Development

Kerr-McGee Corp. increased its capital budget for exploration and production development projects by 15%, or $120 million, to $900 million, to concentrate more on identified projects in the Denver-Julesburg Basin and the Gulf Coast.

It was a rocky week for Williams, which delayed its final earnings estimate Tuesday in order to evaluate contingent liabilities with its spin-off Williams Communications Group (WCG), an action that sparked a rash of investor lawsuits and split the two main ratings agencies down the middle. Late Friday Moody’s Investor Service confirmed Williams ratings, and classified them as stable, while even later Friday Standard and Poor’s (S&P) placed Williams and subsidiaries on CreditWatch with negative implications.

A new run is being taken at one of the tallest hurdles confronting natural gas supply development in Canada, fear of emissions from “sour” reserves, laced with lethal hydrogen-sulphide, which make up about a third of Canada’s gas resources. This time the scientific effort will be quartered in the northeastern United States in an independent laboratory far removed from conflicts in the western provinces.

Denbury Resources said it has reduced its projected 2002 development and exploration budget by $25 million (20%) to $95 million to adjust for the loss in potential revenue and cash flow during 2002 from its natural gas hedges with Enron Corp. and for the general decline in commodity prices.

Due to spiraling commodity prices, which have led to a drop in Devon Energy Corp.’s stock price, Devon and Mitchell Energy & Development Corp. said Friday that the board of directors of each company has amended their merger agreement to address certain risks posed by Devon’s falling stock price. The amendment would provide for an alternate structure to mitigate the risks in the event the stock price would prevent the issuance of certain tax opinions, which are a condition to the merger transaction.

Charles River Associates Inc. (CRA) has been chosen by the New York State Energy Research and Development Authority (NYSERDA) and the New York Independent System Operator (NYISO) to analyze the interactions between natural gas and electricity systems within the state. Among other things, CRA will examine whether existing pipelines will be able to handle the increased flow of gas required by proposed power plants in the state.

Despite the bullish double whammy of rising crude prices and the development of a tropical wave in the Atlantic, natural gas futures remained extremely quiet Friday, as traders elected to wait until a clearer fundamental and technical picture develops. With that the November contract spent a second straight day moving sideways, slipping 0.9 cents at the close to finish at $2.244. November crude oil, meanwhile, tracked 69 cents higher to close at $23.43.

Contrary to reports that Devon Energy Corp.’s plans to acquire Mitchell Energy & Development Corp. as well as Anderson Exploration Co. are falling apart as its stock falls, Devon CEO Larry Nichols assuaged investors on Wednesday during a conference call and reaffirmed his company’s commitment to completing both deals. When the deals are consummated — expected within the next three months — Oklahoma City-based Devon would become the largest independent in the United States.

If Devon Energy Corp. and Mitchell Energy & Development Corp. have to amend their merger agreement, they may create a new holding company to ensure that the transaction remains tax-free for Mitchell shareholders. The proposed change to the merger agreement was announced Wednesday (see Daily GPI, Sept. 27). Under the existing agreement, Mitchell would merge with a subsidiary of Devon in a tax-free transaction to the extent that Mitchell’s shareholders would receive cash. Because of the decline in Devon’s stock price in recent weeks, the original agreement created doubt as to whether those opinions could be obtained at closing. An amended agreement would require both parties to complete the transaction as structured if the tax opinions are available, but in the event that the opinions are not available, the parties would create a new holding company with Devon and Mitchell the subsidiaries. By doing this, Devon’s shareholders would exchange each of their Devon shares for one share of the new holding company and Mitchell shareholders would exchange their shares for .585 shares of the new company and $31 in cash. The new holding company, which would keep the transaction tax-free except for the cash paid to Mitchell shareholders, would include Devon’s current board of directors along with Todd Mitchell, the son of Mitchell CEO George Mitchell.