NGI The Weekly Gas Market Report
Cabot LNG, the energy division of the Boston-based industrialchemical manufacturer Cabot Corp., will be separated from theparent company with the issuance of a targeted stock as part ofslimming and trimming “value enhancement”initiatives announcedrecently.
Cabot, whose core operations were described by Forbes Magazineearlier this year as production of the commodities “soot, sand, andmud,” (carbon black, fumed silica and drilling mud) said “atargeted stock tied to the performance of Cabot’s LNG business willallow investors to more readily see the value of thatbusiness….Our LNG operation should eventually be separated fromCabot Corp. to allow Cabot LNG to more readily pursue opportunitiesin its energy markets. The possible creation of a targeted stockwould be a step toward that eventual separation.”
The move was one of several announced along with earnings fromthe company’s third quarter and nine months which ended June 30,1999. Cabot also plans an initial public offering of approximately15% of its microelectronic materials business, and it will explorealternative ownership structures for its tantalum materialsbusiness (CPM).
A cost reduction restructuring in its core businesses willeliminate 250 positions out of its 4,500 persons workforce for asavings of between $30 and $35 million, Cabot said.
While revenues from LNG operations increased 11% to $199.7million from $179.6 million in the company’s first nine months,operating profits decreased 39% to $10.6 million from $17.4 millionin the same period a year ago. The decrease in operating profit wasattributable to the combination of warmer than normal winterweather and lower average natural gas prices. Average gas sellingprices decreased approximately 19% year-over-year. Offsetting weakprices was an increase in volumes equivalent to 8 additionalcargoes for the first nine months of the year.
In Cabot’s core specialty chemicals and materials group,revenues decreased 2% to $1,068.7 million from $1,089.1 million.The reduction in revenue reflected competitive pricing in severalof the Company’s market segments.
Excluding special items from both years’ earnings, operatingprofit for the nine-month period ended June 30, 1999 was $192.1compared with $194.9 for the same period last year.
Cabot LNG’s Boston-based Distrigas import and distributionsubsidiary recently received its first cargo from the new AtlanticLNG’s processing operations in Trinidad and Tobago to go withdeliveries from its traditional supplier Algeria. Cabot is a 10%shareholder in Atlantic and holds a 20-year purchase contract for 220MMcf/d. But in spite of the uptick in LNG activity and a favorableprognostication in a recent Energy Department report, the future isnot all that bright for expansion of the LNG market, according toCabot LNG President Gordon Shearer. “I think you’re seeing the peak ofLNG spot import activity right now. Next year will be the peak oflong-term contracts fulfilling themselves. After that, however, therecould be some serious fall-off.” (See Daily GPI, July 15, 1999)
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