EXHIBIT 99
Media: | |
| Elizabeth Castro |
| (312) 240-4567 |
Investor Relations: | |
| Mary Ann Wall |
| (312) 240-7534 |
|
|
130 E. Randolph Dr. | |
Chicago, Illinois 60601 | |
For Immediate Release
April 23, 2004
Peoples Energy Reports Second Quarter Results
Reaffirms Outlook for Fiscal 2004
CHICAGO - Peoples Energy (NYSE: PGL) today reported lower second quarter results compared to the year-ago period, with a decrease in natural gas deliveries and higher operating costs in the Company's Gas Distribution segment more than offsetting a 22% increase in operating income from its diversified energy businesses.
For the three months ended March 31, 2004, net income was $54.9 million, or $1.46 per diluted share, compared with $63.5 million, or $1.77 per diluted share in the year-ago quarter. Fiscal year-to-date net income was $86.3 million or $2.32 per diluted share, compared to $94.5 million or $2.64 per diluted share a year-ago. Operating income for the current quarter and fiscal year-to-date totaled $94.9 million and $155.1 million, respectively, versus $114.5 million and $174.9 million in the same periods last year.
"Although Gas Distribution segment income is expected to be lower than anticipated this year, diversified energy results are exceeding our original expectations and should once again show significant year-over-year growth in fiscal 2004," said Thomas M. Patrick, chairman, president and CEO. "In particular, the Oil and Gas Production and Retail Energy Services segments are expected to have very strong years. We continue to estimate that fiscal 2004 earnings per share will be in the target range of $2.70 to $2.85 that we announced early last fall."
The table and discussion below summarize second quarter and fiscal year-to-date operating results for Peoples Energy's business segments:
Three Months Ended | Six Months Ended | ||||||||||
|
|
| Increase/(Decrease) |
|
| Increase/ | |||||
Gas Distribution | $79.2 |
| $100.2 |
| $(21.0) |
| $130.7 |
| $158.5 |
| $(27.8) |
|
|
|
|
|
|
|
|
| |||
Power Generation | (1.4) |
| (1.3) |
| (0.1) |
| (2.6) |
| (2.4) |
| (0.2) |
Midstream Services | 3.3 |
| 8.0 |
| (4.7) |
| 6.8 |
| 10.6 |
| (3.8) |
Retail Energy Services | 4.8 |
| 2.2 |
| 2.6 |
| 8.0 |
| 4.3 |
| 3.7 |
Oil and Gas production | 14.5 |
| 8.8 |
| 5.7 |
| 23.9 |
| 13.7 |
| 10.2 |
Other | 0.4 |
| -- |
| 0.4 |
| 0.2 |
| 0.1 |
| 0.1 |
Diversified Energy Businesses | 21.6 |
| 17.7 |
| 3.9 |
| 36.3 |
| 26.3 |
| 10.0 |
|
|
|
|
|
|
|
|
|
|
|
|
Corporate | (5.9) |
| (3.4) |
| (2.5) |
| (11.9) |
| (9.9) |
| (2.0) |
Total Operating Income | $94.9 |
| $114.5 |
| $(19.6) |
| $155.1 |
| $174.9 |
| $(19.8) |
1
Gas Distribution.Operating income was $79.2 million for the second quarter, compared to $100.2 million in the year-ago period. Operating results were negatively impacted by weather that was 2.5% or 81 degree days warmer than normal and 5.1% or 171 degree days warmer than the same period last year. Gas deliveries fell 8% to 104 Bcf, with about half of the decline estimated to be due to weather and the remainder due to conservation and a decrease in customer count. Other factors impacting the comparison with last year include higher pension expense ($3.9 million), a higher provision for bad debt ($1.9 million), and increases in other operating costs.
On a fiscal year-to-date basis, operating income totaled $130.7 million, versus $158.5 million in the same period last year. Weather was 4.4% or 245 degree days warmer than normal and 7.2% or 412 degree days warmer than a year ago. Gas deliveries fell 7% to 175 Bcf, primarily due to weather. Other factors adversely affecting year-to-date results included higher pension expense ($3.1 million), increases in other operating costs, and the inclusion in the year-ago period of a $4.1 million reduction in municipal and state utility tax accruals.
