Columbia Energy Group revealed yesterday that its defenseagainst a hostile takeover by NiSource has become quite costly,reaching $9 million in pre-tax expenses during the third quarter.The company also took a $4 million pre-tax charge during the thirdquarter for restructuring its retail marketing operation. The twosetbacks combined led to a net loss of $9.7 million (12 cents pershare) during the quarter compared to net income of $11.2 million(13 cents per share) during the same period last year. The companyreported income from continuing operations of $800,000, or 1 centper share, compared to $12.2 million, or 14 cents/share in 3Q98.
Despite the poor performance and the continuing battle againstNiSource, however, CEO Oliver G. (Rick) Richard predicted thecompany would end the year on a high note. “We continue to expectColumbia’s consolidated operating income from continuing operationsfor the full year to exceed the 1998 level by about 15%.”
Columbia’s board still has not met to discuss NiSource’sincreased offer of $74/share ($6.1 billion up from $5.7 billion),and canceled its regulator earnings teleconference yesterday aspart of the quiet period leading up to its decision.
Richard stressed the positive improvements being made inColumbia Energy Services. “We are making solid progress in ourdrive to make Columbia Energy Services (CES) a more efficient andproductive operation,” he said. “A comprehensive evaluation ofColumbia Energy Services’ various businesses begun in February 1999resulted in two major moves during the quarter. Under theleadership of its new president and CEO, Brian Watt, CESrestructured its retail operations and decided to sell itswholesale and trading business. The retail operations werestreamlined and consolidated, resulting in the decision to closeCES’ Pennsylvania office.”
“A decision was made to sell CES’ wholesale and trading businessafter it was determined that we would do better to concentrate onbecoming a significant player in the retail end of the business,where Columbia’s existing geographic footprint gives us anadvantage,” Richard said in a separate statement yesterday.
Wholesale and trading operations were recorded as discontinuedbut posted a third quarter net loss of $10.5 million or 13 centsper share compared with a net loss of $1 million or 1 cent pershare in 3Q98. The division sold 27.7 Bcf of gas during thequarter, which was down from 34 Bcf in 3Q98. There were noannouncements regarding the upcoming sale of the division, althougha spokesman said the company has received “strong interest” frompotential buyers. The entire energy marketing segment, which nowincludes propane, petroleum, and the retail marketing business,reported an operating loss of $26.7 million this quarter versus aloss of $10.6 million in the same period last year.
Exploration and production operations posted 55% increase in gasproduction to about 147 MMcf/d and a $6.1 million increase inoperating income to $11.6 million. Realized gas prices for thecompany averaged $2.39/Mcf, about 44 cents/Mcf less than during thesame period last year.
Operating results from transmission/storage and distributionessentially were unchanged from last year at $55.4 million and $1.3million, respectively. Pipeline throughput rose slightly to 215.5Bcf. Distribution throughput declined 5.2 Bcf to 78.6 Bcf.
The results from the company’s customer choice programs inVirginia, Ohio, Pennsylvania and Maryland improved significantlyfrom the same time last year. Columbia distribution companies haveenrolled 520,000 residential gas customers in their choiceprograms, a 500% increase from 3Q98, Richard said.
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