Following through on plans announced earlier this year after completing the purchase of Koch's gas liquids business, Oneok said Monday it sold its oil and gas production operations for $645 million to privately held, Dallas-based TXOK Acquisition Inc. The transaction, which includes 240 Bcfe of reserves in four fields in Oklahoma and Texas, is expected to close in October.
"With this transaction we will exit the oil and gas production business and will focus our attention on our other businesses, which include natural gas distribution, gas gathering and processing, pipelines and storage, energy services and natural gas liquids," said Oneok Chairman David Kyle.
When Oneok announced the $1.35 billion purchase of Koch's natural gas liquids business in May, Kyle said the company intended to finance the deal through a combination of non-strategic asset sales, cash and long-term debt.
The production operation is among the company's smaller assets. Oneok has among the largest midstream operations in the country and also is among the largest gas distribution companies, serving more than two million customers in Oklahoma, Kansas and Texas. In addition, it is the majority general partner of Northern Border Partners LP.
The production business segment had second quarter operating income of $16.5 million, versus $12 million in the same quarter last year. That compares with second quarter operating income of $41.7 million from gathering and processing, $14.7 million from pipelines and storage, $2.9 million from energy services and a $7 million loss from distribution operations.
Operating income from production during the second quarter increased $8 million because of higher prices and volumes. Natural gas production increased to 4.36 Bcf for the quarter, compared with 4.1 Bcf in the second quarter last year. Oil production increased to 86,000 bbls from 83,000 bbls in the second quarter last year.
The company's new gas liquids business is expected to generate $43 million in operating income this year, compared to $130 million from gathering and processing, $113 million from distribution, $131 million from energy services, and $65 million from pipelines and storage. Oneok previously said that it also expects to record a gain of $42 million this year on the sale of the production business.
As part of the sale, Oneok expects substantially all of the production employees will be offered positions with TXOK Acquisition.
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