Power Generation.Seasonal operating losses totaled $1.4 million and $2.6 million on a quarter and year-to-date basis, respectively, virtually unchanged from the year-ago periods. Most of the capacity revenues in the Power Generation segment are recognized in the June to September period, resulting in normal operating losses for that segment during the first two fiscal quarters.
Midstream Services.Operating income totaled $3.3 million and $6.8 million on a quarter and fiscal year-to-date basis, respectively, compared to $8.0 million and $10.6 million in the same periods a year ago. The decrease in both the quarter and fiscal year-to-date periods versus last year was due to lower results from the hub and wholesale and asset management activities which benefited in the prior year's quarter from higher natural gas price volatility.
Retail Energy Services.Operating income improved to $4.8 million for the quarter and $8.0 million on a fiscal year-to-date basis, compared with $2.2 million and $4.3 million in the year-ago periods. The increase in both periods was due to continued customer growth and enhanced gas margin.
Oil and Gas Production.Operating income totaled $14.5 million and $23.9 million on a quarter and fiscal year-to-date basis, respectively, compared to $8.8 million and $13.7 million in the same periods a year ago. Higher production volumes and higher net realized commodity prices boosted operating income in both periods. In addition, higher income from the Company's equity investment benefited second quarter and fiscal year-to-date comparisons by $1.4 million and $2.1 million, respectively.
2
On a gas equivalent basis, production increased 17% for the quarter and 14% for the fiscal year-to-date compared to the same periods last year. The Company's acquisition of additional oil and gas properties in late December contributed 5.2 MMCFE per day for the current quarter and 2.6 MMCFE per day fiscal year to date, with the balance of the production increase in both periods attributable to prior year acquisitions and the continued success of the Company's drilling program. On a year-to-date basis, the Company has drilled or participated in the drilling of 26 new wells, with an overall success rate of 92%.
The following table summarizes second quarter and fiscal year-to-date operating statistics for the Oil and Gas Production segment:
Three Months Ended | Six Months Ended | |||||||||||
|
| % |
|
| % | |||||||
Average daily production: |
|
|
|
|
|
|
|
|
|
|
|
|
Gas (MMCFD) |
| 73.2 |
| 63.4 |
| 15.5 |
| 69.7 |
| 61.5 |
| 13.3 |
Oil (MBD) |
| 1.6 |
| 1.3 |
| 23.1 |
| 1.5 |
| 1.2 |
| 25.0 |
Gas equivalent (MMCFED) |
| 82.7 |
| 70.9 |
| 16.6 |
| 78.9 |
| 69.0 |
| 14.3 |
Net realized price: |
|
|
|
|
|
|
| |||||
Gas (MCF) |
| $4.64 |
| $4.42 |
| 5.0 |
| $4.40 |
| $4.02 |
| 9.5 |
Oil (BBL) |
| $26.66 |
| $24.33 |
| 9.6 |
| $25.82 |
| $22.43 |
| 15.1 |
|
|
|
|
|
|
|
|
|
|
|
| |
The following table reflects the Company's hedge positions as of April 22, 2004 for its remaining expected fiscal 2004 production (April - September).
Volume Hedged | Weighted Average Prices | |||||||||||
Gas |
|
|
|
|
|
|
|
|
|
| ||
Swaps |
|
| 6,691,500 |
|
|
|
| $4.13 |
|
| ||
Collars |
|
| 6,283,500 |
|
|
|
| $4.50-$5.57 |
|
| ||
|
|
| 12,975,000 | (1) |
|
|
| $4.31-$4.83 |
|
| ||
Oil |
|
|
|
|
|
|
|
|
|
| ||
Swaps |
|
| 226 | (2) |
|
|
| $26.60 |
|
| ||
- Approximately 80% of expected production.
- Approximately 60% of expected production.
Management's expectations of earnings for fiscal year 2004 assumes, among other things, an average NYMEX price of $5.20 per MMBTU for unhedged gas volumes during the remainder of fiscal 2004. The first $0.25 change in this assumed price per MMBTU is estimated to have an impact on operating income of approximately $1.2 million.
