Coho Energy announces major acquisition.

DALLAS--(BUSINESS WIRE)--Nov. 11, 1994--Coho Energy Inc. (NASDAQ-NMS:COHO, TSE:CEE) today announced the signing of a definitive agreement to acquire Interstate Natural Gas Co. ("ING").

ING is a privately held natural gas producer, gatherer and pipeline company operating in Louisiana and Mississippi. Its largest shareholder is The Morgan Stanley Leveraged Equity Fund II L.P.

ING has an estimated 25 year net proved reserve life of 85 billion cubic feet of natural gas, 90 percent of which is classified as proved developed producing. Substantially all of ING's reserves are located in the Monroe field in northern Louisiana. ING, through its subsidiary Mid Louisiana Gas Co., also owns a strategic 170 mile interstate pipeline that runs from the Monroe field to Baton Rouge and more than 1,000 miles of gas gathering lines within the field. During the first nine months of 1994, ING's net daily gas production was 20 million cubic feet and pipeline throughput averaged 80 million cubic feet per day.

Consideration to be paid by Coho for the acquisition of ING is $20 million cash, 2.775 million shares of Coho common stock, shares of a newly created series of preferred stock having an aggregate stated value of $16.125 million, and the assumption of a working capital deficiency of approximately $5 million, which is subject to finalization. The total consideration is estimated to be $55 million. The preferred stock is generally entitled to receive quarterly dividends at a coupon rate equal to the prime lending rate per annum.

Coho may, at its option, redeem the preferred shares for a cash amount equal to the stated value plus a premium or, within nine months of the closing of the transaction and, subject to shareholder approval, exchange the preferred shares for 3.225 million shares of common stock. Coho intends to finance the cash portion of the transaction and has received a commitment letter from Banque Paribas for the entire amount of the bank financing. Closing of the transaction is subject to customary closing conditions and is expected by the end of November 1994.

Management of Coho believes that the acquisition of ING offers numerous benefits: - ING's long lived natural gas reserves and steady pipeline

earnings will provide a balance to Coho's crude oil operations

and should reduce the volatility of the company's results. - Strengthened expertise in pipeline operations should create

attractive new investments opportunities in both the company's

traditional Mississippi operations and in ING's existing

Louisiana focus area. - The company's combined resources should be significantly

enhanced, which will allow Coho to accelerate exploitation of its

substantial undeveloped reserves. - The incremental cash flow and earnings generated from the ING

properties should enable Coho to expand its existing program in

the Mississippi Salt Basin and capitalize on other acquisition

opportunities in Coho's focus areas. - The transaction should be both asset and cash flow positive per

common share in the future.

Jeffrey Clarke, president and chief executive officer of Coho, stated, "With the ING acquisition, Coho achieves a number of strategic corporate objectives. By adding a second concentrated area of operation in the same geographic region and balancing our hydrocarbon mix with gas, Coho is able to maintain its corporate strategy of focusing resources and expertise, while adding new balance, strength and financial flexibility."

Coho Energy is a Dallas-based independent oil producer focusing on exploitation of underdeveloped oil properties in the Mississippi Salt Basin.

CONTACT: Coho Energy Inc., Dallas

Jeffrey Clarke or Anne Marie O'Gorman, 214/991-9493