Houston Natural Gas

Houston Natural Gas Corporation was an American natural-gas utility and energy company headquartered in Houston, Texas. Founded in 1940, it was established to market gas produced by the Houston Pipe Line Company after negotiations to sell that gas through Houston Gas and Fuel did not succeed. The company initially operated within a vertically connected gas-distribution and pipeline structure, with Houston Pipe Line serving as its principal supplier. A major early turning point came in 1956, when Houston Natural Gas acquired Houston Pipe Line Company and its assets for $36 million. At the time, Houston Pipe Line owned approximately 761 miles of transmission lines extending across the Texas Gulf Coast. The transaction gave Houston Natural Gas direct control of an important supply and transportation network and strengthened its position in regional gas infrastructure. The company expanded again in 1963 through the acquisition of Valley Gas Production Company and its pipelines. Robert R. Herring, who had led Valley Gas Production, joined Houston Natural Gas as a vice-president. He later became president in 1967 and chairman of the board in 1973, reflecting the importance of operating and pipeline expertise within the company’s leadership. Houston Natural Gas changed strategic direction in 1976. It sold its energy-distribution operations to Entex Energy and began diversifying outside the traditional energy-distribution business. This move reduced its direct role as a local gas distributor while positioning the company for a broader corporate strategy. The company’s final and most consequential phase began with a takeover challenge in 1984. Coastal Corporation made a hostile approach for Houston Natural Gas, which the board successfully resisted. During the defense, the board recruited Ken Lay, then president of Transco Energy, to manage the company. Lay subsequently negotiated Houston Natural Gas’s acquisition by InterNorth in 1985. The transaction combined Houston Natural Gas with InterNorth, an Omaha-based energy company. Houston Natural Gas executives, including Lay, assumed senior positions in the combined organization. InterNorth was later renamed Enron Corporation, and its headquarters moved from Omaha to Houston, into the former Houston Natural Gas offices. Ken Lay became chief executive of the new Enron, making Houston Natural Gas a key corporate predecessor of one of the most prominent and later notorious companies in modern energy-industry history. Houston Natural Gas no longer operates as an independent company. Its historical significance rests on its development of Gulf Coast gas infrastructure, its acquisition-led expansion, its 1970s diversification, and its role in the 1985 transaction that helped create the corporate platform later known as Enron.

Houston Natural Gas was founded in 1940 to sell gas produced by Houston Pipe Line Company. The company emerged after negotiations to market the gas through Houston Gas and Fuel failed. Its original business therefore linked gas production, pipeline transportation, and regional distribution in and around Houston and the Texas Gulf Coast. In 1956, Houston Natural Gas acquired Houston Pipe Line Company for $36 million. Houston Pipe Line owned about 761 miles of transmission lines crossing the Texas Gulf Coast and had been Houston Natural Gas’s main supplier since the company’s formation. By bringing this pipeline business under common ownership, Houston Natural Gas strengthened its control over the movement and supply of natural gas. The company continued its acquisition strategy in 1963, purchasing Valley Gas Production Company and its pipelines. Valley’s president, Robert R. Herring, joined Houston Natural Gas as a vice-president. Herring became president in 1967 and chairman of the board in 1973. His progression reflected the company’s emphasis on gas production and pipeline operations as it expanded. In 1976, Houston Natural Gas sold its energy-distribution operations to Entex Energy. The sale marked a strategic shift away from the company’s original distribution-centered model. Houston Natural Gas began diversifying into activities outside energy distribution, although it remained part of the broader energy-business landscape. The company faced a major corporate challenge in 1984, when Coastal Corporation attempted a hostile takeover. Houston Natural Gas successfully resisted the approach. As part of its response, the board hired Ken Lay, then president of Transco Energy, to manage the company. Lay subsequently led negotiations that resulted in Houston Natural Gas being acquired by InterNorth in 1985. InterNorth was based in Omaha, while Houston Natural Gas was headquartered in Houston. After the acquisition, Houston Natural Gas executives took senior roles in the combined organization. InterNorth later changed its name to Enron Corporation and moved its headquarters to the former Houston Natural Gas offices in Houston. Ken Lay became chief executive of the newly formed Enron. Houston Natural Gas ceased to exist as an independent corporate entity following the 1985 transaction. Its legacy is primarily institutional rather than consumer-facing: it helped build and consolidate Gulf Coast gas infrastructure, developed through acquisitions and diversification, and supplied important management, assets, and headquarters to the company that became Enron.

