Expectations

Increased outages at its Four Corners Power Plant, combined with mild weather conditions, forced PNM Resources Inc. to drop its expected 2002 earnings.

Fourth quarter earnings expectations for Calgary-based Precision Drilling Corp. were cut nearly 70% (by C31-37 cents/share) on Wednesday because of lower-than-expected Canadian drilling activity. However, on a positive note, Precision said strengthening natural gas and world oil prices will position it to take advantage of a stronger Canadian market by the first quarter.

Despite expectations of Old Man Winter’s arrival Friday in the upper Midwest, Great Lakes and Northeast, spot prices were flat to down a few cents at most locations with even larger declines in the West where temperatures remained well above normal. The weekly gas storage report of a 1 Bcf withdrawal apparently had a little something for everyone on Thursday. It came in lower than many had expected and added a little bearish pressure to the cash market, but the withdrawal was bullish relative to the 33 Bcf injection during the same week last year, and that apparently was a factor in the 9.6 cent increase in December futures.

Coming as some encouraging news in an energy industry in the midst of a financial and credit crisis, Dominion reported Thursday operating earnings for the second quarter of $272 million (97 cents per share), compared with $180 million (72 cents per share) for the same period in 2001, excluding a $25 million charge related to the divestiture of Saxon Capital, Inc.

The weekly withdrawal from storage was slightly below average market expectations of about 90 Bcf but not surprising in light of the week’s warmer than normal weather. Working storage levels at 2,212 Bcf remain incredibly high with 1.1 Tcf more working gas than at the same time last year and 675 Bcf more than the five-year average.

Thanks to the one-two punch of a much-below-expectations storage injection report and somewhat premature winter weather that was producing near-blizzard conditions in parts of the Upper Plains and Upper Midwest, spot prices spiked intensely Thursday for gains in excess of 40 cents nearly across the board.

Fitch, the investment ratings and analysis firm, has joined the ranks of investment advisors with lowered expectations for the upstream natural gas and oil business, predicting stagnant prices through 2002 and into 2003.

Fitch, the investment ratings and analysis firm, has joined the ranks of investment advisors with lowered expectations for the upstream natural gas and oil business, predicting stagnant prices through 2002 and into 2003.

Fulfilling most market watchers’ expectations, natural gas futures continued lower Monday as weakness in the early morning over-the-counter market translated into a gap lower open when the regular open-outcry session reopened at 9:30 a.m. (EDT). The September contract was the hardest hit, tumbling 16.2 cents to close at $2.544. A hefty estimated volume of 80,799 lent credence to the price move.