As expected, Consolidated Natural Gas’ (CNG) decision to exitthe wholesale marketing business showed up in first quarterresults. Warm weather and lower wellhead prices also took some ofthe blame for the reduced earnings. CNG reported 1998 first quarteroperating income down $35 million, or about $0.31/share. Net incomewas down $94 million, or $0.92/share.

The net income results include a $42.9 million charge ($66.0million pretax) to discontinue wholesale trading and marketing. Theresults also reflect a $17.2 million loss in the wholesale businessin the first quarter. The operations posted a $1.5 million loss inthe 1997 first quarter. Positives included a 14% increase in gasand oil production on an energy-equivalent basis, and costcontainment.

“The first quarter was a tough one for CNG, but the fundamentalsof our company are excellent and we look forward to the manyprofitable growth opportunities ahead,” said George A. Davidson,Jr., CEO. “With the decision to exit the wholesale energy marketingbusiness behind us, we now are concentrating on our already strongenergy marketing operations aimed at homeowners and smallbusinesses and on our other lines of business, such as explorationand production, and international.”

Gas production increased about 3% to 37.5 Bcf. Oil productionjumped 67% to 2.1 million barrels. The average wellhead gas pricewas $2.50/Mcf, a decline of 21 cents. Pretax operating income forthe company’s four gas utilities was $137.6 million, down 20% froma year earlier. Weather was 21% warmer than normal and 14% warmerthan a year earlier. Had the weather been normal, CNG saidper-share earnings in the first quarter of 1998 would have been 33cents higher. The amount of gas sold and transported fell 11% to157.9 Bcf in the first quarter.

Pretax operating income for interstate gas pipelines and storagewas down 15% from a year earlier. Lower liquids prices were a majorfactor in the decline. Also, 1997 first quarter results includedthe positive effect of the resolution of certain regulatory issues.Transmission throughput in the 1998 first quarter was 215.7 Bcf,down 17% from a year earlier.

“Although wellhead prices were down industry-wide, the averageprice we obtained for our gas production in the first quarter wasgood relative to our competitors,” Davidson said. “In addition, ourregulated operations in local gas distribution and interstate gastransmission are well-run at low cost. Abnormally warm weather costus 20 cents a share in the first quarter compared to last year, butwe are poised to benefit when the weather returns to more normallevels.”

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