Coastal Avoids Slump, Posts 11% Earnings Growth
During the first quarter, Coastal Corp. continued to avoid the
market slump that has plagued the producing community, posting an
11% increase in earnings to $134.5 million, or 62 cents per share,
which was slightly better than the 60 cents/share that Wall Street
expected. In 1Q98, the company earned $122.9 million, or 55 cents
per share, but booked a $1.9 million loss related to an asset sale.
"Achieving this earnings growth during the first quarter of 1999
underscores the importance of positioning and managing our
operations to profit even in a difficult industry environment,"
said CEO David A. Arledge. "During the quarter, the industry
experienced the lowest natural gas prices since 1995 and the lowest
refining margins in more than 10 years, due primarily to three
consecutive warm winters."
But while many other oil companies have posted sharply lower
earnings because of low oil prices, poor refining margins and soft
gas prices, Coastal bucked the trend by relying almost entirely on
gas production and boosting the performance of its merchant
refining operations and aggressive risk management program.
Refining, marketing, and chemicals earnings soared 46% for the
quarter. "Our risk management activities allowed us to achieve
higher margins and the reengineering of our refineries has
permanently reduced our costs," said Arledge. "In addition, we
continue to benefit from earlier changes to expand our most
profitable marketing operations and eliminate marginal activities.
Arledge said gas production was up 8% for the quarter to 529
MMcf/d and is expected to increase 20% by the end of the year from
the 509 MMcf/d posted in 1998, which was an increase of 17% from
the prior year. However, higher gas production wasn't enough to
offset the drop in prices.
Prices realized for gas were $1.59/Mcf versus $2.01/Mcf in 1Q98.
Crude oil and condensate prices were $10.38/bbl versus $13.54.
Earnings before debt interest and taxes for the E&P division
were $11.4 million compared to $25.5 million for the 1998 quarter.
PaineWebber energy analyst Ronald Barone said in a report on
Coastal that the company is shopping for E&P properties in the
offshore Gulf and South/Central Gulf and is expected to make an
announcement shortly. It isn't, however, in the market to buy an
entire company, Barone said.
Coastal's power and coal segments also showed improved results
during the quarter. The power division reported earnings of $18.9
million compared to $11.6 million in 1Q98, and the coal segment
reported $4.3 million compared to $2.8 million. The gas segment,
which includes ANR Pipeline, reported a 4% drop in earnings to $187
million. Throughput for Coastal's regulated pipeline subsidiaries
was 549 Bcf compared with 566 Bcf in 1Q98.
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