Four hundred and forty four million dollars of gas
29 May 2002
The Texas Eastern Products Pipeline Company (TEPPCO) has signed a purchase and sale agreement with Burlington Resources Gathering to acquire the Val Verde Gathering System located in the San Juan Basin of New Mexico for $444 million.
Located in San Juan and Rio Arriba Counties, NM, the Val Verde Gathering System gathers coal seam gas from the Fruitland Coal Formation of the San Juan Basin, a long-term source of natural gas supply in North America. The Basin consists of both conventional gas reserves and prolific coal seam gas reserves.
The system is one of the largest coal seam gas gathering and treating facilities in the United States. Under the proposed transaction, TEPPCO will acquire 360 miles of pipeline ranging in size from 4 inches to 36 inches in diameter, 14 compressor stations operating over 93,000 horsepower of compression and a large amine treating facility for the removal of carbon dioxide. The system's capacity is approximately one billion cubic feet per day.
The system gathers natural gas from more than 544 separate wells throughout New Mexico and southern Colorado and provides gathering and treating services pursuant to 60 long-term contracts with approximately 40 different natural gas producers in the San Juan Basin. Gas transported on the Val Verde System is delivered to several interstate pipeline systems serving the western United States, as well as local New Mexico markets.
TEPPCO projects first full-year earnings before interest, taxes, depreciation and amortization (EBITDA) from the Val Verde System of approximately $55 million to $60 million. TEPPCO believes that the acquisition will be immediately accretive to income and cash flow upon closing.
The transaction is expected to close by June 30, 2002, subject to regulatory approval and completion of customary closing conditions. A combination of equity and debt financing will be used to fund the acquisition.
