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Coastal Avoids 2Q Pitfalls, Posts Record Earnings

July 27, 1998
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Coastal Avoids 2Q Pitfalls, Posts Record Earnings

Coastal Corp. bucked the trend of poor second-quarter earnings, riding its heavy investment in natural gas to a 23% increase (on a per share basis) in second quarter earnings this year over last. The company also improved refining margins, increased gas production 22% to 526 MMcf/d and raised its crude oil and condensate production by 50% to18,063 b/d. Earnings were $94.6 million, or 43 cents per share, up from 2Q97 earnings of $79.3 million, 35 cents/share.

"Our strategies have produced another record quarter of earnings for Coastal shareholders," said CEO David A. Arledge. "We are well on our way to again achieving our annual growth target of at least 15%. Coastal is less affected than many other energy companies by weak oil prices because our focus is on natural gas, which accounts for 83% of our production on an energy equivalent basis," Arledge added. "In fact, lower oil prices mean lower operating and feedstock costs for our refining business."

Coastal's overall earnings before interest and income taxes (EBIT) for the second quarter 1998 were $208.8 million compared with $182.5 million for the same period in 1997. For the first half of 1998, EBIT increased to $469.2 million, compared with $412.1 million for the same period a year earlier. Refining, marketing and chemicals posted a $25.9 million increase for the quarter. Exploration and production showed a $5.3 million increase to $30.2 million. Realized gas prices were up to $2.04/Mcf versus $1.89 in last year's second quarter. Net crude oil and condensate prices realized were $11.46 per barrel compared with $17.48 per barrel in 2Q97. And for the first half of the year, throughput for Coastal's pipeline subsidiaries rose to 1,119.6 Bcf compared with 1,079.2 Bcf for the same period last year.

The negatives included a one-time charge of $14.6 million related to a default on delivery obligations by a supplier of electricity to Engage Energy, the company's joint venture marketing subsidiary. That affected earnings in the gas segment, which came in at $99.6 million, down from $119.2 million in 2Q97.

Second quarter EBIT for the power segment was $25.8 million compared with $10.0 million for the same period last year. The $15.8 million increase is primarily comprised of $13.6 million in EBIT resulting from the restructuring of power purchase agreements for the company's Fulton, NY, plant.

Rocco Canonica

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