Loss

Barring an unforeseen loss of equipment, the Northeast — having recently fought off broiling temperatures and soaring demands for electricity — should be able to successfully make it through the rest of this summer, according to Tim Gallagher, manager of technical services at the North American Electric Reliability Council (NERC).

The new millenium saw the loss of two major energy companies bythree national energy trade associations, the Interstate NaturalGas Association of America (INGAA), the American Gas Association(AGA), the Edison Electric Institute (EEI), while a fourth, theNatural Gas Supply Association (NGSA), says it is poised for acomeback.

Natural Gas futures slipped lower for the second day in a rowyesterday as light scale-down industrial buying was no match forcommercial and fund selling. The November contract traded to itslowest price in ten weeks at $2.52 before settling at $2.586, 3.9cents lower on the day.

Both independent and major producers are concerned that FERC’sproposed rulemaking on the Outer Continental Shelf (OCS), whichseeks to extend to virtually all OCS gas pipelines some form oflighter handed regulation, is the first step in a Commission planto entirely abandon its Natural Gas Act (NGA) regulation ofoffshore jurisdictional pipelines.

With just over a year to go before the new Alberta-to-Chicagolink, Alliance Pipeline, goes into service, TransCanada PipeLinesand affiliate Nova Gas Transmission already are feeling the impactof the competition.

Chevron announced last Thursday it lost 35% of its profitscompared to the same period in 1998. The company reported a netincome of $329 million or $0.50/diluted share versus $507 millionor $0.77/diluted share in 1998’s first quarter. The oil and gascompany sold oil at an average of under $10/barrel (a 20% drop form1Q98 prices) and gas at an average of $1.63/Mcf (a 22% drop from 1Q98).

Chevron announced Thursday it lost 35% of its profits comparedto the same period in 1998. The company reported a net income of$329 million or $0.50/diluted share versus $507 million or$0.77/diluted share in 1998’s first quarter. The oil and gascompany sold oil at an average of under $10/barrel (a 20% drop form1Q98 prices) and gas at an average of $1.63/Mcf (a 22% drop from 1Q98).

After a $297 million net loss in 1998, it should come as nosurprise that Baker Hughes is cutting capital spending this yearand will not be out shopping for assets or new combinations likemany other industry companies. Drilling activity continues to plumbnew depths (figuratively, not literally), reaching a record lowlast week with 498 rotary rigs operating in the U.S.

Despite a stinging second quarter net income loss of $17.3million, or $0.07 per share, compared to last year’s second quarternet income of $74 million, or $0.30 per share, Union PacificResources noted the addition of Norcen Energy assets helped pushdiscretionary cash flow up 20% ($56 million) to $332 million ($1.34per share). Producing property volumes increased to nearly 2.8Bcf/d, a 72% increase over the same period last year. The drop innet income was a result of lower commodity prices, higherexploration expenses and interest expense from the Norcenacquisition, UPR said. Included in the company’s second quarterresults were a pre-tax gain of $26 million on the sale of DJ Basinproperties, a settlement of gas supply agreements which addedpre-tax income of $30 million and an $11 million pre- tax gain on aforeign currency exchange.