Enron Credit Line -2: Secured By Northern Natural Gas
11/21/2001 
Dow Jones News Service 

The Death Of A Pipedream
11/24/2001 
Australian Financial Review 

Pipeline projects flourish
11/23/2001 
Tulsa World 

N Amer Oil, Gas Industry On High Alert After FBI Warning
11/26/2001 
Dow Jones Energy Service 

Enron Is Sued Over 401(k) Plan; Plaintiffs Seek $850M
11/26/2001 
Dow Jones News Service 

MOU Signed for 1,700-mile Alaskan Gas Pipeline Project
11/26/2001 
Gas Processors Report 

Wall Street - Oil, oil, boil and trouble.
11/24/2001 
Financial Times - FT.com 

Volatility Fell Slightly in Light Holiday Trading--  As Enron Calls, Lilly Puts Attracted Interest
11/26/2001 
The Wall Street Journal 

War is the variable in the oil equation.
11/26/2001 
Financial Times

Terror threat puts oil firms on alert-- Letter warns of attacks on installations, pipelines if bin Laden killed or captured
11/26/2001 
The Globe and Mail 

Dynegy Board Silent On Status Of Enron Takeover 
11/26/2001 
Dow Jones News Service 


Enron, Banks Formalize $690M Debt Extension To Dec. 14
11/26/2001 
Dow Jones News Service 

Another Sign Investors Don't Trust Enron
11/26/2001 
Dow Jones News Service 

Oil, gas industry on high alert after FBI warning 
11/26/2001
Houston Chronicle
______________________________________________________________________

Enron Credit Line -2: Secured By Northern Natural Gas

11/21/2001 
Dow Jones News Service 
(Copyright (c) 2001, Dow Jones & Company, Inc.) 
HOUSTON -(Dow Jones)- Enron Co. (ENE) closed on the remaining $450 million of a previously announced $1 billion in secured credit lines and said it is in active discussions to restructure its debt to improve liquidity. 
In a press release Wednesday, Enron said the $450 million credit facility is secured by the assets of Enron's Northern Natural Gas Co. 
A $550 million credit facility, secured by the assets of Enron's Transwestern Pipeline Co., closed Nov. 16. The proceeds are being used to supplement short-term liquidity and to refinance maturing obligations. 
The company said the maturity on its $690 million note payable obligation will be extended to mid-December. 
Dow Jones Corporate Filings Alert reported Monday that Enron is currently preparing a restructuring plan aimed at taking aggressive steps to rationalize the company's existing cost structure, accelerating the process of divesting noncore businesses and assets and restructuring scheduled maturities of debt and other obligations. 



