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Vastar CEO Sees Supply, Demand Balanced

Vastar CEO Sees Supply, Demand Balanced

Vastar Resources would appear to be taking a wait-and-see view of next year's gas prices. CEO Chuck Davidson told Houston energy reporters Tuesday that "not much" of the company's gas production is hedged next year. Indeed, Vastar generally doesn't hedge more than a year out and hedges less than 50% of its production. Davidson said the company also is using more collars rather than hedges linked to a specific price.

Unlike some in the industry who for the last several months have been crowing about the coming 30 Tcf gas market and a perceived uncertainty of supply's ability to meet demand, Davidson said he sees supply and demand as pretty closely aligned right now. He noted the industry has finally burned off the gas bubble that plagued it for a number of years.

Davidson said Vastar's 2000 capital budget won't be hammered out until next month. The 1999 exploration and production budget was $700 million, with about 75% of that amount being spent offshore - two-thirds on the Continental Shelf and one-third in the deep-water. Breaking this year's budget up another way, about $250 was spent on exploration and $360 was spent on development. The remainder went to acquisitions.

Clearly, Vastar has grown weary of being questioned about its future following the merger of BP Amoco and ARCO, which owns 82% of Vastar. The short answer from Davidson is the company doesn't know yet what will happen. He said Vastar's success can continue "under a variety of ownership structures."

Joe Fisher, Houston

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