As mergers and acquisitions attempt to live up to the pace set during 2000, Denver-based MarkWest Hydrocarbon Inc. reported it has more than doubled natural gas reserves with the $51 million acquisitions of Leland Energy Canada Ltd. and Watford Energy Ltd. — two privately owned exploration and production companies based in Calgary. The companies’ current management, which directs both Leland’s and Watford’s operations, will remain intact, MarkWest said.

The two acquired businesses will add 15 MMcf/d and 190 b/d of oil to MarkWest’s current net production of 6 MMcf/d. According to a recent reserve report, Leland and Watford will add net proved reserves of 26.4 Bcfe to MarkWest’s current portfolio of 63 Bcfe.

The acquisition also adds more than 300 drillable locations on 106,000 acres in central and southern Alberta. The existing wells have been drilled approximately 3,500 feet deep and are expected to carry a reserve life of five to seven years. MarkWest said its capital expenditure budget is expected to exceed $40 million over the next 24 months.

The company said it expects the acquisition to be accretive to both earnings and EBITDA in 2002 and beyond. “Unused capacity under our increased borrowing arrangement will be approximately $25 million to $30 million,” said John Fox, CEO of MarkWest. “Absent further acquisitions, we expect cash flow to fully fund ongoing capital expenditures.

“This is a major new core area for MarkWest in a prolific gas-producing basin. Not only will it more than triple our equity gas production, but the future development potential over the next four to five years is outstanding,” added Fox. “We are very impressed with our Canadian management team and are very pleased they will remain with the company. Finally, this not only provides a fee-based midstream opportunity, but it also further reduces the more volatile Appalachian liquids margin business to less than 25% of our cash operating income.”

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