Enron Reports 1Q Earnings Growth
While Enron Corp. enjoyed a first-quarter increase in operating results in each of its core businesses, the company reported another loss for Enron Energy Services due to start-up costs. And Enron Oil & Gas results were up despite lower commodity prices.
Enron after-tax earnings were $0.65 per diluted share in the first quarter of 1998 compared to $0.57 before a non-recurring gain of $0.24 per diluted share on the sale of liquids properties in the first quarter of 1997. Enron reported total diluted earnings per share of $0.65 and $0.81 and total net income of $214 million and $222 million for the first quarter of 1998 and 1997, respectively.
"Enron's 1998 first quarter results reflect substantial earnings growth across our core business activities," said Kenneth L. Lay, CEO. "Our wholesale business was particularly strong during the quarter, and we made significant progress in building our energy services business by increasing direct sales to end-use customers."
Such was not the case for Enron Energy Services (EES). EES reported an operating loss before interest, minority interest and taxes of $27 million in the first quarter of 1998 compared to a loss of $14 million in the first quarter of 1997, or $0.06 and $0.03 per diluted share for the first quarter of 1998 and 1997, respectively. This loss mainly reflects costs of developing the commodity, capital and services capability to deliver on contracts signed to date by EES.
EES sells gas, electricity and energy management services to commercial and light industrial customers. In the first quarter of 1998, EES executed several commodity and services contracts with new customers. The largest customers to switch electricity providers in California - Pacific Telesis and the University of California and California State University systems - chose EES to supply power and implement energy management services. In the first quarter of 1998, EES signed contracts representing about $850 million of future revenues, bringing the total to date to more than $2 billion in future revenues.
In the first quarter of 1998 Enron's core business groups increased income before interest, minority interest and taxes (IBIT) by 46% to $498 million compared to $341 million a year ago. The core businesses realized after-tax earnings of $0.71 and $0.60 per diluted share for the first quarter of 1998 and 1997, respectively. Among core business results:
Exploration and Production includes Enron Oil & Gas and hedging of exposure to commodity prices related to Enron's majority ownership of EOG. In the 1998 first quarter, Exploration and Production generated IBIT of $43 million compared with $42 million in the first quarter of 1997.
"Despite lagging prices in all product categories - natural gas, crude oil and condensate and natural gas liquids - we increased discretionary cash flow by 13%," said EOG CEO Forrest E. Hoglund. "Natural gas deliveries in the first quarter 1998 totaled 901 MMcf/d and crude oil, condensate and natural gas liquids deliveries totaled 26.1 thousand barrels per day, compared to first quarter 1997 deliveries of 850 MMcf/d and 23.5 thousand barrels per day, respectively." North America gas production averaged 745 MMcf/d in the first quarter compared to 738 MMcf/d a year ago. First quarter 1998 North America wellhead gas prices averaged $1.93/Mcf, down 25% from an average of $2.58/Mcf in the first quarter of 1997.
Transportation and Distribution includes Enron's North American interstate gas pipelines (Gas Pipeline Group) and its electric utility in Oregon (Portland General). Gas Pipeline Group generated IBIT of $126 million in the first quarter of 1998 compared with $135 million in the first quarter of 1997. Portland General generated IBIT of $79 million in the first quarter of 1998. No results from Portland General were included for the 1997 first quarter as the merger was completed in July 1997. First quarter 1998 operating margins and volumes for both groups declined slightly due to an unusually warm winter in their respective service territories.
PaineWebber's natural gas group was pleased by Enron's results. "With the positive outlook of its Energy Services division, heightened interest from electric-oriented investors, the increase in the overall market and its strong first quarter 1998 earnings, we are reiterating our attractive rating on Enron Corp.," PaineWebber said. Joe Fisher, Houston
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