March

With natural gas futures continuing to climb higher from a low of $6.45 on March 8, the New York Mercantile Exchange Inc. (Nymex) said Thursday that it is increasing some margins for its natural gas, Nymex miNY natural gas, Henry Hub swing swap, Henry Hub swap, and Henry Hub penultimate swap futures contracts, as of the close of business on Friday. May natural gas futures closed at $8.064 on Thursday.

Delivery of gas sold in the largest Minerals Management Service (MMS) royalty in kind (RIK) gas sale to date began April 1. The sale, which concluded in mid-March, provided approximately 118 Bcf of RIK gas to be delivered over seven- or 12-month terms. Gas is being delivered to 14 offshore pipelines originating in the Gulf of Mexico. The amount is equivalent to 509,800 MMBtu/d. Nine companies are buying the gas.

The Sea Robin Processing Plant operated by Amerada Hess was back online (see Daily GPI, March 27) and began processing around noon Sunday, Sea Robin Pipeline reported. It asked shippers to adjust gas flows and nominations as needed.

Looking back on the winter that wasn’t in his Monthly Energy Outlook issued March 23, Stephen Smith of Stephen Smith Associates is projecting wholesale natural gas prices near $6-$7 for the second quarter, “and depending on summer heat and hurricanes, possibly longer.”

Minerals Management Service Director Johnnie Burton will be in New Orleans on March 15 to host the Central Gulf of Mexico Lease Sale 198.Burton will open the sale at 9 a.m. (CST) in the Napoleon Ballroom with brief remarks.Immediately following the bid reading, she will hold a media availability to discuss the results of the sale. Lease Sale 198 encompasses 4,040 unleased blocks covering approximately 21.3 million acres in the Central GOM Outer Continental Shelf Planning Area offshore Louisiana, Mississippi, and Alabama. The blocks are located from three to more than 210 miles offshore, in water depths of four to more than 3,400 meters. MMS estimates the lease sale could result in the production of 276 to 654 million barrels of oil and 1.59 to 3.30 Tcf of natural gas. The lease sale will be broadcast at www.oosa.com.

Petrohawk Energy Corp. closed its previously announced North Louisiana gas properties acquisition and entered into a separate transaction to unload its Gulf of Mexico properties. First announced in December (see Daily GPI, Dec. 15, 2005), the Houston-based junior independent purchased two packages of natural gas reserves in the Elm Grove and Caspiana fields of northern Louisiana in private transactions for $262 million, before working capital and other closing adjustments. As of Dec. 31, 2005, Petrohawk owned 551 Bcfe in proved reserves, of which 76% were natural gas. With the added production from this transaction, Petrohawk’s current estimated production rate is 146 MMcfe/d. The acquired reserves are 98% natural gas and include an estimated 106 Bcfe of proved reserves and 100 Bcfe of probable and possible reserves. The assets include about 27,400 gross acres, with 80% of them operated. They include 11 producing wells and 185 identified drilling locations. Average 2006 projected output is expected to be 20 MMcfe/d; current production is 16 MMcfe/d. Lease operating expenses for 2006 are estimated to be $0.55/MMcfe. Petrohawk also announced Monday it is has entered into a definitive agreement with a private company to sell substantially all of its Gulf of Mexico properties for $52.5 million in cash. Petrohawk said these properties have internally estimated proved reserves of 26 Bcfe, are 70% gas, and are 59% proved developed and 27% operated, with lease operating expenses of $2.35 per Mcfe. Petrohawk estimates current production at 10 MMcfe/d. The transaction is expected to close in March 2006.

Between now and March retail electric bills for some Southern California Edison Co. customers could be increased three times, the Rosemead, CA-based Edison International utility announced Tuesday, and two of the three rate hikes are attributable to continuing high wholesale natural gas prices. Sempra Energy’s Southern California Gas Co. utility said it expects retail gas bills to rise 45% to 55% this winter.

Dominion Exploration and Production said about 200 members of its offshore business unit will begin returning to New Orleans in March. The company’s announcement follows Shell Exploration & Production Co.’s news last week that it will move 1,000 employees back to the Big Easy beginning in January (see Daily GPI, Dec. 16).

Calgary-based Canadian Superior said last week that unusually warm weather in February and March, which resulted in a premature spring breakup, led to a “slight, temporary decline” of 7% in oil and natural gas production during the first quarter.