Energy, Energy Service, Natural Gas &amp; Oil Sectors

U.S. Natural-Gas Output Slowed In 2nd Quarter; Prices May Rise

Top 630. Aug 5, 2001 9:02 PM

» JenL_2 - US NG Output Slowed in Q2 - Rising Prices?

This from 8/6 WSJ:

By CHIP CUMMINS

Natural-gas inventories may be brimming, but in spite of intense effort, producers have failed to significantly boost output. That suggests prices may rise again as soon as flagging demand picks back up.

According to a survey conducted by investment firm Jefferies & Co., production at the country's top 100 natural-gas producers climbed just 1.2% in the second quarter from the year-earlier period and was flat compared with the first quarter.

That was despite a big jump in the number of rigs drilling for gas. At the end of last week, 1,047 rigs were working domestic gas fields, up almost 36% from the same time last year, according to oil-services equipment company Baker Hughes Inc.

Companies expanded exploration and production budgets and increased drilling programs last year and earlier this year amid soaring gas prices. While those investments take several months to translate into production gains, "to see no effect [of the increased drilling] through the second quarter really confirms the problem," says Frank D. Bracken, a Jefferies analyst.

The sluggish production growth isn't likely to result in significant price spikes anytime soon, however, since a weakening economy and mild weather have sapped demand for gas. The slack demand has allowed utilities and other gas consumers to replenish inventories in recent months. Stored gas levels are now about 15% higher than this time last year and 7% higher than a six-year average.

Indeed, forecasters have been reducing price outlooks recently as inventories have built steadily. Gas is trading just above $3 per million British thermal units, and Mr. Bracken says it may fall to $2.75 per million BTUs in coming months. Tight inventories and colder-than-normal temperatures late last year helped to drive gas prices as high as $10 per million BTUs.

But he and other analysts say production restraints in the field may eventually send prices higher again once demand returns. "We're burying our problems for another year," says Robert Esser, a director at Cambridge Energy Research Associates, who expects domestic gas production to grow just 1.7% this year over last year.

The Department of Energy, meanwhile, expects gas demand to grow 1.6% in the year, sharply lower than the 5% growth of last year. David Costello, an economist at the DOE's Energy Information Administration, says a surprising lack of industrial demand so far this year accounted for much of that loss as users switched to cheaper fuels when gas prices were still high. Others have simply curtailed production altogether amid a slowing economy. "The industrial sector has been so abysmal," he says.

That could turn around if economic conditions improve, and Mr. Costello says demand for electricity generation continues to grow strongly, rising about 5% in the first quarter from the year-earlier period. The DOE expects total gas demand growth to bounce back to 4.4% next year if the economy rebounds.

Executives have blamed naturally declining fields and limited exploration access in places like the eastern Gulf of Mexico and the Rocky Mountains. Labor and equipment shortages in the field have also slowed production plans.

Exxon Mobil Corp., the country's second-largest gas producer, reported a 9% decline in its domestic gas production for the second quarter over the year-earlier period, citing a rapidly depleting field that had been producing oil and gas since the 1930s.

"The fields, certainly the domestic onshore fields, in many ways are mature," an Exxon Mobil spokesman said. "They've been producing over many years, and that's contributing to declines."

Production could be further crimped if gas prices fall too much more. Cumming Co., a small production company in Fort Worth, Texas, has drilled 14 wells since the beginning of the year, more than the company drilled all of last year.

The company's president, Dwight Cumming, plans to drill another 14 by year-end, but he may cut back if prices fall below his break-even figure of around $3 per million BTUs. "We're right on the cusp of being uneconomical."

Subscribe to WSJ Online @ http://www.wsj.com

......Jen

-- posted by JenL_2

Top 631. Aug 6, 2001 4:56 PM

» ACousins - Thud, thud, thud.....

...or when did utilities become more volatile than tech stocks?

From REalmoney.com

Christopher Edmonds
Barrons and Power
8/06/01 9:26 AM ET
Dan Ford, power analyst at Lehman and one of my long-time favorite utility and power analysts out with comments this morning defending the power sector after this weekend's critique.

"We believe selling in selected utility generation stocks is being overdone," Ford notes. "Weakness related to fears of generation overbuild and a related August 6 Barron's story could be an attractive entry point." In the integrated utility space he highlights Excelon (EXC:NYSE) and Allegheny Energy (AYE:NYSE). He also notes Aquila (ILA:NYSE), Dynegy (DYN:NYSE), and Mirant (MIR:NYSE) are his top unregulated genco/trading & marketing picks.

