Calpine Corporation has revealed that it is evaluating strategic alternatives for its US natural gas assets, which may include a total sale in order to reduce its heavy debt burden.

The move to consider selling comes in the wake of a poor financial performance for the first quarter, which has worsened the company’s debt problem. For the three months ended March 31, 2005, losses increased to $168.7 million, a net loss per share of $0.38, compared to a net loss of $71.2 million, $0.17 per share, for the same quarter in the prior year.

Calpine’s natural gas assets are primarily located in the Sacramento Basin of California, south Texas and the Gulf of Mexico, with additional significant activity in Colorado, New Mexico and Utah.

As of December 31, 2004, the company had 389 billion cubic feet equivalent of proved gas reserves and its assets currently produce approximately 90 million cubic feet equivalent per day from 607 net wells. The power provider also operates 92 power plants, 73 of which run on natural gas.

Estimates suggest that selling its natural gas assets could earn Calpine up to $1 billion, which would make a significant inroad into its multi-billion dollar debt. Calpine said that net proceeds from any sale of the natural gas assets would be used in accordance with its existing bond indentures.