• 1985

  Acquisition by InterNorth

  [1]Houston Natural Gasen.wikipedia.org

  InterNorth acquired Houston Natural Gas. The combined company later became Enron and moved its headquarters to Houston.

• 1984

  Takeover defense and appointment of Ken Lay

  [1]Houston Natural Gasen.wikipedia.org

  The company resisted a hostile takeover attempt by Coastal Corporation and hired Ken Lay, then president of Transco Energy, to manage it.

• 1976

  Distribution business is sold

  [1]Houston Natural Gasen.wikipedia.org

  Houston Natural Gas sold its energy-distribution operations to Entex Energy and began diversifying beyond energy distribution.

• 1963

  Acquisition of Valley Gas Production Company

  [1]Houston Natural Gasen.wikipedia.org

  The company acquired Valley Gas Production Company and its pipelines, and Robert R. Herring joined Houston Natural Gas leadership.

• 1956

  Acquisition of Houston Pipe Line Company

  [1]Houston Natural Gasen.wikipedia.org

  Houston Natural Gas acquired Houston Pipe Line Company and its assets for $36 million, including approximately 761 miles of Texas Gulf Coast transmission lines.

• 1940

  Houston Natural Gas is founded

  [1]Houston Natural Gasen.wikipedia.org

  Houston Natural Gas was established to market gas produced by Houston Pipe Line Company after negotiations with Houston Gas and Fuel did not succeed.

A Houston-based regional natural-gas utility and pipeline company that evolved from gas distribution and transmission into a more diversified energy enterprise before becoming a predecessor of Enron.

• Utility service · 1940

  Natural-gas distribution

  Houston Natural Gas originally operated as a gas-distribution business connected to gas produced by Houston Pipe Line Company. Its distribution activities served the Houston-area and broader regional market until the operations were sold to Entex Energy in 1976.

• Energy infrastructure · 1956

  Natural-gas transmission pipelines

  Through its 1956 acquisition of Houston Pipe Line Company, Houston Natural Gas controlled a substantial transmission system crossing the Texas Gulf Coast. The pipeline network was a central strategic asset and supported the company’s role in moving gas from production sources to distribution and other markets.

• Natural-gas production · 1963

  Gas production interests

  The acquisition of Valley Gas Production Company in 1963 expanded Houston Natural Gas’s interests beyond distribution and transmission into gas production and related pipeline assets.

• 1985

  Negotiate acquisition by InterNorthM&A

  Background

  After resisting Coastal Corporation’s hostile takeover attempt in 1984, Houston Natural Gas brought in Ken Lay to manage the company.

  Action taken

  Ken Lay negotiated the acquisition of Houston Natural Gas by InterNorth.

  Aftermath

  InterNorth later became Enron, moved its headquarters to Houston, and placed Houston Natural Gas executives in senior positions.

  Source

• 1976

  Exit energy distribution and diversifyStrategy

  Background

  Houston Natural Gas reassessed its traditional distribution business and pursued activities outside energy distribution.

  Action taken

  The company sold its energy-distribution operations to Entex Energy and began diversifying.

  Aftermath

  The sale reduced Houston Natural Gas’s direct role as a gas distributor and preceded its later corporate transformation.

  Source

• 1956

  Acquire Houston Pipe Line CompanyM&A

  Background

  Houston Pipe Line Company had been Houston Natural Gas’s principal supplier since the company was founded and owned a major Texas Gulf Coast transmission network.

  Action taken

  Houston Natural Gas acquired Houston Pipe Line Company and its assets for $36 million.

  Aftermath

  The transaction vertically integrated the company with a major gas transmission asset base.

  Acquisition price. $36 million (1956)

  Source

1. 1Houston Natural Gasen.wikipedia.org