MCN Expects Earnings Won't Meet Estimates
MCN Energy Group warned investors Friday it's not likely to meet
analysts' 1998 and 1999 earnings expectations of $1.64/share and
$2.02/share, respectively, and reiterated its plan to sell its
exploration and production business. The E&P operations include
more than 1.3 Tcf of proved reserves, making the company among the
top 20 largest independent producers in the nation.
Following an announcement in June that it would record a net
loss of $210.1 million, or $2.67 per share, related to low oil and
gas prices and poor performance of certain Midcontinent and Gulf of
Mexico producing properties, the company announced plans to sell
its E&P assets.
"Although sales in today's industry environment are uncertain, a
complete exit from the E&P business is possible," MCN Chairman
Alfred R. Glancy III said again last week. "In the meantime, we
will significantly reduce drilling and acquisition activities.
These actions will reduce anticipated production levels. Clearly,
lower production combined with lower prices equates to reduced
earnings expectations from this business."
Based on "recent gas and oil prices and basis differentials, we
expect to incur a ceiling test write-down of $50 million, after
tax, for the third quarter. Any such write-down would be non-cash,"
Glancy added. Delays in achieving anticipated production from the
company's coal fines briquetting project also are having a negative
impact on earnings. The coal fines project recovers particles of
coal that have been a wasted by-product of the mining process. The
plants chemically process these fines, creating briquettes for sale
into existing coal markets.
Aside from its E&P woes and coal fines delay, Glancy said
MCN's other non-regulated businesses are performing well.
"Furthermore, the regulated gas distribution segment is performing
very well and has better growth opportunities today than we have
seen in many years. Fundamentally, MCN remains sound, and we are
determined to achieve solid financial performance."
MCN stock prices, which have been tumbling down from near
$38/share prior to the June announcement, plummeted $8/share (31%)
on Friday to close at $17.50/share. The 52-week high on the
company's stock, reached in late December, was $40.50/share.
MCN is a diversified energy holding company with more than $4
billion of assets, and with markets and investments throughout
North America and in Asia. Michigan Consolidated Gas, its gas
distribution and transmission company, serves 1.2 million customers
in more than 500 communities throughout Michigan.
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