In the aftermath of selling its bulk energy marketing arm,Consolidated Natural Gas (CNG) said it plans to shift its focus toCNG Producing, its New Orleans-based E&P arm, which willsignificantly increase over-all oil and gas production next year asthree key offshore pipeline projects come into operation. Much ofthe increase is expected to come from its production activities inthe Gulf of Mexico.

CNG Producing anticipates a 15% rise in production in 1999, upfrom an increase of 5% to 7% expected for this year. Productionwill begin its jump in the fourth quarter of 1998 as the Nautilusand Nemo projects in the Gulf come on line, along with thecompletion of the second phase of the Neptune project.

Nautilus and Nemo will have a combined daily capacity of 20,000b/d of oil and condensate and 180 MMcf/d of natural gas; Neptune’sdaily capacity will be 35,000 b/d of oil and 32 MMcf/d of gas. CNGholds a working interest of 68.5% in Nautilus, 100% in Nemo and 50%in Neptune.

The decision to focus on production-relatedactivities comes afew months after the parent company announced plans to sell its CNGEnergy Services Corp., its energy marketing arm, to Sempra EnergyTrading, one of the largest marketers and traders of energyproducts in the nation.

At the time, CNG recognized it had a “very fine E&Poperation,” and that that was “a better place for us to concentratethan in the wholesale energy marketing business,” noted CNGspokeswoman Cynthia Navadeh. “We saw that wholesale energymarketing was going to be increasingly a business where size andscale were incredibly important.” The sale of the capital stock ofCNG Energy Services to Sempra, which was estimated at $48 million,was completed on July 31st.

Last year, CNG produced 199 Bcf equivalent of natural gas, whichwas a company record, CNG said. This year the company aims to reacha 150% replacement rate, making it the fourth straight year that ithas achieved a replacement rate of more than 100%. For 1999, CNG’sgoal is to have E&P activities contribute up to 40-50% of thecompany’s overall income. In the second quarter this year, theproducing sector contributed $28 million in pretax operating incomewhile the distribution arm added $14 million to the bottom line.That compares with the $45.6 million in pretax operating income inthe second quarter for its pipeline division. Both the producingand distribution income figures were substantially lower this yearbecause of low oil prices and a warm winter respectively while thepipeline income increased substantially “chiefly because of theresolution of certain regulatory contingencies.”

CNG reported it plans to continue expanding its E&P businessby developing deep-water projects in the Gulf; developinginternational projects; making acquisitions; and keeping productioncosts among the lowest in the industry.

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