Shell Oil affiliate Tejas Energy agreed to sell its Transokaffiliate to Enogex Inc. for about $700 million, which includesEnogex’s assumption of $173 million of long-term debt. Transok isheadquartered in Tulsa and operates more than 5,000 miles ofpipelines with capacity of about 2.5 Bcf/d and nine gas processingand treating plants.
The previously announced sale of the Oklahoma gas gatherer,processor and transporter, is part of the restructuring of Shell’sU.S. Downstream Gas & Power assets with the goal of improvingfinancial performance. Tejas Gas (now Tejas Energy) bought Transokin May 1996 for $890 million, which is about $190 million more thanit is now selling it for. A Shell spokesman said the company had nocomment on the deal other than what it said in its press release.
“The sale of Transok enables us to concentrate on our corenatural gas transportation, storage and NGL assets in the GulfCoast region,” said Walter van de Vijver, CEO of Shell Exploration& Production Co. and head of Shell’s U.S. Downstream Gas &Power business. “These assets provide the greatest synergy betweenShell’s natural gas production and the activities of our gas andpower marketing affiliate, Coral Energy. We are committed to thegrowth of our U.S. natural gas and power business, and this movestrengthens our competitive position.”
OGE Energy Corp. subsidiary Enogex is a non-regulated gasgathering, processing, transportation, production, and energyservices company with principal pipeline operations in Oklahoma,Arkansas, and Texas. In January 1998 Enogex acquired the interstateOzark Pipeline from NGC Corp. (now Dynegy) for $55 million and amajority interest in the intrastate NOARK Pipeline from PrudentialInsurance and a SEMCO Energy subsidiary for $30 million. NGC hadbought the Ozark Pipeline in 1995 for $44.8 million from ColumbiaGulf Transmission, Tennessee Gas Pipeline, USX Corp. and ONEOK Inc.OGE has since integrated Ozark and NOARK into the single interstateentity Ozark. OGE Energy also is the parent of Oklahoma Gas andElectric Co., an electric utility with nearly 700,000 customers inOklahoma and western Arkansas.
“This acquisition provides OGE Energy with excellentopportunities to create long-term value and is consistent with ourstrategy of disciplined, asset-based growth around our corebusinesses-electricity and natural gas,” said Steven E. Moore, CEOof OGE Energy. “As the energy markets here and across the countrymove through the process of deregulation, we look forward tocompeting in those markets with the integration of Transok into ourEnogex natural gas and energy services businesses.”
Combined, the Transok system and the Enogex network will haveabout 10,000 miles of pipe with capacity to transport more than 3Bcf/d of gas to a number of end-users and pipelines. Combined gasstorage will be nearly 23 Bcf. Together, the companies haveinterests in 15 gas processing plants.
“These two systems complement one another quite well,” Mooresaid. “The integrated systems, from the gas wellheads to the majorpipeline delivery points, stretch from the Texas Panhandle acrosshalf of Oklahoma’s 77 counties, through Arkansas all the way toeastern Missouri. Oklahoma is the third-leading gas producing statein the country, and the combined Enogex/Transok system will be oneof the state’s major gas gathering and transportation systems.We’re excited about the possibilities.”
OGE spokesman Brian Alford said the company plans to foldTransok administrative and field operations into Enogex’s OklahomaCity, OK, headquarters. “We will, however, maintain a presence inTulsa, to what degree the integration team will determine.” He saidexpansion and interconnection of the Transok system will beconsidered following the deal’s closing. “Right now we want tofocus on bringing the two companies together. Then we’ll begin tolook forward from there.”
The transaction, expected to close June 30, is expected to beslightly dilutive to OGE Energy’s earnings in 1999 due primarily totransaction-related costs, and accretive to earnings in 2000. Thedeal is subject to regulatory review under the Hart-Scott-RodinoAct of 1976.
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