CMS to Buy Gathering Assets in Midcontinent

The market reach of CMS Energy is set to grow with a planned Midcontinent gathering-processing acquisition. CMS plans to buy Continental Natural Gas for $155 million. Continental is engaged in gathering, processing, purchasing and marketing gas and gas liquids in the Texas and Oklahoma panhandle regions and north central Texas.

The companies agreed for CMS to acquire 100% of Continental's common stock and assume Continental debt. The deal is worth about $90 million in debt and $65 million in equity for an approximate total value of $155 million. The agreement is subject to Continental shareholder approval, and majority shareholders have said they favor it. Closing is expected early in the fourth quarter.

Continental has about 2,000 miles of gathering systems and six processing plants with total capacity of 520 MMcf/d and 25,000 barrels of natural gas liquids per day. Continental's revenues for 1997 totaled $357 million, which included sales of 106 Bcf and three million barrels of gas liquids. Continental (CNGL) has 130 employees.

"Adding CNGL to our portfolio fits in well with CMS Energy's domestic strategy of expanding its energy market reach in the U.S. beyond our traditional midwestern base," said William J. Haener, CEO of CMS Gas Transmission and Storage. It also fits with the goal of "adding sizeable midstream energy businesses in the central and western U.S." The merger will substantially increase CMS' non-utility domestic pipeline, gathering and marketing presence in the Midcontinent region of the U.S., Haener added.

Tim Young, CMS executive director of business development, said CMS has no immediate plans to expand the assets or close down any plants. "We plan on basically keeping them going just like they are and adding where it makes sense." He noted Continental has faced some capital constraints in the past.

Terms of the merger agreement call for exchanging CMS Energy common shares for Continental shares in a pooling of interests. Continental shares will be valued at $10 each. CMS Energy's shares will be valued at the average price for a 10-day period ending five days before closing.

Joe Fisher, Houston

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