Minimal

Wednesday’s minimal gains proved to be an accurate harbinger of a three-day market rally coming to an end. A flat Westcoast Station 2 was the sole exception to falling quotes at all other locations Thursday as the previous day’s 12.7-cent drop by prompt-month futures joined generally pleasant early-fall weather in applying downward pressure to physical gas numbers.

After rebranding itself last year and finishing a transformation into “a significant resource play company,” SM Energy Co. plans to step up development in the Eagle Ford Shale of South Texas and the Bakken-Three Forks formation while it hopes to sell down Eagle Ford assets, secure a joint venture (JV) partner in the Haynesville Shale and exit the Marcellus Shale.

Atlanta-based AGL Resources and Naperville, IL-based Nicor Inc. said last week they plan a merger that would create a holding company with seven regulated gas distribution companies serving 4.5 million customers in Illinois, Georgia, New Jersey, Virginia, Florida, Tennessee and Maryland and with a rate base of $3.8 billion. The combined company would be one of the nation’s largest gas-only distributors.

After making it through the first two months of the 2007 Atlantic hurricane season with minimal activity, recent reports point to that changing — effective immediately. With multiple storms beginning to form in the tropics and the Gulf of Mexico, at least one producer has already ordered precautionary evacuations and production shut-ins.

Despite a minimal change in interest rates, energy prices or company fundamentals, U.S. natural gas utilities continued their bullish run in the first quarter and are showing no signs of slowing down, according to a review by A.G. Edwards analysts.

Despite a minimal change in interest rates, energy prices or company fundamentals, U.S. natural gas utilities continued their bullish run in the first quarter, and they show no signs of abating, according to a review by A.G. Edwards analysts.

After natural gas futures played dead on Monday with minimal activity in either direction, traders were awaiting a spark to steer the market’s next direction. They got that spark Tuesday as AccuWeather.com Hurricane Center Chief Forecaster Joe Bastardi warned that the U.S. Gulf Coast, which avoided the wrath of major storms and hurricanes in 2006, is at much higher risk of destructive tropical weather this year (see related story). April natural gas, which expires Wednesday, soared to a high of $7.530 Tuesday before settling at $7.503, up 24.9 cents on the day. The May contract, which takes over front-month status in after-hours trading Wednesday, added 23.2 cents Tuesday to finish at $7.615. However, prices pushed even higher late Tuesday afternoon in Globex trading due to an unsubstantiated rumor out of the Middle East.

Based on expectations that Rita damage will be minimal and major hurricanes threats have ended for the 2005 season, energy consultant Stephen Smith said he’s betting Henry Hub cash ($15.27 on Sept. 22) will come tumbling down over the next week to 10 days and November futures ($12.687 Friday) will fall by more than $1/MMBtu before expiring in late October. Smith and others are seeing demand destruction about matching shut-ins going forward.

With preliminary damage assessments from Hurricane Dennis showing minimal impact to Gulf of Mexico production facilities, August natural gas futures traded lower in Sunday night’s overnight Access trading session. However, after opening Monday all of the way down at $7.36, traders realized they may have overreacted a bit.