As part of a continued streamlining, Kinder Morgan Inc. unloadedall of its Oklahoma, Kansas and West Texas gathering and processingbusinesses last week to ONEOK Inc. In addition, ONEOK agreed to buyKinder’s marketing and trading business as well as certain storageand transmission pipelines in the Midcontinent.

ONEOK will pay Kinder about $114 million plus an amount equal tonet working capital at closing; assume the operating leaseassociated with the Bushton, KS, gas processing plant; and assumelong-term capacity commitments on Natural Gas Pipeline Co. ofAmerica and Kinder Morgan Interstate Gas Transmission (formerly KNInterstate Gas Transmission Co.). ONEOK last week scheduled aconference call to discuss the deal and then canceled it. Anothercall was planned for today.

“This is a continuation of our strategy of expanding ourownership of natural gas assets and marketing capabilities in theMidcontinent region,” said ONEOK President David Kyle. “Thisacquisition represents in excess of 12,000 miles of pipeline, sixgas processing plants with capacity of 1.26 Bcf/d and 10.5 Bcf ofstorage. When we combine these assets with our existing assets andthose to be added with the Dynegy transaction announced last weekwe will be able to take advantage of operating synergies. We expectthis transaction to be accretive to earnings the first year evenwithout those synergies.”

The transaction includes three storage fields in the TexasPanhandle. A spokesman could not immediately say how much long termcapacity ONEOK acquired on Kinder Morgan’s two main pipelines, butthe purchase of the marketing and trading operation presumablywould have included the capacity held by former NGPL affiliateMidCon Trading.

ONEOK recently said it would buy Dynegy Midcontinent gatheringand processing assets for $307.7 million (see NGI, Feb. 7).

“Last fall, we announced our intention to exit these businessesas part of our ‘back to basics’ strategy,” said Kinder CEO RichKinder. “With this sale, KMI’s divestiture program is more than 80%complete. The sales proceeds are consistent with the estimates wemade in the fourth quarter as part of the write-down ofdiscontinued operations. The combination of cash, assumption of theBushton lease and long-term capacity agreements will furtherstrengthen our balance sheet and other credit characteristics.Going forward, we will focus on growing our core, fee-basedbusinesses.”

Late last year it was announced HS Resources would buy Kinder’sgathering system in the Wattenberg field area of theDenver-Julesberg Basin, along with its interests in the Amoco-BPWattenberg Gas Processing Plant and KN Wattenberg LLC, which ownsthe Wattenberg transmission system, in a phased transaction. Thisalso was characterized as part of Kinder’s divestiture plan (seeNGI, Dec. 6).

Joe Fisher, Houston

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