With the purchase of the sprawling Anadarko pipeline system fromEl Paso Field Services for $35 million last week, Midcoast EnergyResources is rapidly becoming a major Midcontinent region pipelinecompany.

The Anadarko system, which stretches through Beckham and RogerMills counties, OK, and Hemphill, Roberts and Wheeler counties, TX,is made up of more than 696 miles of primarily 16-inch and 20-inchpipeline with an average throughput of 151 MMcf/d and a totalcapacity of 345 MMcf/d. It gathers gas from about 250 wells andincludes a 40 MMcf/d gas processing facility, 11 compressorstations with a total of more than 14,000 hp and interconnectionswith eight major interstate and intrastate pipeline systems.Midcoast plans to finance the purchase with its bank creditfacility. Closing is anticipated during the 3rd quarter.

“This acquisition is a continuation of our aggressive growthefforts, which over the past two years have resulted in aseven-fold increase in total revenues, a nearly three-fold increasein operating income and a ten-fold increase in total miles ofpipeline,” said Midcoast President Dan Tutcher. “The Anadarkosystem will represent a significant addition to our total assetbase and further strengthen Midcoast’s presence in theOklahoma/Texas gathering market. It will also serve to greatlyincrease our unregulated pipeline activities and complement ourexisting regulated operations.

“We are excited about the purchase of the Anadarko system, whichis situated in a prolific natural gas producing region, that hasaveraged almost 200 new well completions per year over the pastfive years. We plan to aggressively seek expansion opportunities inthe Anadarko region and to move quickly to integrate this systemwith our existing operations, to achieve maximum costefficiencies.”

Duane Herbst, vice president of corporate affairs, said noimmediate expansions of the system are planned, except to connectnew wells, and no operational changes are expected. He said thecompany will continue its focus on the Gulf Coast area, and rightnow, gas processing assets are becoming more attractive because ofdepressed liquids margins. “We feel like there might be someopportunities there.” However, pipelines will remain the company’sfocus, he said.

With Anadarko acquisition, Midcoast is picking up a processingplant that handles about 14 MMcf/d. Midcoast already has a plant inMississippi called the Harmony Plant. It has capacity of 15 to 20MMcf/d, Herbst said, but it’s only handling 5 to 6 MMcf/dcurrently.

Earlier this month, Midcoast subsidiary Mid Louisiana GasTransmission said it bought all of the stock in the Creole GasPipeline in southern Louisiana from El Paso Energy for anundisclosed amount (see weekly NGI, July 6, 1998). The purchase ofthe 44-mile pipeline, which has a capacity of 115 MMcf/d and anaverage throughput of 50 MMcf/d, was part of Midcoast’s efforts toincrease its presence in the Louisiana transportation market. Thepipeline, which is near New Orleans, will serve several largeindustrial customers, including Entergy Louisiana Inc., AirProducts &amp Chemicals, Murphy Oil, Domino Sugar and Mobil Oil’sChalmette refinery.

In May, Midcoast Energy Resources announced plans to buy twoshort pipeline systems from Koch Gateway to serve new demand formarketing and transportation in the Baton Rouge, LA, area (Seeweekly NGI, May 18, 1998). The systems were acquired by Midcoast’swholly owned subsidiaries, Mid Louisiana Gas Co. (MLG) and MidLouisiana Gas Transmission Co. (MLGT) for $2.6 million cash.Midcoast assumed operations June 1. The systems are about 10 milesof six- to 12-inch pipeline near Baton Rouge, LA, and were acquiredas part of Midcoast’s development of a high-pressure pipeline toserve new and existing customers in and around Baton Rouge. Theexpansion also was aimed at meeting demand from new contracts toprovide 65 MMcf/d of marketing services and 20 MMcf/d oftransportation services to an industrial facility near Port Hudson,LA, and a new cogeneration facility near Baton Rouge.

Midcoast is a Houston-based pipeline company with regionaloffices in Texas, Alabama, Louisiana, and Mississippi. The companytransports, gathers, processes and markets gas and other petroleumproducts through more than 50 company-owned pipelines covering1,500 miles in nine states.

Joe Fisher, Houston

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