<PAGE> 1
File Number 70-
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM U-1
APPLICATION-DECLARATION UNDER THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
By
HOPE GAS, INC.
Bank One Center
Clarksburg, West Virginia 26302-2868
and
CNG PRODUCING COMPANY
1450 Poydras Street
New Orleans, Louisiana, 70112-6000
subsidiaries of
CONSOLIDATED NATURAL GAS COMPANY
CNG Tower
625 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3199
(registered holding company and
the parent of the Declarants)
Names and addresses of agents for service:
Gary A. Nicholas, Vice President
Hope Gas, Inc.
Bank One Center
Clarksburg, West Virginia 26302-2868
J. M. Hostetler, Attorney
Consolidated Natural Gas Service Company, Inc.
CNG Tower
625 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3199
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File Number 70-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
APPLICATION-DECLARATION UNDER THE PUBLIC UTILITY
HOLDING COMPANY ACT OF 1935
Item 1. Description of Proposed Transaction
_____________________________
(a) Furnish a reasonably detailed and precise
description of the proposed transaction, including a statement of
the reasons why it is desired to consummate the transaction and
the anticipated effect thereof. If the transaction is part of a
general program, describe the program and its relation to the
proposed transaction.
Consolidated Natural Gas Company ("Consolidated") is a
Delaware corporation and a public utility holding company
registered as such under the Public Utility Holding Company Act
of 1935 ("Act"). It is engaged solely in the business of owning
and holding all of the outstanding securities, with the
exception of certain minor long-term debt, of sixteen
subsidiaries. These subsidiary companies are primarily engaged
in natural gas exploration, production, purchasing, gathering,
transmission, storage, distribution, marketing and by-product
operations.
Hope Gas, Inc. ("Hope"), a West Virginia corporation,
is a wholly-owned subsidiary of Consolidated. It is the gas-
utility company in the Consolidated system serving customers in
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West Virginia.(1) It is primarily engaged in the retail
distribution of natural gas to over 113,000 customers in West
Virginia. Like many other gas utilities, Hope has also been
engaged in local gas production (in West Virginia) as an
ancillary part of its gas distribution business.
Hope has signed a binding letter of intent
("Agreement") -- contingent upon Securities and Exchange
Commission ("Commission") approval -- selling at net book value
all production properties currently owned by Hope to CNG
Producing Company ("CNGP") for approximately $4.6 million. The
production properties include oil and gas leases, 156 production
wells, associated production equipment, various gathering lines,
contractual rights and agreements, right-of-ways and surface
rights associated with such oil and gas leases ("Production
Properties").
____________________
(1) The other utility companies in the Consolidated system are
West Ohio Gas Company, The Peoples Natural Gas Company, The
East Ohio Gas Company, and Virginia Natural Gas, Inc.
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CNGP, a Delaware corporation, is also a wholly-owned
subsidiary of Consolidated. Headquartered in New Orleans,
Louisiana, CNGP is the "exploration and production" arm of
Consolidated's integrated natural gas system. CNGP owns and
operates wells primarily in the Gulf of Mexico, Gulf Coast and
Appalachian regions of the country. CNGP already owns and
operates wells in West Virginia; the purchase of Hope's
Production Properties will add to that number.
The sale of the Production Properties is one of Hope's
continuing efforts to become more efficient and profitable by
focusing on its core distribution operations. With the expansion
of interstate pipelines, and changes in the industry during the
past decade providing greater access to gas supplies, owning and
operating production properties is of lesser importance to gas
utilities like Hope. As utility assets, the Production
Properties provide about 2% of Hope's total gas supply. By
selling such, Hope will no longer incur approximately $1.3
million a year in maintenance costs, but will still be able to
purchase the gas from the Production Properties for the next
three years, and thereafter if a suitable price is agreed upon.
After consummation of the sale, the Production Properties will be
owned by CNGP and consequently will not be utility assets.
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The Agreement between Hope and CNGP is filed as Exhibit
A-1. Paragraph 10 of the Agreement makes consummation of the
transaction contingent upon obtaining Commission approval. The
sale price will be the net book value of all the Production
Properties as shown on Hope's books of account as maintained in
the ordinary course of business and in accordance with generally
accepted accounting standards. Net book value is estimated to be
approximately $4.6 million.
Hope and CNGP request authorization to consummate the
sale of the Production Properties to CNGP. The Act at Section
2(a)(18) defines "utility assets" as "facilities, in place, of
any . . . gas utility company for the production, transmission,
transportation, or distribution of . . . natural or manufactured
gas." Thus, the Production Properties' facilities are "utility
assets". The leases being transferred to CNGP, while not within
the definition of "utility assets," constitute "any other
interest in any business" as such phrase is used in Section
9(a)(1) of the Act. New York State Natural Corporation, HCAR No.
12257, CCH Federal Securities Law Reporter, '52-'56 Decisions, at
page 79,245 (December 14, 1953).
