THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED
PURSUANT TO RULE 901(d) OF REGULATION S-T.
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ......... to ..........
Commission File Number 1-7513
TRANSCO ENERGY COMPANY
(Exact name of registrant as specified in its charter)
Delaware 74-1758039
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2800 Post Oak Boulevard
P. O. Box 1396
Houston, Texas 77251
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (713) 439-2000
None
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes /X/ No / /
The number of shares of Common Stock, par value $0.50 per share,
outstanding as of March 31, 1994 was 40,939,921.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
COMPANY OR GROUP OF COMPANIES FOR WHICH REPORT IS FILED:
TRANSCO ENERGY COMPANY AND SUBSIDIARIES (TRANSCO)
The condensed consolidated financial statements included herein have
been prepared by Transco, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission (SEC). Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. In the opinion of Transco's management, however, all
adjustments, consisting only of normal and recurring adjustments,
necessary for a fair presentation of the financial position as of the
dates and results of operations for the periods included herein have been
made and the disclosures contained herein are adequate to make the
information presented not misleading. These condensed consolidated
financial statements should be read in conjunction with the consolidated
financial statements, notes thereto and management's discussion contained
in Items 7 and 8 of Transco's 1993 Annual Report on Form 10-K.
<PAGE>
TRANSCO ENERGY COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Thousands of Dollars)
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1994 1993
______________ _______________
ASSETS
______
Current Assets:
<S> <C> <C>
Cash and temporary cash investments $ 182,755 $ 163,488
Deposits 13,806 34,133
Receivables 207,481 218,053
Transportation and exchange gas receivable 48,550 50,635
Gas supply realignment costs recoverable from customers 39,125 19,231
Inventories 90,316 118,550
Deferred income tax benefits 32,735 21,330
Other 36,154 41,301
______________ _______________
Total current assets 650,922 666,721
______________ _______________
Investments, at cost plus equity in undistributed earnings 31,386 31,454
______________ _______________
Property, Plant and Equipment, at cost:
Natural gas transmission plant-jurisdictional 5,071,675 5,058,546
Less-Accumulated depreciation and amortization 2,696,400 2,653,534
______________ _______________
Natural gas transmission plant-jurisdictional, net 2,375,275 2,405,012
______________ _______________
Natural gas gathering and liquids separation and
fractionation plant 213,040 213,114
Less-Accumulated depreciation and amortization 12,906 11,412
______________ _______________
Natural gas gathering and liquids separation and
fractionation plant, net 200,134 201,702
______________ _______________
Coal properties 409,570 409,695
Less-Accumulated depreciation, depletion and amortization 143,316 138,280
______________ _______________
Coal properties, net 266,254 271,415
______________ _______________
Other property, plant and equipment 5,376 5,280
Less-Accumulated depreciation and amortization 3,346 3,217
______________ _______________
Other property, plant and equipment, net 2,030 2,063
______________ _______________
Total property, plant and equipment, net 2,843,693 2,880,192
______________ _______________
Other Assets:
Nonoperating interest in coalbed methane properties, net 131,287 131,287
Notes receivable 14,832 14,929
Transportation and exchange gas receivable 112,693 106,395
Other 239,694 249,507
______________ _______________
Total other assets 498,506 502,118
______________ _______________
$ 4,024,507 $ 4,080,485
______________ _______________
______________ _______________
The accompanying condensed notes are an integral part of these condensed consolidated financial statements.
</TABLE>
<PAGE>
TRANSCO ENERGY COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Thousands of Dollars)
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1994 1993
______________ _______________
LIABILITIES AND STOCKHOLDERS' EQUITY
____________________________________
Current Liabilities:
<S> <C> <C>
Current maturities of long-term debt $ 7,185 $ 159,479
Payables 299,926 372,592
Transportation and exchange gas payable 39,598 16,258
Accrued federal income taxes 32,672 -
Other accrued liabilities 217,720 214,121
Reserve for rate refunds 116,005 161,991
Other 62,536 62,133
______________ _______________
Total current liabilities 775,642 986,574
______________ _______________
Long-Term Debt, less current maturities 1,936,994 1,786,571
______________ _______________
Other Liabilities and Deferred Credits:
Income taxes 284,939 284,130
Income taxes refundable to customers 23,590 26,364
Transportation and exchange gas payable 68,454 78,411
Accrued pension cost 31,125 31,958
Other 158,090 154,585
______________ _______________
Total other liabilities and deferred credits 566,198 575,448
______________ _______________
Preferred Stock of Subsidiary, net-redeemable 75,191 75,191
______________ _______________
Convertible Preferred Stock, net-non-redeemable 265,322 265,418
______________ _______________
Common Stockholders' Equity:
Common stock $0.50 par value: authorized 150,000,000
shares; issued and outstanding 41,431,419 and
41,386,861 shares in 1994 and 1993, respectively 20,716 20,693
Premium on capital stock and other paid-in capital 518,535 511,797
Retained earnings (deficit) (103,927) (115,447)
______________ _______________
435,324 417,043
Less-Treasury stock, at cost, 491,498 and 15,156 shares
in 1994 and 1993, respectively 7,264 207
Common stock held by Tran$tock, 449,989 and
524,045 shares in 1994 and 1993, respectively-
Deferred compensation 13,329 14,395
Receivable from Tran$tock 7,090 9,383
Restricted stock, 142,612 and 91,964 shares in
1994 and 1993, respectively-
Deferred compensation 2,481 1,775
______________ _______________
Total common stockholders' equity 405,160 391,283
______________ _______________
$ 4,024,507 $ 4,080,485
______________ _______________
______________ _______________
The accompanying condensed notes are an integral part of these condensed consolidated financial statements.
