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Enron Mail |
Could you please try to stay out of trouble.
----- Forwarded by Richard B Sanders/HOU/ECT on 10/16/2000 10:08 AM ----- Eric Thode@ENRON 10/16/2000 09:32 AM To: Mark Frevert/NA/Enron@Enron, Mike McConnell/HOU/ECT@ECT, Jeffrey A Shankman/HOU/ECT@ECT, John L Nowlan/HOU/ECT@ECT, Patrick Danaher/NA/Enron@Enron, Don Schroeder/HOU/ECT@ECT, Richard B Sanders/HOU/ECT@ECT, Harry M Collins/HOU/ECT@ECT, Mark E Haedicke/HOU/ECT@ECT cc: Subject: Wall Street Journal Article - Regarding SPR Oil As most of you know, Enron had some discussions with Euell Energy regarding SPR oil. We ultimately were unable to do any deal with Mr. Euell and subsequently, he publicly blamed us for his inability to complete a deal. Attached is an article from the Wall Street Journal. Mark Palmer, Steve Kean and I spent most of Friday trying to kill the story. In addition to numerous conversations, we even played tapes of the final three phone calls between Mr. Euell and our trader. While we were unable to kill the story completely, we are pleased with the outcome. If you have any questions, please call me at ext. 3-9053. A Trio of Little Guys Embarks on Wild Ride In Global Oil Market --- Pursuing Business With DOE, Their Paths Diverge; One Leads to `a Lot of Money' By Wall Street Journal staff reporters John Fialka in Denver, Alexei Barrionuevo in Tallahassee, Fla., and Jonathan Weil in New York ? 10/16/2000 The Wall Street Journal Page A1 (Copyright © 2000, Dow Jones & Company, Inc.) Lance Stroud of New York, Renard D. Euell of Denver and Ronald Peek of Tallahassee, Fla., all had dreams of becoming oil barons. And on Oct. 4, when the Department of Energy announced the results of the bidding for oil from the nation's Strategic Petroleum Reserve, they thought their ships had come in. Two of the three black entrepreneurs were unknowns in the industry, and none of them had ever done a major oil deal. But there they were, listed as winning bidders alongside some of the biggest names in the business -- Marathon Ashland Petroleum LLC, Morgan Stanley Dean Witter & Co., BP Amoco PLC and Amerada Hess Corp. Each would be given the right to withdraw millions of barrels of oil from the reserve amid one of the most volatile oil markets in decades. In exchange, each had offered to replace that oil, plus an additional amount akin to an interest payment, a year later. They and the other winning bidders, the Energy Department said, were picked soley because they pledged to return the biggest quantities of oil to the reserve. There was just one catch: In its rush to release the oil and so ease a price crunch, the Energy Department had suspended its usual requirement that each bidder supply financial guarantees. But it wanted the winning bidders to present letters of credit, equal to the oil's market value, five days after their bids were submitted. The big players could easily meet that requirement. But Messrs. Stroud, Euell and Peek were men of limited means. They needed to find someone willing to back them for tens of millions of dollars -- and fast. The drama made for an unaccustomed scene in Harlem, where the 35-year-old Mr. Stroud lived with his 74-year-old mother. A heavy-set man with a goatee, Mr. Stroud, a former Army enlisted man who had dropped out of college shy of graduation, had held a string of odd jobs while using the Internet to seek out a big business deal. The aspiring oil man had entered his bid for four million barrels from the reserve, via the Internet. He won't discuss the details of his bid, but says he thought he could outbid the large oil companies because he didn't have as much overhead. After the winning bids were announced, Mr. Stroud became something of a celebrity. TV news crews arrived to interview his neighbors, many of whom had no idea what all the fuss was about. "I thought he [Mr. Stroud] was some kind of rap star," recalls Carline Thomas, who lives down the hall from him. As neighbors paused to shoot the breeze on the steps of nearby residential buildings, most marred by graffiti, Wall Street couriers bearing fat packets of information spent the week scurrying back and forth from Mr. Stroud's apartment on a seedy block in Harlem's central business district. Inside Mr. Stroud's apartment, the telephone wouldn't stop ringing, and his mother was helping him field the calls. He says he was in serious talks with four companies. And a movie producer was interested in his life story. Then, amid the chaos, tragedy struck. On Tuesday night, his mother, Iris Manning, suffered a cardiac arrest, and was taken to a hospital a few blocks south of Mr. Stroud's apartment. Mr. Stroud said he spent most of Wednesday running between his apartment and the hospital, taking occasional phone calls to deal with prospective financiers. Ms. Manning went into cardiac arrest three more times, and died at 9:47 p.m. Wednesday evening. Mr. Stroud was dazed by the fact that what he called the two biggest events of his life -- the death of his mother and his selection by the Energy Department -- occurred almost simultaneously. "I'm saying `there must be some reason I'm here,' " he said later. "These things happening like this, the odds must be in the millions." Mr. Stroud won't discuss which companies were vying for his oil, but he says at one point he thought he had an offer to buy him out for $1.50 a barrel, or $6 million. The most serious discussions began Thursday, with a representative from a refining company, which he refuses to name. From that discussion Thursday until the following evening, Mr. Stroud says, he was confident that the refiner would grant him the letter of credit he needed. But at 9 p.m. Friday, three hours before his deadline, Mr. Stroud said he got a call telling him