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Rule 43, promulgated under the Act, prohibits a
registered holding company or subsidiary from selling to any
company in the same holding company system, any securities or
utility assets or any other interest in any business, unless the
Commission issues an order approving the sale.(2) The Rule
provides an exception (Subsection b) for the "sale of securities
or utility assets or any other interest in any business in an
aggregate amount of up to $5,000,000 during any calendar year if
the acquisition of such securities, assets or other interest does
not require prior Commission approval."(3) However, CNGP's
acquisition of assets and interests from Hope requires prior
Commission approval under Section 9(a)(1) of the Act and
Commission rules promulgated thereunder. (Rule 49(d) -- an
exemption from Section 9(a) of the Act for subsidiaries, like
CNGP, primarily engaged in the production of natural gas or oil
- -- does not apply here because it is limited to acquisitions
from persons other than affiliates.) Thus, the Subsection (b)
exemption in Rule 43 does not apply in this case. Accordingly,
Hope and CNGP have filed this Application-Declaration for case-
specific approval of this transaction.
______________________
(2) See Volume 5 of CCH FEDERAL SECURITIES LAW REPORTER,
Paragraph 37,533, Reg. Section 250.43(a).
(3) ID., Reg. Section 250.43(b). Subsection (b) was amended,
effective May 31, 1994. See SEC Release No. 35-26031
(paragraph 85,377) and 59 FEDERAL REGISTER 21922,
respectively.
<PAGE> 7
Hope has filed a petition with the Public Service
Commission of West Virginia for state approval of the sale of
Hope's Production Properties to its affiliate CNGP. The petition
is attached as Exhibit A-2. CNGP is not required to make any
regulatory filings (other than this one) regarding this
transaction.
Rule 54 promulgated under the Act states that in
determining whether to approve the issue or sale of a security by
a registered holding company for purposes other than the
acquisition of an electric wholesale generator ("EWG") or a
foreign utility company ("FUCO"), or other transactions by such
registered holding company or its subsidiaries other than with
respect to EWGs or FUCOs, the Commission shall not consider the
effect of the capitalization or earnings of any subsidiary which
is an EWG or a FUCO upon the registered holding company system if
Rule 53(a), (b) and (c) are satisfied.
Currently, Consolidated owns indirectly a 1% general
partnership and a 34% limited partnership interest in Lakewood
Cogeneration, L.P. ("Lakewood"), an EWG. The 1% general
partnership interest in Lakewood is owned by CNG Power Services
Corporation, an EWG and a wholly-owned subsidiary of
Consolidated. Consolidated does not own any interests in a FUCO.
Consolidated believes that Rule 53(a), (b) and (c) are satisfied
in its case as follows
<PAGE> 8
Fifty percent of Consolidated's retained earnings as of
September 30, 1995, was $634,048,000; Consolidated's aggregate
investment (as defined in Rule 53(a)(1)(i)) in Lakewood on such
date and in both its EWGs as of the date of filing of this
Application-Declaration is estimated to be approximately
$18,000,000, thereby satisfying Rule 53(a)(1). Consolidated and
its subsidiaries maintain books and records to identify the
investments in and earnings from its EWGs in which they directly
or indirectly hold an interest, thereby satisfying Rule 53(a)(2).
Employees of Consolidated's domestic public-utility companies do
not render services, directly or indirectly, to the EWGs in the
Consolidated System, thereby satisfying Rule 53(a)(3). No
application for EWG financing has been filed with the Commission
since adoption of Rule 53; Rule 53(a)(4) is correspondingly
inapplicable at this time.
None of the conditions described in Rule 53(b) exist
with respect to Consolidated, thereby satisfying Rule 53(b) and
making Rule 53(c) inapplicable.
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Item 2. Fees, Commissions, and Expenses
___________________________
(a) State (i) the fees, commissions and expenses paid
or incurred, or to be paid or incurred, directly or indirectly,
in connection with the proposed transaction by the applicant or
declarant or any associate company thereof, and (ii) if the
proposed transaction involves the sale of securities at
competitive bidding, the fees and expenses to be paid to counsel
selected by applicant or declarant to act for the successful
bidder.
It is estimated that the fees, commissions and expenses
ascertainable at this time to be incurred by Consolidated and
Hope in connection with the proposed transaction will not exceed
$7,000, including the $2,000 filing fee, $4,000 payable to
Consolidated Natural Gas Service Company, Inc. ("Service
Company") for services on a cost basis (including regularly
employed counsel) for the preparation of this Application-
Declaration and other documents, and $1,000 for miscellaneous
other expenses.
(b) If any person to whom fees or commissions have
been or are to be paid in connection with the proposed
transaction is an associate company or an affiliate of the
applicant or declarant, or is an affiliate of an associate
company, set forth the facts with respect thereto.
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The charges of Service Company, a subsidiary service
company, for services on a cost basis (including regularly
employed counsel) in connection with the preparation of this
Application-Declaration and other related documents and papers
required to consummate the proposed transactions are as stated
above.
Item 3. Applicable Statutory Provisions
________________________
(a) State the section of the Act and the rules
thereunder believed to be applicable to the proposed transaction.
If any section or rule would be applicable in the absence of a
specific exemption, state the basis of exemption.
As described above, Section 9(a)(1) and Rule 43 are
deemed applicable here.
If the Commission considers the proposed transaction to
require any authorization, approval or exemption, under any
section of the Act or Rule or Regulation other than those cited
herein, such authorization, approval or exemption is hereby
requested.
(b) If an applicant is not a registered holding
company or a subsidiary thereof, state the name of each public
utility company of which it is an affiliate or of which it will
become an affiliate as a result of the proposed transaction, and
the reasons why it is or will become such an affiliate.
