AGL Resources reported a 32% increase in second quarter net income compared to the same period in 2001. Net income rose to $12.3 million, or $0.22/share, compared with $9.3 million, or $0.17/share, and exceeded First Call consensus estimates of $0.20/share. The key drivers were lower operation and maintenance costs and depreciation expense in the distribution operations segment, improved contributions in the energy investments segment from SouthStar Energy Services, and lower corporate interest expense. “The seas are more turbulent, but we’re still on course,” said CEO Paula G. Rosput. “Despite the challenges within our industry, we are able to stay focused on strategies that are strengthening our cash flows, balance sheet and earnings.” Distribution operations contributed earnings before interest and taxes (EBIT) of $47.5 million, a $3 million increase from the same quarter last year that was achieved despite a lower operating margin and primarily as a result of lower utility operating and maintenance costs due to operational efficiencies and synergies from the company’s acquisition and integration of Virginia Natural Gas. Depreciation expenses were lower due to a change in depreciation rates established as part of Atlanta Gas Light’s performance-based rate plan. Sequent Energy Management’s EBIT contribution in second quarter 2002 declined $0.9 million to a loss of $2.3 million, compared with a loss of $1.4 million for the same period last year. Despite increased volumes and revenue contribution, Sequent’s overall contribution was limited by lower volatility in the Southeast energy market and increased expenses for the continued implementation of the back- and mid-offices. The energy investments segment’s EBIT contribution increased $2.2 million, or about 40%, compared to the same period one year ago, due to lower wholesale gas costs relative to retail prices. The segment still had an EBIT loss of $3.3 million. AGL Resources management said it expects to meet or exceed the earnings guidance previously stated for fiscal year 2002 of $1.65 to $1.70 per share.

KeySpan Corp. reported quarterly earnings from continuing operations of $28 million, or $0.20 per share, compared to a loss of $12 million, or $0.09 per share, for the same period last year. For the six months ended June 30, KeySpan reported earnings of $241 million, or $1.71 per share, compared to $211 million, or $1.54 per share, in 2Q2001. Excluding special items related to the former Roy Kay companies, 2001 earnings from continuing operations were $18.2 million, or $0.13 per share, for the second quarter, and $246.3 million, or $1.79 per share, for the six months ended June 30. Results were in line with expectations and continue to benefit from the conversion of customers to natural gas, the reduction in operation and maintenance expenses in the gas distribution business, the positive effect of lower interest costs, and the elimination of the amortization of goodwill expense. The positive results were partially offset by a significant decrease in gas commodity prices realized by the company’s exploration and production operations compared to last year, and the extremely warm weather that impacted the gas distribution business. The company completed the sale of Midland Enterprises on July 2 and recorded as discontinued operations in the second quarter an expense of $19.7 million, or $0.14 per share, for an additional provision for state and local taxes on the sale. “Our core gas distribution business continues to grow as we convert customers to gas across our attractive Northeast territories,” said CEO Robert B. Catell. “Our core electric business added two new electric-generating plants at Glenwood Landing and Port Jefferson that went online during the quarter. These units will help address the electric needs of Long Island, while enhancing KeySpan’s strong position in the New York energy market. The closing of the sale of Midland Enterprises illustrates our commitment to strengthen our balance sheet. Based on our first half results, we anticipate that we will achieve our 2002 earnings goal.”

NUI Corp. said the downturn in energy marketing led to a third quarter loss from continuing operations of $2.6 million, or ($0.17) per share, including the effect of an additional 1.725 million shares of common stock issued in March. For the nine months ended June 30, NUI reported earnings from continuing operations of $22.9 million, or $1.57 per share, compared to $27.9 million, or $2.11 per share last year. The lower fiscal year-to-date earnings resulted primarily from weather that was 20% warmer than the corresponding period of 2001 and 22% warmer than normal, which severely impacted margins in the utility distribution services business, NUI’s largest segment, and lower earnings from energy trading during the third quarter. Management recently revised downward earnings guidance to $1.50-1.60 per share for fiscal 2002. Based on expected improvement in all of NUI’s business segments, except for energy trading, which is not predicted to experience more than minimal growth, the company initiated fiscal 2003 earnings per share guidance of $1.90 to $2.00 per share. “As 2002 continues, it is becoming evident that we have been caught in the middle of a `perfect storm,'” said CEO John Kean Jr. “While we did not play a role in creating it, we nevertheless are forced to ride it out, which we will. …[W]e are operating two businesses, energy trading and telecom, which the financial markets view with skepticism and disfavor at this time. Nevertheless, they are solid, profitable businesses for us. As our history of close to 150 years has taught us, it is dangerous to react to short-term trends.”

