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KN Warns Investors Of Lower Earnings

KN Warns Investors Of Lower Earnings

KN Energy warned investors last week that warm temperatures, high storage levels, poor processing margins and reduced gas transportation throughput during the first quarter took a bite out of earnings and could continue to plague the company for the rest of the year.

KN said its first quarter earnings are expected to come in up to 7 cents below recently published market estimates of about 20 cents per share, before considering costs of 3 cents per share incurred relevant to a proposed merger with Sempra Energy. These results would represent a 15% decrease in operating income as compared to the first quarter of 1998, KN said. The company said it will announce quarterly earnings May 10.

"The same market conditions that plagued the industry in 1998 -- including low natural gas liquids prices and continued margin pressure in the natural gas processing sector, and warmer than normal weather that contributed to a growing gas storage inventory and to decreased demand for gas transportation -- had a negative impact on KN's 1999 first quarter earnings," said KN Chairman Larry D. Hall. "Merger costs related to the Sempra transaction also contributed to the first quarter earnings picture. While we will continue to reduce the company's cost structure and apply aggressive discipline to capital expenditures, adverse market conditions more than offset the positive impact of these strong management efforts in the first quarter and may continue to do so through 1999."

Heating degree days in KN's principal markets in the first quarter were 11-14% below 30-year norms, a situation exacerbated by the fact that it came on the heels of the unusually mild winter of 1997-1998.

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