Duke Energy Field Services (DEFS) showed last week that it wasnot willing to sit tight and wait for its midstream venture withPhillips’ GPM to begin, as it announced plans to acquire gatheringand processing assets in central Oklahoma from Conoco Inc. andMitchell Energy & Development Corp. The transaction is expectedto close March 31 after regulatory approvals are received. Nofinancial information was disclosed.

The proposed transaction calls for DEFS’ purchase of Conoco’sinterests in the Oklahoma assets for an undisclosed price and anexchange of Mitchell’s interests in the Oklahoma assets for DEFS’interests in the UP Bryan Plant, Ferguson Burleson and Austin Chalknatural gas gathering and processing systems located in centralTexas.

If approved, DEFS would obtain 100% ownership interest of fivelow-pressure gathering systems and six cryogenic plants having2,300 miles of gathering pipe in the Goldsby, Cashion/ Mustang,Carney and Hennessey systems and 42% of the Dover Hennessey systemoperated by Exxon Mobil. DEFS will operate all facilities with theexception of Dover Hennessey, which will continue to be operated byExxon Mobil.

“These midstream assets are strategic and complementary toexisting DEFS assets in Oklahoma,” said Jim W. Mogg, CEO of DEFS.”They fit into our long-term strategy of being a top-tier gatheringand processing company in the mid-continent area.

“Also, these central Oklahoma facilities will become part of therecently announced DEFS and Phillips’ GPM combination. The assetslie adjacent to and between our existing and future systems,providing additional integration opportunities. The resultingefficiencies and cost-effective services will create significantbenefits.”

Expected to have an enterprise value of between $5 and $6billion, the new DEFS will be based in Denver, CO, operate morethan 67 plants, 57,000 miles of pipelines and have an estimated 17Tcf of contracted supply. It will process 5 Bcf/d of raw gas, andproduces 400,000 b/d of gas liquids. The formation of this giantmidstream company, which will be partially owned by the public, wasannounced last month (see NGI, Dec. 20, 1999).

Conoco’s share processes a total of 140 MMcf/d, and produces14,000 barrels per day of natural gas liquids. “The sale of theCentral Oklahoma natural gas gathering and processing assets ispart of Conoco’s ongoing portfolio management program to reducenon-strategic assets and costs, and make strategic acquisitions incore areas of North America that will dramatically increase ournatural gas production, reserves, and processing capacity,” saidMike Johnson, vice president of Conoco’s natural gas and gasproducts business unit.

Mitchell Energy said the move will eliminate multiplepartnership entities, increase operating flexibility and reduceadministrative costs. George P. Mitchell, CEO of Mitchell Energysaid, “This is a win-win exchange for both companies and improvesthe efficiency of our personnel and operations. We see this as anattractive opportunity to further consolidate operations within ourcore areas and enhance asset values in the longer run.”

John Norris

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