Chevron, Dynegy End Marketing Deal
ChevronTexaco Corp. said Friday that it would launch its own natural-gas trading operation to replace the wholesale gas marketing deal it had with Dynegy Inc.
Dynegy markets the natural gas produced by San Ramon, Calif.-based ChevronTexaco in the lower 48 U.S. states -- more than 2 billion cubic feet a day, or enough to serve nearly 9 million average homes daily. But the Houston energy firm is abandoning the trading business to focus on more profitable operations.
The two companies announced Friday that they would terminate Feb. 1 their natural-gas marketing contracts, which were supposed to last until August 2006.
Dynegy has been trying since October to get out of the deal with ChevronTexaco, which owns 26.5% of Dynegy.
The energy-trading business was decimated by the collapse of Enron Corp. and the subsequent loss of confidence by lenders and investors amid revelations of shady practices, including bogus “wash” transactions between companies and false reporting of energy trades to industry publications.
But where Dynegy sees a cash drain, ChevronTexaco spots a business opportunity.
“We see that it’s in our best business interests to do this. We’ve got a strong balance sheet and a significant equity production base, and we think those will be welcome factors in an industry that has seen a significant number of players exiting the business,” ChevronTexaco spokesman Fred Gorell said.
The Houston-based trading operation, to be called ChevronTexaco Natural Gas, will employ about 100 people and also will market natural gas for some of Dynegy’s other customers, he said. Gorell declined to say whether the business would actively seek new customers or would engage in speculative natural-gas trading.
Friday’s announcement represents a step forward for Dynegy, which will pay ChevronTexaco $11 million but will be able to free up $180 million in cash used as collateral for the trading operation.
Dynegy’s stock lost 19 cents to close at $2.43 and ChevronTexaco fell 21 cents to $68.11, both on the New York Stock Exchange.
Dynegy and ChevronTexaco are renegotiating terms of a $1.5-billion loan that Dynegy must repay in November, a Dynegy spokesman said.
