Williams Cos. Inc., Tulsa, signed a definitive agreement to sell its 5,800 mile Texas Gas Transmission Corp. (TGT) natural gas system to Loews Pipeline Holding Corp., a unit of Loews Corp., for $1.045 billion.
The sale price includes $795 million in cash to be paid to Williams and $250 million in debt that will remain with TGT.
Loews is a holding company whose subsidiaries include CNA Financial Corp., Lorillard Inc., Diamond Offshore Drilling Inc., and Bulova Corp.
TGT—which transports gas from the Gulf Coast, East Texas, and North Louisiana to the southern US and US Midwest— has a design capacity of 2.8 bcfd.
Meanwhile, XTO Energy Inc., Fort Worth, has agreed to buy 311 bcf of natural gas and coalbed methane reserves, of which 77% is proved developed, from Williams for $400 million.
In other recent company news:
- A unit of Suncor Energy Inc., Calgary, has agreed to buy ConocoPhillips's Denver refinery, 43 Phillips-branded retail stations and associated storage, pipeline, and distribution facilities for $150 million. In addition, Suncor Energy (USA) Inc. will purchase existing crude oil and product inventories associated with those assets. Closing of the acquisition remains subject to US regulatory approvals.
- ARC Energy Trust, Calgary, plans to acquire private Star Oil & Gas Ltd., also of Calgary, for $710 million (Can.) by the end of April.
- PanOcean Energy Corp. Ltd. has agreed to buy the minority interests in PAE PanAfrican Energy Corp. Ltd. from investors AIG African Infrastructure Fund LLC and RMB Resources (Cayman) Ltd. for $30.75 million in cash and stock.
- Geoservices, a worldwide French oil services company, and Institut Français du Pétrole (IFP) have signed a 2.5 million euro, 3-year contract to develop innovative products to aid in oil drilling surveillance and in oil and natural gas production.
TGT
Pending the sale of TGT, which is subject to approval by the US Federal Trade Commission, Williams expects to record a pretax impairment charge to earnings of about $110-120 million in the first quarter, it said. The sale, which was announced Apr. 14, is expected to close within 2 months.
Williams Chairman, Pres., and CEO Steve Malcolm said, "We targeted [TGT] for sale less than 60 days ago. Today, we have a solid buyer and a signed agreement that captures a good priceU."
So far this year, Williams has sold or agreed to sell $2.1 billion worth of assets. "That figure includes proceeds from assets identified as part of the company's liquidity-management plan as well as two transactions in the company's energy marketing and trading portfolio," the company said.
Williams said all TGT employees will remain with the company, adding that an "unspecified number of other Williams employees who provide services to Texas Gas will be offered the opportunity to transition to employment with Texas Gas."
Following the closing, Williams' subsidiaries will wholly own and operate 14,000 miles of interstate gas transmission pipeline, including the Transcontinental Gas Pipe Line Corp. and Northwest Pipeline systems.
The company also still holds a 50% interest in the 581 mile Gulfstream pipeline. Williams transports 12% of the gas consumed in the US, the company said.
Moody's Investors Service issued a research note that placed under review for possible upgrade TGT's B3 senior unsecured debt and (P)B3 shelf ratings.
Previously, Moody's had assigned a negative outlook to TGT's ratings, "reflecting the weak financial condition of Williams, and this review reflects the potential for ownership by a financially stronger company," the agency said.
"The review will focus on the probability of the transaction being consummated, the relative placement of TGT's securities in Loews's corporate structure, and changes in TGT's financial profile that may result from this transaction and its new ownership," Moody's said.
XTO
Bob R. Simpson, XTO chairman and CEO, said the purchase fits his company's "growth strategy, which combines high margin production with low risk drilling upsides located in legacy asset basins."
The properties are in the Raton basin of Colorado, Hugoton field of southwestern Kansas, and the San Juan basin of New Mexico and Colorado. The acquisition will add 60 MMcfd to XTO's production base.
Closing is expected by June 6, and the deal will be retroactive to Mar. 1 for Hugoton field assets and Apr. 1 for the other assets. Williams said part of the San Juan basin nonoperated properties is subject to preferential purchase rights.
The properties also add a new core operating area, said Steffen E. Palko, XTO vice-chairman and president. "Our coalbed methane expertise is expanding into the prolific Raton basin. We are boosting XTO's existing San Juan basin operations with new conventional and coalbed methane gas positions."
Suncor Energy
Banc of America Securities LLC analyst Tyler Dann called the Suncor Energy deal "a relatively cheap entry into the RockiesU. Canadian syncrudes continue to replace declining Rockies crude production, making the refinery a natural outlet for Suncor's Fort McMurray [Alta.] supply."
Dann said $40 million of the purchase price was for pipeline assets and $20 million was for the retail stations, meaning the refinery alone cost $90 million.
Suncor Energy Pres. and CEO Rick George said, "Additional refining and storage assets linked by existing pipeline to our growing oil sands production are key to effectively marketing our products into the US."
George said Suncor's continuing growth strategy includes seeking more downstream integration opportunities including acquisitions of additional refining assets or expansion of existing assets.
The company plans to spend up to $225 million by 2006 to meet new fuels legislation and enable the 62,000 b/d refinery to integrate Suncor sour crude blends.
After 2006, Suncor Energy expects to integrate as much as 50,000 b/d of its own sweet and sour crude into the refinery.
Upon closing, Suncor will assume 585 employees, including about 300 retail employees.
ARC
The takeover of Star Oil & Gas is to be retroactive to Jan. 1, 2003.
ARC said 75% of the production from Star's properties is natural gas, adding that the properties provide significant development opportunities.
Just over half of Star's production comes from the three largest fields: Dawson, Pouce Coupe, and Hatton gas fields. January 2003 production averaged 3,600 b/d of oil, 1,400 b/d of NGL, and 90 MMcfd of gas.
The proved reserves to be acquired include 11.9 million bbl of oil, 3.7 million bbl of NGL, and 288 bcf of gas, plus additional probable reserves in each category.
PanOcean Energy
Based in St. Helier, Jersey, Channel Islands, UK, PanOcean Energy will own 100% of PAE PanAfrican Energy.
An oil company operating in Gabon and Tanzania, PAE PanAfrican Energy's 2002 production averaged 4,980 b/d, and its first quarter 2003 production averaged 9,700 b/d (OGJ Online, Jan. 20, 2003).
The acquisition, expected to close in May, involves a cash payment of $17.5 million, the issuance of 500,000 PanOcean Class B shares, and $11.5 million in subordinated notes.
IFP
In the partnership with Geoservices, IFP will contribute its scientific and technological knowledge.
The program will involve the development of new materials, new physics, and geochemical measures as well as the modeling of complex oil processes, the companies said.
Applications will be possible in different areas such as measure-while-drilling and production operations, and in interpretation of gases extracted from mud.