Equitable Utilities had operating income for the first quarter of $62.4 million compared to $56.0 million reported for the same period last year. Net operating revenues for the three months ended March 31, 2005 were $99.3 million compared to $93.8 million. The 6% increase in net operating revenues is mainly due to a $5.6 million increase in margins in the Energy Marketing Group, primarily attributable to storage asset optimization resulting from high gas price volatility in the quarter. Commercial and other regulated services revenues were $2.0 million higher than last year. Weather was slightly warmer than the first quarter 2004, resulting in a decrease in distribution revenues of $2.1 million. Total operating expenses for the quarter were $36.9 million, 2% lower than the $37.8 million reported last year. Insurance reserves were $1.0 million lower than the first quarter 2004, bad debt expense was down $0.9 million, and depreciation, depletion and amortization (DD&A) expense was down $0.7 million. These expense reductions were partially offset by higher operating costs and higher fringe benefit costs.
Equitable Supply
Equitable Supply had operating income for the quarter of $65.4 million, 6% higher than the $61.5 million earned in the same period last year. Total revenues were $113.3 million, $14.1 million higher than the previous year’s total operating revenue of $99.2 million. Production revenues increased $9.7 million quarter over quarter to $89.1 million in 2005 from $79.4 million in 2004. The revenue increase was a result of both a sales volume increase of 1.3 Bcfe, from the acquisition early in the first quarter of the remaining 99% interest in Eastern Seven Partners, L.P. (ESP), and an average sales price increase of $0.24 per Mcfe. Gathering revenues were $4.4 million higher at $24.2 million, compared with $19.8 million in 2004. The increased gathering revenue was due to an increase in gathering rates and higher gathered volumes.
Operating expenses for the quarter were $47.9 million compared to $37.7 million last year. One reason for this increase was additional costs of $3.4 million resulting from the purchase of ESP. Excluding the ESP costs, the increase in total operating expenses was primarily due to increases of $3.0 million in gathering expenses, $1.2 million in production taxes, $1.1 million in DD&A expense, and $1.0 million in lease operating expenses.
(more)
NORESCO reported operating income of $3.7 million in the first quarter 2005, $0.1 million lower than the first quarter 2004. NORESCO’s net operating revenues increased slightly for the quarter to $9.9 million from $9.8 million reported last year. This was offset by an increase of $0.2 million in operating expenses, which were $6.2 million compared to $6.0 million in the first quarter 2004. Net earnings from non-consolidated investments less minority interest increased by $0.4 million. NORESCO’s quarter-end backlog was $83 million, compared to $118 million a year earlier.
Other Business
2005 Earnings Guidance
The Company is reiterating 2005 earnings guidance of between $3.45 and $3.50 per diluted share. This guidance excludes the gain from the sale of Kerr-McGee shares and the costs associated with the move to a new office building.
The approximate volumes and prices of Equitable’s hedges for the last nine months of 2005 through 2007 are:
|
| 2005** |
| 2006 |
| 2007 |
| |||
Total Volume (Bcf) |
| 47 |
| 62 |
| 59 |
| |||
Average Price per Mcf (NYMEX)* |
| $ | 4.82 |
| $ | 4.73 |
| $ | 4.75 |
|
** April through December
During the quarter, Equitable Resources repurchased 290,000 shares of EQT stock. The total number of shares repurchased since October 1998 is approximately 19.3 million out of the 21.8 million currently authorized.
In April, Equitable sold 1,027,859 shares of Kerr-McGee Corp. (NYSE: KMG) at an average price of $75.80. The sale will result in a gain of $26.7 million that will be reported in the second quarter results. Subsequent to the sale, Equitable owns 6 million shares of KMG.
To consolidate Equitable’s administrative operations, the Company entered into a long-term lease on an office building in the third quarter of 2003. The relocation process began late in the first quarter of 2005 and will continue through the second quarter. The Company recognized a loss on disposal of assets of approximately $0.5 million during the first quarter and expects to incur additional costs in the second quarter of between $6 and $8 million.
2
The Company reports operating income and earnings from nonconsolidated investments by segment in this press release. Both interest and income taxes are controlled on a consolidated, corporate-wide basis, and are not allocated to the segments.
