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FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (date of earliest event Reported) January 23, 1998
COLUMBIA ENERGY GROUP
(Exact name of registrant as specified in its charter)
Delaware 1-1098 13--1594808
(State of other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
12355 Sunrise Valley Drive, Suite 300, Reston, VA 20191-3420
(Address of principal executive offices)
Registrant's telephone number, including area code (703) 295-0300
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Item 5. Other Events
Information contained in a News Release dated January 23, 1998, is
incorporated herein by reference.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Columbia Energy Group
(Registrant)
By /s/J. W. Grossman
----------------------------
Vice President &
Controller
Date: January 26, 1998
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Contacts:
News Media: Carl Ericson (703) 295-0424
Simon Ruebens (703) 295-0426
Financial Community: Tom Hughes (703) 295-0429
Melissa Bockelmann (703) 295-0427
For Immediate Release
Friday, January 23, 1998
COLUMBIA ENERGY GROUP ANNOUNCES RECORD EARNINGS OF $273 MILLION
RESTON, Va., Jan. 23 -- Columbia Energy Group today reported
record-setting net income for 1997 of $273.3 million, or $4.93 per share, up
$51.7 million, or 81 cents per share, over last year. In 1996, Columbia's net
income was $221.6 million, or $4.12 per share. Operating income of $509.4
million in 1997 was $31.2 million more than in 1996.
On Jan. 20, Columbia Energy Group announced that it had changed its
name from Columbia Gas System. Columbia's common stock continues to trade on the
New York Stock Exchange under the symbol CG.
Oliver G. Richard III, chairman, CEO and president of Columbia Energy
Group, said that "Columbia's results are attributable in part to lower operating
costs and increased revenue for transportation and storage services as well as
gas supply management activities. The record earnings occurred despite weather
that was 4 percent warmer than in 1996."
"In addition," said Richard, "we have made significant investments in
several operating companies that we believe will pay off in future years. For
example, we are adding staff to our marketing unit, Columbia Energy Services,
and building its infrastructure and customer base. At Columbia Gas Transmission,
we are expanding the pipeline and storage operations to boost throughput by 7
percent and speed delivery out of storage fields to meet the competitive needs
of our customers. And at Columbia Natural Resources, our exploration and
production company, we are adding reserves and expanding our capital
expenditures for drilling, which in 1998 are expected to be nearly three times
larger than in 1997.
"These activities and others like them are helping us to not only take
care of current customers but to provide a smooth transition to meeting greater
needs in the future."
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1997 OPERATING INCOME BY SEGMENT
The transmission and storage segment's 1997 operating income of $264.3
million was $56.5 million higher than last year. The improvement was due largely
to reduced operating costs, the sale of 9 billion cubic feet (Bcf) of Columbia
Transmission's storage base gas, as provided for under its rate settlement,
lower restructuring costs and incremental storage and transportation revenues.
Also contributing to the improvement were higher revenues for peaking services
generated by the Cove Point Liquefied Natural Gas facility and a $5.4 million
increase associated with the settlement of an issue related to the recovery of
production-related costs dating back to the 1980s. These improvements were
tempered by a loss on the anticipated sale of certain pipeline facilities,
reduced revenues attributable to a lower cost-of-service level and an
environmental reserve addition that reduced operating income by $3.4 million.
The distribution segment reported operating income of $224.2 million, a
decrease of $1.8 million compared to 1996, due in large part to warmer weather.
Costs associated with restructuring initiatives were smaller in 1997 than in
1996. These activities provided for the implementation of cost-saving measures
and operating efficiencies that resulted in lower normal operation and
maintenance expense in 1997. A revenue increase from gas supply management
activities that Columbia of Ohio retained under the terms of its 1996 rate
settlement also contributed to the improvement. These increases essentially
offset the $23 million decrease attributable to warmer weather.
