Advisors

Tortoise Capital Advisors LLC, whose portfolio includes emerging exploration and production master limited partnerships (MLP), has formed an oil and gas company. Headquartered in Overland Park, KS, Tortoise Gas and Oil Corp. will have equity of $82.9 million and available capital of more than $100 million for direct investments in energy producers. “We formed Tortoise Gas and Oil Corp. primarily to respond to the growing need by private and public U.S. energy production partnerships for timely and flexible direct placement financing to fund internal growth projects and acquisitions,” said Managing Director David Schulte. “We intend to invest directly in privately held companies and publicly traded MLPs operating primarily in the upstream segment, and to a lesser extent the midstream segment, of the energy sector.” Tortoise now has about $10 million invested in High Sierra Energy LP, $10 million in International Resources Partners LP and $7.5 million in EV Energy Partners LP.

Defunct hedge fund Amaranth Advisors LLC, which last year lost more than $6 billion in bad bets on the natural gas market, agreed to pay $716,819 to settle charges with the Securities and Exchange Commission (SEC) that it sold securities short in offerings and covered its positions by buying securities in the offerings, the SEC said last week. The penalty amount breaks down to $150,000 for a civil penalty, $507,627 in disgorgement and $59,192 in prejudgment interest. Amaranth, which is based in Greenwich, CT, neither admitted nor denied the charges. “In connection with five follow-on offerings conducted between November 2004 and February 2005, Amaranth sold securities short during the five business days before the pricing of those offerings and then covered the short positions with securities purchased in the offerings (‘offering shares’),” the SEC said. “These transactions violated Rule 105 of Regulation M, and resulted in funds advised by Amaranth making profits of $507,627.” Companies with shares involved in the Amaranth transactions are Coeur D’Alene Mines Corp., Catapult Communications Corp., Cleco Corp., MEMC Electronic Materials Inc. and American Superconductor Corp. Amaranth told investors that the penalty is unrelated to its natural gas trading activities. Amaranth’s bad bets in the natural gas market first came to light in September (see NGI, Sept. 25).

Defunct hedge fund Amaranth Advisors LLC, which last year lost more than $6 billion in bad bets on the natural gas market, agreed to pay $716,819 to settle charges with the Securities and Exchange Commission (SEC) that it sold securities short in offerings and covered its positions by buying securities in the offerings, the SEC said Wednesday.

With press reports now widely indicating that hedge fund Amaranth Advisors LLC’s long position was so big that it was artificially propping up natural gas futures prices for the winter forward months, Bentek Energy President Porter Bennett warned that the only way regulators could have known about the situation was if each trading company revealed all of their positions on a frequent basis. However, he warned that such a move “would destroy the well functioning, efficient natural gas marketplace we currently have.”

With press reports now widely indicating that hedge fund Amaranth Advisors LLC’s long position was so big that it was artificially propping up natural gas futures prices for the winter forward months, Bentek Energy President Porter Bennett warned that the only way regulators could have known about the situation was if each trading company revealed all of their positions on a frequent basis. However, he warned that such a move “would destroy the well functioning, efficient natural gas marketplace we currently have.”

Calls for regulation of the over-the-counter (OTC) market and of hedge funds continue weeks after hedge fund Amaranth Advisors LLC’s $6+ billion loss due to wrong-way bets in the natural gas futures arena. The latest call for reform came Tuesday from the American Public Gas Association (APGA), which has asked both the House and Senate for “greater transparency” in natural gas trading.

The $6 billion collapse in the value of the Amaranth Advisors LLC fund may go down in history as perhaps the best example of how not to attempt to corner the natural gas market. It also may provide some lawmakers with the ammunition they need to regulate the over-the-counter energy market and gain greater oversight of hedge funds, according to several analysts.

Allowing that much is still unknown surrounding the $6 billion downfall of hedge fund Amaranth Advisors LLC, veteran energy analyst John Olson of Poole Capital Partners LLC said it appears the fund tried to dominate the market by taking enormous position sizes. In Washington, DC, calls for regulation of over-the-counter trading continued.

As the downfall of Amaranth Advisors LLC continues to produce more questions than answers, Robert McCullough, manager of McCullough Research, said Tuesday that he believes Amaranth trader Brian Hunter quite possibly attempted to corner the natural gas market and that the “lack of federal oversight” of energy markets and hedge funds by FERC, the CFTC and the SEC helped him almost accomplish his goal.