KeySpan Corp.’s gas distribution side posted a slightly larger seasonal loss in the third quarter compared to last year and a drop in exploration and production (E&P) earnings from its 67% ownership in Houston Exploration Co. The Brooklyn, NY-based company’s electric operations, meanwhile, were the star performer, leading to third-quarter consolidated earnings from operations, after subtracting for preferred stock dividends, of $3.6 million, or three cents a share.

This compared to a company-wide loss of $38.9 million, or 28 cents a share, for the year-ago period. The performance was just a penny under the analysts’ consensus of four cents published by the research firm Thomson First Call.

KeySpan, the largest gas distributor in the Northeast with 2.5 million customers, posted a $38.9 million earnings loss before interest and taxes (EBIT) in distribution, compared to a $31 million loss in the year-ago period. But the segment’s EBIT so far this year was $320 million, up slightly from $318.6 million for the nine-month period in 2001. The unit serves New York City, Long Island and New England markets.

The company’s Energy Investments segment, which includes KeySpan’s E&P operations (mostly its ownership in Houston Exploration) and pipelines and other investments, reported an EBIT of $32.2 million for the third quarter, compared to $29.2 million for the comparable period in 2001. The segment’s EBIT for the nine-month period dropped considerably, to $77.6 million this year from $155.1 million last year, due mostly to lower natural gas prices.

Houston Exploration’s earnings per share on a fully diluted basis were $0.50, compared to $0.73 for the third quarter a year ago. E&P production rose 16% to 26.9 Bcfe for the third quarter from 23.3 Bcfe for the same period in 2001, as the average realized price for gas fell to $3.14/Mcf in 2002 from $3.50/Mcf a year ago, according to KeySpan. Houston Exploration has hedged approximately 65% of its 2002 production at a weighted average floor price of $3.40/MMBtu and weighted average ceiling price of $4.83/MMBtu. And based on this year’s estimated production, the producer has hedged about 65% of its 2003 production at a weighted average floor prices of $3.40/MMBtu and weighted average ceiling price of $4.55/MMBtu, it said.

KeySpan reaffirmed its earnings guidance of $2.60 to $2.75 per share for 2002, which includes profits of $2.40 to $2.45 per share from continuing operations and 20 to 30 cents per share from its exploration and production (E&P) operations. The company also reaffirmed its commitment to maintaining its dividend at the current annual rate of $1.78 a share.

On a year-to-date basis, consolidated earnings from continuing operations, less preferred stock dividends, were $244.5 million, or $1.74 per share, compared to $171.8 million, or $1.25 a share, for the nine-month period in 2001, KeySpan said.

KeySpan, also the largest electric provider in New York, credited the “solid performance” of its electric operations during the summer for the company’s third-quarter earnings gain. Specifically, it cited as key drivers the installation of 158 MW of new power generating peak units under contract with the Long Island Power Authority (LIPA) and the hot weather during the summer.

KeySpan’s Electric Services segment reported an EBIT of $113.2 million for the third quarter, up nearly $17 million from $96.5 million reported in the comparable period in 2001. Year-to-date EBIT was $243.7 million compared to $229.8 million for the nine-month period in 2001.

KeySpan’s Energy Services sector posted a quarterly loss of $4.5 million, down considerably from the $69.6 million loss reported for the year-similar quarter. Year-to-date losses were $23.9 million compared to $133 million in 2001.

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