Producer

Chicago-based Peoples Energy decided to eliminate the middle manthis week, purchasing an interest in 25 oil and natural gasproducing wells in South Louisiana and the Texas Gulf Coast regionfrom NBB Energy Partners LLP. The $18 million purchase makesPeoples Energy an operator of oil and gas properties for the firsttime in its history, with complete production responsibilities forthe purchased wells.

Seneca Resources Corp., the exploration and production arm ofNational Fuel Gas (NFG), announced yesterday that it will buy TriLink Resources for C$340 million including debt. The parties hopeto conclude the deal by June 15.

BP Amoco has become the latest producer to shell out big bucksto settle whistle-blower claims for underpayment of royalties onoil production during the past decade. It has agreed to pay $32million as part of a settlement with the Department of Justice(DOJ), joining the ranks of other oil producers – Mobil Oil ($45million), Oxy USA Inc. ($7.3 million), Chevron ($95 million) andConoco Inc. ($26 million). Two whistle-blowers alleged that BP andAmoco underpaid their royalties prior to their merger. Thecomplaint against BP and Amoco was filed in a federal court inLufkin, TX, where a number of other cases alleging underpayment ofroyalties on natural gas production are pending as well. The DOJalready has intervened in three civil lawsuits accusing affiliatesof ExxonMobil Corp., Shell Oil Co. and Burlington Resources Inc. of”knowingly undervaluing” their royalties on gas, and it hasindicated it is investigating other gas-royalty cases. The twowhistle-blowers who initiated the complaint against BP and Amocounder the False Claims Act will share more than $5.4 million of thesettlement proceeds.

With commodity prices soaring, first quarter producer earningsare coming in at record levels. Vastar Resources reported a massive307% increase first-quarter 2000 net income. Income was tallied at$77.4 million ($0.78 per diluted share), the company’s thirdconsecutive quarterly record, compared to $19 million ($0.19 perdiluted share) in 1Q99. Vastar’s gas production was down nearly 10%to 1,054 MMcf/d, but realized gas prices were up 57 cents to $2.19on average. Crude and condensate production came in at 46.0thousand barrels per day (Mb/d) down from 46.7 Mb/d in the sameperiod last year, but realized oil prices rocketed to $24.73 from$11.16. And gas liquids production increased to 20.8 Mb/d from 9.2Mbd in 1Q99, while realized liquids prices soared to $19.11 from$8.10.

An alliance with Canadian producer Canadian 88 Energy Corp. isgiving Duke Energy a greater presence in Canada and access to 100MMcf/d of gas production. Duke also will be optimizing Canadian 88gathering lines and about a dozen processing plants. Initially,Duke will be marketing about 100 MMcf/d of Canadian 88 production.

Financially troubled energy producer Coho Energy Inc. announcedthat after several modifications, its plan for a bankruptcyreorganization was approved earlier this month by the U.S.Bankruptcy Court for the Northern District of Texas. The confirmedplan is anticipated to begin March 31. Coho could not be reachedfor comment before press time.

Pioneer Natural Resources Co. of Dallas, Mariner Energy ofHouston, CNG Producing of New Orleans and Westport Oil and Gasparticipated in a deep-water Gulf of Mexico discovery on theDevil’s Tower Prospect in Mississippi Canyon 773, about 140 milessoutheast of New Orleans in 5,610 feet of water. A Pioneerspokesperson said the partners agreed to not disclose the type ofhydrocarbons discovered.

After suffering through a long period of low prices and thinmargins, exploration and production (E&P) companies appear tobe headed toward a period of success, a report published recentlyby Deutsche Banc Alex. Brown (Deutsche Banc) said. Strong gasprices, industry consolidation and probable low storage levels arethe main factors contributing the report’s bullish conclusions.

Pioneer Natural Resources Co. of Dallas, Mariner Energy Inc. ofHouston, CNG Producing Co. of New Orleans and Westport Oil and GasCo. participated in a deep-water Gulf of Mexico discovery on theDevil’s Tower Prospect in Mississippi Canyon 773, about 140 milessoutheast of New Orleans in 5,610 feet of water. A Pioneerspokesperson said the partners agreed to not disclose the type ofhydrocarbons discovered.