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Anadarko Buys Pinnacle, Boosts Texas Presence

Anadarko Buys Pinnacle, Boosts Texas Presence

Houston-based Anadarko Petroleum Corp. increased its presence in the East Texas Bossier sand gas play last week, spending $38 million to acquire Pinnacle Gas Treating Inc., which owns and operates a natural gas pipeline and treating plant there. Pinnacle is a subsidiary of Western Gas Resources Inc. based in Denver, and it plans to use the sale to pay down debt.

Anadarko, which recently said it would boost its capital spending this year about 56%, already runs 33 drilling rigs in the Bossier, making it the single most actively drilled play in North America. It will continue to operate its new assets under the Pinnacle name and retain Pinnacle's 16 employees. Before the acquisition, Anadarko was already shipping approximately 275 MMcf/d through the Pinnacle pipeline and the Bethel plant.

"This acquisition will give us increased flexibility in how we ship and market our Bossier gas, as well as improve the service we can offer to other shippers," said John N. Seitz, Anadarko COO. "The Pinnacle pipeline tracks the Bossier trend through four East Texas counties. As gas volumes in the area continue to grow, we'll be able to expand the system right along with it."

Pinnacle's pipeline runs from the Texas counties of Franklin to Bethel, and then through portions of Freestone, Anderson, Leon and Robertson counties. It has 60 miles of large-diameter pipe, 40 miles of small-diameter laterals and spurs, and a 60-mile fuel re-delivery system. Currently, the pipe can carry as much as 500 MMcf/d.

The Bethel treating plant removes carbon dioxide and hydrogen sulfide from the gas and has a current capacity of nearly 300 MMcf/d. Anadarko said it would expand the plant capacity to meet the demands from growing activity levels and volumes in the area.

Anadarko has been targeting more North American acquisitions since mid-2000, when it boosted its annual budget for 2000 by 34% (see NGI, Aug. 8, 2000). It said then that principal acquisition targets included Anadarko's natural gas projects in East Texas and Louisiana, its gas assets in western Canada and gas and oil projects on its shelf, sub-salt and deep-water properties in the Gulf of Mexico.

With the sale, effective Jan. 1, Western said it will post a first quarter after-tax gain of $7 million, or 22 cents a share.

"This sale largely completes our planned divestiture of under-performing assets begun two years ago, and allows us to reinvest the proceeds into higher growth activities such as the Powder River coalbed methane development," said Lanny Outlaw, Western's CEO. Western, one of the largest producers of coalbed methane in the Powder River Basin, has nearly 531,000 net acres there under lease (see related story this issue).

Carolyn Davis, Houston

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