Enserch Corporation

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Enserch Corporation

Enserch Center
300 South St. Paul Street
Dallas, Texas 75201
U.S.A.
(214) 651-8700
Fax: (214) 573-3351

Public Company
Incorporated: 1909 as Lone Star Gas Company
Employees: 11,200

Sales: $2.82 billion
Stock Exchanges: New York Midwest London

Enserch Corporation operates in the field of energy, engineering, and construction. Since its formation in 1909 as a Texasbased natural gas utility, the company has grown to include some 28,000 miles of pipeline serving 1.25 million customers in nearly 600 Texas and Oklahoma communities. During the 1970s Enserch diversified into petroleum exploration and production conducted primarily onshore in Texas and Oklahoma and offshore in the Gulf of Mexico; as well as into engineering and construction services.

Enserch’s beginnings date back to 1909 when the Lone Star Gas Company was chartered as a gas production and transmission company to take advantage of the Petrolia gas field, discovered a year earlier in Clay County, Texas. Lone Star’s headquarters were established in Fort Worth, with Henry Clay Edrington serving as president. Lone Star acquired a pipeline extending from Petrolia field to the communities of Byers, Wichita Falls, and Henrietta, and constructed a 130-mile pipeline running from Petrolia field to the Dallas-Fort Worth area.

For several years Lone Star operated as an independent pipeline company, selling natural gas wholesale in towns it served through distribution companies. By 1910 Petrolia field oil was being sold to the Fort Worth Gas Company, the Dallas Gas Company, and the North Texas Gas Company.

When Edington died in 1915, Lee B. Denning, an attorney instrumental in Lone Star’s incorporation, became president. By the time the United States entered World War I in 1917, the Petrolia field was nearly played out, and the company was in serious financial trouble. In 1918 Lone Star turned to new sources of gas, removing old pipelines to build an extension to the newly discovered Fox field in southern Oklahoma. Two years later Lone Star began removing gas from both southern Oklahoma and the newly discovered Ranger field in west Texas.

By the mid-1920s transmission lines had been extended to Lone Star’s new gas sources, and the threat of bankruptcy had passed. In 1926 Lone Star Gas Corporation was organized as a holding company to acquire Lone Star Gas Company. Headquarters were established in Dallas, and the new corporation immediately began to expand its producing, transmission, and distribution holdings through acquisition of numerous companies and construction of town distribution plants. Between 1926 and 1927 Lone Star acquired several Texas distribution companies that were former customers, including the Fort Worth Gas Company and several companies serving numerous smaller north and west Texas communities.

In 1927 Lone Star began serving several Oklahoma communities after acquiring pipeline, gas wells, gas rights, and leases in southern Oklahoma. That same year Lone Star began serving Abilene, Texas, after purchasing a pipeline running to the city. In 1929 it bought Texas Cities Gas Company with distribution operations in both Texas and Juarez, Mexico, and expanded into the Midwest and Pacific Northwest, acquiring the Council Bluffs Gas Company in Iowa, Coos Bay Gas Company in Oregon, and Northwest Cities Gas Company, with gas manufacturing plants in Washington, Idaho, and Oregon.

George W. Crawford, part owner of Lone Star’s original Petrolia well, was named the company’s first chairman in 1929. That same year the company laid a transmission line tying the southwestern Oklahoma panhandle and north Texas gas fields to Lone Star’s central system, marking the end of the company’s early field transmission line construction.

Throughout the 1920s Lone Star extended service to Oklahoma and Texas communities; by the end of the decade more than 200 communities were included in the company’s distribution system. Despite the onset of the Great Depression in late 1929, expansion continued into the 1930s, largely through acquisitions and the creation of new subsidiaries. In 1930 the subsidiary Lone Star Gasoline Company was organized to acquire several natural gas production properties and gasoline plants in west Texas. Lone Star also acquired Stamford and Western Gas Company, with town gas plants in 21 west Texas communities. Two years later Lone Star acquired Northwest Texas Gas Company, with distribution and transportation properties serving the former Stamford and Western area. In 1931 the Abilene gas distribution system was added to the Lone Star system.

In 1935 Crawford died, and T.B. Gregory was elected chairman. That same year Lone Star began tapping new sources of gas and resumed pipeline construction, which continued at an active pace through the remainder of the decade. In 1938 it disposed of Northwest Cities Gas Company and acquired the gas production, transportation, and distribution properties serving San Angelo in west Texas.

