Value

Shrugging off what appeared on face value to be a bearish natural gas storage report, February natural gas futures on Thursday morning chose to follow the weather story instead, jumping significantly higher following two consecutive days of decline. The prompt month peaked at $6.52 on the session before settling at $6.445, up 50.2 cents from Wednesday’s settle.

The worst may be over for the utility sector, with the value this year coming from investors identifying “improving” situations before their peers and credit ratings agencies “screw up the courage to follow,” according to a new report by CreditSights analysts.

Citing the uncertainty looming over the high-profile complaint case against El Paso Corp. at FERC, Moody’s Investors Service cut the senior unsecured debt ratings of the Houston-based energy corporation and its subsidiaries to junk status, or Ba2 from Baa3 last Tuesday, and also assigned a senior implied rating to El Paso of Ba1. It put the ratings outlook for embattled El Paso at negative.

As expected, follow-through buying took natural gas prices higher Tuesday morning as more buyers jumped on the bandwagon following a two-day, 40-cent gain. However, all good things must come to an end and prices tumbled lower Tuesday afternoon amid a round of light profit taking. December finished at $4.261, down 0.2 cents for the day and in the bottom half of its $4.215-335 trading range. Estimated volume was relatively heavy, with 95,767 contracts changing hands.

Companies from all sectors of the gas industry were able to save a total of 42 Bcf of gas, or about $126 million at a gas value of $3/Mcf, by reducing methane emissions from unit operations and equipment leaks, according to annual results recently released on the Natural Gas STAR Program by the U.S. Environmental Protection Agency (EPA). The EPA said the savings surpassed the STAR program’s 40 Bcf goal for 2001.

Sharply lower gas and oil prices in the fourth quarter of 2001 forced Devon Energy to write down the value of its reserves by $556 million (after taxes) and take a $518 million net loss compared to $307 million in net earnings in 4Q2000. Quarterly earnings per share before special charges were 23 cents, or nearly double the average of Wall Street estimates. Despite the poor results, Devon reported record high oil and gas production, revenues and year-end reserves, mainly because of its mergers with Canada’s Anderson Exploration and Houston-based Santa Fe Snyder. Earnings for the year including special charges were $103 million, down from $730 million a year earlier. Earnings per share for the year before special charges were $5.03, also beating average Wall Street estimates of $4.87. Sales of oil, gas and natural gas liquids reached a record high $3 billion in 2001, up 10% from 2000. Total production of oil, gas and natural gas liquids rose 12% to a record 135 MMboe. There was an 81% increase in Canadian production attributable to the Anderson acquisition. The average price the company received for its oil production decreased 15% to $21.57/bbl and the average price for gas increased 9% to $3.80/Mcf. Gas liquids prices fell 19% to $16.98/bbl. Although the company reported minimal expenses related to its mergers with Anderson Exploration ($1 million pre-tax) and Santa Fe Snyder ($60 million), operating and other expenses rose across the board, including a 20% increase in operating expenses, a 55% in transportation expenses, a 26% increase in rates related to depreciation, depletion and amortization of property and equipment, a 19% increase in general and administrative expenses and a $3 million charge related to exposure to Enron. Estimated proved oil and gas reserves at the end of the year were 1,620 MMboe, or 523 MMboe greater than at Dec. 31, 2000. Total reserve additions were 658 MMboe, reduced by production of 135 MMboe. This resulted in production replacement of 487%. Year-end reserves included 586 MMbbl of oil, 5.5 Tcf of natural gas and 121 MMbbl of gas liquids. The company’s 2002 capital budget for drilling and facilities expenditures is approximately $1.3 billion. In addition, Devon has budgeted approximately $150 million for midstream facilities.

Sharply lower gas and oil prices in the fourth quarter of 2001 forced Devon Energy to write down the value of its reserves by $556 million (after taxes) and take a $518 million net loss compared to $307 million in net earnings in 4Q2000. Quarterly earnings per share before special charges were 23 cents, or nearly double the average of Wall Street estimates. Despite the poor results, Devon reported record high oil and gas production, revenues and year-end reserves, mainly because of its mergers with Canada’s Anderson Exploration and Houston-based Santa Fe Snyder.

Kicking off 2002 on a strong note, IntercontinentalExchange (ICE) posted a notional value of trades done on Jan. 9 on its on-line exchange at more than $4.3 billion. The amount marked a 75% increase over December’s average of approximately $2.5 billion, which was the record month for the year 2001. “While ICE already experienced incredible growth in 2001 with a 15 fold increase in number of trades executed on our platform compared to last year, the start of the New Year is proving again that we have a very strong platform that perfectly fits the demands of the current market,” said Jeffrey Sprecher, CEO of IntercontinentalExchange. “With the recent addition of many new trading participants and the plans we have in store for the addition of OTC clearing to provide credit amelioration that the market desperately desires, we are looking forward to even stronger growth in the new year.”

Kicking off 2002 on a strong note, IntercontinentalExchange (ICE) posted a notional value of trades done on Jan. 9 on its on-line exchange at more than $4.3 billion. The amount marked a 75% increase over December’s daily average of $2.5 billion, which was the record month for the year 2001.