NGI The Weekly Gas Market Report / NGI All News Access

Industry Briefs

Industry Briefs

Cross Timbers completed its previously announced $115 million acquisition of 175 Bcfe of reserves on producing properties located in East Texas and Louisiana from Herd Producing of Tyler, TX. The properties are located in Freestone, Limestone and Robertson counties, TX, and Claiborne and Union parishes, LA. "We will immediately begin to develop these properties in conjunction with our existing East Texas Freestone Trend exploitation program," stated Cross Timber President Steffen E. Palko. "This trend currently has a resource potential of 1.2 Tcf of gas, which includes more than 500 potential drilling locations and a multitude of recompletion projects." Chairman Bob R. Simpson said the acquisition provides the additional inventory of opportunities for the company to achieve its previously stated goals of increasing gas production by 20% per year. "As a result, we expect to increase gas production to 535 MMcf/d by the end of 2002, a 60% increase above the average rate for 2000."

Pantellos, an online marketplace for utility products and services, opened for business Jan. 1 and 12 new suppliers have signed membership agreements. The site was founded seven months ago when 21 leading utility companies came together to explore the viability of an online trading community. Cinergy and Brenton Safety, a San Francisco-based supplier of health, safety and environmental products, completed the first integrated commercial transactions in the Pantellos marketplace. "Pantellos is changing the way we do business," said Craig Weida, Cinergy's vice president of purchasing. "At its simplest, Pantellos provides us a much more cost effective and efficient way to conduct purchases with our suppliers. We also see significant opportunities for savings and improvements throughout the industry. Working with Pantellos is not about aggregation and price transparency, it is about making better decisions and improving our competitiveness." Initial offerings include asset optimization, project collaboration and auctions. Pantellos will continue to build out the full suite of marketplace capabilities such as logistics and fulfillment, demand planning, financial solutions and trading community services.

BP Amoco has agreed to pay the state of Alaska an additional $34 million in royalties on North Slope oil and gas produced through 1999, Gov. Tony Knowles announced this week. The payment concludes several audits of BP Amoco's royalty obligations and represents 2.6% of the total royalties paid by BP from 1993 through 1999. Payment was made on Dec 29. BP also paid the state $1.2 million to resolve outstanding royalty issues between the state and ARCO for the period through Dec. 31 when BP assumed ARCO's royalty obligations as a result of the BP/ARCO merger.

Houston-based technology company TradeWell Systems said 35 gas trading companies have signed up to test its ExCellerator technology prior to launch in late January. The software is designed to streamline financial accounting and tracking of natural gas trading transactions across multiple ecommerce sites. A second phase will allow participating traders to manage positions in real-time directly from their desktops. It includes interfaces to multiple on-line exchanges and marketplaces that will pass the trading information through TradeWell's EnyWare technology and then deliver the information directly to the trading floor via TradeWell's ExCellerator, allowing traders and support personnel to manage trading positions (pricing, scheduling, deal tracking, etc.) directly from their desktop with real-time trading data. "Streamlined information flow is critical for success in energy trading," said Ralph Currey, vice president of natural gas trading for Texaco Natural Gas, which has agreed to use the new technology. "We are looking forward to the benefits that ExCellerator should provide to our natural gas trading activities in 2001." ExCellerator is a product-oriented solution derived to deliver information to an existing MicroSoft Excel spreadsheet from on-line exchanges and marketplaces via the Internet. For more information on TradeWell, contact Dave Crawley at (713) 541-5466 or visit www.TradeWellsystems.com.

FirstEnergy Services Corp. reported that it has entered into a long-term master energy services agreement with the University of Akron for an undisclosed sum. FirstEnergy will act as the university's energy manager, acquiring competitively priced electricity, natural gas and steam for the school's main campus, and for the university's regional Wayne College campus in Orrville, OH.. As part of the deal, the service provider will offer the university energy-conservation audits, renovation and new construction options. "By packaging our energy needs together, we're better positioned to secure more competitive prices, ultimately reducing our energy and related costs," said Ted Curtis, vice president of Capital Planning and Facilities Management.

The Department of Transportation's Office of Pipeline Safety (OPS) has scheduled a three-day public meeting in mid-February to address initiatives aimed at improving the integrity management and communication requirements for natural gas pipelines. The meeting will be held Feb. 12-14 at the Crystal City Marriott in Arlington, VA. The agency requests that written comments relating to the public meeting be submitted on or before Jan. 29. Specifically, it is seeking comments on how integrity management principles can best be applied to improve the safety of gas pipelines, and on establishing communication standards requiring pipe operators to share information with community and state officials and the public about the risks facing pipelines. Written comments should be submitted to the Dockets Facility, Department of Transportation, Room PL-401, 400 Seventh St. SW, Washington, D.C. 20590-0001. Comments also can be posted electronically to dms.dot.gov. Comments addressing integrity management should have the docket number RSPA-00-7666, while comments on the communications initiative should carry the docket number RSPA-00-7408. For those wishing to make an oral presentation at the meeting, contact Jenny Donohue by Jan. 29 at (202) 366-4046. For further information, contact Beth Callsen at (202) 366-4572, or e-mail her at beth.callsen@rspa.dot.gov.

