September

No one appeared to be shocked when the September aftermarket got launched Friday with prices way below both bidweek and end-of-August levels. The double whammy of a long holiday weekend coupled with decidedly weak weather fundamentals proved to be a potent price-cutter. All Rockies/San Juan and a few other scattered points fell below $2. Rockies pipes were seeing their first sub-$2 averages since trading for June 11 flows.

Continuing for September and until further notice, absent mitigating actions acceptable to the pipeline, any gas received into NGPL’s Louisiana Line (Segments 23, 24 and 25) that contains liquefiable hydrocarbons that might condense in the gas stream and cause the line’s gas quality blend to exceed 1,050 Btus per cubic foot will not be confirmed. Due to a continuing unusually low level of upstream processing, NGPL said, it continues to receive very high deliveries of non-conforming gas. Ten receipt points currently exceeding the quality specification were posted on NGPL’s bulletin board.

El Paso Corp. has hedged almost 75% of its projected natural gas production at a Nymex price of $3.85/Mcf ($3.63/MMBtu) for September through December. Next year, about 60% of its production will be hedged at $4.19/Mcf ($3.95/MMBtu), and in 2003, about 35% is hedged at $4.19/Mcf ($3.95/MMBtu). The Houston-based company expects that its realized natural gas price will be about 30 cents/Mcf less than the Nymex price because of transportation costs and regional price differences. In an earnings update, the company estimated that a 10-cent change in the annual spot price for natural gas in 2002 would result in only a $0.02 per share change in earnings, adding it “remains comfortable with existing earnings guidance” putting it at $3.30/share this year. A 15% earnings increase is expected in 2002. The earnings are in line with First Call/Thomson Financial estimates of $3.33 a share this year and $3.84 in 2002.

Given the double-barreled demand for natural gas by power generators and storage, spot gas prices will average an “unseasonably strong” $4.65/Mcf during this spring and summer, and $5/Mcf for the entire year, according to the Energy Information Administration (EIA) last week. This compares to projections by Dynegy Marketing and Trade and PanCanadian Energy Services of $3.50/Mcf to $5.50/Mcf for the remainder of the year.

Given the double-barreled demand for natural gas by power generators and storage, spot gas prices will average an “unseasonably strong” $4.65/Mcf during this spring and summer, and $5/Mcf for the entire year, according to the Energy Information Administration (EIA).

The Pennsylvania Public Utility Commission has approved atentative settlement agreement with Equitable Gas Co. following anexplosion in September 1998 that killed one person. The explosionoccurred after an Equitable employee failed to accurately mark agas line to a home for repair by Duquesne Light Co. Duquesne Lightthen damaged the line, which caused the explosion in McKeesport,PA.

The Energy Information Administration said in its SeptemberShort Term Energy Outlook it is projecting natural gas prices atthe wellhead will increase by about 87% this winter (October-March)compared to last winter. Residential prices for gas are expected torise on average by 27% compared to last year. For the entire year,the average wellhead price for natural gas is projected to be$3.40/Mcf, the highest annual wellhead price on record (ininflation-adjusted terms, it would be the highest annual averageprice since 1985).

The Energy Information Administration said yesterday in itsSeptember Short-Term Energy Outlook it is projecting natural gasprices at the wellhead will increase by about 87% this winter(October-March) compared to last winter. Residential prices for gasare expected to rise on average by 27% compared to last year. Forthe entire year, the average wellhead price for natural gas isprojected to be $3.40/Mcf, the highest annual wellhead price onrecord (in inflation-adjusted terms, it would be the highest annualaverage price since 1985).

Northern Border Partners have entered into a letter of understanding with Enron North America (ENA) to purchase gas gathering facilities in the Powder River and Wind River Basins in Wyoming for almost $200 million. Included in the acquisition is Enron Midstream Services, which has ownership interests in Bighorn Gas Gathering, and ENA subsidiaries that hold interests in Fort Union Gas Gathering and Lost Creek Gathering. Upon completion of the transaction, Northern Border Partners will own and operate the assets, and will provide gathering and transportation services. ENA will still supply gas purchase and sales, finance, and risk management along with producer outsourcing services.