The Houston Exploration Co., a subsidiary of Brooklyn-based KeySpan Corp. announced Tuesday that it has recently received positive Securities and Exchange Commission (SEC) guidance on its 2001 impairment charge, resulting in higher earnings in the fourth quarter and full 2001.

The SEC has updated it guidance so as to permit the use of hedge-adjusted net realized prices for purposes of conducting the ceiling test for the fourth quarter. This favorable guidance does not require the use of unrealized hedge gains to offset the impairment charge, the company said.

In addition, 2002 hedging gains will now be realized in 2002, and not in 2001 as previously required. This realization of the current year hedge positions should benefit KeySpan’s E&P earnings in 2002. KeySpan’s E&P business has hedged approximately 60% of 2002 production at a weighted average floor price of $3.44 per MMBtu.

KeySpan’s 2001 earnings now include a non-cash after-tax impairment charge of $26.2 million, or $0.19 per share, as compared to the previously recorded non-cash after-tax impairment charge of $31.4 million, or $0.23 per share. This results in adjusted 2001 consolidated earnings, including all special charges and discontinued operations, of $218.4 million, or $1.58 per share, as compared to the previously reported $213.1 million, or $1.54 per share in 2001. Adjusted consolidated earnings for the fourth quarter of 2001, including all special charges and discontinued operations, were $39.7 million, or $0.29 per share, as compared to the previously reported $34.4 million, or $0.25 per share.

KeySpan is the largest distributor of natural gas in the Northeast, with 2.5 million gas customers and more than 13,000 employees. It is also the largest investor-owned electric generator in New York State and operates Long Island’s electric system under contract with the Long Island Power Authority for its 1.1 million customers. KeySpan also manages a dynamic portfolio of service companies.

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