</TABLE>
<PAGE>
TRANSCO ENERGY COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
___________________________________________
1994 1993
_________________ _________________
<S> <C> <C>
Operating Revenues $ 834,090 $ 779,674
_________________ _________________
Operating Costs and Expenses:
Cost of sales and transportation 556,625 518,737
Operation and maintenance 54,404 53,491
Administrative and general 64,938 60,592
Depreciation, depletion and amortization 47,633 46,472
Taxes - other than income taxes 13,741 13,179
_________________ _________________
Total operating costs and expenses 737,341 692,471
_________________ _________________
Operating Income 96,749 87,203
_________________ _________________
Other (Income) and Other Deductions:
Interest expense 46,674 48,662
Interest income (2,166) (3,084)
Capitalized interest and allowance for
funds used during construction (950) (954)
Dividends on preferred stock of subsidiary 1,599 2,140
Equity in earnings of unconsolidated affiliates (253) (550)
Miscellaneous other (income) and deductions, net 4,927 3,871
_________________ _________________
Total other (income) and other deductions 49,831 50,085
_________________ _________________
Income from Continuing Operations
Before Income Taxes 46,918 37,118
Provision for Income Taxes 17,409 14,111
_________________ _________________
Income from Continuing Operations 29,509 23,007
Income from Operations of Discontinued
Segment, Net of Income Taxes - 113
_________________ _________________
Net Income 29,509 23,120
Dividends on Convertible Preferred Stock 5,726 6,433
_________________ _________________
Common Stock Equity in Net Income $ 23,783 $ 16,687
_________________ _________________
_________________ _________________
Primary Earnings Per Share of Common
Stock and Common Stock Equivalents -
Continuing Operations $ 0.58 $ 0.42
Discontinued Operations - -
_________________ _________________
$ 0.58 $ 0.42
_________________ _________________
_________________ _________________
Dividends Declared Per Share of Common Stock $ 0.30 $ 0.30
_________________ _________________
_________________ _________________
Average Shares of Common Stock and Common
Stock Equivalents Outstanding 40,690 39,300
_________________ _________________
_________________ _________________
Shares of Common Stock Outstanding 40,940 40,370
_________________ _________________
_________________ _________________
The accompanying condensed notes are an integral part of these condensed consolidated financial statements.
</TABLE>
<PAGE>
TRANSCO ENERGY COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Thousands of Dollars)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
______________________________
1994 1993
_____________ _____________
<S> <C> <C>
Cash flows from operating activities:
Net income $ 29,509 $ 23,120
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation, depletion and amortization 53,079 51,273
Deferred income taxes (13,453) (17,757)
Tran$tock compensation expense 1,067 863
Other, net (460) 2,206
_____________ _____________
69,742 59,705
Nonrecoverable producer settlements (512) (26,338)
Changes in operating assets and liabilities:
Deposits 20,327 1,117
Receivables 10,220 18,805
Transportation and exchange gas receivable (4,213) (16,966)
Inventories 28,234 48,005
Payables (77,070) (94,618)
Transportation and exchange gas payable 13,383 (1,148)
Accrued liabilities 37,360 (14,410)
Reserve for rate refunds (45,986) 28,538
Other, net 2,108 15,758
_____________ _____________
Net cash provided by operating activities 53,593 18,448
_____________ _____________
Cash flows from financing activities:
Retirement of long-term debt (2,304) (23,621)
Net increase in short-term debt - 40,000
Retirement of preferred stock (1,141) -
Dividends on common and preferred stock (13,466) (14,627)
Other, net (2,461) 38
_____________ _____________
Net cash provided by (used in) financing activities (19,372) 1,790
_____________ _____________
Cash flows from investing activities:
Property, plant and equipment and investment in
unconsolidated affiliates (18,207) (17,867)
Recovery of producer settlements 530 24,865
Other, net 2,723 2,658
_____________ _____________
Net cash provided by (used in) investing activities (14,954) 9,656
_____________ _____________
Net increase in cash and cash equivalents 19,267 29,894
Cash and cash equivalents at beginning of period 163,488 12,528
_____________ _____________
Cash and cash equivalents at end of period $ 182,755 $ 42,422
_____________ _____________
_____________ _____________
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest (net of amount capitalized) $ 46,239 $ 45,416
Income taxes (net of amounts refunded) (8,780) 980
The accompanying condensed notes are an integral part of these condensed consolidated financial statements.
</TABLE>
<PAGE>
TRANSCO ENERGY COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
A. BASIS OF PRESENTATION
The condensed consolidated financial statements include the accounts of
Transco Energy Company and its wholly-owned subsidiaries. As used herein,
the terms "Transco" and the "Company" refer to Transco Energy Company and
its wholly-owned subsidiaries unless the context otherwise requires.
The condensed consolidated financial statements have been prepared from
the books and records of Transco without audit. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted. These condensed consolidated financial statements
should be read in conjunction with the consolidated financial statements
and the notes thereto included in Transco's 1993 Annual Report on Form 10-
K.
As a result of its sale described in Transco's 1993 Annual Report on Form
10-K, the Power Generation segment has been classified in the 1993
Condensed Consolidated Statement of Operations as discontinued operations;
and, as such, revenues and expenses of the Power Generation segment have
been excluded from the results for continuing operations. Certain other
reclassifications have been made in the 1993 financial statements to
conform with the 1994 presentation.
B. REGULATORY MATTERS
There have been no new developments from those described in the 1993
Annual Report on Form 10-K other than described below.
Transcontinental Gas Pipe Line Corporation (TGPL) Matters
_________________________________________________________
Rate Matters
On November 4, 1993, the Federal Energy Regulatory Commission (FERC)
issued an order accepting the Offer of Settlement (the Settlement) filed
by TGPL on May 3, 1993 in connection with TGPL's general rate case (Docket
No. RP92-137). On December 6, 1993, certain parties, including TGPL,
filed requests for rehearing and clarification of the November 4 order.
On December 16, 1993, TGPL filed a request to accelerate partial refunds
under the Settlement on the ground that those refunds could be made
without prejudice to the pending requests for rehearing or clarification.
TGPL's request was granted by order of the FERC dated February 14, 1994,
which order also acted on the pending requests for rehearing or
clarification of the November 4 order. The Settlement became effective on
April 1, 1994. One party has appealed the FERC's November 4 and February
14 orders to the United States Court of Appeals for the D.C. Circuit (D.C.
Circuit). In March and April 1994, TGPL made partial refunds of
approximately $105 million, including interest, under Docket No. RP92-137.
