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Monday July 24th, 2006

Gasoline prices hit all-time record highs; Texas exploration and production continues 46-month expansion…Halliburton anticipates splitting off KBR without planned IPO…Ken Lay’s will leaves everything to his wife… Gasoline prices have hit an all-time high in the last two weeks, rising nearly two cents to just over $3 a gallon. According to the Lundberg Survey, the […]

Gasoline prices hit all-time record highs; Texas exploration and production continues 46-month expansion…Halliburton anticipates splitting off KBR without planned IPO…Ken Lay’s will leaves everything to his wife…

Gasoline prices have hit an all-time high in the last two weeks, rising nearly two cents to just over $3 a gallon. According to the Lundberg Survey, the national average for self-serve regular stood Friday at $3.01. Analyst Trilby Lundberg says the price exceeded by about a third of a penny the previous high set in September last year. The survey of 7,000 gas stations across the country finds the lowest price for regular was $2.77 a gallon in Charleston, South Carolina, while the highest–$3.28 a gallon–was in San Diego.

A Manpower survey finds workers are adjusting their leisure activities to compensate for higher gasoline prices. Almost 65 percent of 900 people surveyed between May and June are reducing their entertainment and hobby expenditures because of higher fuel costs. Sixty-four percent are dining out less. More than half are cutting back on summer travel, with 29 percent canceling all travel plans. Nearly a third said they’re considering switching to a job closer to home.

The Texas exploration and production economy continues a 46-month expansion, according to the Texas PetroIndex. Petroleum economist Karr Ingham says a combination of factors are keeping energy prices high. He says $20 a barrel can be attached to global instability.

“Including the war in Iraq, tensions with Iran, North Korea, the Lebanon-Israeli situation that’s playing out even as we speak, in addition to Nigeria and Venezuela and all of these things that are going on. I think that if all of these things were settled, we’d probably lop $20 off of the cost of a barrel of oil, which of course would make gasoline go down and that kind of thing. So I think we’ve got quite a jitter factor in terms of crude oil pricing, in addition to of course strong economic growth in the United States and around the world.”

There are several factors that go into Ingham’s Texas PetroIndex.

“We look at prices paid to producers for crude oil and natural gas in Texas. We look at the working rig count–the number of drilling rigs that are out there drilling holes in the ground. We look at the number of permits that are issued by the Railroad commission to drill holes for oil and natural gas. We look at well completions for oil and gas. We look at the volume of crude oil and natural gas production as well as the value of that production. And then finally we look at the number of persons that are employed in the exploration and production of petroleum products in Texas.”

Geopolitical events have profound effects on the price of oil, but prices can stabilize quickly.

“We can also look at a fairly recent event in natural gas pricing. You know, we had spikes up to well above $10–really approaching $15–in the wake of the hurricanes, and we’ve beat a very hasty retreat from those really high price levels down to the $5-$6 level, where we are right now. So if, for example, we saw a coordinated or simultaneously-timed leveling off of all of these unstable situations around the world, I think it’s quite possible that we would see a fairly noticeable kind of steady price decline in the price of a barrel of crude oil over the course of a matter of months.”

Figures show that independent producers account for about 96 percent of the wells in Texas, producing about 86 percent of the state’s natural gas output and 90 percent of its crude oil production.

Houston-based Halliburton now anticipates splitting off its KBR unit without a planned initial public offering. In a conference call, Halliburton CEO Dave Lesar cites weaker market conditions. Reuters said Halliburton plans to have the split-off done within the next six to nine months. The company has asked the U.S. Internal Revenue Service for a ruling on the tax-free status of spinning it off to shareholders.

Meanwhile, Halliburton’s Production Optimization Division has been awarded a Pipeline & Processes Services contract by Technip Oceania for testing and pre-commissioning services for the North West Shelf Venture’s Perseus over Goodwyn Project. The work will be completed over a two-month period starting in November.

A Texas oil company wants the courts in the U.S. and Germany to force a Russian company to meet its contractual agreements. Moncrief Oil International says Russian oil and gas company Gazprom is ignoring the agreement. The deal would give Fort Worth-based Moncrief 40 percent stake in a natural gas field–in exchange for an $800 million investment. Moncrief also claims that two German companies–BASF and E.on–are interfering with Moncrief’s agreement with Gazprom by pursuing its own deals. Moncrief tried to sue Gazprom in federal court in Fort Worth, but the court said it had no jurisdiction. Moncrief is appealing.

Former Enron Chairman Ken Lay left everything to his wife Linda, according to his will filed with the Harris County Clerk’s Office. Lay died July 5th, and an autopsy revealed he died of heart disease. Creditors will have to make civil claims against the estate. The will was signed about a year before Lay’s indictment on Enron fraud and conspiracy charges. Enron filed for bankruptcy protection after its stock collapsed in 2001.

