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 3, 1999
SONAT INC.
(Exact name of registrant as specified in its charter)
Delaware 1-7179 63-0647939
(State of (Commission (IRS Employer
Incorporation) File Number) Identification No.)
AmSouth-Sonat Tower
Birmingham, Alabama 35203
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code:
205-325-3800
<PAGE>
Item 5. Other events.
On March 3, 1999, Sonat Inc. issued press releases, filed herewith as
Exhibits 99. 1 and 99.2, relating to 1) the announcement of plans to form a
50/50 joint venture between Southern Natural Gas Company, its wholly owned
subsidiary, and Carolina Power & Light Company, an unaffiliated company, to
construct, own, and operate a 175-mile pipeline to run from Aiken, South
Carolina to interconnections with North Carolina Natural Gas Corporation in
Robeson County, North Carolina, and 2) the current estimate of an expected first
quarter ceiling test charge under full cost accounting provisions for
exploration and production operations of approximately $200 million, after tax.
The current estimate of the ceiling test charge is based on the recent
settlement of the March natural gas futures contract and current oil prices. The
charge will be calculated using the actual natural gas and oil prices realized
in March. This estimate is based upon a number of assumptions that are subject
to change dependent on future events, however, including changes in oil and gas
prices and the impact of reserve changes during the quarter.
Item 7. Financial Statements, Pro Forma Financial
Information, and Exhibits
(c) Exhibits
The following documents are filed herewith as exhibits to this
Current Report:
Exhibit
No. Exhibit
99.1* Press Release dated March 3, 1999
99.2* Press Release dated March 3, 1999
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*Filed herewith
<PAGE>
SIGNATURES
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.
Sonat Inc.
By: /s/ William A. Smith
William A. Smith
Executive Vice President and
General Counsel
Dated: March 3, 1999
EXHIBIT 99.1
Bruce Connery FOR RELEASE: March 3, 1999
Sonat Inc.
205 325 3898
Bob Drennan
Carolina Power & Light
919 546 7474
CP&L AND SOUTHERN NATURAL GAS TO BUILD
A LARGE NEW PIPELINE TO NORTH CAROLINA
RALEIGH, N.C. -- Carolina Power & Light (NYSE: CPL) and Southern Natural Gas
Company, a subsidiary of Sonat Inc. (NYSE: SNT), today announced plans to form a
50/50 joint venture to construct, own and operate a 175-mile, 30-inch, natural
gas pipeline from the terminus of Southern Natural's pipeline system in Aiken,
S.C., to an interconnect with the North Carolina Natural Gas (NCNG) system in
Robeson County, N.C. The new Palmetto Interstate Pipeline will provide a
significant interstate natural gas pipeline connection in eastern North
Carolina.
The Palmetto Pipeline has a planned initial capacity of 200 million to 300
million cubic feet (MMcf) per day and will be expanded to accommodate future
growth. CP&L plans to subscribe for a substantial portion of the Palmetto
Pipeline capacity to fuel new electric generation being developed for its
customers in the Carolinas, with the remainder to be used to increase the
region's natural gas availability. An open season will start soon for customers
to subscribe to firm capacity on the pipeline. Depending upon the resulting firm
subscription, the capital cost for the Palmetto Pipeline is expected to be $200
million to $250 million.
The proposed schedule calls for the new pipeline to be operational in April
2002. Construction is scheduled to begin in the summer of 2001, following the
completion of engineering and environmental preparation and federal and state
permitting. Although an initial pipeline corridor has been identified, the exact
route of the pipeline has not yet been determined. The pipeline route likely
will cross portions of Aiken, Lexington, Richland, Sumter, Lee, Darlington,
Marlboro and Dillon counties in South Carolina and Robeson County, N.C. A
detailed environmental analysis is under way to establish the most
environmentally sound path.
As part of the project, Southern Natural will undertake a major expansion of
its existing interstate pipeline system, consisting of extensive pipeline
looping and additional compression at points from Mississippi to Aiken. The
extent of Southern Natural's pipeline expansion, which is expected to cost in
excess of $200 million, will depend on capacity requirements. This expansion
will provide significant rate and operational benefits to Southern Natural's
existing customers.
CP&L is considering sites in North Carolina and northeastern South Carolina
for new electric generation to be fueled by the new pipeline. The company plans
to build about 4,000 megawatts of gas-fueled generation by 2007. Some of the new
electric generation will be served in conjunction with NCNG, a natural
gas-distribution company headquartered in Fayetteville, N.C. CP&L is in the
process of acquiring NCNG, which owns natural gas pipelines that currently serve
eastern North Carolina.
CP&L is currently building peaking generation (plants used mostly on the
hottest and coldest days of the year to meet increased electricity demand) at
two existing North Carolina plant sites - in Wayne and Buncombe counties. On
Feb. 18, CP&L announced that it is considering sites in Richmond and Rowan
counties in North Carolina for possible peaking generation.
CP&L also is considering sites in the Carolinas for natural gas-fueled
combined-cycle electric plants, which would operate about 50 to 60 percent of
the time, compared with about 11 percent of the time for peaking power plants.
The company anticipates making an announcement related to the location of a
combined-cycle plant in the near future.
Additionally, CP&L has broken ground on a 160-megawatt gas-fired peaking
plant in Monroe, Ga., its first project outside the Carolinas.
