Energy Roundup: Storm May Miss U.S. Rigs
Monday August 20, 3:46 pm ET
Oil Settles Lower, Hurricane Dean Expected to Miss U.S. Rigs, Devon to Work Offshore Brazil
NEW YORK (AP) -- Following is a summary of top stories in the energy sector Monday afternoon.
Oil Prices End Down as Hurricane Threat Recedes
Oil prices dropped as Hurricane Dean headed toward Mexico's Yucatan Peninsula and away from key U.S. oil and gas facilities in the Gulf of Mexico. "On the U.S. domestic market, the hurricane veering to Mexico has gassed the hopes of speculators who were betting on damage," said MF Global analyst Andrew Lebow, who pointed out that energy prices across the board -- crude oil, gasoline, heating oil and natural gas -- all tumbled.
Light, sweet crude for September delivery fell 86 cents to settle at $71.12 on the New York Mercantile Exchange. Gasoline prices dropped 10.2 cents to $1.9365 a gallon.
Natural gas futures declined 97 cents to $6.04 per 1,000 cubic feet. Heating oil futures lost 3.64 cents at $1.9809 a gallon. Energy Producers Still Monitoring Dean
Oil companies with operations in the Gulf of Mexico kept an eye on Hurricane Dean's progress, but most felt they dodged a bullet as the storm appeared headed south of U.S. platforms and pipelines.
The National Hurricane Center said the first hurricane of the Atlantic season was projected to have sustained winds of 160 mph before plowing into Mexico's Yucatan peninsula on Tuesday. The Mexican mainland or Texas could be hit later.
"In terms of production, the shut-in related to Dean is not significant," said Darci Sinclair, a spokeswoman for Royal Dutch Shell PLC. She said the company is "monitoring the status" of Dean and another tropical disturbance that may hit the eastern Gulf of Mexico later in the week.
Shell halted production of about 39,000 barrels of oil and 97.5 million cubic feet of natural gas per day. The amount represents less than 10 percent of the company's production, Sinclair said. The company evacuated about 1,000 employees from its operations in the Gulf.
Valero Energy Corp. spokesman Bill Day said that the company is keeping a close eye on Dean, but anticipates that by the time it reaches Valero's operations, it will likely lose strength. Valero sent a standard alert to its facilities, which are capable of withstanding a strong storm, Day said: "Any time a storm enters the area, we put them on alert."
Exxon Mobil Corp. did not shut down any production as a result of Dean but is preparing for heavy wind and rain, according to its Web site. The company evacuated "nonessential" personnel and is "closely monitoring the progression of the storm."
Things are different in Mexican waters. State-run oil company Petroleos Mexicanos evacuated thousands of personnel from its oil rigs Monday and considered shutting down production as the storm threatened Mexico's main oil-producing region. Pemex, as the company is known, launched its permanent evacuation plan on Sunday, removing 13,360 workers in an operation to be concluded Monday.
Devon Energy Investing in Brazil Offshore Sites. Devon Energy Corp. and its partners plan to invest at least $775 million in exploration off the coast of Brazil in the next five years. Devon Vice President Vince White said the exact size of the company's portion of that financial commitment is yet to be determined. "We think that Brazil is a good place to do business," White said. "We plan to be an active explorer and developer in Brazil for years to come." The company plans to explore for oil or gas in eight blocks it bought in past Brazilian government auctions.
Devon will work in partnership with other oil companies in six blocks of the Campos Basin, a petroleum-rich region off Rio de Janiero. The company also plans to explore for oil on its own in two blocks of the country's northeast coast.
VeraSun Closes Deal on 3 Ethanol Plants. Ethanol producer VeraSun Energy Corp. closed the buyout of three ethanol plants from Dallas-based ASAlliances Biofuels LLC for $725 million. The cash and stock deal is expected to push the company's production capacity to 1 billion gallons by the end of 2008. VeraSun funded the buyout with $200 million in equity, $250 million in cash and $275 million in project financing. The equity consisted of 13,801,384 shares of VeraSun stock valued at $14.49 apiece.
VeraSun announced the acquisition July 23. The facilities are located in Linden Ind., Albion, Neb., and Bloomingburg, Ohio. The three facilities are each expected to operate at 110 million gallons per year, totaling 330 millions per gallon combined.
The company now has 450 million gallon per year production capacity with four facilities in operation and another 550 million gallons per year of capacity in under construction at five different sites.
Fitch: El Paso Corp. Ratings Not Affected by Peoples Energy Purchase.
Fitch Ratings said El Paso Corp.'s plans to acquire Peoples Energy Production Co. for $875 million in cash will not affect the ratings of El Paso or its subsidiaries. El Paso plans to permanently finance the transaction primarily through proceeds from its ongoing divestiture program of noncore upstream assets. The Rating Outlook for El Paso and its subsidiaries is Stable.
Through the acquisition of Peoples Production, a unit of Integrys Energy Group, El Paso will add about 305 billion cubic feet equivalent of proven reserves.
Arkansas Hearing on New Coal-Fired Plant. Arkansas utility regulators plan hearings on a proposed $1.3 billion coal-fired electric plant in the southwest part of the state. Earlier this month, the Public Service Commission heard arguments by hunters and others who said pristine woods and waterways could be harmed by the Southwestern Electric Power Co. plant. The company maintains that the risk matches the economic benefits of building the 600-megawatt facility on 2,875 acres by 2011. The company estimates the plant will create 110 full-time jobs.
The utility, a division of Columbus, Ohio-based American Electric Power, has 464,000 customers in Arkansas, Louisiana and Texas.
Dry Bulk Rates Ease. Spot charter rates for some dry bulk vessels, which carry cargoes such as coal, iron ore and grain, eased again Monday after falling slightly Friday. The Baltic Dry Index closed down 24 points at 7289 -- still only about 30 points below its all-time high. The Baltic Dry Index measures rates on 40 shipping routes on a time charter and voyage basis. "Although dry bulk shipping shares remained volatile last week with the overall market skittishness, the dry bulk shipping market continued to strengthen," said Jefferies & Co. analyst Douglas Mavrinac. He said the ongoing shutdown of a major Japanese nuclear facility is stimulating world coal trade, and shipments of North American grain should pick up in the next few weeks.
"We believe dry bulk charter rates are likely to continue redefining all-time highs through the remainder of the year providing a catalyst for dry bulk shipping shares."
