Forecast

The stocks of exploration and production (E&P) companies are set to appreciate 25% to 35% in the next 12 months, making it time for investors to buy, according to Raymond James Energy’s latest Stat of the Week.

Independent oil and gas exploration and production companies (E&Ps) still face increasing challenges to reinvest “substantial” capital every year as they seek new reserves to replace current production, according to Moody’s Investors Service. However, analysts because technical and geological risks remain high in mature basins and the deepwater, analysts expect more consolidation, especially among independents.

Despite another blast of extremely cold air and an early price push to the upside, natural gas futures slipped lower Monday as traders reacted to updated weather forecasts confirming that at least a temporary warm-up is in store for much of the country. With that the February contract fell 12.8 cents to $5.396 — its lowest daily close since Jan. 14. At 89,844 estimated volume was light considering it was the third-to-last trading day before expiration-day.

Northern Natural Gas declared a System Overrun Limitation for all market-area zones (ABC, D and E/F), effective Thursday.

In a Critical Notice Tuesday, Algonquin said recent forecast data for its service territory show demand continuing to strengthen in response to colder temperatures. In order to mitigate conditions that could threaten its firm service capability, the pipeline said it “is imperative” that effective with the beginning of Wednesday’s gas day, shippers and point operators limit their daily variances between scheduled deliveries and actual deliveries to 2% or less. Any quantity outside the 2% due-pipeline tolerance will be deemed unauthorized and charged a $15/Dth penalty, Algonquin said. Also on Wednesday, the following restrictions will take effect: no nominated increases through Stony Point Compressor Station except for primary no-notice; no forward-haul IT or Authorized Overrun anywhere on the system; and no due-shipper gas available anywhere on the system.

Burlington Resources Inc., with 90% of its oil and natural gas assets in North America, increased its fourth quarter production forecast on Monday, attributing the jump to higher-than-anticipated gas production in Canada. The Houston independent also retained some assets marked for sale longer than expected, which will improve the bottom line, it said.

Based on the weather forecast and projected demand, Sonat is subjecting eight groups on its system to an OFO Type 3 Thursday until further notice. The OFO carries penalties of $15/Dth for excessive negative imbalances. These groups are affected: Birmingham Group, South Main Zone 2, Atlanta Group, South Main Zone 3, East of Wrens, South Georgia-Lee County, Brunswick Line and Savannah Line.

Citing a forecast of cold temperatures through the Thanksgiving weekend and into next week in Market Zone 3 (M-3), Texas Eastern said Tuesday that due to anticipated operating conditions and loads, it will restrict interruptible M-3 deliveries starting Wednesday until further notice. “The need for further restrictions will be evaluated as conditions unfold,” the pipeline said. Also effective with Wednesday’s gas day, no due-shipper gas will be allowed to be taken off the system.

Soothsayers are having a tough time coming up with a solid price forecast for this winter and next year because of the uncertainty over a potential war with Iraq and the mixed views about winter weather and gas supply.