Dallas-based Crosstex Energy LP said last week it will pay $500 million for El Paso Corp.'s processing and liquids business in South Louisiana, which includes 2 Bcf/d of processing capacity, 66,000 bbl/d of fractionation capacity, 2.4 million bbl of underground storage and 140 miles of liquids transport lines.
The sale includes El Paso's interests in the Eunice, Pelican, Riverside, Sabine Pass and Blue Water processing and fractionation facilities. El Paso said it also is in the process of selling its interest in a processing plant in South Texas, which would complete its midstream asset sales.
Crosstex said it will finance the acquisition with 50% debt and 50% equity. It also expects the acquisition to be immediately accretive to earnings.
El Paso expects to report a pretax gain of $400 million on the sale. The deal, which is expected to close in the fourth quarter pending regulatory approval, has already been approved by the boards of both companies.
Since the middle of March, El Paso has announced $1.2 billion in asset sales out of a target of $1.2-1.6 billion. The sales are part of the company's plan to reduce its debt net of cash to about $15 billion by the end of this year.
Crosstex also announced its second quarter earnings last week. Midstream natural gas sales moved 22% higher, but income fell nearly 28%, to $1.7 million (14 cents/share), down from $2.4 million (19 cents) in 2Q2004. Revenue was $630.9 million, well ahead of $516.1 million reported a year ago. Earnings fell short of Thomson First Call estimates, which had expected, on average, for the company to earn 17 cents/share. Crosstex's profit on energy trading activities fell to $399,000 in the quarter, compared with $826,000 a year ago. In the first six months of 2005, energy trading profit fell to $444,000 from $1.246 million in the first half of 2004.
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