Android app on Google Play

OGE Energy (OGE) Unit Enters New Agreement with Large Customer

January 7, 2013 4:32 PM EST Send to a Friend
OGE Energy Corp. (NYSE: OGE) is the parent company of Oklahoma Gas and Electric Company ("OG&E"), a regulated electric utility with approximately 797,000 customers in Oklahoma and western Arkansas, and OGE Enogex Holdings LLC and its subsidiaries ("Enogex"), a midstream natural gas pipeline business with principal operations in Oklahoma.

On January 2, 2013, Enogex and one of its five largest customers entered into new agreements, effective January 1, 2013, relating to the customer's gathering and processing volumes on the Texas portion of Enogex's system. The effects of this new arrangement are:
  • a fixed fee processing agreement replaces the previous keep-whole agreement;

  • the acreage dedicated by the customer to Enogex for gathering and processing in Texas has been increased for an extended term; and

  • the sale of certain gas gathering assets in the Texas portion of its system to this customer for cash proceeds of approximately $35 million. Enogex expects to recognize a pre-tax gain of approximately $10 million in 2013 from the sale of these assets.


If the new arrangement had been in effect as of January 1, 2012, this would have resulted in the estimated percentage of Enogex's natural gas processed volumes that are on a fixed fee basis to be approximately 45 percent in 2012 as compared to 40 percent (as previously reported in the Company's 2012 earnings guidance assumptions in the Company's Form 10-Q for the quarter ended June 30, 2012) and the estimated portion of such volumes that are on a keep-whole basis to be approximately 11 percent in 2012 as compared to 20 percent (as previously reported in the Company's 2012 earnings guidance assumptions in the Company's Form 10-Q for the quarter ended June 30, 2012). The 2013 processing contract mix will be included in the Company's Form 10-K for the year ended December 31, 2012. Although fee-based processing arrangements do not provide as much potential upside in higher commodity price environments as keep-whole processing arrangements, the Company continues to believe that the stable cash flows provided by the fee-based processing arrangements are desirable and in the best interests of its shareholders.




You May Also Be Interested In


Related Categories

Corporate News, Guidance

Related Entities

Earnings

Add Your Comment