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Electricite de France SA’s trading unit is looking at a “long list” of natural gas production assets in the U.S. as prices rebound from a 10-year low.
“In the U.S., opportunities are incredible right now,” Steven Lewis, global head of gas at EDF Trading in London, said in a May 25 interview. “U.S. energy and gas markets are very exciting.”
Gas prices will almost double to about $5 per million British thermal units as the lower 48 states begin to ship liquefied natural gas to Europe and Asia, making some currently unprofitable operations more attractive, he said. “Marginal- production” areas may be in the Hainesville Shale straddling Louisiana and Texas, he said.
Chesapeake Energy Corp. (CHK), the second-largest U.S. gas producer, plans to sell $14 billion of assets after prices for the fuel dropped to a 10-year low and it lost a third of its market value this year. Month-ahead gas dropped to $1.902 per million British thermal units on the New York Mercantile Exchange on April 19 and was at $2.51 today.
There are companies that believe their assets are undervalued and are reluctant to sell, Lewis said.
“Some of these producers have cash-flow issues, so they might not have any choice,” he said.
EDF Trading is also trying to buy into U.S. LNG export terminals, of which just one has been approved by the government so far. Cheniere Energy Inc. (LNG) was granted federal permission to export from a $10 billion plant in Louisiana from 2015. Sempra Energy, Mitsubishi Corp. and Mitsui & Co. Ltd. are seeking permits to ship gas from Hackberry, Louisiana, upon completion of a $6 billion investment in 2016.
Freeport LNG in partnership with Macquarie Group Ltd., Australia’s largest investment bank, is planning to start an export terminal in 2017 and Dominion Resources Inc., a Richmond, Virginia-based power producer, plans to have an export facility operating by 2017.
“In the U.S. we’re looking at every liquefaction opportunity in the market,” Lewis said. “We’ve had memorandums of understanding with almost all of them, as well as Indian and Asian utilities. Quantities are getting booked contingent upon permits being granted.”
EDF Trading started two years ago managing global assets for its parent, including energy production and so-called midstream businesses that include the movement and storage of oil and gas. It took over the commercial operations of EDF’s gas-fired power stations in September and has a remit to grow its portfolio through acquisitions, Lewis said.
The company bought a controlling stake in a central Austrian biodiesel plant on April 16. It acquired an 82-megawatt natural gas-fired power plant in Lowell, Massachusetts, last July.
Earnings before interest tax depreciation and amortization was 673 million euros ($843 million) in 2011, up from 628 million euros in 2010, the company said in February.
EDF appointed Lewis as the global head of gas at EDF Trading in November 2010. He left Credit Agricole Corporate & Investment Bank, a partnership between Credit Agricole SA and EDF Trading, to rejoin EDF Trading, the company said at the time. He was formerly head of trading at EDF Trading between 2001 and 2004.
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