Company increases 2008 earnings guidance on strength of Enogex pipeline performance OKLAHOMA CITY, July 31
OKLAHOMA CITY, July 31 /PRNewswire-FirstCall/ -- OGE Energy Corp.
(NYSE: OGE), the parent company of Oklahoma Gas and Electric Company (OG&E)
and Enogex LLC, today announced second-quarter earnings of $0.62 per diluted
share, compared with $0.68 per diluted share in the second quarter of 2007.
The company's results for the three months ended June 30, 2008 included a
charge of $0.06 per diluted share related to a proposed regulatory settlement
for the recovery of costs associated with the cancelled Red Rock power plant
project and the December 2007 ice storm.
OG&E, a regulated electric utility, contributed second-quarter net income
of $0.33 per diluted share, including the one-time charge of $0.06 per diluted
share discussed above, compared with $0.38 per diluted share last year.
Enogex, a natural gas pipeline business, recorded net income of $0.33 per
diluted share, compared with $0.30 per diluted share in the year-ago quarter.
The holding company, including results from the OGE Energy Resources marketing
business, posted a loss of $0.04 per diluted share in the second quarter this
year, compared with break-even results in the second quarter a year ago. The
loss was primarily due to recording hedges associated with its transportation
and storage contracts at market value on June 30, 2008, for which offsetting
gains are expected later this year.
"We are pleased to be able to increase our 2008 earnings guidance, based
on higher projected net income at Enogex," said Pete Delaney, OGE Energy
chairman, president and CEO. "At OG&E, we are making significant progress, as
evidenced by today's announcement of a positive settlement agreement in our
Redbud power plant acquisition case. We are, however, incurring additional
costs with our efforts to improve our systems and work processes. The higher
costs incurred today for these improvements will help the company lower costs
in future periods."
Discussion of Second Quarter 2008
OGE Energy reported consolidated operating revenues of $1.1 billion in the
second quarter of 2008, compared with $913 million a year earlier. The
second-quarter gross margin on revenues was $314 million, compared with $289
million in the year-earlier quarter. Operating income was $123 million in the
second quarter, compared with $117 million in the year-earlier quarter.
OG&E reported gross margin on revenues of $208 million in the second
quarter of 2008, compared with $193 million last year, primarily due to warmer
weather and new customer growth in the company's electric service area.
Including the one-time write-down and higher operation and maintenance
expenses in the second quarter this year, net income at OG&E was $31 million,
compared with $35 million in the second quarter of 2007.
Enogex reported gross margin on revenues of $112 million in the second
quarter of 2008, compared with $96 million in the comparable quarter last
year. The increase was due primarily to higher volumes and commodity prices
in the gathering and processing segment, partially offset by slightly lower
margins in the transportation and storage segment. The marketing segment
included in Enogex results last year has since been transferred to OGE, the
holding company. Net income at Enogex was $31 million in the second quarter
this year, compared with $28 million in the second quarter of 2007.
2008 Outlook
OGE Energy today announced an increase in its consolidated earnings
guidance for 2008 to $2.50 - $2.70 per diluted share due to increased
projected earnings at Enogex. The increase is based on continuing strong
business conditions in the midstream pipeline business. The guidance assumes
approximately 93.5 million average diluted shares outstanding and normal
weather for the remainder of the year.
The 2008 guidance includes:
-- OG&E, $1.37 to $1.47 per diluted share on net income of $128 million
to $138 million, a decrease from the previous guidance of $1.50 to $1.61 per
diluted share on net income of $140 million to $150 million, primarily due to
higher operation and maintenance expenses and the $0.06-per-share charge
related to the proposed regulatory settlement described above.
-- Enogex, $1.12 to $1.30 per diluted share on net income of $105 million
to $122 million, an increase from the previous guidance of $0.95 to $1.08 per
diluted share on net income of $88 million to $101 million, primarily due to
higher volumes and commodity prices.
-- Holding company, break-even to $0.02 per share on net income of up to
$2 million, an increase from a projected loss in previous guidance of $0.04 to
$0.05 per diluted share on a net loss of $4 million to $5 million, primarily
due to gains expected in the energy marketing segment.
Conference Call Webcast
OGE Energy will host a conference call for discussion of the results and
the outlook for 2008 on Thursday, July 31, at 8 a.m. CDT. The conference will
be available through http://www.oge.com.
