Nearly

Following two days of nearly unchecked buying last week, bullswere quick out of the chute again yesterday as they bid the Augustcontract higher in early trading. However, the same profit takingwhich capped gains Friday thwarted the buying again yesterday whenprices could not break above the $2.58 level. The August contractspent the rest of the session chopping sideways before eventuallyfinishing up 1.4 cents to $2.542.

After cascading nearly 15 cents lower Tuesday and Wednesday,natural gas futures rebounded yesterday as traders ignored thebearish technical picture and focused instead on constructivefundamental factors. The August contract slipped at the close, butwas still able to post a 2.1-cent advance for the day to $2.162.

The Energy Information Administration released its Annual EnergyReview this week chronicling 50 years of changes in the U.S. energyindustry. Fifty years ago the nation was nearly self-sufficient inpetroleum and was a net exporter of natural gas, the report notes.Now, on the eve of the new century, America imports more than half ofits petroleum and 15% of its natural gas. Gas supply and demand werein relative balance in the U.S. until the mid-1980s when aproduction-consumption gap developed. In 1998, U.S. production was 19Tcf, consumption was 21 Tcf and imports were 3 Tcf. While the numberof wells producing gas in the U.S. grew 263% over the 50 years, theaverage output per well fell by 55%. The report is available at http://www.eia.doe.gov/emeu/aer/ on EIA’s web site.Printed copes will be available later this month from the U.S.Government Printing Office, (202) 512-1800, or through EIA’s NationalEnergy Information Center, (202) 586-8800.

Nearly every trading point continued to build Wednesday on theslight degree of bullishness established on Tuesday. The majorityof increases were moderate, within the range of 2-4 cents. Therewas “just a little more heat” to raise cooling load a notch higher,said a Midcontinent source, and the futures screen literally put inits 2 cents worth with a rise of a little over that amount.

Normalizing weather caused cash prices at most points to drop afew cents to nearly a dime yesterday with the Chicago pointsaccruing the largest losses, but the downturn failed to abatemarketers’ optimism, which was buoyed by a new six- to 10-dayforecast calling for below-normal temperatures for a large portionof the nation.

Williams’ exploration and production division increased the sizeof its gas reserve holdings by nearly 30% last week, buying 184Bcfe of proved reserves with 30 MMcf/d of production and 192,000undeveloped acres in the Rocky Mountain region from MCN Energy for$106 million. An additional 35 Bcfe of proved reserves in theRockies were sold by MCN to other unnamed buyers.

Williams’ exploration and production division increased the sizeof its gas reserve holdings by nearly 30% yesterday, buying 184Bcfe of proved reserves with 30 MMcf/d of production and 192,000undeveloped acres in the Rocky Mountain region from MCN Energy for$106 million. An additional 35 Bcfe of proved reserves in theRockies were sold by MCN to other unnamed buyers.

Richmond, VA-based Dominion Energy Inc. is completing its purchaseof gas producer Remington Energy Ltd., of Calgary, AB in a deal valuedat nearly US$300 million that will give Dominion a stake in AlliancePipeline. Still to be completed is its $6.3 billion deal to buyConsolidated Natural Gas (CNG) which was originally announced inFebruary just days before the Remington buyout was revealed (See Daily GPI, Feb. 25, 1999).

Chesapeake Energy 1998 year-end results were hammered bynon-cash impairment charges of $881 million. Due mainly to “thesevere decline in oil and natural gas prices during 1998″Chesapeake lost $934 million on revenues of $382 million.