Northern Border Partners have entered into a letter of understanding
with Enron North America (ENA) to purchase gas gathering facilities in
the Powder River and Wind River Basins in Wyoming for almost $200 million.
Included in the acquisition is Enron Midstream Services, which has ownership
interests in Bighorn Gas Gathering, and ENA subsidiaries that hold interests
in Fort Union Gas Gathering and Lost Creek Gathering. Upon completion of
the transaction, Northern Border Partners will own and operate the assets,
and will provide gathering and transportation services. ENA will still
supply gas purchase and sales, finance, and risk management along with
producer outsourcing services.
Shell Trading unveiled its mega-energy electronic trading platform in
London last week, offering the first heavy duty competition for Enron Corp.'s
industry-leading EnronOnline. Shell Trading, due to start Jan. 1, will
include the company's current trading platforms for crude and oil products
worldwide; chemical feedstocks in Europe and the United States; and natural
gas and power in North America through Coral Energy, based in Houston,
and in Europe through Shell Energy. The worldwide crude and oil products
shipping operations and the marketing business of Coral Energy also will
be included. Shell Trading will have key trading and marketing operations
in North America, Asia, the Middle East and Europe. The reorganization
puts Shell into the deregulation game for natural gas and electric power
markets worldwide. It already leads the pack as the world's largest oil
trading operation. Shell's move to enter the market full steam is not unlike
other multinational oil and gas corporations --- BP Amoco and ExxonMobil
also have plans to do so. However, Shell is considered to be well placed
to meet Enron in a battle for energy trading opportunities because its
energy division already sells retail gas in four U.S. states: Georgia,
New York, New Jersey and Pennsylvania.
Florida Power & Light announced that it has filed a preliminary
action with the Florida Public Service Commission (FPSC) for permission
to recover $518 million in excess expense due to the "skyrocketing
cost of oil and natural gas." Part of the $518 million will be offset
by a customer refund agreement which was formed in April 1999 with the
office of the Public Counsel, and the FPSC. The agreement provides for
revenue sharing between FPL and its customers, as well as a 6% annual rate
reduction for three years. As of now, the refund to customers is estimated
to be in the range of $75 million-to-$100 million. Subtracting the expected
rebate from the forecasted fuel costs, FPL thinks that residential electric
rates could increase by almost 13% a kWh. The company has requested that
the FPSC extend the recovery period to two years instead of one to lessen
the burden on its customers. Along with extending the recovery period,
FPL is searching for other ways of limiting the increase to only 9% a kWh.
The company will ask that it be able to begin recovering expenses in customer
bills beginning Jan 1, 2001.
eCorp Marketing entered into an agreement with NJR Energy Services (NJRES),
a subsidiary of the New Jersey Resources Corp., to provide transportation
management, storage marketing and gas trading services in connection with
Central New York Oil & Gas Co.'s (CNYOG) proposed Stagecoach Natural
Gas Storage Project in Tioga County, NY. CNYOG is an eCORP subsidiary.
Under the terms of the agreement, NJRES will manage the bundled and unbundled
marketing of storage and transportation services from the Stagecoach project
and the Tennessee Stagecoach Expansion Project. The proposed Stagecoach
Project is an underground natural gas reservoir storage facility which
is designed to provide multiple cycles with high rates of injection and
withdrawal. The project which is awaiting FERC approval is expected to
be completed during the summer of 2001 (see NGI, Jan.
Transocean Sedco Forex reached a definitive agreement to acquire R&B
Falcon Corp. in a 100% stock transaction for a total cost of $8.8 billion.
The transaction will result in what the companies claim will be the largest
offshore drilling contractor. The two Houston-based oil and gas exploration
drilling and service companies will become the third largest oil services
firm in the world, with an equity market capitalization of $17.7 billion.
The acquisition is expected to be immediately accretive to Transocean's
cash flow. Both boards of directors have approved a deal that would issue
0.5 of a new Transocean Sedco share for each share of R&B Falcon common
stock. Transocean Sedco estimates it will distribute 100 million shares
at a cost of $5.8 billion. The company will also assume $3 billion of R&B
Falcon's debt. Pending shareholders approval from both companies, regulatory
approvals and other conditions, Transocean Sedco hopes to have the purchase
completed by the end of the first quarter of 2001
Caminus Corp., headquartered in New York City, has completed its acquisition
of Houston-based Nucleus Corp. of Texas for $19.6 million, consisting of
$13.7 million in cash, 261,334 newly issued share of common stock of Caminus
and stock options. Caminus supplies software systems for trading and risk
management in natural gas and electric power throughout North America and
Europe. Nucleus supplies software systems for energy trading in North America.
