Phillips Petroleum Co. and Conoco Inc. reported Tuesday that shareholders of both companies have separately voted to approve the proposed merger of equals. The companies said that the merger is expected to be completed in the second half of 2002, pending expiration of the waiting period under the U.S. Hart-Scott-Rodino Act and other customary closing conditions. Preliminary results from the votes indicate that more than 96% of the Conoco shares voted were cast in favor of the merger, while approximately 97% of the Phillips shares voted were also favorable. Once complete, the merged company will be headquartered in Houston and will be called ConocoPhillips. The combined company is expected to achieve annual recurring cost savings of at least $750 million within the first full year after the completion of the merger. “Today’s vote is an important step in combining Phillips and Conoco, and we appreciate the support from our shareholders,” said Jim Mulva, Phillips CEO. “We believe the combination of these two companies will create significant value for all stakeholders and provide excellent financial and operational growth opportunities.” Mulva will serve as president and CEO of ConocoPhillips, while Archie W. Dunham, currently chairman and CEO of Conoco, will serve as chairman. “The combination creates an extraordinary set of complementary capabilities, drawing on the talented management and core competencies of both Conoco and Phillips,” Dunham said. He added that the new company will have strong and stable earnings and cash flow as a result of its portfolio diversification and a larger relative presence in more politically stable regions of the world. First announced in November 2001, the merger valued at $53.5 billion would create the third-largest integrated U.S. energy company based on market capitalization and oil and gas reserves and production (see NGI, Nov. 26, 2001).

Due to the number of responses and suggestions regarding FERC’s current online systems, the Commission said that it has issued a notice of intent to modify its Commission Issuance Posting System (CIPS), Records Information Management System (RIMS) and its Docket Sheet System. In the notice, the Federal Energy Regulatory Commission said it plans to merge the three systems into one new system called the Federal Energy Regulatory Records Information System (FERRIS). While replacing its older systems with “newer, more robust technology,” FERC said the new system will ultimately provide users with a single point of access with “better search capability” along with other functions. The Commission added that it intends the new system to result in increased performance and reliability for the Commission staff as well as for public users. FERC said it will make FERRIS available for testing and comment before switching over to using the system entirely. A test version of the system will be made available to the public through www.ferc.gov in mid-March. The Commission said it expects to have the full production version of FERRIS available in early April. “The Commission is making every effort to incorporate all functions currently in the existing systems into FERRIS,” the FERC notice said. The first demonstration to help familiarize the public with the new system took place last Tuesday. The second and last scheduled demonstration is set for today (March 18) at 2 p.m. in room 3M-2A&B at FERC. To pre-register for the demonstration, send an e-mail with name, company affiliation and the date of the demonstration to contentmaster@ferc.gov, or fax to (202) 208-2320. You can also call the Public Reference Room at (202) 208-1371, then press 0.

PanCanadian Energy Corp. and Alberta Energy Co. reported that their merger has received a green light from the Competition Bureau of Canada. The receipt of a “no action” letter satisfies one of the key approvals required to complete the proposed merger to form EnCana Corp. “Momentum continues to build towards the shareholder meetings on April 4,” said AEC President Gwyn Morgan. The proposed merger is still subject to approvals by shareholders, the Court of Queen’s Bench of Alberta and the expiry of the waiting period under the Hart Scott Rodino Act in the United States.

Magnum Hunter Resources and Prize Energy Corp. said shareholders of both companies overwhelmingly approved their merger. The final closing of the merger is on schedule for today. The merger would create a company with a combined enterprise value of $1.2 billion. The companies, both headquartered in the Dallas area, have total proved reserves of 1 Tcfe and combined daily production of about 232 MMcfe. The company, which would have a reserve mix of 55% natural gas and 45% oil, would keep the Magnum Hunter name. Under terms of the merger, Prize shareholders would own 49% of the combined company and Magnum Hunter shareholders would own 51%.

NorthWestern Corp. has renamed its Montana Power unit NorthWestern Energy. Northwestern completed its purchase of Montana Power earlier this year and will combine all of its utility businesses in Montana, South Dakota and Nebraska under the new company. NorthWestern Energy provides electricity, natural gas and energy-related services to more than 590,000 customers. The company has one of the largest energy delivery platforms in the northern tier states with a combined electric system that includes 26,000 miles of transmission and distribution lines and associated facilities covering two-thirds of Montana and eastern South Dakota. The company’s natural gas service system includes more than 7,500 miles of pipelines and storage facilities in Montana, South Dakota and central Nebraska. “Changing to a new name and logo will be seamless for our customers,” said CEO Mike Hanson. “Customer service telephone numbers, bill payment programs and procedures will remain the same.”