OGE Energy is the parent company of Oklahoma Gas and Electric Company
(OG&E), which serves more than 766,000 customers in a service territory
spanning 30,000 square miles in Oklahoma and western Arkansas, and of Enogex
LLC, a natural gas pipeline business with principal operations in Oklahoma.
Some of the matters discussed on this news release may contain
forward-looking statements that are subject to certain risks, uncertainties
and assumptions. Such forward-looking statements are intended to be
identified in this document by the words "anticipate", "believe", "estimate",
"expect", "intend", "objective", "plan", "possible", "potential", "project"
and similar expressions. Actual results may vary materially. Factors that
could cause actual results to differ materially include, but are not limited
to: general economic conditions, including the availability of credit, actions
of rating agencies and their impact on capital expenditures; the Company's
ability and the ability of its subsidiaries to obtain financing on favorable
terms; prices of electricity, coal, natural gas and natural gas liquids, each
on a stand-alone basis and in relation to each other; business conditions in
the energy and natural gas midstream industries; competitive factors including
the extent and timing of the entry of additional competition in the markets
served by the Company; unusual weather; availability and prices of raw
materials for current and future construction projects; federal or state
legislation and regulatory decisions (including the approval of regulatory
filings related to the proposed acquisition of the Redbud power plant) and
initiatives that affect cost and investment recovery, have an impact on rate
structures or affect the speed and degree to which competition enters the
Company's markets; environmental laws and regulations that may impact the
Company's operations; changes in accounting standards, rules or guidelines;
the discontinuance of regulated accounting principles under SFAS No. 71;
creditworthiness of suppliers, customers and other contractual parties; the
higher degree of risk associated with the Company's nonregulated business
compared with the Company's regulated utility business; the impact of the
proposed initial public offering of limited partner interests of OGE Enogex
Partners L.P.; and other risk factors listed in the reports filed by the
Company with the Securities and Exchange Commission including Risk Factors and
Exhibit 99.01 to the Company's Form 10-K for the year ended December 31, 2007.
*Note: Consolidated Statements of Income, Financial and Statistical Data
attached.
OGE Energy Corp.
consolidated statements of income
(unaudited) Three Months Ended Six Months Ended
June 30 June 30
20082007 2008 2007
(In millions, except per share data)
OPERATING REVENUES
Electric Utility operating revenues $520.7 $429.9 $907.1 $770.6
Natural Gas Pipeline operating
revenues 615.0 483.5 1,223.3 1,024.3
Total operating revenues 1,135.7 913.4 2,130.4 1,794.9
COST OF GOODS SOLD (exclusive of
depreciation shown below)
Electric Utility cost of goods sold 294.7 225.3523.5413.5
Natural Gas Pipeline cost of goods
sold 527.4 399.6 1,047.4878.3
Total cost of goods sold822.1 624.9 1,570.9 1,291.8
Gross margin on revenues 313.6 288.5559.5503.1
Other operation and maintenance 119.0 105.9244.2204.7
Depreciation 52.447.8103.1 96.5
Taxes other than income19.517.6 41.4 38.5
OPERATING INCOME122.7 117.2170.8163.4
OTHER INCOME (EXPENSE)
Interest income 1.2 0.4 2.1 1.1
Allowance for equity funds used
during construction - 0.4 - 0.4
Other income4.5 3.5 8.4 6.1
Other expense (14.2) (1.8) (18.3)(2.7)
Net other income (expense) (8.5)2.5 (7.8) 4.9
INTEREST EXPENSE
Interest on long-term debt 24.322.2 47.7 44.3
Allowance for borrowed funds used
during construction (0.9) (0.8)(1.6)(1.4)
Interest on short-term debt and
other interest charges 4.0 3.6 10.5 6.3
Interest expense 27.425.0 56.6 49.2
INCOME BEFORE TAXES 86.894.7106.4119.1
INCOME TAX EXPENSE 29.732.1 36.3 39.3
NET INCOME $57.1 $62.6$70.1$79.8
BASIC AVERAGE COMMON SHARES OUTSTANDING 92.191.8 92.0 91.6
DILUTED AVERAGE COMMON SHARES
OUTSTANDING 92.592.7 92.5 92.5
BASIC EARNINGS PER AVERAGE COMMON
SHARE $0.62 $0.68$0.76$0.87
DILUTED EARNINGS PER AVERAGE COMMON
SHARE $0.62 $0.68$0.76$0.86
OGE Energy Corp.