TGPL had previously provided a reserve for these refunds. TGPL has also
provided a reserve which it believes is sufficient for any additional
refunds that may be required under Docket No. RP92-137. At April 30,
1994, these additional refunds, the majority of which are currently
expected to be made during the second quarter of 1994, are estimated to be
approximately $58 million, including interest. Such refund obligations
increase with the passage of time until the refunds are made.
Texas Gas Transmission Corporation (Texas Gas) Matters
______________________________________________________
Rate Matters
On April 29, 1993, Texas Gas filed a general rate case (Docket No. RP93-
106), which became effective November 1, 1993, subject to refund. Texas
Gas has been engaged in settlement proceedings over the past several
months regarding this case. As a result of these discussions, a
preliminary settlement in principle, which would resolve all issues, has
been reached with the majority of the parties, subject to the approval of
definitive documentation by the parties and ultimate approval by the FERC.
Under the terms of this preliminary settlement, if approved by the parties
and the FERC, Texas Gas' stated pre-tax rate of return on equity would be
reduced from 16.6%, included in its previous rate settlement, to 13.9%.
Texas Gas has established a reserve, which it believes to be adequate, to
reflect the difference between the rates currently being collected and the
rates expected to ultimately be effective upon settlement of the rate
case.
Other Regulatory Matters
________________________
ORDER 636
TGPL
TGPL and certain other parties have filed appeals of certain of the FERC's
orders to the D.C. Circuit Court. These appeals had been held in abeyance
pending completion of the FERC's rehearing process and the expiration of
the time to seek judicial review. On March 17, 1994, the FERC issued an
order denying all requests for rehearing relating to TGPL's Order 636
restructuring proceedings, which ends the rehearing process at the FERC.
No procedural schedule has been established by the D.C. Circuit Court and,
therefore, the issues that will be addressed on appeal have not been
identified.
Texas Gas
During 1993, as part of Texas Gas' restructuring under Order 636, Texas
Gas engaged in negotiations which have resulted in the successful
termination of approximately 90% of Texas Gas' deliverability under its
gas purchase contracts with pricing provisions that are not variable
market based. Gas purchased under its remaining gas purchase contracts
with pricing provisions that are not variable market based is being resold
at a monthly auction pursuant to Order 636. Texas Gas continues to pay to
the supplier the actual contract price and is entitled to file for full
recovery of the difference between the contract price and the auction
price as gas supply realignment (GSR) costs under Order 636.
Through March 31, 1994, Texas Gas had paid or committed to pay a total of
$39.9 million for GSR costs, primarily as a result of the contract
terminations. As of March 31, 1994, Texas Gas had paid $22.1 million of
such costs; the remaining $17.8 million was recorded as a current
liability in the accompanying Condensed Consolidated Balance Sheet.
Pursuant to Order 636, Texas Gas may file to recover 100% of these costs
as GSR costs.
To date, Texas Gas has made two quarterly filings to recover $19.4 million
of GSR costs paid through February 1994, pursuant to Order 636 and Texas
Gas' approved FERC Gas Tariff. Such amount represents 90% of GSR costs
paid which are to be recovered over a twelve-month period, from the
effective date of each filing, through a surcharge to Texas Gas'
transportation rates. The remaining 10% of GSR costs is expected to be
recovered from interruptible transportation service. Texas Gas plans to
continue to make future quarterly filings to recover its GSR costs as such
costs are paid.
Consolidated
Transco expects that any Order 636 transition costs incurred should be
recovered from TGPL and Texas Gas' customers, subject only to the costs
and other risks associated with the difference between the time such costs
are incurred and the time when those costs may be recovered from
customers. Although no assurances can be given, Transco does not believe
that the implementation of Order 636 by TGPL and Texas Gas will have a
material adverse effect on its financial position or results of
operations.
C. LEGAL PROCEEDINGS
There have been no new developments from those described in the 1993
Annual Report on Form 10-K other than as described below.
Other Litigation and Claims
___________________________
Dakota Gasification Litigation
As discussed in the Company's 1993 Annual Report on Form 10-K, in October
1990, Dakota Gasification Company (Dakota), the owner of the Great Plains
Coal Gasification Plant, filed suit in the United States District Court in
North Dakota against TGPL and three other pipeline companies alleging that
TGPL and the other pipelines had not complied with their respective
obligations under certain gas purchase and gas transportation contracts.
On March 30, 1994, the parties executed a definitive agreement which would
settle the litigation subject to final nonappealable regulatory approvals.
The settlement is also subject to a FERC ruling that TGPL's existing
authority to recover in rates certain costs related to the purchase and
transportation of gas produced by Dakota will pertain to gas purchase and
transportation costs TGPL will pay Dakota under the terms of the
settlement. In the event that the necessary regulatory approvals are not
obtained, TGPL, Transco and Transco Coal Gas Company intend to vigorously
defend the suit. Although no assurances can be given, Transco does not
believe that the ultimate resolution of this litigation will have a
material adverse effect on its financial position or results of
operations.
Royalty Claims
As discussed in the Company's 1993 Annual Report on Form 10-K, in
connection with TGPL and Texas Gas' renegotiations with producers to
resolve take-or-pay and other contract claims and to amend gas purchase
contracts, TGPL and Texas Gas have each entered into certain settlements
which may require the indemnification by TGPL or Texas Gas of certain
claims for "excess royalties" which producers may be required to pay as a
result of such settlements.
On January 14, 1994, a lawsuit was filed in the 4th Judicial District
Court of Rusk County, Texas (Marathon Oil Company vs. Transcontinental Gas
Pipe Line Corporation and Transco Energy Company (Marathon)) and, on
March 15, 1994, a new lawsuit, which was previously disclosed in the
Company's 1993 Annual Report on Form 10-K as a claim, was filed in the
189th Judicial District Court of Harris County, Texas (Texaco, Inc. vs.
Transcontinental Gas Pipe Line Corporation (Texaco)). In the Marathon and
Texaco lawsuits, the respective plaintiffs each have made claims against
TGPL for reimbursements of settlement amounts paid to royalty owners
pursuant to the excess royalty provision in their respective Omnibus
Contract Amendment and Settlement Agreements. In the Marathon and Texaco
lawsuits, the respective plaintiffs seek to recover approximately $3.6
million and approximately $14.7 million, respectively.
