Daily GPI / NGI All News Access

KN Names Assets to be Sold, Reports Loss for 2Q

KN Names Assets to be Sold, Reports Loss for 2Q

KN Energy has been cleaning house and started a corporate yard sale yesterday with tags on everything but the kitchen sink. Although it wouldn't estimate the total value of the assets being sold, the list is long and encompasses properties and assets in nearly every division of KN's operations.

It includes the Midcon Texas Pipeline system, which is a large Texas Gulf Coast intrastate that transported 611 trillion Btu of gas last year; the Wattenberg Gathering and Processing operations in Colorado; its retail energy and services operations under en*able and Orcom, which together hold about 10 agreements with utilities representing about three million potential customers; KN Field Services and Compressor Pump & Engine; all of KN's operations in Mexico, including the Monterrey Pipeline, the distribution system in Hermosillo and the Igasmex marketing partnership interest; and certain West Texas transmission assets.

The partial gutting of the company represents an attempt by the board to partially recover financially before its merger with Kinder Morgan is completed later this year. KN's second quarter financial results illustrate the need. The company reported a $2.4 million net loss ($0.04/share) compared to $16.7 million in net income ($0.24/share) in 2Q98. It reported a $0.22 operating loss per diluted common share from ongoing operations. The loss was partially offset by the sale of interests in the HIOS and UTOS offshore pipeline systems and the reimbursement of costs related to the terminated merger with Sempra Energy, which contributed earnings per diluted common share of $0.15 and $0.03, respectively.

Upstream gathering and processing showed a return to positive operating income for the first time since the fourth quarter of 1997. But operating income from midstream transportation and storage operations was down $26 million from 2Q98 to $65.6 million. And downstream retail and marketing took a major hit with an operating loss of $16.7 million compared to operating income of $5.6 million for the same period in 1998. The loss resulted primarily from reduced margins on capacity held by KN's commodity marketing group on the Pony Express Pipeline, the company said. Additionally, en*able's loss during the quarter was $2.5 million greater than its loss in 1998.

In addition to the asset sales, KN announced continued changes in top management positions. Along with former CEO Larry Hall, who left suddenly when the $830 million Kinder Morgan merger was announced last month, the following executives have left the company: CFO Clyde McKenzie; Mort Aaronson, chief marketing officer and president and COO of KN Services and en*able; and John DiNardo, executive vice president of KN Gas Gathering.

"We have started to execute our previously stated strategy to return to profitability, reduce our debt load and strengthen our management team," said interim Chairman and CEO Stewart Bliss. "These actions include identification of non-strategic assets for divestiture, corporate reorganization and cost reductions. Moving forward, we will remain focused on customers, shareholder value and building a dynamic management team."

On the positive side, KN noted several projects that could help pull the company out of its current ditch, including the Thunder Creek Gas Services joint venture with Devon Energy in Wyoming's Powder River Basin, the proposed Horizon Pipeline from Chicago to southern Wisconsin, recent marketing deals with power plants in Illinois and new power projects in Colorado.

KN's stock price gained ground slightly following the announcements to end the day up 2.83% at $20.44/share. That compares to a 52-week low in June of nearly $12/share.

©Copyright 1999 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.

ISSN © 2577-9877 | ISSN © 1532-1231
Comments powered by Disqus