Enron Corp.’s wholesale marketing division led the company witha 60% earnings increase at the same time its infant retailoperations continued to show a loss.

Income from the wholesale marketing business before interest andtaxes (IBIT) went to $277 million in the third quarter, compared to$173 million in the third quarter of 1997. In the third quarter of1998, marketed volumes of all energy commodities increased 68% froma year ago to more than 34 trillion Btu/d. These volumes included a22% increase in marketed gas volumes to 13.2 trillion Btu/d, from10.9 trillion Btu/d (86% North American) and a 125% increase inelectricity marketed to about 163 million MWh from 72 million MWh(nearly all North American).

“Enron has proven its ability to effectively manage and hedgethis $1 billion-plus business during both the significantvolatility in the third quarter financial markets and significantvolatility in the second quarter commodity markets,” PaineWebbersaid. “We reiterate our belief that this innovative portfolio ofbusinesses is in a class by itself.”

As for the retail side, Enron Energy Services (EES) reported aloss before interest and taxes of $23 million in the third quarterof 1998 compared to a loss of $25 million in the third quarter of1997, or $0.05 per diluted share in each quarter. The losses wereattributed to start-up activities, and Enron CEO Kenneth L. Laysaid the $850 million in contracts signed during the quarter is”70% over our plan.”

Commenting on Enron, Edward Jones analyst Zach Wagner saidthat’s to be expected. He is, in fact, encouraged by how thecompany has built up its retail business. “The important thing isthe value of the contracts that they’ve signed and the type ofrevenue, the type of cash flow that they’re generating.”

PaineWebber noted Enron is “well on its way to surpass” EEScontracting goals. “In short, given the huge backlog of pendingcontracts and management body language, we expect that, both from aquantitative and qualitative perspective, there will be a lot morecoming out of EES over the next three to six months, not to mentionbeyond. Moreover, with the backlog of projects and increasingrevenue streams from contract performance, we continue to expectthat this division’s losses will decline and that it could breakeven by the third quarter of 1999 and begin to contributesignificant earnings in 2000 and beyond.”

Overall, Enron third quarter earnings of $0.47 per diluted sharewere up compared to $0.46 (before non-recurring charges) in thethird quarter of 1997. The company had net after tax income of $168million compared to $134 million a year ago. Enron’s corebusinesses, including Wholesale Energy Operations and Services,Transportation and Distribution, and Exploration and Production,realized earnings per diluted share of $0.52 for the third quarterof 1998 compared to $0.51 for the third quarter of 1997.

Transportation and Distribution generated $130 million of IBITin the third quarter of 1998 compared with $122 million in thethird quarter of 1997. Exploration and Production generated $25million of IBIT down from $49 million in the third quarter of 1997.These results reflect a 15% growth in worldwide oil and gasproduction offset by increased exploration costs and lower oilprices.

Enron also increased its annual dividend by $0.05 per share to$1.00 per share. The increase will be effective with the fourthquarter dividend of $0.25 per share payable Dec. 21.

Despite record production Enron Oil &amp Gas (EOG) reportedthird quarter net income of $5.9 million, down from $31.2 millionin the third quarter of 1997.

“For the first time in our history, EOG produced over 1 billioncubic feet per day in average wellhead natural gas production,”said Mark G. Papa, EOG president. Adding in oil and gas liquids,boosted total equivalent volumes to more than 1.2 Bcf/d. The totalswere an increase over the 897 MMcf/d of natural gas and 25 MBD ofcrude, condensate and liquids in the third quarter of 1997.

The additional volumes, however, were not enough to make up forthe lower commodity prices. In North America where the largestamount of Enron’s production is located, wellhead prices averaged$1.75 in 3Q 1998 compared to $1.91/Mcf in 3Q 1997, while crude andcondensate price realizations were $12.39 per barrel compared to$18.88 a year ago. Including production in India and Trinidad, EOGcollected an average of $1.67/Mcf in 3Q 1998, compared to $1.84/Mcffor the same period last year. Net revenues for EOG also wereimpacted by higher operating costs. Net operating revenue for thequarter was $191.3 this year compared to $193.1 in 3Q 1997, whileoperating expenses went from $144.4 in 1997 to $172.1 in thequarter just past.

Total North American production averaged 798 MMcf/d for thequarter this year compared to 748 MMcf/d a year ago.

Joe Fisher, Houston

©Copyright 1998 Intelligence Press, Inc. All rightsreserved. The preceding news report may not be republished orredistributed in whole or in part without prior written consent ofIntelligence Press, Inc.