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PG&E Woos Kinder Morgan Exec

PG&E Woos Kinder Morgan Exec

In a move to strengthen its still under-performing Texas natural gas assets, PG&ampE Corp. last week named Thomas B. King president and COO of unregulated subsidiary PG&ampE Gas Transmission, which is based in Houston. King, formerly president of Kinder Morgan Energy Partners, takes on his new duties Nov. 23. He is filling a position left vacant by the death of Joseph Kearney, a PG&ampE executive who suffered a heart attack in September. King will be replaced at Kinder Morgan by Vice Chairman Bill Morgan.

"This move recognizes that we needed someone on the ground in Houston where the bulk of our natural gas assets are now centered," said PG&ampE spokesman Greg Pruett, noting some of the assets have been "under-performing" so far. "We need someone who can make a thorough assessment of those assets and develop a strategy that will result in obtaining the maximum value from them that we can."

King will be responsible for both PG&ampE's Texas and Pacific Northwest gas operations. More than a year ago, PG&ampE bought Texas' Valero Natural Gas, Teco Pipeline and Energy Source. Since then, the company has tried to combine the assets and structure them into efficient operations. However, liquids and gas markets have not cooperated. Low gas basis differentials between Waha in West Texas and Katy and the Houston Ship Channel in East Texas, along with poor liquids prices related to the fall in crude markets hindered profitability.

At one point, PG&ampE management suggested selling off some of the new Texas assets, but legal and tax considerations precluded that move. Instead, PG&ampE Gas Transmission-Texas reorganized into four major lines of business: field services, transmission and storage, gas marketing and supply, and natural gas liquids and put all of its marketing division in Houston and all of its transmission and storage operations in San Antonio (See NGI Sept. 14). "The big reason we're doing this is to make money," Lynn Bourdon, senior vice president of commercial operations for PG&ampE's Texas gas transmission operations said at the time. "We're trying to improve our performance."

Valero and Teco have contributed to PG&ampE revenue. In the third quarter, PG&ampE reported operating revenue of $5.3 billion, compared to $4.1 billion in 3Q 1997. For the first nine months, revenue was $19.3 billion, up from $13.2 billion during the same period of 1997. The company credited the majority of the increase to Valero and Teco. Still, net income for the first three quarters of 1998 was $617 million, down from $763 million over the same period of 1997.

PG&ampE Gas Transmission-Texas owns and operates an 8,000-mile pipeline system connected to most regions in the country, and operates nine gas processing plants and 500 miles of gas liquids pipeline. The division produces more than 100,000 barrels/d of gas liquids. A PG&ampE spokesman noted King's transition to PG&ampE has yet to occur and said last week he was unavailable to talk about what the future might hold for the company's Texas assets.

If experience is an indicator, King could very well be the right man for the job of effectively integrating the assets. He was responsible for integrating the operations of the $1.4 billion Santa Fe Pacific Pipeline Partners liquids lines into Kinder Morgan's products pipelines in the last year. Earlier in his career, he had a series of senior operating positions with Enron Liquid Services Corp., and Enron's Northern Natural Gas, Transwestern Pipeline and Northern Border Pipeline, along with Cabot Corp.'s natural gas unit.

"Tom King brings an exceptional background in the gas pipeline and supply business and will be an outstanding leader for this important component of our national energy strategy," said Robert D. Glynn Jr., PG&ampE Corp. CEO.

At Kinder Morgan, King helped run a company experiencing exponential growth. Kinder third quarter net income of $35.12 million, or 52 cents/unit, grew from $3.75 million, or 20 cents/ unit, in the third quarter of 1997, an increase of 160% per unit. Bill Morgan, currently Kinder Morgan vice chairman, will assume the additional title of president. Morgan has been the president of three major pipeline companies: Florida Gas Transmission, Transwestern, and Northern Natural. Morgan and Richard Kinder, a former Enron executive, set up the partnership two years ago with the purchase of Enron's products pipeline unit.

Joe Fisher, Houston

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