As discussed in the Company's 1993 Annual Report on Form 10-K, TGPL has
been named as a defendant in three other lawsuits involving claims by
producers and/or royalty owners.
In December 1992, a lawsuit was filed which is currently pending in the
United States District Court for the Southern District of Texas (Vaquillas
Ranch Company, Ltd., et al vs. Texaco Exploration and Production, Inc.
(Vaquillas Ranch)) in which royalty owners have made allegations against
the producer for breach of express obligations under the leases; breach of
the covenant to reasonably market gas; breach of the covenant to
reasonably develop; breach of the covenant to protect against drainage;
and failure to deal in good faith. In August 1993, a lawsuit was filed,
which is currently pending in the United States District Court for the
Southern District of Texas (Floyd C. Billings, et al vs. Texaco
Exploration and Production Inc., et al (Billings)), in which royalty
owners did not claim that the producer breached any covenant to develop or
protect against drainage. However, except for this omission, the royalty
owners' claims in the Billings lawsuit are virtually identical to the ones
made in the Vaquillas Ranch lawsuit. In addition, in the Billings
lawsuit the royalty owners have sued the parent and an affiliate of the
producer and TGPL for allegedly conspiring to tortiously interfere with
their lease. The producer defendants in each of the Billings and
Vaquillas Ranch lawsuits have cross-claimed against TGPL pursuant to the
excess royalty provision in the Omnibus Contract Amendment and Settlement
Agreement between TGPL and the producer. While the two complaints have
not specified monetary damages, the royalty owners have verbally alleged
that their claims against the producers could approximate $100 million.
The Vaquillas Ranch lawsuit is set for trial on December 2, 1994.
In October 1991, a lawsuit was filed in 32nd Judicial District Court for
the Parish of Terrebonne State of Louisiana (Betty Duplantis Brown, et al
vs. Mobil Oil Exploration and Producing U.S. Inc., et al (Duplantis)), in
which royalty owners have alleged that they were third party beneficiaries
to the original gas purchase contract between TGPL and the producers and
that the settlement agreement entered into between TGPL and such producers
is not valid without the royalty owners' consent. Additionally, in a
separate lawsuit consolidated with the Duplantis lawsuit, allegations have
been made that Transco Exploration Company (TXC) and TXP Operating Company
(TXPO) and other defendant-producers were entitled to make claims for
breach of gas purchase contracts but failed to either make claim or
receive compensation for such breaches. The royalty owners make a number
of allegations with respect to breach of the leases and breach of implied
covenants similar to those alleged in the Vaquillas Ranch and Billings
lawsuits. The royalty owners have not specified an amount of monetary
damages in their complaints. Trial is set for September 1994.
Each of the lawsuits is in the discovery process. TGPL, TXC and TXPO have
each denied liability in the litigation and each believes that it has
meritorious defenses to the claims which it intends to pursue vigorously.
TGPL believes at this time that its exposure, if any, under the excess
royalty provisions of its settlements with the producers is substantially
less than the amounts claimed by the royalty owners.
Although no assurances can be given, Transco believes that the ultimate
resolution of the TGPL and Texas Gas royalty claims and litigation will
not have a material adverse effect on Transco's financial position or
results of operations.
D. ENVIRONMENTAL MATTERS
There have been no new developments from those described in the 1993
Annual Report on Form 10-K with regard to environmental matters.
E. FINANCING
Long-term Debt Refinancing
__________________________
In April 1994, Texas Gas issued $150 million of 8 5/8% Notes (Notes) due
April 1, 2004. The Notes are not redeemable prior to maturity. Proceeds
from the issuance were used to redeem Texas Gas' outstanding 10%
Debentures (Debentures) on April 29, 1994.
Due to the issuance of the Notes in April 1994 and the subsequent
redemption of the Debentures, $150 million of current maturities of long-
term debt at March 31, 1994 has been reclassified to long-term debt in the
accompanying Condensed Consolidated Balance Sheet.
Restrictive Covenants
_____________________
As described in the 1993 Annual Report on Form 10-K, certain of Transco's
credit facilities and indentures contain restrictive covenants which
could, among other things, affect Transco's ability to incur debt, pay
dividends on its common and preferred stock and to make certain
investments.
F. INVESTMENT IN NONOPERATING INTEREST IN COALBED METHANE PROPERTIES
As discussed in Transco's 1993 Annual Report on Form 10-K, the ultimate
recovery of Transco's remaining investment through future production
payments depends on production from the properties and future gas prices.
The Company cannot predict at this time the ultimate results of these
operations or the amounts of reserves that may ultimately be recoverable.
If future development operations do not result in establishing sufficient
reserves to recover the Company's remaining coalbed methane investment, or
if other factors cause the Company's evaluation of its investment to
diminish, additional reductions in the book value of the Company's
investment would be required in future periods through non-cash charges to
earnings. Any resulting non-cash charge to earnings could reduce the
Company's financial flexibility, including its ability to remain in
compliance with certain restrictive provisions in various debt instruments
and to pay dividends on its capital stock.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE COMPANY'S
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion should be read in conjunction with the
consolidated financial statements, notes and management's discussion
contained in Items 7 and 8 of Transco's 1993 Annual Report on Form 10-K
and with the condensed consolidated financial statements and notes
contained in this report.
INTRODUCTION
In October 1991, Transco's Board of Directors approved a comprehensive
strategic and financial plan (Plan) designed to stabilize Transco's
financial position, improve its financial flexibility and restore its
earnings. Since the Plan's adoption, Transco has made significant
progress in the implementation of the Plan, including the sale of certain
non-core and non-strategic businesses, reduction in capital expenditures,
resolution of certain material litigation and improvement in its results
of operations and financial flexibility.
The Company remains committed to deleveraging its balance sheet, further
eliminating or mitigating the potentially adverse impact from the
resolution of remaining litigation and contingencies and improving
financial results.