The following table reconciles operating income by segment as reported in this press release to the consolidated operating income reported in the Company’s financial statements:
|
| Three Months Ended |
| ||||
|
| 2005 |
| 2004 |
| ||
Operating income (thousands): |
|
|
|
|
| ||
Equitable Utilities |
| $ | 62,377 |
| $ | 55,960 |
|
Equitable Supply |
| 65,353 |
| 61,530 |
| ||
NORESCO |
| 3,705 |
| 3,786 |
| ||
Unallocated expenses |
| (534 | ) | (1,749 | ) | ||
Operating Income |
| $ | 130,901 |
| $ | 119,527 |
|
The following table reconciles earnings from nonconsolidated investments by segment as reported in this press release to the consolidated earnings from nonconsolidated investments reported in the Company’s financial statements:
|
| Three Months Ended |
| |||||
|
| 2005 |
| 2004 |
| |||
Earnings from nonconsolidated investments (thousands): |
|
|
|
|
| |||
Equitable Supply |
| $ | 47 |
| $ | 143 |
| |
NORESCO |
| 1,178 |
| 720 |
| |||
Unallocated |
| 42 |
| 38 |
| |||
Total |
| $ | 1,267 |
| $ | 901 |
| |
Other segment financial measures identified in this press release are reconciled to the most comparable financial measures calculated in accordance with GAAP on the attached operational and financial reports.
Equitable’s teleconference with securities analysts, which begins at 10:30 a.m. Eastern Time today, will be broadcast live via Equitable’s website, http://www.eqt.com and will be available for replay for a seven day period.
3
Equitable Resources is an integrated energy company, with emphasis on Appalachian area natural gas production supply, natural gas transmission and distribution, and leading-edge energy management services for customers throughout the United States.
On May 1 and 2, 2005, Equitable Resources will be making presentations to securities analysts and/or Equitable shareholders to discuss Equitable’s business, financial results and prospects. A copy of the slides will be posted on Equitable’s website at www.eqt.com, under the “Investor” link. In those presentations, Equitable will make forward looking statements, including reaffirming earnings guidance for 2005 of $3.45 to $3.50 per diluted share subject to the exclusions described above.
DISCLOSURES IN THIS PRESS RELEASE CONTAIN FORWARD-LOOKING STATEMENTS RELATED TO SUCH MATTERS AS 2005 EPS GUIDANCE, EARNINGS PER SHARE AND DIVIDEND GROWTH, THE APPROXIMATE VOLUMES AND PRICES OF HEDGES FOR 2005 THROUGH 2007, THE REPURCHASE OF ADDITIONAL COMPANY SHARES, REPAYMENT OF DEBT, THE FORECASTED CAPITAL EXPENDITURES, THE COMPANY’S APPROACH TO LONG-TERM COMPENSATION, INCLUDING DEFINED BENEFIT OBLIGATIONS, CHANGES IN OPERATING COSTS, THE ABILITY OF THE COMPANY TO COLLECT ITS ACCOUNTS RECEIVABLE, OPERATIONAL MATTERS AT THE SUPPLY SEGMENT INCLUDING THE ANTICIPATED NUMBER OF WELLS TO BE DRILLED, THE EFFECTIVENESS OF COMPRESSION, AUTOMATION, METERING AND OTHER INFRASTRUCTURE IMPROVEMENT PROJECTS, ANTICIPATED VOLUMES, STAFFING CHANGES AND THE COMPANY’S ABILITY TO SEGREGATE THE GATHERING BUSINESS FROM THE PRODUCTION BUSINESS AND TO RAISE GATHERING RATES, AND REALIZING VALUE FROM THE INVESTMENT IN KERR-MCGEE, INCLUDING THE EFFECTIVENESS OF HEDGING KERR-MCGEE SHARES. THE COMPANY NOTES THAT A VARIETY OF FACTORS COULD CAUSE THE COMPANY’S ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE ANTICIPATED RESULTS OR OTHER EXPECTATIONS EXPRESSED IN THE COMPANY’S FORWARD-LOOKING STATEMENTS. THE RISKS AND UNCERTAINTIES