CMS Energy to sell oil and gas exploration unit

CMS Energy, the Dearborn company wrapped up in an energy trading scandal, announced plans to sell its oil and gas exploration and production so that it can get rid of its international holdings and reduce debt. CMS Oil and Gas, which had sales of $ 212 mm in 2001, supplies gas and oil in west Texas and Louisiana, but has most of its operations in Cameroon, the Republic of the Congo, Eritrea, Tunisia and Venezuela.

The oil and gas unit, which is based in Houston, earned CMS, Michigan's biggest utility company and owner of Consumers Energy, $ 74 mm in 2001. CMS reported losses of $ 545 mm in 2001. CMS spokesman Dan Bishop said the energy trading problems are unrelated to the announcement. He said the sale is part of the company plan, unveiled in October, to shed its international assets and focus on its business in North America.
"Selling these assets also helps us with our aggressive program to reduce debt and improve our balance sheet," Bishop said. The company hopes to use proceeds of the sale to reach its debt reduction goal of $ 2.9 bn by the end of 2002. The company said it has already reached $ 2.4 bn of that goal through the sales of physical and financial assets.

In November, the company announced plans to sell $ 2.4 bn of its overseas assets and change its strategy from supplying energy to developing countries to focusing on North America. That strategy was reaffirmed during its annual shareholders meeting when CEO and Chairman William McCormick resigned and interim CEO Ken Whipple took over, saying the company was going "back to basics."
McCormick's resignation came just days after the company's stock price hit 14-year lows because of investor concerns over $ 4.2 bn in phoney power trades by the company's marketing division, CMS Marketing, Services and Trading. While the energy swaps, known as round-trip trades, are not illegal, they are viewed by federal regulators as highly questionable and may have artificially increased electricity prices because they exaggerated trading activities and inflated expectations of industry growth.

Round-trip trades involve selling electricity and natural gas to other utilities and then buying it right back for exactly the same price. Federal regulators are investigating the trades. CMS would not say how much it would likely get for the oil and gas unit.
The company sold oil and gas exploration and production properties in Michigan in April 2000 for $ 163 mm. This April, it sold similar properties in Montana and Wyoming for $ 101 mm. Those sales left most of the company's oil and gas properties overseas. CMS executives speaking with analysts in April said the company had other pending asset sales.