Not applicable.
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Item 4. Regulatory Approval
____________
(a) State the nature and extent of the jurisdiction of
any State commission or any Federal commission (other than the
Securities and Exchange Commission) over the proposed
transactions.
Except as described above, the authorization sought
herein is not subject to the jurisdiction of any other State or
Federal commission (other than the Commission).
(b) Describe the action taken or proposed to be taken
before any commission named in answer to paragraph (a) of this
item in connection with the proposed transaction.
Inapplicable.
Item 5. Procedure
________
(a) State the date when Commission action is
requested. If the date is less than 40 days from the date of the
original filing, set forth the reasons for acceleration.
Hope requests that the Commission issue its order with
respect to the transaction proposed by February 15, 1996.
(b) State (i) whether there should be a recommended
decision by a hearing officer, (ii) whether there should be a
recommended decision by any other responsible officer of the
Commission, (iii) whether the Division of Investment Management -
Office of Public Utility Regulation may assist in the preparation
of the Commission's decision, and (iv) whether there should be a
30-day waiting period between the issuance of the Commission's
order and the date on which it is to become effective.
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It is submitted that a recommended decision by a
hearing or other responsible officer of the Commission is not
needed with respect to the proposed transactions. The office of
the Division of Investment Management - Office of Public Utility
Regulation may assist in the preparation of the Commission's
decision. There should be no waiting period between the issuance
of the Commission's order and the date on which it is to become
effective.
Item 6. Exhibits and Financial Statements
___________________________
The following exhibits and financial statement are made
a part of this statement:
(a) Exhibits
______
A-1 Agreement
A-2 Petition before the West Virginia
Public Service Commission
F Opinion of Counsel;
O Proposed Notice pursuant to Rule 22(f).
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(b) Financial Statements
_________________
Financial statements of the declarants are deemed
unnecessary with respect to the proposed authorization sought
herein due to the simple nature of the proposed transaction and
the dollar amount involved relative to the size of the
declarants. However, any financial information will be furnished
upon request.
Item 7. Information as to Environmental Effects
________________________________
(a) Describe briefly the environmental effects of the
proposed transaction in terms of the standards set forth in
Section 102 (2) (C) of the National Environmental Policy Act 42
(U.S.C. 4232(2) (C)). If the response to this item is a negative
statement as to the applicability of Section 102(2)(C) in
connection with the proposed transaction, also briefly state the
reasons or that response.
The proposed transaction does not involve major federal
action having a significant effect on the human environment. See
Item 1(a).
(b) State whether any other federal agency has
prepared or is preparing an environmental impact statement
("EIS") with respect to the proposed transaction. If any other
federal agency has prepared or is preparing an EIS, state which
agency or agencies and indicate the status of that EIS
preparation.
No federal agency has prepared or is preparing an
environmental impact statement with respect to the proposed
transaction.
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SIGNATURES
___________
Pursuant to the requirements of the Public Utility
Holding Company Act of 1935, the undersigned Companies have duly
caused this statement to be signed on their behalf by the
undersigned thereunto duly authorized.
HOPE GAS, INC.
By G. A. Nicholas
Vice President
CNG PRODUCING COMPANY
By P. P. Gregg
Senior Vice President
Dated: December 8, 1995
<PAGE> 1 Exhibit A-1
October 25, 1995
Hope Gas, Inc.
Attn: Mr. Gary A. Nicholas
Bank One Center West, 6th Floor 2155. Third Street
Clarksburg, West Virginia 26302-2668
RE: Hope Properties
Letter of Intent to Purchase
Gentlemen:
CNG Producing Company ("CNGP") and Hope Gas, Inc. ("Hope")
desire to set forth in this binding Letter of Intent the terms
and conditions pursuant to which CNGP intends to purchase and
Hope intends to sell certain assets currently owned by Hope, as
described below. This Letter of Intent replaces and supersedes
CNGP's earlier nonbinding proposals dated September 21 and
September 26, 1995, respectively.
1. Assets To Be Purchased: All of Hope's right, title and
interest in and to the oil and gas properties currently
owned by Hope in West Virginia, together with all of
Hope's interest in the oil, gas and other minerals in
place; rights to production; all associated wells;
fixture; facilities; compressors; selected pipelines or
gathering systems; improvements and other property,
real or personal, tangible or intangible, moveable or
fixed, located on or which was acquired for or is used
in connection with the operation of the properties; all
associated contractual rights and agreements, including
but not limited to leases, operating agreements, unit
agreements, permits, rights of way, surface rights,
easements, licenses, options and orders in any way
relating thereto and all geological and geophysical
reports and data which Hope can legally transfer. All
of the foregoing properties, rights and interests are
hereinafter referred to as the "Assets".
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2. Purchase Price: Subject to such adjustments as may be
provided for in the definitive Purchase and Sale
Agreement hereinafter referred to, CNGP will pay to
Hope a lump sum equivalent to the net book value (as
shown on Hope's books of account maintained in the
ordinary course of business and determined in
accordance with generally accepted accounting
principles) as of the Effective Date (as hereafter
defined) for all of the Hope's right, title and
interest in and to said Assets. Such net book value is
anticipated to be Four Million Six Hundred Thousand
Dollars ($4,600,000.00).
