Houston-based Dynegy Inc. exercised its rights to acquire the common equity of Northern Natural Gas Co. (NNG), a natural gas pipeline formerly owned by Enron Corp., also of Houston. Dynegy reported earlier this month that Enron's option to buy back the pipeline had expired June 30.
In other recent company news:
- Tulsa-based Williams Cos. Inc. has signed a letter of intent to sell its Kansas Hugoton natural gas gathering system to FrontStreet Hugoton LLC, a unit of FrontStreet Partners LLC, Houston. FrontStreet will pay $100 million for the system, but the sale price will be subject to certain post-closing adjustments, Williams said.
- ENI SPA and Germany's EnBW AG said they will acquire jointly a controlling interest in GSV Gasversorgung Süddeutschland GMBH, a major German natural gas transporting and marketing company.
- Mallon Resources Corp. of Denver reported that it has withdrawn from discussions with Tulsa-based Smart Exploration Inc. to enter into a coalbed methane exploration project with the company on Mallon's acreage in New Mexico.
- Tesoro Petroleum Corp., San Antonio, has updated its debt-reduction plan announced last month, when the company said it planned to reduce its debt by $500 million by yearend 2003.
Dynegy acquires NNG
Dynegy had gained temporary possession of the 16,600 mile NNG system earlier this year after beleaguered Enron failed to repay a $1.5 billion equity infusion Dynegy made as part of its unsuccessful attempt to merge with Enron last year (OGJ, Feb. 11, 2002, p. 38).
"Since we assumed ownership of the pipeline in February, we have been working on integration issues to ensure a smooth transition for customers and employees," said Steve Bergstrom, Dynegy president and chief operating officer. "With the uncertainty of NNG's repurchase behind us, we can focus our efforts on executing our strategy to optimize the value of the pipeline for our shareholders," he added.
Based on terms of the transaction, Dynegy said that Enron would continue to provide "certain transition services" associated with the system on a contract basis through January 2003. In addition, about 730 former Enron employees working for NNG have become employees of Dynegy.
Dave Neubauer, who joined NNG in October 1999, will continue to serve as interim NNG president.
NNG extends from the Permian basin in Texas to the upper Midwest US. The system can store 59 bcf of gas and has a market area pipeline delivery capacity of 4.3 bcfd.
Williams sells Hugoton plant
The sale of the Hugoton processing system, which is expected to close by July 31, is part of Williams's plan to "strengthen its balance sheet and more tightly focus its portfolio of energy businesses," it said.
The Hugoton system extends over seven counties in southwestern Kansas and comprises more than 1,800 miles of 2-30-in. gathering lines. The system, which has 55,000 hp of compression, is operated by BP PLC unit BP America Production Co.
"The sale will help us focus our midstream operations in our core growth areas in Wyoming, the San Juan basin, and the Gulf Coast (region), particularly the deepwater Gulf of Mexico," said Phil Wright, president and CEO, Williams's energy services unit.
Sales of assets such as this are part of Williams's overall plan to create a net $8 billion improvement in the company's finances in the coming year, the company said. To date, Williams is $3 billion shy of meeting its goal.
ENI-EnBW deal
ENI and EnBW acquired interests of GSV from Land of Baden-Württemberg 25%, Mannhelm utility MVV RHE AG 26.25%, and other local municipalities 10.97%.
Through a controlled company, the two firms also will acquire 33.4% of GSV already owned by EnBW. In turn, the total 95.62% holdings in GSV will be transferred to the newly formed company. The value of GVS is estimated at 720 million euros.
GVS transports and markets about 8 billion cu m/year of gas to about 750 locations; it achieved annual revenues of 1.7 billion euros in 2001.
ENI said that the transaction marks its fourth large-scale acquisition in recent years. Recently, the Italian state firm acquired 33.34% of Portugal's Galpenergia, solidifying ENI's entrance into the Portuguese gas market. The company also has inked two commercial agreements, one with Spain for the sale of as much as 1.5 billion cu m/year of gas and another with Turkey-along with project partner OAO Gazprom-for the sale of up to 16 billion cu m/year through the recently completed Blue Stream pipeline project (OGJ, Feb. 25, 2002, p. 8).
Mallon's withdrawn deal
Mallon had signed a letter of intent with Smart in April to form a joint venture to explore and develop the Fruitland formation coal seams under Mallon's East Blanco prospect in New Mexico's San Juan basin (OGJ, Apr. 15, 2002, p. 8), but the two firms were unable to agree upon definitive terms, Mallon said.
Mallon Chairman George Mallon said, "We were excited to do a transaction with Smart as outlined in the original letter of intent. Unfortunately, as we worked toward a definitive agreement, we realized that Smart's willingness to commit real exploration dollars to the project was eroding.
"Ultimately, we determined it would not be in our shareholders' best interests for the company to commit our 50,000 prospective acres to a project with Smart," Mallon added.
Mallon said it has reopened discussions with "other prospective joint venture partners."
Tesoro debt reduction
Tesoro's overall debt-reduction goal is focused on several strategic initiatives, including optimizing its working capital, reducing costs, selling some of its assets, and concentrating on the synergies created through its recently acquired Golden Eagle refinery from San Antonio-based Valero Energy Corp. (OGJ, June 10, 2002, p. 38).
"Our first priority is to strengthen our balance sheet-immediately," said Bruce A. Smith, Tesoro chairman, president, and CEO.
Tesoro has delivered bid packages for the assets deemed as viable candidates for divestiture, Smith said, adding that the "initial expressions of interest have been encouraging."
Smith added, "…at the end of the second quarter, the Golden Eagle refinery throughput was around 160,000 b/d after completing its planned turnaround ahead of schedule. Also, the CARB III project is proceeding on schedule and within budget. After scheduled debt payments of $15 million and June's capital program, we still had over $54 million of cash invested at the end of June."