OKLAHOMA CITY, Nov. 4 - OGE Energy Corp. (NYSE: OGE), the parent company of Oklahoma Gas and Electric Company (OG&E) and Enogex Inc., today reported earnings of $1.22 per diluted share for the three months ended Sept. 30, 2005, compared with $1.07 per diluted share for the third quarter of 2004.
OG&E, the company's regulated electric utility, contributed earnings of $1.09 per diluted share in the third quarter, compared with $1.03 per diluted share in the year-ago quarter, an increase of 6 percent. The increase was due to the impact on revenues from warmer weather - cooling-degree days increased 24 percent - substantially offset by higher operating costs. Enogex, the company's pipeline subsidiary, recorded earnings of $0.17 per diluted share, compared with $0.07 per diluted share in the third quarter last year. Enogex benefited from the absence of asset impairment charges, as well as improved performance in the natural gas-gathering business.
The holding company, which primarily has interest expense but no operating revenue, posted a loss of $0.04 per diluted share, compared with a loss of $0.03 per diluted share in the third quarter of 2004. Earnings-per-share also were negatively affected by an increase from a year ago of 2.5 million diluted average common shares outstanding.
"Earnings were higher due to the continuing strong performance of our pipeline business, while improvement for our electric utility was due largely to weather," said Steven E. Moore, OGE Energy chairman, president and CEO. "And while we are pleased that the Referee in our Oklahoma rate case appears to have recommended a higher recovery for OG&E than other parties in the case, our evaluation is not yet complete. We are concerned about the level of electric system investments we will be able to make in the future if the Corporation Commission issues a rate order that forces us to reduce our spending on reliability projects."
The report from the Referee appointed by the Oklahoma Corporation Commission was received by the company late yesterday. The company is still evaluating the report and expects to file its estimate of the Referee's recommended rate increase this afternoon. OG&E seeks an increase of $89 million. A rate order from the Commission is expected in November.
For the nine months ended Sept. 30, OGE Energy reported net income of $155 million, or $1.71 per diluted share, compared with $144 million, or $1.63 per diluted share in the first three quarters of 2004. Operating revenues were $4.3 billion in the first nine months of 2005, compared with $3.5 billion in the comparable period in 2004; gross margins were $772 million, up from $731 million in the year-ago period; and operating income was $290 million in the first three quarters of 2005, up from $269 million in the same period of 2004.
Discussion of Third Quarter 2005
OGE Energy reported consolidated operating revenues of $1.7 billion in the third quarter, compared with $1.3 billion a year earlier. The third-quarter gross margin on revenues was $349 million, compared with $317 million in the year-earlier quarter. Higher gross margins were partially offset by increased operation and maintenance expenses, depreciation and taxes. Operating income was $190 million in the third quarter, compared with $161 million in the year- earlier quarter. Net income was $111 million in the third quarter, compared with $95 million a year ago.
OG&E reported gross margin on revenues of $285 million in the third quarter, compared with $255 million in the comparable quarter last year. The higher margin was partially offset by higher expenses and OG&E reported net income of $99 million, compared with $91 million a year ago. Offsetting the positive impact of warmer weather on OG&E's financial results were significantly higher costs for business operations, materials and supplies. Included in these higher costs were the costs associated with the McClain power plant, which ceased being treated as a regulatory asset effective July 8, 2005 and are being expensed in the Company's condensed consolidated financial statements. In the case now before the OCC, OG&E seeks to recover these costs by having the plant included in the utility's regulated rate base.
"In a summer that was 24 percent hotter than last year, OG&E was able to increase earnings by only 6 percent," said Peter B. Delaney, OGE Energy executive vice president and chief operating officer. "We estimate that if weather had been normal in the third quarters of 2004 and 2005, OG&E's earnings in the third quarter this year would have declined by 5 percent. We believe this decline in the utility's earnings power is clear evidence of the need for rate relief."
Enogex reported gross margin on revenues of $64 million in the third quarter, compared with $62 million last year. Net income was $15 million, compared with $6 million in the third quarter of 2004. The favorable comparison was due primarily to an asset impairment charge of $8.6 million in the year-ago quarter. Enogex also reported higher margins in the gathering and processing business, principally due to favorable commodity prices.
