Conoco Inc. and Mitchell Energy Development Corp. plan to form a joint venture to buy Oryx Energy Co.'s interests in 14 natural gas processing plants in Oklahoma and Texas.
Acquired interests would boost Conoco and Mitchell NGL production by about 10,000 b/d each.
That would increase NGL production of Mitchell's Liquid Energy Corp. subsidiary to 55,000-60,000 b/d, placing it among the top 10 U.S. NGL producers. Conoco's NGL production would climb to about 70,000 b/d.
Twelve of the 14 plants are in Oklahoma and two in the Permian basin of Texas.
CAPACITY, PRODUCTION
Combined processing capacity of the plants in Oklahoma is 866 MMcfd and in Texas 255 MMcfd.
In the first year following conclusion of the sale, the plants in Oklahoma are expected to process about 436.3 MMcfd of gas and in Texas about 176.2 MMcfd. Net first year NGL production to the proposed Conoco-Mitchell joint venture is expected to be 13,317 b/d in Oklahoma and 7,064 b/d in Texas.
As part of the deal, Conoco and Mitchell would receive the same interests in associated gas gathering systems serving each plant.
Most of the plants operate under percent of proceeds contracts in which gas producers and processors share risks related to fluctuations of gas and NGL prices.
Mitchell would take over from Oryx operation of the 60 MMcfd Jameson plant in Coke County, Tex. Conoco would replace Oryx as operator of the 200 MMcfd Laverne plant in Harper County, Okla., 60 MMcfd Goldsby plant in McClain County, Okla., and 15 MMcfd Carney plant in Lincoln County, Okla.
Conoco presently operates 18 gas processing plants in the U.S., including the 30 MMcfd Hennesy plant in Blaine County, Okla., which is involved in the deal.
The two Texas plants are east of Conoco's San Angelo gas gathering and processing system.
The Oklahoma plants are adjacent to Conoco NGL units in the central part of the state.
MITCHELL HEDGE
Allen J. Tarbutton Jr., Mitchell president of transmission and processing, said the proposed acquisition would provide another important hedge for the company's liquids operations.
"About two thirds of our company's existing agreements are 'keep whole' contracts under which we earn a higher percentage of proceeds but must make up for shrinkage and gas consumed as fuel in processing operations," Tarbutton said. Conoco, Mitchell, and Oryx are negotiating terms. Details are to be disclosed upon closing, expected in August.
Copyright 1992 Oil & Gas Journal. All Rights Reserved.