Burlington, MA-based Essential.com,
an online energy and communications marketplace, entered into a reseller
agreement with Niagara Mohawk Energy Marketing (NMEM). Under the agreement,
Essential.com will sell electricity supply from NMEM throughout the Mid-Atlantic
and Northeast regions. The company will also provide customers with online
billing, payment and customer care services. Essential.com's online marketplace
offers electricity, heating oil, propane gas, internet access, telephone
services and satellite TV.
Canadian Occidental Petroleum Ltd.'s subsidiary CXY Energy Offshore
released details of a new oil and gas discovery in the shallow waters of
West Cameron 170 in the Gulf of Mexico. The company reported the 17,125
foot A-6 discovery well encountered 180 feet of net oil and gas pay in
five main pay sands. The well's production tested at a rate of 4,300 b/d
and 9 MMcf/d of natural gas. The discovery well has been tied into production
facilities and is currently producing 2,100 b/d and 6.5 MMcf/d pending
further construction. CXY owns a 78% working interest in the well, which
is located 30 miles offshore Louisiana. The company plans to commit to
follow-up drilling early next year.
Tulsa-based Beta Oil & Gas, which first stated its intentions to
merge with Red River Energy back in November of last year, announced that
the $23.5 million deal has closed (See NGI, Nov.
29, 1999). The combined company will continue to do business as Beta
Oil & Gas and will have assets in the neighborhood of $50 million.
The union will also produce approximately 10 MMcf/d of natural gas equivalent.
The deal reflects a 112% increase in Beta's assets, and a 186% increase
to the company's production level. Beta assumed about $7.6 million of Red
River's existing debt, and issued approximately 2.25 million shares of
Beta Common stock. Beta Oil & Gas is an independent company which is
involved in production, exploration, acquisition and development of oil
and gas properties.
Southern Union Co. shareholders this week approved its $400 million
definitive merger agreement with Providence (RI) Energy and its $75 million
definitive merger agreement with Fall River (MA) Gas Co. These mergers,
along with a pending $160 million merger with Valley Resources Inc., will
add more than 300,000 customers to Austin-based Southern Union, giving
it a total customer base of 1.6 million. Fall River shareholders approved
the merger agreement in a special meeting Aug. 29. Providence Energy and
Valley Resources stockholders had previously approved their merger agreements
(see NGI, May 29). The deal is scheduled
to be completed within the next three months.
Siemens Westinghouse, headquartered in Orlando, FL, yesterday entered
into an agreement with Pegasus Technologies Inc. to provide equipment solutions
for the power generation industry. Siemens is a leading equipment manufacturer
for the power industry and control supplier in the United States and globally.
Pegasus, owned by KFx Inc. and headquartered in Mentor, OH, makes neural
network applications for boiler combustion optimization to reduce emissions
and increase efficiency for electric utility customers. Siemens said its
strategy will be to provide integrated IT solutions from the process level
(unit and plant) to the enterprise level (corporate) to maximize revenue
per megawatt generation.
Midcoast Energy announced that its Mexican pipeline affiliate, Midcoast
del Bajio, which is jointly owned with Associated Pipe Line Contractors,
has been awarded a 10-year natural gas transportation contract to serve
the General Motors de Mexico's Silao Plant. It also has signed a deal to
serve the FIPASI Industrial Park, which includes facilities owned by American
Axle, Weyerhaeuser Co. and Avintech. The industrial park is located in
the Bajio region of central Mexico, where Midcoast del Bajio is building
a 59-mile, 16-inch diameter pipeline. The pipeline will run from an interconnection
with a Pemex Gas y Petroquimica Basica ("Pemex") pipeline near
Valtierrilla to Leon. Substantially all of the right-of-way for the new
pipeline has been acquired and when completed, the system will provide
gas transportation services to parts of central Mexico that do not currently
have access to gas. Under the terms of the GM contract, Midcoast del Bajio
will provide 100% of the natural gas requirements to the Silao plant for
a 10-year term beginning in spring 2001
Devon Energy and Santa Fe Snyder completed their $2.5 billion merger
as shareholders of both companies approved the deal which was first announced
in May. The agreement called for each Santa Fe Snyder common share to be
converted into 0.22 shares of Devon common stock. Conversion requires issuance
of 40.6 million additional Devon common shares, resulting in total shares
outstanding of 127.7 million. Former Santa Fe Snyder shareholders now own
32% of the combined company. The transaction will be accounted for as a
pooling of interests. With merger completion, Devon now ranks among the
top five U.S.-based independent oil and gas producers in terms of market
capitalization, total proved reserves and annual production. The company
has an enterprise value of $9 billion and proved reserves of 1.1 billion
boe. The union expects to realize $30 million to $35 million in annual
cost savings from the merger. Devon was added to the S&P 500 Index
after the close of business.