The Death Of A Pipedream
Pamela Williams

11/24/2001 
Australian Financial Review 
Page 22 
Copyright of John Fairfax Group Pty Ltd 
Some of the biggest names in Washington have been long associated with the dream of opening up the rich energy fields to rival Gulf oil. But the war in Afghanistan has killed off one of the most ambitious projects. 
The web site of the US oil giant, Unocal, tells a tale of corporate power in hiding. It is a blunt statement of repudiation, far from the covetous plans of the 1990s for crossing Afghanistan with pipelines rich with oil and gas. 
Instead, in an admission of defeat, the company has posted the message: ``Unocal does not have nor do we plan to have any projects in Afghanistan. We do not support the Taliban in any way whatsoever.'' 
Hailed as the biggest single economic event of the 21st century with more oil and gas than Saudi Arabia's fabled reserves the project was a multi-billion dollar pipeline, bringing gas from the prime Turkmenistan reserves, across Afghanistan, to the huge Indian and Pakistan markets. Another pipeline would have carried oil from the Caspian reserves. 
But in 1998, the project faced defeat as the civil rights and feminist lobby in the United States took on the oil giants over the suppression of human rights by the fervent Islamic clerics and mullahs of the Taliban. They wrested the attention of the United Nations and forced the hand of then president Bill Clinton. Notwithstanding years of pressure by Unocal and its star-studded array of consultants, Clinton declared that the Taliban's repression of women's rights meant there could be no recognition of the Government in Kabul. 
It was a bitter blow for Unocal. 
But now, with the Taliban steadily being blasted from power, there is renewed speculation that Unocal might seek to breathe new life into the project, bringing a new frenzy of lobbyists and consultants from the US oil industry into the broken Afghan capital. 
Absolutely not, according to Unocal spokesman, Barry Lane. He rejects outright the suggestion that Unocal never gave up the pipeline dream, and pressured new President George W. Bush to re-open the door to the Taliban earlier this year. 
``Why would we want to go back in there,'' Lane demands. ``In the intervening three years since we pulled out, our company has refocused its interests.'' 
Furthermore, he insists that Unocal never cut deals with the Taliban in the first place. He is keen to paint the company (which is a major donor to the Republican Party), as having moved on to greener pastures. 
``It [the Afghanistan pipeline proposal], had all the earmarks of a very good project. But there was no recognised government and therefore you could not get finance, so the project could not go forward,'' Lane says. ``And we were always an advocate on women's rights and we pressured them [the Taliban] at the time,'' he insists. That's not the way the very influential US lobby group The Feminist Majority remembers it. This organisation rallied women and trade unions across America, and galvanised Hollywood to rally for Afghan women's rights. In the end, the Clintons buckled. 
Spokeswoman for The Feminist Majority, Kathy Spillar, says: ``The whole world was willing to look the other way as this Taliban regime stripped women of every human right except to breathe, while it planned on how to exploit these oil interests. Now the eyes of the world are on what this new government will look like. And we're going to be watching the oil interests closely. There are just too many times these brutal regimes have flourished while business interests look the other way.'' 
The speculation about the continued pressure by oil companies on US foreign policy in Afghanistan has been fed by the publication of a new book which alleges that the oil giants stayed George W's hand on investigating terrorism this year while they tried one last round of diplomacy to secure some concessions from the Taliban. 
In Bin Laden: the Forbidden Truth, by Jean-Charles Brisard and Guillaume Dasquie, the authors claim that under pressure from US oil companies, George W. Bush's Administration blocked intelligence agencies from investigating terrorism while it bargained with the Taliban to give up Osama bin Laden in exchange for political recognition and economic aid. 
The authors claim that US oil companies and the US relationship with oil-rich Saudi Arabia were the two greatest obstacles to hunting Islamic terrorists. And they assert that until August this year, the US goal was actually to consolidate the Taliban in the hope of finally striking the lucrative pipeline deals. 
According to the book, the US re-opened negotiations with Taliban representatives in February this year meetings that continued until August, just a month before New York's World Trade Center was attacked. 
The authors claim as their source for this extraordinary revelation, the former deputy director of the FBI, John O'Neill, who for many years led the FBI investigations into Osama bin Laden's Al Qaeda network. 
They say that O'Neill this year complained bitterly that his investigations into bin Laden were blocked by the State Department and the oil lobby connected to President George W Bush. In frustration, O'Neill resigned from the FBI. In a chilling turn of events, he took a new job as head of security at the World Trade Center. He was killed on September 11 in the attack on the twin towers. 
Certainly the top layers of George W. Bush's Administration enjoy excellent relations with the American oil giants. Aside from the Bush family's oil background, Vice-President Dick Cheney was until last year the chief executive of energy services giant, Halliburton; the National Security Adviser, Condoleezza Rice, was a director of Chevron through the 1990s, and the Secretaries of Commerce and Energy, Donald Evans and Spencer Abraham, worked for oil company Tom Brown. And Unocal includes on its board of directors, Donald Rice, who was Secretary of the Air Force under the first president Bush. 
In its efforts to secure a pipeline deal with the Taliban in recent years, Unocal went to extraordinary lengths. 
With consultants on board such as the former US Ambassador to Pakistan, Robert Oakley, the company pursued all opportunities, including donating nearly $US1million to the University of Nebraska to the school of Afghanistan Studies. The money was used in part to set up training programs for Afghans who would work on the pipeline, should Unocal end up in the box seat with the Taliban. 
Taliban mullahs visited the US twice, with representatives travelling to Houston in late 1997 as the guests of Unocal, visiting the home of Unocal boss Marty Miller, enjoying the sights, with trips to the zoo and shopping centres. On the side there were talks with the State Department. 
All the while, intense fighting raged across Afghanistan between the warlords and the Taliban and amongst the warlords themselves. 
The CentGas project, as the Unocal consortium (with its major partner the Saudi company Delta Oil), was known, had to raise its funds by late 1997 to meet its deadlines. But the fighting made it impossible to envision stability and finally the CentGas consortium began to unravel. 
The stakes for the oil giant were huge. In February 1998, Unocal's vice-president of international relations, John Maresca, testified before the House Committee on International Relations. Maresca too, was from the family fold, having been George Bush Snr's Ambassador to Cyprus. 
He outlined the glittering prospects if only the centre could be made to hold in Afghanistan. Despite two decades of bitter warfare and the suppression of human rights, Afghanistan was still the best option for Unocals' pipelines as far as the company was concerned. 
``The route through Afghanistan is the one that would bring Central Asian oil closest to Asian markets and thus would be cheapest in terms of transporting the oil,'' Maresca said. 
And to bring gas, there was the CentGas pipeline. 
But as with the oil pipeline, construction could not begin ``until an internationally recognised Afghanistan government was in place. For the project to advance, it must have international financing, government-to-government agreements and government-to-consortium agreements.'' 
Four weeks later, Bill Clinton, with UN Secretary-General Kofi Annan, and Secretary of State Madeleine Albright by his side, dispatched Unocal's hopes, declaring there would be no diplomatic recognition for the Taliban. 
In his best-selling book, Taliban, Ahmed Rashid, quoted Yasushi Akashi, the UN Under-Secretary-General for Humanitarian Affairs speaking in 1996: ``The outside interference in Afghanistan is now all related to the battle for oil and gas pipelines. The fear is that these companies and regional powers are just renting the Taliban for their own purposes.'' 
The Taliban may now be all but gone, but the oil and gas reserves in the region mean that Afghanistan has by no means reached the end of its long march with the US oil giants. 



