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ONEOK Buying Kinder Assets, Marketing

ONEOK Buying Kinder Assets, Marketing

As part of a continued streamlining, Kinder Morgan Inc. unloaded all of its Oklahoma, Kansas and West Texas gathering and processing businesses last week to ONEOK Inc. In addition, ONEOK agreed to buy Kinder's marketing and trading business as well as certain storage and transmission pipelines in the Midcontinent.

ONEOK will pay Kinder about $114 million plus an amount equal to net working capital at closing; assume the operating lease associated with the Bushton, KS, gas processing plant; and assume long-term capacity commitments on Natural Gas Pipeline Co. of America and Kinder Morgan Interstate Gas Transmission (formerly KN Interstate Gas Transmission Co.). ONEOK last week scheduled a conference call to discuss the deal and then canceled it. Another call was planned for today.

"This is a continuation of our strategy of expanding our ownership of natural gas assets and marketing capabilities in the Midcontinent region," said ONEOK President David Kyle. "This acquisition represents in excess of 12,000 miles of pipeline, six gas processing plants with capacity of 1.26 Bcf/d and 10.5 Bcf of storage. When we combine these assets with our existing assets and those to be added with the Dynegy transaction announced last week we will be able to take advantage of operating synergies. We expect this transaction to be accretive to earnings the first year even without those synergies."

The transaction includes three storage fields in the Texas Panhandle. A spokesman could not immediately say how much long term capacity ONEOK acquired on Kinder Morgan's two main pipelines, but the purchase of the marketing and trading operation presumably would have included the capacity held by former NGPL affiliate MidCon Trading.

ONEOK recently said it would buy Dynegy Midcontinent gathering and processing assets for $307.7 million (see NGI, Feb. 7).

"Last fall, we announced our intention to exit these businesses as part of our 'back to basics' strategy," said Kinder CEO Rich Kinder. "With this sale, KMI's divestiture program is more than 80% complete. The sales proceeds are consistent with the estimates we made in the fourth quarter as part of the write-down of discontinued operations. The combination of cash, assumption of the Bushton lease and long-term capacity agreements will further strengthen our balance sheet and other credit characteristics. Going forward, we will focus on growing our core, fee-based businesses."

Late last year it was announced HS Resources would buy Kinder's gathering system in the Wattenberg field area of the Denver-Julesberg Basin, along with its interests in the Amoco-BP Wattenberg Gas Processing Plant and KN Wattenberg LLC, which owns the Wattenberg transmission system, in a phased transaction. This also was characterized as part of Kinder's divestiture plan (see NGI, Dec. 6).

Joe Fisher, Houston

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