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MCN Expects Earnings Won't Meet Estimates

August 31, 1998
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MCN Expects Earnings Won't Meet Estimates

MCN Energy Group warned investors Friday it's not likely to meet analysts' 1998 and 1999 earnings expectations of $1.64/share and $2.02/share, respectively, and reiterated its plan to sell its exploration and production business. The E&ampP operations include more than 1.3 Tcf of proved reserves, making the company among the top 20 largest independent producers in the nation.

Following an announcement in June that it would record a net loss of $210.1 million, or $2.67 per share, related to low oil and gas prices and poor performance of certain Midcontinent and Gulf of Mexico producing properties, the company announced plans to sell its E&ampP assets.

"Although sales in today's industry environment are uncertain, a complete exit from the E&ampP business is possible," MCN Chairman Alfred R. Glancy III said again last week. "In the meantime, we will significantly reduce drilling and acquisition activities. These actions will reduce anticipated production levels. Clearly, lower production combined with lower prices equates to reduced earnings expectations from this business."

Based on "recent gas and oil prices and basis differentials, we expect to incur a ceiling test write-down of $50 million, after tax, for the third quarter. Any such write-down would be non-cash," Glancy added. Delays in achieving anticipated production from the company's coal fines briquetting project also are having a negative impact on earnings. The coal fines project recovers particles of coal that have been a wasted by-product of the mining process. The plants chemically process these fines, creating briquettes for sale into existing coal markets.

Aside from its E&ampP woes and coal fines delay, Glancy said MCN's other non-regulated businesses are performing well. "Furthermore, the regulated gas distribution segment is performing very well and has better growth opportunities today than we have seen in many years. Fundamentally, MCN remains sound, and we are determined to achieve solid financial performance."

MCN stock prices, which have been tumbling down from near $38/share prior to the June announcement, plummeted $8/share (31%) on Friday to close at $17.50/share. The 52-week high on the company's stock, reached in late December, was $40.50/share.

MCN is a diversified energy holding company with more than $4 billion of assets, and with markets and investments throughout North America and in Asia. Michigan Consolidated Gas, its gas distribution and transmission company, serves 1.2 million customers in more than 500 communities throughout Michigan.

Rocco Canonica

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