NGI The Weekly Gas Market Report

Higher realized gas prices and increased production boostedVastar Resources’ 1997 earnings to a record of $240.5 million, or$2.47/share, a 9% increase from the $220 million, $2.26/share,reported for 1996. Fourth quarter 1997 earnings were $66.9 million,69 cents/share, down from $69.1 million, 71 cents/share Q4 1996.The decline was mainly due to decreased liquids commodity prices.”Our financial performance was very solid, and our operationalachievements have established a sound foundation for the future,”said CEO Charles Davidson. “Vastar’s large project inventory shouldlead to sustainable production growth in the near term, while ourexploration portfolio in the Gulf of Mexico deep-water playprovides potential for the years ahead.”

Enron’s 1997 year-end earnings took a huge hit from a one-time after-tax charge of $537 million related to the company’s settlement of a contract for J-Block gas in the U.K. North Sea and depressed MTBE margins. For the year Enron net income was $105 million, compared to $584 million in 1996. “Our 1997 results reflected extremely strong operating performance in virtually all of our business units, offset to a significant degree by a number of non-recurring charges,” CEO Kenneth L. Lay said. “These charges allow us to clear the decks for future growth.”

Last year was boom time for El Paso Energy, which saw earnings jump 15% in the wake of its merger with Tenneco Energy. The year was not as kind, though, to Duke Energy, which was still digesting the mega-combination of Duke Power and PanEnergy that created the company.

Despite lower throughput on most of its pipes, Williams reported record operating profit from its pipeline business, and Energy Services got a huge boost to record levels from a $27.5 million increase in profit from Exploration and Production. E&ampP’s whopping gain in profit to $30.3 million from $2.8 million came mainly from an increase in gas prices and production, the company said.

As most market analysts predicted, reports from major producers are showing U.S. gas production down in 1997. The domestic natural gas production of Texaco, Chevron, Exxon and Amoco in 1997 collectively was down by 2.5% (202 MMcf/d) to about 8,014 MMcf/d, according to year-end earnings reports released by the four majors last week.

Gas marketers and producers credited FERC last week for taking a “relatively aggressive stance” in finding Natural Gas Pipeline Company of America (NGPL) had committed “significant” violations of its marketing-affiliate rules. But some seriously doubted that by itself the $8.84 million civil penalty imposed by the Commission would be enough to block future unlawful conduct by NGPL or other pipelines.

A small expansion project on El Paso Natural Gas’ San Juan Basin pipeline system is taking heavy fire from protesters at FERC because it gives special privileges to three shippers. The project is El Paso’s proposed $3.6 million, 116.5 MMcf/d expansion of its Bondad line from Ignacio, CO, to Blanco, NM, which is designed to increase capacity on the most constrained area of El Paso’s pipeline system. The pipeline company plans to install new compression on an existing pipeline to serve Enron Capital &Trade, Elm Ridge Resources, and Conoco.

Attorneys for Granite State Gas Transmission and the Town of Wells squared off against each other last week at FERC over the merits of siting a controversial liquefied natural gas (LNG) facility in the Maine community.

While the Energy Information Administration (EIA) is bullish ongas production capacity, at least one analyst group holds a morereserved view. And 1997 year-end production data released last weekby two independents, while up, isn’t enough information to predictfuture production trends.