Peoples Energy added to its Texas exploration and production assets Tuesday, buying interests in five properties in South Texas and the upper Texas Gulf Coast region from a subsidiary of Magnum Hunter Resources for $33 million.

The acquired reserves, 99% of which are natural gas, are close to other Peoples Energy Production holdings and add more than 11 MMcf/d of net production, a substantial increase compared to Peoples’ fiscal 2002 production of 53 MMcfe/d. The package consists of 175 wells in five separate fields located in Webb, Zapata, Colorado and Duval Counties, TX.

“In addition to adding to our production base, the acquired properties provide the company with a number of low to moderate risk drilling and exploitation opportunities which extend our capital and development programs in the region,” said Peoples CEO Thomas M. Patrick.

Magnum Hunter said the divestiture, which represented less than 5% of its reserve base, brings its total sales of non-core properties this year to $93 million. Most of the properties sold were acquired in March through a merger with Prize Energy Co. Including sales currently being negotiated, Magnum Hunter is on target to close $100 million in sales this year. All of the net proceeds have been used to reduce debt.

The properties in this transaction are located in areas where Peoples already has operations and technical expertise, and can be easily integrated into its asset base and operations, said Steven W. Nance, president of Peoples Energy Production, which will operate four of the five acquired properties with an average working interest in the operated properties of 80%. Last year, the company bought South Texas reserves from Sierra 1996-I LP, an EnCap Investments affiliate, for $120 million. The acquired properties included interests in 28 oil and gas wells and 8,900 net acres of developed and undeveloped oil and gas leaseholdings, and brought Peoples’ reserves to about 130 Bcfe.

Exploration and production is one of five business units that make up Peoples Energy, which branched out from its traditional Chicago utility business. Peoples is a diversified energy company with operations in gas distribution, power generation, midstream services, retail energy services, and oil and gas production. It gas distribution business serves about one million retail customers in Chicago and northeastern Illinois.

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