3. Effective Date And Time Of Purchase: The effective date
of the transfer of the Assets will be December 31, 1995
at 7:00 am. local time where the Assets are located
("Effective Date"). Hope's share of any petroleum
hydrocarbons held in tanks above the pipeline
connection on the Effective Date will remain the
property of Hope. Until Closing, Hope will continue to
operate the Assets or cause the Assets to be operated
in the ordinary course 'of business and in the same
manner as a reasonable and prudent operator would
operate in the same or similar circumstances. At CNGP's
request, Hope shall act as a CNGP's interim agent after
Closing for the payment of royalties, delay rentals and
other payments due third parties in connection with the
ownership and operation of the Assets until such time
as the data necessary for CNGP to make such payments
directly to such third parties is fully incorporated
into CNGP's land records and accounting systems.
4. Purchase of Produced Gas: At Closing, the Assets shall be
transferred free and clear of any production sales
contracts, calls on production or any other contractual
commitment for the sale or purchase of production therefrom.
At Closing, CNGP, as Seller, and Hope, as Buyer, shall enter
into in a Gas Purchase Agreement ("GPA") covering gas
produced from all wells within the Assets and containing the
following principal terms:
a. The term of the GPA shall commence on the date of
Closing and shall end on the last day of the 36th
calendar month following the month in which the Closing
occurs;
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b. CNGP shall commit exclusively to Hope gas produced from
wells within the Assets; provided that during periods
when Hope is unable to take CNGP's gas due to capacity
outages or other events of force majeure (as defined in
the GPA), CNGP shall be released from the foregoing
commitment and may sell such gas to others. The
delivery points under the GPA shall be at the inlet of
the Hope-owned meters located at each point of entry
into Hope's pipeline system;
c. Each month during the term of the GPA, Hope shall
pay CNGP a Demand Charge equal to $750.00 times the
number of days in the month. The Demand Charge shall be
prorated on a daily basis to account for any period
during the term of GPA which does not correspond to a
full calendar month. The Demand Charge shall be payable
on or before the tenth (10th) day of each subsequent
month; d. Each month during the term of the GPA, Hope
shall also pay CNGP a Commodity Charge equal to the
quantity of gas delivered to Hope during the preceding
month times the applicable Unit Price. For quantities
delivered during the month up to and including the
Monthly Tier (3000 Dth times the number of days in the
applicable month), the Unit Price shall be: $2.20 per
0th for gas delivered during the first Contract Year
(i. e. Closing Date through last day of 12th month
following month in which Closing occurs), $2.10 per 0th
for gas delivered during the second Contract Year (i.
e. the 12 months following the first Contract Year);
and $2.00 per 0th for gas delivered during the third
Contract Year (i.e. the final 12 months of the term of
GPA). For quantities of gas delivered during the month
in excess of the Monthly Tier, the Unit Price shall be
the price designated as "Index" effective as of the
first day of the delivery month (as listed on the table
entitled "Prices of Spot Gas Delivered to Pipelines"),
as published in Inside FERC's Gas Market Report for
that month, for deliveries into the facilities of CNG
Transmission Corp. in "Appalachia". If such price is no
longer available, CNG and Hope shall select, in good
faith, a functionally similar price posting that is
published at least once per month and reports prices
for gas originating from Appalachia, as delivered into
the mainline of CNG Transmission Corp. as of the first
of the month. Hope shall pay the Commodity Charge on
the later of the 15th day of the month following the
delivery month or 10 days after receipt of CNGP's
invoice;
e. If on any day during the term of the GPA, (i) CNGP
fails to deliver up to 2500 Dth, as requested by Hope,
<PAGE> 4
(ii) as a consequence of CNGP's failure to deliver,
Hope incurs penalties, overrun charges or losses from
CNG Transmission Corporation an-or other gas suppliers,
and (iii) Hope is, at the time such request is made,
ready, willing and able to receive the entire requested
quantity:
i Hope shall receive a credit of $0.30 per Dth against
subsequent payments due CNGP for the amount of the
delivery deficiency; and
ii. If CNGP's failure to deliver is not the consequence of
force majeure, Hope shall receive an additional credit
of $0.30 per 0th against subsequent payments due CNGP
for the amount of the delivery deficiency.
Receipt of the foregoing credits shall be Hope's exclusive
remedy in the event of non-delivery by CNGP and shall
supplant and supersede damages and other remedies otherwise
available under applicable law;
f. A late payment charge equal to the Prime Rate, as
published in the Money Rates table of the Wall Street
Journal, plus 2% per annum shall be applied to all
past due payments; and
g. During the term of the GPA, CNGP shall pay Hope a fee
of $0.093 per 0th of gas delivered to Hope from the
Greer and Tucker Fields. Such fee shall compensate
Hope for any and all dehydration, fuel, gathering and
processing related expenses or losses incurred by Hope
with respect to such gas downstream of the delivery
points. Unless otherwise agreed, CNGP shall retain the
right to cause the gas produced from the Assets to be
processed for the extraction of liquifiable
hydrocarbons; provided CNGP shall be obliged to
compensate Hope for any Btu shrinkage occasioned
thereby.
5. Taxes: Ad valorem, property and other similar forms of
taxes, which have been paid by Hope and which have accrued
on or before the Effective Date, shall be prorated based on
the representative holding period of each Paffi during the
assessment period applicable to such tax. Income taxes and
franchise taxes shall be the sole responsibility of the
party incurring same.
