Depressed

BP Amoco added another 3,000 to the heap of 7,000 job cutsalready announced in the wake of the merger of British Petroleumand Amoco and in the midst of depressed oil and gas prices. Thenewest job cuts will be worldwide, and it is not yet known how manywill be in the United States. Last week the company also announcedreplacement cost operating profit for 1998 of $6,437 million, off39% from $10,583 in 1997.

In case anyone hadn’t noticed, profoundly depressed commodityprices have the world oil industry facing serious uncertainty overits future, according to the 1999 edition of World Oil Trends, ajoint report by Arthur Andersen and Cambridge Energy ResearchAssociates (CERA).

In case anyone hadn’t noticed, profoundly depressed commodityprices have the world oil industry facing serious uncertainty overits future, according to the 1999 edition of World Oil Trends, ajoint report by Arthur Andersen and Cambridge Energy ResearchAssociates (CERA).

With its stock price languishing around a dollar, ChesapeakeEnergy is watching the depressed gas and oil market from atop a$900 million mountain of debt. The view, according to CEO Aubrey K.McClendon, is one of opportunity. “We think our company has one ofthe best upside stories for natural gas prices down the road.”

Depressed gas liquids prices don’t affect the need foradditional liquids transportation capacity in the Gulf of Mexicoregion in the view of two companies that last week joined to expandLouisiana pipeline facilities.

Consolidated Natural Gas (CNG) is taking advantage of depressedprices in the E&ampP sector and spending more of its money where itsees the most long-term bang for the buck. Having pulled out of themarketing business, CNG’s $524.5 million capital budget for 1999continues the company’s focus on expanding its exploration andproduction business. More than 60% of the 1999 budget is allocatedto CNG’s E&ampP subsidiary, CNG Producing Co.

Beyond the currently tumultuous financing markets and depressedcommodity prices there is a good deal of potential energy in themergers and acquisitions arena, according to Eric Mullins, vicepresident of Goldman Sachs.

Aquila Gas Pipeline might be taken off the auction block inlight of depressed gas liquids prices and the fear a sale pricewon’t do justice to the company’s value. Indeed, the company’ssecond quarter results were something less than stellar. Net incomewas $1.4 million, down from $7 million in the second quarter of1997. This despite the fact gas throughput and marketed volumesaveraged a record 1.4 Bcf/d, compared to 1.2 Bcf/d in the secondquarter of last year. However, total system throughput was 446MMcf/d, compared to 534 MMcf/d in the second quarter of 1997. Anincrease in gas volumes marketed off system to 954 MMcf/d from 642MMcf/d in the second quarter of 1997 reflects the continuedincreased emphasis on marketing activities. Liquids productiondecreased to 25,000 barrels/d from 38,000 barrels/d 2Q 1997. Lowliquids prices were the reason for the decline.

Weak oil prices were the bane of three major producers reportingsecond quarter earnings so far. Depressed crude prices were blamedfor second quarter and 1998 first half results significantly offfrom year-ago periods. At least one company said it may refigureE&P expenditures should the low prices persist. Gas prices alsowere off in most cases but less so than oil.