NGI The Weekly Gas Market Report
San Jose, CA-based Calpine Corp. continued its buying/buildingspree Tuesday, acquiring 205 Bcf of natural gas reserves in threedifferent North American locations for $206 million, bringing theaggressive merchant electric generating plantdeveloper/owner/operator’s portfolio of total proved serves to 430Bcf. The move followed Monday’s announcement of Second quarterearnings increase of 176%, compared to 2Q of last year, and a new$2.5 billion revolving credit facility with a consortium of banksto pay for Calpine’s large portfolio of power projects in theUnited States
With the additional acquisition of proven gas reserves Calpinewill boost its daily production from 130 to 150 MMcf/d. At fullproduction, the total reserves can fuel 800 to 900 MW ofcombined-cycle, gas-fired power generation, Calpine officials said.
“Our goal is to control up to 25% of the gas supplies needed forour power plants,” said Bill Highlander, a Calpine vice president.”So as we open up new plants we’ll need more supplies. We’ll belooking to make even larger gas purchases in the future.”
The supplies bought most recently are in the Gulf of Mexico,Western Canada and a combination of Colorado and onshore Gulf Coastreserves from a Houston-based company. There are five drillinglocations in the Gulf, with current production of approximately 17MMcf/d, increasing to 23 MMcf/d by year-end 2000.
The Canadian reserves are spread across 180,000 acres in theprovinces of British Columbia, Alberta and Saskatchewan, with 1,300wells expected to produce 38 MMcf/d now increasing to 42 MMcf/d byyear-end 2000. Piceance Basin reserves in Colorado and the onshoreGulf Coast supplies are expected to double from 10 to 20 MMcf/d bythe end of this year. The assets include 126 wells, 79,000 acres ofundeveloped lands and 195 potential drilling locations withhistorical success rates of more than 90%, Calpine said.
“This is an important step for Calpine as we continue to advanceour 40,000 MW power generation program,” said Charles Chambers,Calpine’s business development vice president. “In addition toenhancing our in-depth fuels capabilities, these acquisitionsprovide us access to three strategic gas markets and strengthen ourposition as a premier power provider.”
In its earnings announcement Monday, Calpine reported secondquarter net income of $51.7 million, compared with $18.7 millionbefore extraordinary charges for the second quarter last year.Diluted earnings-per-share were up 136 % to 37 cents/share from 16cents for the same period last year. Revenue increased 85 % to$363.7 million from $196.6 million a year ago.
The latest construction line of credit, which was also announcedMonday, involves a consortium of banks, including Bank of NovaScotia and Credit Suisse First Boston, as lead arrangers. Thefour-year construction facility will be refinanced in thelonger-term capital markets prior to its maturity. Calpine said itexpected to finalize this latest construction finance vehicle bythe end of September.
Along with a $1 billion credit line announced last November,Calpine will have a total of $3.5 billion as revolving creditfacilities to pay for its expansion program.
“Portfolio financing significantly lowers the cost of capitalfor Calpine and dramatically decreases the time required to financeindividual projects,” Calpine officials said in announcing thelatest one.
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