Cross Timbers completed its previously announced $115 millionacquisition of 175 Bcfe of reserves on producing properties locatedin East Texas and Louisiana from Herd Producing of Tyler, TX. Theproperties are located in Freestone, Limestone and Robertsoncounties, TX, and Claiborne and Union parishes, LA. “We willimmediately begin to develop these properties in conjunction withour existing East Texas Freestone Trend exploitation program,”stated Cross Timber President Steffen E. Palko. “This trendcurrently has a resource potential of 1.2 Tcf of gas, whichincludes more than 500 potential drilling locations and a multitudeof recompletion projects.” Chairman Bob R. Simpson said theacquisition provides the additional inventory of opportunities forthe company to achieve its previously stated goals of increasinggas production by 20% per year. “As a result, we expect to increasegas production to 535 MMcf/d by the end of 2002, a 60% increaseabove the average rate for 2000.”
Pantellos, an online marketplace for utility products andservices, opened for business Jan. 1 and 12 new suppliers havesigned membership agreements. The site was founded seven months agowhen 21 leading utility companies came together to explore theviability of an online trading community. Cinergy and BrentonSafety, a San Francisco-based supplier of health, safety andenvironmental products, completed the first integrated commercialtransactions in the Pantellos marketplace. “Pantellos is changingthe way we do business,” said Craig Weida, Cinergy’s vice presidentof purchasing. “At its simplest, Pantellos provides us a much morecost effective and efficient way to conduct purchases with oursuppliers. We also see significant opportunities for savings andimprovements throughout the industry. Working with Pantellos is notabout aggregation and price transparency, it is about making betterdecisions and improving our competitiveness.” Initial offeringsinclude asset optimization, project collaboration and auctions.Pantellos will continue to build out the full suite of marketplacecapabilities 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 $34million in royalties on North Slope oil and gas produced through1999, Gov. Tony Knowles announced this week. The payment concludesseveral audits of BP Amoco’s royalty obligations and represents2.6% 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 toresolve outstanding royalty issues between the state and ARCO forthe period through Dec. 31 when BP assumed ARCO’s royaltyobligations as a result of the BP/ARCO merger.
Houston-based technology company TradeWell Systems said 35 gastrading companies have signed up to test its ExCelleratortechnology prior to launch in late January. The software isdesigned to streamline financial accounting and tracking of naturalgas trading transactions across multiple ecommerce sites. A secondphase will allow participating traders to manage positions inreal-time directly from their desktops. It includes interfaces tomultiple on-line exchanges and marketplaces that will pass thetrading information through TradeWell’s EnyWare technology and thendeliver the information directly to the trading floor viaTradeWell’s ExCellerator, allowing traders and support personnel tomanage trading positions (pricing, scheduling, deal tracking, etc.)directly from their desktop with real-time trading data.”Streamlined information flow is critical for success in energytrading,” said Ralph Currey, vice president of natural gas tradingfor Texaco Natural Gas, which has agreed to use the new technology.”We are looking forward to the benefits that ExCellerator shouldprovide to our natural gas trading activities in 2001.”ExCellerator is a product-oriented solution derived to deliverinformation to an existing MicroSoft Excel spreadsheet from on-lineexchanges and marketplaces via the Internet. For more informationon TradeWell, contact Dave Crawley at (713) 541-5466 or visitwww.TradeWellsystems.com.
FirstEnergy Services Corp. reported that it has entered into along-term master energy services agreement with the University ofAkron for an undisclosed sum. FirstEnergy will act as theuniversity’s energy manager, acquiring competitively pricedelectricity, 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 theuniversity energy-conservation audits, renovation and newconstruction 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 toaddress initiatives aimed at improving the integrity management andcommunication requirements for natural gas pipelines. The meetingwill be held Feb. 12-14 at the Crystal City Marriott in Arlington,VA. The agency requests that written comments relating to thepublic meeting be submitted on or before Jan. 29. Specifically, itis seeking comments on how integrity management principles can bestbe applied to improve the safety of gas pipelines, and onestablishing communication standards requiring pipe operators toshare information with community and state officials and the publicabout the risks facing pipelines. Written comments should besubmitted 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. Commentsaddressing integrity management should have the docket numberRSPA-00-7666, while comments on the communications initiativeshould carry the docket number RSPA-00-7408. For those wishing tomake an oral presentation at the meeting, contact Jenny Donohue byJan. 29 at (202) 366-4046. For further information, contact BethCallsen at (202) 366-4572, or e-mail her firstname.lastname@example.org.