CAPITAL RESOURCES AND LIQUIDITY
Financing
_________
Transco funds its capital requirements, including its working capital
requirements, with cash flows from operating activities, including the
sale of trade receivables, supplemented, when required, with borrowings
under its $450 million working capital line. At March 31, 1994, the
Company had $150 million in short-term investments and no outstanding
borrowings under its $450 million working capital line.
In April 1994, Texas Gas issued $150 million of 8 5/8% Notes due April 1,
2004. The Notes are not redeemable prior to maturity. Proceeds from the
issuance were used to redeem Texas Gas' outstanding 10% Debentures on
April 29, 1994.
Capitalization and Cash Flows
_____________________________
As shown in the following table, at March 31, 1994, the percentage of
total debt to total invested capital was 72.3% compared to 72.7% at
December 31, 1993. Although total debt at March 31, 1994 remained
approximately the same as at December 31, 1993, net income during the
first quarter had the effect of reducing the percentage of total debt to
total invested capital.
<PAGE>
<TABLE>
<CAPTION>
March 31, Dec. 31,
1994 1993
____________ ____________
(In millions)
<S> <C> <C>
Common Stockholders' Equity $ 405.2 $ 391.3
Preferred Stock 340.5 340.6
Long-term Debt, less Current Maturities 1,937.0 1,786.6
____________ ____________
Total Capitalization 2,682.7 2,518.5
Current Maturities of Long-term Debt 7.2 159.5
____________ ____________
Total Invested Capital $ 2,689.9 $ 2,678.0
____________ ____________
____________ ____________
Long-term Debt, less Current Maturities as a
Percentage of Total Capitalization 72.2% 70.9%
Common Stockholders' Equity as a Percentage
of Total Capitalization 15.1% 15.5%
Total Debt as a Percentage of Total Invested Capital 72.3% 72.7%
</TABLE>
Short-term investments of $150 million at March 31, 1994 were primarily
the result of the TEVCO sale proceeds received in 1993 along with improved
cash flows from operating activities during the first quarter of 1994.
The Company expects to use a portion of these short-term investments in
1994 to fund any TGPL or Texas Gas refunds that may be required upon
settlement of their respective general rate cases.
At March 31, 1994, Transco had a working capital deficit of $125 million,
compared to a deficit of $320 million at December 31, 1993. The most
significant factors influencing the reduction in the working capital
deficit were payments made during the first quarter of 1994 for TGPL's
initial refunds under Docket No. RP92-137 and the refinancing of Texas
Gas' Notes, as discussed in Notes B and E, respectively, of the Notes to
Condensed Consolidated Financial Statements.
<TABLE>
<CAPTION>
Three Months
Ended March 31,
__________________________
1994 1993
__________ __________
(In millions)
<S> <C> <C>
Cash Flows Provided By Operating Activities $ 53.6 $ 18.4
__________ __________
__________ __________
</TABLE>
For the three months ended March 31, 1994, consolidated net cash flows
from operating activities were $35 million greater than for the three
months ended March 31, 1993. This improvement in cash flows is primarily
the result of TGPL's lower cash payments in 1994 for producer settlements,
the return of a collateralized deposit that was no longer needed due to
the utilization of a new reimbursement facility that provides Transco with
standby letters of credit and the amount and timing of net collections of
receivables and disbursements of payables, partially offset by higher cash
payments in 1994 for rate refunds.
<TABLE>
<CAPTION>
Three Months
Ended March 31,
__________________________
1994 1993
__________ __________
(In millions)
<S> <C> <C>
Cash Flows Provided By (Used in) Financing Activities $ (19.4) $ 1.8
__________ __________
__________ __________
</TABLE>
Consolidated net cash flows used in financing activities for the three
months ended March 31, 1994 included cash outflows for dividends of $13
million on common and preferred stock along with the retirement of $2
million of long-term debt by Transco.
Consolidated net cash flows from financing activities for the three months
ended March 31, 1993 included cash inflows from short-term borrowings of
$40 million under Transco's Bank Credit Facility and cash outflows for the
retirement of $24 million of long-term debt by Transco, TGPL and Transco
Coal Company (Coal) and dividends of $15 million on common and preferred
stock.
<TABLE>
<CAPTION>
Three Months
Ended March 31,
__________________________
1994 1993
__________ __________
(In millions)
<S> <C> <C>
Cash Flows Provided By (Used in) Investing Activities $ (15.0) $ 9.7
__________ __________
__________ __________
</TABLE>
For the three months ended March 31, 1994, consolidated net cash flows
used in investing activities included cash outflows for expenditures for
property, plant and equipment and investments in unconsolidated
affiliates, as shown on the following table.
For the three months ended March 31, 1993, consolidated net cash flows
from investing activities were primarily from TGPL's and Texas Gas'
recovery of producer settlement costs which exceeded consolidated capital
expenditures for property, plant and equipment and investments in
unconsolidated affiliates.
<TABLE>
<CAPTION>
Three Months
Capital Expenditures and Investments in Ended March 31,
__________________________
Unconsolidated Affiliates 1994 1993
_______________________________________ __________ __________
(In millions)
<S> <C> <C>
Pipelines
TGPL
Market-Area Projects $ 2.7 $ 1.2
Supply-Area Projects 2.5 7.0
Maintenance of Existing Facilities and Other Projects 6.2 4.4
Texas Gas
Market-Area Projects 2.8 0.5
Maintenance of Existing Facilities and Other Projects 2.7 1.2
Other 0.2 0.8
__________ _________
Total Pipelines 17.1 15.1
Gas Marketing 0.1 0.2
Coal 1.0 2.7
Other - 3.9
Intersegment Eliminations (TGPL Expenditures) - (4.0)
__________ __________
Total Capital Expenditures and Investments in
Unconsolidated Affiliates $ 18.2 $ 17.9
__________ __________
__________ __________
</TABLE>
Other Capital Requirements and Contingencies
____________________________________________
Transco's capital requirements and contingencies are discussed in the
Company's 1993 Annual Report on Form 10-K. Other than described in Notes
B and C of the Notes to Condensed Consolidated Financial Statements and
below, there have been no new developments from those described in the
Company's 1993 Annual Report on Form 10-K with regard to other capital
requirements and contingencies.