Pipeline projects flourish

11/23/2001 
Tulsa World 
FINAL HOME EDITION 
Page 8 
(Copyright 2001) 
Tulsa-based Williams Cos. Inc., El Paso Corp. and other domestic energy firms are leading a $2 billion-a-year expansion of natural- gas pipelines in the United States, the biggest since the 1960s. 
Spurred by a projected 30 percent rise in demand for gas in the next nine years, pipeline companies are building projects that will snake their way from the Great Plains to California, and from Canada to New York. 
Falling gas prices and a weakening economy haven't slowed construction. El Paso recently said it plans to spend as much as $1.8 billion on a 750-mile line to bring gas to New York from Nova Scotia, and Duke Energy Corp. announced a $478.1 million expansion of a Canadian line to Boston. 
"We're looking through the short-term cycle," said Stephen Beasley, president of El Paso's Tennessee Gas Pipeline unit. "We're in a transition from a petroleum to a natural-gas economy. If you're building a new boiler, a new home, a new power plant, the principal fuel is natural gas." 
Houston-based El Paso owns 58,000 miles of interstate pipeline, the biggest U.S. network. 
Since 1997, federal regulators have granted construction certificates for 60 onshore and offshore projects that would add 8,110 miles of pipeline with the capacity to move an extra 23.2 billion cubic feet of gas a day. The projects are valued at $10.7 billion. 
There are 24 additional projects, worth $4.4 billion, awaiting federal approval for an additional 8 billion cubic feet of capacity and 1,730 miles of pipeline. 
This year, about 17 pipeline projects are scheduled for completion, adding 5.5 billion cubic feet in daily capacity and 1,400 miles of new or upgraded pipeline, according to the U.S. Department of Energy. 
The construction involves pipelines to new gas reserves, lines to new markets and line expansion to new customers, Beasley said. 
The United States has 185,0000 miles of interstate pipelines and 75,000 miles of distribution pipelines. The system can move about 22 trillion cubic feet of gas daily. 
Forecasts by the Interstate Natural Gas Association and DOE put 2010 demand close to 30 trillion cubic feet. 
Pipeline companies sell line capacity to gas users before starting construction, so the fall in gas prices this year isn't expected to halt construction. 
"These aren't the types of projects you do on speculation," said Cuba Wadlington, head of pipeline operations for Williams. "We aren't selling gas -- we're selling capacity." 
Williams, also one of the biggest energy traders, has a 27,300- mile pipeline network that spans North America. Its biggest project is a $1.6 billion joint venture with Duke Energy for a line from Alabama to Florida. The pipeline will run 700 miles and carry 1 billion cubic feet of gas. 
The company also is working on a $135 million expansion of its Kern River pipeline to California, and is spending $300 million to build a line to the Pacific Northwest from central Wyoming. 
Williams plans to spend an additional $6 billion in the next three years on pipeline projects, Wadlington said. The company also is part of a group that announced recently it will draw up a plan to build a pipeline for bringing Alaskan natural gas to markets in the "lower 48" states. 
The group expects to present a plan to the owners of Alaska's gas reserves and the state by the end of the year to build and run the line by 2008. 
Foothills Pipe Lines Ltd., a venture of TransCanada PipeLines Ltd. and Westcoast Energy Inc., owns the right of way to the route. 

COLOR PHOTO; Caption: Since 1997, federal regulators have approved 60 projects that would add 8,110 miles of pipeline with the capacity to move an extra 23.2 billion cubic feet of gas a day. CREDIT:FROM STAFF AND WIRE REPORTS 



N Amer Oil, Gas Industry On High Alert After FBI Warning

11/26/2001 
Dow Jones Energy Service 
(Copyright (c) 2001, Dow Jones & Company, Inc.) 
WASHINGTON (AP)--The oil and gas industry is on especially high alert after a Federal Bureau of Investigation warning that Osama bin Laden may have ordered retaliatory strikes against North American natural gas facilities in event of his capture or death, industry sources said Monday. 
The sources, who spoke on condition of anonymity, said the warning issued by the FBI last week was general and singled out no specific target, but referred specifically to natural gas infrastructure such as pipelines. 
There are thousands of miles of gas pipeline, most of them buried, crossing the U.S. and Canada. Thirty interstate gas pipelines carry 90% of the natural gas transported, according to the Interstate Natural Gas Association of America. 
One source characterized the warning as similar to one issued earlier this month on potential attacks against West Coast bridges that prompted security alerts, but no evidence of actual terrorist intentions. 
The FBI alert prompted the American Petroleum Institute, which is the lead industry group coordinating with the FBI and Energy Department on security matters, to issue a warning to oil and gas companies. 
"We have received uncorroborated information that Osama bin Laden may have approved plans to attack natural gas supplies in the United States," said the memo, adding that the information was "from a source of undetermined reliability." 
The FBI warning continued that "such an attack would allegedly take place in the event that either bin Laden or Taliban leader Mullah Omar are either captured or killed." 
Energy companies have stepped up security at refineries, pipeline pumping stations and other facilities since the Sept. 11 terrorist attacks in New York and Washington and the U.S. retaliatory attacks in Afghanistan. 
There are thousands of miles of natural gas and petroleum pipelines crossing North America, making protection of such lines difficult. Aerial monitoring of pipelines have increased and security has been intensified at pipeline pumping stations, according to industry officials, who spoke on condition of anonymity. 
Also, some detailed information about location of pipelines and other energy infrastructure have been taken off some corporate and government Internet sites. Access to facilities has been tightened as well, officials said.



