-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, XLSpQh4BICAKSuM6S5paGigEOv1Qzp+N0uzIdkjDMOgJAdCC50y8jdhpirIYR945 ND8uqwwJjmxh/PsUm+BmhQ== 0000054502-94-000015.txt : 19940328 0000054502-94-000015.hdr.sgml : 19940328 ACCESSION NUMBER: 0000054502-94-000015 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19930908 ITEM INFORMATION: 1 FILED AS OF DATE: 19940325 FILER: COMPANY DATA: COMPANY CONFORMED NAME: K N ENERGY INC CENTRAL INDEX KEY: 0000054502 STANDARD INDUSTRIAL CLASSIFICATION: 4923 IRS NUMBER: 480290000 STATE OF INCORPORATION: KS FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 34 SEC FILE NUMBER: 001-06446 FILM NUMBER: 94518074 BUSINESS ADDRESS: STREET 1: P O BOX 281304 STREET 2: 12055 WEST 2ND PLACE CITY: LAKEWOOD STATE: CO ZIP: 80228 BUSINESS PHONE: 3039891740 FORMER COMPANY: FORMER CONFORMED NAME: KN ENERGY INC DATE OF NAME CHANGE: 19920430 FORMER COMPANY: FORMER CONFORMED NAME: KANSAS NEBRASKA NATURAL GAS CO INC DATE OF NAME CHANGE: 19830403 8-K 1 FORM 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of earliest event reported: March 24, 1994 K N ENERGY, INC. ______________________________________________________________ (Exact name of registrant as specified in its charter) Kansas 1-6446 48-0290000 __________________________________________________________________ (State or other (Commission (IRS Employer jurisdiction of File Number) Identification No.) incorporation) 370 Van Gordon Street, P.O. Box 281304, Lakewood, CO 80228-8304 _________________________________________________________________ (Address of principal executive offices) (Zip Code) Registrant's telephone number, include area code: (303) 989-1740 Item 5: Other Events ______ ____________ With respect to the execution of a definitive merger agreement between K N Energy, Inc. and American Oil and Gas Corporation, reference is hereby made to the press release dated March 24, 1994 which is filed herewith as an exhibit and incorporated herein by this reference. Item 7: Financial Statements, Pro-Forma Financial Information ______ _____________________________________________________ and Exhibits ____________ (a) Financial Statements - None (b) Pro-Forma Financial Statements - None (c) Exhibits 1.1 Press release dated March 24, 1994 _____________ EXHIBIT INDEX _____________ Exhibit Number Exhibit Description Page _______ ___________________ ____ 1.1 Press Release dated March 24, 1994 4 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. K N ENERGY, INC. By:/s/ William S. Garner, Jr. ____________________________ William S. Garner, Jr. Vice President, General Counsel and Secretary Date: March 25, 1994 EX-99 2 PRESS RELEASE [KNE logo] [AOG logo] NEWS K N ENERGY AND AMERICAN OIL AND GAS ENTER INTO MERGER AGREEMENT Lakewood, CO/Houston, TX -- K N Energy, Inc. (NYSE-KNE) and American Oil and Gas Corporation (NYSE-AOG) jointly announced today they had signed a definitive merger agreement to combine the two companies. TRANSACTION STRUCTURE The contemplated merger will be a tax-free exchange of common stock, in which 0.47 of a share of K N Energy common stock will be exchanged for each outstanding share of American Oil and Gas. Following the merger, the combined company will have approximately 28 million shares of common stock outstanding. The proposed merger will require approval by the shareholders of both companies, as well as specific regulatory and lender approvals. Closing is anticipated within the next 90 to 120 days. "We view this important merger as a marriage of two complementary companies with the ability to capitalize on their respective strengths," said Charles W. Battey, K N Energy chairman and chief executive officer. "Shareholders will benefit as a result of the new company's strong financial position, attractive dividend yield and prospects for future growth." "The merger will create a strategic alliance and will better position the combined company to take advantage of growth opportunities," said David M. Carmichael, chairman and chief executive officer of American Oil and Gas. "We believe the new company will be a significant player in the evolving North American gas markets by virtue of its strong access to supply and markets." The merger will combine two geographically distinct gas systems with complementary supply basins, service territories, and target marketing areas. The proximity of the two companies' Rocky Mountain and Mid-Continent operating regions enhances the opportunity to integrate facilities and services, and compete more effectively in the natural gas industry. FINANCIAL CONSIDERATIONS At December 31, 1993, the pro forma combined companies would