<PAGE> 5
6. Purchase And Sale Agreement: Upon receipt of the regulatory
authorization described in Section 10 below, CNGP and Hope
shall enter into a Purchase and Sale Agreement incorporating
the terms and conditions of this Letter of Intent and shall
execute such other agreements or documents as may be
necessary to effect the transfer of the Assets to CNGP.
7. Assignments and Warranties: At Closing, Hope shall convey
the Assets by a mutually acceptable assignment(s), which
shall include a special warranty of title, defending against
any person claiming by, through or under Hope, but not
otherwise. Such special warranty of title shall not apply to
claims attributable to title defects forming the basis for a
negotiated reduction in the Purchase Price pursuant to
Section 11. Hope shall further warrant that Hope has made or
will make full and correct payment of royalties and any
other lease burdens for the period of time prior to the
Effective Date and that all leases have been properly
maintained according to their terms and shall be in full
force and effect at Closing. Finally, Hope shall indemnify
and hold CNGP harmless for any and all claims or suits
relating to occurrences prior to the Effective Date.
8. Liens And Encumbrances: The Assets shall be transferred from
Hope to CNGP free and clear of all liens, mortgages, rights
of reassignment, reversionary rights, preferential rights,
taxes (other than those for the current year), obligations
(including delinquent operating expenses), claims, suits, or
any other encumbrance.
9. Press Releases: Hope shall not issue any press release or
make any announcement directed to the general public
concerning this Letter of Intent without the prior written
consent of CNGP, but may treat this Letter of Intent as a
non-confidential document in connection with seeking the
consents, approvals and regulatory authorization referenced
in Section 10 hereof.
<PAGE> 6
10. Consents, Approvals, Regulatory Authorizations
a. Unless specifically waived by CNGP, Hope shall, prior
to Closing, obtain and furnish CNGP with all necessary
consents, approvals, or waivers thereof.
b. Hope shall, prior to Closing, request each regulatory
authorization from the Public Service Commission of
West Virginia as may be required for Hope to transfer
to Assets in the manner specified herein.
Notwithstanding anything herein to the contrary,
either CNGP or Hope may terminate this Letter of
Intent (and thereby be released from any and all
obligations hereunder) upon notice to the other party,
if the Public Service Commission of West Virginia
fails to issue on or before April 1, 1996 a final
order unconditionally authorizing Hope to transfer the
Assets to CNGP in the manner specified herein.
c. The consummation of the transaction contemplated
hereby is contingent upon Seller's obtaining approval
from the Securities and Exchange Commission ("SEC") of
a Form U-1, Declaration under the Public Utility
Holding Company of 1935, (the "Declaration"), which
Seller shall file as soon as practicable with the SEC.
Seller shall give Buyer immediate written notice of
the approval or denial of the Declaration. If the
Declaration is approved, the Closing shall occur in
the manner provided herein. If the Declaration is
denied or if SEC fails to approve or deny the
Declaration by April 1, 1996, either CNGP or Hope may
terminate this Letter of Intent (and thereby be
released from any and all obligations hereunder) upon
notice to the other party.
11. Review Of Contracts and Data: Upon acceptance of this
proposal, Hope will thereafter provide CNGP with a list of
all contracts and agreements which will be assigned to CNGP
in conjunction with the sale and will permit CNGP to have
access to Hope's premises and to the records of Hope insofar
as they relate to the Assets to permit CNGP to, among other
things, verify Hope's working interest, net revenue
interest, title to the Assets, the adequacy of permits, and
to review and approve financial statements, operating
reports, geological and geophysical reports and data
(including without limitation original well records, log
<PAGE> 7
films and proprietary or joint venture seismic data or other
seismic data that Hope is not contractually restricted from
providing to CNGP), engineering data, production data,
contracts (including without limitation oil and gas sales
contracts, gathering agreements, transportation agreements,
marketing or processing agreements, leases, operating
agreements, unit agreements, farmins, farmouts and any other
contract or agreements relating to Assets), land records
(including without limitation abstracts, title opinions,
division orders, prospect plats and unit orders) and any
other books and records of Hope that relate to the Assets.
If after said review it is determined that the working
interest or net revenue is different than that which is
stated herein or that there exists a title defect or some
other situation or condition that would materially detract
from the value of the Assets, CNGP reserves the right to
negotiate an adjustment to the Purchase Price with Hope or
(if this proposal covers multiple properties) have the
property in question removed from the sale with a
corresponding adjustment to the Purchase Price based on the
value allocated to such property. In the event CNGP and
Hope cannot agree on an adjusted price within a reasonable
time period, either party' may terminate this Letter of
Intent and the Purchase and Sale Agreement.
12. Physical And Environmental Inspections: Hope will also
permit CNGP to conduct a physical and environmental
inspection of the Assets and to witness tests and/or inspect
any of Hope's oil and gas wells as CNGP may reasonably
request, to examine and verify field operations, producing
equipment, and volumes and prices as represented by Hope.
Hope will promptly obtain any consent from any co-owner
necessary with respect to the matters described in this
paragraph. If after said review it is discovered that there
exists a physical or environmental defect affecting the
Assets involving repair or remediation costs that exceed
normal maintenance costs, Hope shall have the option to
repair or remedy such defect at Hope's sole cost or exclude
the lands or facilities affected by said defect from the
Assets and to receive a corresponding reduction of the
Purchase Price based on the value allocated to such excluded
lands or facilities.