Enron Is Sued Over 401(k) Plan; Plaintiffs Seek $850M

11/26/2001 
Dow Jones News Service 
(Copyright (c) 2001, Dow Jones & Company, Inc.) 
NEW YORK -(Dow Jones)- Enron Corp. (ENE) was sued Monday in the latest of at least three purported employee class action suits the company faces over lost 401(k) retirement savings due to the recent collapse of the price of Enron stock. 
In a press release Monday, Eli Gottesdiener, a Houston attorney who filed the latest suit on behalf of employees, said it seeks $850 million in plan losses, in part because the company sold Enron stock to its employees knowing the price was artificially inflated. 
An Enron spokeswoman declined to comment. 
Unlike two similar, recently filed suits against Enron, the latest also contends that Enron offered the stock without the required prospectus. 
If proven, the sale without a prospectus "give workers the automatic right to rescind their purchases and receive their money back with interest," Gottesdiener said in a statement. 
Enron "locked down" the retirement plan from Oct. 17 to Nov. 19, to make administrative changes, which prevented employees from selling Enron shares as the share price collapsed amid growing disclosures of financial problems. 
Earlier this month, Houston-based Dynegy Inc. (DYN) offered to buy its far larger competitor in an all-stock deal that values Enron shares at $10.85 a piece, or about $9.2 billion. 
Enron later disclosed that its future earnings would be substantially less than expected and shares fell sharply. 
Enron currently trades at $4.05 a share, down from their 52-week high of $84.88 a share in December 2000. 
The first suit was filed Nov. 13 on behalf of plaintiffs by Campbell Harrison & Wright LLP in Houston. A second was filed last week by Seattle-based Hagens Berman LLP. 
-John Seward; Dow Jones Newswires; 201-938-5400 




MOU Signed for 1,700-mile Alaskan Gas Pipeline Project

11/26/2001 
Gas Processors Report 
(c) 2001 Phillips Business Information, Inc. 
A memorandum of understanding has been signed between subsidiaries of six U.S. companies and three Canadian firms to immediately begin developing a proposal to build a 1,700- mile natural gas pipeline being designed to transport Alaskan natural gas from the North Slope to Canada and the lower 48 by 2008. The companies are hoping to present a proposal to producers by year-end. If and when an agreement is reached with the producers, the companies will move forward with the Alaskan portion of the project. 
The U.S. companies involved in the project include Williams, Duke Energy, Sempra Energy International, Enron, PG&E Corp., El Paso Corp., while TransCanada PipeLines, Westcoast Energy and Foothills Pipe Lines represent the Canadian parties. The signing of the MOU is significant because it shows a renewed interest in eliminating the historic and other commercial roadblocks to building the project, according to our source. 
All of the companies are the original partners in the Alaskan Northwest Natural Gas Transportation Co., which was designed by the President and U.S. Congress to build and operate the Alaskan portion of the project in 1977. The companies dropped out of the project years ago, even though the Federal Energy Regulatory Commission had already received approval for the project. Numerous other federal permits for the construction and operation of the Alaskan Natural Gas Transportation System (ANGTS) are already in place. The statutory framework for the project provides for a quick approval of the remaining permits needed before construction can begin. 
"This is a big step forward in bringing Alaska's natural gas to markets in the Lower 48, said Alaska Senator Frank Murkowski. "I always have believed that construction of an Alaskan gas transportation system to the Lower 48 is going to take the synergistic efforts of pipeline companies and the oil and gas production companies in cooperation with the State, the federal government and Canada. While this does not guarantee construction of a North Slope gas delivery system, it is a big step in the right direction." 



Wall Street - Oil, oil, boil and trouble.

