Coastal EPS before extraordinary items up 31 percent for first half; Exploration and production group leads advance.

HOUSTON--(BUSINESS WIRE)-- July 23, 1996--The Coastal Corporation today reported that earnings before extraordinary items increased 16 percent in the second quarter to $66.1 million, or 58 cents per share, compared with $57.2 million, or 50 cents per share, during the same quarter a year earlier.

For the first half, corresponding amounts increased to $148.6 million, or $1.32 per share, compared to $114.8 million, or $1.01 per share for the same period a year earlier. This represents a 31 percent increase in earnings per share.

In addition, Coastal said that during the most recent quarter, it took advantage of an opportunity for early redemption of all $400 million of its 11-3/4 percent Senior Debentures. The one-time cost associated with this redemption is reflected in an extraordinary charge of $12 million, amounting to 11 cents per share.

Second-quarter net earnings after the extraordinary item were $54.1 million, or 47 cents per share.

"Coastal is on-track toward reaching its goal of increasing earnings per share by more than 15 percent this year," said David A. Arledge, Coastal's chief executive officer. "I am especially pleased with the performance of our Exploration and Production group, where lower costs and production volume increases coupled with stronger prices have resulted in dramatically improved profitability.

"Also important is the impact of our continuing efforts to improve Coastal's capital structure. For example, interest and debt expense has been reduced, and the redemption of the 11-3/4 percent Senior Debentures will result in a significant further reduction in these costs, boosting quarterly earnings for periods going forward.

"Meanwhile, the company continues to look for ways to deploy its assets so as to produce even greater earnings growth for shareholders. The previously announced proposed sale of our Coal group progressed well during the second quarter. Expressions of interest were received from a considerable number of prospective buyers, and two data rooms were recently opened to facilitate the process.

"Our intention is to further strengthen Coastal's balance sheet through the repayment of higher cost debt and other obligations and to provide the financial flexibility to accelerate our pursuit of opportunities in the company's other lines of business."

Coastal's overall operating profit was $172.8 million for the second quarter, compared with $186.0 million for the same period a year earlier. For the six months, operating profit was $371.4 million compared with $370.4 million a year earlier.

On a segment basis, Coastal's Exploration and Production group reported the most impressive gain, posting an operating profit of $41.0 million for the quarter, compared to $4.5 million in the same period a year earlier. For the six months, operating profit was $55.1 million compared to $7.4 million a year earlier. Coastal said the results reflect improved production volumes resulting from Coastal's ongoing successful drilling program as well as improved prices as compared with last year. Coastal's Exploration and Production results also benefited by $9 million during the quarter from net effects of hedging and asset monetization activities.

Average production of natural gas was 293.6 million cubic feet per day during the first six months, compared with 228.1 million cubic feet per day a year ago. Net production of crude oil and condensate for the six months averaged 12,623 barrels per day, compared with 12,023 barrels per day for the same period in 1995.

Operating profit for Natural Gas was $73.8 million in the second quarter compared with $83.3 million in the same period a year earlier. These results, while in line with expectations, reflect the reduced rates and margins associated with the changing, more competitive marketplace. Six-month operating profit was $199.9 million compared with $215.8 million for the same period a year earlier.

Coastal's natural gas marketing subsidiary increased sales to 622.6 billion cubic feet for the first half, up from 580.1 billion cubic feet for the same period a year earlier. Total throughput for Coastal's wholly owned natural gas pipelines was 1,135.0 billion cubic feet for the first six months, compared with 1,073.1 billion cubic feet last year.

Refining, Marketing and Chemicals reported second-quarter operating profit of $23.5 million compared with $72.3 million during the same period a year earlier. Six-month operating profit was $58.3 million compared with $96.5 million a year earlier. Second-quarter comparisons reflect a one-time $17 million pretax gain during the second quarter a year ago relating to the sale of interest in certain liquid-pipeline assets, and lower paraxylene prices during the 1996 quarter.

Overall results of other activities in the Refining, Marketing and Chemicals segment were approximately level with last year's results, despite lower industry-wide refining margins in the company's principal operating areas. This reflects the benefits of our on-going programs to upgrade facilities to produce more higher-value products at lower cost. Coastal made significant progress during the second quarter toward construction of facilities which will double sulfur-extraction capabilities at the company's refinery in Corpus Christi, Texas.

Also, the company's results benefited from operation of a new 31,000-barrel-per- day delayed coker which was dedicated in April at the company's largest refinery in Aruba. Overall, sales of refined products, including products purchased from others, averaged 891,000 barrels per day through the first six months of 1996, compared with 827,000 barrels per day a year ago.

