The Houston Exploration Co, and KeySpan Energy concluded theirreview of strategic alternatives for Houston Exploration and saidKeySpan will retain its 64% equity position in the productioncompany for the foreseeable future.

Under a pre-existing credit arrangement, approximately $80million in debt owed by Houston Exploration to KeySpan Energy willbe converted into common equity April 1. The conversion price isbased on the average closing prices of Houston Exploration commonstock for the 20 trading days ending three days before conversion.Based on the current market price of Houston Exploration commonstock, KeySpan’s interest in Houston Exploration would increase toabout 70% after the conversion.

“After having spent a number of months reviewing manyalternatives available to us, including a possible sale of all orpart of Houston Exploration, we have decided to maintain our equityposition in Houston Exploration,” said Robert B. Catell, KeySpanCEO. “Houston Exploration is a premier exploration and productioncompany that continues to produce excellent operating results thatgenerate significant net income, the bulk of which goes directly toour bottom line. In today’s markets, there is a profound disconnectbetween the equity market valuation of energy stocks, operatingperformance and commodity price outlook. In these circumstances, webelieve that we are far better served by holding on to ourinvestment in Houston Exploration.”

Joe Fisher, Houston

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