Expenditures

Oil and natural gas producers are expected to spend 7% more on capital expenditures this year than in 2005, and the North American drilling rig count is at a 20 year high — up 19.4% since July 2005. With all of that money and scarce conventional resources, U.S. producers have shifted their exploration strategies to the “evolving opportunities” onshore and finding success across the continent, energy analysts said Monday.

Atmos Energy Corp.’s net income for its fiscal year 2005 ended Sept. 30 was $135.8 million, or $1.72 per diluted share, compared with net income of $86.2 million, or $1.58 per diluted share the prior year. The company noted that its results exceeded First Call’s mean estimate of $1.71 per diluted share.

Energy giant Duke Energy Corp. announced Monday that it has entered into a definitive agreement to acquire Cincinnati, OH-based Cinergy Corp. for $9 billion in stock, creating a formidable utility company with 5.4 million natural gas and electric customers. Company officials also hinted the future might see Duke splitting off its natural gas assets and going forward as a pure electric play.

In light of the huge capital expenditures and long lead times for liquefied natural gas (LNG) projects, as well as LNG supply constraints, energy industry experts and analysts told a joint House-Senate panel last Thursday that U.S. gas prices will remain at lofty levels throughout most of the current decade.

In light of the huge capital expenditures and long lead times for liquefied natural gas (LNG) projects, as well as LNG supply constraints, energy industry experts and analysts told a joint House-Senate panel Thursday that U.S. gas prices will remain at lofty levels throughout most of the current decade.

Exploration and development (E&D) spending, the largest component of capital expenditures for many of the top U.S. independents, grew 32% in the first six months of 2004 versus a year earlier, and capital budgets are expected to keep climbing, according to a survey by Raymond James’ analysts.

AGL Resources reported a 32% increase in second quarter net income compared to the same period in 2001. Net income rose to $12.3 million, or $0.22/share, compared with $9.3 million, or $0.17/share, and exceeded First Call consensus estimates of $0.20/share. The key drivers were lower operation and maintenance costs and depreciation expense in the distribution operations segment, improved contributions in the energy investments segment from SouthStar Energy Services, and lower corporate interest expense. “The seas are more turbulent, but we’re still on course,” said CEO Paula G. Rosput. “Despite the challenges within our industry, we are able to stay focused on strategies that are strengthening our cash flows, balance sheet and earnings.” Distribution operations contributed earnings before interest and taxes (EBIT) of $47.5 million, a $3 million increase from the same quarter last year that was achieved despite a lower operating margin and primarily as a result of lower utility operating and maintenance costs due to operational efficiencies and synergies from the company’s acquisition and integration of Virginia Natural Gas. Depreciation expenses were lower due to a change in depreciation rates established as part of Atlanta Gas Light’s performance-based rate plan. Sequent Energy Management’s EBIT contribution in second quarter 2002 declined $0.9 million to a loss of $2.3 million, compared with a loss of $1.4 million for the same period last year. Despite increased volumes and revenue contribution, Sequent’s overall contribution was limited by lower volatility in the Southeast energy market and increased expenses for the continued implementation of the back- and mid-offices. The energy investments segment’s EBIT contribution increased $2.2 million, or about 40%, compared to the same period one year ago, due to lower wholesale gas costs relative to retail prices. The segment still had an EBIT loss of $3.3 million. AGL Resources management said it expects to meet or exceed the earnings guidance previously stated for fiscal year 2002 of $1.65 to $1.70 per share.

Although economic growth has resumed, the increase in corporate expenditures wasn’t great enough to stem the rising tide of credit-rating downgrades during the second quarter, said Moody’s Investors Service last week. In fact, it reported that credit-rating downgrades exceeded upgrades by a margin of 4.9-to-1 during the period, the highest ratio since the record 6.3-to-1 in the fourth quarter of 1990.