The Coal segment's operating profit for the quarter was $23.9 million, compared with $25.7 million for the same period a year earlier. For the six months, Coal posted operating profit of $42.3 million compared with $50.0 million for the same period in 1995. Lower quarterly results for the coal group resulted from temporary outage at a major customer's plant. In addition, Coal has experienced deferral of certain other deliveries during the first half which should be made up later this year. Coal sales from subsidiary-owned mines were 8.0 million tons for the six months, compared with 8.4 million tons for the same period a year earlier.

The company's newest business segment, Power, reported second-quarter operating profit of $7.8 million, compared with $100,000 for the same period a year earlier. For the first half, Coastal Power posted a $10.2 million operating profit in 1996, compared with a loss of $100,000 for the same period in 1995. Because Coastal Power's strategy often involves joint ownership with other partners, some earnings from power projects are not included in operating profit but are reflected as equity investment earnings in "other income - net." Therefore, Coastal views the performance of this business on the basis of earnings before interest and taxes, or operating profit plus equity earnings. For the second quarter, Power reported earnings before interest and taxes of $11.4 million, compared with $3.6 million during the same period a year earlier. For the six months, earnings before interest and taxes were $18.9 million, compared with $7.7 million a year earlier.

Coastal Power continued to expand during the second quarter, building new plants and developing opportunities. Power announced that a joint venture in which it holds an equity interest will build, own and operate a $150 million, 140-megawatt gross output, natural-gas-fired power generation plant in Quetta, Pakistan. Also during the second quarter, Coastal Power completed a 53-megawatt expansion of its existing 91-megawatt capacity power plant in Nejapa, El Salvador; neared completion on construction of a 76-megawatt power plant in Suzhou, China; and began construction on a 72-megawatt power plant in Nanjing, China. In addition, negotiations continued on a number of other projects around the world.

The Coastal Corporation (NYSE: CGP) is a Houston-based energy holding company. Coastal has consolidated assets of more than $10 billion and subsidiary operations in natural gas marketing, transmission and storage; petroleum refining and marketing; oil and gas exploration and production; chemicals; independent power production; and coal. -0-

            THE COASTAL CORPORATION AND SUBSIDIARIES

                                     (millions except per share)
                                   Three Months         Six Months
                                ------------------  ------------------
PERIODS ENDED JUNE 30             1996      1995      1996      1995
---------------------           --------  --------  --------  --------
Operating revenues            $2,938.0  $2,613.5  $6,033.1  $5,231.8
Operating costs and expenses
 Purchases                    $2,252.4  $1,880.6  $4,612.9  $3,777.8
 Operating expenses              406.8     453.4     842.5     896.3
 Depreciation, depletion &
  amortization                    106.0      93.5     206.3     187.3
                               --------  --------  --------  --------
                               $2,765.2  $2,427.5  $5,661.7  $4,861.4
Operating profit               $  172.8  $  186.0  $  371.4  $  370.4
Other income - net                 18.3       6.9      36.4      24.3
Other expenses
 General and administrative        14.1      13.7      28.6      27.9
 Interest and debt expense         95.1     102.9     190.7     212.5
 Taxes on income                   15.8      19.1      39.9      39.5
                               --------  --------  --------  --------
                              $  125.0  $  135.7  $  259.2  $  279.9

Earnings before extraordinary
 item                          $   66.1  $   57.2  $  148.6  $  114.8
Extraordinary item (a)         $  (12.0) $     --  $  (12.0) $     --
Net earnings                   $   54.1  $   57.2  $  136.6  $  114.8
Dividends on preferred stock   $    4.4  $    4.4  $    8.7  $    8.7
Net earnings available to
 common stockholders           $   49.7  $   52.8  $  127.9  $  106.1
Earnings per share
  Before extraordinary item    $    .58  $    .50  $   1.32  $   1.01
  Extraordinary item           $   (.11) $     --  $   (.11)       --
                               --------  --------  --------  --------
       Net                     $    .47  $    .50  $   1.21  $   1.01
Average common and common
 equivalent shares                106.3     105.3     106.1     105.3

Operating profit (loss) by
   segment
 Natural gas                   $   73.8  $   83.3  $  199.9  $  215.8
 Refining, marketing and
  chemicals                        23.5      72.3      58.3      96.5
 Exploration and production        41.0       4.5      55.1       7.4
 Coal                              23.9      25.7      42.3      50.0
 Power                              7.8        .1      10.2       (.1)
 Other                              2.8        .1       5.6        .8
                               --------  --------  --------  --------
    TOTAL                      $  172.8  $  186.0  $  371.4  $  370.4

(a) Loss on early extinguishment of debt.

CONTACT: Steve Eames, The Coastal Corporation, 713/877-6733