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Enogex Buying Transok for $700 M

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.

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