Pengrowth Energy Trust of Calgary has agreed to acquire Calpine Corp.’s oil and gas holdings in British Columbia for US$248 million (C$387 million).

The sale includes about 171 Bcfe of natural gas proved reserves (net of royalties), with current production of 37 MMcf/d of gas and 9,500 bbl/d of oil and natural gas liquids. Fifty-two percent of the reserves are natural gas. Calpine also said it “retains a call” on these supplies for future purchase of oil and gas production. The deal was effective last July 1 and is scheduled to close on or about Oct. 1.

About 60% of the deal will be paid in cash, Calpine said. The British Columbia assets represent approximately 157,000 net developed acres and 380,000 net undeveloped acres of petroleum and natural gas rights. A statement by Pengrowth said the “assets will constitute a new focus area for Pengrowth, augmenting its current interests in the Alberta sector of the Western Canadian Sedimentary Basin and in the Sable producing gas fields located offshore Nova Scotia.” Pengrowth cited the “high productivity nature of the acquired assets under present pricing conditions,” which should enable the trust to increase distributions.

Pengrowth cited “a very high level of current cash flow, with annualized cash flow of approximately C$100 million prior to capital expenditures,” based on the first six months of 2002. The company will sell off some of the BC assets being acquired in the Fort St. John area to Progress Energy Ltd. for $25.4 million. Progress will acquire interest in seven properties with combined production of approximately 1,000 boe/d and 3 MMboe of proven oil and gas reserves. In addition Progress will acquire a 50% interest in approximately 61,000 net acres of undeveloped rights in the Fort St. John area outside of Pengrowth’s core areas of Squirrel, Oak, Montney and Rigel. Progress will commit to spend a minimum of $10 million on the exploration of the joint Pengrowth/Progress lands over the next 18 months and it is anticipated that up to 15 wells could be drilled on Pengrowth interest lands during this period.

This sale “enhances Calpine’s liquidity and financial strength,” according to Calpine CFO Bob Kelly. “It is also consistent with Calpine’s strategy of increasing our cash position while retaining the long-term value of our core power generation business.”

Reducing costs and selling assets are both continuing as Calpine seeks to accumulate a “cash cushion” of $2 billion by the end of this year, said Ron Walter, a Calpine executive vice president, speaking at a Merrill Lynch energy financial forum in New York City Wednesday. Calpine has a goal of selling $650 million in assets this year, so the latest transaction should put the company at about the US$480 million mark. Calpine also has been paring back its list of new power plant projects on the drawing board, and is working on sale-lease-back arrangements on 11 peaking units and one baseload plant under development in California.

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