Finding success not only in Canada, but in its ever-growing international base, Calgary-based Talisman Energy Inc. increased its proved reserves by 26% in 2001 to 1.5 Bboe, and probable reserves increased by 27% to more than 990 MMboe. The company replaced 304% of production (including acquisitions) at a cost of C$7.08/boe. Excluding acquisitions, the replacement rate was 221%, at a cost of C$5.34/boe. Overall, proved conventional oil and liquids reserves were up 17% to stand at a million bbl, with proved natural gas reserves up 37% to 4.5 Tcf. Talisman’s proved reserve life index also rose to 9.8 years, compared to 7.9 years at the end of 2000. The company also said it had 721 gross wells drilled at a success rate of 88%. “Including acquisitions, the company replaced almost 400% of its international production at a cost of C$4.86/boe,” said CEO Jim Buckee. “Talisman now has over 500 million barrels of proved international oil reserves, half of which are in the North Sea, and a growing international gas presence, with 1.9 Tcf of proved reserves. Canadian proved reserves increased by 13% with the addition of 148.7 MMboe (including acquisitions) at a cost of C$11.75/boe. Talisman’s Canadian finding and development costs increased to C$9.06/boe in 2001 because of industry-cost pressures, it said. It spent almost C$500 million on drilling in Canada during 2001 (an increase of 32%) to drill 339 net wells (down from 367 net wells a year earlier). Also in Canada, Talisman added 367 Bcf (124% of production) of proved natural gas reserves through drilling, revisions and transfers and an additional 308 Bcf through net purchases. Estimated finding and development costs for natural gas were C$1.50/Mcf in 2001. In Canada alone over the past five years, Talisman added 1.4 Tcf through drilling and 879 Bcf through acquisitions.

Williams disclosed that its former telecommunications business, Williams Communications Group, intends to exercise a purchase right for certain assets for which Williams is guarantor. WCG expects Williams to pay for the fiber-optic network and associated facilities, pursuant to the guarantee, which was negotiated in September 1999, in return for unsecured debt or equity. Williams CEO Steve Malcolm said the action already was factored into earnings, balance sheet and liquidity numbers reported in filings and presented to investors during the past week. “In the event we need to perform on this obligation, we have developed more than sufficient financial capacity to do so,” he said. The issue involves credit support of $750 million for a lease agreement related to the communications assets. The expected closing date for the transaction is April 1. Williams Communications said the move will help preserve its flexibility to achieve a previously-announced comprehensive balance sheet restructuring. The proposed restructuring is intended to support uninterrupted business service and, at the same time, minimize any impact to customer and vendor relationships. Discussions with the company’s banks and others have been expanded to include multiple restructuring options, including the use of a negotiated Chapter 11 reorganization as a restructuring mechanism. The company may decide to pursue that alternative to allow for a more orderly process that maximizes enterprise value.

Avista Utilities filed a request with the Oregon Public Utility Commission (OPUC) to reduce natural gas rates because of lower wholesale prices. The filing requests an overall decrease of 15.3%, or $12.5 million in revenues. Avista’s filing proposes an effective date of April 2. The utility serves about 80,000 natural gas customers in Oregon. If approved, the rate reduction will save the average residential customer (60 therms per month) about $8.90, or 15.05%, each month. Larger-use commercial and industrial customers in Oregon will see a higher percentage decrease because of lower base rates for these customers. In a separate filing, Avista proposed a low-income rate assistance program intended to reduce the energy burden among those residential customers least able to pay natural gas bills. If approved by regulators, about $200,000 would be collected through a 0.5% tariff on residential natural gas sales and used to provide assistance to Avista’s low-income customers demonstrating need. The proposal is in response to the Oregon legislature’s authorization for rate assistance for low-income natural gas customers and is based on a program already in place for Avista customers in Washington.

Infinity Inc. more than doubled its acreage position with new leasehold interests on 106,000 net acres of coalbed methane properties located in the Sand Wash Basin in the states of Colorado and Wyoming. The name of seller and the terms of the proposed transaction were not disclosed. “These properties are located between our Antelope and Pipeline coalbed methane projects, and this should result in significant logistical advantages for Infinity and its oilfield services subsidiary when development activities get underway,” noted CEO Stanton E. Ross. “Infinity will retain the deep gas rights, as well as the coalbed methane rights, on these properties, which may open the door for Infinity to partner with another energy company to explore and develop both coalbed methane and the deeper gas horizons.”

Centrica plc and NewPower Holdings Inc. announced the early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 regarding Centrica’s acquisition of NewPower. A subsidiary of Centrica, Windsor Acquisition Corp., is buying NewPower’s outstanding common stock for $1.05 per share, or about $130 million in cash. The deal will make Centrica by far the largest retail energy marketing company in North America with about 4.3 million retail customers.

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