11/24/2001 
Financial Times - FT.com 
(c) 2001 Financial Times Limited . All Rights Reserved 
A short week on Wall Street appeared a very long week for the energy sector, an industry that has - in everything from oil to electricity - succeeded in delivering some stinging surprises to the US economy this year. 
Last Sunday, Conoco and Phillips Petroleum jolted merger and acquisition specialists out of their torpor with the year's biggest deal, a $35bn "merger of equals" to create the third-largest integrated energy company in the US and the sixth-largest in the world. 
Coincidentally, on Monday, ChevronTexaco feted the consummation of its merger with a New York analysts' meeting at which David O'Reilly, the combined group's chief executive, promised higher than expected annual savings of $1.8bn by 2003. 
Whether the sector needs another clumsy baptism - the fruit of Sunday's announcement will, inevitably, be saddled with the name ConocoPhillips - is not really at issue. Consolidation that began in the 1990s has left medium-sized energy companies such as Conoco and Phillips with little option but to combine resources for exploration and production in order to compete with "super-majors" such as ExxonMobil. 
Volatile oil prices - another story of the week - appear to add to the urgency of the combination, although James Mulva, Phillips's chairman and chief executive, denied that was a prime reason for consolidation. After all, the industry has learned to live with volatility. 
These are companies that, in just three years, have shrugged off concerns about what would happen if crude oil remained at $10 a barrel, and, at the other extreme, the possibility of crude lingering above $30. 
In the short term, the fate of stock prices in the sector may depend on Opec's ability to snatch victory from the jaws of defeat in its confrontation with Norway and, in particular, Russia over calls for a cut in oil output to underpin the world price. Oil stocks, as measured by the Philadelphia Oil Service index, have had a turbulent time since September 11, plummeting initially only to rally back to their levels before the terrorist attacks and then slump again as the wrangling between Opec and non-Opec oil producers burst into the open. 
ChevronTexaco, for one, seemed unperturbed by the stand-off. "If you want a stable price environment, you don't want to be in this business," O'Reilly said on Monday. He was talking about the oil price but he might just as easily have been referring to energy stocks. 
Energy-related industries - from utilities to pipelines - make up six of the 10 worst-performing sectors over the past month, according to Dow Jones data analysed by CBS Marketwatch. 
None, however, has fallen as precipitously or as publicly as Enron, the energy trading company. Its share price at the close on Wednesday was $5.01, down 44 per cent on the week and 94 per cent below its 52-week high of nearly $85. Remember that this was a company that outperformed the Nasdaq Composite Index even as the technology-heavy index rose to its March 2000 peak. 
In addition, Enron remained at stratospheric price and valuation levels even after the dotcoms, whose magic dust its online trading operations borrowed, fell to earth. 
In the process, its ability to pioneer new trading markets, such as bandwidth, made it the envy of Wall Street's own broker-dealers, jealous of its trading bravado and its share rating. 
Two of Wall Street's giants - JP Morgan Chase and Citigroup - are now helping to prop up the group, laid low by its failure to disclose adequately off-balance-sheet transactions that it carried out as part of its rapid expansion. The two banks are advising Enron on a rescue bid from Dynegy, the much smaller rival energy group part-owned by ChevronTexaco, and backing it with $1bn of credit, secured on pipeline assets. 
The trigger for this week's sharp decline was Enron's regulatory filing late on Monday, which revealed for the first time to shaken shareholders and bondholders that the group would have to repay $690m of notes next Tuesday because of a downgrade 10 days ago by Standard & Poor's. 
Wednesday's announcement that Enron had managed to postpone that deadline until the middle of next month seemed to do little to allay the crisis of confidence about the group's ability to repay its heavy debts. Ahead of the Thanksgiving holiday, few share traders seemed to want to hold the stock, which fell 28 per cent on Wednesday alone, and electricity and gas counterparties are also wary of entering long-term contracts in the markets that Enron helped pioneer. 
The Enron debacle is a reminder of how quickly fortunes can change. Earlier this year, the well-connected and politically influential Houston-based group was powerful enough to be accused by Californians of playing a key role in provoking the electricity crisis on the west coast. 
Now Enron's shares and bonds are trading as though it may go bust. If it does, it could drag down other, weaker energy companies, because of its role as a market-maker, supplying liquidity to the power and gas markets. If the worst fears of some Wall Street bankers are realised there may even be repercussions for the wider financial markets, where Enron lays off the risk of price fluctuations, using derivatives. 
andrew.hillft.com. 
(c) Copyright Financial Times Group. 
http://www.ft.com. 



Volatility Fell Slightly in Light Holiday Trading
As Enron Calls, Lilly Puts Attracted Interest
By Cheryl Winokur Munk

11/26/2001 
The Wall Street Journal 
Page B8 
(Copyright (c) 2001, Dow Jones & Company, Inc.) 
NEW YORK -- The options market dozed, as many participants stayed home to recover from too much turkey and football. 
The Chicago Board Options Exchange's market volatility index, or VIX, which measures certain Standard & Poor's 100 Index option prices to gauge investor sentiment, remained in a tight range during the abbreviated trading session the day after Thanksgiving. It fell 0.53 to 24.79. 
VIX typically ranges between 20 and 30. A rise indicates traders and money managers are becoming anxious about the stock market; a fall shows investor optimism. 
Volatility has been dropping from post-Sept. 11 levels in recent weeks amid victories over the Taliban in Afghanistan and interest-rate cuts by the Federal Reserve and other central banks. VIX ranged between 30 and 40 for several weeks following the attacks. 
Volatility is likely to remain low, said Mika Toikka, head of options strategy at Credit Suisse First Boston. "Typically, going into the Thanksgiving and December holidays, we tend to experience a seasonal drift lower in implied volatility. We would expect the same this year, especially in markets outside the U.S. where volatility is still lingering at high levels," Mr. Toikka wrote in a recent research note. 
The CBOE's Nasdaq Volatility index, or VXN, a sentiment barometer for the technology sector, fell 1.86 to 50.82 while the American Stock Exchange's Nasdaq volatility index, or QQV, dropped 1.03 to 42.74. 
Elsewhere in the options market: 
Calls in Enron Corp., the embattled Houston energy and trading company, continued to trade briskly, with one investor buying 10,000 January 5 calls and simultaneously selling 12,250 January 10 calls. 
More than 14,800 of the January 5 contracts traded, compared with open interest of 3,640, as shares fell 33 cents, or 6.6%, to $4.68. These calls cost $1.40 on the American Stock Exchange where most of the volume was traded. 
More than 15,000 of the January 10 contracts traded, compared with open interest of 30,674. These out-of-the-money calls cost 30 cents on the Amex. 
Eli Lilly & Co.'s December 80 out-of-the-money puts also were popular Friday, as shares fell 91 cents, or 1.1%, to $82.42. Morgan Stanley cut its rating on the company to neutral from outperform, saying the stock has become too expensive even with Food and Drug Administration approval of its potential blockbuster drug Xigris, which treats septic infections. More than 3,000 of these puts traded, compared with open interest of 6,427. They cost $1.25 on the CBOE, which saw much of the volume. 



War is the variable in the oil equation.
By IAN BREMNER.