New Jersey Resources reported record quarterly and fiscal year-to-date results. Earnings per share for the nine months ended June 30 increased 6.8% to a record $2.21, compared with $2.07 for the same period last year. For the third quarter ended June 30, earnings per share were a record $0.18, compared with $0.16, a 12.5% increase (per share amounts were adjusted for a three-for-two stock split March 4). The company attributed its strong financial performance to continued profitable customer growth at its principal subsidiary, New Jersey Natural Gas (NJNG), and positive contributions from wholesale marketing activities at its unregulated wholesale energy services subsidiary, NJR Energy Services Co. (NJRES). During the first nine months of the fiscal year, NJNG added 1.5 Bcf of new throughput, which is expected to generate about $4.5 million in gross margin. NJNG expects to maintain its 3% annual customer growth rate in fiscal 2002, well above the national average for natural gas distribution companies. About 35% of those new customers are expected to convert from other fuels. In fiscal 2002, NJNG expects to add more than 2 Bcf of firm sales representing more than $6 million of annual gross margin. For the nine months ended June 30, weather was 17% warmer than normal but the impact of weather is significantly offset by NJNG’s weather-normalization clause (WNC), which is designed to smooth out year-to-year fluctuations that may result from changing weather patterns on both NJNG’s gross margin and customers’ bills. The company also had significant growth from off-system gas sales and capacity management programs, which generated $3.8 million in margin. New Jersey Natural Gas serves more than 430,000 gas customers.

Progress Energy , parent of North Carolina Natural Gas, Florida Power and Carolina Power & Light, reported consolidated net income of $120.6 million, or $0.56 per share, for the second quarter of 2002 compared with $111.7 million, or $0.56 per share, for the second quarter of 2001. Excluding non-operating charges, ongoing earnings were $0.83 per share compared with $0.77 per share. Reported earnings for the first half of 2002 were $253.1 million, or $1.18 per share, compared with $265.7 million, or $1.33 per share. “For both Florida Power and CP&L, we reached agreements that provide base rate freezes through 2005 and 2007, respectively, and that provide substantial benefits to our customers and our shareholders,” said CEO William Cavanaugh. “Since approximately 75% of enterprise net income comes from these two subsidiaries, we are very pleased to have this extraordinary level of predictability and stability for the core of our business. Despite the industrial slowdown that continues to impact CP&L and the slow start in the first quarter due to weather, we still expect to achieve our earnings target for 2002, though we will likely be in the lower half of our $3.90 to $4.10 range.”

Northwest Natural Gas Co. reported consolidated earnings applicable to common stock of $30.3 million, or $1.18/share, for the six months ended June 30 compared to $29.6 million, or $1.16/share, in the first six months of 2001. “Utility operating results are continuing on track for our 2002 fiscal year primarily due to cooler-than-average weather, services to electric generation and interstate gas storage customers and advantageous gas purchasing,” said CEO Richard G. Reiten. NW Natural’s results include a non-recurring charge in the second quarter for costs incurred because of its efforts to acquire Portland General Electric Co. from Enron Corp. The amount of the charge was $8.3 million after tax, or 32 cents a share. The purchase agreement was terminated because of complications related to Enron’s bankruptcy. “We would still be interested in acquiring PGE if it were offered for sale and if contingent liability issues relating to PGE were satisfactorily addressed,” Reiten said, “but the termination of our prior agreement and the uncertainties relating to Enron’s future plans make it prudent to charge our costs through June 30 to the loss reserve.” Earnings excluding the special charges for the second quarter rose to $4.8 million, or 18 cents/share, compared to $4.3 million, 17 cents, in the second quarter of 2001. Results including the non-recurring charge to the loss reserve for the PGE acquisition costs were a loss of $3.6 million, or 14 cents a diluted share. Operating margin (gross revenues minus cost of sales) in the second quarter was $56.6 million, up $1.8 million or 3% from last year. NW Natural estimates that its results for the quarter ending Sept. 30 will be a seasonal loss in the range of 25 to 35 cents a share, and confirms its prior estimate that its stand-alone earnings for 2002, excluding the non-recurring charges relating to the PGE acquisition, will be in the range of $1.90 to $2.05 a share.

