kRoad Ventures LP made a significant investment in HoustonStreetExchange Inc. to finance the online energy trading system’s pondcrossing to Europe. New York City-based kRoad is a global venturecapital fund focused on the infrastructure sector (energy,utilities, water and waste management). kRoad brings tradingliquidity, sector experience and international business networksunique to its limited partners: Vivendi (Europe), Softbank (Asia)and Sithe (North America). kRoad’s investment is the cornerstone ofHoustonStreet’s international initiatives. kRoad, Vivendi andHoustonStreet agreed to structure a strategic partnership toestablish HoustonStreet Europe.
Expecting strong summer gas prices, Friedman, Billings, Ramsey& Co. Inc. initiated coverage of HS Resources with a “buy”rating and a 12-month price target of $30. FBR senior researchanalyst David Khani identified HS as the dominant oil and gasproducer in the Denver-Julesberg (D-J) Basin. “Given the company’sleverage in the natural gas market and the double- digit growthpotential of its Gulf Coast program, we believe HS Resourcesrepresents a strong value relative to its peer group,” Khani said.”HS Resources is well positioned to take advantage of the recentrise in natural gas prices, which is largely due to theanticipation of a summer price rally and the discrepancy betweenoil and gas prices.” According to Khani’s March 2000 report, “TheBoom in the Natural Gas Market? — Fact or Fiction,” gas pricesare expected to exhibit a near-term spike due to peak electricitydemand during the summer but will return to stability in thelong-term.
Completing a deal announced last December, El Paso EnergyPartners L.P. announced it has assumed control of El PasoIntrastate – Alabama Inc. (EPIA) for $26.4 million from its parentcompany, El Paso Energy Corp. EPIA owns and operates over 450 milesof pipelines and related compression facilities and is the leadingnatural gas gatherer in the Black Warrior Basin in western Alabama.The system has current throughput of 150 MMcf/d from 27 producers.El Paso Production Co., another subsidiary of El Paso Energy Corp.,is the largest producer on the system and is currently engaged inan aggressive coal seam development program. The partnership plansto expand the EPIA system with 4,200 hp of new compression. Thiswill increase system volume by 40 MMcf/d within the next two years.EPIA was acquired by El Paso Energy through its October 1999 mergerwith Sonat Inc.
Chuck Watson, CEO of Dynegy, said last week that the companyexpects first quarter earnings to be 20% higher than industryestimates. In an interview with The Wall Street Journal, Watsonsaid each operating division of the company was operating “on allcylinders.” He said key factors in the performance have been thepower trading desks in both the U.S. and Europe and synergies fromthe now-complete merger with Illinova. He expects earnings of 49cents/share, well above First Call estimates of 41 cents/share.PaineWebber analyst Ron Barone raised his recurring 2000 earningsper share (EPS) estimate from $2.25 to $2.40 as a result of thenews. He also reiterated his attractive rating for the stock,raising the 12-18 month price target from $68/share to $75/share.
Although the tight supply/demand situation for gasoline took thespotlight in the Energy Information Administration’s Short-TermEnergy Outlook last week, the EIA was pretty bullish on natural gasas well. The administration has gas demand rising 3.5% this year to22.17 Tcf and 4.1% next year to 23.08 Tcf. It projects a major 22%wellhead price hike this year to an average of $2.56/MMBtu followedby a much smaller rise in 2001 to $2.61. EIA sees dry domestic gasproduction inching up about 1% this year and only about 0.2% in2001. Imports are seen rising 8.3% this year to 3.67 Tcf and 2.7%next year to 3.77 Tcf. The increase in gas demand is expectedacross all sectors in both 2000 and 2001. Industrial demand isexpected to grow 5.4% this year and 3% in 2001 in reaction tosharply higher oil prices which will encourage fuel switching.
Questar Pipeline bought Enron Overthrust Pipeline Co.’s 18%interest in the Overthrust Pipeline effective Jan. 1, 2000. Thetransaction gives Questar Pipeline a 72% interest in the 88-mile,36-inch-diameter pipeline, which runs from the Whitney Canyon area— north of Evanston, WY, — to Rock Springs, WY. QuestarPipeline designed and built the Overthrust Pipeline, and hasoperated it since its completion in October 1982. Other partnersare Natural Gas Pipeline Co. of America and Colorado Interstate GasCo. The Overthrust Pipeline is a segment of the 793-mileTrailblazer system, which runs from southwestern Wyoming toBeatrice, NE. “Increased ownership of the Overthrust Pipeline is anatural fit for us,” said Questar Pipeline President Nick Rose.”Its location in our service territory and proximity to ourfacilities and supply sources will enhance the services weprovide.”
ONEOK Inc. completed the sale of its 43.3% interest in theIndian Basin Gas Processing plant and gathering system for $55million to El Paso Field Services Co. ONEOK said the plant, locatedin Eddy County, NM, was no longer strategic to its existing assets.
The Department of Energy (DOE) is planning to hold a series of”summits” later this month to address the potential for more poweroutages this summer. Three summits are planned for April 24 —Hartford, CT, New Orleans, LA, and in an undetermined northern NewJersey city – with Energy Secretary Bill Richardson scheduled tojet to each one, along with utility executives, state regulatorsand local officials. A follow-up summit will be held April 28 inSacramento, CA. Richardson is expected to address measures thefederal government can take to prevent a repeat of brownouts,outages and price spikes during the summer months. While thesituation may have improved somewhat over last summer, “hecertainly doesn’t think we’re out of the woods yet,” said DOEspokesman Tom Welch.
