Consolidated Natural Gas paid a hefty price during the secondquarter for its proposed merger with Dominion Resources. Thecompany took a one-time $165.3 million, $1.12/share, charge relatedprimarily to cash-out of stock options and awards to about 700employees and took another $6.3 million charge, $0.04/share, for aworkforce reduction related to the merger. CNG reported a secondquarter loss from continuing operations of $80 million, or 83 centsa diluted share, compared with income of $46.8 million, or 49 centsa 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 favorableregulatory decision. Excluding special items for both periods,income from continuing operations was 33 cents a diluted share in2Q99, compared to 34 cents in 2Q98. Wall Street consensus had CNGpegged quite a bit higher at $0.39/share.

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

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

Pretax operating income for the company’s four local gasutilities was $2.9 million, down from $14.5 million a year earlier.Workforce reduction costs related to a previously announcedrestructuring reduced 1999 operating results by $7.8 million. Theweather was 20% warmer than normal, compared to 18% warmer thannormal in 2Q98. Distribution throughput was 74.7 Bcf, compared with72.1 Bcf a year earlier.

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

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