Sharply

Despite recent declines in rig utilization because of sharply lower natural gas prices, Schlumberger Reed-Hycalog’s annual rig census shows that U.S. drilling rig utilization has jumped this year to a 20-year high. High commodity prices over the past year have caused the activity level of the expanded fleet to push utilization to 93%, a level not seen since the early 1980s.

California’s sharply divided energy regulators last Thursday suspended direct access to retail electric customers in the state and okayed one other major rate change necessary to begin the process of selling $13 billion in state electricity revenue bonds. The actions were effective immediately and allow existing direct access customers to continue their current arrangements.

Lehman Brothers Analyst Thomas Driscoll said an “exhaustive analysis” of mergers and acquisitions among 47 large producers, who account for about 70% of domestic production, led him to conclude that production rose 1.5-1.6% over the past six months. A continuation of the first-half trends will lead to 3-3.5% year-to-year production growth by the end of the fourth quarter, Driscoll said. However, the significant decline in prices probably will have an impact on drilling in the second half of the year.

The swing market had a lot going for it Monday, and it showed in sharply higher prices at all points. The biggest factor, of course, was more summer-like hot weather returning in several market areas, particularly through the midsection of the United States. In addition, a tropical wave in the Caribbean drew some attention, the screen went up nearly 16 cents, and there was the normal rebound in industrial/commercial load following a weekend.

Only sharply higher-than-expected production performance or a sharper-than-anticipated downturn in industrial activity this year will prevent continued pressure on natural gas spot prices in the $4-$5 range, according to the Energy Information Administration’s Short-Term Energy Outlook for April 2001.

Only sharply higher-than-expected production performance or a sharper-than-anticipated downturn in industrial activity this year will prevent continued pressure on natural gas spot prices in the $4-$5 range, according to the Energy Information Administration’s Short-Term Energy Outlook for April 2001.

Despite sharply higher gas prices and an apparent struggle to maintain adequate supply levels, gas producers have more than enough reservoir targets and they are continuing to expand the nation’s gas resource base, according to a biennial report released yesterday by the Potential Gas Committee (PGC). However, committee officials warned that some energy policy changes are needed for the industry to continue expanding the resource and to meet burgeoning demand.

Independents Noble Affiliates and Kerr McGee Corp. have sharplyincreased their capital investment budgets this year. Kerr-McGee isbudgeting a record $1.24 billion for capital expenditures in 2001,a 60% increase from the company’s 2000 capital expenditures, andNoble’s spending is being increased 40%, with 60% of the $700million being used for developmental projects.

Wholesale gas and power sales still appear to be climbingsharply for most major marketers as Enron, Duke Energy and Reliantall posted significant increases in both commodities in thirdquarter. Southern Energy reported that while its third quarterNorth American electricity sales declined from last year’s thirdquarter level, its gas sales enjoyed a sizable increase.