American Electric Power, Columbus, Ohio, has signed a definitive agreement to purchase Houston Pipe Line Co., which comprises virtually all of Houston-based Enron Corp.'s extensive Texas intrastate natural gas operations.
In other company news, a number of US independent producers have unveiled increased capital spending budgets for 2001 in recent weeks. Other international firms also have announced their spending plans for the coming year.
AEP pipeline acquisition
The acquisition is to be made in the second quarter through AEP subsidiary AEP Energy Services Gas Holding Co., pending the usual regulatory approvals. Terms of the transaction were not disclosed.
Enron's intrastate Texas operations have long been a part of the company. Enron officials told Oil & Gas Journal that they were not shopping these assets around but rather had responded to a good offer from AEP.
HPL's intrastate system consists of 4,400 miles of pipeline infrastructure with a throughput capacity of 2.4 bcfd of gas. It also includes the Bammel gas storage field on the Texas Gulf Coast-one of the largest gas storage facilities in North America-with a capacity of 118 bcf. That facility serves the massive refining and petrochemical complex along the Texas Gulf Coast as well as Houston-based gas utilities.
Enron undertook a $28 million expansion of the Bammel site and HPL in 1998 (OGJ, Mar. 23, 1998, p. 34). The pipeline has connections with a number of gas producing areas in Texas as well as numerous interconnections with other intrastate and interstate pipelines. It is a major provider of natural gas in the Houston area.
"Adding HPL to our natural gas asset portfolio will help us reach our goal of becoming a top 10 gas trader and marketer," said Paul Addis, executive vice-president for AEP.
"The acquisition will allow AEP to extend its strategy of linking physical asset operations with trading and marketing to provide our customers flexible and tailored energy products," he said.
In the third quarter of last year, AEP was ranked No. 14 in volume among wholesale US gas marketers, with deals averaging 4 bcfd of gas.
The company also owns and operates more than 38,000 Mw of generating capacity, making it one of the largest US generators of electricity. It also is a major wholesale energy marketer and trader, ranking second in the US in electricity volume.
Enron officials did not reveal what they plan to do with the proceeds of that sale. However, they said they are comfortable in their position as the top US marketer of gas and electricity.
Capital spending
The following US firms announced their 2001 capital spending plans:
- Kerr-McGee Corp., Oklahoma City, plans to spend $630 million on exploration and production in the North Sea this year-the bulk of a $1.03 billion global E&P program. The investments are part of a record $1.24 billion budgeted for capital expenditures in 2001, which is up 60% from last year.
- Noble Affiliates Inc., Houston, said it would spend up to $700 million in 2001. This is a 40% rise over spending in 2000, the company said.
- Dallas independent Pioneer Natural Resources Co. said it has slated outlays of $430 million for its 2001 capital budget, a 28% increase over its spending last year.
- Edge Petroleum Corp., Houston, set its capital budget for this year at $23.2 million. This amount is an increase of 115% over 2000 spending, the company said.
Outside the US:
- Venezuelan state oil company Petroleos de Venezuela SA (PDVSA) earmarked $5.8 billion in investments for 2001. About $4.25 billion will go to E&P activities, industry sources said. According to the sources, PDVSA plans to increase Venezuela's oil production capacity to almost 4 million b/d. The company also estimated its gross revenues in 2001 at $25.5 billion.
- Westcoast Energy Inc., Vancouver, BC, plans to spend $725 million (Can.) in 2001, a drop from the $1.3 billion planned last year. The pipeline company said spending will be down because most of its major capital projects are nearing completion. It also said that, after a multiyear expansion program, spending is returning to near-normal levels.
Kerr-McGee
Kerr-McGee plans to spend $185 million on E&P in the Gulf of Mexico, $55 million on US onshore prospects, and $160 million on projects in Australia, Indonesia, Ecuador, and China.
The company is budgeting $205 million for "worldwide exploration expense" to cover drilling costs for up to 30 exploratory wells.
Kerr-McGee Chief Executive Officer Luke R. Corbett attributed the firm's largest-ever capital expenditures budget to the "tremendous success of [the] exploration and appraisal program" that led to major development projects at its UK North Sea Leadon field and to the deepwater Gulf of Mexico Nansen and Boomvang developments, all of which will continue in 2001.
Last month, the UK Department of Trade and Industry approved Kerr-McGee's $600 million-plus plan to develop Leadon, Birse, and Glassel fields with subsea horizontal wells tied back to a floating production, storage, and offloading vessel. The company expects first flow from the Leadon-area fields in early 2002, with peak production of 50,000 b/d of oil by the end of that year. The fields are estimated to hold up to 170 million boe of oil and gas.
These projects will fuel a 13% increase in oil and gas production volumes in 2002, said Corbett.
Capital expenditures for Kerr-McGee's chemical operations were set at $200 million, "excluding the 25 million euro buy-up of the remaining 20% minority interest" held by Bayer AG in the company's titanium dioxide plants in Uerdingen, Germany, and Antwerp, Belgium.
Corporate overhead will absorb the remaining $10 million, Kerr-McGee said.
Noble Affiliates
Noble's spending plans are split 60-40 between, respectively, development and exploration projects. The company said it will spend $300 million in the Gulf of Mexico. Spending for onshore US exploration and development has been set at $70 million.
Outside the US, Noble says it will spend $240 million on exploration and development prospects, which will include those planned for China, Israel, Ecuador, and the North Sea. Also allocated is $90 million for the completion of Equatorial Guinea and Ecuador projects.
"The substantial increase in our 2001 capital program indicates the depth and quality of the investment opportunities our organization has developed," said Noble's Pres. and CEO Charles D. David- son.
Pioneer
Through its planned development projects, Pioneer aims to increase production by at least 25% over the next 2 years, said Scott D. Sheffield, Pioneer chairman and CEO.
Pioneer says $315 million of its 2001 budget has been allocated to development projects. Of this amount, $74.5 million is planned for development in the deepwater Gulf of Mexico, namely on Aconcagua and Camden Hills natural gas fields and the associated Canyon Express pipeline and Devils Tower oil field. Pioneer also will use part of the amount to develop Sable oil field off South Africa.
Exploration projects, meanwhile, will take $115 million and will occur in the Gulf of Mexico, South Africa, Gabon, Argentina, and Canada.
Edge Petroleum
Edge will spend $14.1 million to drill 25-30 wells with "the largest average working interest" in the company's history, it said. Production operations, including workovers and completions, will require another $1.8 million. And $1.6 million is allocated for land-related projects, such as renewal and permitting costs for new seismic data.
In addition, about $2.7 million is earmarked for geological and geophysical activities, which mostly comprise additional seismic data.
Edge said it expects its reserve base, in addition to new drilling, to increase total production by 5-8% over last year.
"This year marks an important turning point at Edge," said John Elias, Edge chairman, president, and CEO. "Past drilling success and strong commodity prices will provide us the financial flexibility to execute a meaningful drilling program with working interest participation that can result in significant reserve and production growth."
