Dilemma

Independent exploration and production (E&P) operators in the United States have faced a funding dilemma since they began rushing into unconventionals. With more resources than capital, many have taken loans that have increased their debt, or they’ve sought out joint venture (JV) partners to pay for drilling expenses.

The impossibility of predicting future natural gas and coal prices adds to the dilemma, but Rosemead, CA-based Edison International’s two-edged conundrum involving an idled California nuclear plant and money-losing merchant coal-fired generation assets in Illinois and Pennsylvania remains unresolved as time constraints worsen the potential financial fallout.

The New York Mercantile Exchange (Nymex) solved the dilemma of how to take its electronic energy trading to a round-the-clock schedule. Nymex Holdings Inc. reported Thursday that it has entered into a technology services agreement with the Chicago Mercantile Exchange (CME), under which the CME will become the exclusive electronic trading services provider for Nymex’s energy futures and options contracts.

Faced with the dilemma of whether to side with bullish longer-term technicals or bearish short-term fundamentals, natural gas traders chose the latter Wednesday as sellers deposited the prompt contract to its lowest point in a week. By finishing the session at $4.927, the September natural gas futures contract lost 11.1 cents on its final trading day, but was up 23.4 cents from the final resting place of the August contract. A year ago the September 2002 contract went off the board at $3.288.