AEC Oil & Gas of Calgary, Alberta, a partnership owned byAlberta Energy Co. Ltd., acquired the majority of its key prospectsin the special Crown land sale for deeper petroleum and gas rightsunderlying AEC’s existing producing properties on the SuffieldMilitary Range. The company acquired 200,000 acres of explorationlands for $63 million, about 70% of the posted lands. “These landsare in the heart of what AEC views as one of our franchise assetregions, at Suffield, and are surrounded by existing infrastructurewhich will minimize future development and operating costs,” saidRandy Eresman, AEC Oil & Gas president. “AEC’s acquisition hasthe potential to yield recoverable reserves in the range of 25 to50 million barrels of oil, with the potential to double AEC’s oilproduction at Suffield over the next five years from the currentlevel of 16,000 b/d. The acquisition also positions AEC to add gasreserves, helping to sustain our 190 MMcf/d of natural gasproduction.”
Mitchell Energy & Development Corp. is stepping up capitalspending on strength of natural gas and opportunities in itsgathering and processing operations. The company announced a fiscal2001 budget of $221.5 million, a 50% increase from last year’sexpenditures of $147.8 million, excluding the Jameson gasprocessing plant acquisition. Of the total budget, $183.1 millionis allocated to exploration and production, $36.2 million to gasservices and the remainder to corporate projects. As part of thecompany’s accelerated drilling program, $127 million is slated todrill 196 net wells, up from the $85 million spent on 111 net wellsduring last fiscal year. The focus remains on developing theBarnett shale where 136 wells are planned. The light sand fracturetechnology that was successfully applied in the Barnett will alsobe extended to wells in Limestone and Freestone counties in eastTexas, with 26 wells scheduled for this area.
PECO’s Exelon Infrastructure Services Inc. (EIS) announced a newservice yesterday in which gas utilities are offered a newcured-in-place relining technology, called starliner, forrehabilitating faulty mains and services. Utilities perform morethan 150,000 gas service line restorations and 4,500 miles of gasmain restoration each year, Exelon said. The majority of this workinvolves the traditional open-cut excavation. Unlike straight orrigid liners, cured-in-place liners can be installed through bends,fully open fittings, and where there may be variations in internaldiameters. This new service minimizes costly tasks like trafficcontrol and digging up and restoring streets, which account for 70%of the cost in gas line restoration work. Starliner has been usedsuccessfully in Europe since 1991 to restore over one million feetof gas main. EIS is the first construction company to offerstarliner to the U.S. market.
NiSource and Columbia filed a joint petition with the StateCorporation Commission of the Commonwealth of Virginia requestingapproval of their planned $6 billion merger, which was announcedFeb. 28. The transaction is expected to close by the end of theyear. The combined company will become the largest gas distributoreast of the Rocky Mountains, serving more than 4.1 millioncustomers primarily located in nine states. Columbia Gas ofVirginia, a Columbia Energy Group subsidiary, provides retail gasservice to more than 182,000 customers. The companies stressed theproposed merger would have no impact on Columbia Gas of Virginia’srates, terms and conditions now approved by the Commission. Thefiling also says following the NiSource/Columbia merger, ColumbiaGas of Virginia will maintain its headquarters, retain keymanagement personnel along with local decision-making authority,retain local operations and the employee workforce. The actionfollows a similar filing March 30 with the Pennsylvania PublicUtility Commission. NiSource and Columbia also will seek mergerapproval from state regulators in Kentucky and from various federalagencies.
The Gas Industry Standards Board (GISB) will facilitate a secondindustry-wide meeting April 17 on an organization to developwholesale and retail standards for the gas and electric industries.The meeting, will be held at the Department of Energy’s ForrestalBuilding, 1000 Independence Ave., S.W., from 1 to 6 p.m. and willdeal with the scope of a gas and electric standards organization.Representatives of companies and trade associations in the gas andelectric industries, as well as interested individuals, are invitedto attend, but registration is required. To register, e-mail theGISB office at GISB@aol.com by April 12. The first meeting on theissue, held on Feb. 14 at DOE, dealt with the need for a gas andelectric standards organization. A third meeting, also facilitatedby GISB, will concern governance issues, including industrysegments and voting procedures.
Kerr-McGee Corp. has bought a 50% stake in four explorationlicenses covering 1.5 million acres offshore Nova Scotia, Canada,from Canadian 88 Energy Corp. for $10.5 million. The deepwaterexploration prospects are located 125 miles south of Halifax inwater depths from 500 to 9,200 feet. “This area, which is about 100miles from the Sable Island developments, will add anotherpromising deepwater exploration opportunity to Kerr-McGee’sextensive inventory of worldwide prospects,” said Kerr-McGee CEOLuke R. Corbett. “With this acquisition, Kerr-McGee will own morethan 18 million acres in the deepwater areas of the Gulf of Mexico,Australia, Brazil, Gabon, Thailand and Canada.” Kerr-McGee OffshoreCanada Ltd. will operate all four licenses. Canadian 88 will retainthe remaining 50% interest. Under the terms of the agreement,Kerr-McGee will replace C$9.4 million (US$6.5 million) of workcommitment promissory notes previously filed by Canadian 88 withthe Canada-Nova Scotia Offshore Petroleum Board. Kerr-McGee alsowill assume US$1.5 million (C$2.2 million) of future seismicprocessing costs related to the project. Through this transaction,Kerr-McGee also acquired 2-D and 3-D seismic over portions of thelicensed area and anticipates drilling the first exploratory wellin 2002. Canadian 88 and Western Geophysical shot a large deepwater3-D seismic program (900 square miles) off the east coast ofCanada. Initial mapping indicates a large turbidite fan playanalogous to major discoveries offshore Angola and Brazil.Photographs and maps are available from Canadian 88’s website atwww.cdn88energy.com.
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