Headlines

March 15, 2010
Canada Looks to End 2009-2010 Winter With Propane
Stock Carryover

Fears that Canadian propane inventories would be completely drained by the end of the winter heating season have been replaced with expectations that the nation will see some carryover of product into the 2010 summer build season.
  
There's less than a month left in the winter heating season and given the unseasonal warm winter weather that has prevailed in Canada, the West Coast and U.S. northeast, marketers just don't expect to see large stock draws in the last month of the season.
  
Propane inventories saw rapid declines in October, November and December. Had that consumption rate continued into 2010, marketers feared that propane stocks would run out before the winter ended -- either that or propane prices would see a spike.
  
But Canada experienced one of the warmest winters in 60 years, noted one marketer, and the propane stock pool turned stagnant. How much propane could remain in storage by the March 31 end of the winter heating season, traders weren't willing to guess.
  
According to the National Energy Board, total Canadian propane stocks stood at 1.88 million bbl as of the start of March. It was 1.21 million from the start of February. Year over year, stocks were actually up 571,000 bbl, the NEB said Friday.
  
Month over month, total Canadian butane stocks fell 219,000 bbl to reach 2.365 million bbl. That was a 473,000-bbl decline year over year.
  
Western Canada propane stocks fell a modest 554,000 bbl for the month, reaching 1.46 million bbl. Warm winter weather along the U.S. and Canadian West Coasts and in the U.S. mid-continent were factors behind the tepid stock draw, propane marketers said.
  
Western Canada butane stocks stood at 1.75 million bbl at the start of March. That was down 181,000 bbl for the month. Compared to year-ago levels, butane stocks were down 605,000 bbl.
  
Eastern Canada saw propane stocks fall 654,000 bbl to reach 422,000 bbl by March 1. One marketer said that level represented a decent cushion for the region. He added that it seems like the worst of the winter demand has passed and that demand will continue to slacken through March.

Year over year, propane stocks were down 321,000 bbl.

Butane stocks in Eastern Canada stood at 613,000 bbl, down 38,000 bbl for the month. Year over year, butane stocks were down 132,000 bbl.

        

March 10, 2010
Strong Propane Sales Support Ferrellgas' Second-Quarter
Earnings Gain

A 9.7% rise in retail propane sales and a 23% jump in wholesale sales were two factors supporting a 7% increase in fiscal second-quarter earnings for Ferrellgas Partners LP. The growth came even as the firm saw the quarterly winter temperatures run 5% warmer than year-ago levels.
  
The firm said today that for the quarter ended Jan. 31, adjusted EBITDA was up 7% to $130.1 million over the year-ago record $121.6 million. Gross profit totaled $248.7 million compared with $243.5 million the year before, while distributable cash flow increased 12% to $104.3 million from $93.1 million. Second-quarter net earnings rose 11% to $77.9 million from $70.4 million a year earlier.
  
President and Chief Executive Officer Steve Wambold explained, "Particularly encouraging was the strong propane volume, which continued to outpace the industry's performance. Retail propane gallon sales increased 9.7%, while wholesale volume climbed more than 23%, resulting in a total volume gain of nearly 13% on temperatures in our service locations that were 5% warmer than in the prior year."
  
He noted that general and administrative expense also decreased modestly, while equipment lease expense was down sharply, nearly 35%.
  
Looking ahead, Wambold commented, "We expect the second-quarter's positive momentum to carry over into the second half of the fiscal year, as we remain focused on our strategy of profitable growth. Therefore, we expect improved performance that should lead to record adjusted EBITDA for fiscal 2010.

"Ferrellgas reported adjusted EDITDA of $251.1 million for fiscal 2009.

     

March 9, 2010
Rail Delivery Seems to be the Answer to How Mid-Atlantic Will
Get Propane

Mid-Atlantic dealers are expected to pick up a significant portion of their propane supply next winter from rail terminals, now that two Delaware River refineries have been closed. But that's not to say that the region's supply is more secure, it's just that rail will have a larger slice of the transport business.
  
Portions of the Mid-Atlantic region, Maryland, Delaware, Virginia and parts of northern North Carolina, are in a proverbial propane supply black hole. To the south, the region
is supplied by the Dixie Pipeline's terminal in Apex, N.C., and the marine terminal in Chesapeake, Va. At the north and east, it is supplied by the TEPPCO pipeline and Philadelphia area refineries. But, in the middle, occupied by the Baltimore-Washington metropolitan area, and on the Delmarva Peninsula, there are no facilities except for
rail lines.
  