THAT MAY AFFECT THE OPERATIONS, PERFORMANCE, GROWTH AND RESULTS OF THE COMPANY’S BUSINESS INCLUDE, BUT ARE NOT LIMITED TO, THE FOLLOWING: WEATHER CONDITIONS, COMMODITY PRICES FOR NATURAL GAS AND ASSOCIATED HEDGING ACTIVITIES, INCLUDING CHANGES IN HEDGE POSITIONS, AVAILABILITY AND COST OF FINANCING, CHANGES IN THE COMPANY’S CREDIT RATINGS, CHANGES IN INTEREST RATES, CHANGES IN TAX LAWS, UNANTICIPATED CURTAILMENTS OR DISRUPTIONS IN PRODUCTION, TIMING AND AVAILABILITY OF REGULATORY AND GOVERNMENTAL APPROVALS, INCLUDING PENDING AND ANTICIPATED RATE CASES, THE TIMING AND EXTENT OF THE COMPANY’S SUCCESS IN ACQUIRING UTILITY COMPANIES AND NATURAL GAS PROPERTIES AND DIVESTING NON-CORE PRODUCING PROPERTIES AND INTERNATIONAL ASSETS, THE ABILITY OF THE COMPANY TO DISCOVER, DEVELOP, PRODUCE, GATHER AND MARKET RESERVES, THE ABILITY OF THE COMPANY TO ACQUIRE AND APPLY TECHNOLOGY TO ITS OPERATIONS, THE IMPACT OF COMPETITIVE FACTORS ON PROFIT MARGINS IN VARIOUS MARKETS IN WHICH THE COMPANY COMPETES, THE PACE AT WHICH THE PERFORMANCE CONTRACTING BUSINESS CAN BE RESUMED, CHANGES IN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND/OR THEIR INTERPRETATION, THE ABILITY OF THE COMPANY TO NEGOTIATE LABOR CONTRACTS, THE AMOUNT OF INCENTIVE PLAN ACCRUALS INCLUDING THE IMPACT OF CHANGES IN THE RELATIVE PRICE OF EQUITABLE COMMON STOCK, THE ABILITY OF THE COMPANY TO REALIZE THE VALUE OF ITS KERR-MCGEE STOCK, AND THE LEVEL OF FUTURE SHARE REPURCHASES BY THE COMPANY. THE COMPANY UNDERTAKES NO OBLIGATION TO CORRECT OR UPDATE ANY FORWARD-LOOKING STATEMENT, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME (UNAUDITED)
(Thousands except per share amounts)
|
| Three Months Ended |
| ||||
|
| March 31, |
| ||||
|
| 2005 |
| 2004 |
| ||
|
|
|
|
|
| ||
Operating revenues |
| $ | 439,767 |
| $ | 400,427 |
|
Cost of sales |
| 217,293 |
| 197,596 |
| ||
Net operating revenues |
| 222,474 |
| 202,831 |
| ||
|
|
|
|
|
| ||
Operating expenses: |
|
|
|
|
| ||
Operation and maintenance |
| 23,843 |
| 18,698 |
| ||
Production |
| 14,170 |
| 10,087 |
| ||
Selling, general and administrative |
| 30,121 |
| 32,752 |
| ||
Depreciation, depletion and amortization |
| 23,439 |
| 21,767 |
| ||
Total operating expenses |
| 91,573 |
| 83,304 |
| ||
|
|
|
|
|
| ||
Operating income |
| 130,901 |
| 119,527 |
| ||
|
|
|
|
|
| ||
Earnings from nonconsolidated investments: |
|
|
|
|
| ||
International investments |
| 1,159 |
| 716 |
| ||
Other |
| 108 |
| 185 |
| ||
|
| 1,267 |
| 901 |
| ||
Other income, net |
| 1,138 |
| — |
| ||
|
|
|
|
|
| ||
Minority interest |
| (439 | ) | (370 | ) | ||
|
|
|
|
|
| ||
Interest expense |
| 13,965 |
| 12,259 |
| ||
|
|
|
|
|
| ||
Income before income taxes |
| 118,902 |
| 107,799 |
| ||
Income taxes |
| 42,496 |
| 37,729 |
| ||
|
|
|
|
|
| ||
Net income |
| $ | 76,406 |
| $ | 70,070 |
|
|
|
|
|
|
| ||
Earnings per share of common stock: |
|
|
|
|
| ||
Basic: |
|
|
|
|
| ||
Weighted average common shares outstanding |
| 60,712 |
| 62,256 |
| ||
Net income |
| $ | 1.26 |
| $ | 1.13 |
|
|
|
|
|
|
| ||
Diluted: |
|
|
|
|
| ||
Weighted average common shares outstanding |
| 62,175 |
| 63,531 |
| ||
Net income |
| $ | 1.23 |
| $ | 1.10 |
|
(A) Due to the seasonal nature of the Company’s natural gas distribution and energy marketing business, and the volatility of gas and oil commodity prices, the interim statements for the three month period are not indicative of results for a full year.