The Barron's piece made a cogent point about generation that deserves repeating (something we have argued in the past several months): many of the plants that have been announced may never be built, a result of regulatory or capacity issues. Announced capacity will not equal actual capacity.

Nonetheless, power sector is likely to feel pressure this morning. And, Dan may very well be right (again) about a good entry point.
Long EXC, MIR

-- posted by ACousins

Top 632. Aug 7, 2001 11:17 AM

» lcha - GM fuel cell PR

GM is on TV playing up their fuel cell technology. They are working on fuel cells for autos as well as stand-alone fuel cells that could power a home.

The good news on the stand-alone fuel cell is that it is fed natural gas.

I tried(very quickly) to find a link to the news but couldn't find one yet.

Long live NG.

-- posted by lcha

GM Plans Fuel-Cell-Powered Generator For Stationary Use in Homes and Offices

Top 633. Aug 8, 2001 7:19 AM

» JenL_2 - Re: GM fuel cell PR

In response to message posted by lcha:

Here's the article lcha in 8/8 WSJ:

By JOSEPH B. WHITE

General Motors Corp. said it is developing a stationary fuel-cell-powered electric generator that could be used to power homes and offices, and a senior company executive suggested that GM could try to develop such a system commercially.

Larry Burns, GM vice president for research and development, speaking at an industry conference in Traverse City, Mich., wouldn't commit to a time frame for offering the units commercially, but he said a stationary unit, which could be fueled by natural gas, would probably become available sooner than would a fuel-cell-powered automobile.

GM executives have said their goal is to develop commercially viable fuel-cell-powered vehicles for sale to consumers by 2010. GM and other auto makers, including Ford Motor Co., DaimlerChrysler AG, Toyota Motor Corp. and Honda Motor Co., all are pursuing fuel-cell research in response to pressures to reduce pollution and global-warming gases emitted by gasoline-powered internal combustion engines. But GM and its rivals say fuel-cell-propulsion systems for vehicles are still too expensive for regular commercial sale.

Fuel-cell systems extract hydrogen from a fuel, such as gasoline or methanol, and combine the hydrogen with oxygen to generate electricity. Mr. Burns said GM's gasoline fuel-cell system would get 50% better fuel economy than a conventional internal combustion engine.

GM showed off at the industry conference a Chevrolet S-10 pickup truck powered by a prototype fuel-cell system that runs on gasoline. Mr. Burns said the small pickup is the first drivable vehicle with a gasoline fuel-cell processor system but would cost three to 10 times more than a conventionally powered truck.

GM's announcements are the latest in a public-relations campaign to demonstrate that the company is serious about developing fuel cells as green alternatives to conventional internal combustion engines, even as the company lobbies in Washington against proposals for more stringent fuel-economy targets for conventional light-truck models.

Mr. Burns said GM could benefit from developing stationary fuel-cell technology because it would generate some revenue to offset high research costs and allow GM and its suppliers to learn how to put fuel cells into high-volume production. Mr. Burns said GM has been approached by "several companies" about its stationary generation system.

Subscribe to WSJ Online @ http://www.wsj.com

......Jen

-- posted by JenL_2

Top 634. Aug 8, 2001 8:55 AM

» Rande - Department of Energy chimes in:

Department of Energy chimes in:

11:38am 08/08/01 DOE SEES 2001 FUEL OIL PRICES 7 CENTS LOWER THAN 2000

11:37am 08/08/01 ENERGY DEPT. DROPS ESTIMATE OF 2001 GLOBAL GROWTH TO 2%

11:35am 08/08/01 CRUDE OIL PRICES EXPECTED TO RISE $2 BY Q4: DOE

11:36am 08/08/01 WORLD OIL DEMAND TO GROW 1M BARRELS A DAY: DOE

11:34am 08/08/01 ENERGY DEPT.: STRONG SUPPLY PRESSURES NAT GAS PRICE

11:33am 08/08/01 NATURAL GAS PRICES COULD STAY AROUND $3: DOE

11:30am 08/08/01 ENERGY DEPT.: GAS PRICES TO BE $1.38-$1.40 REST OF YEAR

-- posted by Rande

http://quotes.freerealtime.com/rt/frt/I?...

