Debt

As part of its plan to reduce debt and strengthen its balance sheet, CMS Enterprises announced Wednesday that it has completed the previously announced sale of a portfolio of its businesses in Argentina and its northern Michigan nonutility natural gas assets for about $130 million (see Daily GPI, Feb. 5). The principal subsidiary of CMS Energy sold its interests in those businesses to Michigan-based Lucid Energy. The Argentina businesses sold by CMS Enterprises were the CT Mendoza and Ensenada generating plants and the TGM natural gas pipeline business. The sale of Argentine businesses originally was to include the CMS Enterprises interest in Hidroelectrica El Chocon SA. However, the CMS Enterprises 17.2% interest in El Chocon was sold last week to Endesa under a separate arrangement after Endesa exercised a right of first offer for $50 million. The total proceeds from the two transactions — the sale to Lucid Energy announced today and the sale of the El Chocon interest announced Friday — are $180 million. In Michigan, the sale to Lucid Energy includes CMS Enterprises’ natural gas pipelines and processing assets, the Antrim natural gas processing plant, 155 miles of associated gathering lines and interests in three special purpose gas transmission pipelines that total 110 miles. As a result of the sales to Endesa and Lucid Energy, CMS Energy expects to recognize an after-tax, noncash loss of approximately $160 million in the first quarter of 2007. CMS Enterprises said it will maintain its interest in the TGN natural gas business in Argentina, which remains subject to a potential sale to the government of Argentina or some other disposition. Regarding CMS Enterprises’ commitment to sell its 23.5% interest in TGN, CMS Energy said it expects to record an after-tax impairment charge of approximately $140 million in the first quarter of 2007 to reflect the fair value of its TGN ownership interest.

TC PipeLines LP has closed its previously announced acquisition of Sierra Pacific Resources’ 50% interest in Tuscarora Gas Transmission Co. for US$100 million (see NGI, Nov. 6).

Kinder Morgan Inc. (KMI) stockholders on Tuesday overwhelmingly approved a management-led plan to take the company private in a transaction valued at $22 billion, including $7 billion in debt. The private equity buyout, considered one of the largest ever, will give most of the company’s shareholders $107.50 in cash, without interest, for each KMI common share, a 27% premium over the $84.41 closing price on May 26, the last trading day before the proposal was made (see Daily GPI, May 31).

Stone Energy Corp.’s board said Monday that Energy Partners’ (EPL) $1.4 billion cash and stock offer (plus $800 million in assumed debt) is “superior” to the the deal already made with Plains Exploration & Production. As a result, Plains has five days to raise its offer.

Record cash levels and historically low levels of debt should fuel strong exploration and production (E&P) earnings for the second quarter and perhaps encourage more mergers and acquisitions (M&A) within the energy sector through the rest of the year, but if natural gas prices remain low, producers weighted toward gas may see a slowdown in full-year earnings, according to energy analysts. E&P 2Q2006 earnings announcements will begin in earnest within the next few days.

Devon Energy Corp.’s quarterly profit rose sharply on rising energy prices, share repurchases and operational improvements, but its oil and natural gas production, compared with a year ago, was down because of hurricane impacts and asset sales. Southwestern Energy Co., which concentrates in some of the same U.S. onshore regions as Devon, increased its gas-rich volumes 14% and boosted earnings 79% in 1Q2006.

National Grid confirmed it is in talks with KeySpan Corp. to potentially acquire the company in an all-cash deal. However, “there is no certainty that they will lead to any definitive agreement,” National Grid said in a statement. “If agreed, any transaction would be on an all cash basis, satisfied wholly from borrowings.”

Vintage Petroleum shareholders Thursday voted in favor of Occidental Petroleum’s $4.4 billion purchase offer, including $550 million in debt assumption and $3.87 billion in OXY shares and cash. The positive vote paves the way for the acquisition to be completed at the end of the month.

Moody’s Investors Service has launched a review of Burlington Resources Inc.’s debt ratings, which it said was prompted by the producer’s success in replacing reserves and increasing production. Burlington’s “trend of operational success” and “strong financial profile,” has been aided by financial discipline and a “buoyant oil and natural gas price environment.”