Investment in Nonoperating Interest in Coalbed Methane Properties
As discussed in Note F of the Notes to Condensed Consolidated Financial
Statements, the ultimate recovery of Transco's remaining investment
through future production payments depends on production from the
properties and future gas prices. The Company cannot predict at this time
the ultimate results of these operations or the amounts of reserves that
may ultimately be recoverable. If future development operations do not
result in establishing sufficient reserves to recover the Company's
remaining coalbed methane investment, or if other factors cause the
Company's evaluation of its investment to diminish, additional reductions
in the book value of the Company's investment would be required in future
periods through non-cash charges to earnings.
Rate Refunds
As discussed in Note B of the Notes to Condensed Consolidated Financial
Statements, TGPL received a FERC order accepting the Settlement in
connection with its general rate case (Docket No. RP92-137) on November 4,
1993.
In March and April 1994, TGPL made partial refunds of approximately $105
million, including interest, under Docket No. RP92-137. TGPL had
previously provided a reserve for these refunds. TGPL has also provided
a reserve which it believes is sufficient for any additional refunds that
may be required under Docket No. RP92-137. At April 30, 1994, these
additional refunds, the majority of which are currently expected to be
made during the second quarter of 1994, are estimated to be approximately
$58 million, including interest. Such refund obligations increase with
the passage of time until the refunds are made.
CONCLUSION
__________
Although no assurances can be given, the Company currently believes that
the aggregate of cash flows from operating activities, supplemented, if
necessary, by borrowings under the working capital line of the Amended
Transco Bank Credit Facility, will provide sufficient liquidity to meet
its capital requirements.
<PAGE>
RESULTS OF OPERATIONS
CONSOLIDATED
Transco's consolidated net income and operating income for the three
months ended March 31, 1994 were $7.1 million ($0.16 per share) and $9.5
million higher, respectively, than the same period in 1993, primarily
because of the continued strength of the financial results from Pipelines,
improved financial results from Gas Marketing and Gas Gathering and, for
the net income variance, lower net interest expense and preferred
dividends. In addition, operating losses from Transco's coalbed methane
investment were significantly reduced due to the transfer of the Company's
operating interest in that project to TECO Energy, Inc. in July 1993.
Each segment's results of operations are discussed in more detail below.
PIPELINES
The table below shows the net income of Pipelines by company:
Three Months
Net Income Ended March 31,
__________ ____________________
1994 1993
________ ________
(In millions)
TGPL $ 27.6 $27.3
Texas Gas 16.0 14.9
Other Companies 0.1 0.1
________ ________
Total Pipelines $ 43.7 $42.3
________ ________
________ ________
The two major operating companies in this segment, TGPL and Texas Gas,
provide substantially all of the segment's revenues, operating income and
net income. As discussed in Transco's 1993 Annual Report on Form 10-K,
effective January 1, 1993 for TGPL and November 1, 1993 for Texas Gas,
substantially all sales revenues and the related costs, including gas
costs applicable to TGPL and Texas Gas' sales service, are reported by
Transco in Gas Marketing. The financial performance of TGPL (excluding
its 1993 and 1994 sales service) and Texas Gas (excluding its 1994
variable-market-based sales service) is discussed below.
TGPL
____
Net and Operating Income
TGPL's net income for the three months ended March 31, 1994 was $0.3
million higher than net income for the three months ended March 31, 1993,
due primarily to lower net interest expense, higher allowance for funds
used during construction and lower dividends on preferred stock, partly
offset by higher operating expenses. Operating income for the first
quarter of 1994 when compared to the 1993 quarter was $0.7 million lower
reflecting higher operating expenses, partially offset by slightly higher
net transportation revenues (net of the related cost of transportation and
surcharges) as a result of increased production area transportation.
Operating Revenues
TGPL's operating revenues decreased $23 million to $220 million for the
quarter ended March 31, 1994, when compared to the quarter ended March 31,
1993, due primarily to lower transportation rates resulting from the
elimination of the producer settlement surcharge which expired on May 31,
1993. However, the decrease in transportation rates related to this
surcharge did not affect TGPL's operating or net income since the
expiration of the producer settlement surcharge also resulted in lower
cost of sales and transportation when compared with the prior year
quarter. Effective September 1, 1992, TGPL placed new rates into effect,
subject to refund, under its general rate case, Docket No. RP92-137. The
rates for firm transportation service are based on a straight-fixed-
variable (SFV) rate design, under which all fixed costs allocated to firm
transportation service, including return on equity and taxes, are included
in a demand charge to customers. All variable costs are recovered through
commodity rates. On March 8, 1994, TGPL made partial refunds of
approximately $100 million, including interest, under Docket No. RP92-137.
On April 8, 1994, TGPL made additional refunds of approximately $5
million, including interest, under Docket No. RP92-137. TGPL had
previously provided a reserve for these refunds. TGPL has also provided
a reserve which it believes is sufficient for any additional refunds that
may be required under Docket No. RP92-137. At April 30, 1994, these
additional refunds, the majority of which are currently expected to be
made during the second quarter of 1994, are estimated to be approximately
$58 million, including interest. Such refund obligations increase with
the passage of time until the refunds are made.
Operating Costs and Expenses
Excluding the cost of sales and transportation of $43 million in the first
quarter of 1994 and $67 million in the first quarter of 1993, TGPL's
operating expenses for the 1994 quarter were approximately $2 million
higher than the same period in 1993. This increase in operating expenses
for the quarter was primarily the result of increased costs for main
engine repairs and miscellaneous contractual services and higher
depreciation and taxes other than income taxes, offset in part by lower
group insurance expense.
System Deliveries
As shown in the table below, TGPL's total market-area deliveries for the
three months ended March 31, 1994 were 8.7 billion cubic feet (Bcf), or 2
percent, higher than the same period in 1993. The increased deliveries,
primarily firm transportation volumes, are higher than the same period in
1993 primarily due to the colder-than-normal weather during January and
February 1994. The production-area deliveries for the three months ended
March 31, 1994, when compared to the same period in 1993, increased 8.8
Bcf, or 32 percent, due to TGPL's decreased rates resulting from the
elimination of the producer settlement surcharge which expired on May 31,
1993. However, as a result of a SFV rate design, these increased
deliveries had no significant impact on operating income.
