Coastal’s earnings for the third quarter were up 40% over thesame period in 1999, boosted by higher gas production volumes andhigher commodity prices in its oil refining and marketingbusinesses. Earnings for the quarter were $144.8 million, or 65cents per share, compared with $102.1 million, or 47 cents a sharea year ago. Excluding merger related items, earnings for theHouston-based company were $146.9 million, or 66 cents per share.First Call/Thomson Financial had predicted 60 cents/share.

“Our ongoing strategies for growth and profitability continue toproduce excellent results,” CEO David A. Arledge said, noting that thecompany had “more than doubled” its earnings from refining, marketingand chemicals.” Coastal and El Paso announced a $16 billion mergerdeal in January (see Daily GPI, Jan. 19).

Coastal’s exploration and production unit earnings were up 84%,with increased natural gas production up 33% and crude oil andcondensate production increasing 41%. Natural gas productionaveraged 876.8 MMcf/d for the third quarter, up from 658.8 MMcf/dfor the third quarter of 1999.

Arledge said that Coastal had long predicted there would be astrong demand for natural gas, and “that is now a reality.” Thecompany’s natural gas strategy was centered on the market demand,he said, and because of those expectations, Coastal had completed”several low-cost acquisitions of producing properties with highdevelopment potential.”

Stirling Pack, vice president of investor relations, said thatthe natural gas division had become a “large predictable cash flowgenerator” for Coastal, with increased earnings from gathering,processing and marketing offsetting lower earnings from itsregulated pipeline operations. Those earnings were down, said Pack,because of lower rates in re-negotiated contracts andtransportation costs.

“Our natural gas segment again delivered sizable earnings with agrowing contribution from non-regulated operations,” said Arledge.”We have more than quadrupled our natural gas processing capacitiessince the 1999 third quarter.”

The company also increased its power earnings by 54%, andincreased its net generating capacity by 58%, mostly related toseveral new projects said Pack. Earnings before interest and taxeswas $100.8 million, compared with $65 million for the 1999 thirdquarter. Coastal had set a target of $100 million for the entireyear, said Pack, and the third quarter allowed the company to”surpass an important target.” Net generating capacity for thethird quarter was 2049 MW, up 58% from 1,295 MW for the same periodlast year.

“Since the third quarter of last year, we have begun operationsat two new facilities, including a 265 MW facility in Colorado, andincreased ownership in the Midland Cogeneration Venture Ltd.Partnership (MCV) in Michigan,” Arledge said.

Pack said that the quarterly results reflected the highcommodity prices in the market, but added that the company’soverall earnings “reflect what we have anticipated for a longperiod of time.” He said he “envisions the high growth goingforward.”

Developing the company’s future prospects and other propertiesnow in its inventory in North America and elsewhere “should providedouble digit production increases for the next two years,” saidArledge. Growth is expected to be concentrated in the domesticmarket, where there are “numerous opportunities to expand along itsextensive natural gas systems, strengthening the company’s overalloperations.”

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