KN Energy warned investors yesterday warm temperatures, highstorage levels, poor processing margins and reduced gastransportation throughput during the first quarter took a bite outof earnings and could continue to plague the company for the restof the year.

KN said its first quarter earnings are expected to come in up to7 cents below recently published market estimates of about 20 centsper share, before considering costs of 3 cents per share incurredrelevant to a proposed merger with Sempra Energy. These resultswould represent a 15% decrease in operating income as compared tothe first quarter of 1998, KN said. The company said it willannounce quarterly earnings May 10.

“The same market conditions that plagued the industry in 1998 -including low natural gas liquids prices and continued marginpressure in the natural gas processing sector, and warmer thannormal weather that contributed to a growing gas storage inventoryand to decreased demand for gas transportation-had a negativeimpact on KN’s 1999 first quarter earnings,” said KN Chairman LarryD. Hall. “Merger costs related to the Sempra transaction alsocontributed to the first quarter earnings picture. While we willcontinue to reduce the company’s cost structure and applyaggressive discipline to capital expenditures, adverse marketconditions more than offset the positive impact of these strongmanagement efforts in the first quarter and may continue to do sothrough 1999.”

Heating degree days in KN’s principal markets in the firstquarter were 11-14% below 30-year norms, a situation exacerbated bythe fact that it came on the heels of the unusually mild winter of1997-1998.

©Copyright 1999 Intelligence Press Inc. All rights reserved. Thepreceding news report may not be republished or redistributed, inwhole or in part, in any form, without prior written consent ofIntelligence Press, Inc.