Kinder Morgan Inc. and ONEOK Inc. agreed for ONEOK to buy all ofKinder’s gas gathering and processing businesses in Oklahoma,Kansas and West Texas, the companies announced Tuesday. Inaddition, ONEOK agreed to buy Kinder’s marketing and tradingbusiness as well as certain storage and transmission pipelines inthe Midcontinent.

ONEOK will pay Kinder about $114 million plus an amount equal tonet working capital at closing; assume the operating leaseassociated with the Bushton, KS, gas processing plant; and assumelong-term capacity commitments on Natural Gas Pipeline Co. ofAmerica and on Kinder Morgan Interstate Gas Transmission (formerlyKN Interstate Gas Transmission Co.).

“This is a continuation of our strategy of expanding ourownership of natural gas assets and marketing capabilities in theMidcontinent region,” said ONEOK President David Kyle. “Thisacquisition represents in excess of 12,000 miles of pipeline, sixgas processing plants with capacity of 1.26 billion cubic feet perday and 10.5 billion cubic feet of storage. When we combine theseassets with our existing assets and those to be added with theDynegy transaction announced last week we will be able to takeadvantage of operating synergies. We expect this transaction to beaccretive to earnings the first year even without those synergies.”

The transaction includes three storage fields in the TexasPanhandle. A spokesman could not immediately say how much long termcapacity ONEOK acquired on Kinder Morgan’s two main pipelines, butthe purchase of the marketing and trading operation presumablywould have included the capacity held by former NGPL affiliateMidCon Trading.

Last week ONEOK said it would buy Dynegy Midcontinent gathering andprocessing assets for $307.7 million (see Daily GPI, Feb. 2).

“Last fall, we announced our intention to exit these businessesas part of our ‘back to basics’ strategy,” said Kinder CEO RichKinder. “With this sale, KMI’s divestiture program is more than 80%complete. The sales proceeds are consistent with the estimates wemade in the fourth quarter as part of the write-down ofdiscontinued operations. The combination of cash, assumption of theBushton lease and long-term capacity agreements will furtherstrengthen our balance sheet and other credit characteristics.Going forward, we will focus on growing our core, fee-basedbusinesses.”

Late last year it was announced HS Resources would buy Kinder’sgathering system in the Wattenberg field area of the Denver-JulesbergBasin, along with its interests in the Amoco-BP Wattenberg GasProcessing Plant and KN Wattenberg LLC, which owns the Wattenbergtransmission system, in a phased transaction. This also wascharacterized as part of Kinder’s divestiture plan (see Daily GPI, Dec. 1)

Kinder is one of the largest midstream energy companies inAmerica, operating more than 30,000 miles of gas and productspipelines in 26 states. It also has significant retaildistribution, marketing, gathering, electric generation andterminal assets. ONEOK is an integrated gas company involved inproduction, processing, gathering, storage and transmission in theMidcontinent. The company’s gas marketing operations provideservice to customers in 25 states.

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