Shell Affiliate Tejas Energy Sells Oklahoma-Based Assets to OGE Energy for $700m

Tejas Energy, a natural gas affiliate of Shell Oil, has agreed to sell its Oklahoma-based gathering, processing, and transportation operation to a subsidiary of OGE Energy for $700 million, with the assumption of $173 million in long-term debt. This sale is part of a larger effort by Royal Dutch Shell's North American operator to improve its bottom line through asset sales. The deal is seen as a strategic move by both companies, as OGE will double the size of its Enogex subsidiary and enhance its presence in the Oklahoma region, while Tejas Energy will focus on its core natural gas transportation, storage, and NGL assets in the Gulf Coast region.

Key Takeaways:

• The sale of Transok, a subsidiary of Tejas Energy, will enable Shell to concentrate on its core natural gas transportation, storage, and NGL assets in the Gulf Coast region.
• The purchase will double the size of OGE's Enogex subsidiary and enhance its presence in the Oklahoma region.
• Tejas Energy's Transok operations will be folded into Enogex's Oklahoma City operations, creating a combined system with approximately 10,000 miles of pipe and the capacity to transport more than 3 billion cubic feet of gas per day.
• The combined Transok-Enogex system will have interests in 15 gas processing plants.
• OGE's Enogex subsidiary has no overlap with Tejas Energy's operations, with the majority of Tejas Energy's business in Texas, Louisiana, and the Gulf of Mexico.
• Jimmy Fox, of Houston-based Tejas Energy, stated that the company has no production in Oklahoma and the bulk of its business is in Texas, Louisiana, and the Gulf of Mexico.
• OGE's Chairman, Steven E. Moore, stated that the acquisition is consistent with the company's strategy of disciplined, asset-based growth around its core businesses of electricity and natural gas.

Statistics:

• $700 million: the sale price of Tejas Energy's Oklahoma-based assets to OGE Energy.
• $173 million: the long-term debt assumed by OGE Energy in the purchase.
• 10,000 miles: the combined length of pipe in the Transok-Enogex system.
• 3 billion cubic feet per day: the capacity of the Transok-Enogex system to transport natural gas.
• 15: the number of gas processing plants in which the combined system has interests.
• 700,000: the number of customers served by OGE's regulated utility company.
• 13,000 miles: the length of interstate pipeline owned by Tejas Energy, with Transok accounting for more than one-third.

Sources:

• Financial Times Limited, 1999.