Associated Natural Gas Corporation - Company Profile, Information, Business Description, History, Background Information on Associated Natural Gas Corporation

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History of Associated Natural Gas Corporation

Associated Natural Gas Corporation (ANG) is one of the largest independent natural gas companies in the United States. ANG is involved in virtually every phase of the natural gas business, including purchasing, gathering, processing, transportation, and marketing. The company purchases gas from a number of major and independent producers, then gathers and processes it using company-owned pipelines and processing plants. The gas is then sold to industrial end-users, local distribution companies, or wholesalers. ANG also handles natural gas liquids (NGLs) and crude oil. In 1993, the company owned about 8,000 miles of pipeline, and had gathering, processing, or transmission facilities in nine southern and southwestern states: Alabama, Arkansas, Colorado, Kansas, Louisiana, Mississippi, New Mexico, Oklahoma, and Texas. These facilities included 32 natural gas gathering systems, 13 natural gas processing plants, five fractionation facilities for NGLs (where NGLs are separated into component products such as ethane, propane, or butane), and two NGL transmission pipelines. Well over 7,000 producing wells are connected to the ANG system. The company processed, marketed, or gathered 1.21 billion cubic feet of natural gas daily in 1993. In addition, ANG transported 24,400 barrels of NGLs and transported and traded more than 61,000 barrels of crude oil each day during that year.

ANG began as a partnership under the name Natural Gas Associates (NGA) in 1983. Cortlandt S. Dietler, who had started the Western Crude oil company in the mid-1960s and successfully ran it until 1980 when he sold it to Getty Oil, recognized in the early 1980s that the role of natural gas as an energy source in the United States would increase dramatically in the coming years. He established NGA to take advantage of the changes that were occurring in the oil and gas industry, both in regulation and in the market. Changes in regulations for the natural gas industry made it easier for companies to gain access to interstate pipelines for transporting natural gas owned by others. Dietler noted that gathering, processing, and marketing were functions essential to both producers and end-users of natural gas. He hoped that the new company would prosper through its ability to react more quickly than its larger, plodding rivals to the industry's shifting demands.

Natural Gas Associates' first natural gas processing and gathering system went into operation in March 1983. The company processed its first cubic foot of natural gas at a plant near Kersey, Colorado. The plant, with a daily capacity of 10 million cubic feet, was part of a system 18 miles long connected to 22 natural gas wells. Continuous drilling and the construction of hundreds of miles of additional pipeline expanded the company's Colorado system greatly over the next few years.

The company's survival, however, was tied to the aggressive marketing employed by Dietler and his associates. When the system's natural gas volume began to exceed the needs of the local utility companies, NGA mounted its first serious marketing effort, initially using the yellow pages as its source for potential customers. As most companies struggled to stay afloat while demand for fuel decreased and supply grew in the industry, NGA was able to sustain its early growth through the mid-1980s. Largely thanks to Dietler's reputation and marketing savvy, NGA managed to expand through several acquisitions. In 1986, the company purchased the Colorado Gathering & Processing Corporation, a subsidiary of Wichita Industries. The Colorado Gathering system was adjacent to NGA's own Colorado operation, and was therefore easily assimilated into its existing system. NGA was also active in the mid-continent region in 1986, purchasing two parallel pipelines in Oklahoma at a Federal Bankruptcy Court auction. The lines, which ran between the towns of Cyril and Duncan, were then connected to several other pipeline systems, enabling the company to offer gas redelivery service to producers in the gas- and oil-rich Anadarko Basin. One result of this acquisition was the formation of the company's ATTCO Pipeline Company subsidiary. ATTCO (from Associated Transport and Trading Company) Pipeline was created to operate the crude oil gathering system that arose from one half of that purchase. Adjacent crude oil gathering systems were later bought from Phillips, Shell, Sun, and Mobil, transforming the system into a sprawling 900-mile chain of facilities covering a good chunk of southern Oklahoma and north Texas.

By 1987, NGA had annual sales of $85.3 million and net income of $1.1 million. More acquisitions came during that year. In February, NGA acquired the Minden gas gathering and processing plant in northern Louisiana, giving the company more of a presence in the Gulf Coast area. The Pantera gathering system, adjacent to the company's existing Colorado operations, was purchased in October from Pantera Energy Corporation.

