Rapidly expanding Crosstex Energy LP, a Texas-based midstream natural gas company, Thursday said it had completed the previously-announced acquisition of the LIG Pipeline Co. and its subsidiaries (LIG Inc., Louisiana Intrastate Gas Co. LLC, LIG Chemical Co., LIG Liquids Co. LLC and Tuscaloosa Pipeline Co.) from American Electric Power (AEP) for $76.2 million.
AEP still has on the market for a separate sale, Jefferson Island Storage and Hub LLC, which it acquired with the LIG assets. Jefferson Island Storage and Hub consists of two salt dome gas storage caverns, with 9 Bcf of storage capacity, and two 16-inch header pipelines.
Crosstex made the purchase through its wholly-owned subsidiary Crosstex Louisiana Energy, L.P. The sale includes 2,000 miles of natural gas gathering and transmission pipelines in Louisiana and five gas processing facilities that straddle the system.
The acquisition increases Crosstex’ assets to 4,500 miles of pipeline, 1.2 Bcf/d of transported volumes and over 700 MMcf/d of processing capacity.
The history of Crosstex goes back to 1992 when it was named Ventana Natural Gas. It was sold to Comstock Natural Gas in the early 1990s, and then CEO Barry E. Davis bought back the assets in 1996 to form Crosstex Energy. With funding from Yorktown Partners in 2000 and the successful public sale in 2002 of master limited partnership Crosstex Energy LP, Crosstex Energy spent about $200 million on more than a dozen acquisitions to form its current network. Crosstex Energy Inc. held an IPO in January (see Daily GPI, Jan. 14).
“This asset gives Crosstex a strategic presence all along the Gulf Coast, from South Texas to Mississippi, while practically doubling our pipeline footprint,” said Davis, president and CEO of Crosstex. “We also acquired an operating team that will be a great addition to our intellectual capital and will help drive our growth in the Louisiana market.”
LIG, which is one of the largest intrastate pipelines in the state of Louisiana, consists of approximately 2,000 miles of gas gathering and transmission systems located in 29 parishes extending from northwest and north-central Louisiana through the center of the state to south and southeast Louisiana.
LIG also has been bought and sold several times in recent history. AEP bought it from Pittsburgh-based Equitable Resources in 1998 (see NGI, Dec. 7, 1998) in a transaction valued at $320 million plus working capital. The transaction included a 500 MMcf/d oil line Equitable had converted to natural gas, the 3.6 Bcf capacity Jefferson Island salt dome storage project it developed and its gas and power marketing operation. Equitable had bought LIG from Arkla in 1993 for $191 million (see NGI, March 23, 1998).
LIG’s current on-system market of approximately 580,000 MMBtu/d includes power plants, municipal gas systems, and industrial markets located principally in the industrial corridor between New Orleans and Baton Rouge. Processing plants owned by LIG give the system the capability to handle rich and lean gas supplies connected to the system. Connections to several interconnected pipelines and the Jefferson Island Storage facility provide access to additional system supply, providing significant system management flexibility.
The LIG transaction is part of AEP’s divestiture of assets that don’t align with the company’s long-term strategy. Proceeds from the sale will be used to reduce debt and strengthen the balance sheet. The sale of LIG is not expected to have a material impact on 2004 GAAP earnings.
AEP said it continues progress on the planned divestiture of Jefferson Island Storage and Hub.
American Electric Power owns and operates more than 42,000 MW of generating capacity in the United States and select international markets and is the largest electricity generator in the U.S.
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