2005 Outlook
The Company's 2005 earnings guidance is between $149 million to $158 million of net income, or $1.65 to $1.75 per diluted share, assuming approximately 91.0 million average diluted shares outstanding. The Company's 2005 earnings guidance excludes gains of approximately $52 million, or $0.57 per diluted share, from asset sales of Enogex Arkansas Pipeline Corporation and Enerven. The 2005 outlook for Enogex remains unchanged at $49 million to $56 million, or $0.54 to $0.62 per diluted share, with commodity spread projections between $2.30 and $2.60 per MMBtu in 2005 and average natural gas liquids price projections between $1.00 and $1.10 per gallon in 2005.
The 2005 outlook now includes earnings guidance of $112 million to $116 million, or $1.23 to $1.27 per diluted share, at OG&E, up from $106 million to $110 million, or $1.17 to $1.22 per diluted share, primarily due to warmer than normal weather in September 2005. The 2005 outlook now includes earnings guidance at the holding company with a loss between $8 million and $10 million, or $0.09 to $0.11 per diluted share, which was lowered from a loss between $6 million and $8 million, or $0.07 to $0.09 per diluted share, primarily due to higher forecasted interest expense in 2005.
Conference Call Webcast
OGE Energy will host a conference call for discussion of the results and outlook on Friday, Nov. 4, at 8 a.m. CST. The conference, hosted by James R. Hatfield, senior vice president and CFO, will be available through http://www.oge.com.
OGE Energy is the parent company of Oklahoma Gas and Electric Company (OG&E), which serves approximately 744,000 customers in a service territory spanning 30,000 square miles in Oklahoma and western Arkansas, and of Enogex Inc., a natural gas pipeline business with principal operations in Oklahoma and Arkansas.
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 industry; competitive factors including the extent and timing of the entry of additional competition in the markets served by the Company; unusual weather; federal or state legislation and regulatory decisions (including OG&E's pending rate case before the Oklahoma Corporation Commission) 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; 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; and other risk factors listed in the reports filed by the Company with the Securities and Exchange Commission.
* Note: Consolidated Statements of Income, Financial and Statistical Data
attached.
OGE Energy Corp.
consolidated statements of income
(unaudited) Three Months Ended Nine Months Ended
September 30 September 30
2005 2004 2005 2004
(In millions, except per share data)
OPERATING REVENUES
Electric Utility operating
revenues $612.9 $535.9 $1,308.0 $1,251.7
Natural Gas Pipeline
operating revenues 1,068.6 783.3 2,987.1 2,254.9
Total operating revenues 1,681.5 1,319.2 4,295.1 3,506.6
COST OF GOODS SOLD
Electric Utility cost of
goods sold 316.3 267.3 683.5 669.6
Natural Gas Pipeline cost of
goods sold 1,016.7 735.0 2,839.3 2,106.4
Total cost of goods sold 1,333.0 1,002.3 3,522.8 2,776.0
Gross margin on revenues 348.5 316.9 772.3 730.6
Other operation and
maintenance 93.8 87.9 292.3 270.2
Depreciation 47.4 42.7 137.5 131.0
Impairment of assets - 8.6 - 8.6
Taxes other than income 17.2 16.5 52.4 51.6
OPERATING INCOME 190.1 161.2 290.1 269.2
OTHER INCOME (EXPENSE)
Other income 0.7 5.8 3.3 11.2
Other expense (2.0) (0.9) (4.7) (3.7)
Net other income (expense) (1.3) 4.9 (1.4) 7.5
INTEREST INCOME (EXPENSE)
Interest income 0.3 0.2 2.4 1.1
Interest on long-term debt (21.8) (17.2) (60.5) (51.8)
Interest expense -
unconsolidated affiliate - (4.3) - (13.0)
Allowance for borrowed funds
used during construction 0.4 0.9 1.7 1.2
Interest on short-term debt and
other interest charges (5.3) (0.6) (8.6) (2.4)
Net interest expense (26.4) (21.0) (65.0) (64.9)
INCOME FROM CONTINUING OPERATIONS
BEFORE TAXES 162.4 145.1 223.7 211.8
INCOME TAX EXPENSE 55.3 51.3 75.8 70.8
INCOME FROM CONTINUING OPERATIONS 107.1 93.8 147.9 141.0
DISCONTINUED OPERATIONS
Income from discontinued
operations 5.9 0.5 10.7 3.8
Income tax expense (benefit) 1.9 (0.3) 3.7 1.0
Income from discontinued
operations 4.0 0.8 7.0 2.8
NET INCOME $111.1 $94.6 $154.9 $143.8
BASIC AVERAGE COMMON SHARES
OUTSTANDING 90.4 87.8 90.2 87.6
DILUTED AVERAGE COMMON SHARES
OUTSTANDING 90.8 88.3 90.6 88.1
BASIC EARNINGS PER AVERAGE COMMON
SHARE
Income from continuing operations $1.19 $1.07 $1.64 $1.61
Income from discontinued
operations, net of tax 0.04 0.01 0.08 0.03
NET INCOME $1.23 $1.08 $1.72 $1.64
DILUTED EARNINGS PER AVERAGE COMMON
SHARE
Income from continuing
operations $1.18 $1.06 $1.63 $1.60
Income from discontinued
operations, net of tax 0.04 0.01 0.08 0.03
NET INCOME $1.22 $1.07 $1.71 $1.63
OGE Energy Corp.