The Northwest River Forecast Center reports that water availablefor hydroelectric generation in the U.S. Northwest will be belownormal the first half of the year, with stream flows at The Dalleshydroelectric dam on the Columbia River between January and July at75% of normal. The Dalles is a major measure of the water availablebecause it is one of the last dams before the Columbia River meetsthe Pacific Ocean, and it measures the water supplies throughoutthe Columbia and Snake River systems. The forecast center’s “earlybird” or preliminary forecast set inflows to the Mica reservoir inBritish Columbia from April to September 2000 at 86% of normal. TheBritish Columbia system was a major electricity supplier to thePacific 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 determineshow much power will actually be produced in spring and summermonths. The stream flows are measured by the amount of snowaccumulation in the Cascade Mountains.
TrueQuote LLC last week announced that truequote.com, itsInternet platform for over-the-counter trading of energy-basedcommodities, has received notification from the Commodity FuturesTrading Commission (CFTC). As a result of the Commodities FuturesModernization Act of 2000, TrueQuote can assure its customers withlegal certainty that the contracts for financial products offeredfor trade on truequote.com will be permissible and enforceable.”This notification confirms the legality of transactions beingconducted on our online platform,” said TrueQuote CEO Dennis Crum.”We want our customers to be aware of the CFTC’s statement and thevalidity it provides to the assurance of operations ontruequote.com.” The platform began operations earlier this quarterwith the assistance of APB Energy. The system was developed incollaboration with EnFORM Technology and Microsoft Corp.Truequote.com is a real-time, broker-assisted system for theelectricity, natural gas and coal wholesale marketplace.
In its largest development program ever, North Coast EnergyInc., based in Twinsburg, OH, has begun drilling the first of 37natural gas development wells on leaseholds in Ohio, Pennsylvaniaand West Virginia, and plans to have five rigs to complete thedrilling by March 31. CEO Omer Yonel said investor partners hadcommitted more than $6 million to drill the prospects. “It is ourplan to drill, complete and pipeline as many of the wells beforethe end of winter to meet the rising demand of our industrial andcommercial 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 its2000 earnings to fall 10% below analysts’ estimates because ofweather-related construction problems at its businesses in Michiganand Alaska. Wall Street estimates, according to First Call/ThomsonFinancial, had expected the company to earn $1.02 per share for2000, but Semco said the figure would be closer to $0.92. Thecompany said construction service revenues had been negativelyaffected by bad weather in November and December in the Midwest,which had delayed project completions, and had slowed down cableand fiber-optic installations. CEO William Johnson said the companywould focus on internal revenue growth along with making “selectacquisitions” in energy engineering, construction and informationtechnology.
Penn Virginia Corp., based in Radnor, PA, has closed the sale ofits non-strategic gas properties to Energy Corporation of Americafor $59.4 million, and will use the proceeds to pay off long-termdebt. The properties are located mostly in Kentucky and WestVirginia, and the effective date of the sale was Oct. 1, 2000. Theproperties are estimated to contain 70 Bcfe of proved reserves andcurrently produce 7 MMcf/d. Penn Virginia CEO A. James Dearlovesaid the sale would allow the company to begin 2001 with a “strongbalance sheet,” and said the company now will begin developing itscore assets in Appalachia and Mississippi. “Our ambitious naturalgas exploration efforts will continue and we will go on evaluatingadditional acquisition opportunities in both our oil and gas andcoal royalty business.”
High natural gas prices have forced the indefinite closure ofone of Mexico’s largest steelmakers, Hylsamex, which closed thelast of its four sponge-iron plants this week. Hylsamex is the ironand steelmaking unit of Alfa, and said it closed its final plant onMonday because natural gas prices had risen 150% last year. Theplant, located in Monterrey, had a production capacity of 700,000tons a year, and is worth about $100 million. Alfa’s othersponge-iron plants, in Monterrey and Puebla, were closed in 2000because of escalating natural gas prices. Hylsamex said it wouldimport sponge iron, used for steel production, to make up forshortfalls with the plants’ closures.