have had approximately $1.2 billion in assets, $1.0 billion in annual revenues, and $31 million in annual net income. Also, pro forma combined pre-tax cash flow from operations, defined as operating income plus depreciation, depletion and amortization, would have been $123 million. The merger is expected to be accounted for as a pooling of interests, in which the resources and the reported financial statements of the two entities are consolidated. The parties anticipate the merger will provide substantial operating benefits. The benefits are expected to increase cash flow from operations and provide for positive earnings momentum once the combination is completed and the one-time charges associated with the combination have been absorbed. The combined entity will have equity capital of approximately $392 million, and a long-term debt to total capitalization ratio of approximately 45 percent, which will provide significant financial flexibility. This ratio compares to an average long-term debt to total capitalization ratio of 50 percent among diversified natural gas companies and about 55 percent among natural gas gathering, transportation and marketing companies. K N Energy's most recent declared quarterly common stock dividend was $0.24 per share, payable March 31, 1994; American Oil and Gas does not pay a common stock dividend. It is anticipated that the combined company will maintain a $0.24 per share quarterly dividend level on common stock after the merger. BUSINESS OPPORTUNITIES The combined company will be a major pipeline participant in the natural gas gathering, transportation and marketing sector, particularly in the Rocky Mountain and Mid-Continent regions of the United States. The combined entity will market, sell and transport an aggregate of 1.5 billion cubic feet of natural gas per day--almost three percent of total United States natural gas consumption. GAS SALES AND MARKETING: For 1993, the total sales of natural gas of the two companies was approximately 333 billion cubic feet. K N Energy's traditional service territory has a high winter heating demand for natural gas, while American Oil and Gas's service territory has a higher demand in the summer when natural gas is used for electricity generation and to power irrigation pump engines. The balanced load that results from the combined company's strong year- round demand will enhance market access for producers and provide a diverse, competitive gas supply for customers. The combined company will have greater access to multiple pipeline market centers, or trading hubs, thereby enhancing the ability to market gas to a broader customer base on the nationwide natural gas pipeline system. Market centers are physical pipeline interconnects among a number of pipelines where natural gas is bought, sold, delivered and transferred for short and long-term customer needs. The natural gas industry's use of market centers increased dramatically during the abnormally cold winter of 1993-1994 and contributed to the success of the industry in meeting marketplace demands. American Oil and Gas's systems connect with the Waha mar center in West Texas and with K N Energy's Buffalo Wallow market center in the Texas Panhandle. GAS TRANSPORTATION AND STORAGE: The combined company will have over 18,700 total miles of transmission and gathering pipeline that serve direct markets and also interconnect with other major pipelines. The new company will offer natural gas shippers greater access to diverse supply regions and to natural gas markets throughout the United States and, therefore, will be better able to utilize existing pipeline system capacity. K N Energy was successful in increasing the total throughput on its pipeline systems by 70 percent between 1988 and 1993. The combined management team will focus its efforts on maximizing throughput on all of the merged company's systems. In addition, the combined company will have initial core working gas storage capacity of 28 billion cubic feet, with an additional three billion cubic feet of high-deliverability salt cavern storage under development. The locations of the principal storage fields in southwestern Nebraska and in western Texas offer customers flexible storage options to meet peaking needs and seasonal load management requirements. American Oil and Gas's storage sites are located near the Waha, Texas market center and are directly connected to K N Energy's Buffalo Wallow market center through the Red River Pipeline, operated by American Oil and Gas. NATURAL GAS GATHERING AND PROCESSING: The combined company will operate nonregulated gathering and processing