HOUSTON, TEXAS, June 14, 2001—El Paso Corporation (NYSE: EPG), through a wholly-owned Canadian subsidiary, today announced it has entered into an agreement to acquire Canadian-based Velvet Exploration Ltd. (Toronto:VLV) for C$8.15 per share in cash for an equity value of US$228 million plus the assumption of debt estimated at US$52 million.

The transaction has been unanimously approved by both companies' boards of directors and will be conditioned upon at least 66-2/3 percent of Velvet's shares being tendered under the offer, regulatory approval and other customary conditions. Velvet has agreed that it will not solicit competing offers and will pay a C$15 million (approximately US$10 million) non-completion fee in certain circumstances.

"The acquisition of Velvet provides El Paso with a strong platform to build a significant production business in western Canada," said Rod Erskine, president of El Paso Production Company. "Velvet has a large acreage position which can be effectively developed using our proven technical skills. Further, we are very enthusiastic about the prospect of adding Velvet's high quality employee group to our team."

Based on El Paso's evaluation of Velvet's reserves, in consultation with El Paso's independent reserve evaluators, Velvet has 172 billion cubic feet equivalent of net proved reserves (after royalties, on a 6:1 basis). Approximately 59 percent of the reserves are natural gas. Current average daily net production is 54 million cubic feet equivalent (MMcfe). Velvet has approximately 65 employees.

The total acquisition cost per proved thousand cubic feet equivalent (Mcfe) is US$1.16, after allocating value to Velvet's 403,000 net acres of undeveloped land, its seismic position and tax pools. El Paso expects the transaction to be immediately accretive to 2001 and 2002 earnings and cash flow per share. The acquisition will not materially affect net capital spending for El Paso Production in 2001. The transaction will be recorded using purchase accounting.

The board of directors of Velvet will recommend that shareholders accept El Paso's offer. All of Velvet's senior management and directors have agreed to tender and not withdraw their shares under the offer. El Paso intends to mail the offer to Velvet shareholders on or before June 25, 2001, with a closing date expected in late July.

Lehman Brothers is acting as financial advisor to El Paso on this transaction and will act as soliciting dealer manager for the offer.

El Paso Corporation, the largest and most broadly based natural gas company in the world, spans the energy value chain from wellhead to electron. With an enterprise value in excess of $50 billion, El Paso is a leader in every phase of the natural gas industry. The company owns and operates a significant portion of the North American natural gas delivery grid, operates the fastest growing, most sophisticated energy merchant group, and is the nation's third largest natural gas producer. El Paso, a leader in risk management techniques, is focused on maximizing shareholder value, transforming existing markets, and speeding the development of new markets. Visit El Paso at www.elpaso.com.

This release includes forward-looking statements and projections, made in reliance on the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The company has made every reasonable effort to ensure that the information and assumptions on which these statements and projections are based are current, reasonable, and complete. However, a variety of factors could cause actual results to differ materially from the projections, anticipated results or other expectations expressed in this release. While the company makes these statements and projections in good faith, neither the company nor its management can guarantee that the anticipated future results will be achieved. Reference should be made to the company's (and its affiliates') Securities and Exchange Commission filings for additional important factors that may affect actual results.