Peoples Energy Acquires Reserves in East Texas

Peoples Energy's subsidiary, Peoples Energy Production, has acquired oil and gas properties in east Texas from a private entity for approximately $9.5 million. The acquired properties, which will be operated by the Company, are located in close proximity to the existing Peoples Energy Production holdings in east Texas.

The acquisition includes approximately 5,300 gross acres in the heart of the Cotton Valley/Travis Peak gas trend. The Company estimates the proved undeveloped reserves acquired are approximately 10 BCFE with an additional 10-20 BCFE of low-risk, upside reserve potential. Initial development of the acquired reserves, 96% of which are natural gas, will begin in fiscal 2005 with anticipated capital spending on these properties of between $10 to $15 million of the 2005 capital program.

"The acquisition of these properties increases our inventory of low risk drilling opportunities and will help us to achieve our production growth target for fiscal 2005," said Thomas M. Patrick, chairman, president and CEO of Peoples Energy.

"We are extremely pleased to acquire such quality properties with a substantial inventory of drilling opportunities at a very attractive cost," said Steven W. Nance, president of Peoples Energy Production. "This acquisition builds on our successful entree into east Texas, a prolific producing province of longer life, low risk reserves, which was accomplished during fiscal 2004."

Peoples Energy, a member of the S&P 500, is a diversified energy company comprised of five primary business segments: Gas Distribution, Power Generation, Midstream Services, Retail Energy Services, and Oil and Gas Production.