FIELD SERVICES
"We set four goals for 1999: become a mega-player in the NGL industry; complete a step-out to a new production basin; improve our asset base in expanding production areas; and establish a position in Canada. We've acquired UPFuels, Canrock's Canadian assets, Koch's South Texas facilities, completed a new processing plant in Texas and constructed a new plant in the Mobile Bay area. The combination of these has essentially doubled the earnings capability of Duke Energy Field Services. At the same time, natural gas liquids prices began to rebound, and this gave us a double-barreled earnings boost. Now we're following this with the Phillips Petroleum deal, which doesn't just take DEFS to the next level, it fundamentally redefines the industry. Our vision for this industry has become the driving force in its evolution."
In a $1.35 billion deal, DEFS acquired UPFuels from Union Pacific Resources Group Inc., which encompasses its natural gas gathering, processing and fractionation, natural gas liquids (NGL) pipelines, and natural gas and NGL marketing businesses. DEFS also bought the South Texas natural gas gathering, treating and processing systems from a subsidiary of Koch Industries and purchased Canrock gathering and processing assets in Alberta, Canada, from Cometra Energy. DEFS now serves seven major production basins from the Canadian Rockies to the Gulf of Mexico.
The growth of DEFS in 1999 was dramatic. In one year DEFS: (1) became the largest NGL producer in the U. S., at approximately 200,000 barrels per day (Bbl/d); (2) grew to one of the largest U. S. processors of natural gas, with a capacity of 6.9 billion cubic feet per day (Bcf/d), up from 4.6 Bcf/d; (3) increased the number of processing facilities in which it owns all or partial interest from 41 to 66; (4) expanded operation of processing plants from 30 to 52 plants; (5) expanded its fractionation capacity by 118,000 Bbl/d to 200,000 Bbl/d; and (6) extended its pipeline systems by 8,000 miles to 28,000 miles.
In December, Duke Energy and Phillips Petroleum redefined the evolution of the field services industry in a single stroke. The companies agreed to combine midstream businesses, subject to regulatory approval, to create the largest U.S. NGL business and the premier gatherer and processor of natural gas. Depending on market conditions after closing, it is expected that the new company will offer approximately 20 percent of its equity to the public in an initial public offering, giving investors the opportunity to participate directly in this industry.
