Louise,
 
This is the email written by Paul Bienawski regarding a potential aquisition of Bistineau.  You had mentioned an interest in seeing this email last week.
 
Mrha
-----Original Message-----
From: Bieniawski, Paul 
Sent: Thursday, August 23, 2001 9:54 PM
To: Miller, Don (Asset Mktg)
Cc: Mrha, Jean; Gregory, Paul
Subject: Bistineau
Importance: High


Don,
 
This is a long e-mail and I apologize for that but since we have not had a chance to talk, I wanted to send you some information on Bistineau as well as the latest output from the Storage Group's M & A analysis.
 
The M&A analysis was just updated as they have been several reservoir transactions in the past few months (AEC @ Manchester, Atmos @ East Diamond, and Aquila @ Lodi).  Prior to these transactions we did not have enough data points to draw meaningful conclusions about the trends in reservoir acquisition.
 
I have attached the output for your review but I think a couple of points are key.
 

The reservoir curve is "hockey-sticking" just as the salt curve did previously.  While not as dramatic as salt, the premiums are increasing dramatically. 
The market is NOT placing a premium on optionality.  Salt is inherently more flexible than a reservoir, yet on a deliverability basis, there does not appear to be a significant difference.  That may explain why we see players who DO value optionality in the marketplace (Aquila, AEC, Duke, etc).  These companies have long established asset based storage groups and actively trade around these assets.

As far as Bistineau is concerned, there are several points worth highlighting.  I have attached output from the database maintained by the Storage Group for your reference. I have not included caverns but we do have that data.

Reliant Energy is part owner of the facility.  Reliant is aggressively trying to build a merchant storage business.  My group has bumped into them several times in the marketplace. 
Since the facility is federally regulated, Reliant and Koch would be required to make a NGA 7(b) filing to abandon the services they provide their customers before anyone could purchase the reservoir.  The length of this process would be a function of the number of intervenors.  
Bistineau is a very large reservoir with a large amount of native base gas.  How much of this volume is recoverable (and therefore monetizable) is a large question mark. 
Relative to its peers, Bistineau is a poor performer in terms of flexibility (low injection capabilities) 
Koch has, in the past, written off losses at Bistineau.  The low injection rate may be as a result of this.  I have not researched the exact amount of the losses but a seach of FERC filings would reveal the nature and extent of the losses.  Epps likewise has had some loss problems.

If Enron's intent is to establish a storage asset position in Louisiana, South Downsville would probably be the best candidate.  The field is privately held, under development, has many interconnects, and acquisition would probably meet little resistance given the lack of customers.  

While I have not communicated with Matrix in some time, I do know the principals and could easily get an update on their status and plans.

 

I will not be in tomorrow morning, but should you wish to discuss this e-mail, feel free to call me on my cell phone @ 713-825-2643.