NGI The Weekly Gas Market Report

Briefs -- Rio Bravo Pipeline, Williams-ETE, Sempra-TransCanada, Chesapeake Energy Corp., Stone Energy, Freeport-McMoRan, TGP

Rio Bravo Pipeline Co. LLC is holding a binding open season for firm service on a proposed 137-mile pipeline with receipt points near the Agua Dulce market area in South Texas for transportation to a delivery point adjacent to the proposed Rio Grande liquefied natural gas (LNG) export terminal at the Port of Brownsville. Facilities would include twin 42-inch diameter pipelines running parallel. At full buildout, the pipeline system would have deliverability of up to 4.5 Bcf/d. In-service would be phased, with the first pipeline estimated to start service at 1.5 Bcf/d during 4Q2020. The pipeline and LNG terminal are projects of NextDecade LLC.  Certificate applications have  been filed at the Federal Energy Regulatory Commission [CP16-455] (see Daily GPIMay 6). For more information on the open season, visit www.riobravopipeline.com.

The U.S. Securities and Exchange Commission has declared effective the registration statement for the proposed acquisition of The Williams Companies Inc. by Energy Transfer Equity LP (ETE). Williams shareholders are to vote on the merger at 9:00 a.m. CDT June 27 in Tulsa. Williams' board and management support the transaction, while ETE has pulled back following the collapse in commodity prices (see Daily GPIMay 16). Williams is suing ETE for allegedly obstructing the deal's progress. A trial over tax issues related to the merger is expected to begin June 20. Williams said the transaction is subject to customary conditions, besides shareholder approval, with closing expected during the second quarter.

Sempra Energy unit IEnova is partnering with TransCanada Corp. in bidding in the Mexico Comision Federal de Electricidad (CFE) tender for the proposed Sur de Texas-Tuxpan pipeline. The companies are partners in Infrastructura Marina del Golfo (IMG), with IEnova holding 40% and TransCanada holding 60%. If it wins the concession, IMG would develop the 500-mile pipeline, which would run undersea from South Texas to the port of Tuxpan on the northern Gulf Coast of Mexico. The pipeline would supply gas to CFE power plants in the states of Tamaulipas and Veracruz and serve the eastern, central and western regions of Mexico. According to a project data sheet, CFE estimates the project cost at US$3.1 billion. Awarding of a contract is expected in June with commercial operation of the pipeline expected in October 2018. IEnova already won a bid to construct the Ramal Empalme pipeline in the Mexican state of Sonora (seeDaily GPIMay 6). This followed IEnova's loss to TransCanada in the contest to construct the Tula-Villa de Reyespipeline (see Daily GPIApril 14).

The Fort Worth, TX, city council has voted 9-0 to authorize a $15 million settlement with Chesapeake Energy Corp. regarding underpaid natural gas royalties for Barnett Shale volumes. Fort Worth originally had sought $33.5 million in the lawsuit for royalties from more than 260 leases on 5,800 acres of property in Tarrant and Johnson counties. Chesapeake, which has leased land with the city since 2006, agreed to make the full payment by Tuesday (May 31). Going forward, royalty payments for the Barnett gas will be calculated using Houston Ship Channel prices, without any deductions for post-production costs and expenses. Revenue would be retroactive to April 1, 2016. The city council in March settled a similar lawsuit for $6 million with Chesapeake's Barnett 25% partner Total E&P USA (see Shale DailyMarch 23). Chesapeake and Total also agreed to pay $52.5 million to settle lawsuits with more than 13,000 people owning land in the Barnett, who had claimed they were underpaid royalties for their gas leases (see Shale DailyMay 23).

The New York Stock Exchange (NYSE) has issued Stone Energy Corp. a notice of non-compliance for failing to maintain its market capitalization listing standard. The company received the notice on May 17. Its average market capitalization has been less than $50 million over a consecutive 30-day trading period. Under NYSE rules, the company was given 10 business days from receipt of the notice to send a letter saying it would submit a plan that demonstrates its ability to regain compliance within 18 months. It then has 45 days after it sends the letter to submit such a plan. Stone Energy's finances have rapidly deteriorated in recent months with the fall in commodity prices; its borrowing base has been cut, its capital budget has been slashed, and it has warned of default and hired an adviser to explore strategic alternatives (see Shale DailyApril 18March 15). The company, which primarily operates in the offshore Gulf of Mexico and the Appalachian Basin, has shut in nearly all of its production in the Marcellus Shale, where differentials have been squeezing its returns. Its stock has traded at a 52-week low of 27 cents/share.

Phoenix-based Freeport-McMoRan Inc. has withdrawn a proposal to publicly launch its oil and natural gas unit citing poor market conditions. The global conglomerate said it determined "not to proceed with the initial public offering..." The operator reported its sixth straight quarterly loss in 1Q2016, and said poor market conditions have prevented it from finding a buyer for the entire U.S.-focused energy business (see Daily GPIApril 27). However, a "number of parties" have expressed interest in some assets. The oil and gas unit, based in Houston, is being folded into the corporation. The company plans to take a $40 million charge in 2Q2016 related to a 25% workforce reduction and restructuring.

Tennessee Gas Pipeline Co. LLC (TGP) formally submitted a notice of withdrawal of certificate application with FERC for its Northeast Energy Direct (NED) project on Monday. TGP, a Kinder Morgan Inc. company, first proposed the $5 billion project to the Federal Energy Regulatory Commission last November, but canceled its plans four months later after drawing an insufficient amount of customer interest (see Daily GPIApril 21Nov. 20, 2015). NED called for an expansion of the TGP system in Pennsylvania, New York and New England. The project [CP16-21] would have provided additional supplies of Marcellus Shale gas from northern Pennsylvania to customers in New York and New England.

ISSN © 1532-1266

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