Financial

In its first quarterly financial report since EnCana Corp. was formed in April by the merger of PanCanadian and Alberta Energy Company, the company reported stable earnings and company officials predicted solid growth in the future despite the decline in commodity prices and current turmoil in the industry.

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.

In its first quarterly financial report since EnCana Corp. was formed in April by the merger of PanCanadian and Alberta Energy Company, the company reported stable earnings and company officials predicted solid growth in the future despite the decline in commodity prices and current turmoil in the industry.

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.

The gas and power marketing and trading business put in a poor financial performance in the first quarter compared to the extremely profitable first quarter of 2001, and gas and electric distribution utilities came in with only average results, according to a detailed analysis by Energy Performance Review (EPR), a Maryland-based information services firm. EPR examined aggregate first quarter results for 117 gas and power companies.

The key lessons learned in the financial massacre of leading gas and electric companies are that “balance sheet matters…real cash flow matters…assets matter…and dividends matter,” Southern Co.’s CFO Gale Klappa told the Banc of America Securities Energy & Power Conference last Wednesday.

A financial community audience hosted by Standard & Poor’s in New York City was told last Wednesday that in the wake of this year’s energy industry credit and credibility crisis, electricity reserves look adequate for North America through 2008, but energy price volatility is expected to continue, particularly in regard to natural gas. On average, however, gas prices should stay in the $2.75-$3.50/MMBtu range, according to a presentation by Boulder, CO-based researcher Douglas Logan, a principal in Platts Research & Consulting/RDI.

While the financial and political sectors are consumed with what last week’s revelations about wholesale power market manipulation will mean to the energy industry, California’s independent electric transmission grid operator, Cal-ISO, is focused on the broader market power abuses as the potential malfunctions that have the broadest, longest lasting and most costly impact. Relatively, the market power costs are in the billions of dollars, while the market manipulation of the kind described in the infamous Enron internal memos (see Daily GPI, May 9) collectively costs maybe hundreds of millions, according to Cal-ISO sources.

Financial incentives proposed in the Senate omnibus energy bill would lower the “trigger price” required for construction of an Alaska natural gas pipeline to be economically favorable to $3.05/Mcf, according to a new report issued by the Energy Information Administration (EIA).