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Southern Union Buys Sid Richardson Pipeline Network for $1.6B

Pennsylvania-based Southern Union Co. extended its nationwide natural gas pipeline network Friday, announcing it will pay $1.6 billion in cash to purchase the privately held Sid Richardson Energy Services Co. of Fort Worth. The company, started by legendary wildcatter Sid Richardson and his nephew Perry Bass in 1947, includes 4,000 miles of gas pipe in West Texas and New Mexico.

The Sid Richardson enterprise includes about 450 MMcf/d of cryogenic processing capacity among six interconnected plants, 930 MMcf/d of high-pressure treating capacity and the pipeline network. The company also offers gas liquids and gas marketing by a staff based in Houston and Fort Worth. Southern Union's purchase also includes the Sid Richardson Carbon Co., a leading manufacturer of furnace carbon black, a primary nonrubber component in tires. The carbon plants are located in Big Spring and Borger, TX as well as Addison, LA.

"We are thrilled to add the expansive pipeline network of Sid Richardson Energy Services to the Southern Union family of companies," said CEO George L. Lindemann. "With the addition of the Sid Richardson business, we will now have more than 22,000 miles of gathering and transportation pipelines stretching from the Gulf of Mexico to the Southwest, Midwest and Canada. The Sid Richardson gathering and processing business reflects our continued commitment to the natural gas business and is a logical complement to our existing transportation and [liquefied natural gas] LNG businesses. We are confident that these robust assets will drive additional earnings and cash flow growth in the years to come."

Southern Union currently operates about 22,000 miles of pipe, extending from the Gulf of Mexico to Canada. The pipelines serve several major gas producing areas, including the Permian Basin in West Texas, the Anadarko Basin in Oklahoma and the San Juan Basin in New Mexico. The company also distributes gas to more than 1 million customers through Missouri Gas Energy, New England Gas and PG Energy.

With the closing of this acquisition, Southern Union will have made acquisitions totaling $6 billion in the natural gas gathering, processing and transportation businesses. In June 2003, the company acquired the CMS Panhandle Cos., which added more than 10,000 miles of mainline natural gas pipelines across North America (see Daily GPI, June 12, 2003). Late last year, it acquired CrossCountry Energy LLC from Enron Corp. through a joint venture, adding about 7,500 miles of pipeline (see Daily GPI, Nov. 18, 2005). Southern Union's interstate pipelines operate in 17 states.

The transaction, which has been approved by the boards of both companies, is expected to be accretive to Southern Union's 2006 earnings. The transaction is expected to close in 1Q2006. Southern Union CFO Julie Edwards said the company plans to fund the purchase with a combination of equity and debt."We may be required to utilize bridge financing while we evaluate alternative sources of equity and are confident that we will have the appropriate capital structure in place within several months."

The Sid Richardson Co. has long been controlled by the Bass family, the wealthiest family in Fort Worth and one of the wealthiest in the nation. Sid Richardson made his fortune as an oil wildcatter in Texas, New Mexico and Louisiana, making most of his fortune from the Keystone Field in West Texas. Richardson died in 1959, and his only nephew Perry Bass and then his sons, Sid, Robert, Lee and Ed, continued the operations through Bass Enterprises. The family will continue to control Bass Enterprises Production Co., which is operated separately. Through September 2005, Bass Enterprises had produced 1.3 million bbl of oil and 14.8 Bcf of gas, which makes it among the state's top producers. In 2004, it was ranked the 30th best producer in Texas.

Fleischman & Walsh LLP and Kasowitz, Benson, Torres & Friedman LLP acted as Southern Union's legal counsel. Merrill Lynch & Co. has assisted Southern Union in its evaluation of the Sid Richardson business.

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