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BP Remains Top North American Gas Marketer; Coral, Chevron, Cinergy Moving on Up

While BP and ConocoPhillips, the continent's top two natural gas marketers, lumbered along complacently with 8% increases in physical gas sales in the second quarter of 2005 compared to 2Q2004, some of the runners-up were putting on the speed, with 15-31% increases in sales volumes.

BP is so far in front with 26.56 Bcf/d in sales that it doesn't need to bother looking back at the field. ConocoPhillips didn't do nearly half as much business and had to share the second place ranking this time with Coral Energy, which posted a 17% increase from the second quarter of 2004. Both had 2Q sales of 11.2 Bcf/d.

Sempra hiked sales by 15% to 10.6 Bcf/d to gain fourth place, and Chevron jumped 26% to sixth place with 5.75 Bcf/d.

Fifth place Cinergy was the standout in the moving-up department, however, with a 31% increase to 5.87 Bcf/d in sales in 2Q2005. Now you know why its prospective merger partner, Duke Energy, may not feel the loss of its Duke Energy North America (DENA), and with it, the unit's once highly regarded trading book (see NGI, May 16). Duke announced in mid-September it would sell the trading operation.

However, Cinergy had some problems with gas trading early in the year. It reported having "the wrong market bias," which led to a commercial gas division loss of 13 cents per share contributing to a 14% drop in Cinergy's second quarter net income. CEO James Rogers called it a "major disappointment," and said the company is evaluating what to do with the gas trading division. Some changes probably will be in store in the second half (see NGI, Aug. 1). "Our commercial gas group has consistently contributed to earnings over the last few years, and we're taking the necessary steps to restore their contribution in the future," Rogers said in July.

Nexen, Constellation, UBS and Louis Dreyfus rounded out the top 10, with Dreyfus the standout in that group with a 21% gain to 4.11 Bcf/d.

While large producers still dominate the list, the increasing invasion of the natural gas market by cash-rich investment bankers and commodities houses is showing up in the rankings. Besides Nos. 9 and 10, UBS and Louis Dreyfus, the top 20 includes Merrill Lynch, which bought out Entergy-Koch, and now ranks as No. 18.

No. 19 Calpine Corp. recently announced a joint trading venture with Bear Stearns Companies Inc., to be called CalBear Energy LP (see NGI, Sept. 12). Calpine's volumes were down 19% to 2.1 Bcf/d in the second quarter over a year earlier, but the new venture plans to change all that. Calpine executive vice president Paul Posoli said the new company plans to capture "a very significant" portion of the gas and power trading business in North America.

Calpine already ranks high in the power trading sector with an extensive physical presence in the gas-fired power plant market. Add Bear Stearns' deep financial pockets, the newly created joint venture, "really gives us a unique model," Posoli said.

Others financiers moving in on the physical gas market, although in a smaller way, include Morgan Stanley, JPMorgan, Goldman Sachs, Citigroup, Credit Suisse First Boston, Barclays, Wachovia and Societe Generale.

Energy trading is an industry "that makes a lot of sense to be in," says Beau Taylor, JP Morgan's gas and power chief. Because of the risk management synergies and client base, the "opportunities are big." More joint ventures are expected for some of the smaller gas merchants, either with investment banks or oil and natural gas producers, which continue to have the largest North American gas sales volumes, according to NGI.

One new face will be showing up in the next ranking. ONEOK, No. 13 with 3.05 Bcf/d in sales has sold its production assets to an unknown quantity by the name of TXOK Acquisition Inc. The sale is expected to close this month (see NGI, Sept. 26).

Company 2Q05 2Q04 Change
BP* 26.56 24.50 8%
ConocoPhillips 11.20 10.40 8%
Coral 11.20 9.60 17%
Sempra 10.60 9.20 15%
Cinergy 5.87 4.47 31%
Chevron 5.75 4.57 26%
Nexen 4.74 5.22 -9%
Constellation 4.72 NA NA
UBS 4.30 4.10 5%
Louis Dreyfus 4.11 3.40 21%
Tenaska 4.10 3.50 17%
EnCana 3.21 3.01 7%
Oneok 3.05 2.73 12%
ExxonMobil 2.72 2.96 -8%
Williams 2.40 2.30 4%
Devon 2.27 2.43 -7%
Sequent 2.13 2.00 6%
Merrill Lynch * 2.10 7.30 -71%
Calpine 2.10 2.60 -19%
Burlington 1.80 1.73 4%
Total ** 110.21 106.02 4%

Source: Quarterly financial reports with the Securities and Exchange Commission, or if necessary, statements signed by company officials and provided to NGI.

* Merrill Lynch's 2Q2004 number is an estimate based on what EntergyKoch (which was purchased by Merrill Lynch earlier this year) traded at the time. BP's 2Q2005 number is an estimate based on the U.S. gas sales BP reported and the average of its Canadian gas sales in 4Q2004. ** The total excludes Constellation because no number was provided for 2Q2004. BP, Constellation, ConocoPhillips, Coral, Chevron, Tenaska, Louis Dreyfus, UBS, Calpine and Merrill Lynch did not report North American gas sales volumes to the SEC. Data for those companies, except for BP, were obtained directly from company officials, or, in BP's case, were estimated based on previous information.

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