Texas Eastern Products Pipeline Company LLC, the general partner of TEPPCO Partners LP, last week signed a definitive agreement to acquire the Chaparral and Quanah natural gas liquids (NGL) pipelines from Diamond-Koch II LP and Diamond-Koch III LP. TEPPCO said the estimated $130 million transaction is expected to close in February.

“This acquisition supports our strategy of building a base for long-term growth by pursuing new fee-based assets that fit the master limited partnership structure,” said William L. Thacker, CEO of the general partner of TEPPCO. “Over the last two years, TEPPCO has announced more than $900 million in acquisitions, and we remain committed to completing accretive acquisitions of $300 million to $400 million in 2002.”

The 800-mile Chaparral system extends from West Texas and New Mexico to Mont Belvieu, TX. The pipeline delivers NGLs to fractionators and existing TEPPCO storage in Mont Belvieu. The 170-mile Quanah Pipeline is an NGL gathering system that begins in Sutton County, TX, and connects to the Chaparral Pipeline near Midland, TX.

According to TEPPCO, the pipelines are connected to 27 gas plants in West Texas and have approximately 28,000 hp of pumping capacity at 14 stations. The agreement includes the San Andres facility in Andrews County, TX — two underground NGL storage wells with 220,000 barrels of combined capacity. TEPPCO said the assets will be operated and commercially managed by Duke Energy Field Services LP (DEFS) under agreements.

The company said it expects first full-year earnings before interest, taxes, depreciation and amortization from the Chaparral and Quanah systems of approximately $16 million. All of the revenue associated with the acquired assets is either tariff or fee-based. The acquisition will be immediately accretive to income and cash flow.

“With DEFS’ significant gas processing capacity in West Texas and ownership in two fractionation plants in Mont Belvieu, DEFS is in a position to bring value to the acquisition,” said Jim W. Mogg, CEO of DEFS and vice chairman of the general partner of TEPPCO. “This should significantly benefit both TEPPCO and DEFS as we continue to provide quality service to producers in the Permian Basin area.”

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