An alliance with Canadian producer Canadian 88 Energy Corp. isgiving Duke Energy a greater presence in Canada and access to 100MMcf/d of gas production. Duke also will be optimizing Canadian 88gathering lines and about a dozen processing plants. Initially,Duke will be marketing about 100 MMcf/d of Canadian 88 production.

Canadian 88 CFO Don Gardner said the company is working torealign its management and will be sitting down with Duke midstreamemployees to review operation of its gathering and processingassets. “It’s just part of our ongoing plan to re-vitalize thiscompany. The midstream business is something that we’ve agreed toinvestigate jointly. That will be done over the next three months.”

Duke — through subsidiary Duke Energy Hydrocarbons (DEH) —will gain about 25 million common shares of Canadian 88 atC$2/share and after the investment will hold about 20% of thecompany. “Our investment in Canadian 88 adds value to Duke Energy’snetwork business by enhancing our access to attractive natural gassupplies from both western Canada and the Sable Island region,”said Brad Karp, DEH president. “This transaction highlights DukeEnergy’s wholesale portfolio management capabilities anddemonstrates our ability to align natural gas supply to our growingportfolio of power generation and commodity energy positions.”

Greg Noval, current Canadian 88 CEO, said Duke’s investmentallows his company to exploit ploys in which it has investedheavily at the front end. Duke’s cash also will allow Canadian 88to pursue more exploration opportunities. Canadian 88 has gas playsin some of the highest impact regions of North America includingthe Alberta Foothills and the Sable Island deep-water areas.Canadian 88 has a highly talented technical staff that has one ofthe most successful track records in the western sedimentary basin.In January Canadian 88 announced a significant gas discovery in theFoothills of Alberta in the Bearberry area about 80 miles northwestof Calgary.

In Canada, Duke Energy provides industrial energy services, hasone of the largest gas marketing and trading operations and througha joint venture operates a sizable Canadian midstream business.Duke Energy also is part owner and an operator of the Maritimes& Northeast Pipeline that delivers Sable Island gas to market.

As part of the agreement, Joseph Pritchett III, DEH executivevice president, will resign that position and become president andCEO of Canadian 88, and the Canadian 88 board of directors will bereconstituted. James D. Raymond will remain chairman of the newboard and Noval, current Canadian 88 president and CEO, and JohnPanneton will remain board members. Joining the board in additionto Pritchett will be Don Gardner, current Canadian 88 chieffinancial officer, and John Burns Q.C., a partner at the law firmof Bennett Jones. Duke Energy will appoint two directors to theboard and an additional independent director will be jointlyappointed taking the new Canadian 88 board of directors to a totalof nine.

Pritchett said it is too soon to tell exactly what Duke will bedoing to optimize the Canadian 88 gathering and processing assets.He also said he could not speculate on future growth in productionand marketed gas volumes.

Joe Fisher, Houston

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