Top 635. Aug 8, 2001 9:35 AM

» dewam - Just to keep up on the drilling end:

Just to keep up on the drilling end:

The worldwide offshore rig count, for the week of August 3,decreased by nine-net rigs, from a month ago, to 571 and increased by 26-net rigs, from a year ago, with noticeable increases outside the Gulf of Mexico (GOM). The rig count for the US fell by nine to 1266, during the past month, although this number still exceeds the 1990 peak of 1,190. We continue to believe that pessimism is overdone regarding the recent rise in crude oil and natural gas inventories in the US as a consequence of the economic slowdown. During the weekend, Tropical Storm Barry resulted in short-term production halts of crude oil and natural gas in the GOM, which provides approximately 25% of US production. This illustrates the fragility of the energy supply/demand balance in the context of OPEC's July 25 official announcement of an oil production cut of 1m b/d effective September 1. We continue to believe that the critical investment issues are that OPEC is focused on maintaining crude oil prices in the $25 range and that cash flows from current oil and natural gas production are likely to drive a multi-year drilling cycle.

-- posted by dewam

Markets Still Move in Fits and Starts

Top 636. Aug 9, 2001 7:17 AM

» JenL_2 - Crude Oil futures TA

Here's some excerpts on energy stocks from a TA article in 8/8 Barron's Online:

By Michael Kahn

After breaking above their declining trend lines last week, most major U.S. market indexes have either reversed or cancelled out those bullish moves.

That has created trading ranges which, given the overall down trend since May, could turn out to be bearish indicators.

As we've been pointing out for some time, the markets don't seem able to sustain moves in either direction. But with sentiment still bordering on excessive optimism, it seems likely that declining trends will reassert themselves.

(clip)

Energy stocks, however, have not done well in recent months, and pundits are quick to point towards falling energy prices as one of the reasons. Last week, New York Mercantile Exchange Crude Oil futures made a short-term breakout move to the upside, and this is significant because only last month they failed to hold on to an intermediate-term break lower (see chart 5).

Chart 5
<img src="/files/mysites/jen2/ta58-8-01.gif" width=449 height=310>

These fakeout moves, sometimes called bear traps, shake out weak players and set the stage for moves in the opposite direction. Should this play out, it could mean $31 oil prices in the near future with an argument possible for a return to last year's peak of $37 per barrel.

With all of these head fakes and failures to follow through, investors still have plenty of time to formulate a game plan without feeling the pressure to buy into any hyped rally. The nimble have a nice assortment of stocks on which to nibble, while the rest of us wait for the market to get itself together again. But for now, the trend for the major averages remains anything but up.

Subscribe to WSJ & Barron's Online @ http://www.wsj.com

.....Jen

-- posted by JenL_2

Top 637. Aug 13, 2001 11:06 AM

» lcha - NG production

Record Natgas Drilling Fails to Up Output
By Gelu Sulugiuc

NEW YORK (Reuters) - Soaring natural gas prices last year spurred record drilling, but production in the United States is only marginally rising as old fields deplete at ever-accelerating rates, analysts said Friday.

The industry will get no relief in the near term, as natural gas from new fields is years away from reaching the market.

Natural gas futures prices on the New York Mercantile Exchange surged to an all-time high above $10 per million British thermal units (mmBtu) last December.

They have since plunged more than 70 percent to below $3.00, but not before igniting unprecedented exploration and development spending in North America.

A recent survey by consulting firm Andersen of 155 of the world's biggest publicly traded oil companies found that their spending on exploration and development in North America rose by 72 percent to $36.2 billion last year.

Yet natural gas production increased by only about 1.5 percent in the United States in the past six months, according to analysts.

``That's pretty phenomenal given that we've had record gas drilling activity,'' said David Pursell, analyst at investment bankers Simmons & Company.

``That's showing that base gas production is declining very rapidly and it also speaks to the quality of the prospects that are being drilled.''

The latest report from oil services firm Baker Hughes (NYSE:BHI - news)showed that 1,047 rigs were drilling for natural gas in the United States last week, compared to the 647 average of last year and more than double the 426 average from 1999.

'BLOWDOWNS' TO BLAME

To take immediate advantage of the high prices, many companies drilled in old fields that provided quick production. The disadvantage was that the strategy accelerated the fields' depletion rates in what drillers call ``blowdowns.''

That's what Exxon Mobil (NYSE:XOM - news) did at its aging Webster field in Texas.

``By blowing down this field, Exxon were able to have better production in 1999 and 2000,'' said Steven Pfeifer, a Merrill Lynch analyst.

``But once gas reserves at the Webster field were depleted, which is very common for a blowdown, you're at the end of the field and you're basically producing the last gas remaining,'' he added.

The Webster blowdown was chiefly responsible for the nine percent decline in U.S. natural gas production for Exxon Mobil in the second quarter compared to last year.