Using a combination of fixed-price swaps and costless collars,Oklahoma City-based Louis Dreyfus Natural Gas Corp. has put priceprotections on 200,000 MMBtu/d of natural gas production from Marchthrough October 2001. The company has sold 100,000 MMBtu/d for theperiod at an average fixed price of $5.68. It also has placed priceprotections on 100,000 MMBtu/d in costless collars with an averagefloor price of $5 and an average ceiling price of $6.89. “Wecontinue to be very optimistic about the fundamentals for naturalgas demand,” said CEO Mark Monroe. “Based upon prices currentlyquoted in the Nymex natural gas futures market for 2001, thecompany’s cash flow is expected to exceed $500 million.” Monroesaid that the “current market dynamics” will give the company anopportunity to add more price protections with its spring, summerand early fall gas production. Monroe said, “Even if gas pricesaverage higher than $6.89 and the ceilings are triggered, we willhave approximately 40% of our 2001 production unhedged.” LouisDreyfus was named one of the 10 biggest gainers on the New YorkStock 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 approveda 32% increase in the company’s exploration and developmentspending for this year, adding 78% of its $290 million budget ondeveloping reserves already discovered. It expects its combined oiland 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 hasinitiated hedges in the form of “costless collars” covering 97,000MMBtu/d of its natural gas production for the period from February2001 through October 2001. For the Appalachia operating area, Cabotput a floor price on 35,000 MMBtu/d of $5.43, with a ceiling priceof $9.09 per MMBtu. On 25,000 MMBtu/d in the Midcontinent operatingregion, 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 $5floor, and a $9 ceiling per MMBtu. In total, the 97,000 MMBtu/dwill have a weighted average floor price of $5.15 per MMBtu, and aceiling price of $8.92 per MMBtu. The hedging equates to a $5.50per Mcf floor price, and a ceiling price of $9.55 per Mcf. “Wecontinue to be encouraged by the fundamentals of the natural gasmarket,” commented Ray Seegmiller, Cabot’s CEO. “While we believethere is a sustained strengthening in natural gas prices, thisenvironment of extremely high prices, combined with the dailyvolatility in the futures market, creates the opportunity and needfor some price protection. We will continue to evaluate the meritsof adding to this position; however, we have no plans at this timeto hedge beyond October of 2001. This action will allow the companyto realize a minimum price (related to the new hedged volumes) thatis more than $1.00 per Mcf higher than the original 2001 budget forthis same nine month period.” The company estimates that the newhedges cover about 51% of its anticipated 2001 natural gasproduction for the nine month period. After accounting for all ofCabot’s open hedges, the company expects that 45% of its gasproduction during the nine month period will remain subject tomarket pricing.
McMoRan Exploration Co.’s gas discovery at Eugene Island appearsto be twice as big as expected, and now is expected to recover 100Bcf of natural gas. The well will be put into production in thesecond quarter by the New Orleans-based company, and production isexpected to reach 100 MMcf/d by then. Initially, the target for theEugene Island Block 193 No. 3 exploration well in the North Terndeep prospect was a gross unrisked potential of approximately 50Bcf. However, the pay sands encountered were about twice as thickas indicated by the 3-D seismic data.
North American utility companies continue to move ahead withe-business plans, despite the recent upheaval in the Internetindustry and the volatility of the energy market, according to astudy by Chartwell, a researcher based in Atlanta. The use of theInternet as a customer-contact portal is gaining in popularity,with nearly 18% of energy companies now offering online sign-upservice. Another 27% say they will implement online services soon.Among other things, the study, which used 100 surveys, found thatlast year, a small percentage of utilities provided Web-enabledcustomer service through “live chat” rooms. Dennis Smith,Chartwell’s editorial director, said the new study found that bothtraditional utilities and the blended energy/communicationscompanies “believe the Web will play an essential part in futurebusiness, and the leading companies have their strategies in placeand are moving forward. Many others, from the smallest co-ops tothe largest IOUs, are just now getting on board and developing acentral e-business strategy to improve services and enhancerevenues in the challenge for these organizations.” For moreinformation on the study, “Chartwell’s Guide to E-Business in theEnergy Industry 2001,” visit the company’s website atwww.chartwellinc.com/research.htm, or call (800) 432-5879.
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