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By Joe Carroll
Sept. 11 (Bloomberg) -- Exxon Mobil Corp., the largest North American energy company, has been unable to sell four Canadian fields as low natural-gas prices discourage potential buyers.
The properties, which include Exxon Mobil’s stake in the Yukon Territory’s only producing gas field, haven’t attracted any suitors since they were put up for sale on May 4, said Bruce Rauch, an Exxon Mobil asset-enhancement manager based in Calgary. Two of the fields are actively pumping gas and crude, and two are idle, according to the offering documents.
The stalled sales by Irving, Texas-based Exxon Mobil reflect gas prices that have sunk to a 7 1/2-year low, spurring other companies to slash thousands of jobs and take billions of dollars in writedowns. Slack demand and soaring output from newly tapped reservoirs in Texas and Louisiana prompted companies to pump 1.055 trillion cubic feet of the fuel into storage since the end of May, enough to supply New York state’s demand for almost 11 months.
“Where gas prices are at and the debt market are affecting people’s ability to buy stuff,” Rauch said today in a telephone interview. “It’s just the way it is.”
The auction block may get even more crowded this year as plunging prices spur lenders to reduce credit lines that energy producers rely on to lease drilling rigs, said Jim Byrne, an analyst at BMO Capital Markets in Calgary.EnCana Corp., the largest Canadian gas producer, today announced plans to sell some gas fields as part of its split into separate oil and gas companies.
Faltering Demand
Exxon Mobil fell 77 cents, or 1.1 percent, to $69.88 at 1:45 p.m. in New York Stock Exchange composite trading, almost four times the rate of decline of the Standard & Poor’s 500 Index. Exxon Mobil dropped 12 percent this year.
U.S. gas futures traded in New York tumbled 82 percent from a 2008 peak of $13.69 per million British thermal units as a recession-driven demand slump coincided with rising production of the fuel used to run factories, furnaces and power plants. On Sept. 4, the futures dropped to $2.41, a level not seen since March 2002.
Canadian gas producers feel the pinch of falling U.S. prices because they supply 90 percent of U.S. gas imports, according to the Energy Department in Washington. The spot price at the AECO C Hub in Alberta dropped to C$1.86 ($1.73) per gigajoule on Sept. 4, the lowest since October 2001.
EnCana Separation Plan
Calgary-based EnCana yesterday revived a plan to separate its gas and crude-oil entities. Cratering gas prices will make investors reluctant to buy stock in the gas business, which will retain the EnCana name, said Glenn MacNeill, chief investment officer at Lawrence Asset Management in Toronto.
Exxon Mobil, which pumps more oil than every member of the Organization of Petroleum Exporting Countries except Saudi Arabia, Iran and Iraq, this week said its full-year 2009 worldwide production may fall short of the estimate announced in March.
Shrinking gas demand in Europe, a market that accounts for 13 percent of the company’s total global gas and oil production, may preclude Exxon Mobil from boosting output by 2 percent this year to the equivalent of 4 million barrels of crude a day, Senior Vice President Mark Albers said to an energy conference in New York on Sept. 9.
Exxon Mobil has been trying to sell its 1 percent non- operated stake in the Kotaneelee gas field in the Canadian Yukon. Kotaneelee produced an average of 5,000 cubic feet of gas a day in 2008, according to the offering documents.
Hussar, South Zama
The company is also seeking to shed stakes in Hussar Glauconitic A in southeast Alberta, which pumped 1 million cubic feet of gas and 115 barrels of crude a day last year. Exxon Mobil’s interests in Hussar range from 25 percent to 50 percent.
The other two properties for sale are the 100 percent Exxon Mobil-owned-and-operated South Zama Lake oil field, and a 32 percent stake in a pair of shut-in gas wells known as Waterton North. South Zama Lake and Waterton North both are in Alberta.
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