financial and statistical data
(unaudited)Three Months Ended Six Months Ended
June 30 June 30
2008 2007 2008 2007
(In millions)
ELECTRIC UTILITY
Operating revenues by
classification
Residential $185.3 $152.7 $331.7$287.4
Commercial 126.6108.1216.0 184.3
Industrial59.9 55.5106.5 96.8
Oilfield 40.1 34.6 72.7 62.4
Public authorities and street
light51.6 44.5 87.7 75.8
Sales for resale 16.5 15.7 31.8 29.6
Provision for rate refund - 0.1 -0.1
System sales revenues 480.0411.2846.4 736.4
Off-system sales revenues 33.2 11.1 45.5 20.4
Other 7.5 7.6 15.2 13.8
Total operating revenues $520.7 $429.9 $907.1$770.6
Sales of electricity - MWH (a)
sales by classification
Residential2.0 1.8 4.2 3.8
Commercial 1.7 1.5 3.1 2.9
Industrial 1.0 1.1 2.0 2.1
Oilfield 0.7 0.7 1.4 1.4
Public authorities and street
light 0.8 0.8 1.4 1.4
Sales for resale 0.3 0.4 0.7 0.7
System sales 6.5 6.3 12.8 12.3
Off-system sales 0.5 0.3 0.7 0.6
Total sales 7.0 6.6 13.5 12.9
Number of customers 766,407 759,184 766,407 759,184
Average cost of energy per
KWH (b) - cents
Natural gas 10.4127.5838.996 7.473
Coal 1.1661.1111.124 1.107
Total fuel 3.7183.0313.435 2.816
Total fuel and purchased power 4.1663.4423.816 3.196
Degree days
Heating
Actual 220 2572,034 1,926
Normal 236 2362,218 2,199
Cooling
Actual 721 602 733 645
Normal 547 547 556 555
NATURAL GAS PIPELINE
Operating revenues (before
intercompany eliminations) (c) $323.9 $510.1 $590.6 $1,067.9
Operating income (c) $59.6$50.6 $105.2 $80.8
Net income (c) $30.9$28.1$53.4 $43.6
Net cash provided from operating
activities (c)$42.2 $4.6$60.7 $54.3
Capital expenditures (c) $65.2$31.0 $127.5 $56.5
New well connects (includes wells
behind CRP's (d)) (e) 103 112 188 211
New well connects (excludes wells
behind CRP's) (e)57 51 9697
Gathered volumes - Tbtu/d (f) 1.12 1.03 1.09 1.01
Incremental transportation volumes
- Tbtu/d 0.41 0.52 0.41 0.46
Total throughput volumes -
Tbtu/d 1.53 1.55 1.50 1.47
Natural gas processed - Tbtu/d 0.63 0.58 0.62 0.55
Natural gas liquids sold
(keep-whole) - million gallons 52 64 105 115
Natural gas liquids sold (purchase
for resale) - million gallons48 26 8953
Natural gas liquids sold
(percent-of-liquids) - million
gallons 64 10 8
Total natural gas liquids
produced - million gallons106 94 204 176
Average sales price per gallon$1.551 $0.992 $1.456$0.931
Estimated realized keep-whole
spreads (g) $7.18$4.62$7.11 $3.93
(a) Megawatt-hours.
(b) Kilowatt-hours.
(c) No results for OGE Energy Resources, Inc. ("OERI") for the three
and six months ended June 30, 2008 are included because, as of
January 1, 2008, Enogex distributed the stock of OERI to OGE
Energy.
(d) Central receipt points.
(e) As reported to management by third parties.
(f) Trillion British thermal units per day.
(g) The estimated realized keep-whole spread is an approximation of the
spread between the weighted-average sales price of the retained NGL
commodities and the purchase price of the replacement natural gas
shrink. The spread is based on the market commodity spread less
any gains or losses realized from keep-whole hedging transactions.
The market commodity spread is estimated using the weighted-average
OPIS daily posting for the NGL commodities prices and the Inside
FERC Panhandle Eastern Pipe Line Co. TX and OK first of month
posting for natural gas prices.
SOURCE OGE Energy Corp.
