Interim revenue forecast down $1.2B

Kristen Nelson

Petroleum News

Unrestricted revenue for fiscal year 2009 is down $1.2 billion from the fall revenue forecast, the Alaska Department of Revenue said Feb. 3 in releasing an interim fiscal year 2009 update.

Gov. Sarah Palin submitted a supplemental budget Feb. 3, reducing general funds by $268.6 million and seeking authorization to access savings to balance the budget at the end of the FY 2009 fiscal year, June 30.

“FY 2009 has been a year of unprecedented revenue volatility,” Palin said in a statement. “Due to the dramatic decline in oil prices, the estimated revenue of $7.5 billion in the spring 2008 forecast was lowered to $5.5 billion in the January 2009 interim forecast, making responsible reductions necessary.”

The $268.6 million in reductions will bring the estimated revenue shortfall to $1.36 billion, the governor said. Legislators will have to authorize the use of reserves or make additional reductions to balance the FY2009 budget.

Revenue used a New York Mercantile Exchange-generated oil price forecast adjusted for Alaska North Slope crude oil that averages $37.47 per barrel for the third quarter of FY 2009 (January-March) and rises to $43.75 per barrel for the fourth quarter (April-June).

The Nymex, revised daily, is “one of the most timely forecasts to adopt given the ongoing oil price volatility,” the department said. The Nymex was also used for the fall 2008 revenue forecast for FY 2009.

For FY 2009 the department used six months of actual Alaska North Slope crude oil prices and six months of forecasted ANS prices for an annual average of $63.28.

The department said production levels for FY 2009 are relatively unchanged at 686,000 bpd, falling some 3,000 barrels per day from the fall forecast.

Using these price and volume assumptions, the department said unrestricted revenue for FY 2009 is projected at $5.5 billion, $1.2 billion less than projected in the fall forecast. FY 2009 unrestricted revenue was $10.7 billion.

Oil revenues provide 87 percent of anticipated unrestricted revenue. Total oil revenues, unrestricted and restricted, are projected at $5.4 billion for FY 2009, compared to $11.3 billion for FY 2008.

An update for FY 2010 will be provided in February and the spring forecast is scheduled to be released in March.