Exhibit 99.1
NEWS
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KeySpan Corporation For Immediate Release
Contacts: Investors Media Relations
George Laskaris Andrea Staub
718.403.2526 516.545.5052
516.824.1241 (pager)
KeySpan Reduces its Ownership in Houston Exploration from 55% to 24%
through an Exchange for a Houston Exploration Subsidiary
KeySpan Corporation (NYSE:KSE) announced today that the company plans to enter
into an agreement with The Houston Exploration Company (NYSE:THX) under which
KeySpan will transfer to Houston Exploration 10.8 million shares of Houston
Exploration common stock in exchange for 100% of a wholly owned Houston
Exploration subsidiary, Seneca-Upshur Petroleum, Inc. At the time of the
exchange, the subsidiary will hold all of Houston Exploration's Appalachian
Basin assets and an amount of additional cash calculated so as to equalize the
value of the operating business and the Houston Exploration shares being
exchanged.
The transaction is consistent with the business strategies of both KeySpan and
Houston Exploration. As previously discussed, KeySpan does not consider Houston
Exploration to be a strategic holding and has been working to restructure its
stake in the company in a manner that will be beneficial to both KeySpan and
Houston Exploration.
"This transaction represents an important step to restructuring our interest in
Houston Exploration. We welcome Seneca-Upshur into the KeySpan family and intend
to grow this business through additional investments in energy related assets
that support our core businesses," said Robert B. Catell, KeySpan's Chairman and
Chief Executive Officer. "This transaction allows the Company to further
concentrate on executing its strategy of growing its core energy businesses."
The parties have ascribed a value of $60 million dollars to the Appalachian
Basin producing assets. At December 31, 2003, these properties had proved
reserves of 50.5 billion cubic feet of natural gas equivalent (Bcfe), or
approximately 7 percent of Houston Exploration's total proved reserves. The
Appalachian assets include properties originally acquired and owned by a
predecessor company to KeySpan in the early 1970's to strengthen its gas supply
strategy. At the time of the transaction, it is expected that Seneca-Upshur will
have cash in excess of $350 million based on the initial offering price
assumptions set forth below. This KeySpan subsidiary plans to use the cash to
make additional investments in energy related assets.
Of the 10.8 million shares that Houston Exploration expects to receive from
KeySpan, Houston Exploration intends to retire approximately 4.6 million shares
and plans to offer 6.2 million shares of common stock in a public offering.
The value of the exchange will be dependent on the ultimate public offering
price of the Houston Exploration shares in the offering. Assuming an initial
public offering price of $45.01 (which is the May 21,2004, NYSE last sale for
Houston Exploration), KeySpan will receive a per share value equal to $40.09,
before expenses. The value per share received by KeySpan will increase or
decrease, as the case may be, by approximately $0.51 per share for a
corresponding $1.00 increase or decrease in the public offering price of $45.01
per share.
This transaction will reduce KeySpan's ownership interest in Houston Exploration
to approximately 24% from the current 55% level with the number of outstanding
shares being reduced from approximately 17.4 million shares to approximately 6.6
million shares. In addition, three of KeySpan's five designated directors on the
Houston Exploration Board will resign at the closing of the transaction, and
KeySpan will retain the right to nominate two of the remaining seven directors
on the Houston Exploration Board.
Consummation of this transaction is subject to each party's satisfaction with
the public offering price. Accordingly, no assurance can be given that the
transaction will be completed. The underwriters will be granted an option to
purchase an additional 930,000 shares of common stock to cover any
over-allotments. If this over-allotment is exercised in full, KeySpan's
ownership interest in Houston Exploration will be reduced to approximately
22.5%.
This press release shall not constitute an offer to sell or the solicitation of
an offer to buy nor shall there be any sale of these securities in any state in
which such offer, solicitation or sale would be unlawful prior to registration
or qualification under the securities law of any state.
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A member of the Standard & Poor's 500 Index, KeySpan Corporation (NYSE:KSE) is
the fifth largest distributor of natural gas in the United States and the
largest in the Northeast, operating regulated gas utilities in New York,
Massachusetts and New Hampshire, serving 2.5 million customers. These
customer-focused businesses are complemented by a portfolio of service companies
which offer energy-related products, services and solutions to homes and
businesses. KeySpan is also the largest electric generator in New York State. We
own approximately 6,600 megawatts of generating capacity, providing power to 1.1
million customers of the Long Island Power Authority on Long Island and
supplying approximately 25 percent of New York City's capacity needs. In
addition to these assets, KeySpan has strategic investments in natural gas
exploration, production, pipeline transportation, distribution and storage, and
Canadian gas processing. KeySpan has headquarters in Brooklyn, New England and
Long Island. For more information, visit KeySpan's web site at
www.keyspanenergy.com.
Certain statements contained herein are forward-looking statements, which
reflect numerous assumptions and estimates and involve a number of risks and
uncertainties. For these statements, we claim the protection of the safe harbor
for forward-looking statements provided by the Private Securities Litigation
Reform Act of 1995. There are possible developments that could cause our actual
results to differ materially from those forecast or implied in the
forward-looking statements. You are cautioned not to place undue reliance on
these forward-looking statements, which are current only as of the date of this
filing. We disclaim any intention or obligation to update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. Among the factors that could cause actual results to differ
materially are: general economic conditions, especially in the Northeast United
States; available sources and costs of fuel; volatility of energy prices in a
deregulated market environment as well as in the source of natural gas and fuel
used to generate electricity; potential write-down of our investment in natural
gas properties when natural gas prices are depressed or if we have significant
downward revisions in our estimated proved gas reserves; federal and state
regulatory initiatives that increase competition, threaten cost and investment
recovery and impact rate structure; our ability to successfully reduce our cost
structures; implementation of new accounting standards; the degree to which we
develop unregulated business ventures, as well as federal and state regulatory
policies affecting our ability to retain and operate those business ventures;
our ability to identify and make complementary acquisitions, as well as the
successful integration of those acquisitions; inflationary trends and interest
rates; and risks detailed from time to time in reports and other documents filed
by us with the Securities and Exchange Commission.
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