Southwest Gas 8-K Reports Third Quarter Results

November 6, 2007

Media Contact:  Cynthia Messina, Las Vegas, NV (702) 876-7132

Shareholder Contact:  Ken Kenny, Las Vegas, NV (702) 876-7237

SWX-NYSE

For Immediate Release

SOUTHWEST GAS CORPORATION

REPORTS THIRD QUARTER RESULTS

Las Vegas – Southwest Gas Corporation recorded a net loss of $0.22 per share for the third quarter of 2007, a $0.04 improvement from the loss of $0.26 per share recorded during the third quarter of 2006.  Net loss for the third quarter of 2007 was $9.3 million, compared to a loss of $10.7 million in the prior period.  Due to the seasonal nature of the business, net losses during the second and third quarters are normal and not generally indicative of earnings for a complete twelve-month period.

According to Jeffrey W. Shaw, Chief Executive Officer, “Although quarterly results improved, much of the improvement is attributable to a reallocation of operating margin between periods in our California jurisdictions (from the first quarter into the second and third quarters).  After adjusting for the reallocation, incremental operating margin from rate relief and customer growth totaled approximately $2 million in the current quarter, whereas operating costs increased by $5 million.  Customer growth continues to moderate as the Company added 48,000 customers over the past 12 months.”

Looking ahead, Shaw noted, “We recently filed a $50 million general rate increase request in Arizona to help recover rising operating costs and infrastructure investments.  We are also supporting rate design changes which, if approved, would encourage

      

        -more-      

    

energy efficiency and also shield the Company and its customers from weather-related volatility.  We hope to have new rates in place in about a year.”

For the twelve months ended September 30, 2007, consolidated net income was $86.8 million, or $2.06 per basic share, compared to $67.4 million, or $1.69 per basic share, during the twelve-month period ended September 30, 2006.  Results for the prior twelve-month period include net nonrecurring charges of approximately $0.09 per share.

Natural Gas Operations Segment Results

Third Quarter

Operating margin, defined as operating revenues less the cost of gas sold, increased $8 million, or seven percent, in the third quarter of 2007 compared to the third quarter of 2006.  Rate changes (primarily from implementing a California equalized margin tracker mechanism, effective January 2007) accounted for $7 million of the increase in operating margin compared to the prior year.  New customers accounted for the remaining incremental operating margin during the quarter as the Company added 48,000 customers during the last twelve months, an increase of three percent.

Operating expenses for the quarter increased $5 million, or four percent, compared to the third quarter of 2006 primarily due to general cost increases and incremental

      

        -more-      

    

operating costs associated with serving additional customers.  A reduction in property tax rates mitigated the overall operating expense increase.

Net financing costs increased $1.2 million between periods primarily due to higher rates on variable-rate debt and interest expense associated with deferred purchased gas cost balances.

Twelve Months to Date

Operating margin increased $61 million between periods.  Rate relief in Arizona and California added $31 million.  Customer growth contributed an incremental $16 million.  Differences in heating demand, caused primarily by weather variations, resulted in a $14 million increase in operating margin as warmer-than-normal temperatures were experienced during both periods (during the current twelve-month period the negative impact was $7 million, while the negative impact during the prior twelve-month period was $21 million).

Operating expenses increased $28.5 million, or six percent, between periods primarily due to general increases in labor and maintenance costs, and incremental operating costs associated with serving additional customers.  Higher uncollectible and employee-related costs also contributed to the increase.  Net financing costs increased slightly between periods primarily due to higher rates on variable-rate debt.

      

        -more-      

    

Southwest Gas Corporation provides natural gas service to approximately 1,800,000 customers in Arizona, Nevada, and California.  Its service territory is centered in the fastest-growing region of the country.

This press release may contain statements which constitute "forward-looking statements" within the meaning of the Securities Litigation Reform Act of 1995 (Reform Act).  All such forward-looking statements are intended to be subject to the safe harbor protection provided by the Reform Act.  A number of important factors affecting the business and financial results of the Company could cause actual results to differ materially from those stated in the forward-looking statements.  These factors include, but are not limited to, the impact of weather variations on customer usage, customer growth rates, the effects of regulation/deregulation, the timing and amount of rate relief, and changes in rate design.

      

        -more-      

    

SOUTHWEST GAS CONSOLIDATED EARNINGS DIGEST

(In thousands, except per share amounts)

QUARTER ENDED SEPTEMBER 30,	2007		2006
Consolidated Operating Revenues	$	371,524	$	351,800
Net Loss	$	9,318	$	10,736
Average Number of Common Shares Outstanding		42,448		40,982
Loss Per Share	$	0.22	$	0.26
NINE MONTHS ENDED SEPTEMBER 30,	2007		2006
Consolidated Operating Revenues	$	1,591,777	$	1,459,643
Net Income	$	40,109	$	37,153
Average Number of Common Shares Outstanding		42,219		40,221
Basic Earnings Per Share	$	0.95	$	0.92
Diluted Earnings Per Share	$	0.94	$	0.91
TWELVE MONTHS ENDED SEPTEMBER 30,	2007		2006
Consolidated Operating Revenues	$	2,156,892	$	1,956,638
Net Income	$	86,816	$	67,408
Average Number of Common Shares Outstanding		42,060		39,957
Basic Earnings Per Share	$	2.06	$	1.69
Diluted Earnings Per Share	$	2.04	$	1.67