Exxon Mobil acknowledged that it will continue with enhanced recovery at some of its mature fields. ``We've got other blowdown projects as well in the United States,'' said company spokesman Bob Davis.

But Exxon Mobil was not the only company to maximize gas production and accelerate the depletion of its reserves amid last year's record gas prices, analysts said.

And now, oil majors are finding it difficult to raise or even maintain steady gas production in the United States.

In the second quarter, Texaco Inc (NYSE:TX - news) saw its gas production slip by eight percent, while Chevron Corp
(NYSE:CHV - news) and Royal Dutch/Shell (SHEL.L)(RD.AS)posted only marginal gains of two and one percent, respectively.

The last six months' 1.5 percent overall increase in U.S. production comes from the independents like Ocean Energy (NYSE:OEI - news), that in the second quarter boosted its production 31 percent, Anadarko Petroleum Corp. (NYSE:APC - news) 17 percent, and Amerada Hess Corp. (NYSE:AHC - news) 22 percent.

``Everybody's playing in the same playpen, but independents can do more with less.'' said Pursell from Simmons & Company.

``It's a curse of size. It's hard to grow at high percentage rates when you have a big base.''

-- posted by lcha

Top 638. Aug 13, 2001 11:14 AM

» lcha - Firmer oil

08/13 05:59
Crude Oil Rises After Saudi Arabia Tells Clients of Sales Cut
By Thomas Tugendhat

London, Aug. 13 (Bloomberg) -- Crude oil rose 1 percent after Saudi Arabia told Asian customers it would lower shipments next month, increasing expectations of better compliance among OPEC countries.

Saudi Arabia, the Organization of Petroleum Exporting Countries' most influential member, plans to reduce sales to Japan by as much as 17 percent, the Bloomberg Energy Service said, citing unidentified traders. The cut is the first of a series in preparation for OPEC's Sept. 1 reduction, the third this year.

``What Saudi does, other OPEC countries will follow,'' said Shelley Mansfield, energy manager with ADM Investor Services International.

Brent crude oil for September settlement rose as much as 25 cents to $26.23 a barrel on the International Petroleum Exchange in London. Brent has risen 8.8 percent this year.

In the U.S., crude oil for September delivery rose 11 cents, or 0.4 percent, to $28.26 a barrel in electronic trading on the New York Mercantile Exchange.

Last month, Saudi Arabia sold 235,000 barrels, or 3 percent, more than its OPEC quota allowed. OPEC's 11 nations pump 40 percent of the world's oil and have targeted prices between $22 and $28 a barrel for its benchmark index.

On Friday, the so-called OPEC basket was worth $24.91. OPEC has agreed to cut production three times this year to defend its target range. The latest, starting next month, will reduce shipments by a million barrels a day. That'll take this year's reduction to a total of 3.5 million barrels a day.

The International Energy Agency last week increased its forecast of oil demand for the first time this year, bringing the IEA closer to BP Plc's outlook.

Oil Demand

Oil demand will increase by 510,000 barrels daily this year, 50,000 more than expected last month, according to the Paris-based agency, whose 26 members use about three-fifths of the world's oil. Because of revisions to estimates for oil demand before 1999, daily oil use this year will likely total 76.4 million barrels, 380,000 more than expected last month.

BP when it reported second-quarter earnings last week said daily use this year would rise by 800,000 barrels.

The OPEC cut and higher demand forecasts have led to fewer speculators betting oil prices will fall than at any time in the past six weeks.

The U.S. government's Commodities Futures Trading Commission reported traders in the most recent week had sold 30,121 more oil contracts than they bought on the Nymex, equal to 30.1 million barrels of oil. A week earlier, they had sold 50,363 contracts.

``The oil price is going to remain strong to the end of the year,'' said Doug Leggate, an oil analyst with Commerzbank Securities in London. ``If OPEC doesn't come under pressure for market share from non-OPEC production, I can't see prices falling below $24 a barrel for Brent in the next year.''

Expectations of higher oil prices boosted oil company shares, with The Hague-based, Royal Dutch Petroleum Co. among the leading gainers in Europe. Shares of Royal Dutch, owner of 60 percent of Royal Dutch/Shell Group, rose as much as 1.30 euros, or 2.1 percent, to 62.10 euros.

Total Fina Elf SA, the largest French oil company, gained 3.20 euros, or 2.1 percent, to 159.4. BP, the third-largest publicly traded oil company, climbed 12p, or 2 percent, to 602.

-- posted by lcha