13. Conditions: CNGP's obligation to enter into a definitive
Purchase and Sale Agreement and/or to close under such
Purchase and Sale Agreement is subject to and conditioned
upon the following:
(a) approval by CNGP of Hope's title to the Assets;
(b) approval by CNGP of all material agreements pertaining
to the Assets;
<PAGE> 8
(c) performance by CNGP of a physical inspection of the
Assets, the results of which are acceptable to CNGP;
(d) performance by CNGP of an environmental audit of the
Assets by experts on CNGP's staff or an independent
environmental auditing firm retained by CNGP at CNGP's
expense;
(e) confirmation by CNGP of Hope's working interest and net
revenue interest in the Assets;
(f) Hope furnishing CNGP with a listing of all pending,
threatened or anticipated claims or suits relating to
the Assets, and CNGP's determination that such matters
will not materially impair the value of the Assets;
(g) the absence of any take-or-pay recoupment rights,
prepayment arrangements, production payment agreements
or similar agreements or encumbrances which would
prevent CNGP from receiving full value for its share of
production acquired from Hope;
(h) the Assets not being subject to a gas imbalance
attributable to Hope's overproduction of gas prior to
the Effective Date;
(i) the absence of any material adverse change in the
Assets after the Effective Date through Closing,
including accrual of an overproduction imbalance or
commitment to a capital expenditure of Fifty Thousand
Dollars ($50,000.00) or more.
If Hope agrees to the terms and conditions set forth above,
please so signify such concurrence by executing in the space
provided below and returning one fully executed original of this
Letter of Intent.
Very truly yours,
CNG PRODUCING COMPANY
By: __________________________
Gordon L. Wogan
General Manager
Appalachian Region
ACCEPTED AND AGREED TO THIS
31st DAY OF OCTOBER, 1995.
HOPE GAS INC.
By: ____________________________
Title: _________________________
<PAGE> 1 Exhibit A-2
<PAGE> 1
November 7, 1995
Howard M. Cunningham
Executive Secretary
Public Service Commission
of West Virginia
P. O. Box 812
Charleston, West Virginia 25323
Re: Case No. 95- _____ - G-PC
Hope Gas, Inc., Petition for Approval of
Sale of Hope's Production Properties to
CNG Producing Company, an Affiliated Company
Dear Mr. Cunningham:
Enclosed herewith is an original and nine (9) copies of the
"Petition of Hope Gas, Inc., for Consent and Approval to Enter
Into a Contract for the Sale of Hope's Production Properties to
CNG Producing Company". Please stamp one of the enclosed copies
as "received" and return it to me at the address listed above.
Thank you for your assistance in this matter. If you have any
questions, please let me know.
Sincerely,
David K. Dewey
Attorney
DKD:lsh
Enclosures
<PAGE> 2
PUBLIC SERVICE COMMISSION
OF WEST VIRGINIA
CHARLESTON
Case No. 95- _____ - G-PC
Hope Gas, Inc.
Petition for Approval of Sale
of Hope's Production Properties
to CNG Producing Company, an
Affiliated Company
PETITION OF HOPE GAS, INC.,
FOR CONSENT AND APPROVAL
TO ENTER INTO A CONTRACT FOR
THE SALE OF HOPE'S PRODUCTION
PROPERTIES TO CNG PRODUCING COMPANY
___________________________________
Hope Gas, Inc., (hereinafter "Hope" or "Petitioner")
respectfully petitions the Commission for consent and approval of
an agreement to sell certain oil and gas properties (hereinafter
"Production Properties") to CNG Producing Company (hereinafter
"CNGP"). The Production Properties are described in greater
detail in Paragraph five herein. In support of this petition,
Hope represents as follows:
1. The name and address of the Petitioner is:
Hope Gas, Inc.
P.O. Box 2868
Clarksburg, West Virginia 26302-2868
2. The name and address of CNGP is:
CNG Producing Company
CNG Tower
1450 Poydras Street
New Orleans, LA 70112-6000
<PAGE> 3
3. Certificates of Incorporation. Petitioner and CNGP are
both wholly owned subsidiaries of Consolidated Natural Gas
Company (hereinafter "CNG"). CNG is incorporated under the laws
of the State of Delaware. A copy of CNG's Certificate of
Incorporation, restated October 4, 1990, was attached to the
"Petition of Hope Gas, Inc., for Consent and Approval to Enter
Into a Contract for Allocation of Natural Gas Storage Volumes
Among Affiliates" received by this Commission as Case No. 94-
0473-G-P. CNGP's certificate of incorporation can and will be
supplied if the Commission so desires. However, waiver of such
requirement is hereby requested since the provision of said
certificate would serve no discernible useful purpose. CNG's
headquarters are located in Pittsburgh, Pennsylvania and CNGP's
headquarters are located in New Orleans, Louisiana. CNG and CNGP
are not public utilities and are therefore not subject to the
jurisdiction of the Commission.
4. Financial Condition. The financial condition of
Petitioner was reviewed in Hope's most recent base rate case,
Case No. 95-0003-G-42T. The financial condition of CNG is set
forth in its Annual Report to Shareholders which is regularly
submitted to the Commission as part of Hope's rate case filings.
