ONEOK to Sell Oil, Gas Production Units; Move Will Reduce Debt, Narrow Focus
Posted on: Wednesday, 20 July 2005, 21:01 CDT
Jul. 20--ONEOK Inc. will begin the process of selling its oil and gas production companies to reduce debt and narrow its focus, the Tulsa-based natural gas company said Tuesday.
The announcement comes less than three weeks after ONEOK completed its $1.35 billion purchase of pipelines and processing plants from Koch Inc.
While a relatively small segment of the $8.2 billion company, ONEOK's production assets are concentrated in four fields in south-central Oklahoma, the Oklahoma and Texas panhandles and east Texas. The fields' 1,100 wells produced 16.6 billion cubic feet of natural gas and 334,000 barrels of oil in 2004, ONEOK spokesman Weldon Watson said.
The assets make up operations of one of the company's six divisions. ONEOK also is the parent company of Oklahoma Natural Gas Co., Kansas Gas Service and Texas Gas Services Co.
"When we completed our acquisition of the natural gas liquids businesses from Koch, we indicated our intention to finance the transaction through a combination of available cash, issuance of long-term debt, settlement of our equity units in February 2006, and from the proceeds of the sale of less strategic assets," David Kyle, ONEOK chairman, president and chief executive officer, said in a statement Tuesday.
"Selling our oil and gas production operations is consistent with that strategy."
Tulsa money manager Fred Russell said selling the production assets to reduce debt and focus on the pipeline business is a good move for ONEOK.
"Pipelines are synonymous with ONEOK," said Russell, head of Fredric E. Russell Investment Management Co.
"They know the business. They've been doing it for a long time. You want to do what you know best. If you have debt and you invested in something you know best, you probably would be smart to reduce the enterprise risk by trimming down your debt by selling assets that are not material."
And the timing could not be better, he said.
"It's worth a heck of a lot more now than it was a year ago or certainly two years ago. If you have something to sell, you always want to sell at the top or after the price has risen. We don't know if we're at the top yet, but oil and gas prices have already had a meteoric rise."
ONEOK said it plans to contact a limited number of prospective buyers. If the company proceeds with a sale, the deal likely will be completed during the third quarter, the company said.
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OKE,
Source: The Daily Oklahoman
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