Kerr-McGee Corp., based in Oklahoma City, lost money in the second quarter, reporting income before special items of $93.6 million, or 93 cents a share, compared with $164.4 million, or $1.60 for the second quarter of 2001. Net loss for the quarter was $7.6 million, or 8 cents, compared with net income of $175 million, or $1.71 a year earlier. The net loss for the first six months was $2.1 million, or 2 cents, compared with income of $509.7 million, or $4.92 for the first half of 2001. The second quarter income was impacted by after-tax special charges totaling $212.6 million for impairment of oil and gas assets, mainly non-core assets held for sale that did not meet the criteria of discontinued operations under current accounting standards ($158.5 million); litigation reserves ($45.5 million); and environmental reserves for the cleanup of inactive oil and gas and chemical sites ($8.3 million). Second quarter operating profit, excluding special items, was $230.5 million, down 30% from $328.7 million for the same period a year ago. Exploration and production operating profit was $211 million, down 29% from second quarter 2001 because of lower oil and gas sales prices, which were partially offset by a 40% increase in gas sales volumes and a 4% increase in oil production. Kerr-McGee’s daily sales of natural gas averaged 731 MMcf, up 40% from the second quarter of 2001. The average sales price of $2.96/Mcf was 32% lower than the $4.36 a year earlier, however. CEO Luke R. Corbett said the company had made significant progress on its strategic plan to divest non-core oil and gas assets and apply the proceeds to reducing debt. “In the Gulf of Mexico, we continue to capitalize on our deepwater expertise, technology infrastructure and inventory,” said Corbett. The company now has 618 blocks in the Gulf.

Occidental Petroleum Corp. posted net income for the second quarter of $240 million ($0.64 per share), compared with $473 million ($1.27 per share) for the second quarter 2001. The company attributed the decline primarily to weaker natural gas prices. There were no special items recorded for the quarter, compared to earnings before special items of $466 million ($1.25 per share) for the second quarter 2001. Despite the drop from the similar time period a year ago, Occidental’s net income for the second quarter improved significantly compared with $25 million ($0.07 per share) for the first quarter 2002, which included a goodwill write off and severance charges of $104 million after tax. Earnings before special items for the first quarter were $129 million ($0.34 per share). “Our second quarter oil and gas production increased by 14% compared to last year, with volumes rising from an average of 450,000 to 512,000 b/d,” said CEO Ray R. Irani. “Despite the sharp increase in production, our profits were down significantly due primarily to much lower gas prices. We’re encouraged by the improvement in our profits compared to the first quarter. “The improvement was driven by higher oil and gas prices and by strengthening chemical markets for our products. We’re on target to increase oil and gas production by more than 5% this year, and we expect production growth to continue at an average annual rate of 5% through 2006 — based solely on current development projects. Our chemical business was aided significantly by improved prices. We expect additional improvement in the chemical business in the third quarter.”

Noble Energy Inc. , headquartered in Houston, said lower natural gas prices sent its income down in the second quarter, as well as a shutdown of its methanol plant in Equatorial Guinea. It reported net income in the second quarter of $17 million, or 30 cents a share, compared with $51 million, or 91 cents a share for the second quarter of 2001. Discretionary cash flow (net income plus depreciation, exploration expense, loss from unconsolidated subsidiaries, distribution from unconsolidated subsidiaries, deferred income tax less capitalized interest) for the second quarter 2002 was $121 million, or $2.12 per share and for the first six months of 2002 was $212 million. Noble’s gas prices averaged $3.08/Mcf in the second quarter, compared with $4.12/Mcf a year earlier. During the second quarter, CEO Charles D. Davidson said the company initiated its first production from Lost Ark, a deepwater gas development in the Gulf of Mexico as well as finalizing a gas sales agreement in Israel. Cash operating costs (operating expense; selling, general and administrative; and net interest) for the second quarter on a unit basis averaged $6.51/boe, up 5 cents from the first quarter of 2002. Average production was approximately 97 Mboe, a decrease of about 5% over the second quarter of 2001. Natural gas production was approximately 375 MMcf/d in the quarter, down 14% from the second quarter 2001. Noble participated in 107 gross exploration and development wells in the Gulf of Mexico, of which 83 were successful, resulting in a success rate of about 78% in the second quarter. Noble currently is participating in nine onshore wells, of which five are associated with the Aspect venture.

