Westcoast, Coastal Split Engage Energy Assets

To prepare for El Paso Energy's looming takeover of Coastal Corp., Westcoast 
Energy Inc. and Coastal are splitting up Engage Energy, their three-year-old 
marketing venture, with each retaining a half interest in the Houston-based 
gas marketer. The split should be completed by the end of the week. 

Coastal, headquartered in Houston, will merge with El Paso Energy in a $16 
billion deal by the end of the fourth quarter (see Daily GPI, Jan. 19), and 
company officials said that several transactions needed to be completed 
before the merger could be finalized, including dismantling the Engage 
venture. Vancouver-based Westcoast and Coastal each own 50% interest in 
Engage, which has 12 regional offices throughout North America and employs 
300. One of the top North American gas marketers, it purchases natural gas 
from every producing basin in North America, and trades electricity within 
all NERC regions. Engage estimates it will add another 1 Bcf/d to its natural 
gas deliverability by the end of this year. 

NGI ranked Engage in 12th place in its 1999 North American power marketers 
list, dropping from eighth place in 1998, losing about 15.2% in sales. Engage 
reported a sales volume of 5.6 Bcf/d last year, compared with 6.6 Bcf/d the 
previous year. It sold an estimated 2,100 Bcf of natural gas in 1999. 

Westcoast and Coastal formed Engage in 1997 to offer a full spectrum of 
energy services, including natural gas marketing and trading, electricity 
trading and sales, energy management services, structured storage and 
transportation-related services, structured power and management services and 
energy risk management services. The companies said that those services would 
continue as before. There is expected to be little impact on either company's 
existing asset valuation. 

Under the restructuring plan, Westcoast will retain the Engage Canadian 
business entity and certain natural gas and power activities in the United 
States. Westcoast also will retain the right to use the Engage Energy name 
and will continue to conduct business from Calgary, Southfield, MI and other 
U.S. locations. Coastal will retain the U.S. business entity, with 
headquarters in Houston. 

"By taking full ownership of our natural gas and electricity marketing and 
trading functions, we can better capitalize on the knowledge, experience, 
track record and infrastructure that we have built over the past three 
years," said Michael Phelps, Westcoast CEO. 

When Coastal merges with El Paso, it will be joining a company that already 
has a strong gas marketing arm. NGI ranked El Paso seventh on its list of gas 
marketers in 1999, noting that it traded 6.7 Bcf/d of natural gas last year. 
It also was ranked seventh in 1998.