Western Unloads Non-Core East Texas Gathering, Producing Assets
Western Gas Resources said Friday it sold its Edgewood gas
gathering system and related facilities to Dynegy Inc. for $6.1
million, and sold production assets upstream of Edgewood and a 50%
joint venture interest in Redman Smackover production project in
East Texas to Vintage Petroleum for $49.7 million. The proceeds
from the two separate transactions total $55.8 million, and Western
said it expects to recognize a pre-tax gain of $1 million from the
sales in the fourth quarter of 1998. Both transactions closed Oct.
29 with effective dates of July 1, 1998 and Nov. 1, 1998,
"The sale of these non-strategic assets is part of our ongoing
strategy to reduce debt and redeploy capital to continue the
development of higher rate-of-return projects such as our coalbed
methane development in the Powder River Basin in northeast
Wyoming," said Western President Lanny Outlaw.
Spokesman Ron Wirth said the sale is not part of strategic plan
to prepare the company for potential sale as some observers
speculated might occur. Western's stock prices are near an all-time
low and it is one of the last remaining independent Midstream
operators in the country. But the oil price depression has
triggered a lull in mergers and acquisitions in the sector.
"We're not in any current discussions [with potential buyers or
merger partners] at the moment," said Wirth. "We're concentrating
on our core business, and we've got some good growth opportunities
that we've identified. I know that Union Pacific has their whole
package [of midstream assets] up for sale and there seems to be
quite a bit of interest there. Depending on what kind of multiple
they receive that may rekindle a lot of peoples' interest. We're
going about our business, meanwhile."
The properties Western sold to Vintage have current net daily
production averaging 1,100 barrels of condensate and natural gas
liquids and 3,800 Mcf of gas or a total of 1,733 barrels of oil
The gathering system sold to Dynegy currently handles about 25
MMcf/d and will be connected to Dynegy's Eustace processing plant.
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