After opening on a soft note following last Thursday’s latesell-off, natural gas futures plodded higher for the sixth Fridayin a row, as traders once again shied away from the short side ofthe market ahead of the weekend. The October contract advanced 5.3cents to close at $4.853, but even more impressive was the winterstrip, which advanced an average of 6.1 cents to finish at $4.76.
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Most of the market “seemed to take a breather” Friday, as oneproducer perceived it, going quietly into the weekend flat tomildly higher. The points experiencing significant declines ofabout a nickel or greater were scattered They included San JuanBasin, Stanfield and Iroquois Zone 2 and were topped by a drop of alittle more than a dime at Malin.
In step with the rest of the industry as it deals with supersoft commodity prices, Houston-based Pogo Producing Co. also hascut back spending. In recent years the company’s annual explorationbudgets have been between $230 million and $250 million. Lastyear’s allocation was $230 million and was set to grow to between$260 and $270 million, said CEO Paul Van Wagenen. Instead, thecompany cut back considerably. This year Pogo is planning to spendabout $170 million.
Along with disappointing 3Q earnings announced by Williams camean acknowledgment by management that the company continues toachieve disappointing results in several of its businesses. Withresults reduced by energy market conditions and by pre-tax chargesand write-downs of about $70 million, or 10 cents/share, Williamsreported unaudited net income of $32.1 million, or 7 cents/share ona diluted basis, for the third quarter. This compares to unauditedrestated net income of $13.7 million, or 3 cents/share, for thesame period of 1997, a quarter in which results were reduced by 17cents/share for the cost of debt restructuring.
The latest lease sale by the Texas General Land office raised$9.2 million Tuesday, down considerably from previous sales of thisspring. The highest bids for tracts were in the bays along thecoast, with the highest single bid from Sabco Oil & Gas Corp.of more than $1.11 million for 320 acres in Corpus Christi Bay. Thesecond highest bidder was Petsec Energy Inc., totaling $275,572 foran 1,135-acre High Island tract off Jefferson County in the Gulf ofMexico. The third highest bidder was Seneca Resources Corp. for a320-acre gulf tract off Brazoria County. The Seneca bid was$236,309.
While the abundance of gas now in storage has analystspredicting soft prices in the coming months, others suggest thecharacter of storage operations will be changing as more and moremarketers take title to storage capacity from LDCs. Storage held bylocal distribution companies and power generators typically hasbeen used to ensure supply. Marketers holding storage or optimizingstorage assets under contract with LDCs see storage as a financialopportunity in addition to a supply insurance policy. Thearbitrageurs will handle their storage differently when suppliesget tight, said Pete Kinsella, Columbia Gas Transmission vicepresident of marketing and volume management.