Break

A break in the flat price pattern that has dominated the overallcash market during February came Tuesday, and appropriately it wasto the downside, where many sources had long expected prices to beheaded because of mild weather, a softening screen and a massivestorage surplus for this late in the winter season.

Texas producers laboring under the weight of low commodityprices are on their way to getting a temporary tax break from theTexas legislature. Last week, the Texas Senate passed S.B. 290,which grants a severance tax exemption to marginal gas and oilwells producing 90 Mcf/d or less or 15 barrels/d or less. Reliefwould kick in when gas drops below $1.80/MMBtu and/or oil dropsbelow $15/barrel for three consecutive months on the New YorkMercantile Exchange.

While the March Nymex futures contract began Friday’s tradingsession on yet another up-note, a late sell-off brought it backdown to settle 2.9 cents lower on the day. The spot month went upas high $1.875, where it flirted with crossing over the 40-daymoving average, only to finish the day at $1.80.

Companion bills have been introduced in the Texas legislature togive small producers a break on gas and oil severance taxes inlight of foundering commodity prices. If enacted, legislation wouldtrigger a temporary suspension of severance taxes on productionfrom certain wells.

Companion bills have been introduced in the Texas legislature togive small producers a break on gas and oil severance taxes inlight of foundering commodity prices. If enacted, legislation wouldtrigger a temporary suspension of severance taxes on productionfrom certain wells. Relief would be triggered if the three-monthaverage price for gas hits $1.89/Mcf (NYMEX) or $15/barrel (NYMEX)for oil.. When the price trigger is reached, the severance taxwould be suspended until the three-month average rises above thetrigger price. Severance tax relief would apply to oil productionfrom leases with wells averaging 15 barrels/d or less and to gasproduction from leases with wells averaging 90 Mcf/d or less. Ifpassed by the legislature, the measure would take effectimmediately and last until Aug. 31 or until $45 million in taxrelief has been granted, whichever comes first.

Traders returned Monday from a long holiday weekend to find thecash market about as weak or even weaker than it had been prior toChristmas, depending upon the market area. A warming trend andsofter futures were cited as reasons. The Gulf Coast, last week’sbargain basement region for gas, was only dropping a nickel to adime. But Western points, which had been riding high on the basisof having the nation’s chilliest weather, fell anywhere from about20 cents (PG&E citygate) to as much as 50 cents (Stanfield).

A story that ran in NGI’s Daily Gas Price Index Oct. 14 falselyreported that a state court had ordered the break-up of ProLianceEnergy. It also contained several other inaccuracies. The decisionby the Indiana appellate court merely reversed an order by theIndiana Utility Regulatory Commission (IURC) in which supplycontracts between ProLiance and affiliates Indiana Gas and CitizensGas Light & Coke were approved. The court ruled thatcontractual provisions relating to the use of published gas priceindexes required a different approval process. ProLiance “disagreeswith the court’s interpretation of the state statute and believesthat the IURC had full authority to approve the contracts under thestatutes cited in the IURC’s opinion.” The company intends toappeal the decision. The decision also does not require refunds tocustomers.

Chevron U.S.A. Production and its joint-venture partners – ShellDeepwater Development, EEX Corp. and Enterprise Oil Gulf of Mexico- set a new water-depth world record of 7,718 feet as they begandrilling their initial exploratory test well in the Gulf ofMexico’s Atwater Valley Block 118, about 175 miles southeast of NewOrleans. The Chevron-led team anticipates the well, designatedAtwater Valley 118 #1, will reach target depth of 15,471 feet belowthe seabed in the fourth quarter of this year. The companies areusing the fabled Glomar Explorer drill ship – initially built forU.S. intelligence work – owned by Global Marine to drill the well.Chevron and Texaco plan to alternate into the operator position asthey go forward with plans to drill 20 deepwater wells in the Gulfof Mexico.

Aside from a mostly weather-related boost to cash prices inCalifornia and a supply-related recovery in San Juan prices, Juneincremental trading finished its last trading session flat to downa couple of cents almost across the board. Moderating temperaturesin areas experiencing record setting readings over the weekend andreduced end-of-month activity resulted in the minor softness.