"Between TEPPCO and Dixie, there's a dead zone," noted Anne Keller, president of Midstream Energy Group, an industry consultant.
  
The closing of Sunoco's Eagle Point and Valero's Delaware City refineries along the Delaware River took away two sources of propane. The Delaware City closure was especially significant for Delmarva. The plant had a refrigerated pit that could hold about 500,000 bbl of propane. That pit, which has been prone to leaks, is expected to be drained by the end of March and the refrigeration shut off. Even if the refinery is sold, propane industry sources do not expect the pit to be reopened.
  
The peninsula is especially vulnerable because it can only really be supplied from the north via rail or truck. The Chesapeake, Va., terminal seems to be close as the crow flies to the southern end of the spit of land. But, propane transport delivery trucks are not allowed to transit the Chesapeake Bay Bridge-Tunnel, and it's too expensive to barge rail cars across the bay from the Chesapeake terminal, sources say. Over the road, it's just too far for propane dealers to go. Hauling distances could easily tally to 400 miles or more. For that reason, the marine terminal is not expected to be scheduling any additional cargos for the 2010-2011 winter.
  
One Delmarva propane dealer said that neighboring propane firms have been adding rail delivery capacity for the last four to five years. About a half dozen rail terminals are now operating on the peninsula. And one propane distributor said local short-line railroads are happy to have the business as other shipments have slackened in the sluggish economy.
  
Propane tank cars are delivered mostly from the north via the Norfolk Southern or CSX railroads. And most of those cars were loaded in Sarnia or along the Gulf Coast, rather than from closer locations, logistics sources say.
  
Across the bay, Thompson Gas announced last month that it is taking over the operations of a propane terminal in the Baltimore area. In central Virginia, rail shipments of propane are delivered to Stevens City and Milford.
  
The past winter highlighted a limitation of rail delivery. The Mid-Atlantic was blanketed numerous times with snow and the rail deliveries backed up. The terminals are now struggling to keep up unloading and distributing propane that came with the deluge of rail cars that were overdue in February.

Given the fact that rail deliveries are limited in volume and can be disrupted by weather, sources say that the Mid-Atlantic's tenuous propane supply situation is likely to remain that way.

     

March 3, 2010
NGL Exports for March Called Near 1 Million BBL

Traders are looking for about 975,000 bbl of natural gas liquids to be exported from the U.S. in March.
  
Two confirmed export cargos have been booked out of Houston. The first, predicted to sail by March 8 is expected to consist of 125,000 bbl of normal butane and 400,000 bbl of propane. The other cargo, of about 450,000 bbl of propane, is called to depart by March 12 or 13, sources tell OPIS.
  
The cargos are headed to Latin America, one source said.
  
Additional exports could be booked for the month, noted one trader. He said the export arbitrage window is opening, meaning it's becoming profitable to buy in the U.S. and ship elsewhere. He has seen enough interest from buyers to suggest that two additional cargos could be booked. But the deals have yet to be formalized. They could be confirmed by week end, the trader said.
  
If those shipments materialize, the source predicted that a total of 2 million bbl of NGLs, largely propane, could be exported for March.
  
For April, the outlook is dimmer. One export cargo of about 400,000 bbl of propane and 100,000 bbl of normal butane is expected to sail. Other than that other export pportunities look slim.

The U.S. could see some normal butane imports in April, but those cargos have yet to be confirmed. One source noted that the talk is that some imports have been nominated, but those nominations are not firm. They could be cancelled at any time, he added.       

  

March 2, 2010
Ohio to Get Propane Auto Fueling Stations

Fleet fueling company Alliance AutoGas Clean Fuels Ohio said it plans to build propane fueling stations in Ohio to foster propane use in motor vehicle fleets.
  
Alliance AutoGas said it plans to retrofit 77 vehicles for propane use and will build
propane refueling stations at the fleet bases. The fleets participating in the plan include Columbus Green Cabs, Yellow Cab of Cleveland, and Ace Taxi of Cleveland. Alliance AutoGas received $11 million from the U.S. government's American Recovery and Reinvestment Act.
  
The Ohio Advanced Transportation Partnership, which is being sponsored by the U.S. Department of Energy, plans to eventually bring 280 alternative fuel vehicles and 15 refueling stations to Ohio.
  
Alliance AutoGas was founded by propane marketer Blossman Gas and American Alternative Fuel.