Other
Corporate support expenses increased $2.5 million in the second quarter and $2.0 million year-to-date compared to the year ago periods. The increase for the quarter was primarily due to higher outside services expenses and the impact of a higher Peoples Energy stock price on equity compensation expenses related to stock appreciation rights. The year-to-date increase related primarily to higher outside services expenses.
3
The quarter and year-to-date periods also benefited from a $2.2 million adjustment in accrued income taxes based on updated estimates of income tax liabilities.
Higher average common shares outstanding reduced diluted earnings per share by approximately $0.07 for the quarter and $0.10 year-to-date compared to last year.
Financial
At March 31, 2004, total debt was 50% of total debt plus equity, unchanged from the end of last year's second quarter and reflecting the normal seasonal decline in working capital requirements in the Gas Distribution, Midstream Services, and Retail Energy Services segments. It is currently estimated that fiscal 2004 capital spending will total approximately $180 million, with about $85-$90 million of expenditures estimated for the Oil and Gas Production segment and most of the remaining balance targeted for Gas Distribution.
Earnings Conference Call
Peoples Energy will hold a conference call to discuss financial results for the second quarter of fiscal 2004 on Friday, April 23, 2004, at 9:00 a.m. Central (10:00 a.m. Eastern). To listen to the webcast both live and in replay visit the "Investors" section of the Peoples Energy website at www.PeoplesEnergy.com and select the Live Webcast icon on the Corporate Overview page. A replay of the call can also be accessed by dialing 1-800-642-1687, reference number 6113639. The telephone replay will be available approximately two hours after completion of the call through April 28, 2004. The webcast replay will be available through April 30, 2004.
Peoples Energy, a member of the S&P 500, is a diversified energy company comprised of five primary business segments: Gas Distribution, Power Generation, Midstream Services, Retail Energy Services, and Oil and Gas Production. The Gas Distribution business serves about 1 million retail customers in Chicago and northeastern Illinois. Visit the Peoples Energy web site at PeoplesEnergy.com.
Forward-Looking Information. This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, such as management's outlook for earnings and capital expenditures for fiscal year 2004. Generally, the words "may", "could", "project", "believe", "anticipate", "estimate", "plan", "forecast", "will be", and similar words identify forward-looking statements. Actual results could differ materially from such expectations because of many uncertainties, including, but not limited to: adverse decisions in proceedings before the Illinois Commerce Commission concerning the prudence review of the utility subsidiaries' gas purchases; the future health of the United States and Illinois economies; the timing and extent of changes in interest rates and energy commodity prices, including but not limited to the effect of gas prices on cost of gas supplies, accounts receivable an d the provision for uncollectible accounts, interest expense and earnings from the oil and gas production segment; adverse resolution of material litigation; effectiveness of the Company's risk management policies and the creditworthiness of customers and counterparties; regulatory developments in the United States, Illinois and other states where the Company does business; changes in the nature of the Company's competition resulting from industry consolidation, legislative change, regulatory change and other factors, as well as action taken by particular competitors; the Company's success in identifying diversified business segment projects on financially acceptable terms and generating earnings from projects in a reasonable time; operational factors affecting the Company's gas distribution, power generation and oil and gas production segments; Aquila Inc.'s financial ability to perform under its power sales
4
agreements with Elwood Energy LLC; drilling risks and the inherent uncertainty of oil and gas reserve estimates; weather related energy demand; and terrorist activities. Some of the uncertainties that may affect future results are discussed in more detail in Peoples Energy's most recent Form 10-K filed with the SEC under Item 1 - Business and Item 7 - Management's Discussion and Analysis, as such information may be updated by subsequent filings under the Securities Exchange Act of 1934. All forward-looking statements included in this press release are based upon information presently available, and Peoples Energy assumes no obligation to update any forward-looking statements.