financial and statistical data
(unaudited) Three Months Ended Nine Months Ended
September 30 September 30
2005 2004 2005 2004
(In millions)
ELECTRIC UTILITY
Electric revenues
Residential $261.4 $218.7 $525.6 $495.3
Commercial 148.4 134.2 320.0 309.7
Industrial 110.7 100.4 258.6 254.0
Public authorities 57.9 53.3 127.5 124.4
Sales for resale 21.4 17.9 48.2 44.3
Provision for refund on gas
transportation and storage
case - - (2.1) (6.4)
Other 10.5 11.2 26.3 29.9
Total system revenues 610.3 535.7 1,304.1 1,251.2
Sales to other utilities 2.6 0.2 3.9 0.5
Total electric
revenues $612.9 $535.9 $1,308.0 $1,251.7
Sales of electricity - MWH (a)
Residential 3.0 2.6 6.8 6.3
Commercial 1.8 1.7 4.6 4.4
Industrial 1.9 1.8 5.4 5.2
Public authorities 0.8 0.7 2.1 2.0
Sales for resale 0.4 0.4 1.1 1.1
Total system sales 7.9 7.2 20.0 19.0
Sales to other utilities - - - -
Total electric sales 7.9 7.2 20.0 19.0
Number of customers 743,811 733,243 743,811 733,243
Average cost of energy per KWH
(b) - cents
Fuel 3.635 3.244 3.036 2.891
Fuel and purchased power 3.884 3.635 3.363 3.462
Degree days
Heating
Actual 3 - 1,870 1,962
Normal 30 29 2,229 2,247
Cooling
Actual 1,390 1,120 2,035 1,760
Normal 1,295 1,295 1,850 1,850
NATURAL GAS PIPELINE
Operating revenues (before
intercompany eliminations) $1,115.7 $811.2 $3,087.8 $2,326.2
Operating income $26.2 $14.0 $67.5 $61.8
Net income $15.0 $6.3 $34.3 $30.6
Net cash (used in) provided from
operating activities $(17.5) $25.6 $48.7 $162.7
Capital expenditures from
continuing operations $11.2 $7.9 $26.2 $22.8
New well connects 71 78 193 186
Gathered volumes - TBtu/d (c) 1.01 0.99 1.00 0.98
Incremental transportation
volumes - TBtu/d 0.52 0.42 0.43 0.38
Total throughput volumes -
TBtu/d 1.53 1.41 1.43 1.36
Natural gas processed -
Mmcf/d (d) 513 498 525 494
Natural gas liquids produced
(keep whole) - million gallons 63 73 225 176
Natural gas liquids produced (POL
and fixed-fee) - million gallons 4 4 11 12
Total natural gas liquids
produced - million gallons 67 77 236 188
Average sales price per gallon $0.972 $0.727 $0.812 $0.693
(a) Megawatt-hours.
(b) Kilowatt-hours.
(c) Trillion British thermal units per day.
(d) Million cubic feet per day.
