In the ongoing attempt to finance its acquisition of the Empire State Pipeline, Buffalo, NY-based National Fuel Gas Co. said Wednesday that its Seneca Resources Corp. subsidiary has agreed to sell its southeast Saskatchewan oil properties for $80 million.

Seneca expects to record an after-tax loss in the range of $70-83 million related to the properties being sold, with $22.6 million ($0.28 per share) recorded during the second quarter. When the transaction closes in the fourth quarter, Seneca expects to record the remaining after tax loss of $50-60 million ($0.61-0.73 per share). Expected to be effective Aug. 1, the sale is scheduled to close by Sept. 30.

National Fuel said the after-tax proceeds from the sale will be used to pay down short-term debt. The sale of the southeast Saskatchewan properties is expected to reduce Seneca’s fiscal 2004 production by approximately 10 Bcfe.

“As we’ve discussed in the past, our desire to finance the acquisition of the Empire State Pipeline through the sale of timber properties and/or non-strategic assets precipitated a careful review of the economics of all of our non-regulated businesses, including certain oil and gas properties,” said National Fuel CEO Philip C. Ackerman. “Our southeast Saskatchewan properties were identified as a candidate for sale given their overall marginal contribution to earnings. Selling when oil prices are high maximized the proceeds and helped mitigate the impact on the balance sheet. While this sale represents roughly half of our Canadian assets, Seneca will remain active in Canada, primarily exploring for natural gas in Alberta and British Columbia.”

The company also reported that it expects to close its previously announced sale of timber properties later this week. Upon closing, the National Fuel will record an after-tax gain of approximately $102 million or $1.24 per share.

As a result of the timber and oil sales, the company reported that it is revising its fiscal 2003 earnings guidance from $1.65 to $1.75 per share to $2.00 to $2.10 per share including non-recurring items. In addition, National Fuel reaffirmed its fiscal 2003 earnings guidance before non-recurring items of $1.75 to $1.85 per share.

“Given our high depletion expense associated with the properties, the sale will have a minimal impact on fiscal 2004 earnings,” National Fuel said. For fiscal 2004, the company expects earnings to be in the range of $1.70 to $1.80 per share excluding non-recurring items. Including the impact of an expected one-time charge relating to pension obligations, earnings are expected to be in the range of $1.60 to $1.70 per share.

In early October, National Fuel entered into an agreement to acquire Empire from Duke Energy’s DEGT (Duke Energy Gas Transmission) subsidiary for $240 million (see Daily GPI, Oct. 4, 2002). The Empire pipe is a 24-inch diameter natural gas pipeline that originates at the United States/Canada border at the Chippawa Channel of the Niagara River, and extends easterly 157 miles from Buffalo, NY to near Syracuse, NY. The pipeline, which was constructed in 1992 and has been in service since 1993, has a design capacity of 525 MMcf/d. Empire delivers gas supplies to major industrial companies, power producers and utilities, including National Fuel’s utility segment.

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