NGI The Weekly Gas Market Report
Although 1997 saw record financial results for Consolidated Natural Gas (CNG), the company said last week a management reorganization is needed to ensure further growth. CNG is reorganizing its four local gas utilities and its interstate natural gas pipeline and storage operations.
The new structure will bring all five companies – East Ohio Gas of Cleveland, OH; Peoples Natural Gas of Pittsburgh, PA; Virginia Natural Gas of Norfolk, VA; and Hope Gas and CNG Transmission both of Clarksburg, WVA – under the leadership of a single management team to be managed by business process rather than by company.
“While this new structure will result in cost savings, the primary goal of these changes is to promote sustainable and efficient growth,” said Ronald L. Adams, CNG senior vice president of regulated business. “We want to focus the company’s local utility and pipeline resources on being more responsive to the needs of our customers and to enable CNG’s regulated businesses to more effectively seize growth opportunities in the competitive marketplace. The best way to do that is to simplify the structure and reorganize management so as to remove barriers and unleash speed, creativity and efficiency.”
Effective Jan. 1, the new leadership structure will be organized along four key business processes: commercial operations, asset operations, technology and implementation, and organizational and financial performance.
CNG spokesman Chet Wade said the organizational changes will have no impact on CNG’s exploration and production operations. Last month the company announced a $524.5 million 1999 capital budget with a focus on expanding the exploration and production business. More than 60% of the 1999 budget is allocated to CNG Producing. Spending at CNG Producing is budgeted at $326 million in 1999, compared with an initial 1998 budget of $307 million and expected 1998 spending of $354 million (see NGI Nov. 16, 1998).
Last year saw record financial results for CNG due to strong oil and gas production and stable performance from gas transmission and distribution. Net income in 1997 was $304.4 million, compared to $298.3 million in 1996.
In July CNG sold its gas marketing operations, including supply, sales, storage, and transportation agreements to Sempra Energy for $48 million (see NGI July 27, 1998). The move was announced in April following a $17.2 million first-quarter loss. At the time CNG said it planned to concentrate on expanding its retail energy marketing operations, exploration and production, and distribution businesses because wholesale marketing margins were nonexistent.
CNG’s local utilities serve nearly 2 million customers, making them the fifth largest gas distribution network in the country. In addition, the company operates North America’s largest gas storage system, with a total capacity of 885 Bcf. This storage system is linked to major markets in the Northeast and Mid-Atlantic regions by CNG’s pipeline network. All five companies will continue to remain legally separate and retain their names.
Leading the new groups and reporting to Adams will be: Paul D. Koonce, president, commercial operations; Jimmy D. Staton, president, asset operations; William A. Fox, senior vice president, technology and implementation; and Laura J. McKeown, senior vice president, organizational and financial performance.
Transition to the new structure will be completed during the first half of 1999. It is expected to result in a 5% employment cut in the next year. CNG expects to incur a pretax charge of about $8 million in the fourth quarter in connection with workforce reductions.
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