Exploration and production segment operating income of $30.9 million in
1997 reflected a small improvement of $900,000 over 1996, despite lower natural
gas prices. A $4.1 million contract buyout in 1997 related to a long-term
cogeneration facility gas supply contract and a 1.1 Bcf increase in production
volume offset the 7 percent decrease in the average price received for natural
gas production. The average price received for natural gas production in 1997
was $2.63 per thousand cubic feet (Mcf), while gas production was 34.7 Bcf. In
late 1997, Columbia Natural Resources secured an average price of $3.02 per Mcf
for approximately 60 percent of its natural gas production through October 1998.
These positions were hedged in the marketplace through a gas-marketing
affiliate.
The marketing, propane and power generation segment reported an
operating loss of $2.9 million in 1997, compared to operating income of $12.5
million in 1996. This decrease primarily reflected higher operating costs
associated with expanding the gas marketing operations and building its
infrastructure, combined with lower margins. Columbia Energy Services has been
increasing its wholesale business to expand the base for future retail
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growth. The effect of the increased lower-margin wholesale sales tempered the
favorable effect of increased sales volumes. The acquisition of PennUnion Energy
Services LLC and the agreement to purchase and market offshore production for
the Kerr-McGee Corp. led to 1997 marketing volumes of 889 Bcf, more than 240
percent greater than in 1996. Revenue from this segment rose to $2.3 billion,
three times the 1996 level. Despite the warmer weather, propane operations
improved over the 1996 level due to an increase in higher-margin customers. The
1997 results for this segment also benefited from $2.6 million received by
Columbia Electric Corp. (formerly TriStar Ventures Corp.) for the assumption of
a transportation contract resulting from the termination of a partnership in a
cogeneration facility.
INCOME TAX EXPENSE
Income tax expense of $118.9 million was up only $3 million over 1996
despite substantially higher taxable income. This was due in large part to a
$12.8 million reduction to tax expense resulting from benefits gained through
the filing of a consolidated state tax return.
OTHER INCOME (DEDUCTIONS)
Other Income (Deductions), which includes interest income and interest
expense and related charges, reduced income by $117.2 million in 1997 and $140.7
million in 1996. The improvement was due largely to reduced interest expense on
short-term borrowings and an $8.5 million pre-tax gain for the payment received
related to the deactivation of a storage field to allow the mining of coal
reserves. Also in 1997, Columbia's coal assets were sold, which improved pre-tax
income by $9.3 million. In 1996 an $8.6 million pre-tax favorable adjustment was
recorded for the 1995 sale of Columbia's southwest gas and oil subsidiary.
SUMMARY OF FOURTH-QUARTER RESULTS
Columbia's fourth-quarter 1997 net income was $75.6 million, or $1.36
per share, an increase of $7.4 million, or 13 cents per share over the same
period in 1996. Fourth-quarter results included the benefit of reduced
restructuring costs in 1997 compared to 1996 and the gain on the sale of coal
assets. Tempering these improvements were reduced margins and high start-up
costs for the gas marketing operations as well as an environmental reserve
addition.
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FOURTH-QUARTER 1997 OPERATING INCOME BY SEGMENT
The transmission and storage segment's 1997 fourth-quarter operating
income of $65.8 million was up $19.2 million over the same period last year. The
improvement largely reflects a reduction in restructuring costs and lower normal
operating expenses due largely to implementing restructuring initiatives.
Tempering these favorable changes was a $3.4 million increase in operating
expense for an environmental reserve addition in 1997.
The distribution segment's fourth-quarter operating income of $73.7
million decreased $6.6 million from the same quarter last year. The principal
reason for the decrease was that the overall weather patterns experienced early
in the quarter resulted in reduced gas usage by customers. The favorable impact
of Columbia of Ohio's 1997 regulatory settlement was mostly offset by the cost
of a risk management program for Columbia of Ohio and Columbia of Kentucky
designed to mitigate the potential adverse effects of certain future business
risks.
