Arkla, Inc.

Arkla Building
525 Milam
Shreveport, Louisiana 71101
U.S.A.
(318) 429-2700
Fax: (318) 429-2793

Public Company
Incorporated: 1928 as Southern Cities Distributing Company
Employees: 10,000
Sales: $2.44 billion
Stock Exchange: New York

Arkla, Inc. is an integrated natural gas company with three primary business segments—natural gas transmission, distribution, and production and exploration. Arkla serves key markets in the central United States. It operates more than 14,000 miles of pipelines; distributes gas to 2.6 million customers; and has interests in 186 gas and oil fields.

Arkla’s predecessor, Southern Cities Distributing Company (SC), was incorporated in 1928, with headquarters in Shreveport, Louisiana. In an era of acquisitions and mergers, Southern Cities was established to acquire and operate natural gas production and distribution systems. In 1934 Southern Cities merged with Arkansas Louisiana Pipeline Company, Reserve Natural Gas Company, Arkansas Natural Gas Company, and Public Utilities Company of Arkansas to form the Arkansas Louisiana Gas Company, (ALG), a subsidiary of Cities Service Company. The earliest predecessor of these companies dated back to 1905, when significant natural gas discoveries were first made in Louisiana. During the Great Depression, ALG expanded slowly. In 1936 it bought Little Rock Gas & Fuel.

In 1944 the Securities and Exchange Commission (SEC), under the Public Utility Holding Company Act, required the divestiture of ALG from Cities Service. Full reorganization did not occur until 1952 because of litigation and hearings. That year ALG became a publicly owned corporation, separate from Cities Service, and its stock was listed on the American Stock Exchange.

Wilton R. Stephens acquired a controlling stock interest in 1954 and became a director in 1956, board chairman in 1957, and president in 1958. Stephens owned a large investment bank, Stephens Inc., and was a dominant figure in Arkansas business and politics. Through the next decade, the company diversified. In 1957 it formed the subsidiary, Arkla Air Conditioning, to purchase a manufacturer of air conditioning equipment. Soon to follow were Arkansas Louisiana Finance Corporation, which financed appliances and construction; Arkla Chemical Corporation, a fertilizer and plywood manufacturer; and Arkansas Cement Corporation. There was even an amusement park called Arkla Village.

In 1960 and 1961 ALG expanded its gas operations and acquired three other distribution utilities—Consolidated Gas Utilities Corporation, with operations in Oklahoma and Kansas; Mid-South Gas Company of east Arkansas; and Southwest Natural Gas Company, which served parts of Louisiana, Oklahoma, and Texas. Also acquired was Southwest Natural Gas Company’s gas production company, which was renamed Arkla Exploration Company. Given these expansions, the ALG gas sources in northwestern Louisiana and east Texas were not sufficient. Drilling and gas acquisition activities reached into Oklahoma and the Texas panhandle. In 1963 ALG built a new pipeline between its central gas system in Arkansas and new gas fields in Oklahoma. ALG’s earnings were volatile during this decade of experimentation and expansion; from $15.5 million in 1960, they rose to $25 million in the mid-1960s, and dipped to $21 million by the decade’s end. In the late 1970s Stephens cut dividends.

The 1970s ushered in a recession, oil embargoes, and energy shortages. There was also increased energy regulation. In 1973, the year ALG’s stock listing moved to the New York Stock Exchange, Stephens relinquished the reins to Don W. Weir and Sheffield Nelson, who served as chairman and president of the company, respectively, and became co-chief executives. Under the unusual arrangement, Weir oversaw the subsidiaries, finances, and exploration, and Nelson handled pipeline operations and politics as well as relations with customers and regulations. ALG sold its unprofitable fertilizer and plywood operations and concentrated on finding new sources of gas. There were also dedicated efforts to work with regulators. In a highly regulated industry, the company was answerable to six different state agencies and the Federal Energy Regulatory Commission.

During the energy crunch of the mid-1970s, ALG had difficulty competing for gas because intrastate companies could pay more, as they were free of federal price controls. Stepping up its own-source supplies was vital, and ALG, between 1975 and the early 1980s, found more gas than it produced. Also in 1975 Nelson persuaded the Arkansas Public Service Commission—regulator of more than half of ALG’s gas sales—to institute a new state gas-pricing formula, which allowed ALG to charge higher prices in return for promising better supplies. The company’s expanded supply allowed it to win additional industrial customers. By 1976 the company’s financial health had significantly improved. It successfully renegotiated contracts at bargain prices with gas producers before the 1978 Natural Gas Policy Act, which marked the start of gas decontrol. In the early 1980s, these contracts accounted for more than 60% of ALG’s supplies and allowed the company to offer competitive prices to customer. ALG surpassed $1 billion dollars in total assets by 1979, when Weir retired as chairman and passed that title to Nelson. Earnings were up to $73 million in 1980.

In 1981 the company name was changed to Arkla, Inc. Around the same time, Arkla signed a 15-year contract with Central Louisiana Electric Company, agreeing to sell the company more than 100 million cubic feet of gas daily. After federal regulators approved the contract in 1982, it reduced the oversupply that had resulted from Arkla’s abundant discoveries of its own and favorable contracts with other suppliers, to the large industrial gas market in southern Louisiana. Arkla was on track. The company’s bond rating had been upgraded four times in three years, granting it a reputation for high growth and solid earnings. In 1983 Thomas F. McLarty III was elected president and in 1985 became chairman and CEO, succeeding Nelson. In 1985 McLarty initiated reorganization of the company into independent business units—natural gas distribution, transmission, and exploration and production. Arkla sold its Arkansas Cement Corporation in 1985. In 1986 Arkla’s exploration division expanded with the purchase of Arkoma Production Company. Arkla acquired Mississippi River Transmission Corporation for $305 million in 1986, providing access to new service territories in western Illinois and St. Louis, Missouri.

In 1988 Arkla acquired Entex, Inc. through a $500 million stock swap. It was Arkla’s largest merger to date, Entex serving about 1.2 million customers in the Houston metropolitan area and more than 500 other markets in the Gulf of Mexico region. In 1989 Arkla bought Louisiana Intrastate Gas for about $170 million, adding 1,900 miles of pipeline—the largest intrastate system in Louisiana. Also in 1989, Arkla sold 18% of Arkla Exploration Company to the public. The exploration subsidiary’s shares traded on the New York Stock Exchange.

Late in 1990, Arkla acquired Diversified Energies, Inc., whose main unit is Minnegasco, which distributes natural gas in Minnesota, Nebraska, and South Dakota, and brought with it some 650,000 customers. The stock transaction was valued at $630 million. Between 1984 and 1990 Arkla more than doubled its size through acquisitions and reached new markets in Houston, Texas; Minneapolis, Minnesota; and St. Louis, Missouri. In the early 1990s it operated the sixth-largest pipeline system in the United States and was among the ten largest operators of natural gas reserves.

Principal Subsidiaries

Arkla Energy Marketing Company; Mississippi River Transmission Corporation; Louisiana Intrastate Gas Corporation; Arkla Exploration Company (82%); Diversified Energies, Inc.

Further Reading

Nulty, Peter, “Little Rock’s Hot-Cookin’ Gas Company,” Fortune, October 5, 1981; The History of Arkla, Inc.: 1905-Today, Shreveport, Louisiana, Arkla, Inc., [n.d.].

—Carol I. Keeley