Noting his company's "significantly long" natural gas position from 2010 onward, a Calpine senior executive said Thursday the company has seen some moderation of natural gas prices since the Gulf of Mexico hurricanes, and it is possible prices will go down some more over the full course of next year. The value of the company's portfolio has increased by an estimated $300 million over the past three months, said Paul Posoli, Calpine executive vice president, during a third-quarter earnings conference call.
"We're obviously watching the natural gas markets closely, and while there are definitely risks of price spikes over this winter, there is a high probability of demand destruction over the next six months [across all customer categories -- residential, commercial and industrial], which should result in a softening of prices in 2006.
"In fact, we have already seen 2006 gas prices down by approximately $1.15/MMBtu since Sept. 30 through today. Over the last three weeks -- even with 5 Bcf/d of Gulf gas production still offline -- we have been able to inject more than 175 Bcf into storage."
Posoli acknowledged for Calpine, which reported another quarter of growing losses, that the higher gas prices have been "a strain on our collateral situation," but that the company has been able to keep collateral levels about flat since June 30, "even with a "greater than $4 increase in gas prices over that period."
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