Enogex Buying Transok for $700 M
Shell Oil affiliate Tejas Energy agreed to sell its Transok
affiliate to Enogex Inc. for about $700 million, which includes
Enogex's assumption of $173 million of long-term debt. Transok is
headquartered in Tulsa and operates more than 5,000 miles of
pipelines with capacity of about 2.5 Bcf/d and nine gas processing
and treating plants.
The previously announced sale of the Oklahoma gas gatherer,
processor and transporter, is part of the restructuring of Shell's
U.S. Downstream Gas & Power assets with the goal of improving
financial performance. Tejas Gas (now Tejas Energy) bought Transok
in May 1996 for $890 million, which is about $190 million more than
it is now selling it for. A Shell spokesman said the company had no
comment on the deal other than what it said in its press release.
"The sale of Transok enables us to concentrate on our core
natural gas transportation, storage and NGL assets in the Gulf
Coast region," said Walter van de Vijver, CEO of Shell Exploration
& Production Co. and head of Shell's U.S. Downstream Gas &
Power business. "These assets provide the greatest synergy between
Shell's natural gas production and the activities of our gas and
power marketing affiliate, Coral Energy. We are committed to the
growth of our U.S. natural gas and power business, and this move
strengthens our competitive position."
OGE Energy Corp. subsidiary Enogex is a non-regulated gas
gathering, processing, transportation, production, and energy
services company with principal pipeline operations in Oklahoma,
Arkansas, and Texas. In January 1998 Enogex acquired the interstate
Ozark Pipeline from NGC Corp. (now Dynegy) for $55 million and a
majority interest in the intrastate NOARK Pipeline from Prudential
Insurance and a SEMCO Energy subsidiary for $30 million. NGC had
bought the Ozark Pipeline in 1995 for $44.8 million from Columbia
Gulf Transmission, Tennessee Gas Pipeline, USX Corp. and ONEOK Inc.
OGE has since integrated Ozark and NOARK into the single interstate
entity Ozark. OGE Energy also is the parent of Oklahoma Gas and
Electric Co., an electric utility with nearly 700,000 customers in
Oklahoma and western Arkansas.
"This acquisition provides OGE Energy with excellent
opportunities to create long-term value and is consistent with our
strategy of disciplined, asset-based growth around our core
businesses-electricity and natural gas," said Steven E. Moore, CEO
of OGE Energy. "As the energy markets here and across the country
move through the process of deregulation, we look forward to
competing in those markets with the integration of Transok into our
Enogex natural gas and energy services businesses."
Combined, the Transok system and the Enogex network will have
about 10,000 miles of pipe with capacity to transport more than 3
Bcf/d of gas to a number of end-users and pipelines. Combined gas
storage will be nearly 23 Bcf. Together, the companies have
interests in 15 gas processing plants.
"These two systems complement one another quite well," Moore
said. "The integrated systems, from the gas wellheads to the major
pipeline delivery points, stretch from the Texas Panhandle across
half of Oklahoma's 77 counties, through Arkansas all the way to
eastern Missouri. Oklahoma is the third-leading gas producing state
in the country, and the combined Enogex/Transok system will be one
of the state's major gas gathering and transportation systems.
We're excited about the possibilities."
OGE spokesman Brian Alford said the company plans to fold
Transok administrative and field operations into Enogex's Oklahoma
City, OK, headquarters. "We will, however, maintain a presence in
Tulsa, to what degree the integration team will determine." He said
expansion and interconnection of the Transok system will be
considered following the deal's closing. "Right now we want to
focus on bringing the two companies together. Then we'll begin to
look forward from there."
The transaction, expected to close June 30, is expected to be
slightly dilutive to OGE Energy's earnings in 1999 due primarily to
transaction-related costs, and accretive to earnings in 2000. The
deal is subject to regulatory review under the Hart-Scott-Rodino
Act of 1976.