Tom Kilgore, CP&L's senior vice president for Power Operations, said the
pipeline will provide for competitively priced gas supplies to electric
generation, which will benefit all CP&L customers. "Ensuring that we have a
reliable supply of efficiently priced and environmentally compatible natural gas
is important for our customers because those efficiencies help keep their
electric rates stable," Kilgore said. "Add to that the economic development
benefit of enhancing the energy infrastructure and the creation of tax revenues
for the counties and communities along the line's route, and you have an
excellent project for the Carolinas and CP&L."
"The development of the Palmetto Pipeline reflects the nationwide movement
to fuel new power plants with natural gas. This movement is particularly strong
in the Southeast," said Jim Yardley, president of Southern Natural Gas.
"Expansion to North Carolina has been a key part of our strategic plan for some
time, and we're proud to partner with CP&L in this project. We believe that
energy consumers in the region will benefit by having access to a second major
interstate pipeline and the first one to eastern North Carolina."
The construction of the Palmetto Pipeline and expansion of the Southern
Natural system require approval by the Federal Energy Regulatory Commission
(FERC) as well as other federal and state agencies. Construction is also subject
to execution of definitive agreements between CP&L and Southern Natural.
People with questions about the pipeline project can call toll-free
1-800-224-9918 and leave their name, number and a message, and the call will be
returned as soon as possible. A map of the Palmetto Pipeline can be viewed at
the CP&L website (www.cplc.com) or on the Sonat website (www.sonat.com).
Headquartered in Raleigh, CP&L provides electricity and energy services to
nearly 1.2 million customers in the Carolinas. CP&L's service area includes much
of central and eastern North Carolina, the Asheville area and northeastern South
Carolina. CP&L maintains a system of 16 electric generating plants and 60,000
miles of power lines distributed throughout its 30,000-square-mile retail
service area.
Headquartered in Birmingham, Ala., Southern Natural Gas is the major
transporter of natural gas in the Southeast. Southern Natural Gas and affiliates
own more than 14,000 miles of natural gas pipelines throughout eight
Southeastern states and the Gulf of Mexico. Southern Natural Gas is a wholly
owned subsidiary of Sonat Inc., a diversified energy company engaged in
exploration and production of oil and natural gas, interstate transmission of
natural gas and energy services.
# # #
99-04
Media contacts: Mike Hughes at CP&L (919) 546-6189
Bruce Connery at Sonat (205) 325-3898
IR contacts: Bob Drennan at CP&L (919) 546-7474
Bruce Connery at Sonat (205) 325-3898
EXHIBIT 99.2
Bruce L. Connery FOR RELEASE: March 3, 1999
205 325 3898
Thomas W. Barker, Jr.
205 325 3586
SONAT INC. PROVIDES HIGHLIGHTS FROM PRESENTATION TO DLJ ENERGY CONFERENCE,
INCLUDING PALMETTO INTERSTATE PIPELINE AND ESTIMATE FOR FIRST QUARTER
CEILING TEST CHARGE
BIRMINGHAM, Ala. -- Ronald L. Kuehn, Jr., chairman, president, and chief
executive officer of Sonat Inc. (NYSE: SNT), and John B. Holmes, Jr., president
and chief executive officer of Sonat Exploration Company, made a presentation
today at the DLJ Energy Conference in New York City. Highlighting the
presentation was a discussion of the Palmetto Interstate Pipeline, a proposed
joint venture with Carolina Power and Light to construct a 175-mile pipeline
from the terminus of the Southern Natural Gas Company pipeline system in Aiken,
South Carolina, to eastern North Carolina. A detailed press release on this
project and a related Southern Natural expansion was released earlier today. In
addition, Mr. Kuehn said that due to the sharp decline in natural gas prices
from December 1998 levels, the company expects to have a first quarter ceiling
test charge under full cost accounting provisions for exploration and production
operations of approximately $200 million after-tax. Full cost accounting
requires a quarterly valuation, or ceiling test, of oil and natural gas reserves
using current prices. If the ceiling test calculates a value that is below the
carrying value on the company's balance sheet, the reserves must be written down
to the lower level. The current estimate of the charge is based upon last week's
settlement of the March natural gas futures contract and current oil prices. The
charge will be calculated using the actual natural gas and oil prices realized
for March.
The charts shown at the DLJ Energy Conference are available for viewing on
the Sonat web site (www.sonat.com) under analyst presentations.
Sonat Inc., headquartered in Birmingham, is a diversified energy company
engaged in exploration and production of oil and natural gas, interstate
transmission of natural gas, and energy services.
Cautionary Statement Concerning Forward-Looking Statements
This press release includes certain forward-looking statements, which are based
on assumptions the company believes are reasonable, but a variety of factors
could cause the company's actual results and experience to differ materially
from the anticipated results or other expectations expressed in management's
forward-looking statements. Such statements are made in reliance on the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995.
There can be no assurance that Sonat and Carolina Power & Light will execute
definitive agreements for the Palmetto Interstate Pipeline, or that it and the
related Southern Natural expansion will receive regulatory approvals or be
constructed as proposed. Further, the estimated ceiling test charge is only an
estimate and is subject to final determination of realized March prices and the
impact of reserve changes during the remainder of the quarter.
Additional factors that may affect the company can be found under the caption
"Cautionary Statement Concerning Forward-Looking Statements" in the company's
1997 Annual Report on Form 10-K, and its Quarterly Reports on Form 10-Q for the
first, second and third quarters of 1998. These reports, which are filed with
the Securities and Exchange Commission, are hereby referenced in their entirety
for further information about the company, its operations and its financial
statements.
# # #
99-05
