Duke Energy North America announced the sale of its ownership interest in Duke Energy McClain to NRG Energy. Duke Energy McClain is the holder of a 77% interest in the McClain energy generating facility, a 500 MW merchant power facility under construction in Oklahoma. Terms of the transaction were not disclosed. The McClain facility is a combined-cycle, natural gas-fired merchant generation facility located near Newcastle, OK. Construction of the facility began in March 2000, with commercial operations set to begin this summer. Duke Energy McClain closed on the sale of a 23% interest in the facility to the Oklahoma Municipal Power Authority in March 2001. The sale of the McClain facility is expected to close in the third quarter of 2001.

A new study by John S. Herold Inc. found that despite a 150% increase in capital spending to $50.7 billion, reserve replacement costs dropped a dramatic 8% to 4.73/boe last year. Reserve replacement rates set all time records, with U.S. E&P companies replacing 272% of oil production and 251% of gas production, the firm said in its report, “The Herold 34th Annual Reserve Replacement Cost Analysis–Top 50 U.S. Companies.” The $30 billion jump in capital spending was fueled by a $20 billion increase in proved acquisitions and a $10 billion spurt in finding and development expenditures. BP was the biggest U.S. spender ($12.7 billion), followed by Phillips Petroleum ($6.7 billion) and Anadarko Petroleum ($6 billion). U.S. gas reserves rose 17% to 102 Tcf, said Nicholas D. Cacchione, Herold senior vice president and director of research. “Record reserve replacement rates were due not only to strong acquisition activity but also to drillbit additions.” The Herold 50 replaced its natural gas production through the drillbit for the first time in at least five years and replaced 163% of oil production through drilling. Despite the torrent of spending, U.S. reserve replacement costs fell to a 5-year low. Finding and development costs dropped to $5.17/boe while proved acquisition costs slipped to $4.38/boe. The only “blemish” was a 15% uptick in production costs to $4.14/boe, due largely to higher price sensitive production taxes, Herold said. For information about Herold’s study, call (203) 847-3344 or email accounts@herold.com.

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