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FOCUS-Texas freeze delivers billions in profits to gas and power sellers

Credit: REUTERS/ADREES LATIF

Natural gas suppliers, pipeline companies and banks that trade commodities have emerged as the biggest market winners from February's U.S. winter blast that roiled gas and power markets, according to more than two dozen interviews and quarterly earnings reports.

 (Adds Energy Transfer results, details on BP)
    By Devika  Krishna Kumar, Scott DiSavino and Jessica
Resnick-Ault
    May 6 (Reuters) - Natural gas suppliers, pipeline companies
and banks that trade commodities have emerged as the biggest
market winners from February's U.S. winter blast that roiled gas
and power markets, according to more than two dozen interviews
and quarterly earnings reports.
    The deep freeze caught Texas's utilities off-guard, killed
more than 100 people and left 4.5 million without power. Demand
for heat pushed wholesale power costs to 400 times the usual
amount and propelled natural gas prices to record highs, forcing
utilities and consumers to pay exorbitant bills. 
    After the storm, few companies wanted to talk about their
financial gains, unwilling to be seen as profiting off others'
hardships. But a clearer picture is emerging from quarterly
earnings and as utility companies smarting from big bills sue to
recoup their losses.       
    The biggest winners were companies with access to supplies,
including leading energy trader Vitol, gas suppliers Kinder
Morgan <KMI.N>, Enterprise Products Partners <EPD.N> and Energy
Transfer <ET.N>, oil giant BP plc <BP.L>, and banks Goldman
Sachs <GS.N>, Bank of America (BofA) <BAC.N> and Macquarie Group
<MQG.AX>. 
    The firms combined stand to reap billions of dollars in
profits by selling gas and power during the storm, according to
interviews and reviews of public documents. It is possible that
some companies may never collect on those sales due to ongoing
litigation, however. 
    Losers include producers that could not deliver oil and gas
due to frozen wellheads, gathering systems and processing
stations. The week-long output loss cost shale producer Pioneer
Natural Resources <PXD.N> $80 million, Chevron <CVX.N> about
$300 million, and Exxon Mobil <XOM.N> $800 million.  
    Utilities are complaining of price gouging and of
unwarranted supply cancellations. The Federal Energy Regulatory
Commission is reviewing gas and power markets for potential
market manipulation.
    Goldman Sachs and Vitol did not comment. BofA did not
respond to a request for comment.
    
    'MAXIMUM WITHDRAWAL'
    Energy Transfer appears to have been the biggest winner,
saying in its quarterly results it expects gains of about $2.4
billion for the year from the storm. The pipeline giant made
most of its money from trading and from selling what it had in
storage during the period when prices skyrocketed. [nBw1t54lka]
    Energy Transfer did not comment for this story. 
    Rival Enterprise Products Partners said the storm led to
gains of about $250 million in the first quarter. [nL4N2MQ2FJ]
    Kinder Morgan, another gas storage and pipeline operator,
earned about $1 billion during the storm, the vast majority from
higher gas prices and sales. Anticipating high demand, Kinder
Morgan said it dispatched workers and backup generators ahead of
the storm to its gas storage and pipeline facilities.
    A source close to BP said gas trading contributed hundreds
of millions of dollars to the company's first quarter results.
Chief Executive Bernard Looney said he wanted to "deftly avoid"
giving an exact number for the trading division's results.
    

    
    At the beginning of February, gas prices ranged from $2.50
to $3 per million British thermal unit (mmBtu) at hubs from
Houston to Tulsa, Oklahoma. Prices began climbing on Feb. 11
into the hundreds of dollars, with Tulsa's hub surging to a
record $1,192.86 on Feb. 17, according to government data.
    "That's what happens when you go from a very well supplied
market to a very tight market, and in this case a
catastrophically tight market," said one natural gas trader.
"That was very localized pain, and it really surprised a lot of
people."
    Energy traders with three Texas electric cooperatives told
Reuters they paid as much as $400 per mmBtu during a four-day
stretch that began Valentine's Day weekend. They requested
anonymity because they were not authorized to speak about the
crisis. San Antonio's municipal utility CPS Energy said its gas
bill for the week was about $700 million. 
    "I've been tracking natural gas markets for 20 years. I've
never seen price increases like we saw," said Tyson Slocum, an
energy and environmental advisory committee member at the
Commodity Futures Trading Commission and a director at Public
Citizen, a consumer advocacy organization.
    
    WINNING AND LOSING    
    Australia's Macquarie, the second-largest marketer of U.S.
natural gas, said its trading around the storm boosted its
overall profit outlook for the year by about 10%, which analysts
estimated at about A$400 million ($317 million). [nL1N2KR0I5]
    Ahead of the storm, Macquarie traders researched how
previous cold fronts disrupted infrastructure to prepare a plan,
said sources within the firm, who requested anonymity. The
company did not comment for this story.       
    Texas's grid operator ERCOT canceled $1 billion in service
charges and state officials are considering securitizing unpaid
ERCOT bills from electric companies that defaulted.      
    Many of the firms that profited from trading, such as
Goldman Sachs and BofA, are also facing losses from their
exposure to utilities and electric co-operatives that have
declared bankruptcy, according to court filings.
    BofA made hundreds of millions via its trading arm,
according to a source with direct knowledge of the matter, but
it is owed nearly $480 million by Brazos Electric Power
Cooperative, which filed for bankruptcy.  
    Disputes over price gouging and reneged contracts have also
emerged after some suppliers declared the freeze was a force
majeure event that allowed them to suspend contracts.
    Macquarie was sued by Exxon seeking to void an $11 million
gas bill. CPS Energy sued BP, Chevron, Energy Transfer and
others for submitting bills that ran into the hundreds of
millions of dollars.  
    Texas wind farm operators also have filed lawsuits against
trading arms of JP Morgan Chase and Citigroup, maintaining the
cold snap was an extreme event that overrode contracts for power
generation and delivery. [nL1N2ME35R]

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Texas gas prices soars during February freeze    https://tmsnrt.rs/3h3E4TK
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting By Devika Krishna Kumar, Scott DiSavino, Jessica
Resnick Ault, and Gary McWilliams; additional reporting by Liz
Hampton, Stephanie Kelly, Jennifer Hiller, Shadia Nasralla and
Dmitry Zhdannikov; writing by David Gaffen and Gary McWilliams
Editing by Marguerita Choy)
 ((david.gaffen@thomsonreuters.com; +1-646-223-6064; Reuters
Messaging: david.gaffen.reuters.com@reuters.net))

Keywords: USA WEATHER/TEXAS PROFITS (UPDATE 1, FOCUS, PIX, GRAPHICS)

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