During the first quarter, Coastal Corp. continued to avoid themarket slump that has plagued the producing community, posting an11% increase in earnings to $134.5 million, or 62 cents per share,which was slightly better than the 60 cents/share that Wall Streetexpected. In 1Q98, the company earned $122.9 million, or 55 centsper share, but booked a $1.9 million loss related to an asset sale.

“Achieving this earnings growth during the first quarter of 1999underscores the importance of positioning and managing ouroperations to profit even in a difficult industry environment,”said CEO David A. Arledge. “During the quarter, the industryexperienced the lowest natural gas prices since 1995 and the lowestrefining margins in more than 10 years, due primarily to threeconsecutive warm winters.”

But while many other oil companies have posted sharply lowerearnings because of low oil prices, poor refining margins and softgas prices, Coastal bucked the trend by relying almost entirely ongas production and boosting the performance of its merchantrefining operations and aggressive risk management program.

Refining, marketing, and chemicals earnings soared 46% for thequarter. “Our risk management activities allowed us to achievehigher margins and the reengineering of our refineries haspermanently reduced our costs,” said Arledge. “In addition, wecontinue to benefit from earlier changes to expand our mostprofitable marketing operations and eliminate marginal activities.

Arledge said gas production was up 8% for the quarter to 529MMcf/d and is expected to increase 20% by the end of the year fromthe 509 MMcf/d posted in 1998, which was an increase of 17% fromthe prior year. However, higher gas production wasn’t enough tooffset 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 divisionwere $11.4 million compared to $25.5 million for the 1998 quarter.

PaineWebber energy analyst Ronald Barone said in a report onCoastal that the company is shopping for E&P properties in theoffshore Gulf and South/Central Gulf and is expected to make anannouncement shortly. It isn’t, however, in the market to buy anentire company, Barone said.

Coastal’s power and coal segments also showed improved resultsduring the quarter. The power division reported earnings of $18.9million compared to $11.6 million in 1Q98, and the coal segmentreported $4.3 million compared to $2.8 million. The gas segment,which includes ANR Pipeline, reported a 4% drop in earnings to $187million. Throughput for Coastal’s regulated pipeline subsidiarieswas 549 Bcf compared with 566 Bcf in 1Q98.

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