The Northwest River Forecast Center reports that water available for hydroelectric generation in the U.S. Northwest will be below normal the first half of the year, with stream flows at The Dalles hydroelectric dam on the Columbia River between January and July at 75% of normal. The Dalles is a major measure of the water available because it is one of the last dams before the Columbia River meets the Pacific Ocean, and it measures the water supplies throughout the Columbia and Snake River systems. The forecast center's "early bird" or preliminary forecast set inflows to the Mica reservoir in British Columbia from April to September 2000 at 86% of normal. The British Columbia system was a major electricity supplier to the Pacific Coast areas of the United States last summer. U.S. hydroelectric turbines in the Northwest produce up to 25,000 MW, but the water amount on the Columbia and Snake rivers determines how much power will actually be produced in spring and summer months. The stream flows are measured by the amount of snow accumulation in the Cascade Mountains.

TrueQuote LLC last week announced that truequote.com, its Internet platform for over-the-counter trading of energy-based commodities, has received notification from the Commodity Futures Trading Commission (CFTC). As a result of the Commodities Futures Modernization Act of 2000, TrueQuote can assure its customers with legal certainty that the contracts for financial products offered for trade on truequote.com will be permissible and enforceable. "This notification confirms the legality of transactions being conducted on our online platform," said TrueQuote CEO Dennis Crum. "We want our customers to be aware of the CFTC's statement and the validity it provides to the assurance of operations on truequote.com." The platform began operations earlier this quarter with the assistance of APB Energy. The system was developed in collaboration with EnFORM Technology and Microsoft Corp. Truequote.com is a real-time, broker-assisted system for the electricity, natural gas and coal wholesale marketplace.

In its largest development program ever, North Coast Energy Inc., based in Twinsburg, OH, has begun drilling the first of 37 natural gas development wells on leaseholds in Ohio, Pennsylvania and West Virginia, and plans to have five rigs to complete the drilling by March 31. CEO Omer Yonel said investor partners had committed more than $6 million to drill the prospects. "It is our plan to drill, complete and pipeline as many of the wells before the end of winter to meet the rising demand of our industrial and commercial customers," said Yonel. North Coast, organized in 1981, develops gas and oil reserves principally in the Appalachian Basin.

Port Huron, MI-based gas distributor Semco Energy expects its 2000 earnings to fall 10% below analysts' estimates because of weather-related construction problems at its businesses in Michigan and Alaska. Wall Street estimates, according to First Call/Thomson Financial, had expected the company to earn $1.02 per share for 2000, but Semco said the figure would be closer to $0.92. The company said construction service revenues had been negatively affected by bad weather in November and December in the Midwest, which had delayed project completions, and had slowed down cable and fiber-optic installations. CEO William Johnson said the company would focus on internal revenue growth along with making "select acquisitions" in energy engineering, construction and information technology.

Penn Virginia Corp., based in Radnor, PA, has closed the sale of its non-strategic gas properties to Energy Corporation of America for $59.4 million, and will use the proceeds to pay off long-term debt. The properties are located mostly in Kentucky and West Virginia, and the effective date of the sale was Oct. 1, 2000. The properties are estimated to contain 70 Bcfe of proved reserves and currently produce 7 MMcf/d. Penn Virginia CEO A. James Dearlove said the sale would allow the company to begin 2001 with a "strong balance sheet," and said the company now will begin developing its core assets in Appalachia and Mississippi. "Our ambitious natural gas exploration efforts will continue and we will go on evaluating additional acquisition opportunities in both our oil and gas and coal royalty business."

High natural gas prices have forced the indefinite closure of one of Mexico's largest steelmakers, Hylsamex, which closed the last of its four sponge-iron plants this week. Hylsamex is the iron and steelmaking unit of Alfa, and said it closed its final plant on Monday because natural gas prices had risen 150% last year. The plant, located in Monterrey, had a production capacity of 700,000 tons a year, and is worth about $100 million. Alfa's other sponge-iron plants, in Monterrey and Puebla, were closed in 2000 because of escalating natural gas prices. Hylsamex said it would import sponge iron, used for steel production, to make up for shortfalls with the plants' closures.

