Prices

Merger rumors that tweaked the stock prices of Chevron andTexaco have cooled somewhat. While the industry awaits word of adeal (or no deal), observers might consider the words of managementand economics professor Lester Thurow.

TransTexas Gas Corp. of Houston said last week, followingdiscussions with a group representing a majority of its parentcompany’s note holders, it voluntarily filed for Chapter 11bankruptcy. The company said it believes the filing will allow forcompletion of its recapitalization involving TransTexas and parent,TransAmerican Energy Corp. Details of the recapitalization plan areexpected to be filed in bankruptcy court within 30 days.

In step with the rest of the industry as it deals with supersoft commodity prices, Houston-based Pogo Producing Co. also hascut back spending. In recent years the company’s annual explorationbudgets have been between $230 million and $250 million. Lastyear’s allocation was $230 million and was set to grow to between$260 and $270 million, said CEO Paul Van Wagenen. Instead, thecompany cut back considerably. This year Pogo is planning to spendabout $170 million.

While the real price of other goods and services in the U.S.increased by 34% since 1987, the price of natural gas to consumershas decreased by an average 14%, from 1987 to 1997, according to areport used by the American Gas Association to show FERC thatretail unbundling is working. The distributors’ group told afederal/state regulatory policy conference Thursday the price toconsumers went from an average $4.47/Mcf in 1987 to $3.85 in 1997(all in 1997 $). Of that delivered price the total transportationand distribution cost to consumers went from $2.23 to $1.53, a 31%decline, AGA said, citing surveys by the Energy InformationAdministration. During the same period the wellhead price wentfrom $2.24 (in 1997 $) to $2.32 in 1997.

After two brief rally efforts failed to produce higher prices,the futures market again came under selling pressure as moreprominent bearish fundamentals more than offset below-normal marketarea temperatures. And in a rare occurrence, the 4.1-cent loss seenin the prompt March contract was outpaced by more substantiallosses in the April, May, June and July contracts.

Without clear fundamental or technical direction, the futuresmarket was left to follow the early lead of cash prices, which wasgenerally softer Friday. Lack of substantial liquidity was also alimiting factor during the abbreviated trading session as manytraders elected to remain on the sidelines. The March contractfinished down 3 cents at $1.807.

Texas producers laboring under the weight of low commodityprices are on their way to getting a temporary tax break from theTexas legislature. Last week, the Texas Senate passed S.B. 290,which grants a severance tax exemption to marginal gas and oilwells producing 90 Mcf/d or less or 15 barrels/d or less. Reliefwould kick in when gas drops below $1.80/MMBtu and/or oil dropsbelow $15/barrel for three consecutive months on the New YorkMercantile Exchange.

Providence (RI) Energy Corp. blamed a warm winter and a sharpdrop in oil prices for diminished earnings for the year ended Sept.30. Net income declined to $6.4 million, or $1.09 per share, from$7.8 million, or $1.35 per share, in fiscal 1997. However,operating revenue from the company’s non-regulated business grewmore than five-fold to $33 million.

The Midwest snowstorm that gave such a lift to the first dailyprices of 1999 was being repeated to a lesser degree over theweekend and Monday, but this time there were no gains of 20 centsor more as a result. Instead, most of the cash market was flat todown as much as a dime Monday. Still-massive storage inventories,along with forecasts of warming weather in the North and a fallingscreen, were cited as reasons for the softness. Several sources described trading action as subdued.