NiSource, National Fuel, Equitable Show Improved Quarterly Results
Northeastern local gas distributors NiSource, National Fuel and Equitable Resources reported improved financial results for the quarter ending Dec. 31, 2003, with NiSource Inc. delivering the largest quarterly improvement, a 70% gain in net income to $139.8 million, but also reporting a substantial decline for the year because of a charge for discontinued operations.
Restructuring costs due to power plant divestitures, the exit from telecommunications, and the sale of exploration and production led NiSource to take a $331 million charge for discontinued operations for the year. NiSource reported a 77% drop in net income to $85.2 million and an 81% decline in earnings per diluted share to 33 cents.
However, CEO Gary Neale said the company "accomplished what we set out to do in 2003. We strengthened our balance sheet, completed the announced divestitures of our major non-core assets, held the line on operation and maintenance costs and continued our focus on meeting customers' expectations while generating solid shareholder returns." NiSource's core business is now virtually 100% regulated. The utility holding company, based in Merrillville, IN, delivers energy to 3.7 million customers through its Columbia Gas, Bay State Gas, Northern Utilities and other subsidiaries.
"One of our major accomplishments in 2003 was our continued progress in reducing debt," Neale said. "Since the end of 2000, we've reduced debt by $2 billion through funds generated from operations, the divestiture of our major non-core assets and the issuance of common equity, helping to drive down interest expense and strengthen our balance sheet."
Colder weather overall in 2003 and lower interest expense contributed to improved income from NiSource's continuing operations for the year of $425.7 million, or $1.64 per share, compared with $398.1 million, or $1.89 per share, in 2002. Weather in NiSource's gas markets was 7.9% colder overall during the year than in 2002, Neale noted, resulting in improved natural gas sales by the company's utility assets. This favorable impact was slightly offset by a cooler summer in northern Indiana compared with 2002, reducing electric sales. For the fourth quarter, weather was 12.8% warmer than in the previous year.
NiSource reported that its total gas distribution and LDC transportation sales declined 7% for the fourth quarter and was down 5% for the year. Gas pipeline throughput drooped 13% for the fourth quarter and was down 6% for the year. And electricity sales fell 5% in the quarter and were down 1% for the year.
For 2004, Neale said NiSource will continue to control costs, focus on regulated revenue growth, standardize operations where appropriate to improve service and lower costs, and provide good customer service. "Meeting these goals will help us deliver earnings per share for 2004 in a range of $1.65 to $1.70, assuming normal weather and an estimate of customer usage patterns consistent with current gas prices," Neale said.
Equitable Resources, which operates a pipeline, production and distribution business based in Pittsburgh, reported a 17% increase in net income to $49.5 million for the fourth quarter and a 10% increase in net income for the year to $170 million. Its earnings per share rose 16% during the quarter and 11% for the year.
Equitable Utilities operating income rose 8% to $109.9 million for the year. Heating degree-days increased 8% from 2002 but were 2% warmer than the 30-year norm. Operating income for the 2003 fourth quarter was $32.8 million, 9% higher. The fourth quarter 2003 weather was 11% warmer than the prior year and 7% warmer than normal.
Equitable Supply recorded operating income of $195.8 million in 2003, 14% higher than in 2002. The increase was primarily the result of a 13% higher average wellhead sales price, a 5% increase in equity production volumes, and a 10% increase in revenues from gathering fees. Operating income for the 2003 fourth quarter rose slightly to $51 million on higher sales prices and a 4% rise in production.
Equitable's Noresco segment posted 2003 operating income of $16.9 million, compared with $9.8 million earned in 2002. Fourth quarter results were negatively impacted by a charge of $11.1 million, related to the impairment of the unit's investment in Petroelectrica de Panama LDC, an independent power plant project located in Panama.
Equitable reiterated its previously forecast 2004 earnings of $3.00 to $3.05 per diluted share. Its earnings guidance assumes $4.50/MMBtu average Nymex gas price and normal weather. Equitable has hedged 50.4 Bcf of its 2004 equity sales at an average price of $4.56/Mcf and 47.5 Bcf of 2005 equity sales at an average price of $4.65/Mcf.
National Fuel reported a 30% increase in net income for the quarter (its first quarter of fiscal 2004) to $49.4 million. It's quarterly earnings per share rose 28% to 60 cents. Excluding non-recurring items, earnings for the quarter were $44 million or $0.53 per share, a decrease of $2.9 million or $0.05 per share from the prior year's first quarter.
The decrease in earnings before non-recurring items was the result of several factors, including warmer weather, higher operating costs in the utility segment, and lower harvesting activity in its timber segment. Although gas production declined compared with the same period in the prior fiscal year, earnings in the exploration and production segment were up due to higher commodity prices and lower interest expense.
"Despite our vivid experiences with the current cold spell, weather during the last three months of calendar 2003 was warmer than normal, and earnings in the regulated businesses and our marketing segment were impacted accordingly," said National Fuel CEO Philip C. Ackerman. "We are, however, pleased with the quarterly results from our exploration and production segment; production is in line with our forecast, we had a 97% success rate for drilling, and earnings improved from one year ago. Overall, earnings for this quarter were on the higher side of our expectations, and we continue to be enthusiastic about the remainder of fiscal 2004."