      

        -end-      

    

SOUTHWEST GAS CORPORATION
SUMMARY UNAUDITED OPERATING RESULTS
(In thousands, except per share amounts)
	THREE MONTHS ENDED						NINE MONTHS ENDED				TWELVE MONTHS ENDED
	SEPTEMBER 30,						SEPTEMBER 30,				SEPTEMBER 30,
	2007			2006			2007		2006		2007		2006
Results of Consolidated Operations
Contribution to net income (loss) - gas operations	$	(12,863	)	$	(13,780	)	$	32,910	$	28,306	$	76,077	$	54,975
Contribution to net income - construction services		3,545			3,044			7,199		8,847		10,739		12,433
Net income (loss)	$	(9,318	)	$	(10,736	)	$	40,109	$	37,153	$	86,816	$	67,408
Earnings (loss) per share - gas operations	$	(0.30	)	$	(0.34	)	$	0.78	$	0.70	$	1.81	$	1.38
Earnings per share - construction services		0.08			0.08			0.17		0.22		0.25		0.31
Basic earnings (loss) per share	$	(0.22	)	$	(0.26	)	$	0.95	$	0.92	$	2.06	$	1.69
Diluted earnings (loss) per share	$	(0.22	)	$	(0.26	)	$	0.94	$	0.91	$	2.04	$	1.67
Average outstanding common shares		42,448			40,982			42,219		40,221		42,060		39,957
Average shares outstanding (assuming dilution)		-			-			42,607		40,610		42,469		40,343
Results of Natural Gas Operations
Gas operating revenues	$	274,748		$	273,041		$	1,345,996	$	1,235,351	$	1,838,039	$	1,658,259
Net cost of gas sold		141,825			148,527			834,453		760,847		1,107,594		989,281
Operating margin		132,923			124,514			511,543		474,504		730,445		668,978
Operations and maintenance expense		83,222			79,446			250,847		234,716		336,934		322,475
Depreciation and amortization		39,774			36,896			117,380		109,012		155,022		143,925
Taxes other than income taxes		7,848			9,515			28,253		25,752		37,495		34,515
Operating income		2,079			(1,343	)		115,063		105,024		200,994		168,063
Other income (expense)		478			1,686			5,502		6,567		8,984		8,801
Net interest deductions		22,003			20,808			64,466		64,015		86,018		85,366
Net interest deductions on subordinated debentures		1,932			1,931			5,795		5,793		7,726		7,724
Income (loss) before income taxes		(21,378	)		(22,396	)		50,304		41,783		116,234		83,774
Income tax expense (benefit)		(8,515	)		(8,616	)		17,394		13,477		40,157		28,799
Contribution to net income (loss) - gas operations	$	(12,863	)	$	(13,780	)	$	32,910	$	28,306	$	76,077	$	54,975

SOUTHWEST GAS CORPORATION
SELECTED STATISTICAL DATA
SEPTEMBER 30, 2007
FINANCIAL STATISTICS
Market value to book value per share at quarter end		128	%
Twelve months to date return on equity  -- total company		9.5	%
-- gas segment		8.7	%
Common stock dividend yield at quarter end		3.0	%
GAS OPERATIONS SEGMENT
							Authorized
	Authorized			Authorized			Return on
	Rate Base			Rate of			Common
Rate Jurisdiction	(In thousands)			Return			Equity
Arizona	$	922,721			8.40	%		9.50	%
Southern Nevada		574,285			7.64			10.50
Northern Nevada		110,309			8.56			10.50
Southern California		102,703			8.74			10.38
Northern California		45,487			8.74			10.38
Paiute Pipeline Company (1)		82,853			9.44			11.80
(1) Estimated amounts based on rate case settlements.
SYSTEM THROUGHPUT BY CUSTOMER CLASS
	NINE MONTHS ENDED						TWELVE MONTHS ENDED
	SEPTEMBER 30,						SEPTEMBER 30,
(In dekatherms)	2007			2006			2007			2006
Residential		53,941,505			50,622,071			71,079,930			66,524,478
Small commercial		23,379,275			23,002,870			31,362,053			30,743,143
Large commercial		9,516,396			9,494,716			12,847,212			12,171,919
Industrial / Other		7,820,051			11,223,458			11,520,845			14,745,872
Transportation		89,318,349			87,164,947			119,677,198			118,671,745
Total system throughput		183,975,576			181,508,062			246,487,238			242,857,157
HEATING DEGREE DAY COMPARISON
Actual		1,363			1,314			1,870			1,756
Ten-year average		1,398			1,405			1,949			1,968
Heating degree days for prior periods have been recalculated using the current period customer mix.