The sale of Shell subsidiary Transok to Enogex Inc. for about$700 million last week continues Shell’s domestic restructuring anddoubles Enogex’s pipeline holdings. The sale price includesEnogex’s assumption of $173 million in 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.

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,” saidSteven E. Moore, CEO of Enogex subsidiary OGE Energy, which willoperate the merged systems. “The integrated systems, from the gaswellheads to the major pipeline delivery points, stretch from theTexas Panhandle across half of Oklahoma’s 77 counties, throughArkansas all the way to eastern Missouri. Oklahoma is thethird-leading gas producing state in the country, and the combinedEnogex/Transok system will be one of the state’s major gasgathering and transportation systems. We’re excited about thepossibilities.”

The purchase is expected to be slightly dilutive to OGE Energy’searnings in 1999 due primarily to transaction-related costs, andaccretive to earnings in 2000.

In January 1998 Enogex acquired the interstate Ozark Pipelinefrom NGC Corp. (now Dynegy) for $55 million and a majority interestin the intrastate NOARK Pipeline from Prudential Insurance and aSEMCO Energy subsidiary for $30 million. OGE has since integratedOzark and NOARK into the single interstate entity Ozark. OGE Energyalso is the parent of Oklahoma Gas and Electric Co., an electricutility with nearly 700,000 customers in Oklahoma and westernArkansas.

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 sale by Shell is part of a previously announcedrestructuring of its U.S. downstream gas and power assets that isdesigned to improve financial performance. Tejas Gas (now TejasEnergy) bought Transok in May 1996 for $890 million, which is about$190 million more than the current selling price. “The sale ofTransok enables us to concentrate on our core natural gastransportation, storage and NGL assets in the Gulf Coast region,”said Walter van de Vijver, CEO of Shell Exploration &amp ProductionCo. and head of Shell’s U.S. Downstream Gas &amp Power business.”These [core] assets provide the greatest synergy between Shell’snatural gas production and the activities of our gas and powermarketing affiliate, Coral Energy. We are committed to the growthof our U.S. natural gas and power business, and this movestrengthens our competitive position.”

The transaction is expected to close June 30 but is subject toregulatory review under the Hart-Scott-Rodino Act of 1976.

Joe Fisher, Houston

©Copyright 1999 Intelligence Press, Inc. All rightsreserved. The preceding news report may not be republished orredistributed in whole or in part without prior written consent ofIntelligence Press, Inc.