EQUITABLE UTILITIES
OPERATIONAL AND FINANCIAL REPORT
|
| Three Months Ended |
| ||||
|
| 2005 |
| 2004 |
| ||
OPERATIONAL DATA |
|
|
|
|
| ||
Heating degree days (30-year average: 2,930) |
| 2,834 |
| 2,925 |
| ||
|
|
|
|
|
| ||
Residential sales and transportation volume (MMcf) |
| 12,373 |
| 13,080 |
| ||
Commercial and industrial volume (MMcf) |
| 10,783 |
| 11,666 |
| ||
Total throughput (MMcf) - Distribution |
| 23,156 |
| 24,746 |
| ||
Total throughput (Bbtu) - Pipeline |
| 16,461 |
| 18,961 |
| ||
|
|
|
|
|
| ||
Net Revenues (thousands): |
|
|
|
|
| ||
Distribution |
|
|
|
|
| ||
Residential |
| $ | 43,161 |
| $ | 44,966 |
|
Commercial & industrial |
| 21,242 |
| 20,773 |
| ||
Other |
| 2,389 |
| 1,564 |
| ||
Pipeline |
| 16,466 |
| 16,018 |
| ||
Marketing |
| 16,012 |
| 10,445 |
| ||
|
| $ | 99,270 |
| $ | 93,766 |
|
|
|
|
|
|
| ||
Operating expenses as a % of net operating revenues |
| 37.16 | % | 40.32 | % | ||
|
|
|
|
|
| ||
Operating income (thousands): |
|
|
|
|
| ||
Distribution |
| $ | 38,327 |
| $ | 37,919 |
|
Pipeline |
| 8,419 |
| 8,655 |
| ||
Marketing |
| 15,631 |
| 9,386 |
| ||
Total |
| $ | 62,377 |
| $ | 55,960 |
|
|
|
|
|
|
| ||
Capital expenditures (thousands) |
| $ | 9,787 |
| $ | 14,600 |
|
|
|
|
|
|
| ||
FINANCIAL DATA (Thousands) |
|
|
|
|
| ||
Utility revenues |
| $ | 216,582 |
| $ | 195,689 |
|
Marketing revenues |
| 82,486 |
| 85,685 |
| ||
Total operating revenues |
| 299,068 |
| 281,374 |
| ||
|
|
|
|
|
| ||
Utility purchased gas costs |
| 133,324 |
| 112,368 |
| ||
Marketing purchased gas costs |
| 66,474 |
| 75,240 |
| ||
Net operating revenues |
| 99,270 |
| 93,766 |
| ||
|
|
|
|
|
| ||
Operating expenses: |
|
|
|
|
| ||
Operating and maintenance |
| 13,946 |
| 12,117 |
| ||
Selling, general and administrative |
| 16,315 |
| 18,363 |
| ||
Depreciation, depletion and amortization |
| 6,632 |
| 7,326 |
| ||
Total operating expenses |
| 36,893 |
| 37,806 |
| ||
|
|
|
|
|
| ||
Operating income |
| $ | 62,377 |
| $ | 55,960 |
|
EQUITABLE SUPPLY
OPERATIONAL AND FINANCIAL REPORT
|
| Three Months Ended |
| ||||
|
| March 31, |
| ||||
|
| 2005 |
| 2004 |
| ||
OPERATIONAL DATA |
|
|
|
|
| ||
Capital expenditures (thousands) (a) |
| $ | 88,631 |
| $ | 21,053 |
|
|
|
|
|
|
| ||
Production: |
|
|
|
|
| ||
Total sales volumes (MMcfe) |
| 18,328 |
| 17,042 |
| ||
Average (well-head) sales price ($/Mcfe) |
| $ | 4.74 |
| $ | 4.50 |
|
|
|
|
|
|
| ||
Company usage, line loss (MMcfe) |
| 1,231 |
| 1,199 |
| ||
|
|
|
|
|
| ||
Natural gas inventory usage, net (Mmcfe) |
| (51 | ) | (112 | ) | ||
|
|
|
|
|
| ||
Natural gas and oil production (Mmcfe) |
| 19,508 |
| 18,129 |
| ||
|
|
|
|
|
| ||
Lease operating expense excluding production taxes ($/Mcfe) |
| $ | 0.32 |
| $ | 0.23 |
|
Production taxes ($/Mcfe) |
| $ | 0.41 |
| $ | 0.32 |
|
Production depletion ($/Mcfe) |
| $ | 0.62 |
| $ | 0.54 |
|
|
|
|
|
|
| ||
Gathering: |
|
|
|
|
| ||
Gathered volumes (MMcfe) |