Mayor Bill White announced the signing of a new formal agreement between the City of Houston and Beijing, capping a week-long trade mission of about 60 representatives to China with the Greater Houston Partnership. Mayor White says the relationships built between the cities means jobs and growth for Houston, as well. City Councilmember Ada Edwards signed an agreement with the Beijing government setting the stage for future information technology exchanges. Another agreement is for both cities to work together on exchanges and development in petrochemicals, medical, economic and education. Similar agreements were signed with two other cities. Houston will help sister city Dalian to develop an extensive air-cargo facility similar to Houston’s operation at Bush Intercontinental Airport.

HCA, the nation’s largest for-profit hospital operator, has agreed to being purchased by an investment group in a $21.3 billion deal. The sale includes the assumption of $11.7 billion in debt. HCA’s board has approved the deal and recommended it to HCA shareholders. HCA owns or operates 176 hospitals, 92 freestanding surgery centers and facilities for outpatient and other services in 21 states, England and Switzerland. The purchasing group is comprised of Bain Capital, Kohlberg Kravis Roberts & Co. and Merrill Lynch Global Private Equity.

The Port of Houston Authority Commission has approved increases in port cargo security fees–the first increase since fees were adopted in April, 2005. The increases go into effect on October 1st to offset some of the costs associated with ensuring a safe and secure port. The commissioners also approved about some $336,000 in construction contract credits and contract increases for the Bayport Cruise Terminal building, Port Road, marine terminal gate and container yard projects.

Houston-area retail centers built before 1990 currently have average occupancies of 83 to 85 percent, while those built in the 1990s and 2000s post occupancies of 88 percent, according to O’Connor & Associates. The company’s latest Houston Retail Market Update says the effect carries over to rental rates, as well. The report says newer retail centers tend to have better tenant layouts giving good exposure to each tenant. Older retail centers with dated facades frequently have poor layouts. Vintage centers that possess good locations often end up as targets for redevelopment. Retail occupancy fell for the second straight quarter, decreasing a fifth of a point to 85.67 percent.

The annual sales tax holiday for back-to-school items has been set for the weekend of August 4th-6th by Texas Comptroller Carole Keeton Strayhorn. Her office estimates that Texas families will save an estimated $49 million from not having to pay sales taxes on select items that weekend. The sales tax exemption applies to school clothes, tennis shoes under $100, socks and underwear. It does not apply to backpacks, jewelry, accessories and school supplies.

Shares in Landry’s Restaurants rose today as it evaluates “strategic alternatives” for its Joe’s Crab Shack and Saltgrass Steak House chains. Houston-based Landry’s announced Friday that it also was lowering its second-quarter earnings forecast, and that a charge was likely from some recent Joe’s closures. C.L. King estimated that the two chains might fetch $750 million. Analyst Michael Gallo said they account for about $600 million in annual sales and $100 million in restaurant-level earnings before interest, taxes, depreciation and amortization. Landry’s said little about what alternatives were being studied, but contended that “the sum of the company’s parts may be greater than the whole” at the current valuation of stock.

The Houston Symphony has achieved break-even financial results for the second year in a row, according to Houston Symphony Society President Jess Tutor. Revenue from ticket sales improved about ten percent over the previous season. Fundraising events like the Symphony Ball brought in more money than expected. And partnerships and participation with the NBA All-Star game and their joint holiday performance with Lakewood Church also helped the symphony end its fiscal year with a $15,000 surplus.

Consumer groups want the Senate to look into the fees banks charge merchants for credit card transactions and the effect on consumers. Merchants pay what’s known as an “interchange fee” of about 1.6 percent of the amount of each credit card transaction. In 2004, that came to an estimated $27.6 billion. The U.S. public interest research group, Consumer Federation of America and Consumer Action, say those fees are passed on to all consumers in the form of higher product prices–even if they don’t use credit cards. The groups claim credit card associations have used misleading and anticompetitive practices that are costly to both consumers and merchants in an effort to increase their profits.

Progress Energy says it’s selling its Winchester Energy and Associated Natural Gas businesses to a subsidiary of Dallas-based Exco Resources for $1 billion. Officials with the Raleigh, North Carolina-based utility say they expect the deal to close this Fall. The deal is subject to closing provisions and adjustments. So far in 2006, the company has announced divestitures totaling more than $1.7 billion, all of which are expected to close before the end of this year. As a result of the sale, Progress Energy expects to record a one-time after-tax gain of approximately $400 million in the third quarter of 2006.

Atlanta-based BellSouth today reports a jump of more than 11 percent in second-quarter profit on a slight increase in sales. That beat Wall Street expectations. BellSouth is the dominant local telephone provider in nine southeastern states. On Friday, BellSouth shareholders approved the sale of the company to San Antonio-based AT&T for $67 billion in stock. It says it earned $887 million for the three months ending June 30th. That compares to a profit of $795 million for the same period a year ago. Excluding special items, BellSouth says its earnings from continuing operations was $1.08 billion. Revenue in the quarter rose 1.2 percent to $5.21 billion–compared to $5.14 billion recorded in the same period a year ago.

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