on pipelines carrying natural gas. Natural gas pipelines accounted for 22 of the 26 pipeline-related deaths in 1999, according to preliminary figures in the NTSB report that was issued last week. This compares to 17 deaths from gas pipelines in 1998. Fatalities on hazardous liquid pipelines also rose in 1999 - from one to four. Overall, however, pipelines accounted for a mere fraction of the 43,986 persons that were killed in transportation-related accidents in 1999. In comparison, highway accidents were responsible for 41,611 deaths last year; roadway/railway crossing mishaps, 402 deaths; rail accidents, 805 deaths; marine accidents, 853 deaths; and aviation mishaps, 691 deaths.

True Quote announced an alliance with Cap Gemini Ernst & Young to provide customers with information technology consulting, as well as system and business integration services. In addition, the companies intend to license truequote.com's advanced trading platform to the global marketplace, including turnkey solutions for other exchanges desiring real-time bid-ask systems. These services will be provided to clients under the "TQ Trade Solutions" brand name. "This alliance will expedite the deployment of integrated solutions beyond the box, allowing us to provide powerful and cost- effective products to our customers," said True Quote President and CEO Dennis Crum. True Quote develops and operates independent electronic energy trading platforms and portals. These systems provide virtual trading communities for market participants to communicate and transact in an efficient, real-time environment. The truequote.com application architecture is devoted to an open-access, broker-assisted model that allows equal access to all qualified market participants. Currently, PG&E National Energy Group, APB Energy, Inc., Cap Gemini Ernst & Young, EnFORM Technology LLC and Microsoft Corp. are the principal companies working together to develop and promote truequote.com. The technology has been developed using the latest distributed application design and development principles, as outlined in Microsoft's Distributed Internet Application Architecture (Windows DNA). For more information visit the company's website at www.truequote.com or call Lee Ann Zoeller at (800) 327-1499.

Allegheny Power and PJM Interconnection signed an agreement to develop a new electric transmission system affiliation that is designed to expand the Mid-Atlantic energy market. It will lead to a new area in the PJM market known as PJM West. The terms of the agreement will be filed Oct. 16 with FERC. Through the affiliation, PJM will expand its regional scope and demonstrate the ability of its energy market and congestion management systems to function over multiple control areas. Allegheny Power will satisfy the FERC's independence requirement for its transmission system operations while continuing to pursue the development of a large, regional, independent transmission entity. The arrangement will for the first time expand the PJM system management concepts beyond a single control area with the potential to result in a significantly larger energy market. The timeline set out in the agreement includes negotiation for a definitive contract to be completed by February and implementation by Dec. 15, 2001. Under the PJM West concept, an office would be created and staffed and the PJM West Transmission Owners would transfer monitoring and functional control of their transmission systems to PJM. Allegheny Power delivers energy to three million people in Maryland, Ohio, Pennsylvania, Virginia, and West Virginia. PJM is an independent system operator, administering almost eight percent of the country's electric power, with a pooled generating capacity of more than 58,000 MW and a membership of more than 190.

Coastal Corp. announced that Engage Energy U.S., L.P. has changed its name to Coastal Merchant Energy, L.P., which coincides with the split of the Engage Energy joint venture by participants Coastal and Westcoast Energy. Effective on Oct. 3, the operations were divided into separate entities which are owned and operated solely by each company. Coastal Merchant Energy, which handles up to 3.5 Bcf/d, appointed James C. Dyer IV as president and CEO. "Coastal Merchant Energy, L.P. will continue to provide a full spectrum of energy services, including natural gas marketing and trading, electricity trading and sales, energy management services, structured storage and transportation-related services, structured power and management services, and energy risk management services," said David A. Arledge, CEO of The Coastal Corp. "We will undoubtedly benefit from the further integration of our merchant activities with Coastal's asset-based businesses."

Tulsa, OK,-based Home-Stake Oil & Gas Co. and Cortez Oil & Gas headquartered in Plano, TX, announced they have entered into a definitive merger agreement in which Cortez will purchase all of Home-Stake's outstanding shares from its shareholders for $11.00 per share. The two exploration and production companies will become one pending approval by Home-Stake shareholders, and other customary closing conditions. Both sets of directors have already approved the action, and the companies expect to have the deal closed by the end of the year. Home-Stake Oil & Gas was founded in 1917.

Constellation Power Source said it plans to build an 800 MW, combined-cycle power plant in Seguin, TX, located between San Antonio and Austin. Commercial operation of the Rio Nogales Power Project is slated to begin in June 2002. Rio Nogales is the fourth power plant Constellation has announced it will build this year as the company continues to seek opportunities to meet customer demand in national wholesale power markets. Constellation Power Source President Charles W. Shivery noted the Austin-San Marcos-San Antonio region of Texas is one of the fastest growing areas in the U.S. The $340 million plant will feature a combined-cycle facility with three natural gas turbines. Site clearing began for the Rio Nogales project in July 2000.

