Briefs

The Philadelphia City Council unanimously passed a resolution last Thursday directing the city to join a lawsuit against the Delaware River Basin Commission (DRBC) over Marcellus Shale natural gas drilling in the Delaware River Basin.

Denver-based independent Delta Petroleum Corp. has more than doubled its daily gas production with the purchase of the domestic oil and gas assets of Castle Energy Corp. The transaction includes interests in about 525 producing wells in 14 states, plus undeveloped acreage, with proved reserves of 62 Bcfe and proved developed producing reserves totaling 32 Bcfe. As part of the purchase price, the company issued 9.56 million new shares of common stock to Castle Energy. “The Castle acquisition more than doubles Delta’s daily production to approximately 22 MMcfe/d, comprised of approximately 45% oil and 55% natural gas,” said Delta CEO Roger Parker. “At current commodity prices and current daily production rates, Delta’s oil and gas revenue could be in excess of $27 million for the fiscal year ending June 30, 2003, and cash flow from operations could exceed $13 million.” Following the acquisition, Delta’s proved natural gas equivalent reserves approximate 80 Bcf, compared with 18 Bcf prior to the Castle purchase. Parker said Delta would “immediately initiate workover, recompletion and drilling activities on certain of the Castle properties in order to further increase daily production.” Shareholders approved the purchase at the company’s annual meeting May 30.

Topeka, KS-based Western Resources Inc. said it is planning to sell its $960 million stake in Tulsa-based Oneok. Western subsidiary Westar Industries has engaged JP Morgan to advise it in the sale of 4.7 million shares of Oneok common stock and preferred stock that is convertible into 39.9 million additional shares of Oneok common stock, representing about 44.5% of total Oneok shares. Oneok is a midstream gas transporter in the Midcontinent region and the largest natural gas distributor in Kansas and Oklahoma, operating as Kansas Gas Service and Oklahoma Natural Gas, which serve 1.4 million customers. Western Resources has total assets of $6.6 billion, including security company Protection One and electric utility Westar Energy, which serves 640,000 customers in Kansas.

Range Resources reported that fourth quarter 2004 production volumes rose to 214.8 MMfe/d, a 30% increase comapred to 4Q2003 levels. Production for the year averaged 196 MMcfe/d, a 23% increase over 2003. About 71% of the company’s production in the quarter was natural gas. The company’s production is projected to continue to increase sharply in 2005. Range currently expects first quarter 2005 production to reach 224-226 MMcfe per day, a 27% increase over productiong during the first quarter of 2004 and a 5% increase over the most recent quarter. Range’s fourth quarter 2004 oil and gas price realizations (including the impact of hedging) averaged $4.85/Mcfe, a 20% increase over the prior-year period. First quarter 2005 price realizations are expected to average $5-$5.10/Mcfe, which is 25% higher than the prior-year period.

As expected, Colorado Interstate Gas (CIG), a subsidiary of El Paso Corp., last week filed a formal application with FERC to construct the proposed Raton Basin expansion project (see NGI, Jan. 10). The project’s targeted date for initial service is Oct. 1, 2005, with full completion in December 2005. The $61 million expansion will add 104,600 Dth/d of natural gas transmission capacity from the Raton Basin to Midcontinent delivery systems in south-central Colorado and the Oklahoma Panhandle. El Paso said the project includes 102 miles of 16-, 20-, and 24-inch pipeline looping, 1,770 horsepower of additional compression and new metering facilities. “With this expansion, CIG will have more than 380,000 Dth/d of daily firm delivery capacity available to the production community in the Raton Basin. Both producers and shippers will benefit from our enhanced ability to deliver gas to premium growth markets,” said James Cleary, president of El Paso’s Western Pipeline Group. Five producing shippers have executed firm agreements with minimum 10-year terms for transportation services on the project. They are Pioneer Natural Resources Co., El Paso Energy Raton LLC, Red River Ranch Holding LLC, Apple Tree Holdings LLC and XTO Energy.

Natural gas pipeline partnership Northern Border Partners LP said strong gas prices and the gain from the sale of a Canadian pipeline stake will push its earnings forecast for 2004 about 10 cents above Wall Street estimates. Net income for 2004 is expected to range between $141-144 million ($2.81-2.77/unit), including a $3.4 million (7 cents/unit) gain from selling a stake in its Gregg Lake/Obed Pipeline in Alberta. The Partnership sold its interest in the Alberta pipe in mid-December for $13.8 million. Other items affecting 2004 results include favorable pricing of natural gas and natural gas liquids in the Williston Basin; accounting for financing costs; and adjustments to reserves made in the normal course of business. Wall Street analysts had pegged 2004 average earnings at $2.71/unit.

Two published reports Friday indicated that the third largest oil and natural gas company in China was considering a takeover bid to acquire all or part of Unocal Corp. Both the Wall Street Journal and London’s Financial Times said that China National Offshore Oil Corp. (CNOOC) was considering making a bid of more than $13 billion for the El Segundo, CA-based company. Unocal is ranked as the ninth largest U.S. energy company in terms of reserves. According to sources, the state-owned CNOOC has asked financiers to study taking over the entire company and then selling the U.S. assets. The Journal cited unnamed sources and called CNOOC’s interest “highly preliminary.” Unocal had no comment on the reports.

Occidental Petroleum Corp. said Thursday that several 4Q2004 charges and a tax credit, unrelated to its oil and natural gas business, will negatively impact earnings by about $65 million (16 cents/share). The biggest charge follows the closing of the company’s chemicals affiliate, Occidental Chemical Corp. (OxyChem), which it said it was exiting for “strategic and economic reasons.” The unprofitable vinyl specialty resins business is in Pottstown, PA was closed, resulting in a pre-tax charge of $53 million. Approximately 220 employees will be affected by the closure, Occidental said. Besides the plant closure, Occidental also will take a pre-tax charge of $12 million to write-off some production facilities using mercury cell technology at OxyChem’s Delaware City, DE chloralkali plant. These actions were taken to strengthen the company’s profitable core chloralkali and polyvinyl chloride (PVC) business. Occidental also will take pre-tax charges totaling $76 million to increase its environmental remediation reserves, provide for several ongoing litigation matters and increase its self-insurance reserves. The environmental charge included in the total mainly reflects revisions of cost estimates and changes in work programs at a number of existing remediation sites. These charges will be partially offset by a tax credit of approximately $27 million that will be recorded to reflect the settlement of some income tax audit issues. Following the announcement, Standard & Poor’s Equity Research reiterated a “buy” rating and lowered the 4Q2004 operating earnings estimate to $1.70/share from $1.72. S&P Equity Research raised 2005 earnings estimates by a penny to $6.31.

The Energy Information Administration (EIA) said Wednesday that it has delayed the release of some of its January oil and natural gas inventory reports in observance of the Martin Luther King holiday on Monday, Jan. 17 and the presidential inauguration on Thursday, Jan. 20. The weekly natural gas storage report that would normally be released on Thursday, Jan. 20 will be delayed until Friday, Jan. 21 at 10:30 a.m (EST). The EIA’s report on U.S. crude oil and petroleum product inventories will be delayed until 5 p.m. (EST) on Wednesday, Jan. 19, instead of the weekly report’s normal release on Wednesday at 10:30 a.m. (EST).