Strip

Canadian royalty trusts in the oil and gas sector had a decade-long bull run until the Canadian government mounted a plan to strip them of their favorable tax status for distributions (see NGI, Nov. 6). The plan to tax the trusts could very well spark a movement of investment dollars southward and American exploration and production (E&P) activity northward, said David Marcell, TriStone Capital managing director, acquisitions and divestitures.

Canadian royalty trusts in the oil and gas sector had a decade-long bull run until the Canadian government mounted a plan to strip them of their favorable tax status for distributions (see Daily GPI, Nov. 2). The plan to tax the trusts could very well spark a movement of investment dollars southward and American exploration and production (E&P) activity northward, said David Marcell, TriStone Capital managing director, acquisitions and divestitures.

The expectation for continued strong oil and natural gas prices, as expressed in each commodity’s Nymex strip, has had both positive and negative impacts on the exploration and production sector. It has allowed the industry to substantially pay-down debt, but also has driven up costs for people, equipment and, in particular, assets.

The expectation for continued strong oil and natural gas prices, as expressed in each commodity’s Nymex strip, has had both positive and negative impacts on the exploration and production sector. It has allowed the industry to substantially pay-down of debt, but also has driven up costs for people, equipment and, in particular, assets.

The current disparity between spot gas prices and those on the Nymex strip would appear to make financial hedges a rather unappealing prospect for gas buyers, such as local distribution companies (LDCs). However, hedging isn’t an arbitrage play for LDCs, but rather a means to price risk management. While it might not spare a buck it’s really intended to avoid a surprise.

While near-month futures spiked to an all-time high Tuesday of $14.338 and the 2006 strip stands at $11.93, two analysts predict the gas market will scale back down by about 33% next year to range between $7.15 and $8/Mcf after the hurricane recovery is complete. They said prices should remain just above $6 over the long term.

With nearly all areas outside a strip along the Gulf Coast and parts of the Southwest doing some serious chilling out Tuesday, prices again made big gains. Although the Northwest relaxed a bit from the dollar-plus upticks it had seen Monday, Tuesday’s strength was more solidly based because of significantly larger advances in non-Northeast markets and a lack of weakness in the West.

Rep. Lois Capps (D-CA) on Wednesday offered a motion on the House floor that directed conferees on the national energy bill to strike provisions calling for the federal government to inventory oil and natural gas resources in the Outer Continental Shelf (OCS), and to respond to appeals of state permitting decisions under the Coastal Zone Management Act (CZMA) within a compressed time frame. The House postponed a vote on the motion until next Wednesday.

Seven persons died as a result of an April 24 rupture of a natural gas distribution pipeline outside of a small strip mall in Toronto, according to the Toronto Fire Marshal’s Office.