<PAGE> 4
5. Description of Properties to be Sold. The sale of
Petitioner's Production Properties, if approved, includes all of
Hope's right, title and interest in and to the oil and gas
properties currently owned by Hope, together with all of Hope's
interest in the oil, gas and other minerals in place; rights to
production; all associated wells; fixtures; facilities; selected
pipelines or gathering systems; improvements and other property,
real or personal, tangible or intangible, movable or fixed,
located on or which was acquired for or is used in connection
with the operation of the properties; all associated contractual
rights and agreements, including but not limited to leases,
operating agreements, unit agreements, permits, rights-of-way,
surface rights, easements, licenses, options and orders in any
way relating thereto and all geological and geophysical reports
and data which Petitioner can legally transfer. A copy of CNGP's
proposal is attached hereto as "Exhibit A".
6. Purchase of Natural Gas Production. If the sale of
Petitioner's Production Properties is approved by this
Commission, Hope will purchase the natural gas produced from the
Production Properties from CNGP at a two-part rate consisting of
a Demand Charge and a Commodity Charge:
(a) The Demand Charge shall consist of a monthly payment
equal to seven hundred fifty dollars ($750.00) times
the number of days in each month. The Demand Charge is
based on daily sales of two thousand five hundred
(2,500) dekatherms.
<PAGE> 5
(b) The Commodity Charge shall be two dollars and twenty
cents ($2.20) for each dekatherm of gas delivered
during the First Contract Year (defined as the closing
date through the last day of the twelfth month
following the month in which closing occurs), two
dollars and ten cents ($2.10) for each dekatherm of gas
delivered during the Second Contract Year (defined as
the twelve months following the First Contract Year)
and two dollars ($2.00) for each dekatherm of gas
delivered during the Third Contract Year (defined as
the twelve months following the Second Contract Year).
For each dekatherm of gas delivered in excess of three
thousand (3,000) dekatherms per day, the Commodity
Charge shall be set at an index price.
This sales arrangement is consistent with the price paid to other
Appalachian producers delivering natural gas directly into
Petitioner's natural gas distribution system.
7. Purchase Price. Payment for Petitioner's Production
Properties shall be made by CNGP in one lump sum amount
equivalent to the net book value of the Production Properties as
shown on Hope's books of account (as maintained in the ordinary
course of business and in accordance with generally accepted
accounting standards). Said net book value is estimated to be
four million six hundred thousand dollars ($4,600,000).
8. Expedited Review. The sale of the Production
Properties requires expedited review by the Commission. If not
approved by April 1, 1996, CNGP's offer to purchase is null and
void.
<PAGE> 6
9. Improved Efficiency. The proposed sale of Petitioner's
Production Properties will have no deleterious effect upon
Petitioner's provision of natural gas service in West Virginia
and will enable Hope to conduct its public utility business more
efficiently. In support of this contention, Hope represents as
follows:
(a) Hope is no longer actively drilling for natural gas on
its Production Properties. As a result, the existing
wells located on Petitioner's properties are showing
characteristics of steadily declining deliverability
while at the same time, Petitioner's proven reserves
are underutilized.
(b) Hope has neither the technical expertise nor the
physical resources to maintain an economically viable
natural gas drilling/production program. The result is
an average cost of gas which will over time exceed
current market prices.
(c) Hope will be able to purchase the gas produced from the
Production Properties for at least the next three (3)
years and thereafter subject to negotiating a mutually
agreeable price with CNGP.
(d) There will be no loss of jobs resulting from this sale,
but Hope will be able to improve its productivity and
efficiency by concentrating on its core business.
(e) The sale of Hope's Production Properties was
contemplated by the Joint Stipulation and Agreement for
Settlement entered into in Case No. 95-0003-G-42T, et
al.
(f) Hope has installed a products extraction unit to
improve the quality of the gas flowing out of the
Greer-Tucker production area. CNGP has agreed to pay
Petitioner a products extraction charge of nine and
three-tenths cents ($0.093) for each
<PAGE> 7
dekatherm of gas processed at this facility. Hope will
not be generating any marketable co-products, at this
facility, from which revenue can be derived.
(g) Costs of operating the Production Properties, including
royalty payments and billings due under current joint
operating agreements will no longer be incurred.
(h) Future costs associated with plugging and abandoning
the wells will be avoided.
10. Sale is in the Public Interest. The prayer of the
Petition should be granted since the proposed sale is fair and
reasonable and gives no party thereto an advantage over any
other. The benefits derived from this Agreement will enable Hope
to conduct its public utility business more efficiently.
<PAGE> 8
WHEREFORE, Petitioner respectfully requests that the
Commission expeditiously grant its consent and approval of the
entering into an agreement for the sale of Petitioner's
Production Properties to CNGP; that notice and hearing be
dispensed with; and that the Commission grant Petitioner such
further authority in connection with this petition as may be just
and proper.
Respectfully submitted,
HOPE GAS, INC.
By Counsel
_________________________________________
Marc A. Halbritter
David K. Dewey
Hope Gas, Inc.
