Realized

The inflection point in U.S. gas market fundamentals likely will be realized this month, and the market will become increasingly undersupplied through the spring of 2010, energy analysts said Wednesday.

Southern Union Co. weathered the storm of lower realized commodity prices from the company’s gathering and processing segment to post 1Q2009 adjusted net earnings that beat analyst’s estimates.

As a result of early settlement and reset arrangements for 37% of its 2009 commodity hedge volumes, XTO Energy Inc. said it has realized about $900 million of after-tax proceeds that it has used to reduce its outstanding debt. The company expects to end the first quarter with net debt of approximately $11 billion. The net effect of the early settlements is to accelerate cash receipts, while maintaining XTO’s full hedge position against further declines in oil and natural gas prices during the year. By executing the transactions, the company said it has accomplished the lion’s share of its previously announced $1.25 billion minimum debt reduction. In November XTO said it had 1,745 MMcf of gas hedged at $8.83/Mcf for 2009 and 730 MMcf of gas hedged at $8.67/Mcf for 2010 (see Daily GPI, Nov. 21, 2008). At the same time, the company’s board of directors approved a 2009 capital budget for development and exploration expenditures of $3.3 billion and an additional $500 million was budgeted for the construction of pipeline infrastructure and compression and processing facilities. Fort Worth, TX-based XTO’s properties are concentrated in Texas, New Mexico, Arkansas, Oklahoma, Kansas, Wyoming, Colorado, Alaska, Utah, Louisiana, Mississippi, Montana, North Dakota, Pennsylvania, New York, West Virginia and Kentucky.

Prices realized double-digit increases across the board Wednesday, propelled by rising heat levels in the West, chillier weather in the Midwest and the previous day’s 12.1-cent advance by June futures.

Most cash points continued to rise Tuesday as the latest cold wave began to engulf much of the East. Northeast citygates realized triple-digit spikes due to what one forecaster described as blizzard-like conditions expected in the region Wednesday. However, warming trends had a good deal of the West and Midcontinent falling by 2-3 cents to as much as 15 cents.

Natural gas futures plunged in active trading Tuesday as traders elected to extract a storm premium from the market once it was realized that tropical storm activity was not a threat to Gulf infrastructure.

With forecasts of warming trends slow in being realized, the market found enough residual heating load to turn in a mixed performance Wednesday in which there were more gains than losses. Most points were flat or close to it, and those more than a dime higher or lower were few.

The full potential of geothermal energy is not being realized in certain parts of the U.S. due to a “chicken and egg game” involving the way in which the federal Bureau of Land Management (BLM) handles leases, the executive director of the Geothermal Energy Association (GEA) recently said.

Some Northeast citygates peaked above $9 and realized dollar-plus increases Friday amid gains at nearly all points in trading for the holiday weekend. That was hardly surprising with freezing weather due throughout Canada and most of the U.S. And for a change cash prices had prior-day screen support to set against the usual extra decline of industrial load during a long weekend.