The exploration and production segment's 1997 fourth-quarter operating
income of $8.2 million increased $800,000 over last year. The effect of higher
natural gas production from the recent acquisition of Alamco Inc., a gas and oil
production company in Appalachia, was offset by a 7 percent decrease in the
average price received for natural gas production. Natural gas production for
fourth-quarter 1997 was 9.4 Bcf, with an average price of $2.72 per Mcf,
compared to 9 Bcf and $2.92 per Mcf in the same period in 1996.
The marketing, propane and power generation segment reported an
operating loss of $7.9 million for fourth-quarter 1997 compared to operating
income of $1.2 million in the same period in 1996. Lower margins and higher
start-up costs for gas marketing activities more than offset increased gas
marketing volumes sold and improved margins for propane operations.
OTHER INCOME (DEDUCTIONS)
Other Income (Deductions) decreased fourth-quarter 1997 income by $29.8
million, compared to a reduction of $45 million in the same quarter in 1996. The
improvement primarily reflected recording the sale of the coal assets mentioned
previously.
The Columbia Energy Group, headquartered in Reston, Va., is one of the
nation's leading energy companies, with assets of more than $6 billion. Its
operating companies are engaged in all phases of the natural gas business
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plus marketing, fuel management services and electric power generation, sales
and trading. Columbia companies, directly or indirectly, serve more than 7
million natural gas consumers -- 12 percent of the nation's total -- in 15
states and the District of Columbia. Information about Columbia is available on
the World Wide Web at www.columbiaenergygroup.com. Columbia stock trades on the
New York Stock Exchange under the symbol CG.
###
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COLUMBIA ENERGY GROUP
Summary of Financial and Operating Data
TWELVE MONTHS THREE MONTHS
ENDED DECEMBER 31 ENDED DECEMBER 31
------------------------ ------------------------
INCOME STATEMENT DATA 1997 1996 1997 1996
-------- -------- -------- --------
($ millions)
Total Operating Revenues ............. 5,053.6 3,354.0 1,720.2 1,117.8
Operating Expenses
Products Purchased ................. 3,138.1 1,481.1 1,171.2 579.4
Operation and Maintenance .......... 962.3 965.9 287.7 283.2
Depreciation and Depletion ......... 221.3 215.2 58.1 57.4
Other Taxes ........................ 222.5 213.6 64.4 54.7
-------- -------- -------- --------
Total Operating Expenses ............. 4,544.2 2,875.8 1,581.4 974.7
-------- -------- -------- --------
Operating Income ..................... 509.4 478.2 138.8 143.1
-------- -------- -------- --------
Other Income (Deductions)
Interest Income and Other, Net ..... 40.4 26.1 12.5 (12.9)
Interest Expense and Related Charges (157.6) (166.8) (42.3) (32.1)
-------- -------- -------- --------
Total Other Income (Deductions) ...... (117.2) (140.7) (29.8) (45.0)
-------- -------- -------- --------
Income before Income Taxes ........... 392.2 337.5 109.0 98.1
Income Taxes ......................... 118.9 115.9 33.4 29.9
-------- -------- -------- --------
Net Income ........................... 273.3 221.6 75.6 68.2
======== ======== ======== ========
PER SHARE DATA
Basic Earnings on Common Stock ($) ... 4.93 4.12 1.36 1.23
Basic Average Common Shares
Outstanding (millions) .............. 55.4 53.8 55.5 55.3
Diluted Earnings on Common Stock ($) . 4.90 4.11 1.35 1.23
Diluted Average Common Shares
Outstanding (millions) .............. 55.7 54.0 55.8 55.4
