Northwest Natural Gas announced the sale of its Canadian oil andgas exploration subsidiary, Canor Energy Ltd, for C$87.5 million incash to Celsius Energy Resources Ltd, a Canadian exploration andproduction company owned by Questar Corp.

Canor owns and operates more than 800 wells located primarily inAlberta, as well as in British Columbia and Saskatchewan, and hasproven reserves estimated at 61.1 Bcfe. The acquisition alsoincludes another 6.2 Bcf equivalent of reserves consideredprobable, about 150,000 net undeveloped acres principally in theprovince of Alberta, and a substantial seismic inventory.

“This sale allows us to re-deploy our financial investment inCanor into an aggressive growth strategy for NW Natural’s corebusiness,” said NW Natural CEO Richard G. Reiten. “That includesexpansion of our local natural gas distribution and underground gasstorage assets.” Northwest is in the process of expanding its Mistgas storage facility by 1 Bcf of working gas capacity every twoyears for the next six to a total of 14.5 Bcf/d in 2006.Deliverability is expected to grow by about 105 MMcf/d to 425MMcf/d.

Reiten said that although NW Natural’s customer base has beengrowing at more than three times the national average, it has ampleroom to gain additional market share in its gas distributionbusiness. The company’s customer base grew by more than 5% in 1999,marking the company’s 10th consecutive year of customer growthexceeding 4% per year. The average growth rate for natural gas LDCsacross the country is 1.5%.

“We succeeded in carrying out our plan to rapidly grow thebusiness and then, when the time was right, either spin it off orsell it to another company,” said Canor CEO Rick Harper. “This is agood time for us to exit, given the high crude oil and natural gasprices, and our ability to use the proceeds productively in ourcore utility business.”

Gary L. Nordloh, CEO of Questar’s exploration and productionsubsidiaries, said the acquisition “provides a broader operatingand financial base for Questar’s Canadian activities, particularlyin the areas of exploration and exploitation.”

Canor was created in 1990 when NW Natural bought a number of oiland gas properties from Gulf Canada. The subsidiary tripled in sizefrom 1995 to 1998, when it merged with its joint venture partner,Southlake Energy Inc., a subsidiary of NiSource Inc. Portland,OR-based NW Natural serves 500,000 customers in northwest Oregonand southwest Washington. It operates its Mist underground gasstorage facility in Columbia County, northwest of Portland, and twoliquefied natural gas plants in its service area.

Rocco Canonica

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