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El Paso To Sell EP Energy To Apollo-Led Group For $7.15 Bln.


El Paso Corp. (EP) Friday agreed to sell its exploration and production business EP Energy Corp. for about $7.15 billion to a consortium led by private equity firms Apollo Global Management LLC and Riverstone Holdings LLC.

The sale of EP Energy is part of a $21 billion merger deal between El Paso and Kinder Morgan Inc. (KMI) announced last October, when shortly thereafter Kinder Morgan revealed plans to sell El Paso's E&P assets.

El Paso said the sale of EP Energy would be dependent upon completion of the Kinder Morgan-El Paso merger that is expected in the second quarter 2012, subject to regulatory approvals. The sale of EP Energy is also expected to close about that time.

The EP Energy sale was expected when it was reported by Wall Street Journal last month that Kinder Morgan was in advanced talks with a group led by Apollo Global to clinch a deal.

El Paso's net operating loss carry forwards will largely offset taxes arising from the sale of E&P assets. As a result, El Paso said most of the proceeds from the Energy Corp sale will be used to cut debts that Kinder Morgan borrowed to fund the El Paso purchase.

The EP Energy sale is yet another multi-billion deal in the energy sector involving private equity firms. Last November, a group led by Kohlberg Kravis Roberts & Co L.P. (KKR) agreed to acquire Samson Investment Co., the largest privately held oil and gas firm in the U.S., for $7.2 billion.

El Paso had initially planned to separate itself into two public entities through a spinoff of its E&P business before the end of 2011. However, the agreement with Kinder Morgan did not necessitate that process.

The company in mid-October agreed to be acquired by Kinder Morgan for about $21 billion in a deal that will combine the two largest natural gas pipeline operators in North America.

Houston, Texas-based El Paso owns oil and natural gas fields in the U.S., Brazil and Egypt, with major holdings being in the Eagle Ford Shale in south Texas, the Haynesville Shale in Texas and Louisiana as well as the Gulf of Mexico's shallow waters and offshore Brazil fields.

Kinder Morgan Inc., a pipeline transportation and energy storage company, owns an interest in or operates more than 38,000 miles of pipelines and 180 terminals.

EP closed Friday on the NYSE at $27.16, up $0.39 or 1.46%, on a volume of 11.2 million shares. In after hours, the stock gained 0.29%.

KMI closed at $33.24, up $0.92 or 2.85%, on a volume of 2.5 million shares. In after hours, the stock rallied 0.87%.

by RTTNews Staff Writer

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