Increasing

El Paso Corp.’s accounting for results from restructured power contracts was in the headlines again Tuesday in the Wall Street Journal and The New York Times, and investors avoided EP shares like the plague in reaction to the news. El Paso’s stock plummeted 23% to $10.40, only a day after UBS Warburg raised its stock rating on the company to “Strong Buy.” Meanwhile, Standard and Poor’s (S&P) said it found nothing new in the newspaper reports and reaffirmed El Paso’s “BBB+/Stable/A2” credit ratings, despite the sharp downturn in its stock and in investor sentiment.

El Paso Corp.’s accounting for results from restructured power contracts was in the headlines again Tuesday in the Wall Street Journal and The New York Times, and investors avoided EP shares like the plague in reaction to the news. El Paso’s stock plummeted 23% to $10.40, only a day after UBS Warburg raised its stock rating on the company to “Strong Buy.” Meanwhile, Standard and Poor’s (S&P) said it found nothing new in the newspaper reports and reaffirmed El Paso’s “BBB+/Stable/A2” credit ratings, despite the sharp downturn in its stock and in investor sentiment.

Almost exactly as it did Friday, natural gas futures opened higher, but ultimately tumbled lower Monday as technical factors and scale-up selling dictated the trading action. The August contract finished at $2.947, up 1.4 cents for the day, but more than a nickel below its mid-morning high at $3.00. Volume was heavy with an estimated 108,301 contracts changing hands.

Almost exactly as it did Friday, natural gas futures opened higher, but ultimately tumbled lower Monday as technical factors and scale-up selling dictated the trading action. The August contract finished at $2.947, up 1.4 cents for the day, but more than a nickel below its mid-morning high at $3.00. Volume was heavy with an estimated 108,301 contracts changing hands.

Looking to help meet North America’s ever-increasing appetite for natural gas, companies such as El Paso Corp. and Shell have been looking outside the box to find new sources of natural gas, and new methods to deliver it to the continent. El Paso announced that it has finalized LNG agreements with a Norwegian consortium, while Shell has proposed its floating liquefied natural gas technology (FLNG) for Timor Sea production. Shell also announced last week that it will invest in the first LNG export project in Venezuela, which intends to tap 10 Tcf of gas reserves and send them to the U.S. East Coast (see related story).

Despite falling gas prices, declining demand and increasing production, the rush is still on to bring more liquefied natural gas (LNG) to the United States. Two El Paso Corp. subsidiaries are conducting separate open seasons to determine non-binding customer interest in transportation capacity on pipelines that will transport natural gas from El Paso Global LNG’s planned terminal on Grand Bahama Island to Florida.

Increasing financial risk in the energy trading business has prompted Natural Gas Exchange (NGX) to move to a fully collateralized gas commodity clearinghouse on July 1. The move is designed to ensure the integrity and security of exchange and clearing operations. NGX will require all parties to post collateral in the form of cash margin or a letter of credit.

Duke Energy Corp.’s deal to pick up Vancouver-based Westcoast Energy moved another step closer Friday after receiving approval from federal Industry Canada (similar to the U.S.Dept. of Commerce). The cash, stock and debt acquisition, valued at US$8 billion, would allow the Charlotte, NC-based diversified energy company to grow its Canadian business and expand its North American natural gas infrastructure. As part of the transaction, Duke also plans a significant financial investment in its stake, adding several new Canadian offices and donating funds for Canadian educational research.

Canadian producers have been surprisingly effective in increasing producing despite steep wellhead decline rates and expectations that the response to drilling would be weak, according Lehman Brothers. Data recently released by Canadian pipelines shows gas production was up 9.3% or 1.3 Bcf/d in November from November 2000, which was following the 8.4% increase in October. However, E&P expenditures are expected to be down 20% this year and rig utilizations already have dropped by 21%.