Mmbtu

With gas futures prices topping out at $7.70/MMBtu Thursday, it’s no secret that there is a natural gas supply problem in North America. Consultants at Energy and Environmental Analysis Inc. (EEA) say that problem will get even worse before it gets better, with Henry Hub gas prices averaging $7.50 all of next year and $8.50 in 2007. The current 2007 futures strip is about $1.00 less than that.

In the fourth sale of its kind, the Minerals Management Service (MMS) recently awarded a contract to Cinergy Marketing & Trade LP for delivery of 9,000 MMBtu/d, with the gas coming from the Bureau of Land Management’s (BLM) Cliffside Helium Enrichment Unit near Amarillo, TX. The 12-month delivery began April 1.

As part of the agency’s royalty-in-kind (RIK) program, the Minerals Management Service (MMS) has requested written offers to purchase 387,000 MMBtu/d of royalty gas produced from federal leases in the Gulf of Mexico. The production is delivered into 11 offshore pipeline systems, including ANR Nearshore, Columbia Gulf Bluewater, Central Texas Gathering System, Garden Banks, Mississippi Canyon, Matagorda Offshore Pipeline System, Seagull Shoreline, Stingray, Tennessee Gas 800 Leg, Tetco East Louisiana and the Transco Southeast Lateral. MMS said it may award a contract on the basis of the initial offer received without discussion. Accordingly, each initial offer should be submitted on the most favorable terms that the offerer can submit. However, MMS may negotiate with offerers in the event offers of similar or unanticipated value are received. MMS said the Henry Hub and/or Nymex are preferred indices on all packages in addition to the named indices. Initial deliveries of royalty gas to the buyer will commence on Nov. 1. The royalty gas delivery period will be for a term of five months ending March 31, 2005 or 12 months ending Oct. 31, 2005, depending on the value of offers received. Written offers can be submitted via facsimile at (303)-231-3846 by 11 a.m. (CT) on Oct. 6. The agency said it will award the offers by 3:00 p.m. on Oct. 7. For more information, contact Mike DeBerard at (303)-231-3884, Karen Bigelow at (303)-231-3890, or Jeff Olson at (303)-231-3225. The MMS-implemented RIK program generates revenues through receiving oil and gas royalties in kind, rather than in cash, and competitively selling the commodities in the marketplace.

Birmingham, AL-based producer Energen Resources increased its hedge position to include another 3.6 Bcf of gas production at a price of $6/MMBtu and 240,000 bbl of sour crude at an average Nymex price of $33.98/bbl. The company now has prices locked in for 41% of its 2005 gas production and 40% of its 2005 crude oil production.

Even with a conservative Henry Hub gas price forecast of $5/MMBtu in 2004 and $3.50 over the long term and an oil price forecast of $30/bbl in 2004 and $21/bbl for beyond 2005, the credit rating picture and overall fundamentals for the exploration and production sector should continue to improve unless certain thorny issues, such as reserve revisions, get in the way of some companies, Standard and Poor’s (S&P) said in a new report.

Even with a conservative Henry Hub gas price forecast of $5/MMBtu in 2004 and $3.50 over the long term and an oil price forecast of $30/bbl in 2004 and $21/bbl for beyond 2005, the credit rating picture and overall fundamentals for the exploration and production sector should continue to improve unless certain thorny issues, such as reserve revisions, get in the way of some companies, Standard and Poor’s (S&P) said in a new report.

The Department of the Interior’s Minerals Management Service (MMS) said last week that 329,000 MMBtu of royalty-in-kind (RIK) gas produced from federal leases in the Gulf of Mexico was sold to eight companies during a March sale.

The Department of the Interior’s Minerals Management Service (MMS) said Wednesday that 329,000 MMBtu of royalty-in-kind (RIK) gas produced from federal leases in the Gulf of Mexico was sold to eight companies during a March sale.

UBS analysts raised their gas price forecast last week by 40 cents/MMBtu to $5.05 at the Henry Hub for 2004 and increased their long-term “equilibrium” price for natural gas to $4.65 from $4.15, citing higher than expected first quarter price levels, sharper first year well decline rates, high crude oil prices and an abundance of gas-fired power generation.