A 24% increase in natural gas sales helped Mitchell Energy & Development
Corp. to reach record second quarter earnings of $1.13 a share, or $55.4
million - more than twice that for the second quarter of 1999's 55 cents
per share or $26.8 million. A First Call consensus had put the earnings
estimate at 97 cents a share. Natural gas sales rose to 294 MMcf/d, with
the company operating 12 drilling rigs bringing in new production, particularly
in the Barnett shale in North Texas where sales nearly doubled to 135 MMcf/d
for the second quarter. The Woodlands, TX-based company's accelerated drilling
program in North Texas and third-party drilling in Southeast Texas sent
natural gas liquids production up 18% to an average of 51,500 barrels per
day, and pipeline throughput at 798 MMcf/d. This was the company's second
consecutive quarter of record earnings, reflecting a 19% volume increase
and a 64% rise in commodity prices.
Dominion Exploration & Production said it bought operating interests
in three Texas Gulf Coast natural gas fields from Suemaur Exploration &
Production, LLC and several partners for an undisclosed sum. Dominion now
owns and operates the Bluntzer Field, a Vicksburg discovery made in western
Nueces County by Suemaur in early 1999. The field produces a total of about
24 MMcf/d of gas and 450 b/d of oil and has significant opportunity for
additional development drilling. Over the last 18 months, Dominion has
acquired interests in five onshore Texas fields, boosting net production
from the area by over 115 MMcfe/d and increasing reserves by about 270
UtiliCorp United is using Lukens Consulting Group Storage Valuation
Advisor software and modeling methodology to estimate the future value
of gas storage based on the volatility of future prices. Based on real
option theory, the software incorporates the latest thinking in econometric
modeling of energy commodity markets. Since launching the software package
in April, Lukens has done work with leading storage operators, including
Dominion Resources, Columbia Energy Group and National Fuel Gas Supply.
"Competing in the energy marketplace requires a number of effective
tools," said Bob Poehling, senior vice president, Capacity Services,
Aquila Energy. "Storage Valuation Advisor is one of those tools which
will allow us to more effectively manage and value our storage portfolio."
For more information on the software, contact Scott R. Smith at (713) 961-1100.
Lukens Group's Internet address is www.lukensgroup.com.
The New York Mercantile Exchange has selected Andersen Consulting to
act as program manager and integrator for enymex, the exchange's new Internet
venture. Enymex is intended to be a global exchange for forward trading
and clearing contracts in a range of physical commodities with an initial
focus on energy and metals. The exchange originally said it planned to
launch the first phase of the e-commerce exchange in October. However,
start-up has been pushed back to "early 2001," according to Nymex
spokeswoman Nachamah Jacobovits. "We're not going to launch it until
we can get clearing services and trade matching up and running," she
said. Nymex will use its existing clearing infrastructure to introduce
complete counter-party risk management for OTC trading, and will create
net margining with futures markets by calculating a consolidated clearing
position. The new system will provide a single, Internet-based interface
to both the OTC markets and the futures market by routing futures orders
to the trading floor and the Nymex ACCESS electronic trading system, depending
on the session. The range of OTC products offered initially will focus
on swap contracts in crude oil, petroleum products, natural gas, with some
spot cash market products also offered, Nymex said. Over time, this would
be expanded to include electricity, precious and base metals, coal, and,
potentially, bandwidth, weather, and emissions.
Calgary's Husky Energy completed its acquisition of Renaissance Energy
and began trading yesterday as one company on the Standard and Poor's Global
1200, TSE 300 Composite, S&P/TSE 60, TSE 100 and Toronto 35 Indices.