# # # #
(Financial Tables Follow)
5
| Preliminary | |||||
| PEOPLES ENERGY CORPORATION | |||||
| FINANCIAL HIGHLIGHTS | |||||
| (Unaudited) | |||||
| Financial Data | |||||
| Three Months Ended March 31, | |||||
| (In Thousands, Except Per-Share Amounts) | 2004 | 2003 | |||
| Total Revenues | $927,021 | $903,833 | |||
| Equity Investment Income (Loss) | $1,489 | ($13) | |||
| Operating Income | $94,941 | $114,529 | |||
| Net Income | $54,904 | $63,481 | |||
| Earnings Per Share - Basic | $1.47 | $1.78 | |||
| Earnings Per Share - Diluted | $1.46 | $1.77 | |||
| Average Shares Outstanding - Basic | 37,290 | 35,723 | |||
| Average Shares Outstanding - Diluted | 37,497 | 35,842 | |||
| Six Months Ended March 31, | |||||
| (In Thousands, Except Per-Share Amounts) | 2004 | 2003 | |||
| Total Revenues | $1,531,905 | $1,452,944 | |||
| Equity Investment Income (Loss) | $1,244 | ($266) | |||
| Operating Income | $155,093 | $174,847 | |||
| Net Income | $86,255 | $94,482 | |||
| Earnings Per Share - Basic | $2.33 | $2.65 | |||
| Earnings Per Share - Diluted | $2.32 | $2.64 | |||
| Average Shares Outstanding - Basic | 37,061 | 35,637 | |||
| Average Shares Outstanding - Diluted | 37,253 | 35,743 | |||
| Common Stock Data | |||||
| March 31, | |||||
| 2004 | 2003 | ||||
| Annualized dividend rate | $2.16 | $2.12 | |||
| Dividend yield | 4.8% | 5.9% | |||
| Book value per share | $24.17 | $24.04 | |||
| Market price | $44.65 | $35.77 | |||
| Market price as a percent of book value | 185% | 149% | |||
6
| Peoples Energy Corporation | Preliminary | |||||||||
| Summary of Selected Operating Data (Unaudited) | ||||||||||
| Three Months Ended | Six Months Ended | |||||||||
| March 31, | March 31, | |||||||||
| 2004 | 2003 | 2004 | 2003 | |||||||
| Gas Distribution Deliveries (MDth) | ||||||||||
| Gas sales | ||||||||||
| - Residential | 56,778 | 62,447 | 93,993 | 102,603 | ||||||
| - Commercial | 9,553 | 10,047 | 15,866 | 16,455 | ||||||
| - Industrial | 1,744 | 2,071 | 2,799 | 3,375 | ||||||
| Transportation | 35,734 | 38,645 | 62,042 | 65,791 | ||||||
| Total Gas Distribution Deliveries | 103,809 | 113,210 | 174,700 | 188,224 | ||||||
| Weather | ||||||||||
| Heating degree days - actual | 3,195 | 3,366 | 5,310 | 5,722 | ||||||
| Heating degree days - percent colder (warmer) than normal | (2.5%) | 3.4% | (4.4%) | 3.4% | ||||||
| Number of Gas Distribution Customers (average) | ||||||||||
| Gas sales | ||||||||||
| - Residential | 901,053 | 910,910 | 892,056 | 904,354 | ||||||
| - Commercial | 46,147 | 45,482 | 45,112 | 44,827 | ||||||
| - Industrial | 2,934 | 2,953 | 2,891 | 2,915 | ||||||
| Transportation | 25,029 | 27,200 | 24,706 | 26,515 | ||||||
| Total Gas Distribution Customers | 975,163 | 986,545 | 964,765 | 978,611 | ||||||
| Retail Energy Gas and Electric Customers (at March31) | 22,862 | 17,900 | 22,862 | 17,900 | ||||||
| Employees (at March31) | ||||||||||
| Gas Distribution | 1,834 | 1,867 | 1,834 | 1,867 | ||||||
| Diversified Businesses | 124 | 119 | 124 | 119 | ||||||
| Corporate Support | 394 | 433 | 394 | 433 | ||||||
| Total Employees | 2,352 | 2,419 | 2,352 | 2,419 | ||||||