Denning died in 1940, and Dechard Anderson Hulcy was elected president. That same year the Securities and Exchange Commission (SEC) ordered Lone Star to comply with the 1935 Public Utility Holding Company Act and divest itself of specified properties in order to have a system of interconnected pipelines; Lone Star carried out the divestment restructuring process between 1942 and 1944, selling all of its remaining assets outside of Texas and southern Oklahoma. The company also complied with an order to divest its Texas Cities Gas Company and the distribution systems at El Paso and Gavelston.

The Delaware-chartered Lone Star Gas Corporation ceased to exist in 1943, replaced by the Lone Star Gas Company with operations revolving around the Dallas-Fort Worth area, extending into southern Oklahoma. Lone Star’s only remaining affiliate was a gas supply subsidiary, Lone Star Producing Company, an outgrowth of the former Lone Star Gas Corporation.

Following the United States’s entrance in World War II in 1941, Lone Star undertook a construction program to bring gas service to new defense projects, including an airplane bomber plant. In 1946 Lone Star initiated a postwar construction program. Before the decade was over, more than 2,200 miles of new transmission, gathering, and distribution lines connected numerous Texas and Oklahoma communities to the Lone Star system. In the first three years of the 1950s an additional 3,400 miles of pipeline was constructed or acquired, giving Lone Star over 15,000 miles of pipeline.

In 1951 Gregory died, and the following year President Hulcy assumed the additional duties of chairman. In 1952 Lone Star resumed acquisition activities and acquired the Abilene distribution division of United Gas System in north Texas with gas distribution, production, and transmission properties in ten communities. Three years later Lone Star purchased the distribution properties in Cisco, Texas, near Abilene.

During the mid-1950s Lone Star launched an expansion program in west Texas. In 1953 Lone Star constructed a major gasoline plant in west Texas to produce gas and an underground storage reservoir to safeguard its gas supply for the area. In 1954 a new production office was opened in San Antonio, and three years later a new west Texas district and regional headquarters building was opened in Abilene.

By 1959 Lone Star was providing gas to 838,000 customers, an increase of nearly 500,000 customers since the end of World War II. Through acquisitions of small companies and extension of its distribution and transmission system, Lone Star closed the decade serving more than 425 communities.

In 1961 Lone Star Gas organized the subsidiary Lone Star Gathering Company to purchase, gather, and market natural gas in south Texas. The company diversified in 1964 when a division of Lone Star Producing Company built a fertilizer complex near Kerens, Texas.

In 1966 Lone Star Gas acquired an interest in the Katy Gas Field near Houston, described at the time as the largest untapped reservoir of natural gas in the United States. By 1967 Lone Star had constructed a 200-mile pipeline from the field to an area just east of Dallas.

L.T. Potter was named chairman in 1967, and Louis G. James was promoted from vice president to president. James retired in 1970, giving way to William Charles McCord, a former senior vice president of operations. In 1971 Potter retired as chairman and was replaced by Roy E. Pitts. Under McCord and Pitts the size and nature of the company began to change quickly during a period of accelerated growth. In 1970 Lone Star purchased the Amarillo-based City Gas Company with distribution systems in seven surrounding north and west Texas towns, pushing the total number of Lone Star system communities to over 560. The following year Lone Star entered the oil field services business with the purchase of Mobile Well Service, Inc., an east Texas oil well maintenance and service provider. In 1972 Lone Star acquired Pool Company, the nation’s largest gas and oil well production service firm, and established the subsidiary LSG Transtexas Gas Company, to engage in intrastate gathering and transmission of natural gas.

During 1972 and 1973 Lone Star expanded its business to include foreign gas and oil exploration and development subsidiaries in Australia, Malaysia, Canada, Bolivia, the Netherlands, and Greece. In 1973 Lone Star discontinued the majority of its gas appliance sales. That same year the company purchased recently discovered gas reserves in Galveston Bay, and in 1974 Lone Star acquired the Gulf Offshore Company of Texas, a petroleum productions services concern.

During the early and middle 1970s pipeline construction was again accelerated. Major products included a pipeline running through the Kiamichi Mountains of Oklahoma and a line running from far western Texas to the Dallas-Fort Worth area.

In 1975 the parent corporation’s name was changed to Enserch to distinguish utility operations from growing nonutility operations and to reflect the company’s diversified energy-related activities. With the name change, Lone Star Gas became a division of the new parent. That same year Louis B. Hulcy was promoted from senior vice president of operations to president of Lone Star Gas, while McCord was named president of Enserch. Pitts remained chairman of Lone Star Gas and also became chairman of Enserch.