the deal was off. "I was upset," he says. "I mean, instead of wasting my time with that I could have obtained the financing quickly" from some other source. A spokesman for Koch Industries Inc., based in Wichita, Kan., said it was in negotiations with both Messrs. Euell and Stroud. "We invited them to make a deal that made economic sense." BP Amoco said it also had discussions with Mr. Stroud. Mr. Stroud now says the DOE should have given him an extension, under the circumstances. "If your mother passes, aren't you given three days to grieve?" Mr. Stroud asks. His mother's funeral is scheduled for Wednesday, which would have been her 75th birthday, he says. Mr. Euell ran a small company, Euell Energy Resources, whose 12 employees helped him broker natural-gas sales and other small energy deals. By night, he worked the phones from his home in a modest Denver suburb, calling oil producers in Nigeria and energy brokers in Singapore and Sydney, always looking for the big score that would make him rich. A friend, Norman Early, a sometime golfing partner and a former Denver U.S. district attorney, says the 50-year-old Mr. Euell is "one of those guys who shoots for the stars." On Oct. 4, Mr. Euell thought he had hit one. He had been awarded the right to withdraw three million barrels of oil from the Strategic Petroleum Reserve, in exchange for returning 3.3 million barrels a year later. That was enough oil to fill 14,019 conventional tank trucks. Knowing he would need a partner to provide financial backing, Mr. Euell had already placed a call to a man he'd never met: Kenneth L. Lay, chairman and chief executive of Enron Corp. He said he was sure he was going to be one of the top bidders for the reserve oil. Would Enron like to be his partner? Within a few hours John Nolan, the giant energy company's vice president in charge of trading, called from London. Enron , he said, was interested. By Oct. 6, the price of oil had already fallen, making Mr. Euell's bid look generous. Still, he felt bullish. "I'm betting on Mother Nature, that she's coming back this winter and that oil's going to be more valuable." It wasn't Mother Nature, but the crisis in the Middle East that turned things around. Monday, Oct. 9, the target price for November oil futures on the New York Mercantile Exchange, jumped a dollar to $31.86 a barrel and headed higher. Mr. Euell flew to Houston and took a room at the Hyatt Regency, from which he could see Enron 's 50-story office tower. By Tuesday, the price of oil had hit $33.18. By Mr. Euell's calculations that meant a $3 million profit for him and an equal amount for his prospective partner just across the street. Enron 's lawyers were working on an agreement that would substitute Enron as the major party in Mr. Euell's contract, he said, and were drawing up the letter of credit for $93 million that the DOE required. Eager to close the deal, Mr. Euell called Enron trader Patrick Danaher, who was working on the project. "I want to sign this thing up today," Mr. Euell told him, claiming that he had received an offer from another, unnamed firm, offering to buy his contract for $1.2 million. According to tapes of the conversation provided by Enron , Mr. Danaher said the paperwork was under way: "Let me see if we can do that today." Mr. Euell called backed at 11:30 a.m. and again at 11:45 a.m. Each time, the trader sounded more pessimistic. Prospects were "50-50." When Mr. Euell suggested he had other offers, Mr. Danaher told him: "If you have a bid at $1.2 million, you should take it. A bird in the hand is worth two in the bush. I just have to tell you that." Still, he invited Mr. Euell to dinner. Tuesday's deadline passed without dinner or any action from Enron . While it appears from the tapes that the parties had been close to an accord, Eric Thode, a spokesman for Enron 's trading branch, says: "At no time was there anything remotely resembling a deal with Mr. Euell." Mr. Euell got the DOE to agree to extend the deadline for another 24 hours and, after a round of frantic phone calls, says he collected pledges from a group of European banks to support the $93 million letter of credit. But, when the new deadline expired, he still had failed to get the proper paperwork to the DOE, which then declared his award to have lapsed. "They played me," Mr. Euell complains, blaming Enron for the missed deadlines. Still, he says, the experience amounted to an instant "Ph.D." in oil. Next time, he vows, he will have his own letter of credit. The DOE said late last week that it will accept new bids on the seven million barrels of oil Messrs. Stroud and Euell forfeited. As for Mr. Peek, he remains the mystery man of the three. His company, Burhany Energy Industries Inc., was formed Aug. 21. It employs no one but Mr. Peek himself. Staffers at the Florida Black Business Investment Board, where Mr. Peek works as a business-development specialist, said he had taken last week off. Shutters were drawn at his modest, one-story house in Tallahassee. Phone calls to Mr. Peek were forwarded to an unidentified neighbor. In an e-mail to a reporter, Mr. Peek apologized for being unreachable. He was "working relentlessly to consummate this transaction" and couldn't "entertain any distraction at the moment." On Saturday, the Department of Energy announced that Mr. Peek had successfully transferred his interest in three million barrels of government oil to Hess Energy Trading Co. of New York, a partnership that includes Amerada Hess. Amerada Hess Vice President Carl Tursi said he could give few details of the deal, except to say that he believes there was an "arrangement" that resulted in "a lot of money" for Mr. Peek. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved.
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