Flashback: Zigged When They Should Have Zagged
Ron Kuehn rose to the CEO post at Sonat after serving as general counsel and dealmaker for supply contracts.
The whiplash price cycles of oil and gas are the name of the game for Energen Corp. in our cover story in this issue, with a happy outcome. Energen jumped over to oil wells before natural gas prices plunged.
On the other hand, making a wrong move in petroleum futures can bring the mightiest of corporations to its knees.
For decades, Sonat — one of the largest interstate natural gas pipelines in the country — was the largest public company in Alabama, the big mule occupying the most space in Birmingham’s AmSouth-Sonat Tower, the tallest building in Alabama at the time.
From that perch, Sonat CEO and Chairman Ron Kuehn negotiated many of the 1970s supply deals that kept Sonat Inc.’s gas pipelines flowing when other companies were running on empty. One of the more imaginative was the liquefied natural gas deal among Sonat, El Paso and Sonatrach, the Algerian national gas production company. As general counsel for Sonat, Kuehn had equipped his firm to survive the unparalleled and unexpected gas shortage of the mid to late 1970s.
Sonat rushed to find supplies at a locked-in price. But supplies swelled in the mid-’80s, prices plunged, and Sonat got stuck holding a bag full of “take or pay” contracts at above market prices.
Sonat lost $295 million in 1986, then restructured in 1987, letting go a third of its employees. The company returned to profitability the next year and in May 1988 we featured Kuehn in the cover story, “Riding Out a Petroleum Glut.”
The recovery, however, was not robust enough to resist consolidations that swept the industry in the late ’90s. In March of 1999, Sonat signed a $5.5 billion merger deal with Houston’s El Paso Corp. and is now part of the 42,000 miles of pipeline owned by El Paso — the largest natural gas pipeline system in North America. That towering command center on 20th Street in Birmingham folded up and moved to Houston.
Sonat was founded as Southern Natural Gas Corp. in 1928. In 1953, Southern Natural spun off its natural gas utility, forming Birmingham-based Alabama Gas Corp. — Alagasco, the utility that was the foundation of — but is now a small fraction of — Energen Corp.