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Duke, Koch Swap Gathering, Processing Assets

Duke, Koch Swap Gathering, Processing Assets

Koch Midstream Gathering and Processing and Duke Energy Field Services took a gander at some of each other's assets and decided to make a deal. The companies signed a letter of intent to exchange gas gathering and processing systems in Texas, Mississippi, New Mexico, Alabama and Oklahoma.

Duke will acquire Koch's gathering and processing systems in South Texas and Oklahoma that Koch purchased in November from Delhi. Koch will acquire Duke's Black Warrior system in Alabama, the AIM Pipeline in Mississippi and certain gathering and processing assets in West Texas and New Mexico. The agreement is subject to certain contingencies; terms were not disclosed. The exchange is expected to take place in the third quarter.

The rationale behind the deal was to allow Koch to boost its trading capabilities and knowledge and position activities around the Waha and Henry hubs, said a Koch spokesman. "By having more assets around these trading hubs, it just makes us - we think - a more efficient operator, and it just helps us gain more knowledge, trading knowledge." The Alabama assets will help the company reach markets in the Northeast as well as the Southeast. He stressed Koch is not leaving Oklahoma, where the company still has its Medford fractionator.

Duke's Field Services division has actively building its midstream position this year, adding assets in areas where its existing systems are concentrated. The Koch assets are an "excellent strategic fit with our existing systems in South Texas and Oklahoma and will significantly expand our operations and services in these areas," said Jim Mogg, president of Duke Energy Field Services. "Duke Energy Field Services is continuing its strategy of acquiring and optimizing assets in the Mid-continent. Additionally, this transaction greatly advances our expansion strategy in South Texas."

In addition to the Koch deal, Duke also purchased Dynegy's 56% interest in the 85 MMcf/d Roberts Ranch gas processing plant in Midland County, TX, last week. The plant is located 10 miles north of Duke Energy's Pegasus Gas Plant and five miles west of Duke Energy's Parks Booster Station in Midland County.

Field Services also recently completed expansion of two processing plants in North Louisiana and Southeast Texas. Expansions added 100 MMcf/d of capacity at the Minden, LA, plant and 75 MMcf/d at the processing complex in Port Arthur, TX, and increased capacity of the two Gulf Coast plants from 240 MMcf/d to 415 MMcf/d. In addition it recently acquired the Hico-Knowles plant in Lincoln Parish, LA, from Sid Richardson Corp. This plant will be integrated into Duke's existing Ruston gathering system to offer producers a competitive processing alternative in Lincoln Parish.

The company acquired the 85 MMcf/d capacity Haynesville, LA., processing and fractionation facility and related gas and gas liquids pipeline systems from Dynegy Midstream Services April 20. And in early April, Duke began deliveries into the Perryville Hub in northern Louisiana through a new 4.5-mile gas pipeline and the addition of 7,500 hp of mainline compression. The expansion enabled Duke to provide an incremental 100 MMcf/d of delivery capacity into the major pipelines serving the Midwest and Northeast markets. The company also expanded its South Texas gathering and processing capabilities with the acquisition of the 90-mile Brooks-Hidalgo Pipeline gas gathering system.

Joe Fisher, Houston

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