11/26/2001 
Financial Times 
(c) 2001 Financial Times Limited . All Rights Reserved 
Oil prices are in the news again. Over the past two months, competition for market share and the threat of global recession have caused oil prices to plummet. Investors have regarded this as a positive development, since low energy prices can help resuscitate struggling western economies. 
However, the markets may be pricing the wrong end of the equation, for it is supply, not demand, that may prove a shock to the system. 
At issue is risk in the Middle East. As the war against terrorism moves beyond the Taliban, the US-led coalition will turn elsewhere to root out supporters of al-Qaeda and other terrorist networks. The top suspects are Saudi Arabia, Iran and Iraq - oil exporters with 45 per cent of the world's reserves among them. 
Pressure on these regimes to change their position on terrorism will mount in the coming months. But with the present governments in place, none is likely to do so. The Saudis and Iranians are unable, the Iraqis unwilling. 
While Saudi Arabia has been a military and economic ally of the US, its business and religious leaders have long supported the Taliban and al-Qaeda. Full co-operation with the investigations of September 11 and severance of the financial networks that supported it would critically expose the ruling family. 
Meanwhile, domestic opinion in Saudi Arabia runs counter to the interests of the US-led coalition. For Crown Prince Abdullah to maintain authority, he must take a far more radical stance against the US. Signs of Saudi intransigence have grown accordingly. Prince Abdullah stated that the US and Saudi Arabia should recognise and pursue their separate interests, and stepped up criticism of US policy on Palestine and Iraq. 
Iran's internal stability is also in doubt. Iran tops the US list of state sponsors of terrorism, through its continued support of Hamas and Hezbollah. President Mohammad Khatami would like to move his country towards the west; privately, his advisers hint that he is prepared to make significant concessions on the terrorism issue. But despite an overwhelming electoral victory for the reformers last June, authority remains in the hands of the Khamenei-led conservatives, who soften their stance at their peril. The political situation in Iran - where soccer riots have led to widespread anti-government demonstrations - leaves little room for compromise. 
Demographics work against both regimes. Rapidly expanding and extremely young populations have led to high unemployment and drastically diminished per capita income. Oil prices in the teens could not come at a worse time, guaranteeing crippling budget deficits and cutbacks on stretched social services. Together with pressure from the west, the position of both regimes is increasingly untenable. 
Saddam Hussein, Iraq's president, has little concern for domestic instability. But reports of Iraqi intelligence connections to the September 11 terrorists, coupled with Mr Saddam's alleged development of biological and chemical weapons, make it hard for the US to avoid escalation. President George W. Bush does not yet subscribe to the view of many in the defence department that Iraq should be the US's next military target, but pressure to remove Mr Hussein from power will undoubtedly increase. 
Further stirring the pot, the propaganda war is being lost by the US and the UK. Few in the Middle East feel any sympathy for Mr bin Laden, but the war in Afghanistan remains unpopular. Many are incensed by harm to Iraqi civilians over the issue of sanctions and by US support for Israel. As the war against terrorism moves closer to them, these feelings will intensify, further destabilising isolated regimes. 
The danger is not that Saudi Arabia or their neighbours will stop selling oil to the west on principle: their need for petrodollars is overwhelming. The risk is that one or more key oil producers will face a sudden crisis of government, disrupting the flow of oil. And there are other dangers, such as a terrorist attack on key refineries or pipelines. 
Nevertheless, few economists are seriously discussing the possibility of a jump in oil prices. They remain focused on prospects for recovery in the middle of next year. Significantly higher prices are far from certain, but $40 a barrel for any sustained period would damage or stall any recovery. 
Washington can do little to help. Using its strategic oil reserves is a possibility, as is exploiting new reserves in Alaska. Strategic discussions with Russia to keep supply high and increased flows from the Caspian would also help. 
Either way, a recovery is dependent upon maintaining stability in the Middle East. US fixes are simply nibbling around the edges. 
Ian Bremmer is president of Eurasia Group and senior fellow at the World Policy Institute. 
(c) Copyright Financial Times Ltd. All rights reserved. 
http://www.ft.com. 



Terror threat puts oil firms on alert-- Letter warns of attacks on installations, pipelines if bin Laden killed or captured
PETER KENNEDY

11/26/2001 
The Globe and Mail 
Metro 
Page A4 
"All material Copyright (c) Bell Globemedia Publishing Inc. and its licensors. All rights reserved." 
VANCOUVER -- Canada's oil-and-gas sector is on high alert after learning of a threat that associates of Osama bin Laden may be planning to sabotage energy installations and pipelines in North America. 
A spokesman for B.C. Gas Utility Ltd. confirmed yesterday that the company has received a copy of a warning it believes was distributed to about 400 members of the Washington, D.C.-based American Petroleum Institute last week. 
In a confidential letter, the institute said it had received information from a source of "unde- termined reliability" warning that an attack will take place if Mr. bin Laden or Taliban leader Mullah Mohammed Omar is either captured are killed. 
The letter contained no details on who issued the warning, how such an attack would be carried out, or which facilities would be targeted. 
B.C. Gas spokesman Dean Pelkey said the warning may be the work of a prankster. "But at the same time, when something like this comes out, you can't dismiss it out of hand," he said. 
"Since Sept. 11, we have increased security at our facilities and we are being more vigilant in watching and monitoring our pipelines. I think other oil-and-gas companies are likely doing the same," he said. 
Mr. Pelkey said he believes the confidential warning was sent to other Canadian members of API, which, according to its Web site, include Alberta companies Petro-Canada and Syncrude Canada Ltd. 
Contacted yesterday, officials at Petro-Canada and Syncrude Canada said they were not aware of the warning. They said their security measures have been stepped up since the Sept. 11 attacks. 
Syncrude Canada spokeswoman Cherry Holland said the oil sands company's 3,700 employees have been told to wear personal identification tags at all times. 
A Petro-Canada official said the company has installed fencing and surveillance cameras around its Edmonton refinery. Company employees also need security cards to get in and out of Petro-Canada's office buildings. 
"We are cognizant of the events of Sept. 11, as terrible as they were, and it is certainly accurate to say that we are being very conscious of security measures lately," Petro-Canada spokesman Chris Dawson said. 
News of the warning comes just weeks after oil-patch representatives met with Alberta government officials to talk about security. 
At the meetings Sept. 28, Alberta Premier Ralph Klein said the government needs to see an inventory of what oil-and-gas sector projects around the province need increased security. He said government and industry need to co- ordinate their efforts. 
A spokesman for the Canadian Association of Petroleum Producers declined to discuss the API warning. 
"On matters like this we make absolutely no comment other than that all information we received is passed on to federal and provincial authorities," he said. 
About 40 per cent of U.S. oil-supply needs are met by Canadian producers, according to API's Web site. 



