Colonial Gas Company Enters Into Gas Supply Resource Management Agreement With Midcon Gas Services Corp.

LOWELL, Mass.--(BUSINESS WIRE)--Oct. 14, 1997--Colonial Gas Company (NYSE:CLG) and MidCon Gas Services Corp. today announced that they have entered into a one year agreement to jointly manage most of Colonial's portfolio of gas supplies, interstate pipeline transportation and off-system storage resources. The objective of the arrangement is to lower costs for Colonial's full service natural gas customers by maximizing the off-system revenue opportunities associated with the portfolio resources during off-peak periods. Colonial estimates that the savings generated from this arrangement will represent more than a 50% increase over Colonial's own optimization efforts with these resources during the twelve months ending August 31, 1997.

Under this arrangement, MidCon will act as Colonial's exclusive agent for scheduling Colonial's day-to-day gas supply and storage refill requirements. In doing so, MidCon will remarket designated portfolio resources which are available during periods when demand for gas by Colonial's own customers does not require the full utilization of such resources.

Colonial Senior Vice President John Harrington commented that "Colonial is continuously pursuing alliances and opportunities which will generate savings and improve efficiency in this increasingly-competitive natural gas industry. The intent of this working relationship with MidCon is to lower prices to our customers and to increase gross margins by optimizing the value of Colonial's resources."

Harrington added, "this arrangement also allows Colonial to focus on emerging regulatory changes while preserving the quality of service and reliability that our customers have come to expect. MidCon provides significant experience and expertise in gas resource management and our long-standing relationship gives us great confidence that this arrangement will increase the value of service to our customers." Harrington noted that MidCon was selected from eight quality companies from which Colonial had solicited proposals.

MidCon's Vice President of Sales and Marketing, Robert E. Adrian said, "Colonial has been a valued customer for years and we appreciate the opportunity to offer an enhanced service to Colonial's business. Portfolio management is a core competency at MidCon Gas Services, and we believe Colonial's strategic decision to expand the nature of our relationship will prove to be very complementary."

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Colonial Gas Company, a Massachusetts corporation formed in 1849, is primarily a regulated natural gas distribution utility. The Company serves over 149,000 utility customers in 24 municipalities located northwest of Boston and on Cape Cod. Through its subsidiary, Transgas Inc., the Company also provides over-the-road transportation of liquefied natural gas, propane and other commodities.

MidCon Gas Services provides natural gas storage, supply and marketing. Enhanced services include asset and risk management. Its parent firm, MidCon Corp. has various divisions engaged in natural gas transmission, storage, processing and marketing as well as trading and electric power marketing. MidCon Corp., headquartered in the Chicago suburb of Lombard, Ill., is a unit of Occidental Petroleum Corporation.

CONTACT: Colonial Gas Co.

Brian Norris, 978/322-3435

or

MidCon Gas Services Corp.

Shelli C. Carter, 713/963-3224