Using a combination of fixed-price swaps and costless collars, Oklahoma City-based Louis Dreyfus Natural Gas Corp. has put price protections on 200,000 MMBtu/d of natural gas production from March through October 2001. The company has sold 100,000 MMBtu/d for the period at an average fixed price of $5.68. It also has placed price protections on 100,000 MMBtu/d in costless collars with an average floor price of $5 and an average ceiling price of $6.89. "We continue to be very optimistic about the fundamentals for natural gas demand," said CEO Mark Monroe. "Based upon prices currently quoted in the Nymex natural gas futures market for 2001, the company's cash flow is expected to exceed $500 million." Monroe said that the "current market dynamics" will give the company an opportunity to add more price protections with its spring, summer and early fall gas production. Monroe said, "Even if gas prices average higher than $6.89 and the ceilings are triggered, we will have approximately 40% of our 2001 production unhedged." Louis Dreyfus was named one of the 10 biggest gainers on the New York Stock Exchange last month, climbing more than 15% to stand at $48.188 on Dec. 27. Its 52-week low was a year ago, standing at $15.75 on Jan. 12, 2000. In December, Louis Dreyfus' board approved a 32% increase in the company's exploration and development spending for this year, adding 78% of its $290 million budget on developing reserves already discovered. It expects its combined oil and gas production this year to range from 147 Bcfe to 161 Bcfe. Gas production is expected to range from 132 Bcf to 144 Bcf.

Houston-based Cabot Oil & Gas reported last week that it has initiated hedges in the form of "costless collars" covering 97,000 MMBtu/d of its natural gas production for the period from February 2001 through October 2001. For the Appalachia operating area, Cabot put a floor price on 35,000 MMBtu/d of $5.43, with a ceiling price of $9.09 per MMBtu. On 25,000 MMBtu/d in the Midcontinent operating region, the company set a floor of $5 and a ceiling of $8.57. Likewise, for 37,000 MMBtu/d from the Gulf Coast, Cabot placed a $5 floor, and a $9 ceiling per MMBtu. In total, the 97,000 MMBtu/d will have a weighted average floor price of $5.15 per MMBtu, and a ceiling price of $8.92 per MMBtu. The hedging equates to a $5.50 per Mcf floor price, and a ceiling price of $9.55 per Mcf. "We continue to be encouraged by the fundamentals of the natural gas market," commented Ray Seegmiller, Cabot's CEO. "While we believe there is a sustained strengthening in natural gas prices, this environment of extremely high prices, combined with the daily volatility in the futures market, creates the opportunity and need for some price protection. We will continue to evaluate the merits of adding to this position; however, we have no plans at this time to hedge beyond October of 2001. This action will allow the company to realize a minimum price (related to the new hedged volumes) that is more than $1.00 per Mcf higher than the original 2001 budget for this same nine month period." The company estimates that the new hedges cover about 51% of its anticipated 2001 natural gas production for the nine month period. After accounting for all of Cabot's open hedges, the company expects that 45% of its gas production during the nine month period will remain subject to market pricing.

McMoRan Exploration Co.'s gas discovery at Eugene Island appears to be twice as big as expected, and now is expected to recover 100 Bcf of natural gas. The well will be put into production in the second quarter by the New Orleans-based company, and production is expected to reach 100 MMcf/d by then. Initially, the target for the Eugene Island Block 193 No. 3 exploration well in the North Tern deep prospect was a gross unrisked potential of approximately 50 Bcf. However, the pay sands encountered were about twice as thick as indicated by the 3-D seismic data.

North American utility companies continue to move ahead with e-business plans, despite the recent upheaval in the Internet industry and the volatility of the energy market, according to a study by Chartwell, a researcher based in Atlanta. The use of the Internet as a customer-contact portal is gaining in popularity, with nearly 18% of energy companies now offering online sign-up service. Another 27% say they will implement online services soon. Among other things, the study, which used 100 surveys, found that last year, a small percentage of utilities provided Web-enabled customer service through "live chat" rooms. Dennis Smith, Chartwell's editorial director, said the new study found that both traditional utilities and the blended energy/communications companies "believe the Web will play an essential part in future business, and the leading companies have their strategies in place and are moving forward. Many others, from the smallest co-ops to the largest IOUs, are just now getting on board and developing a central e-business strategy to improve services and enhance revenues in the challenge for these organizations." For more information on the study, "Chartwell's Guide to E-Business in the Energy Industry 2001," visit the company's website at www.chartwellinc.com/research.htm, or call (800) 432-5879.

©Copyright 2001 Intelligence Press, Inc. All rights reserved. The preceding news report may not be republished or redistributed in whole or in part without prior written consent of Intelligence Press, Inc.

ISSN © 2577-9877 | ISSN © 1532-1266
Comments powered by Disqus