Husky Energy will be removed from the oil and gas producers' subgroup and
is being moved into the integrated oils subgroup. According to Husky's
CEO John C.S. Lau, the new company is ranked as Canada's second largest
integrated energy company in terms of oil and natural gas production, third
largest in reserves and fourth largest downstream retailer.
Aquila Energy said it has been awarded a $550 million long-term contract
to supply 154 Bcf of natural gas over 12 years to members of the American
Public Energy Agency (APEA). It is the fourth contract the agency has awarded
to Aquila since 1998. Under the three previous contracts with APEA Aquila
is supplying the agency with 14.4 Bcf of gas over ten years, 91 Bcf over
12 years and 141 Bcf over 12 years. All together, Aquila is providing APEA
with more than 400 Bcf over the next 12 years. APEA provides a reliable
supply of natural gas to many municipal utilities and other public entities
throughout the United States. These public buyers serve thousands of homes
Despite the fact that bids were considered well below what government
officials hoped, Alberta soon expects to be the first Canadian province
to successfully deregulate its power industry after five companies won
the rights to sell electric power in the coming retail marketplace, which
opens Jan. 1, 2001. The winning companies, all with offices in Canada,
were EPCOR Utilities, TransCanada PipeLines Ltd., Engage Energy, Enron
Canada Power Corp. and Enmax Energy. All total, they bid nearly C$1.17
billion for the right to sell 4,249 MW of electricity to Alberta residential,
industrial and residential customers over the next 20 years. More than
6,500 MW of power from 10 Alberta plants - about 85% of the power available
in the province - was available at the auction. Generation capacity at
four plants attracted no bids, while production from Engage Energy will
be subsidized. The four plants that failed to receive bids carried the
highest debt and costs, according to officials. The auction opened Aug.
2 and concluded last Monday with 69 bidding rounds between seven companies.
PanCanadian Petroleum and UtiliCorp United of Kansas failed to win any
power contracts in the auction. Alberta Minister of Development Mike Cardinal
said the government will soon unveil a redistribution program that will
use the money raised in the auction plus revenue from other Alberta plants,
to offset rising electricity costs. In the past year alone, the average
price of power per kilowatt hour at the Power Pool of Alberta has increased
Peoples Gas, a subsidiary of Peoples Energy, is expanding its customer
choice program this September to include up to 82,000 small commercial
and industrial customers within the City of Chicago. Eligible customers
can begin enrolling on Sept. 1 in the company's Choices For You(SM) program.
Introduced as a pilot in 1997, the program so far has included only 14,000
customers. This is the first open enrollment where eligible customers have
the option to sign up for the program on an ongoing basis. Peoples Gas
also will offer an optional billing service to suppliers so that customers
may receive one bill, including gas charges from the customer's supplier
along with the distribution charges from Peoples Gas. The six suppliers
who are currently qualified to participate in the program include: Enron
Energy Services, MidAmerican Energy, Multiut, Nicor Energy, Peoples Energy
Services and Santanna Energy Services.
In an acquisition that CEO Jack E. Wheeler called "very strategic
and synergistic," the Aspen Group Resources Corp. last week acquired
100% of Old Dominion Oil Corp.'s Anadarko Basin producing wells, leases,
property and equipment, of which about 90% are natural gas reserves, in
an all-cash transaction. Terms of the transaction were not disclosed. Old
Dominion's holdings include interests in about 400 production wells in
Arkansas, Louisiana, Michigan, New Mexico, Oklahoma and Texas. Most of
its production now is in the Anadarko Basin of Oklahoma where Aspen also
has several key producing properties. "Old Dominion's properties in
the Anadarko Basin, when combined with our own, give Aspen a very strong
position in an extremely productive, gas-rich area of western Oklahoma,"
said Wheeler. "In addition, we add interests in two new states in
Michigan and New Mexico, and increase our base of properties from 840 to
over 1,240. In respect to our business plan, we are well ahead of schedule."
