OG&E 2011 Annual Report Download - page 20

18 OGE Energy Corp.
Enogex expects to expand its cryogenic processing plant currently
under construction in Wheeler County, Texas from a processing capacity
of 120 MMcf/d to 200 MMcf/d with the installation of additional residue
compression facilities. The initial processing capacity of 120 MMcf/d is
expected to be in service at the beginning of the third quarter of 2012, and
the additional processing capacity is expected to be in service by the
end of the third quarter of 2012. The new plant will be supported by the
installation of 9,400 horsepower of field compression. The total capital
expenditures associated with this project are expected to be $140 million.
In support of significant long-term acreage dedications from its
customers in the area, Enogex continues to expand its gathering infra-
structure in four counties of western Oklahoma. These expansions are
planned to occur in phases, with the initial phase calling for the installation
of 47,980 horsepower of low pressure compression and over 300 miles
of gathering pipe across the area. This infrastructure is expected to be
constructed throughout 2012 and 2013. The total capital expenditures
associated with these expansions projects are expected to be $240 million.
Enogex expects to install a 200 MMcf/d cryogenic processing plant
in Custer County, Oklahoma. The new plant will be supported by 6,000
horsepower of inlet compression and 25 miles of transmission pipeline.
This plant is expected to be in service by the end of the third quarter of
2013. The total capital expenditures associated with this project are
expected to be $135 million.
Gas Gathering Acquisitions
On September 23, 2011, Enogex entered into the following agreements:
an agreement with Cordillera Energy Partners III, LLC (“Cordillera”), Oxbow
Midstream, LLC (“Oxbow”) and West Canadian Midstream LLC pursuant
to which Enogex agreed to acquire 100 percent of the membership interest
in Roger Mills Gas Gathering, LLC, an Oklahoma limited liability company
that owns an approximately 60-mile natural gas gathering system located
in Roger Mills County and Ellis County, Oklahoma; an agreement with
Cordillera and Oxbow pursuant to which Enogex agreed to acquire an
approximately 30-mile natural gas gathering system located in Roger
Mills County, Oklahoma; and agreements with Cordillera and other pro-
ducers pursuant to which such producers agreed to provide Enogex
with long-term acreage dedication in the area served by the gathering
systems encompassing approximately 100,000 net acres. The gathering
systems are located in the Granite Wash area. The aggregate purchase
price for these transactions was $200.4 million which was paid in cash
primarily from contributions from OGE Energy and the ArcLight group
(as discussed in Note 4 of Notes to Consolidated Financial Statements)
as well as cash generated from operations and bank borrowings. The
transactions closed on November 1, 2011. Enogex believes that the trans-
actions will provide Enogex with key new opportunities in the Granite Wash
area. See Note 3 of Notes to Consolidated Financial Statements for a
further discussion.
In support of the acquisitions described above, Enogex plans to
construct 20 miles of 16-inch gathering pipe and over 11,000 horsepower
of low pressure compression in 2012. The total capital expenditures for
these projects are expected to be $55 million.
2012 Outlook
The Company’s 2012 consolidated earnings guidance will be provided
following a final order in the Oklahoma general rate case. The Company
anticipates the final order during March 2012. The 2012 earnings guidance
for Enogex and the related key assumptions for such guidance, as well
as 2013 volume projections, are listed below.
2012 Earnings Guidance and Key Assumptions for Enogex
The Company projects Enogex to earn approximately $80 million
to $95 million, or $0.80 to $0.95 per average diluted share, in 2012
net of noncontrolling interest. The guidance assumes approximately
99.9 million average diluted shares outstanding. The key factors and
assumptions include:
•Total Enogex anticipated gross margin of between $500 million and
$515 million. The gross margin assumption includes:
- Transportation, storage and marketing gross margin contribution of
between $140 million and $155 million, of which 80 percent is attrib -
utable to the transportation business;
- Gathering and processing gross margin contribution of between
$355 million and $365 million, of which 62 percent is attributable to
the processing business;
- Key factors affecting the gathering and processing gross margin
forecast are:
• Assumed increase of six to 10 percent in gathered volumes over 2011;
• Assumed increase of approximately 15 percent in processable*
volumes over 2011;
• At the midpoint of Enogex’s gathering and processing assumption
Enogex has assumed:
- Processing contract mix of 42 percent fixed-fee, 25 percent percent-
of-liquids, 17 percent percent-of-proceeds and 16 percent keep-whole;
- Weighted average natural gas price of $2.70 per MMBtu in 2012;
- Realized weighted average NGLs price of $1.04 per gallon in 2012; and
- Average price per gallon of condensate of $2.12 in 2012;
•Enogex has assumed operating expenses of $295 million to $305 million,
with operation and maintenance expenses comprising 58 percent of
the total;
•Interest expense of $31 million to $33 million;
•An effective tax rate of 38 percent; and
•ArcLight group will own approximately 19 percent of Enogex Holdings
by the end of 2012.