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Conoco Enhances Natural Gas Portfolio

Conoco Enhances Natural Gas Portfolio

Conoco Inc. enhanced its natural gas portfolio last week, announcing an agreement to acquire LG&E Energy Corp.'s natural gas gathering and processing business assets in New Mexico, Texas, Oklahoma and Montana. The deal will make Conoco the second largest natural gas gatherer in the region, more than doubling its capacity in southeast New Mexico and improving its processing capacity in the region by 42%.

In the deal, the Houston-based company will acquire three natural gas processing plants in New Mexico and Texas with a combined processing capacity of 86 MMcf/d. Also included in the acquisition are a natural gas storage facility and 1,200 miles of natural gas pipelines. Financial terms were not disclosed.

"The properties are a significant enhancement to Conoco's natural gas portfolio and allow us to continue building larger and more integrated natural gas operations in markets where we can establish a competitive advantage," said Mike L. Johnson, vice president for natural gas and gas products.

Integration of the new assets with Conoco's existing New Mexico operations in Maljamar, NM "creates one of the largest" gathering, processing and transportation systems in the region, said Johnson.

"The existing Maljamar operation is primarily a low-pressure gas system, while the LG&E assets are mostly high pressure," Johnson said. "The systems are highly complementary, and when combined will create a business of sufficient size and scale to make Conoco even more competitive in the region's natural gas business." He said the acquisition also would leverage Conoco's natural gas and natural gas liquids marketing programs in California.

Combined with LG&E's assets, Conoco will have 1,500 miles of gathering systems with a capacity in excess of 300 MMcf/d, four natural gas processing plants with 165 MMcf/d capacity and storage capacity of 10 Bcf. Some of the LG&E assets that do not "fit" with Conoco's natural gas business strategy will be sold, Johnson said.

Carolyn Davis, Houston

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