Despite fiscal first quarter 2003 revenues that surged to $549,111 from the $377,548 posted during the similar period of 2002, Peoples Energy reported a stagnant net income of $31 million or $0.87 per diluted share for its first quarter 2003 ended December 31, 2002, compared with $31 million or $0.87 per diluted share last year.

“First quarter results exceeded our expectations,” said Thomas M. Patrick, Peoples Energy CEO. “Our core gas distribution business benefited from a return to more normal weather, although that improvement was overshadowed by a significant reduction in pension credits, as anticipated, and an increase in the provision for uncollectibles. Meanwhile, all of our diversified energy businesses posted strong results, and we expanded the production base and earnings potential of our oil and gas production unit with the purchase in November of additional gas reserves in Texas.”

For the quarter, Peoples Energy’s gas distribution segment posted operating income of $58.3 million, compared to $68.4 million in the year-ago quarter. Quarterly results benefited from weather that was 3.4% or 77 heating degree days colder than normal, but was more than offset by a number of factors including a $14 million reduction in first quarter pension credits.

The power generation segment contributed an operating and equity investment loss of $1.2 million for the first quarter, compared to a $2.8 million loss in the year-ago first quarter. Peoples Energy attributed the improvement primarily to equity investment income generated from the Southeast Chicago Energy Project (SCEP), a 350 MW plant owned in partnership with Exelon, which began commercial operations in July of 2002.

The company’s midstream services segment reported operating and equity investment income of $2.6 million for the quarter, compared to $2.3 million in the year-ago first quarter. The $0.3 million improvement primarily reflects losses incurred in the year-ago first quarter associated with enovate, LLC, which ceased operations in the second quarter of last year.

The retail energy services segment’s operating income rose to $2.1 million compared with $1.4 million in the previous year’s first quarter due mainly to lower operating costs, while the company’s oil and gas production division posted income of $4.9 million compared to $1.8 million in the previous year’s first quarter. Peoples Energy said the increase resulted primarily from higher realized gas prices and higher production volumes.

Looking ahead, Peoples Energy said colder weather should benefit the company in its full year 2003 results. “Assuming normal weather for the remainder of the year, we continue to estimate that fiscal 2003 earnings will be in the range of $2.70 to $2.80 per diluted share,” said Patrick. “Colder weather than last year should benefit gas distribution, but this improvement is expected to be offset by a previously disclosed reduction of $0.35 to $0.40 per share in pension credits for the full fiscal year, and higher bad debt expense. Early results from our diversified energy businesses are encouraging, particularly in the oil and gas segment, where strong prices and the first quarter acquisition of additional reserves are expected to significantly boost year-over-year operating income for the segment.”

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