facilities in six Rocky Mountain and Mid-Continent states. The combined company will have operations in some of the largest and most prolific gas-producing areas in the U.S., stretching from the Wind River and Powder River Basins in Wyoming, south through the Denver-Julesburg Basin in Colorado, the Anadarko Basin and Hugoton Embayment in Kansas, Oklahoma and Texas, to the Permian Basin in southwestern Texas. For 1993, total processing plant hydrocarbon liquid sales of the two companies were 320 million gallons. This accounted for approximately 10 percent of 1993 aggregate revenues of the two companies. CONSOLIDATION EFFICIENCIES: The combined entity's diversity of operations in all facets of the natural gas value stream allows it to moderate the potential risks of any one sector of the industry. The combined company will attain economies of scale in operations and will be able to reduce overall administrative overhead costs, making it a more competitive service provider from the natural gas wellhead to the burnertip. MANAGEMENT AND GOVERNANCE Upon closing of the transaction, Charles W. Battey, chairman and chief executive officer of K N Energy, will serve as chairman of the board of the combined company, Larry D. Hall, K N Energy's president and chief operating officer, will serve as president and chief executive officer of the combined company and David M. Carmichael, chairman and chief executive officer of American Oil and Gas, will serve as vice chairman of the combined company. Prior to closing, Dan Dienstbier will continue as president of American Oil and Gas and will help accomplish the integration of the two companies. Also, upon closing, K N Energy's Board of Directors will be increased from 10 to 14 directors, as a result of adding four current directors of American Oil and Gas. Cabot Corporation, American Oil and Gas's largest shareholder, will be represented at board of directors' meetings of the combined company via a single, non-voting, advisory director. Cabot owns approximately 35 percent of the outstanding shares of American Oil and Gas, and would own approximately 15 percent of the outstanding common stock of the combined company at the time of merger. OPERATIONS DESCRIPTIONS K N Energy is a natural gas services company focusing on gas reserves development, gas gathering, processing, marketing, storage, transportation and retail gas distribution services. The Company, with 1,735 employees, operates in seven states and serves customers, including 232,000 direct retail customers, through three pipeline systems. American Oil and Gas operates principally in Texas in the mid-stream segment of the natural gas industry, providing essential services between the wellhead and the end user. These services include marketing, storage, transportation, gathering and processing. American Oil and Gas has 409 employees. Petrie Parkman & Co. and Rauscher Pierce Refsnes, Inc. are serving as financial advisors to K N Energy in connection with the merger, and Goldman, Sachs & Co. is serving in the same capacity for American Oil and Gas. END (A table of summary 1993 financial and statistical information relating to the two companies follows. A map showing the geographic scope of operations is also included.) Release Date: Immediate Release, Thursday, March 24, 1994 Contacts: K N Energy, Inc.- Dick Buxton (303) 763-3472 Dave Loiseau (303) 763-3494 American Oil and Gas Corporation - Tom Fanning (713) 739-2960 K N ENERGY, INC. AND AMERICAN OIL AND GAS CORPORATION SUMMARY FINANCIAL AND STATISTICAL INFORMATION
YEAR ENDED DECEMBER 31, 1993 ___________________________________ AMERICAN PRO FORMA K N ENERGY OIL AND GAS COMBINED ========== =========== ========= FINANCIAL INDICATORS ____________________ (Dollars in Millions) Operating Revenues $ 493 $ 539 $ 1,032 Operating Costs 434 518 952 _____ _____ _______ Operating Income 59 21 80 Net Income $ 24 $ 7 $ 31 ===== ===== ======= Pre-Tax Cash Flow From Operations (Operating Income + DD&A) $ 85 $ 38 $ 123 Assets $ 731 $ 422 $ 1,153 Common Equity $ 202 $ 190 $ 392 Long-Term Debt % of Total Capitalization 52% 35% 45% STATISTICS: Natural Gas Sales, Bcf 129 204 333 Natural Gas Transported, Bcf 100 111 211 Average Daily Throughput (Sales Plus Transport), MMcf 627 871 1,498 Natural Gas Liquids Sales, Million Gallons 145 175 320 Transmission and Gathering Pipeline, Miles 12,500 6,200 18,700
Bcf = billion cubic feet MMcf = million cubic feet Geographic Scope of Operations [KNE logo] [map of combined systems located in states of Wyoming, Nebraska, Colorado, Kansas, Oklahoma and Texas] [AOG logo] -----END PRIVACY-ENHANCED MESSAGE-----