Riding the wave of strong growth in operating income from the company’s diversified energy businesses, a return to more normal weather in its gas distribution business and lower interest expense, Chicago-based Peoples Energy on Friday announced sharply higher fiscal year 2003 results compared to fiscal 2002.

The company boasted 2003 net income of $103.9 million, or $2.87 per diluted share, compared with $89.1 million, or $2.51 per diluted share in the prior year. Peoples Energy’s operating income totaled $209.5 million, an increase of $25.1 million over last year.

For the fourth quarter ended Sept. 30, net income was $1.4 million, or $0.04 per diluted share, compared with $1.7 million, or $0.05 per diluted share in the year-ago quarter. Operating income totaled $10.2 million, a $1 million decline from the year-ago quarter.

“Overall, fiscal 2003 was an excellent year for Peoples Energy. Earnings per share improved substantially over the prior year, and also exceeded the target range we announced a year ago,” said Thomas M. Patrick, CEO. “In addition, our common stock dividend was increased to $2.12 per share and we further strengthened our balance sheet and liquidity.

“From an operating perspective, we continued to make progress on enhancing our core gas distribution business and improving efficiency, while substantially growing our diversified energy businesses. This balanced strategy has produced 5% annual earnings growth over the past five years, a growth rate that we will strive to meet or exceed over the next five-year period.”

Gas distribution led operating income on the year, contributing $174.4 million, compared to $169.6 million for 2002. Peoples Energy’s oil and gas production segment contributed $31.8 million in operating income in 2003, compared to $16.1 million the previous year. Midstream services chipped in $13.5 million, compared to $12.8, and power generation had operating income of $11.3 million, compared to $10.1 million in 2002.

The sharp increase in operating earnings from the production segment was attributed to primarily to higher production and higher commodity prices. Production went up due to Peoples Energy’s fiscal first quarter acquisition of properties from Magnum Hunter, the fiscal third quarter acquisition of additional interests in the Corpus Christi West Field from Royal Production Co. and the continued success of the company’s drilling program.

Gas production went up 35%, from 46.8 MMcf/d in 2002 to 63.2 MMcf/d for 2003. Gas prices increased from an average of $3.24/Mcf in 2002 to $4.28/Mcf in 2003.

Sticking to its guns, Peoples Energy said it was staying with its estimates of $2.70-2.85 per share for the financial 2004 year. Capital expenditures are expected to total approximately $150 million with about one-half earmarked for gas distribution.

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