| 33,152 |
| 32,568 |
| ||
Average gathering fee ($/Mcfe) |
| $ | 0.73 |
| $ | 0.61 |
|
Gathering and compression expense ($/Mcfe) |
| $ | 0.30 |
| $ | 0.20 |
|
Gathering and compression depreciation ($/Mcfe) |
| $ | 0.10 |
| $ | 0.10 |
|
|
|
|
|
|
| ||
(in thousands) |
|
|
|
|
| ||
Production operating income |
| $ | 57,283 |
| $ | 54,328 |
|
Gathering operating income |
| 8,070 |
| 7,202 |
| ||
Total |
| $ | 65,353 |
| $ | 61,530 |
|
|
|
|
|
|
| ||
Production depletion |
| $ | 12,059 |
| $ | 9,822 |
|
Gathering and compression depreciation |
| 3,324 |
| 3,352 |
| ||
Other depreciation, depletion and amortization |
| 1,002 |
| 869 |
| ||
Total depreciation, depletion and amortization |
| $ | 16,385 |
| $ | 14,043 |
|
|
|
|
|
|
| ||
FINANCIAL DATA (Thousands) |
|
|
|
|
| ||
Production revenues |
| $ | 89,104 |
| $ | 79,429 |
|
Gathering revenues |
| 24,171 |
| 19,815 |
| ||
Total revenues |
| 113,275 |
| 99,244 |
| ||
|
|
|
|
|
| ||
Operating expenses: |
|
|
|
|
| ||
Lease operating expense excluding production taxes |
| 6,235 |
| 4,254 |
| ||
Production taxes (b) |
| 7,935 |
| 5,833 |
| ||
Gathering and compression |
| 9,896 |
| 6,587 |
| ||
Selling, general and administrative |
| 7,471 |
| 6,997 |
| ||
Depreciation, depletion and amortization |
| 16,385 |
| 14,043 |
| ||
Total operating expenses |
| 47,922 |
| 37,714 |
| ||
|
|
|
|
|
| ||
Operating income |
| $ | 65,353 |
| $ | 61,530 |
|
|
|
|
|
|
| ||
Earnings from nonconsolidated investments |
| $ | 47 |
| $ | 143 |
|
(a) Capital expenditures for the three months ended March 31, 2005 include $57.5 million for the acquisition of the remaining 99% limited partnership interest in Eastern Seven Partners L.P.
(b) Production taxes include severance and production-related ad valorem taxes.
NORESCO
OPERATIONAL AND FINANCIAL REPORT
|
| Three Months Ended |
| ||||
|
| March 31, |
| ||||
|
| 2005 |
| 2004 |
| ||
|
|
|
|
|
| ||
OPERATIONAL DATA |
|
|
|
|
| ||
Revenue backlog, end of period (thousands) |
| $ | 82,511 |
| $ | 118,261 |
|
|
|
|
|
|
| ||
Gross profit margin |
| 25.8 | % | 28.9 | % | ||
SG&A as a % of revenue |
| 15.5 | % | 17.0 | % | ||
|
|
|
|
|
| ||
Capital expenditures (thousands) |
| $ | 217 |
| $ | 28 |
|
|
|
|
|
|
| ||
FINANCIAL DATA (Thousands) |
|
|
|
|
| ||
Energy service contract revenues |
| $ | 38,491 |
| $ | 33,926 |
|
Energy service contract costs |
| 28,562 |
| 24,105 |
| ||
Net operating revenues (gross profit margin) |
| 9,929 |
| 9,821 |
| ||
|
|
|
|
|
| ||
Operating expenses: |
|
|
|
|
| ||
Selling, general and administrative |
| 5,975 |
| 5,784 |
| ||
Depreciation and amortization |
| 249 |
| 251 |
| ||
Total operating expenses |
| 6,224 |
| 6,035 |
| ||
|
|
|
|
|
| ||
Operating income |
| $ | 3,705 |
| $ | 3,786 |
|
|
|
|
|
|
| ||
Earnings from nonconsolidated investments: |
|
|
|
|
| ||
International investments |
| 1,159 |
| 716 |
| ||
Other |
| 19 |
| 4 |
| ||
Minority interest |
| (439 | ) | (370 | ) | ||
