Midcoast Energy Resources marked another in a chain of recentgrowth spurts with a definitive agreement to buy the Anadarkopipeline system from El Paso Field Services. Under the agreement,Midcoast will acquire the Anadarko system in Beckham and RogerMills counties, OK, and Hemphill, Roberts and Wheeler counties, TX.The system is made up of more than 696 miles of primarily 16-inchand 20-inch pipeline with an average throughput of 151 MMcf/day anda total capacity of 345 MMcf/day. The system gathers gas from about250 wells and includes a 40 MMcf/day gas processing facility, 11compressor stations with a total of more than 14,000 hp andinterconnections with eight major interstate and intrastatepipeline systems.

The cash deal is worth about $35 million, and Midcoast plans tofinance its bank credit facility. Closing is anticipated during the3rd quarter and is subject to review by the Department of Justiceand the Federal Trade Commission under the Hart-Scott-Rodino Act.

“This acquisition is a continuation of our aggressive growthefforts, which over the past two years have resulted in aseven-fold increase in total revenues, a nearly three-fold increasein operating income and a ten-fold increase in total miles ofpipeline,” said Midcoast President Dan Tutcher. “The Anadarkosystem will represent a significant addition to our total assetbase and further strengthens Midcoast’s presence in theOklahoma/Texas gathering market. It will also serve to greatlyincrease our unregulated pipeline activities and complement ourexisting regulated operations.

“We are excited about the purchase of the Anadarko system, whichis situated in a prolific natural gas producing region, that hasaveraged almost 200 new well completions per year over the pastfive years. We plan to aggressively seek expansion opportunities inthe Anadarko region and to move quickly to integrate this systemwith our existing operations, to achieve maximum costefficiencies.”

Duane Herbst, vice president of corporate affairs, said noexpansions of the system are planned except to connect new wells.No operational changes are expected, at least not immediately,Herbst said. The acquisition will serve to better balanceMidcoast’s holdings in unregulated and regulated assets. He saidthe company will continue its focus on the Gulf Coast area, andright now, gas processing assets are becoming more attractivebecause of depressed liquids margins. “We feel like there might besome opportunities there.” However, pipelines will remain thecompany’s focus, he said.

Midcoast is picking up a processing plant with Anadarkoacquisition, which comes with a processing facility handling about14 MMcf/d. Midcoast already has a plant in Mississippi called theHarmony Plant. It has capacity of 15 to 20 MMcf/d, Herbst said, butit’s only handling 5 to 6 MMcf/d currently.

Earlier this month, Midcoast subsidiary Mid Louisiana GasTransmission said it bought all of the stock in the Creole GasPipeline in southern Louisiana from El Paso Energy for anundisclosed amount (see weekly NGI, July 6, 1998). The purchase ofthe 44-mile pipeline, which has a capacity of 115,000 Mcf/d and anaverage throughput of 50,000 Mcf/d, was part of Midcoast’s effortsto increase its presence in the Louisiana transportation market.The pipeline, which is near New Orleans, will serve several largeindustrial customers, including Entergy Louisiana Inc., AirProducts & Chemicals, Murphy Oil, Domino Sugar and Mobil Oil’sChalmette refinery.

In May Midcoast Energy Resources announced plans to buy twoshort pipeline systems from Koch Gateway to serve new demand formarketing and transportation in the Baton Rouge, LA, area (Seeweekly NGI, May 18, 1998). The systems were acquired by Midcoast’swholly owned subsidiaries, Mid Louisiana Gas Co. (MLG) and MidLouisiana Gas Transmission Co. (MLGT) for $2.6 million cash.Midcoast assumed operations June 1. The systems are about 10 milesof six- to 12-inch pipeline near Baton Rouge, LA, and were acquiredas part of Midcoast’s development of a high-pressure pipeline toserve new and existing customers in and around Baton Rouge. Theexpansion also was aimed at meeting demand from new contracts toprovide 65 MMcf/day of marketing services and 20 MMcf/day oftransportation services to an industrial facility near Port Hudson,LA, and a new cogeneration facility near Baton Rouge.

Midcoast is a Houston-based pipeline company with regionaloffices in Texas, Alabama, Louisiana, and Mississippi. The companytransports, gathers, processes and markets gas and other petroleumproducts through more than 50 company-owned pipelines covering1,500 miles in nine states.

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