Dynegy Board Silent On Status Of Enron Takeover 
By Christina Cheddar

11/26/2001 
Dow Jones News Service 
(Copyright (c) 2001, Dow Jones & Company, Inc.) 
NEW YORK -(Dow Jones)- As the market continues to speculate about the status of Dynegy Inc.'s (DYN) takeover of Enron Corp. (ENE), Dynegy's board isn't offering its opinion. 
"Any comments coming out of Dynegy are coming from the company's executives," said Jerry Johnson, a Dynegy board member who also is an executive vice president at Safeguard Scientifics Inc. (SFE). 
Johnson declined to comment on any matters related the pending acquisition of its larger rival, and wouldn't say whether the board has been meeting to discuss the transaction. 
Three other board members, through their representatives, declined to comment as well. Other non-executive directors on the 14-member board either weren't immediately available to comment or couldn't be reached. 
As for Dynegy's management, spokesman John Sousa said the company's opinion on the deal remains the same since its last comments on Wednesday. 
At that time, Dynegy Chairman and Chief Executive Chuck Watson said Dynegy was continuing its due diligence and was looking to accelerate regulatory approval of the deal. 
According to Sousa, Dynegy worked through the holiday weekend gathering information as part of its due diligence efforts. 
Meanwhile, Enron continued its discussions to raise between $500 million to $1 billion of additional financing, said Enron spokeswoman Karen Denne. The company also is working to restructure its debt by mid-December, she said. 
But investors appear to be voting with their feet. Enron shares were recently down 18.3%, or 86 cents, to $3.85, while Dynegy shares slipped 2.7%, or $1.06, to $39.34. As a result, the already huge discount to the deal's offer price has grown even bigger as the market continues to signal the deal won't get completed on its original terms. 
Under the terms of the transaction, Enron shareholders are to receive 0.2685 of a Dynegy share for each share outstanding, or about $8.98 billion, based on Dynegy's recent stock price. 
At Enron's recent level, the stock is trading at a 64% discount to the Dynegy offer. 
Neither Sousa or Denne would comment on the stock movement. 
Dynegy has already provided Enron with a $1.5 billion cash infusion that is secured by Enron's pipeline assets. While that investment has helped Enron's near-term liquidity position, it remains unclear how long the company can remain solvent without any added investments. 
-By Christina Cheddar, Dow Jones Newswires; 201-938-5166; christina.cheddar@dowjones.com 



Enron, Banks Formalize $690M Debt Extension To Dec. 14
By Carol S. Remond and Christina Cheddar

11/26/2001 
Dow Jones News Service 
(Copyright (c) 2001, Dow Jones & Company, Inc.) 
Of Dow Jones Newswires 
   
NEW YORK -(Dow Jones)- Enron Corp. (ENE) and a group of banks last week formalized an agreement to extend the due date on a $690 million syndicated loan by three weeks to Dec. 14. 
The loan relates to one of Enron's consolidated limited partnerships that owns minority interests in power and energy projects around the world. Enron said last week that Standard & Poor's downgrade of its credit rating to "BBB-" had triggered an obligation to repay the loan by Nov. 27. 
People familiar with the matter said last week that lead banks J.P. Morgan Chase & Co. and Citigroup Inc. and Enron will use the extension to negotiate a further postponement of the debt to the middle of 2002 when other Enron bank loans come due. About $1.75 billion of Enron's $3.5 billion in syndicated bank loans come due in May 2002 and will likely need to be restructured. 
About $250 million of the assets securing the $690 million loan are in the process of being sold and will be used to pay down the loan, reducing the outstanding portion of the loan that will need to be restructured, those people familiar with the matter said. 
Enron's shares and bonds continue to suffer from mounting uncertainties about the company's finances and whether those could force one-time rival Dynegy Inc. (DYN) to reconsider its offer to buy Enron, an offer that many see as Enron's only chance to avoid bankruptcy. Enron stock was recently down 18% to $3.84. Meanwhile, Enron bonds are also lower, with the 6.4% bonds due 2004 recently trading at a distressed level of 48 cents on the dollar. 
Carol S. Remond; 201-938-2074; Dow Jones Newswires; carol.remond@dowjones.com 
and Christina Cheddar; Dow Jones Newswires; 201-938-5166 



Another Sign Investors Don't Trust Enron
By Michael Rapoport

11/26/2001 
Dow Jones News Service 
(Copyright (c) 2001, Dow Jones & Company, Inc.) 
A Dow Jones Newswires Column 
  
