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CNG Posts 2Q Loss After Large Merger Charges

CNG Posts 2Q Loss After Large Merger Charges

Consolidated Natural Gas paid a hefty price during the second quarter for its proposed merger with Dominion Resources. The company took a one-time $165.3 million, $1.12/share, charge related primarily to cash-out of stock options and awards to about 700 employees and took another $6.3 million charge, $0.04/share, for a workforce reduction related to the merger. CNG reported a second quarter loss from continuing operations of $80 million, or 83 cents a diluted share, compared with income of $46.8 million, or 49 cents a diluted share, a year earlier. The comparison was made worse by a $13.9 million, or $0.15/share, gain in 2Q98 related to a favorable regulatory decision. Excluding special items for both periods, income from continuing operations was 33 cents a diluted share in 2Q99, compared to 34 cents in 2Q98. Wall Street consensus had CNG pegged quite a bit higher at $0.39/share.

CNG said the merger costs were expected, however. "Our fundamental, basic business remains sound," said CEO George A. Davidson, Jr. "Our oil and gas production continues to increase and our regulated businesses remain solid. We bring a strong business into our merger with Dominion Resources, a merger which we expect to close as soon as the end of 1999." The $6.4 billion ($66.60/CNG share) merger already has been approved by shareholders of both companies and the Pennsylvania Public Utility Commission.

CNG said it's gas production rose 18%, or 7.2 Bcf, to 46.6 Bcf from 2Q98, and its oil production jumped 45% to 2.8 million bbl. Pretax operating income for exploration and production was $31.8 million in the second quarter of 1999, up from $28.2 million a year earlier. The average wellhead price for CNG's gas production was $2.18/Mcf, down 13 cents from a year earlier. Its average oil price was $12.21/bbl, down 50 cents from a year earlier.

Pretax operating income for the company's four local gas utilities was $2.9 million, down from $14.5 million a year earlier. Workforce reduction costs related to a previously announced restructuring reduced 1999 operating results by $7.8 million. The weather was 20% warmer than normal, compared to 18% warmer than normal in 2Q98. Distribution throughput was 74.7 Bcf, compared with 72.1 Bcf a year earlier.

Pretax operating income for the company's interstate gas pipeline and storage business was $37.7 million, down from $46.2 million a year earlier. The 1998 figure included $13.9 million for the favorable resolution of a regulatory contingency. Transmission throughput was 112.8 Bcf, down from 119.7 Bcf a year earlier.

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