Aspen, based in Oklahoma City, has interests in wells located in 10 states,
but most of its focus is in Oklahoma, Kansas and Texas. Formerly Cotton
Valley Resources, it began trading under the Aspen name in April (see NGI,
Aquila Energy's UtiliCorp Energy Management got a Hallmark greeting
of its own last week, after inking a three-year agreement with the Hallmark
Cards Inc. to manage the company's energy procurement process for natural
gas and electricity. No financial details were disclosed on the amount
of the agreement. Under the contract, UEM will manage the multi-million
dollar energy budget for 17 of Hallmark's facilities, including its Kansas
City-based headquarters and its Binney & Smith subsidiary, which makes
Crayola crayons. The Kansas City-based UEM also will oversee the energy
supply chain management for demand-side services, targeting onsite energy
efficiency projects. Currently UEM provides energy management services
for more than 350 client facilities throughout the United States, which
represent more than $200 million in annual energy expenditures.
Central Hudson Energy Services, with a long-term strategy to offer a
full range of energy supply alternatives, moved toward that goal with the
purchase last week of Griffith Consumers Co., a heating oil provider with
43,000 retail customers and a significant market share in the Washington,
D.C. area. The subsidiary of CH Energy Group, which is headquartered in
Poughkeepsie, NY, already offers natural gas, electricity, fuel oil and
propane and other energy services throughout New England, the metro New
York region and the greater D.C. area. Details of the transaction were
not disclosed, but the Griffith company purchase was considered a key in
building a platform to market services in D.C., Maryland, Delaware, Virginia
and West Virginia. Maryland-based Griffith last year sold 107.4 million
gallons of residential and commercial heating oil, commercial motor fuels
and wholesale products, and it posted revenues of nearly $97 million. In
1999, Griffith became a division of AllEnergy, a subsidiary of NEES Energy
Inc., a division of National Grid USA. The utility affiliate of CH Energy,
Central Hudson Gas & Electric Corp., serves 270,000 electric and 62,000
gas customers in eight New York counties. CH Energy Group revenues in 1999
were $522 million.
After a hard fight over a small project assigned big significance by
the contestants, the National Energy Board (NEB) has upheld the doctrine
that has ushered pipeline competition into the Canadian natural-gas community.
An NEB panel under board Chairman Ken Vollman approved a new, producer-sponsored
bypass of the TransCanada-Nova system in Alberta, rejecting pleas for the
federal agency to stop setting precedents favoring new entries into gas
Alberta Energy Co. intends to have deliveries under way by fall on the
new stretch of pipe, a C$22.3-million (US$15.4-million), 97-kilometre (60-mile)
route for 190 MMcf/d. The new line titled, the North Suffield Pipeline,
will carry production from the Suffield military range in southeastern
Alberta across the Saskatchewan boundary to a connection with TransCanada's
national and international system.
The area served by the line counts for 3.4 Tcf of proven reserves, and
an estimated 4.1 Tcf of undiscovered potential, with the possibility of
more as drilling ventures into new deep rights acquired recently by AEC.
The decision was the second pipeline victory in the area for the producer,
which earlier built a similar bypass for southern Suffield wells.
Shippers stand to save up to C$14 million (US$9.6 million) per year
by switching to North Suffield because its tolls of C13.7 cents (US9.4
cents) a gigajoule is a little more than half the C26.1 cents (US18 cents)
charged by the Alberta-wide grid of TransCanada-Nova. The old gas-transportation
mainstays warned the NEB that Suffield represented "an important precedent
and policy-setting case." By approving North Suffield, the board confirmed
it is prepared to allow new projects even at a time when the Canadian pipeline
sector is heading into a period of surplus capacity. The surplus is estimated
to be up to 2 Bcf/d, thanks to the forthcoming completion of Alliance Pipeline
this fall on top of the late-1990s expansions by the TransCanada and Foothills
systems. Shippers hope it will take years for production to catch up with
the pipeline expansions because they are fostering a buyers' market in
delivery services in Canada for the first time in the industry's history.
It helped AEC that it structured North Suffield as a fully "at-risk"
project, pledging to take the chance that it will lose money on any unused
capacity without seeking regulatory decisions to prop up the tolls. Rather
than pipeline profits, "the primary benefits in the North Suffield
case relate to competition and choice," the NEB said.
The NEB panel also turned down pleas by TransCanada-Nova for a ruling
to define the pro-competition doctrine more clearly. In particular, to
set out some limits about when benefits outweigh costs and vica-versa.
Despite repeated attempts by pipeline companies and their lawyers to narrow
the NEB's discretion, the Canadian doctrine on competition in gas transportation
continues to be a simple statement: "In general, the public interest
is served by allowing competitive forces to work, except where there are
costs that outweigh the benefits."