KN Names Assets to be Sold, Reports Loss for 2Q
KN Energy has been cleaning house and started a corporate yard
sale yesterday with tags on everything but the kitchen sink.
Although it wouldn't estimate the total value of the assets being
sold, the list is long and encompasses properties and assets in
nearly every division of KN's operations.
It includes the Midcon Texas Pipeline system, which is a large
Texas Gulf Coast intrastate that transported 611 trillion Btu of
gas last year; the Wattenberg Gathering and Processing operations
in Colorado; its retail energy and services operations under
en*able and Orcom, which together hold about 10 agreements with
utilities representing about three million potential customers; KN
Field Services and Compressor Pump & Engine; all of KN's
operations in Mexico, including the Monterrey Pipeline, the
distribution system in Hermosillo and the Igasmex marketing
partnership interest; and certain West Texas transmission assets.
The partial gutting of the company represents an attempt by the
board to partially recover financially before its merger with
Kinder Morgan is completed later this year. KN's second quarter
financial results illustrate the need. The company reported a $2.4
million net loss ($0.04/share) compared to $16.7 million in net
income ($0.24/share) in 2Q98. It reported a $0.22 operating loss
per diluted common share from ongoing operations. The loss was
partially offset by the sale of interests in the HIOS and UTOS
offshore pipeline systems and the reimbursement of costs related to
the terminated merger with Sempra Energy, which contributed
earnings per diluted common share of $0.15 and $0.03, respectively.
Upstream gathering and processing showed a return to positive
operating income for the first time since the fourth quarter of
1997. But operating income from midstream transportation and
storage operations was down $26 million from 2Q98 to $65.6 million.
And downstream retail and marketing took a major hit with an
operating loss of $16.7 million compared to operating income of
$5.6 million for the same period in 1998. The loss resulted
primarily from reduced margins on capacity held by KN's commodity
marketing group on the Pony Express Pipeline, the company said.
Additionally, en*able's loss during the quarter was $2.5 million
greater than its loss in 1998.
In addition to the asset sales, KN announced continued changes
in top management positions. Along with former CEO Larry Hall, who
left suddenly when the $830 million Kinder Morgan merger was
announced last month, the following executives have left the
company: CFO Clyde McKenzie; Mort Aaronson, chief marketing officer
and president and COO of KN Services and en*able; and John DiNardo,
executive vice president of KN Gas Gathering.
"We have started to execute our previously stated strategy to
return to profitability, reduce our debt load and strengthen our
management team," said interim Chairman and CEO Stewart Bliss.
"These actions include identification of non-strategic assets for
divestiture, corporate reorganization and cost reductions. Moving
forward, we will remain focused on customers, shareholder value and
building a dynamic management team."
On the positive side, KN noted several projects that could help
pull the company out of its current ditch, including the Thunder
Creek Gas Services joint venture with Devon Energy in Wyoming's
Powder River Basin, the proposed Horizon Pipeline from Chicago to
southern Wisconsin, recent marketing deals with power plants in
Illinois and new power projects in Colorado.
KN's stock price gained ground slightly following the
announcements to end the day up 2.83% at $20.44/share. That
compares to a 52-week low in June of nearly $12/share.
©Copyright 1999 Intelligence Press Inc. All rights reserved. The
preceding news report may not be republished or redistributed, in
whole or in part, in any form, without prior written consent of
Intelligence Press, Inc.