Three Months
TGPL System Deliveries (Bcf) Ended March 31,
____________________________ ____________________
1994 1993
_______ _______
Market-area deliveries:
Long-haul transportation 230.8 235.0
Market-area transportation 134.2 121.3
_______ _______
Total market-area deliveries 365.0 356.3
Production-area transportation 36.3 27.5
_______ _______
Total system deliveries 401.3 383.8
_______ _______
_______ _______
TGPL's facilities are divided into six rate zones. Three are located in
the production area and three are located in the market area. Long-haul
transportation is gas that is received in one of the production-area zones
and delivered in a market-area zone. Market-area transportation is gas
that is both received and delivered within market-area zones. Production-
area transportation is gas that is both received and delivered within
production-area zones.
Rates
TGPL has expressed to the FERC concerns that inconsistent treatment under
Order 636 of TGPL and its competitor pipelines with regard to rate design
and cost allocation issues in the production area may result in rates
which could make TGPL less competitive, both in terms of production-area
and long-haul transportation. A hearing before a FERC Administrative Law
Judge (ALJ) dealing with, among other things, TGPL's production-area rate
design began on April 25, 1994. TGPL is unable at this time to fully
assess the competitive effect and resulting financial impact on TGPL of
having to maintain its current production-area rate design which is
different than that of its competitors. For a discussion of TGPL's Order
636 compliance filing, see Note B of the Notes to Condensed Consolidated
Financial Statements.
Texas Gas
_________
Net and Operating Income
Texas Gas' net income for the three months ended March 31, 1994 was $1.1
million higher than for the three months ended March 31, 1993. The
increase in net income was primarily due to higher gas transportation
revenues, partially offset by lower net gas sales revenues and increased
operating costs and expenses. Each of these factors is discussed below.
Operating income was $2.3 million higher for the three months ended March
31, 1994 than for the three months ended March 31, 1993 for the same
reasons that resulted in higher net income.
Texas Gas' November 1, 1993 implementation of Order 636 included a change
in its rate design method from modified-fixed-variable (MFV) to SFV.
Under the MFV method, all fixed costs, with the exception of equity return
and income taxes, were included in the demand component of the charge to
customers; the equity return and income tax components of cost of service
were included as part of the volumetric charge to customers. Accordingly,
under SFV, the demand component has a greater impact on Texas Gas'
operating income, while overall throughput has a less significant impact.
Texas Gas' demand charges under Order 636, are seasonal and are generally
higher during the winter heating season.
Operating Revenues
Total operating revenues decreased $67 million primarily as the result of
$106 million of lower gas sales revenues, due primarily to the realignment
of Texas Gas' variable-market-based sales service under Transco Gas
Marketing Company (TGMC) effective November 1, 1993, partially offset by
$41 million of higher gas transportation revenues. In 1994, the only
sales administered by Texas Gas are from volumes purchased from a limited
number of contracts with pricing provisions that are not variable market
based which are auctioned each month to the highest bidder pursuant to
Order 636. The increase in gas transportation revenues was due to higher
firm transportation demand revenues, primarily the result of the
conversion of customers' firm sales service to firm transportation service
due to the implementation of Order 636 which ended Texas Gas' bundled
sales service. Although long-haul transportation volumes increased, the
decrease in the average commodity transportation rate, which resulted from
the implementation of Order 636 and SFV rates, more than offset the effect
on transportation revenues of the higher transportation volumes.
Operating Costs and Expenses
Cost of gas sold in the first three months of 1994 decreased $77 million
from the same period in the prior year, primarily due to the realignment
of Texas Gas' variable-market-based sales service under TGMC effective
November 1, 1993. Texas Gas' administrative and general expenses
increased $2 million, primarily the result of higher cost of
postretirement benefits other than pensions, which is included in rates.
System Deliveries
As shown in the table below, Texas Gas' total mainline deliveries for the
three months ended March 31, 1994 increased 23.9 Bcf, or 14%, compared to
the three months ended March 31, 1993, primarily due to increased service
to other interstate natural gas pipelines and slightly colder weather on
a degree-day basis in Texas Gas' primary market area. The revenues
associated with short-haul transportation volumes are not material to
Texas Gas.
<TABLE>
<CAPTION>
Three Months
Texas Gas System Deliveries (Bcf) Ended March 31,
_________________________________ _____________________
1994 1993
________ ________
<S> <C> <C>
Sales - 31.7
Long-haul transportation 192.2 136.6
________ ________
Total mainline deliveries 192.2 168.3
Short-haul transportation 50.8 53.4
________ ________
Total system deliveries 243.0 221.7
________ ________
________ ________
</TABLE>
Texas Gas' facilities are divided into five rate zones. Generally, gas
delivered in the northern four zones is classified as long-haul
transportation. Gas delivered in the remaining southernmost zone is
classified as short-haul transportation. Auction sales made under the
Order 636 environment by Texas Gas are generally made in the southernmost
zone; however, the sales are made off system and, therefore, do not
constitute system deliveries.
Rates
Effective November 1, 1993, Texas Gas placed rates into effect, subject to
refund, under a new general rate case as discussed in the Company's Annual
Report on Form 10-K. Texas Gas has been engaged in settlement proceedings
over the past several months regarding this case. As a result of these
discussions, a preliminary settlement in principle, which would resolve
all issues, has been reached with the majority of the parties, subject to
the approval of definitive documentation by the parties and ultimate
approval by the FERC. Under the terms of this preliminary settlement, if
approved by the parties and the FERC, Texas Gas' stated pre-tax rate of
return on equity would be reduced from 16.6% included in its previous rate
settlement, to 13.9%. If the settlement is ultimately approved upon its
current terms, Texas Gas currently estimates that the settlement could,
along with reduced interruptible transportation revenue associated with
the implementation of Order 636, result in lower annual operating income
in the low $70 million range.