Post Office Box 2868
Clarksburg, West Virginia 26302-2868
(304) 623-8000
E. Dandridge McDonald
1201 United Center
500 Virginia Street, East
Charleston, West Virginia 25301
(304) 344-5113
U: PRODUCT1
<PAGE> 9
VERIFICATION
STATE OF WEST VIRGINIA
COUNTY OF HARRISON, to-wit:
_________________________, _____________________________ of
Hope Gas, Inc., being first duly sworn, states that the facts and
allegations contained herein are true, except so far as they are
stated to be on information, and that, so far as they are stated
to be on information, he believes them to be true.
__________________________________
Taken, sworn to and subscribed before me this ______ day of
November, 1995.
_________________________________
Notary Public in and for
said County and State
My commission expires:
________________________________________________.
<PAGE> 1 EXHIBIT F-
December 8, 1995
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: The Hope Gas Company, et al.
S.E.C. File Number 70-____
Dear Sirs:
The following opinion is rendered in accordance with the
requirements of Exhibit F to Form U-1 of the Securities and
Exchange Commission ("SEC") with respect to the transaction
proposed by Hope Gas, Inc. ("Hope") and CNG Producing Company
("CNGP"), in the Application-Declaration filed concurrently
herewith. The Application-Declaration seeks authority for Hope
to sell utility assets -- production wells and connecting
lines, including leases, etc. ("Production Properties") -- to
CNGP in exchange for approximately $4.6 million.
I have examined the Certificate of Incorporation and Bylaws
of Hope and CNGP; the Purchase and Sale Agreement signed by Hope
and CNGP relating to the transaction proposed within the
Application-Declaration; and such other documents, records, laws
and other matters as I deemed relevant and necessary for the
proposes of this opinion.
Based on such examination and relying thereon, I am of the
opinion that when the SEC permits the Application-Declaration to
become effective, all requisite action will have been obtained by
Hope and CNGP to consummate the sale of the Production
Properties.
In the event the proposed transaction is consummated in
accordance with the Application-Declaration, I am of the opinion
that all state laws applicable to the proposed transaction will
have been complied with; that Hope will legally acquire
approximately $4.6 million; CNGP will legally acquire the
interest in the Production Properties; and the consummation of
the proposed transaction will not violate the legal rights of
Hope or CNGP, its parent, or any associate company thereof.
I hereby consent to the use of this opinion in connection
with the filing.
Sincerely,
J. M. Hostetler
Attorney
TEXT>
<PAGE> 1 EXHIBIT O
Proposed Notice Pursuant to Rule 22f)
(Release No. 35- )
FILINGS UNDER THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
("ACT")
December __, 1995
Notice is hereby given that the following filing(s) has/have been
made with the Commission pursuant to provisions of the Act and
rules promulgated thereunder. All interested persons are
referred to the application(s) and/or declaration(s) for complete
statements of the proposed transaction(s) summarized below. The
application(s) and/or declaration(s) and any amendments thereto
is/are available for public inspection through the Commission's
Office of Public Reference. Interested persons wishing to
comment or request a hearing on the application(s) and/or
declaration(s) should submit their views in writing by
___________, 199_ to the Secretary, Securities and Exchange
Commission, Washington, DC 20549, and serve a copy on the
relevant applicant(s) and/or declarant(s) at the address(es)
specified below. Proof of service (by affidavit or, in case of
an attorney at law, by certificate) should be filed with the
request. Any request for hearing shall identify specifically the
issues of fact or law that are disputed. A person who so
requests will be notified of any hearing, if ordered, and will
receive a copy of any notice or order issued in the matter.
After said date, the application(s) and/or declaration(s), as
<PAGE> 2
filed or as amended, may be granted and/or permitted to become
effective.
____________________________________
Hope Gas, Inc., et. al. (70-____)
________________________________________
Hope Gas, Inc. ("Hope") (Bank One Center, Clarksburg, West
Virginia, 26302-2868) and CNG Producing Company ("CNGP") (1450
Poydras Street, New Orleans, Louisiana, 70112-6000), both wholly-
owned subsidiaries of Consolidated Natural Gas Company
("Consolidated") (CNG Tower, Pittsburgh, Pennsylvania 15222-
3199), a registered holding company, have filed a Application-
Declaration under Sections 9(a)(1) of the Act, and Rule 43
thereunder.
Hope, a gas utility, has signed a binding letter of
intent ("Agreement") -- contingent upon Commission approval --
selling all its production wells to CNGP for approximately $4.6
million. CNGP is a gas and oil, exploration and production
company. The sale price will be the net book value of all the
Production Properties as shown on Hope's books of account as
maintained in the ordinary course of business and in accordance
with generally accepted accounting standards. Net book value is
estimated to be $4.6 million
<PAGE> 3
The sale of the Production Properties is one of Hope's
continuing efforts to become more efficient and profitable by
focusing on its core distribution operations. With the expansion
of interstate pipelines, and changes in the industry in the past
decade providing greater access to gas supplies, owning and
operating production properties is of lesser importance to gas
utilities like Hope. As utility assets, the Production
Properties provide about 2% of Hope's total gas supply. By
selling such, Hope will no longer incur approximately $1.3
million a year in maintenance costs, but will still be able to
purchase the gas from the Production Properties for the next
three years, and thereafter if a suitable price is agreed upon.
After consummation of the sale, the Production Properties will be
owned by CNGP and consequently will not be utility assets.
________________________________________
For the Commission, by the Division of Investment
Management, pursuant to delegated authority.
Jonathan G. Katz
Secretary
