Nabors Industry & El Paso Enter Drilling Joint Venture

El Paso Corporation has entered into agreements with a wholly owned subsidiary of Lehman Brothers, the global investment bank, and a wholly owned subsidiary of Nabors Industries Ltd. that will collectively result in an additional $350 million of drilling activity over the next nine to 12 months.

Lehman will contribute 50 percent of an estimated $500-million total cost to develop two specified packages of wells in exchange for a 50-percent net profits interest (cash proceeds available after royalties and operating costs have been paid), and Nabors will contribute 20 percent in exchange for a 20-percent net profits interest in such wells. Once a specified payout is achieved, Lehman's and Nabors' net profits interest will convert to an overriding royalty interest in the wells for the remainder of the wells' productive lives. The remaining 30 percent of the $500 million of capital will be contributed by El Paso as part of its existing 2003 and 2004 capital budget. Under the terms of the agreements, all parties have a right to cease further investment with 30 days notice.

It is anticipated that 54 percent of the estimated $500 million total capital will be invested under agreements with El Paso Production Company and El Paso Production GOM Inc. and the balance invested with El Paso Production Oil & Gas USA, L.P.

"We are excited about this opportunity to have Lehman and Nabors participate in our drilling program," said Rod Erskine, president of El Paso's production segment. "These agreements allow us to accelerate the drilling of our inventory within our existing capital spending budget."