Demonstrating its intent to build a strong production portfolio,Peoples Energy recently announced a purchase of 50% interest in SanJuan Basin coalbed methane producing territories from KochIndustries for $47 million. The purchase not only introduces theChicago-based company as a player in the basin, it also doubles theamount of its fledgling production business from 15 MMcf/d to 30MMcf/d.

“[Our] production operations are small right now, but we have along-term goal of moving onto the list of top 50 productioncompanies,” said a Peoples Energy spokeswoman. “Our goal is toreach the 350 to 400 Bcf reserve level. We’re going to focus onlow-risk onshore areas that generate steady income and allow us tohedge production as well.” She did not give a timeframe for theexecution of this plan.

Thomas M. Patrick, COO of Peoples Energy, said, “This mostrecent acquisition enhances shareholder value by providinglong-life reserves while also generating cash and near-term incomefor Peoples Energy.”

Koch still owns the other 50% interest and will remain theoperator of the territories. The gas produced from the basin can bedelivered to growing markets throughout the western United Statesand expanding electric generation markets in the Midwest. PeoplesEnergy Production, the production subsidiary performing thepurchase, has spent more than $90 million in asset acquisitionsince 1998. Production from the San Juan Basin properties will betransported through Williams’ and El Paso’s interstate pipelinesystems.

“This purchase aligns with our strategy to acquire and invest inproperties with proved producing reserves and the potential forenhancement through drilling programs,” said Kevin J. O’Connell,vice president of Peoples Energy and head of its oil and gasproduction unit. “With this transaction, we have invested over $90million in the oil and gas production business since 1998.”

©Copyright 1999 Intelligence Press Inc. All rights reserved. Thepreceding news report may not be republished or redistributed, inwhole or in part, in any form, without prior written consent ofIntelligence Press, Inc.