OPERATING INCOME (LOSS) BY SEGMENT
($ millions)
TRANSMISSION AND STORAGE OPERATIONS
TWELVE MONTHS THREE MONTHS
ENDED DECEMBER 31 ENDED DECEMBER 31
----------------- -----------------
1997 1996 1997 1996
----- ----- ----- -----
OPERATING REVENUES
Transportation revenues ..... 622.0 629.0 173.2 177.9
Storage revenues ............ 179.8 159.5 42.8 40.1
Other revenues .............. 48.0 22.3 6.8 7.4
----- ----- ----- -----
Total Operating Revenues ....... 849.8 810.8 222.8 225.4
----- ----- ----- -----
OPERATING EXPENSES
Operation and maintenance ... 428.3 444.1 119.5 140.2
Depreciation ................ 104.3 102.6 25.6 26.5
Other taxes ................. 52.9 56.3 11.9 12.1
----- ----- ----- -----
Total Operating Expenses ....... 585.5 603.0 157.0 178.8
----- ----- ----- -----
OPERATING INCOME ............... 264.3 207.8 65.8 46.6
===== ===== ===== =====
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COLUMBIA ENERGY GROUP
Summary of Financial and Operating Data (continued)
DISTRIBUTION OPERATIONS
TWELVE MONTHS THREE MONTHS
ENDED DECEMBER 31 ENDED DECEMBER 31
--------------------- ---------------------
1997 1996 1997 1996
------- ------- ------- -------
NET REVENUES
Sales revenues ............ 2,153.1 2,007.9 618.6 679.8
Less: Cost of gas sold .... 1,385.6 1,206.4 381.4 434.9
------- ------- ------- -------
Net Sales Revenues ........ 767.5 801.5 237.2 244.9
------- ------- ------- -------
Transportation revenues ... 143.2 119.8 45.4 31.8
Less: Associated gas costs 12.6 14.6 4.7 4.0
------- ------- ------- -------
Net Transportation Revenues 130.6 105.2 40.7 27.8
------- ------- ------- -------
Net Revenues ................. 898.1 906.7 277.9 272.7
------- ------- ------- -------
OPERATING EXPENSES
Operation and maintenance . 441.0 463.0 133.4 130.4
Depreciation .............. 78.2 74.4 22.4 22.7
Other taxes ............... 154.7 143.3 48.4 39.3
------- ------- ------- -------
Total Operating Expenses ..... 673.9 680.7 204.2 192.4
------- ------- ------- -------
OPERATING INCOME ............. 224.2 226.0 73.7 80.3
======= ======= ======= =======
EXPLORATION AND PRODUCTION OPERATIONS
TWELVE MONTHS THREE MONTHS
ENDED DECEMBER 31 ENDED DECEMBER 31
----------------- -----------------
1997 1996 1997 1996
----- ----- ----- -----
OPERATING REVENUES
Gas ........................... 109.5 99.1 31.9 26.3
Oil and liquids ............... 3.8 5.4 1.0 1.4
----- ----- ----- -----
Total Operating Revenues ......... 113.3 104.5 32.9 27.7
----- ----- ----- -----
OPERATING EXPENSES
Operation and maintenance ..... 45.7 37.0 14.8 10.6
Depreciation and depletion .... 27.6 28.8 7.0 7.5
Other taxes ................... 9.1 8.7 2.9 2.2
----- ----- ----- -----
Total Operating Expenses ......... 82.4 74.5 24.7 20.3
----- ----- ----- -----
OPERATING INCOME ................. 30.9 30.0 8.2 7.4
===== ===== ===== =====
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COLUMBIA ENERGY GROUP
Summary of Financial and Operating Data (continued)
MARKETING, PROPANE AND POWER GENERATION OPERATIONS
TWELVE MONTHS THREE MONTHS
ENDED DECEMBER 31 ENDED DECEMBER 31
---------------------- ----------------------
1997 1996 1997 1996
------- ------- ------- -------
NET REVENUES
Gas marketing revenues ... 2,186.8 728.0 904.5 265.7
Less: Products purchased . 2,166.0 711.5 900.5 262.4
------- ------- ------- -------
Net Gas Marketing Revenues 20.8 16.5 4.0 3.3
------- ------- ------- -------
Propane revenues ......... 77.9 80.7 25.6 26.7
Less: Products purchased . 43.2 48.3 13.6 17.2
------- ------- ------- -------
Net Propane Revenues ..... 34.7 32.4 12.0 9.5
------- ------- ------- -------