| Megawatt Capacity (at March 31) | 805 | 805 | 805 | 805 | ||||||
| Oil and Gas Production | ||||||||||
| Average daily production: | ||||||||||
| Gas (MMCFD) | 73.2 | 63.4 | 69.7 | 61.5 | ||||||
| Oil (MBD) | 1.6 | 1.3 | 1.5 | 1.2 | ||||||
| Gas equivalent (MMCFED) | 82.7 | 70.9 | 78.9 | 69.0 | ||||||
| Average index price: | ||||||||||
| Gas ($/MMBTU) - Henry Hub | $ 5.69 | $ 6.58 | $ 5.14 | $ 5.28 | ||||||
| Oil ($/BBL) | $ 34.23 | $ 33.86 | $ 33.16 | $ 31.00 | ||||||
| Average hedge price: | ||||||||||
| Gas ($/MMBTU) | $ 4.99 | $ 4.15 | $ 4.55 | $ 3.91 | ||||||
| Oil ($/BBL) | $ 27.09 | $ 21.24 | $ 26.16 | $ 20.42 | ||||||
| Percentage hedged: | ||||||||||
| Gas | 92% | 84% | 86% | 78% | ||||||
| Oil | 78% | 57% | 72% | 62% | ||||||
| Net realized price: | ||||||||||
| Gas ($/MCF) | $ 4.64 | $ 4.42 | $ 4.40 | $ 4.02 | ||||||
| Oil ($/BBL) | $ 26.66 | $ 24.33 | $ 25.82 | $ 22.43 | ||||||
7
| Peoples Energy Corporation | Preliminary | |||||||
| Consolidated Statements of Income (Unaudited) | ||||||||
| Three Months Ended | Six Months Ended | |||||||
| March 31, | March 31, | |||||||
| (In Thousands, Except Per-Share Amounts) | 2004 | 2003 | 2004 | 2003 | ||||
| Revenues | $ 927,021 | $ 903,833 | $ 1,531,905 | $1,452,944 | ||||
| Operating Expenses: | ||||||||
| Cost of energy sold | 632,491 | 598,232 | 1,013,050 | 927,737 | ||||
| Operation and maintenance | 99,057 | 89,597 | 186,367 | 177,511 | ||||
| Depreciation, depletion and amortization | 30,970 | 28,013 | 59,892 | 55,477 | ||||
| Taxes, other than income taxes | 71,051 | 73,449 | 118,747 | 117,106 | ||||
| Total Operating Expenses | 833,569 | 789,291 | 1,378,056 | 1,277,831 | ||||
| Equity investment income (loss) | 1,489 | (13) | 1,244 | (266) | ||||
| Operating Income | 94,941 | 114,529 | 155,093 | 174,847 | ||||
| Other income and expense - net | 776 | 434 | 1,380 | 1,091 | ||||
| Interest expense | 12,381 | 12,571 | 24,662 | 25,373 | ||||
| Income Before Income Taxes | 83,336 | 102,392 | 131,811 | 150,565 | ||||
| Income tax expense | 28,432 | 38,911 | 45,556 | 56,083 | ||||
| Net Income | $ 54,904 | $ 63,481 | $ 86,255 | $ 94,482 | ||||
| Average Shares of Common Stock Outstanding | ||||||||
| Basic | 37,290 | 35,723 | 37,061 | 35,637 | ||||
| Diluted | 37,497 | 35,842 | 37,253 | 35,743 | ||||
| Earnings Per Share of Common Stock | ||||||||
| Basic | $ 1.47 | $ 1.78 | $ 2.33 | $ 2.65 | ||||
| Diluted | $ 1.46 | $ 1.77 | $ 2.32 | $ 2.64 | ||||
8
| Peoples Energy Corporation | Preliminary | ||||||||
| Consolidated Balance Sheets (Unaudited) | |||||||||
| March 31, | March 31, | ||||||||
| (In Thousands) | 2004 | 2003 | |||||||
| Assets | |||||||||
| Capital Investments: | |||||||||
| Property, plant and equipment | $ 3,071,928 | $ 2,881,343 | |||||||
| Less - Accumulated depreciation, depletion | |||||||||
| and amortization | 1,176,136 | 1,080,227 | |||||||
| Net property, plant and equipment | 1,895,792 | 1,801,116 | |||||||
| Investments in equity investees | 130,660 | 138,628 | |||||||
| Other investments | 25,060 | 22,954 | |||||||
| Total Capital Investments - Net | 2,051,512 | 1,962,698 | |||||||