Marking the fifth consecutive quarter it has raised its cash distribution, the board of directors for the general partner of Williams Energy Partners LP on Wednesday declared a quarterly cash distribution of 67.5 cents per common and subordinated unit for the period April 1 through June 30, 2002. The move represents a 10% increase over the first-quarter 2002 distribution of 61.25 cents per unit. The second-quarter distribution, which equates to $2.70 per unit on an annualized basis, will be paid Aug. 14 to unitholders of record at the close of business on Aug. 5. “Our cash distributions are up 29% since our initial public offering last year,” said Don Wellendorf, CEO. “This distribution increase reflects our confidence in the future of Williams Energy Partners despite the current turmoil in the energy industry. Our businesses are performing well, including the recent acquisition of Williams Pipe Line, which we expect to be more than 50 cents accretive to annual cash flow per unit over time.” In response to its plunging share price Tuesday, Williams Energy Partners assured the investment community that its businesses were healthy in a conference call (see Daily GPI, July 24 ). The partnership said it plans to announce second-quarter earnings before the market opens on Monday, (July 29). Following the release, an investor conference call is scheduled at 2 p.m. EDT on the same day. To participate, dial (800) 289-0468 and provide code 553688. A webcast will also be available at

Unocal Corp. saw its profit in the second quarter down 54% over the same period a year ago, with income of $134 million, or 55 cents a share. For the second quarter of 2001, the El Segundo, CA-based company had income of $228 million, or 92 cents. Net earnings were $114 million, or 46 cents, compared with $247 million, or 99 cents a year ago. The company’s average worldwide price for natural gas was $2.80/Mcf, compared with $3.41/Mcf for the second quarter of 2001. Worldwide, Unocal’s consolidated net daily production in the second quarter averaged 486,000 boe/d, compared with 516,000 boe/d a year earlier. Most of the decline was from the company’s North America operations, “which reflected lower Gulf of Mexico natural gas production stemming from a significant decline in Muni field production and low second-half 2001 drilling activity in response to lower commodity prices.” Capital spending for the quarter was $440 million, down from $464 million, excluding major acquisitions, in the second quarter 2001. Unocal is forecasting adjusted earnings from continuing operations of 45-55 cents a share in the third quarter, assuming an average Nymex benchmark price of $26.75/bbl and $3.15/MMBtu for North American gas. In the Gulf of Mexico, Unocal expects production gains from several drilling projects on properties jointly held with Forest Oil Corp, and new discoveries made earlier this year.

Newfield Exploration Co. , headquartered in Houston, reported quarterly net income of $20.1 million, or 44 cents a share, compared with $53 million, or $1.11 a share for the second quarter of 2001. Stated after the effect of the non-cash charge, net income for the second quarter of 2002 was $16.3 million, or 36 cents, and revenues were $161.6 million. Operating cash flow before changes in working capital was $99.7 million, or $2.07, compared with $144.7 million, or $2.97, a year earlier. Newfield’s production increased 4% over the second quarter of 2001, and was up 8.5% over the first quarter of this year. Second quarter production was 47.5 Bcfe, or an average of 522 MMcf/d. The company said it is on target to meet its 2002 production goal of 180-185 Bcfe, excluding the impact of closing the previously announced agreement to acquire EEX Corp., which is expected to close in late September 2002. Capital expenditures in the second quarter of 2002 were about $80 million. For the third quarter, Newfield estimtaes natural gas production to be 34-37 Bcf.

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