El Paso Corp. is teaming up with investment banker Lehman Brothers and drilling operator Nabors Industries Ltd. for about $500 million worth of drilling activity in two unspecified locations in the next nine to 12 months.

Lehman will contribute $250 million in exchange for 50% of the net profit, while Nabors will contribute $100 million in exchange for 20% of the profits. Once their payouts are met, El Paso said their net profits interest will convert to an overriding royalty interest in the wells. The remaining 30% of the drilling costs will be funded by El Paso as part of its existing 2003 and 2004 capital budget.

Under the terms of the agreements, all parties will have a right to cease further investment with 30 days notice.

El Paso said in a statement that 54% of the estimated $500 million total capital will be invested under agreements with El Paso Production Co. and El Paso Production GOM Inc., and the balance invested with El Paso Production Oil & Gas USA LP.

“We are excited about this opportunity to have Lehman and Nabors participate in our drilling program,” said Rod Erskine, president of El Paso’s production segment. “These agreements allow us to accelerate the drilling of our inventory within our existing capital spending budget.”

Gene Isenberg, Nabors’ CEO, said El Paso’s prospects inventory “is known to be of high-quality, and they have an excellent track record of execution in the E&P business. We welcome the opportunity to broaden our relationship.”

The Nabors companies own and operate almost 600 land drilling and 933 land workover and well-servicing rigs worldwide. Offshore, It operates 44 platforms, 17 jack-ups, and three barge rigs in the domestic and international markets. Nabors also markets 30 marine transportation and support vessels, mostly in the U.S. Gulf of Mexico.

©Copyright 2003 Intelligence Press Inc. Allrights reserved. The preceding news report may not be republishedor redistributed, in whole or in part, in any form, without priorwritten consent of Intelligence Press, Inc.