| Customer Accounts Receivable - net of reserves | 450,090 | 534,942 | |||||||
| Other Current Assets | 216,652 | 198,366 | |||||||
| Other Assets | 444,231 | 410,527 | |||||||
| Total Assets | $ 3,162,485 | $ 3,106,533 | |||||||
| Capitalization and Liabilities | |||||||||
| Common Stockholders' Equity: | |||||||||
| Common stock | $ 378,380 | $ 315,097 | |||||||
| Treasury stock | (6,760) | (6,760) | |||||||
| Retained earnings | 596,459 | 579,409 | |||||||
| Accumulated other comprehensive income (loss) | (61,505) | (25,705) | |||||||
| Total Common Stockholders' Equity | 906,574 | 862,041 | |||||||
| Long-Term Debt | 846,330 | 629,345 | |||||||
| Total Capitalization | 1,752,904 | 1,491,386 | |||||||
| Current Liabilities | |||||||||
| Current maturities of long-term debt | - | 90,000 | |||||||
| Short-term debt | 50,000 | 152,000 | |||||||
| Other | 621,516 | 734,346 | |||||||
| Total Current Liabilities | 671,516 | 976,346 | |||||||
| Deferred Credits and Other Liabilities | 738,065 | 638,801 | |||||||
| Total Capitalization and Liabilities | $ 3,162,485 | $ 3,106,533 | |||||||
9
| Preliminary | ||||||||||
| Peoples Energy Corporation | ||||||||||
| Business Segments (Unaudited) | ||||||||||
| Retail | ||||||||||
| Gas | Power | Midstream | Energy | Oil and Gas | Corporate and | |||||
| (In Thousands) | Distribution | Generation | Services | Services | Production | Other | Adjustments | Total | ||
| Three Months Ended March 31, 2004 | ||||||||||
| Revenues | $ 670,988 | $ - | $ 109,153 | $ 124,588 | $ 34,771 | $ 173 | $ (12,652) | $ 927,021 | ||
| Depreciation, depletion and amortization | 17,455 | 32 | 112 | 444 | 12,809 | 4 | 114 | 30,970 | ||
| Equity investment income (loss) | - | (294) | - | - | 1,372 | 411 | - | 1,489 | ||
| Operating income (loss) | 79,210 | (1,359) | 3,264 | 4,820 | 14,483 | 445 | (5,922) | 94,941 | ||
| Three Months Ended March 31, 2003 | ||||||||||
| Revenues | $ 677,420 | $ - | $ 113,872 | $ 106,889 | $ 27,940 | $ 28 | $ (22,316) | $ 903,833 | ||
| Depreciation, depletion and amortization | 16,755 | 32 | 107 | 988 | 10,103 | 4 | 24 | 28,013 | ||
| Equity investment income (loss) | - | (147) | - | - | (41) | 175 | - | (13) | ||
| Operating income (loss) | 100,191 | (1,283) | 8,063 | 2,206 | 8,799 | (43) | (3,404) | 114,529 | ||
| Six Months Ended March 31, 2004 | ||||||||||
| Revenues | $ 1,109,399 | $ - | $ 174,354 | $ 207,714 | $ 63,392 | $ 254 | $ (23,208) | $1,531,905 | ||
| Depreciation, depletion and amortization | 33,963 | 63 | 224 | 873 | 24,544 | 8 | 217 | 59,892 | ||
| Equity investment income (loss) | - | (507) | - | - | 1,394 | 357 | - | 1,244 | ||
| Operating income (loss) | 130,748 | (2,649) | 6,808 | 7,969 | 23,897 | 227 | (11,907) | 155,093 | ||
| Six Months Ended March 31, 2003 | ||||||||||
| Revenues | $ 1,092,792 | $ - | $ 174,642 | $ 161,562 | $ 50,134 | $ 71 | $ (26,257) | $1,452,944 | ||
| Depreciation, depletion and amortization | 33,262 | 63 | 213 | 1,405 | 20,479 | 8 | 47 | 55,477 | ||
| Equity investment income (loss) | - | (210) | - | - | (667) | 611 | - | (266) | ||
| Operating income (loss) | 158,482 | (2,444) | 10,627 | 4,308 | 13,671 | 94 | (9,891) | 174,847 | ||
10