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Midcoast Plans to Buy El Paso's Anadarko System

Midcoast Plans to Buy El Paso's Anadarko System

With the purchase of the sprawling Anadarko pipeline system from El Paso Field Services for $35 million last week, Midcoast Energy Resources is rapidly becoming a major Midcontinent region pipeline company.

The Anadarko system, which stretches through Beckham and Roger Mills counties, OK, and Hemphill, Roberts and Wheeler counties, TX, is made up of more than 696 miles of primarily 16-inch and 20-inch pipeline with an average throughput of 151 MMcf/d and a total capacity of 345 MMcf/d. It gathers gas from about 250 wells and includes a 40 MMcf/d gas processing facility, 11 compressor stations with a total of more than 14,000 hp and interconnections with eight major interstate and intrastate pipeline systems. Midcoast plans to finance the purchase with its bank credit facility. Closing is anticipated during the 3rd quarter.

"This acquisition is a continuation of our aggressive growth efforts, which over the past two years have resulted in a seven-fold increase in total revenues, a nearly three-fold increase in operating income and a ten-fold increase in total miles of pipeline," said Midcoast President Dan Tutcher. "The Anadarko system will represent a significant addition to our total asset base and further strengthen Midcoast's presence in the Oklahoma/Texas gathering market. It will also serve to greatly increase our unregulated pipeline activities and complement our existing regulated operations.

"We are excited about the purchase of the Anadarko system, which is situated in a prolific natural gas producing region, that has averaged almost 200 new well completions per year over the past five years. We plan to aggressively seek expansion opportunities in the Anadarko region and to move quickly to integrate this system with our existing operations, to achieve maximum cost efficiencies."

Duane Herbst, vice president of corporate affairs, said no immediate expansions of the system are planned, except to connect new wells, and no operational changes are expected. He said the company will continue its focus on the Gulf Coast area, and right now, gas processing assets are becoming more attractive because of depressed liquids margins. "We feel like there might be some opportunities there." However, pipelines will remain the company's focus, he said.

With Anadarko acquisition, Midcoast is picking up a processing plant that handles about 14 MMcf/d. Midcoast already has a plant in Mississippi called the Harmony Plant. It has capacity of 15 to 20 MMcf/d, Herbst said, but it's only handling 5 to 6 MMcf/d currently.

Earlier this month, Midcoast subsidiary Mid Louisiana Gas Transmission said it bought all of the stock in the Creole Gas Pipeline in southern Louisiana from El Paso Energy for an undisclosed amount (see weekly NGI, July 6, 1998). The purchase of the 44-mile pipeline, which has a capacity of 115 MMcf/d and an average throughput of 50 MMcf/d, was part of Midcoast's efforts to increase its presence in the Louisiana transportation market. The pipeline, which is near New Orleans, will serve several large industrial customers, including Entergy Louisiana Inc., Air Products &amp Chemicals, Murphy Oil, Domino Sugar and Mobil Oil's Chalmette refinery.

In May, Midcoast Energy Resources announced plans to buy two short pipeline systems from Koch Gateway to serve new demand for marketing and transportation in the Baton Rouge, LA, area (See weekly NGI, May 18, 1998). The systems were acquired by Midcoast's wholly owned subsidiaries, Mid Louisiana Gas Co. (MLG) and Mid Louisiana Gas Transmission Co. (MLGT) for $2.6 million cash. Midcoast assumed operations June 1. The systems are about 10 miles of six- to 12-inch pipeline near Baton Rouge, LA, and were acquired as part of Midcoast's development of a high-pressure pipeline to serve new and existing customers in and around Baton Rouge. The expansion also was aimed at meeting demand from new contracts to provide 65 MMcf/d of marketing services and 20 MMcf/d of transportation services to an industrial facility near Port Hudson, LA, and a new cogeneration facility near Baton Rouge.

Midcoast is a Houston-based pipeline company with regional offices in Texas, Alabama, Louisiana, and Mississippi. The company transports, gathers, processes and markets gas and other petroleum products through more than 50 company-owned pipelines covering 1,500 miles in nine states.

Joe Fisher, Houston

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