Columbia Energy Group barely overcame warmer than normaltemperatures, weak gas prices and higher marketing costs during thefirst quarter to post a 2% increase in earnings. The companyreported first quarter 1999 earnings of $150.4 million, or $1.81per share, up $2.9 million, or four cents per share, from $147.5million or $1.77 per share in the 1998 first quarter. Strongperformances by its regulated transmission, storage anddistribution operations, as well as its propane, power generationand LNG activities were offset by continued difficulties inmarketing and exploration and production.

The marketing segment reported an operating loss of $21.5million, which was $16 million more than the loss in 1Q98. Higheroperating costs reflected increased investment in infrastructureand retail customer acquisitions as well as additional staffinglevels, Columbia said. Total gross margins dropped $5.7 million dueprimarily to the warm weather. While 1999’s first quarter weatherwas 20% colder than the record warmth of the 1998 quarter, it stillwas 6% warmer than normal. However, Columbia’s gas sales of 554 Bcf(6.16 Bcf/d) were up 52% over last year and power trading was at7.85 million MWh compared to 305 GWh in 1Q98. Columbia EnergyServices now provides energy service to nearly half a millionretail customers in 10 states, more than twice the level of retailcustomers of a year ago.

“This dramatic growth has placed Columbia Energy Services amongthe nation’s leading marketing companies for retail energycustomers and for gas and power trading,” said CEO Oliver G.Richard III. “However, the growth has strained the company’smarketing infrastructure, highlighting areas that need improvement.While continuing to work to improve its infrastructure, over thenear term, we are focusing the marketing segment’s efforts whereColumbia has an established presence.”

On the wholesale side, CFO Michael W. O’Donnell said the company”significantly cut back on the amount of risk activity in thecompany,” since the trading snafus that contributed to a fourthquarter loss of $39.4 million and a loss for the year of $59million (see Daily GPI Feb. 12 issue). “We’ve moved the managementof the books, the marking of the prices in the books, from thefront office to the mid-office. We think that’s a much better riskmanagement practice than we had before. In addition to that, we’rejust doing a lower level of trading activity generally.” Richardsaid he expects the wholesale operations will make a profit thisyear and retail marketing will break even. Columbia is activelylooking for a senior executive to manage its unregulated divisions,he added.

Columbia’s total revenues for the first quarter were up morethan $700 million from the same period last year. Operating incomeof $272.6 million set a new record high for a quarter, an increaseof $18.4 million over 1998. Transmission and storage’s operatingincome was up $26.4 million due primarily to recording thesettlement of the last remaining producer issue stemming fromColumbia’s bankruptcy proceedings that concluded in 1995. Thesettlement resulted in a one-time improvement of $20.6 million.Richard also noted Columbia Gas Transmission’s market expansionprogram is expected to be completed later this year.

Distribution operating income increased $10.1 million. Richardsaid more than 1.6 million retail customers in Columbia’sdistribution service areas can choose their natural gas supplier.In Ohio, Columbia’s choice program has resulted in nearly $30million in customer savings since its inception.

Its propane, power generation and LNG’s operating incomeimproved $1.6 million over 1Q98. Exploration and production’soperating income was $8.8 million lower, however due to sharplylower prices that only partially offset a 7% increase inproduction. Prices averaged $2.44/Mcf compared to $3.38/Mcf lastyear, while 1999 production of 10.6 Bcf, was up almost 1 Bcf.

“Since the end of the quarter, we have announced definitiveagreements for three acquisitions on the nonregulated side-two inpropane and one in exploration and production,” said Richard. “Oncecompleted, these transactions would broaden our geographicfootprint in propane, nearly triple the number of propane customersserved and expand Columbia Propane’s market area from eight to 35states, making it one of the largest propane companies in America.Also, Columbia Energy Resources would be able to extend itsleadership position in the Appalachian Basin, with about 3 Bcf ofadditional annual production and over 40 Bcf of proved reserves.”

©Copyright 1999 Intelligence Press Inc. All rights reserved. Thepreceding news report may not be republished or redistributed, inwhole or in part, in any form, without prior written consent ofIntelligence Press, Inc.