In 1988, the company more than doubled its revenue to $189 million, and it went public with an initial stock offering. Around the same time, the company's name was changed to Associated Natural Gas Corporation (ANG). As ANG, the company's program of expansion through acquisitions continued at a brisk pace. Among the year's purchases were the Wilcox gas processing plant in Lavaca County, Texas, and an associated natural gas liquids pipeline. The Wilcox plant, with a capacity of 235 million cubic feet per day, processed gas gathered by the Texas Eastern Transmission Company's system. The following year, ANG bought the Milfay gathering and processing system in Creek County, Oklahoma, giving the company a solid presence in the eastern part of that state. This foothold was bolstered over the next few years by the acquisitions of several neighboring systems, including those of ARCO, Silver City, Patriot, Texaco, Blue Bell, Sand Springs, Conoco, and Triok. The addition of those systems enabled ANG to quadruple the amount of gas put through the Milfay plant.

Further acquisitions followed as ANG entered the 1990s. In 1990, the company purchased natural gas gathering systems from Galaxy Energies Inc. and AD-AM Gas Company. Both systems were located in Alabama's Black Warrior Basin, covering Pickens, Fayette, and Lamar Counties. ANG's revenue took another leap for the year, reaching $292 million, and the company recorded a $3.3 million profit, compared to a small deficit the previous year. ANG prospered in 1991. The company's Mid Continent Division took a giant leap forward by merging 940 miles of gas gathering pipelines from MEGA Natural Gas Company into its own operations in the Anadarko Basin and eastern Oklahoma. Major strides were made in Colorado as well. ANG bought Panhandle Eastern Corporation's Wattenberg System, consisting of over 1,200 miles of pipeline and eight compressor stations in the Denver-Julesberg basin, for $48 million. From Apache Corporation, ANG purchased the Spindle field pipeline gathering and gas processing facilities in Adams and Weld Counties, Colorado for $34 million. The producing part of this purchase was then sold off to other companies. With these purchases, ANG's pipeline system in Colorado was stretched to 1,350 miles, helping boost the company's net income to over $10 million, on sales of $636 million, for 1991.

During 1992, the company expanded operations in all of its major areas of activity. In Colorado, the company added 200 miles of gas gathering lines and two processing plants near its existing Wattenberg operations by purchasing all of the gas processing and gathering properties of Gerrity Oil & Gas Corporation. But most of ANG's activity in 1992 was concentrated in Oklahoma, where the company consolidated its system in the eastern part of the state with gathering and processing facilities acquired from Triumph, Finlay, and Philips Petroleum. The Philips purchase alone added 1,900 miles of natural gas pipeline. In addition, purchases of competing systems from ARCO and Exxon boosted the company's operations in the Arkoma Basin, initially acquired in the MEGA merger.

ANG sustained its momentum through 1993. In June, the company acquired a gas gathering system in the final stages of construction from Evergreen Resources, Inc. The system, initially 37 miles long, connected Evergreen production sites to pipeline owned by El Paso Natural Gas Company. Around the same time, ANG announced the joint formation, with Evergreen, of ANGI Ltd., a gas marketing company to operate in the United Kingdom. A few months later, ANG beefed up its Gulf Coast operations with the $32.5 million purchase of four natural gas pipeline systems, plus certain contractual gas storage rights, from Endevco Inc. Among the properties involved were the Ada gathering system in Louisiana and the Chalybeate Springs pipeline system in Louisiana and Arkansas. Those two systems together gather 70,000 million cubic feet of gas per day. The purchase also included the Leaf River pipeline system and other properties in Mississippi, totaling 547 miles of pipeline.

The company continued to expand through acquisitions in 1994. In July, the company merged with Grand Valley Gas Company. Grand Valley, based in Salt Lake City, Utah, had facilities for gathering and processing in New Mexico, Kansas, Texas, Oklahoma, Wyoming, and Utah. A new wholly-owned subsidiary, Associated Gas Services, Inc., was formed at the same time to combine the existing marketing activities of Grand Valley and ANG.

If ANG's influence in the oil and gas industry is tied to its record of growth, the company appears poised to assume an important role in whatever new form the industry ends up taking. As the U.S. oil and gas industry has reshaped itself, ANG's consistent program of expansion through acquisitions and new construction has strengthened the company's industry position.

Principal Subsidiaries: Associated Natural Gas, Inc.; Associated Transport and Trading Company; Associated Interstate Pipeline Company; Associated Intrastate Pipeline Company; Associated Louisiana Intrastate Pipeline Company; ATTCO LA Company; ATTCO NGL Pipeline Company; ATTCO Pipeline Company; AIM Pipeline Company; ANGI Ltd.; Associated Natural Gas (U.K.) Ltd.; Associated Gas Services, Inc.

Additional Details

Further Reference

"Associated Acquires System," Oil Daily, June 4, 1993, p. 5."Firms File Merger Statement," Oil Daily, April 19, 1994, p. 2."Panhandle Eastern Pipeline," Wall Street Journal, July 12, 1991, p. C13."Pipeline Systems Sold," Oil Daily, September 15, 1993, p. 5.

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