Coming to completion right on schedule, Houston-based Texas Eastern Products Pipeline Co. LLC, general partner of TEPPCO Partners LP, reported that it has finalized its acquisition of the Jonah Gas Gathering Co. from Green River Pipeline LLC and McMurry Oil Co., both wholly owned subsidiaries of Alberta Energy Co. Ltd. (AEC). TEPPCO said the estimated $360 million deal marks its entry into the natural gas gathering business.

Under the agreement, which was first announced in early September (see Daily GPI, Sept. 11), TEPPCO will acquire about 300 miles of existing gathering lines, five compressor stations totaling 33,000 hp and related metering facilities in the Green River Basin located in southern Wyoming. The system serves 14 producers in the Jonah and Pinedale gas fields. Gas transported on the system is processed by others and delivered to several interstate pipeline systems that provide access to a number of West Coast, Rocky Mountain and Midwest markets.

Included in the agreement, TEPPCO assumed approximately $25 million in remaining costs for an expansion project currently under construction. The expansion includes 50 miles of new 20-inch diameter pipeline that will increase the gathering capacity from 450 MMcf/d to 730 MMcf/d. The new capacity should begin commercial service in early 2002. TEPPCO said the Jonah system will be commercially managed and operated by Duke Energy Field Services LP.

“When we purchased McMurry Oil and its 1.2 trillion cubic feet of long- life gas reserves in June 2000, we also acquired the Jonah Gas Gathering System. This sale yields strong value for AEC shareholders and illustrates the high-quality and underlying value of AEC’s midstream assets,” said Gwyn Morgan, CEO of AEC. “To assure competitive market access for our growing Wyoming production, we retain long-term gas transportation agreements on the system. The sale will have no impact on AEC’s gas operating or transportation costs.”

AEC said it will use the sale proceeds to reduce bank debt. The company said it expects to record a gain exceeding C$100 million. AEC’s midstream debt to capitalization ratio remains at 60:40 and the company said its forecast for midstream operating cash flow remains unchanged at about C$300 million in 2001.

“This sale further enhances AEC’s financial strength and flexibility, resulting in pro forma unutilized bank lines of $1.9 billion,” Morgan said. “The fact that these assets can be sold without changing our forecast on 2001 midstream cash flow confirms the strengthening performance of AEC’s midstream division.”

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