In 1976 Enserch acquired Ebasco Service Inc., a major engineering, construction, and consulting service company specializing in energy and environmental markets. Through the remainder of the decade, Enserch concentrated on expansion of its oil field services business and acquired several oil well service firms providing oil rigs and other well-producing services both onshore in Texas and Oklahoma and offshore in the Gulf of Mexico. It also purchased the Louisiana-based Livingston Corporation, an oil service firm specializing in the marine tubing market, and the Boston-based Samson Ocean System Inc., a producer of cordage and other marine-related products and systems.

In 1977 McCord became president and chairman of Enserch and remained chairman of Lone Star Gas. Carol Neaves became president of Lone Star Gas in 1979.

By the late 1970s more than half of Enserch’s revenues were coming from nonpipeline, energy-related services. Enserch entered the 1980s with a fully developed oil field services business; a gas and oil development and exploration business operating worldwide; and goals of expanding its established construction and engineering business. Those plans took shape between 1981 and 1983 when Enserch acquired Alaska International Industries, an engineering and construction company; Humphreys & Glasgow Ltd., a London-based process, design and engineering firm; a 50% interest in Losinger AG, a Swiss construction and engineering firm specializing in the intrastructure market; and a 49% interest in Dorsch Consult, a German engineering and consulting firm. During the early 1980s Enserch posted record gains, including sales of $3.7 billion in 1982.

Reduced domestic exploration activity led Enserch to cut its rig-making work force in 1982. By 1983 oil and gas prices were dropping. With losses mounting in its oil services division, in 1984 Enserch began selling marine-related oil services assets and the following year wrote down $225 million on its assets.

To reduce debt and raise money for petroleum exploration and production, in 1985 Enserch transferred substantially all of its development and exploration assets to the newly formed master limited partnership, Enserch Exploration Partners, Ltd. Fifteen percent of the new partnership was sold to the public to finance company activities. Enserch closed its 1985 books with a $62.3 million loss.

Neaves became chairman of Lone Star in 1985, and David W. Biegler was named president. In response to a changing regulatory and pricing climate in the natural gas industry, in 1986 Lone Star Gas formed two subsidiaries, Enserch Gas Company and Enserch Gas Transmission Company. Enserch Gas was created to supply gas for the growing short-term or spot market, and Enserch Gas Transmission was formed to target the industrial and electric-generation markets along the Texas gulf coast with a gas supply separate from Lone Star. In other moves to boost business, in 1986 the umbrella subsidiary Enserch Development Corporation was formed to seek, develop, and manage project opportunities in which multiple Enserch companies could be involved. In early 1988 Enserch Development landed its first major project, a cogeneration plant near Sweetwater, Texas, to coproduce electricity and process heat with end products being purchased by an electric utility and a local factory.

In 1988 Enserch discontinued its remaining oil field services. That same year Lone Star elected to participate in the new open access plan, which allowed the company to utilize nonaffiliated interstate pipelines for interstate gas and offsystem marketing sales.

The company’s troubles in construction and engineering and its losses due to discontinued oil field services led to a net loss in 1988 of $181 million. Enserch bounced back into the black the following year, accompanying an upturn in gas prices and profits in all three business segments.

Spurred by low oil prices, in 1989 Enserch Corporation traded its shares for those of Enserch Exploration Partners in a public exchange, resulting in the corporation gaining control of more than 99% of the partnership. With renewed interest in natural gas as an environmentally sound fuel, in 1989 Lone Star Gas constructed a compressed natural gas (CNG) fueling station at its Dallas service center to provide fuel for the Dallas transit system and local school district fleets, which had converted vehicles to run on CNG. That same year, Biegler assumed the additional duties of Lone Star Gas chairman.

In 1990 Enserch sold its 50% interest in the A.G. Losinger and the Pool Company, comprising all of Enserch’s remaining interest in oil field services. The next year Lone Star reached an agreement to sell all of its Oklahoma transmission and distribution properties. Also in 1991 Biegler was named president of Enserch, succeeding McCord, who remained chairman, and J. Michael Talbert was named president of Lone Star, succeeding Biegler, who remained chairman. Enserch’s goals in the early 1990s called for its natural gas division to capitalize on anticipated growth in environmental and energy-related markets and to expand third-party transportation sales, short-term sales, and sales stemming from additional uses of natural gas for such purposes as vehicle fuel.

Principal Subsidiaries

Lone Star Gas Company; Lone Star Energy Company; Enserch Gas Company; Enserch Gas Transmission Company; Enserch Exploration, Inc.; Enserch Exploration Partners Ltd. (99.2%); Ebasco Services Incorporated; Humphreys & Glasgow International (U.K.); Dorsch Consult (Germany, 49%); Enserch Development Corporation.