Slow

Fitch Ratings analysts believe clearing services in the wholesale natural gas and power markets could help restore the health of the energy trading business. But some significant hurdles remain and there probably will be limited progress this year.

Shut-ins from Tropical Storm Isidore and property sales failed to slow down natural gas production for Magnum Hunter Resources Inc., which doubled its quarterly production from 2001. The Irving, TX-based independent reported actual production volumes of 19.8 Bcfe, averaging 215 MMcfe/d, and said its total equivalent production volumes were weighted 67% toward natural gas.

The Gulf Coast oil and gas industry was somewhat fortunate Thursday that Lili made landfall in central Louisiana as a Category 2 hurricane with 100 mph winds rather than the Category 4 with 145 mph winds it had been Wednesday evening. While it will take a few days for complete damage assessments, the readily apparent loss is that of supply. Lili’s presence and that of the weaker Isidore last week have removed 60 Bcf of gas production and 10 million barrels of oil from the market over the past two weeks, according to the Mineral Management Service (MMS) (see related story).

The Delaware Chancery Court has issued a preliminary injunction that may prevent Unocal Corp. from completing an offer to exchange the common stock shares of Pure Resources Inc. Unocal subsidiary Union Oil Company of California already owns 65% of Pure, and it launched its exchange offer last month to acquire the remaining 35% (see Daily GPI, Sept. 6).

Using historical trends and assuming the once-prolific Ladyfern production remains flat, Canadian natural gas production through 2002 will be down between 1% and 2% from last year, according to research by Lehman Brothers’ energy and power analysts. The downtrend this year compares with the 6% annual increase experienced in 2001. At the same time, Canadian demand was up 2% year-to-date April over the same period a year ago.

Houston-based international drilling contractor GlobalSantaFe on Monday reported that declines in the Gulf of Mexico’s Summary of Current Offshore Rig Economics, or SCORE, “have slowed considerably,” with the international SCORE near its highest level since early 1999. Overall, the SCORE for February 2002 was down from January by 1.1%.

Despite fundamental support having virtually disappeared, most of the cash market outside the Rockies managed to hang tough for at least one more day of firmness Tuesday, but new price advances slowed almost to a crawl. Non-Rockies quotes tended to range from flat to no more than about a nickel higher, with most points averaging gains of 3 cents or less.

After a year of 6% gas production growth in 2001, Canadian gas production growth in January and February is beginning to slow down. Canadians may be unable to make significant gains without another Ladyfern-type find, said Lehman Brothers analyst Thomas Driscoll.

After a year of 6% gas production growth in 2001, Canadian gas production growth in January and February is beginning to slow down. Canadians may be unable to make significant gains without another Ladyfern-type find, said Lehman Brothers analyst Thomas Driscoll.