ONEOK Grabs Koch's OK Gathering, Processing
ONEOK Inc. is building up its midstream presence by agreeing to
acquire all the Oklahoma midstream gas gathering and processing
assets of Koch Midstream Enterprises for $285 million in cash.
The assets include eight gas processing plants and about 3,250
miles of gathering pipeline connected to 1,460 gas wells in
Oklahoma. Total capacity of the plants is 515 MMcf/d. The
transaction is subject to approval by regulators and the boards of
David Kyle, president of Tulsa, OK-based ONEOK, said, "These
assets are located in an area where ONEOK owns significant natural
gas production and development acreage. This will enable the
company to continue our strategic objective of maximizing values in
all of our non-regulated natural gas operations. We have had
partial ownership of some of these assets before, but recent
natural gas reserve acquisitions and, more importantly, the
opportunity to own gathering systems upstream of the plants will
provide greater opportunity in a highly competitive marketplace. We
will be focusing on improving the utilization of these assets to
maximize their future value."
Also last week, ONEOK formed a strategic alliance with Midland,
TX-based Costilla Energy Inc. to capitalize on properties Costilla
plans to acquire from Pioneer Natural Resources Co. as well as
other potential transactions. ONEOK will participate in Costilla's
previously announced $335 million acquisition of Texas oil and gas
properties from Pioneer (assuming it is successful) through an
equity investment in Costilla preferred stock.
ONEOK's level of participation will be $100 million, $35 million
in properties and $65 million in equity. ONEOK will have the option
to participate with Costilla in potential future production
transactions in the Midcontinent. Specific terms of the agreement
were not announced pending approval by the companies' boards of
"ONEOK's investment in Costilla forms the financial cornerstone
for our acquisition from Pioneer," said Mike Grella, Costilla
Energy CEO. "Just as importantly, this transaction complements our
exploration expertise with ONEOK's significant marketing and
distribution strengths." The Pioneer deal should close March 31.
In a move to cut debt and costs by reducing its property
inventory, Dallas-based Pioneer last September agreed to sell
certain oil and gas properties to Costilla. for $410 million. The
sale price has since been renegotiated to $335 million. The sale
properties represent about 425 domestic fields, primarily in Texas.
Joe Fisher, Houston
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