December

A California Superior Court in San Diego is expected to rule the first week of December in the $1.6 billion settlement between El Paso Corp. and four western states, the principal one being California. Two separate court approvals are needed before the Federal Energy Regulatory Commission-approved deal can be made final, both of which could come before the end of the year.

The El Nino weather pattern, said NW Natural, which affected the western United States in December 2002, continued in early 2003, “such that January weather in NW Natural’s service area was 15% warmer than average.” Overall, first quarter temperatures were 8% warmer than average and 12% warmer than in the first quarter of 2002.

The difference between wellhead prices and Henry Hub prices between August 1996 and December 2000 averaged 32 cents/Mcf, with Hub prices averaging 10.8% higher, according to a study by the Energy Department’s Energy Information Administration (EIA). However, the median value between the two of 24 cents/Mcf may be a better measure, EIA said.

Mirant’s stock price has plunged 60% since the beginning of December forcing the company to take drastic actions to restore investor confidence. Enron’s bankruptcy, Mirant’s credit rating downgrade by Moody’s Investor Services and questions about its accounting practices all have played a role in the collapse of its stock.

EOG Resources Canada Inc. announced in late December it would buy Fox Energy Corp., a junior oil and gas company with assets in Western Canada. EOG will acquire all of the issued and outstanding common shares of the Calgary-based company, paying C$0.46 in cash for each Fox common share. EOG’s offer is an 18% premium to the closing price of Fox on Dec. 21, 2001, when Fox closed at C$0.39 after opening at C$0.42. This year, Fox has drilled seven wells in its core assets, with a 71% success rate.

The January aftermarket started out strongly relative to end-of-December numbers, but without straying too far from apparent first-of-month index levels. Nearly all of the swing movement ranged from flat to about 20 cents higher, but gains tended to get much bigger at Northeast citygates, topped off by an advance of more than a dollar at the Transco Zone 6-NYC pool.

With wholesale gas costs plummeting, Dominion East Ohio Gas said its customers will pay 25% less for natural gas in November, December and January than they paid during the same months a year earlier. Under a gas cost recovery (GCR) decrease filed on Wednesday with the Public Utilities Commission of Ohio (PUCO), Dominion East Ohio sales customers, starting Oct. 26, will pay $5.38/Mcf, down 12.8% from the current $6.17/Mcf and down 25% from the $7.18/Mcf they paid during the third quarter last year.

El Paso Corp. has hedged almost 75% of its projected natural gas production at a Nymex price of $3.85/Mcf ($3.63/MMBtu) for September through December. Next year, about 60% of its production will be hedged at $4.19/Mcf ($3.95/MMBtu), and in 2003, about 35% is hedged at $4.19/Mcf ($3.95/MMBtu). The Houston-based company expects that its realized natural gas price will be about 30 cents/Mcf less than the Nymex price because of transportation costs and regional price differences. In an earnings update, the company estimated that a 10-cent change in the annual spot price for natural gas in 2002 would result in only a $0.02 per share change in earnings, adding it “remains comfortable with existing earnings guidance” putting it at $3.30/share this year. A 15% earnings increase is expected in 2002. The earnings are in line with First Call/Thomson Financial estimates of $3.33 a share this year and $3.84 in 2002.

It’s official, last week GPU and UtiliCorp United’s Aquila Energysubsidiary announced that in late December, the companies completedthe transaction that sent GPU International to Aquila Energy for $225million. The sale included the interests that GPU International heldin six independent generating plants and a generating project, whichis currently under development. First announced in October 2000, thefive interests, all in the United States, total approximately 500 MWof capacity (see Daily GPI, Oct. 6,2000). Aquila also receives a 50% interest in the 715 MW project,which is still under development. With this latest deal, Aquila nowowns or controls approximately 4,500 MW of generation underconstruction, in development, or in commercial operation.