Union

Kerr-McGee Corp. has announced it will cut its U.S. non-union workforce by 7-9% or up to 250 employees in order to reduce costs. The job reductions and a plan to mitigate $15 million of future annual medical and pension expenses is expected to add up to about $45 million in savings.

In response to Oneok’s Wednesday announcement that it had entered an agreement to acquire Southern Union Co.’s Texas gas distribution business, Standard & Poor’s Rating Services said Thursday that its ratings and outlook for Oneok (A/Stable/A-1) will not be affected. In making the purchase of the business that supplies approximately 535,000 customers in Texas with natural gas, Oneok CEO David Kyle said the company started as a gas distributor and the business continues to be an important segment of Oneok’s strategy (see Daily GPI, Oct. 17). S&P commented that management has begun to strengthen Oneok’s financial profile, and the acquisition will be financed in accordance with that plan. “The regulated gas distribution business’ relatively low-cost, steady earnings will boost that segment’s share of operating income to 35% to 40% of operating income derived from natural gas production, transport and storage, gathering and processing, and distribution,” S&P said. The ratings agency noted that these businesses have accounted for about 70 to 80% of consolidated operating income with marketing and trading accounting for the remaining portion. However, S&P pointed out that marketing and trading’s contribution fluctuates with commodity price volatility. For example, S&P said marketing and trading accounted for 53% of consolidated operating income in the first half of 2002 compared with 29% in first-half 2001. Enbridge Energy Partners LP closed its acquisition of the Midcoast, Northeast Texas and South Texas systems from Enbridge Inc. The purchase price of $820 million is subject to adjustments for working capital and other items. The Midcoast system includes 4,000 miles of natural gas gathering and transmission pipelines, with an aggregate throughput capacity of 4 Bcf/d, and natural gas treating and processing assets located in the Midcontinent and Gulf Coast regions. Included in the Midcoast system are four interstate pipeline systems, 35 intrastate and wholesale customer gas pipeline systems, 35 gathering and processing/treating systems, 98 gas liquids, crude oil and carbon dioxide trucks and trailers and 48 rail cars. The Northeast Texas system includes 1,200 miles of gas gathering lines with a throughput capacity of 400 MMcf/d, along with five treating plants and four processing plants. The South Texas system consists of 175 miles of gas gathering lines with a capacity of 100 MMcf/d and one treating plant. The South Texas gathering system interconnects with 500 miles of gas transmission lines, which the partnership has the right to acquire, subject to among other things, payment by the partnership of the $41 million purchase price and regulatory approvals. Concurrently with the closing, the partnership sold nine million limited partner interests to Enbridge Energy Management LLC for $333 million ($39/share). The partnership intends to use the proceeds from the sale to pay off debt assumed in connection with the acquisitions.

Unocal Corp. increased its offer, albeit slightly, on the pending share exchange offer for Pure Resources Inc. Subsidiary Union Oil Company of California made the amended offer Wednesday after a special committee of the Pure Resources’ board of directors obtained an injunction to stop the share exchange a day earlier (see Daily GPI, Oct. 2).

President Bush’s focus on security in the upcoming State of the Union message will include “the security that comes from being energy-independent and having reliable supplies of American-made fuel, White House spokesman Ari Fleischer said in a news briefing Thursday. “Among the domestic policy issues that the president will focus on throughout 2002 are the creation of jobs for the American people, helping the economy to grow out of the recession and recover, energy independence and the development of a comprehensive energy plan. I remind you that it again is another exciting bipartisan opportunity for the country. It passed — the president’s energy plan passed the House with a rather sizeable bipartisan vote; the President hopes the Senate will take action.” There has been no decision as to exactly what day the president’s address to Congress will be given this year, a spokesman said. It usually occurs around Jan. 20.

Cinergy Corp. said customers of its affiliates, Cincinnati Gas & Electric Co. and the Union Light, Heat and Power Co., will see significant reductions in natural gas prices for the winter period, compared with last year under filings made by the companies with state regulatory agencies in Ohio and Kentucky. The company claimed that customers of CG&E in Ohio can expect natural gas prices to be 30% below the winter period a year ago, while ULH&P customers in Kentucky will experience a reduction of 18% from last year.

According to Cinergy Corp., customers of its Cincinnati Gas & Electric Co. and the Union Light, Heat and Power Co. affiliates will see significant reductions in natural gas prices for the winter period, compared with last year under filings made by the companies with state regulatory agencies in Ohio and Kentucky. The company claimed that customers of CG&E in Ohio can expect natural gas prices to be 30% below the winter period a year ago, while ULH&P customers in Kentucky will experience a reduction of 18% from last year.

Chevron Corp’s proposed agreement to acquire Texaco Inc. for$35.7 billion in stock would, if given the go-ahead by federalregulators, put the merged company into the “Super Major” League ofproducers worldwide and domestically. It would create the thirdlargest natural gas and oil producer in the United States.

UGI Corp. announced that its energy marketing subsidiary, UGI Energy Services Inc., has agreed to acquire the gas marketing business of PG Energy Services Inc., a subsidiary of Southern Union Co., effective July 1, 2001. UGI Energy Services, which does business as GASMARK and POWERMARK, will assume the existing sales and supply agreements for approximately 500 commercial and industrial customers of PG Energy Services. All employees associated with PG Energy customer accounts will join UG Energy Services. Terms of the transaction were not disclosed. The acquisition is expected to increase GASMARK sales volume by over 30%, increasing its annual revenues to over $400 million and making it one of the region’s largest energy marketing companies.

El Paso declared an Unauthorized Overpull Penalty situation Sunday and kept it in place through Monday.