NEW YORK -(Dow Jones)- If you needed any further proof that investors no longer trust Enron Corp. (ENE), here's another piece of evidence - one that goes to the heart of the recent plunge in the company's stock. 
Enron doesn't simply trade for less than its book value; it fell below that milestone weeks ago. No, now it trades for less than ONE-THIRD of its book value. 
That's a rare level for a company of Enron's size and prominence. And it may mean, among other things, that investors have decided that they simply can't place any further faith in the veracity of Enron's earnings and balance-sheet figures, much-revised as they've been - something that has unnerving implications for any attempt to value the company fairly. 
First, let's be clear about what this means. Enron stock is currently about $4 a share; the company's reported book value is about $12.90 a share. In other words, Enron stock sells for less than one-third of what shareholders would get if the company were to liquidate - were to turn all its assets into cash, pay off all its liabilities on its balance sheet and give what's left over to shareholders. 
This is an uncommonly dismal level for any company, even a troubled one. For comparison's sake, Dynegy Inc. (DYN), which has agreed to buy Enron, trades at about three times book value, as does El Paso Corp. (EPG), a competitor of both companies. In fact, Enron has the second-lowest price-to-book ratio of any company in the Standard & Poor's 500-stock index - only Conseco Inc. (CNC), another troubled company, is lower, by an eyelash. 
Part of the problem is undoubtedly the continuing fear among investors that Dynegy's agreement to buy Enron will fall apart, and the belief that Enron will have to file for bankruptcy if it does, in which case Enron shareholders would be hard-pressed to realize any value. The Dynegy deal now amounts to about $10.60 per Enron share, itself well under Enron's book value; the huge premium that level offers over Enron's current stock price is an indication of the big risk investors see that the deal won't be consummated in its current form. 
But given Enron's current woes, it's certainly also possible that Enron is trading at such a big discount to book value because investors don't feel they can trust the earnings and balance-sheet numbers coming out of Enron. Those numbers, after all, are the raw material that form the basis for valuing Enron, or any other company, by computing figures like price-to-book and price-to-earnings ratios. 
And the Enron debacle has been all about the quality of those numbers, with Enron shifting assets off its balance sheet to outside limited partnerships from which some of its executives benefitted. In terms of those numbers, the ground has shifted underneath investors three separate times now - when the company slashed its reported shareholder equity by $1.2 billion to unwind its transactions with one of those partnerships, when it restated nearly five years' worth of earnings downward by a total of $586 million, and when it revealed that it could take further charges and was facing an imminent deadline to post collateral on a $690 million note. (That deadline has now been extended until Dec. 14.) 
When you've gotten punched in the face three times, it's not unreasonable to fear there'll be a fourth blow, no matter how much the puncher assures you there won't be. Given Enron's insanely complicated structure, and the way bad financial news has dribbled out of the company over the past several weeks, who can guarantee there aren't more such shocks yet to come? 
That's what investors appear to be fearing, and that may be part of the reason Enron stock has fallen so precipitously. Thanks to Enron's repeated demonstrations that its numbers can't be relied on, investors no longer have a firm, trustworthy basis on which to value the stock. And so, not surprisingly, the value is getting ratcheted down to the most conservative, bare-minimum level. 
An Enron spokesman couldn't be reached for comment. 
It's ironic, in a way. For a long time, it was hard to properly value Enron because its structure and finances were so complex and hard to decipher. Now it's hard to properly value Enron because the company's attempts to clarify its finances have made it clear that it's hard to expect investors to trust in their accuracy. 
-By Michael Rapoport, Dow Jones Newswires; 201-938-5976; michael.rapoport@dowjones.com 



Nov. 26, 2001, 11:19AM
Oil, gas industry on high alert after FBI warning 
Associated Press 
WASHINGTON -- The oil and gas industry is on especially high alert after a Federal Bureau of Investigation warning that Osama bin Laden may have ordered retaliatory strikes against North American natural gas facilities in event of his capture or death, industry sources said today. 
The sources, who spoke on condition of anonymity, said the warning issued by the FBI last week was general and singled out no specific target, but referred specifically to natural gas infrastructure such as pipelines. 
There are thousands of miles of gas pipeline, most of them buried, crossing the United States and Canada. Thirty interstate gas pipelines carry 90 percent of the natural gas transported, according to the Interstate Natural Gas Association of America. 
One source characterized the warning as similar to one issued earlier this month on potential attacks against West Coast bridges that prompted security alerts, but no evidence of actual terrorist intentions. 
The FBI alert prompted the American Petroleum Institute, which is the lead industry group coordinating with the FBI and Energy Department on security matters, to issue a warning to oil and gas companies. 
"We have received uncorroborated information that Osama bin Laden may have approved plans to attack natural gas supplies in the United States," said the memo, adding that the information was "from a source of undetermined reliability." 
The FBI warning continued that "such an attack would allegedly take place in the event that either bin Laden or Taliban leader Mullah Omar are either captured or killed." 
Energy companies have stepped up security at refineries, pipeline pumping stations and other facilities since the Sept. 11 terrorist attacks in New York and Washington and the U.S. retaliatory attacks in Afghanistan. 
Also, some detailed information about location of pipelines and other energy infrastructure have been taken off some corporate and government Internet sites. Access to facilities has been tightened as well, officials said.