Massive

Even with the massive 1 Tcf storage surplus compared to last year’s levels, UBS Warburg’s ever-bullish analyst, Ron Barone, said he expects gas prices to go up and demand to go unsupplied in the not so distant future due to dwindling reserves and declining drilling rig utilization.

Investors in oil and natural gas companies shouldn’t be surprised if asset writedowns for 2001 are in the $10 billion neighborhood, according to the John S. Herold, Inc. consulting firm, which already has tracked more than $2 billion in announced asset writedowns and impairments this year.

Investors in oil and natural gas companies shouldn’t be surprised if asset writedowns for 2001 are in the $10 billion neighborhood, according to the John S. Herold, Inc. consulting firm, which already has tracked more than $2 billion in announced asset writedowns and impairments this year.

Kinder Morgan Energy Partners LP (KMP) added the massive eastern Texas pipeline system of Tejas Gas LLC to its shopping cart this Christmas. The company said it’s buying Tejas, a wholly owned subsidiary of InterGen (North America) Inc. — which is a joint venture of Royal Dutch Shell and Bechtel — for $750 million in cash, or “a little less than eight times the [annual] EBITDA of the system,” according to CEO Richard Kinder.

Kinder Morgan Energy Partners LP (KMP) added the massive eastern Texas pipeline system of Tejas Gas LLC to its shopping cart this Christmas. The company said it’s buying Tejas, a wholly owned subsidiary of InterGen (North America) Inc. — which is a joint venture of Royal Dutch Shell and Bechtel — for $750 million in cash, or “a little less than eight times the [annual] EBITDA of the system,” according to CEO Richard Kinder.

Expectations of another massive weekly storage injection figure — confirmed by AGA at 117 Bcf for the week ending June 1 — combined with milder weather and high line pack, put significant downward pressure on cash and futures prices yesterday. Most eastern points were down 20-30 cents, while California prices into PG&E at Topock dipped below $3 in response to a high inventory operational flow order. SoCal-Topock prices dropped more than a dollar.

El Paso Corp.’s securities filing late last week revealed that its Merchant Energy segment, which includes the company’s trading and risk management functions, posted an astounding increase in 2000 earnings before interest and taxes over 1999. The segment posted $3 million in EBIT in 1999, compared with $563 million for 2000.

Buoyed by a massive buying binge by commercial traders who werelong paper positions and short January futures, natural gas futuressoared higher during the last 30 minutes of trading Wednesday,catapulting the market briefly above key resistance at $10.00. Whenall the dust had cleared and the orders tabulated in the data roomat Nymex, the numbers were staggering. During its 20-day tenure asprompt month at Nymex, January gained $3.773 or more than 60% tonotch the highest settlement in the history of the commodity at$9.98.

Building more greenfield natural gas pipelines to the Northeastis not the answer. In fact, massive switching from distillate oilto natural gas will not protect the region’s energy customers froma repeat of the heating oil price shocks that they experiencedearlier this year. If anything, it could aggravate prices not onlyfor distillate oil but for gas, the Energy InformationAdministration (EIA) said in a report issued yesterday.