Despite the global economic recession and a tumultuous period for some of the top North American natural gas marketers, third quarter volumes for the companies still in the business showed impressive growth as BP once again claimed the No. 1 spot by transacting 29.9 Bcf/d, according to NGI's 3Q2008 Top North American Gas Marketers Ranking.
BP's tally for the quarter could not be compared to last year's quarter because the company wasn't reporting at that time, but the 3Q2008 figure was 1.3% below its 2Q2008 figure of 30.3 Bcf/d. Removing BP's data, the continent's next top 23 reporting marketers for the quarter transacted 108.1 Bcf/d, up 6.5% over the 101.5 Bcf/d in 3Q2007. ConocoPhillips retained the No. 2 spot with an 11% increase from 14 Bcf/d in 3Q2007 to 15.50 Bcf/d during 3Q2008.
Even as the industry said goodbye during the quarter to marketers such as Lehman Brothers and UBS, which accounted for 7.39 Bcf/d in 3Q2007, the volumes likely are only temporarily lost. Since September, when the bottom fell out of the financial markets, several of NGI's top marketers have begun to exit the business, including Lehman Brothers Holdings, which declared bankruptcy in September (see NGI, Sept. 22a). In a twist, UBS, which acquired Enron's wholesale trading operations in February 2002 following the energy giant's demise (see NGI, Feb. 11, 2002), quit its energy trading business in October as part of the bank's "repositioning" strategy (see NGI, Oct. 6). After hitting the skids in early September, Merrill Lynch -- another top marketer -- agreed to be sold to Bank of America Corp. (see NGI, Sept. 22b).
Neither Lehman Brothers nor UBS participated in NGI's 3Q2008 survey, while Merrill Lynch reported that it did 2.29 Bcf/d during the quarter, a 10% increase over the 2.08 Bcf/d transacted in 3Q2007.
Other marketers continue to do business amidst a cloud of uncertainty. After running out of cash in September, Constellation Energy agreed to merge with MidAmerican Energy Holdings and said it also intended to sell its Houston-based downstream gas trading operations (see NGI, Nov. 10). However, last Wednesday's termination of that merger agreement left Constellation's trading arm in limbo (see related story).
On a conference call last Wednesday, Constellation CEO Mayo A. Shattuck III said the company is trimming operations and looking to reduce risk. "We are making excellent progress at economically flattening our trading book," he said. "Going forward, Constellation's strategy is focused on its generation, customer supply and utility operations, which substantially lowers our risk profile." The scale and scope of the company's global commodities business is being reduced and speculative activities are being wound down as Constellation applies free cash flow to debt reduction, cuts overhead and streamlines operations.
Earlier this month, Tenaska Inc. -- the ninth largest marketer in NGI's ranking with 5.5 Bcf/d transacted during the quarter -- said it was repurchasing the 50% interest of its North American natural gas marketing arm currently owned by affiliates of troubled American International Group Inc. (AIG) (see NGI, Dec. 8). A Tenaska executive said at the time the company was likely looking for a new partner "sooner rather than later."
Despite the departures of some marketers and the uncertainty surrounding others, market watchers chalk up the turnover to the normal cycle of things, noting that while the organization names in the game might change, the actual participants and the volumes likely will stay the same, just like in 2002 when Enron's traders went to work for UBS. In late October, the Federal Energy Regulatory Commission approved the sale of bankrupt Lehman's Houston-based wholesale gas and power marketer Eagle Energy Partners to EDF Trading North America (see NGI, Nov. 3).
"There will always be turnover in marketing and trading. How much we want to make of that, I don't really know," said Tim Evans, an analyst with Citi Futures Perspective in New York. "It may not really mean much for the marketing business overall. I think it is more a matter of the people who have been doing the business finding another shop to go work for. You have one or two companies exit the space, but another company or two will step in and hire the same talent, use the same Rolodex and work with the same clients.
"The only thing that changes is the company name because the business is still getting done," Evans added. "When Enron went out of business, the physical size of the market and the volumes did not change, nor did the natural gas market become less volatile. Gas marketing and trading is a needs-driven business. If the need is the same, then the business has to find a way to get it done."
Looking at some of the highlights of the quarter, Constellation Energy's volume posted 40% growth from 9.94 Bcf/d during 3Q2007 to 13.93 Bcf/d for 3Q2008. The next two largest increases were XTO with a 25% jump from 1.56 Bcf/d to 1.95 Bcf/d and Anadarko, where marketing volumes climbed 20% from 1.66 Bcf/d to 1.99 Bcf/d.
The largest declines were reported by RBS Sempra (21% drop from 9.5 Bcf/d to 7.5 Bcf/d), El Paso (18% drop from 1.21 Bcf/d to 0.99 Bcf/d) and ExxonMobil (15% drop from 2.11 Bcf/d to 1.80 Bcf/d).
|Shell Energy NA
Source: Quarterly financial reports with the Securities and Exchange Commission, or if necessary, statements signed by company officials and provided to NGI.
*Companies providing data directly to NGI include Chevron, ConocoPhillips, Constellation Energy Commodities Group, Louis Dreyfus Energy Services, Merrill Lynch Commodities, Shell Energy North America and Tenaska Marketing Ventures. BP plc did not participate in the quarterly survey in 3Q2007. UBS Energy and Lehman Brothers both dropped out of the survey. UBS Energy, which marketed 4.89 Bcf/d during 3Q2007, got out of energy trading in October. Lehman Brothers, which marketed 2.5 Bcf/d during 3Q2007, declared bankruptcy in September.
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