Scaling

A number of states that have laws requiring utilities to use renewable fuels to produce a specific amount of electricity are considering scaling back their mandates — or even repealing them altogether — given the prolific supply of natural gas that has caused prices to plunge.

Scaling back from original plans for a shift to more natural gas-fired generation, Nevada’s major utility, NV Energy, has submitted to state lawmakers a plan for dumping coal-fired generation, but so far the plan has stirred a political fight.

Dallas-based Pioneer Natural Resources Co. is cutting jobs and scaling back operations in its Trinidad, CO, operating area, a dry natural gas play in the Raton Basin. The company said low gas prices were the culprit.

While Talisman Energy Inc. has a diverse portfolio of international exploration and production (E&P) interests, in North America the company is focused largely on the Marcellus, Montney and Eagle Ford shales, plays in which its activities are in various stages of development. In the Marcellus, where its shale activities are the most mature, Talisman is enjoying improved well results as it continues to learn the play.

Chevron Corp. and Anadarko Petroleum announced a new deepwater discovery at their Big Foot prospect in Walker Ridge Block 29 about 225 miles south of New Orleans. The companies expect that the oil discovery also will provide associated natural gas production but no commercial estimates have been made available yet.

While scaling back its Deep Panuke exploration plans and selling its stake in the Syncrude Canada oil sands project, EnCana Corp. remains “well-positioned” to produce 3 Bcf/d to 3.1 Bcf/d in North America — without acquisitions, the company’s CEO said last week.

After scaling back its drilling program in the first half of the year, Fort Worth-based Quicksilver Resources Inc. said it plans to step up its drilling efforts in the United States and Canada in the second half. The company also said it expects to see results from its cost-cutting efforts in the coming months. Quicksilver reported second quarter net income of $3.7 million, or 18 cents/share, including a 2 cent/share charge for a writedown of an equity investment. Second quarter 2001 net income was $5 million, or 26 cents/share. Net income for the first six months of 2002 was down 59% from the same period last year mainly because of significantly lower commodity prices. Quicksilver’s gas production for the second quarter fell to 7.9 Bcf, or 87 MMcf/d, from 8.3 Bcf in 2Q2001. Realized prices fell 12% to $2.71/Mcf compared to $3.09/Mcf in 2Q2001. The company’s crude oil production fell 25% to 231,000 bbl and realized oil prices averaged $22.28/bbl compared to $23.01 in 2Q2001. Natural gas liquids production fell 24% to 34,000 bbl and liquids prices were down 12%. Quicksilver has drilled 58 gross (36 net) successful development and exploration wells this year, many of them (23 net) in the company’s Michigan Antrim shale project and its Corydon project in Indiana. Through Canadian coalbed methane joint ventures, Quicksilver has participated in 120 total wells in Alberta since late 2000. “We will be accelerating our development drilling both domestically and in Canada in the coming months, which will result in solid reserve growth for the company,” said CEO Glenn Darden. “We are seeing the early results of our previously initiated streamlining efforts to lower costs. Benefits should become more evident in future months.”

After scaling back its drilling program in the first half of the year, Fort Worth-based Quicksilver Resources Inc. said it plans to step up its drilling efforts in the United States and Canada in the second half. The company also said it expects to see results from its cost-cutting efforts in the coming months.

While some producers may be scaling back exploration and acquisition plans in view of current low prices, Stone Energy, which operates in the shallow Gulf of Mexico, is seizing the opportunity to add to its portfolio of prospects.