Hoping to benefit in both efficiency and cost savings, Compaq Computer Corp. inked an agreement with Enron Corp.'s Enron Energy Services, a deal in which Enron will manage the electricity, natural gas and energy-related management services for Compaq's facilities in Texas, California and Massachusetts. Financial details for the five-year agreement were not disclosed. The deal between the two Houston-based corporations adds to the growing list of energy service management contracts Enron has inked during the past few years, which has ramped up this year. In early September, Enron Energy Services secured a 10-year $1 billion energy management service agreement with Starwood Hotels and Resorts Worldwide. The energy services arm of the marketing giant remains on track to reach its goal of $16 billion in agreements this year, nearly double 1999's total of $8.5 billion. That's up from $3.8 billion in energy agreements in 1998.

FuelCell Energy, Inc. announced yesterday that it has formed an alliance with Enron North America. The companies plan to work together to develop and market FuelCell Energy's Direct FuelCell products, focusing on state renewable and energy conservation programs. "Targeting state-sponsored renewable programs and energy conservation opportunities will accelerate the commercialization of our Direct FuelCell products in these 'early adopter' markets," said FuelCell Energy CEO Jerry Leitman. In connection with the deal, Enron has purchased $5 million in FuelCell Energy common stock and has the option to purchase up to 1.3 million more shares. Terms of the additional purchases have been negotiated between the companies and are contingent upon the sales of 55 MW of power generation utilizing FuelCell Energy products. "This transaction enables us to reach the developing markets for clean energy and renewable energy, which may be served through distributed generation products, such as fuel cells and other emerging technologies," said Dave Delainey, president and chief executive officer for Enron North America. Danbury, CT-based FuelCell, formerly Energy Research Corp., has developed a technology that eliminates external fuel processing to extract hydrogen from a hydrocarbon fuel. This results in a product whose cost, combined with high efficiency, simplicity and reliability, results in product advantages for stationary power generation. The company has developed Direct FuelCell power plants with nominal ratings of 300 kW, 1.5 MW and 3 MW.

Southern Company and subsidiary Southern Energy Inc. announced gross proceeds of $1.81 billion from the initial public offering of Southern Energy common stock and a concurrent securities offering yesterday. Southern Energy sold at $22 per share 66.7 million shares of common stock, which included 8.7 million shares sold after underwriters exercised an overallotment option. The gross proceeds to Southern Energy from the IPO were $1.467 billion. The 66.7 million shares of common stock represent 19.7% of the 338.7 million shares outstanding. Southern Energy also sold at $50 per security 6.9 million shares of convertible trust preferred securities, including 900,000 securities sold after underwriters exercised an overallotment option. The convertible trust preferred securities were priced to yield 6.25% with a conversion price of $27.50 per share. The gross proceeds to Southern Energy from the offering of the convertible trust preferred securities were $345 million.

Devon Energy said it has brought about 51 MMcf/d of new gas production on stream from two new wells on Eugene Island Block 156 offshore Louisiana in about 82 feet of water. Devon is the operator and has a 100% working interest. The wells were drilled in the second quarter and construction of a production platform and facilities was completed in August. Both wells are producing from about q 100-foot interval near 14,000 feet deep.

Constellation Power Source said it plans to build an 800 MW, combined-cycle power plant in Seguin, TX, located between San Antonio and Austin. Commercial operation of the Rio Nogales Power Project is slated to begin in June 2002. Rio Nogales is the fourth power plant Constellation has announced it will build this year as the company continues to seek opportunities to meet customer demand in national wholesale power markets. Constellation Power Source President Charles W. Shivery noted the Austin-San Marcos-San Antonio region of Texas is one of the fastest growing areas in the U.S. The $340 million plant will feature a combined-cycle facility with three natural gas turbines. The exhaust heat generated by the turbines will be captured and used to make steam to power a fourth unit, a single steam turbine. Site clearing began for the Rio Nogales project in July 2000, and multiple water supply sources for the plant are now being secured. The 30-acre site includes existing transmission lines that serve the San Antonio and Austin regional markets, the Dallas market to the north, and Houston and Corpus Christi markets to the east and south. The plant will also be able to serve the Lower Colorado River Authority's service area.

Conoco Inc. has agreed to use Planalytics' Weathernomics Gas Buyer, an Internet-based tool for natural gas buyers and sellers that suggests ways to reduce risk and exploit opportunities from weather-driven changes in gas prices. According to Planalytics, the tool does not forecast gas prices, but rather predicts the turning points and direction of gas price changes by combining long-range weather intelligence, American Gas Association inventory change forecasts, real-time Nymex futures contract pricing and proprietary technology. "The gas markets have been extremely volatile this year, and this is a tool that promises to help us see more clearly into the future direction of gas prices," said Jim Duncan, who manages gas market analysis for Conoco Gas and Power Marketing. From January to October 2000, the average year-to-date cost to buy natural gas at the month-end settlement price was $4.10 MMBtu. Over the same period, Planalytics estimates that the average cost using the Weathernomics tool was $3.41 MMBtu. Wayne, PA-based Planalytics now serves more than 120 corporate clients, including Dow Hydrocarbons and Resources, Cargill and Monsanto. Conoco is its first major energy client.

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