Other Revenues ........... 11.0 7.7 1.5 1.5
------- ------- ------- -------
Net Revenues .................. 66.5 56.6 17.5 14.3
------- ------- ------- -------
OPERATING EXPENSES
Operation and maintenance 61.2 38.8 22.8 11.7
Depreciation ............. 5.2 3.1 1.7 0.8
Other taxes .............. 3.0 2.2 0.9 0.6
------- ------- ------- -------
Total Operating Expenses ...... 69.4 44.1 25.4 13.1
------- ------- ------- -------
OPERATING INCOME (LOSS) ....... (2.9) 12.5 (7.9) 1.2
======= ======= ======= =======
CORPORATE
TWELVE MONTHS THREE MONTHS
ENDED DECEMBER 31 ENDED DECEMBER 31
----------------- -----------------
1997 1996 1997 1996
---- ---- ---- ----
OPERATING INCOME (LOSS) .............. (7.1) 1.9 (1.0) 7.6
=== === === ===
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COLUMBIA ENERGY GROUP
Summary of Financial and Operating Data (continued)
DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- -----------------
CAPITALIZATION
($ millions)
Common Stock Equity
Common Stock, $10 par value,
outstanding 55,495,460 and 55,263,659
shares, respectively ........................ 554.9 552.6
Additional paid in capital .................. 754.2 743.2
Retained earnings ........................... 482.7 259.3
Unearned employee compensation .............. (1.1) (1.5)
------- -------
Total Common Stock Equity ........................ 1,790.7 1,553.6
Long-Term Debt ................................... 2,003.5 2,003.8
------- -------
Total Capitalization ............................. 3,794.2 3,557.4
======= =======
Short-Term Debt .................................. 328.1 250.0
======= =======
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COLUMBIA ENERGY GROUP
Summary of Financial and Operating Data (continued)
TWELVE MONTHS THREE MONTHS
ENDED DECEMBER 31 ENDED DECEMBER 31
------------------------ ------------------------
1997 1996 1997 1996
-------- -------- -------- --------
AVERAGE PRICE OF GAS PRODUCTION ($ PER MCF) .. 2.63 2.84 2.72 2.92
======== ======== ======== ========
OPERATING DATA
Gas production (billion cubic feet) ....... 34.7 33.6 9.4 9.0
======== ======== ======== ========
Propane gallons sold (millions) ........... 70.9 75.9 23.1 23.0
======== ======== ======== ========
Marketing volumes sold (billion cubic feet) 889.1 259.6 337.7 88.4
======== ======== ======== ========
THROUGHPUT
Transmission (billion cubic feet):
Transportation
Columbia Transmission
Market area ........................ 1,032.6 1,102.4 313.0 314.2
Columbia Gulf
Main-line .......................... 607.5 633.7 149.2 158.5
Short-haul ......................... 252.4 266.5 67.3 63.8
Intrasegment Eliminations .......... (591.0) (624.5) (143.0) (154.7)
-------- -------- -------- --------
Total Throughput ......................... 1,301.5 1,378.1 386.5 381.8
======== ======== ======== ========
Distribution (billion cubic feet):
Gas Sales ............................... 267.8 305.4 87.4 96.1
Transportation .......................... 258.9 248.8 71.9 65.0
-------- -------- -------- --------
Total Throughput ......................... 526.7 554.2 159.3 161.1
-------- -------- -------- --------
Off-system sales .......................... 45.4 10.8 0.1 2.4
-------- -------- -------- --------
Total sold and transported ................ 572.1 565.0 159.4 163.5
======== ======== ======== ========
DEGREE DAYS-DISTRIBUTION SERVICE TERRITORY
Actual .................................. 5,736 5,975 2,098 2,065
Normal .................................. 5,600 5,632 2,032 2,032
% Colder than normal .................... 2 6 3 2
% Colder (warmer) than prior period ..... (4) 5 2 (7)