There are various factors which may affect Texas Gas' actual operating
results, including, but not limited to, competition from other pipelines,
its rate design structure, cost management, and, to a lesser extent,
fluctuations in its throughput which may result from a number of factors,
including weather. Furthermore, while the use of SFV rate design limits
Texas Gas' opportunity to earn incremental revenues through increased
throughput, it also minimizes Texas Gas' risk associated with fluctuations
in throughput. Texas Gas believes that under Order 636, with SFV rates
and its anticipated transition cost recovery, its rate structure will
remain competitive.
GAS MARKETING
TGMC, through agency management agreements with TGPL and Texas Gas, has
assumed operation of substantially all of TGPL and Texas Gas' sales
service. Accordingly, effective January 1, 1993, and November 1, 1993,
respectively, substantially all sales service for TGPL and Texas Gas is
being reported in Gas Marketing.
The tables below show the results of operations and sales volumes for Gas
Marketing for the periods presented:
<TABLE>
<CAPTION>
Three Months
Net Income (Loss) Ended March 31,
_________________ _____________________
1994 1993
________ ________
(In millions)
<S> <C> <C>
Natural Gas Marketing $ 5.6 $ 1.2
Natural Gas Liquids Marketing (0.6) 0.7
________ ________
Total Gas Marketing $ 5.0 $ 1.9
________ ________
________ ________
</TABLE>
<TABLE>
<CAPTION>
Three Months
Sales Volumes Ended March 31,
_____________ _____________________
1994 1993
________ ________
<S> <C> <C>
Gas (Bcf)
Long-term 120.8 95.1
Short-term 59.2 51.4
________ ________
Total gas sales 180.0 146.5
________ ________
________ ________
Liquids (million gallons) 49.8 49.6
________ ________
________ ________
</TABLE>
Gas sales volumes increased due primarily to the inclusion of Texas Gas'
sales service volumes of 10.7 Bcf in the first quarter of 1994 and higher
demand as a result of colder weather.
Net and Operating Income
Gas Marketing recorded net income in the first quarter of 1994 of $5.0
million, compared to net income of $1.9 million for the same period in
1993. As discussed below, the improvement in 1994 over 1993 is due to
improved results from natural gas marketing operations, somewhat offset by
a decline in the results from natural gas liquids marketing operations and
lower equity in earnings of affiliates. Gas Marketing recorded operating
income of $7.8 million in 1994, compared to operating income of $1.8
million in 1993.
Natural Gas Marketing
Operating income from natural gas marketing was $6.8 million higher for
the first quarter of 1994 compared to the first quarter of 1993, primarily
due to increased natural gas sales as a result of the colder-than-normal
weather in January and February of 1994 and the positive effect of
restructuring, in 1993, certain long-term gas purchase contracts with
prices formerly at a premium to market prices. While substantial progress
was made in 1993 to restructure certain long-term gas purchase contracts
with prices at a premium to market prices and to find alternatives for
currently underutilized firm transportation capacity, additional progress
needs to be made toward permanent utilization of Gas Marketing's firm
transportation capacity.
Natural Gas Liquids Marketing
Operating income from natural gas liquids marketing declined $0.9 million
in the first quarter of 1994 compared to the first quarter of 1993,
primarily due to higher prices for feedstock natural gas combined with
lower product prices. The lower equity in earnings of affiliates was also
attributable to the higher cost of natural gas in relation to product
prices.
Operating Revenues
Gas Marketing's operating revenues increased to $514 million in the first
quarter of 1994 from $356 million in the first quarter of 1993. The
higher revenues were due to higher gas sales volumes and prices and the
inclusion of Texas Gas' sales service revenues of $40 million in Gas
Marketing for the first quarter of 1994, partially offset by lower liquids
prices.
Operating Costs and Expenses
Excluding the costs of sales and transportation of $499 million in 1994
and $348 million in 1993, Gas Marketing's operating expenses in the first
quarter of 1994 of $7 million were approximately equal to operating
expenses in the first quarter of 1993.
COAL
Coal reported net income of $1.0 million for the first quarter of 1994,
compared to net income of $0.7 million for the same period in 1993. The
positive income variance was primarily due to lower interest expense along
with higher income tax benefits in 1994, partially offset by a reduction
in the operating margin due to a lower average sales price. Coal's
operating income decreased to $0.5 million for the first quarter of 1994
from $1.1 million for the first quarter of 1993 due to the lower average
sales price discussed above.
GAS GATHERING
Gas Gathering's net loss for the first quarter of 1994 was $1.0 million
compared to $2.7 million for the first quarter of 1993. The operating
loss in the first quarter of 1994 was $0.2 million compared to a first
quarter operating loss of $1.3 million in 1993. The improvement was
primarily due to lower interruptible transportation expense charged by
other pipelines. This positive variance was partially offset by an
increase in depreciation expense due to the acquisition of interests held
by Corpus Christi Gas Gathering, Inc. and certain affiliates (Corpus
Christi) in jointly-owned gas gathering and intrastate pipeline
partnerships in the third quarter of 1993. Also contributing to the net
loss reduction was equity in earnings of unconsolidated affiliates in 1994
of $0.1 million compared to a $0.9 million loss in 1993. The positive
variance was primarily attributable to losses in 1993 associated with Gas
Gathering's 50% interest in the Corpus Christi pipeline partnerships, the
assets of which are now wholly-owned by Gas Gathering due to the
aforementioned Corpus Christi acquisition.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
See discussion of legal proceedings in Note C of the Notes to
Condensed Consolidated Financial Statements included herein.
ITEM 2. CHANGES IN SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
None.
(b) Reports on Form 8-K.
Transco filed a Form 8-K, Current Report dated April 7, 1994,
to report that Transco and TGPL, along with pipeline units of
The Coastal Corporation, MidCon Corp. and Tenneco Inc.,
announced that each have signed settlement agreements to
resolve litigation with Dakota Gasification Company and the
Department of Energy related to their respective contracts,
signed in 1982, to purchase gas from the Great Plains
Gasification Plant. The settlements are subject to the
approval of the Federal Energy Regulatory Commission. See
Note C of the Notes to Condensed Consolidated Financial
Statements.
<PAGE>
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 thereunto duly authorized.
TRANSCO ENERGY COMPANY
Dated: May 16, 1994
By /s/ Larry J. Dagley
__________________________________
(Signature)
Larry J. Dagley
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
