Having recently snapped up Mid-American Pipeline and Seminole Pipeline from Williams, Enterprise Products Partners L.P. announced it was continuing to solidify its natural gas liquids empire with the purchase effective Nov. 1 of four NGL terminals and certain wholesale propane supply and sales contracts from an affiliate of Cornerstone Propane Partners, L.P.

The purchase price for the terminals, propane inventories and supply and sales contracts was approximately $11.5 million in cash. And it may not end there. “We’re always looking for assets that fit our system. We’re a company on the move,” spokesman Andy Burkhalter responded to an NGI query. Enterprise is a “full midstream energy company, bringing producers to end users.” It is a “strategic partner” with Shell, which owns 30% of the general partner, while Enterprise handles all Shell’s Gulf of Mexico liquids.

Enterprise has been in the Gulf Coast midstream business since 1968, but only went public in 1998, when Shell bought in. “Now with the Williams’ pipelines purchase we extend into the Rockies Overthrust area and, indirectly through third parties, connect into Canada and the MacKenzie Delta. We’re the most integrated [master limited partnership] out there,” Burkhalter said.

While nowhere near the $1.2 billion cash paid to Williams for the two liquids pipelines acquired in July, the Cornerstone terminals and contracts are key additions, according to O.S. “Dub” Andras, president and CEO of Enterprise. “These terminals expand the fee-based transportation and storage services that we provide to our customers. We expect that this purchase will be immediately accretive to our partnership’s cash flow,” he said.

The terminals, which were part of Cornerstone’s Coast Energy Group (CEG) wholesale propane business, are located in Bakersfield and Rocklin, CA; Reno, NV, and Albertville, AL. Storage associated with these facilities totals approximately 2.6 million gallons. The Bakersfield terminal supports fee-based logistical services that Enterprise provides to several West Coast refineries, including Shell Oil Products.

As part of the asset purchase agreement, Enterprise also acquired certain wholesale propane supply and sales contracts that utilize the purchased terminals as well as the propane terminals on the Mid-America Pipeline system and the Dixie Pipeline system. Enterprise acquired 16 propane terminals as part of the Mid-America Pipeline purchase. The company also owns approximately 20% of the Dixie Pipeline Co.

In addition, Enterprise has entered into a long-term supply agreement to provide Cornerstone with propane. Annual propane volumes associated with the wholesale contracts and the collateralized supply agreement with Cornerstone are expected to be 400 million gallons.

Cornerstone said the sale of subsidiary CEG’s wholesale propane business essentially completes its exit from the wholesale propane business. Earlier this year, CornerStone sold or closed the midstream crude oil pipeline, gathering and marketing assets of CEG. In 2001, CornerStone exited its Canadian crude oil business.

Meanwhile, financially stressed Cornerstone said in a press release that with the transactions and actions taken over the past three months to reduce costs, capital expenditures and working capital needs, it “believes that it has adequate liquidity to operate through the peak winter heating season.

“Everyone has made a terrific effort to achieve these results,” said Curtis G. Solsvig III, Cornerstone’s CEO. “When we started restructuring this summer, we hoped to be able to get through the season with our own resources. Selling CEG to Enterprise and partnering with Enterprise on propane procurement was critical to this strategy. This both generates significant cash for CornerStone and reduces our working capital needs.”

“We also have made tremendous progress in restructuring our core retail propane business. By consolidating sub-scale Service Centers, reducing overhead, deferring capital expenditures and cutting back on other costs, we have dramatically reduced our cash requirements. We have also gotten critical support from our general partners.”

Cornerstone continues to discuss financial restructuring options with its noteholders.

Enterprise Products Partners L.P. is the second largest publicly traded, midstream energy partnership with an enterprise value of $6 billion. It is a leading provider of midstream energy services to producers and consumers of natural gas and NGLs. The company’s services include natural gas transportation, processing and storage and NGL fractionation (or separation), transportation, storage and import/export terminaling.

Cornerstone, a master limited partnership, is one of the nation’s largest retail propane marketers. It has 1,900 employees and serves 440,000 customers in more than 30 states in the East, South, Central and West Coast regions.

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