Producers may be walking around barefoot and hungry after thefinancial struggle in 1998, but LDCs’ wallets are thin as well. Theexceptionally warm year cut gas distribution throughputsignificantly and several local distribution companies ended theyear in the red. Average net income declined 10% for 19 gas andcombination utilities that reported earnings last week or the weekprior.
Producers
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No Picnic for LDCs in 1998
Like producers, local distribution companies are under the weather, too, judging by their year-end results. “It’s dismal,” said Merrill Lynch analyst Rebecca Followill, who follows LDCs.
Changing of the Guard Takes Place at GISB
The leadership of the Gas Industry Standards Board’s (GISB) topdecision-making committee has been in the hands of the pipelinesand producers for a number of years, but the gavel has been passedto service companies and distributors in 1999. This changing of theguard has left some feeling uneasy as they wonder whether a radicalchange in direction is in store for the standards-setting group inthe year ahead.
NGSA, CAPP to Sponsor Joint Conference
The Natural Gas Supply Association (NGSA) and the CanadianAssociation of Petroleum Producers (CAPP) will sponsor a majorconference later this month to review the status of North Americangas supply and demand.
Independents Juggle Finances to Keep Going
Two recently announced deals provide further proof thatindependent producers are finding it tough going in the current lowcommodity price environment. Houston-based independentRutherford-Moran Oil Corp. struck a deal with Chevron to allow itto continue activities in the Gulf of Thailand, and EEX announcedit is selling $150 million of securities to fund its deep-waterdevelopment program.
Frigid Weather Fails to Avert Overall Price Drops
Producers who may have been tempted to sing a few (paraphrased)bars of “It’s beginning to look a lot like winter” upon seeingTuesday’s weather reports probably stifled the urge after cashprices at most points fell by widely varying amounts. The softnessoccurred despite cold to very cold temperatures pervading almostevery part of Canada and the U.S.
Producers Continue Spending Cuts
Unocal Corp. said Monday it expects 1999 capital spending tototal between $1 billion and $1.1 billion, down from the estimated$1.7 billion in capital expenditures this year. The lower spendingreflects Unocal’s narrowed focus on core oil and gas explorationand production in response to lower commodity prices.
EIA Outlook Shows Tough Challenges Ahead for Producers
The Energy Information Administration released its Annual EnergyOutlook 1999 (AEO99) last week, projecting gas demand will grow byabout 50% to 33.17 Tcf by 2020 from 1997 levels of 22.59 Tcf, whichis a 1.7% average annual increase.
Unocal Facing Weak Prices, Cutting Spending
Unocal Corp., like most other producers struggling againstdepressed oil and gas prices, said Wednesday it expects to cutcapital spending by 30 to 40% in 1999 from this year’s level. Inaddition, the company is targeting cash expense reductions of $150million, of which about $100 million has already been identified.
More Majors Report Major Earnings Declines
Third quarter earnings announced by three more major producersThursday showed income declines from the previous third quarterranging from 37% to 79%. Not surprisingly, Shell, Chevron, andPhillips Petroleum all cited weak commodity prices for their poorperformances.