tw sale / hedge of unsubscribed firm tw is currently in negotiations with a handful of shippers regarding 3 blocks
of unsubscribed firm capacity :
block one
volume : 27 , 500 mmbtu / d
term : 1 year , 01 / 01 / 02 thru 12 / 31 / 02
receipt : san juan , ignacio or blanco
delivery : california border - not to exceed 13 , 500 mmbtu / d at needles .
price : floating . difference between ngi socal and iferc , epng , san juan
award criteria : adjustment ( + / - ) to floating price
block two
volume : 49 , 000 mmbtu / d
term : 1 year , 01 / 01 / 03 thru 12 / 31 / 03
receipt : san juan , ignacio or blanco
delivery : california border - not to exceed 35 , 000 mmbtu / d at needles .
price : floating . difference between ngi socal and iferc , epng , san juan
award criteria : adjustment ( + / - ) to floating price
block three
volume : 11 , 000 mmbtu / d
term : 2 years , 01 / 01 / 02 thru 12 / 31 / 03
receipt : san juan , ignacio or blanco
delivery : east of thoreau
price : floating . difference between ngi socal and iferc , epng , san juan *
award criteria : adjustment ( + / - ) to floating price
* mismatch between delivery point and pricing location is an attempt to
capture more of the spread value . however , early discussions with shippers
indicates the structure may not be marketable . we may ultimately revert to
selling it on a " san juan to eot " basis .
transwestern attempted to impose a deadline for consideration of these blocks
on friday , jan . 5 , in order to bring closure . however , some parties were
not able to comply and will be providing proposals on monday .
if an acceptable offer for one or more of these blocks ( blocks one and two ,
in particular ) is received on monday , then in addition to the preparation of
the physical gas transportation contract , a hedging strategy to lock - in the
spread value should be implemented .
i ' ve spoken with dave neubauer and others ( larry , morgan , vernon and theresa )
regarding the execution of an appropriate risk management strategy . in
particular , i spoke with morgan about hedging the basis risk by executing
fixed / floating price swaps at the receipt and delivery ends . we ' ve already
talked with the potential shippers about using ngi socal at the california
border and iferc , epng , san juan for receipts . these indices appear to be
the most liquid with respect to trading the paper . they are also highly
correlated to physical prices at the receipt and delivery locations off
transwestern .
if the physical transport deals are completed on monday , i believe we should
move to execute derivative instruments to hedge the basis spread .
indications from counterparties earlier in the week are showing about a $ 1 . 40
spread in ' 02 and $ 0 . 90 in ' 03 . however , given the current state of the gas
market , and after consulting with steve harris , i also believe we should
leave the price risk open on the fuel collection under these contracts . it
seems imprudent at this point to lock - in fuel gas prices that are at
historically high levels .
i ' ve attempted to at least " tee - up " the requisite paperwork that will
document the physical transaction , hedge transaction and attempted hedge
strategy . i ' ve included it below for your use if a hedge is indeed put on
for these pending transactions . please feel free to modify or to make such
changes as you see necessary .
i ' ll be in washington d . c . on monday and tuesday . i ' ll have my cell phone
with me and will be checking messages also . call if you have questions .
tw sale / hedge of unsubscribed firm
tw is currently in negotiations with a handful of shippers regarding 3 blocks
of unsubscribed firm capacity :
block one
volume : 27 , 500 mmbtu / d
term : 1 year , 01 / 01 / 02 thru 12 / 31 / 02
receipt : san juan , ignacio or blanco
delivery : california border - not to exceed 13 , 500 mmbtu / d at needles .
price : floating . difference between ngi socal and iferc , epng , san juan
award criteria : adjustment ( + / - ) to floating price
block two
volume : 49 , 000 mmbtu / d
term : 1 year , 01 / 01 / 03 thru 12 / 31 / 03
receipt : san juan , ignacio or blanco
delivery : california border - not to exceed 35 , 000 mmbtu / d at needles .
price : floating . difference between ngi socal and iferc , epng , san juan
award criteria : adjustment ( + / - ) to floating price
block three
volume : 11 , 000 mmbtu / d
term : 2 years , 01 / 01 / 02 thru 12 / 31 / 03
receipt : san juan , ignacio or blanco
delivery : east of thoreau
price : floating . difference between ngi socal and iferc , epng , san juan *
award criteria : adjustment ( + / - ) to floating price
* mismatch between delivery point and pricing location is an attempt to
capture more of the spread value . however , early discussions with shippers
indicates the structure may not be marketable . we may ultimately revert to
selling it on a " san juan to eot " basis .
transwestern attempted to impose a deadline for consideration of these blocks
on friday , jan . 5 , in order to bring closure . however , some parties were
not able to comply and will be providing proposals on monday .
if an acceptable offer for one or more of these blocks ( blocks one and two ,
in particular ) is received on monday , then in addition to the preparation of
the physical gas transportation contract , a hedging strategy to lock - in the
spread value should be implemented .
i ' ve spoken with dave neubauer and others ( larry , morgan , vernon and theresa )
regarding the execution of an appropriate risk management strategy . in
particular , i spoke with morgan about hedging the basis risk by executing
fixed / floating price swaps at the receipt and delivery ends . we ' ve already
talked with the potential shippers about using ngi socal at the california
border and iferc , epng , san juan for receipts . these indices appear to be
the most liquid with respect to trading the paper . they are also highly
correlated to physical prices at the receipt and delivery locations off
transwestern .
if the physical transport deals are completed on monday , i believe we should
move to execute derivative instruments to hedge the basis spread .
indications from counterparties earlier in the week are showing about a $ 1 . 40
spread in ' 02 and $ 0 . 90 in ' 03 . however , given the current state of the gas
market , and after consulting with steve harris , i also believe we should
leave the price risk open on the fuel collection under these contracts . it
seems imprudent at this point to lock - in fuel gas prices that are at
historically high levels .
i ' ve attempted to at least " tee - up " the requisite paperwork that will
document the physical transaction , hedge transaction and attempted hedge
strategy . i ' ve included it below for your use if a hedge is indeed put on
for these pending transactions . please feel free to modify or to make such
changes as you see necessary .
i ' ll be in washington d . c . on monday and tuesday . i ' ll have my cell phone
with me and will be checking messages also . call if you have questions .