The Coastal Corporation
Address:
Coastal Tower
Nine Greenway Plaza
Houston, Texas 77046
U.S.A.
Statistics:
Public Company
Incorporated: 1955 as Coastal States Gas Producing Company
Employees: 13,300
Sales: $7.37 billion (1998)
Stock Exchanges: New York Amsterdam Dusseldorf Frankfurt Hamburg Munich London
Ticker Symbol: CGP
NAIC: 48621 Pipeline Transportation of Natural Gas; 22121 Natural Gas Distribution; 32411 Petroleum Refineries; 42271 Petroleum Bulk Stations & Terminals; 44711 Gasoline Stations with Convenience Store
Company Perspectives:
Throughout our operations, Coastal seeks to maximize the competitive advantage of our strategically integrated and diverse base of energy assets and operations; focus on core geographic areas where our assets and expertise bring unique strengths; maintain a strong balance sheet to provide the financial flexibility necessary to take advantage of rapidly emerging opportunities; allocate capital to generate growth, both long- and short-term, while sustaining a solid foundation of earnings and cash flow.
Key Dates:
1955: Oscar Wyatt establishes Coastal States Gas Producing Company.
1962: Coastal buys a pipeline network and Texas refinery from Sinclair Oil Corporation.
1980: Company changes its name to The Coastal Corporation.
1987: Despite U.S. economic sanctions against Libya, CEO Wyatt negotiates a deal with Libyan dictator Muammar Qaddafi.
1993: Coastal completes construction on the Empire State Pipeline, a joint venture.
1995: Wyatt retires as CEO.
Company History:
The Coastal Corporation, based in Houston with operations in several energy markets, is a Fortune 500 energy company that owns outright or through joint venture natural gas pipelines covering over 18,000 miles across the United States. The company’s principal business segments consist of the gathering, processing, storage, and distribution of natural gas; oil refining and marketing; oil exploration and production; electric power production; and coal mining. With the second largest natural gas storage facilities in the United States, Coastal was handling about 13 percent of the country’s total consumption of natural gas in the late 1990s. The company’s ANR Pipeline subsidiary operates about 18,000 miles of domestic pipeline as well as 14 natural gas processing plants and 27 underground storage facilities. Coastal’s exploration and production division, which operates primarily in the Gulf of Mexico, south Texas, and Utah, has interests in more than 3,000 wells. This segment expanded into international exploration in the 1990s. The company also owns four refineries and provides gasoline in 34 states through more than 1,500 branded retail outlets.
Rapid Development and Expansion in the 1950s and 1960s
To a great extent Coastal’s success can be attributed to the dynamic leadership of founder Oscar Wyatt. Wyatt served in World War II as a bomber pilot, earned a degree in mechanical engineering from Texas A & M University, and gained experience in the oil business as a partner in Wymore Oil Company. In 1955 Wyatt founded Coastal States Gas Producing Company in Corpus Christi, Texas. Compared to the monolithic enterprise it became in later years, Coastal States began business in modest circumstances, with 68 miles of pipeline and 78 employees.
From the beginning Wyatt demonstrated an almost intuitive understanding of the energy business. His pipeline company purchased small amounts of gas from a number of producers, packaged it, and then sold it in larger volumes. Gas gathering became the company’s primary business. Wyatt developed effective pipeline systems that connected both buyers and sellers and still left room for profits. Most pipeline owners set output quotas to make an oil field last for up to 20 years. Wyatt ignored this convention and generally purchased as much gas from producers as they could pump. The practice enraged other pipeline owners, but the arrangement worked to Coastal’s advantage, and by 1960 revenues exceeded $17.6 million.
As the U.S. economy grew in the 1960s, dependence on energy sources, notably oil and gas, also increased, and Coastal took full advantage of the soaring demand. By the early 1960s Coastal’s newly created subsidiary, LoVaca Gathering Company, supplied gas to San Antonio, Austin, Corpus Christi, and other cities in south Texas. In 1962 Coastal purchased 800 miles of crude oil pipeline from Sinclair Oil Corporation, including a major refinery in Corpus Christi with a capacity for almost 30,000 barrels of oil per day. Later, as oil refining became one of its principal activities, Coastal extended this capacity.
Much of Coastal’s subsequent expansion came through takeovers–often hostile–of rival companies. Wyatt acquired a reputation as a tough business competitor and corporate raider. In 1968 Coastal acquired a 965-mile system from United Pipeline Company. In the same year Wyatt won control of Rio Grande Valley Gas Company. In June 1970 the company announced plans to link its west Texas natural gas reserves to the Dallas area.
Continued Expansion and Rising Controversy in the 1970s
In the early 1970s events in the Middle East overshadowed the triumphant rise of Coastal. The Arab-dominated Organization of Petroleum Exporting Countries (OPEC), by presenting a united front, began to win price increases. In 1971 OPEC cut production and raised prices by 70 percent, and by 1974 prices had quadrupled, leading to the energy crisis of the mid-1970s.
LoVaca, Coastal’s pipeline subsidiary, had signed fixed-price contracts to supply cities in south Texas with natural gas. With energy prices soaring and supplies dwindling, LoVaca could not meet its contractual obligations, and at one point it cut off gas supplies to the cities of San Antonio and Austin during the winter. Wyatt then obtained regulatory permission to increase prices beyond the limits specified in the contracts.
LoVaca was the target of lawsuits by outraged customers, and the problems of the subsidiary came to haunt Coastal for years. After much wrangling, Coastal finally settled $1.6 billion in lawsuits by agreeing to spin off LoVaca. The spinoff, Valero Energy Corporation, which was formed on December 31, 1979, from LoVaca and other Coastal assets, had annual revenues of about $1 billion. The customers suing Coastal received 55 percent of Valero’s stock, with the remaining split among Coastal shareholders, not including Wyatt. At the plaintiffs’ insistence, he was excluded from the agreement.
Despite the impact of the energy crisis, Coastal maintained its profitability and continued to expand throughout the 1970s. Expansion was not confined to Texas. In 1973 Coastal acquired Colorado Interstate Gas Company, along with its three refineries, in a $182 million hostile bid. With the acquisition Coastal became a truly national company. In 1973 Wyatt renamed the company Coastal States Gas Corporation.
In the first half of the decade, Coastal also sought to diversify into other energy markets. In 1973 Coastal entered the coal mining field with the acquisition of Southern Utah Fuel Company. Also in 1973, with the acquisition of Union Petroleum Corporation, renamed Belcher New England, Inc., Coastal began the marketing and distribution of petroleum products. By 1975 revenues had reached $1.9 billion. Coastal’s expansion continued in 1976 with the purchase of Pacific Refining Company’s plant in Hercules, California, which increased Coastal’s refining capacity to about 300,000 barrels per day. In 1977 Coastal acquired Miami-based Belcher Oil Company, one of the largest marketers of fuel oils in the Southeast.
https://www.company-histories.com/The-Coastal-Corporation-Company-History.html
OSCAR WYATT
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