Without one-time charges, MCN Energy lost plenty in the thirdquarter, and a huge hit of $2.14/share in nonrecurring chargesdidn’t help at all.
Along with earnings, MCN — which, could be selling its E&Passets as early as within the next six months – announced last weeka new direction for its previously released strategic plan. “Now,we are launching a refocused strategic direction that emphasizessteady growth through projects that offer more predictable,long-term earnings streams in areas that we know well,” said CEOAlfred R. Glancy III. “This plan entails more modest – but stillsubstantial – capital investment levels of approximately $600million to $700 million annually, compared with previous plansexceeding $1 billion a year.
The company posted a third quarter net loss, excluding unusualitems, of $8 million, or $0.10 per diluted share, compared withearnings of $1.2 million, or $0.02 per share, in the 1997 thirdquarter. Including special items the net loss totaled $177.2million, or $2.24 per diluted share. MCN said lower results mainlyreflect continued weak energy prices in the Diversified Energysegment, partially offset by reduced seasonal losses from loweroperating costs in the Gas Distribution segment. The DiversifiedEnergy group recorded a break-even 1998 third-quarter, excludingunusual charges, compared with $17.8 million, or $0.23 per dilutedshare, earned a year earlier.
“Looking ahead, without (all or most of) its exploration andproduction division, MCN’s Diversified Energy Group of companiesshould realize the benefits from increased asset capacityutilization, additional projects coming on-line, as well as fromincremental growth from future investments,” wrote PaineWebber’sresearch department
Excluding a ceiling test write-down, Exploration and Productionoperating and joint venture income was $6.5 million, compared with$16.0 million for the 1997 third quarter. Gas and oil productionwas 24.3 Bcfe, down from 25.6 Bcfe in the third quarter of 1997,primarily due to the sale of producing oil properties since late1997.
Pipelines & Processing operating and joint venture income,excluding a charge for the company’s coal fines project andwrite-down of a Midwest pipeline investment, was $3.5 million inthe 1998 third quarter, compared with $7.8 million in thecorresponding period last year. And Energy Marketing, Gas Storage& Electric Power – excluding a $2.5 million restructuring charge – had operating and joint venture income of $8.3 million comparedwith $8.1 million in the 1997 third quarter. Gas sales and exchangedeliveries rose 42% to 114.5 Bcf mainly due to increased volumesmarketed in the Midcontinent/Gulf Coast supply area and in themidwestern United States.
The Gas Distribution group typically records losses fromseasonally lower demand in the third quarter. Excluding unusualcharges, the unit’s 1998 third-quarter loss was $7.8 million, or$0.10 per diluted share, compared with a net loss of $16.6 million,or $0.21 per share, in the same period a year before. Total gassales and transportation volumes in the 1998 third quarter fell to175.3 Bcf from 207.6 Bcf a year earlier.
“We believe the Gas Distribution segment will continue toprovide MCN with a solid and growing level of earnings and cashflow to be used to fund its growth initiatives as well as thedividend payment,” PaineWebber said.
PaineWebber highlighted one-time charges plaguing the company inthe third quarter. All after-tax, they include $54.6 million forthe ceiling test write-downs, $86.9 million for the write off ofthe Pipelines and Processing division’s coal fines venture, $2.5million for write-down of pipeline assets, $1.6 million forrestructuring related to international power projects, $6.8 millionfor corporate reorganization, $11.2 million for write-down of gasgathering pipelines, and $5.5 million for impairment of aninvestment in a Missouri gas distribution company that failed tosign up customers as quickly as expected.
Last Month, MCN said it would take a year-end, one-time chargeof $10 million for the first phase of its corporate realignmentwhich was prompted by a second quarter net loss of $210.1 million,or $2.67 per share, related to low oil and gas prices and poorperformance of certain Midcontinent and Gulf of Mexico producingproperties. MCN Energy Group warned investors in September thatit’s not likely to meet analysts’ 1998 and 1999 earningsexpectations of $1.64/share and $2.02/share.
Joe Fisher, Houston
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