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FORM 8-K
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
CURRENT REPORT
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Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (date of earliest event Reported) July 13, 1998
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COLUMBIA ENERGY GROUP
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(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
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(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 July 13, 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
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(Registrant)
By /s/J. W. Grossman
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Vice President &
Controller
Date: July 13, 1998
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For Immediate Release Contact: John H. Jennrich
July 13, 1998 (703) 295-0423
OPERATING IMPROVEMENTS PARTIALLY OFFSET ADVERSE WEATHER
FOR COLUMBIA ENERGY GROUP'S SECOND-QUARTER EARNINGS
RESTON, Va., July 13 - Columbia Energy Group today reported
second-quarter 1998 net income of $22.8 million, or 27 cents per share, compared
with $34.9 million, or 42 cents per share, during the same period last year.
This $12.1 million decrease was attributable largely to weather that was 38
percent warmer than last year.
All per-share amounts reflect the 3-for-2 stock split that occurred
on June 15, 1998.
Despite the adverse impact of the warmer weather, Oliver G. Richard
III, Columbia chairman, CEO and president, emphasized that "During the quarter,
Columbia continued to show improvements in operations." Richard specifically
cited the benefits of "innovative regulatory programs, reductions in operation
and maintenance costs and a 57-percent increase from our exploration and
production (E&P) operations."
The warm second quarter, compared with last year's 44 percent
colder-than-normal weather, reduced earnings by $16.6 million, or 20 cents per
share.
During the second quarter, Richard said, Columbia continued the
aggressive expansion of its retail unbundling and marketing activities. "We just
received a green light from the Public Utilities Commission of Ohio to expand
the pilot supplier-choice program in Toledo to all of our 1.3 million Ohio
customers, with suppliers free to sign up customers beginning Aug. 1. In
Pennsylvania, the regulatory commission last week approved an expansion of
Columbia Gas of Pennsylvania's supplier-choice program. As a result, nearly 70
percent of the company's 382,000 customers will have the opportunity to choose
suppliers other than the utility, which, however, will continue to deliver the
gas to customers. These increases in Ohio and Pennsylvania mean that,
systemwide, 85 percent of our utility customers will be able to choose their gas
supplier. This is a win-win situation for customers and Columbia, the result of
injecting a dose of economic democracy into the
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natural gas marketplace. Customers in our Ohio program, for example, are saving
nearly 11 percent per month on their gas bills. At the same time, we can create
new markets and expand our nonregulated retail operations to maintain our
leadership position as a supplier of choice in today's developing energy
marketplace."
"Our nonregulated supply strategy continues to pay off as well,"
Richard added. "Largely due to last year's acquisition of an Appalachian
supplier, operating income in our E&P business rose 57 percent in the second
quarter. We've also made important progress in building the electricity supply
part of our business; thus far this year, we've unveiled plans to develop with
partners more than 1,500 megawatts (Mw) of electric power generation.
Specifically, as previously announced, we're working with Westcoast Energy Inc.
on developing three gas-fired plants in northeastern North America, and with
LG&E Power Inc. to build a 550-Mw gas-fired cogeneration plant on a Reynolds
Metals site in Gregory, Texas."
Operating income for the quarter was $70.9 million compared with
$84.3 million last year, a decline of $13.4 million. The warmer weather resulted
in a $26 million decrease in operating income versus last year and a $5.4
million reduction when compared with normal weather. Costs related to investment
in infrastructure for the marketing company further reduced operating income.
Also impacting period-to-period comparisons was last year's regulatory
settlement at Columbia Gas Transmission Corp. that included the sale of storage
base gas and provided a $19.1 million benefit to 1997 operating income.
Operating Income (Loss) by Segment
Second-quarter 1998 operating income for the transmission and
storage segment was $58.8 million, a decrease of $6 million from the same period
last year, which included the $19.1 million improvement from Columbia Gas
Transmission's rate settlement mentioned above. The second quarter benefited
from lower operating costs achieved through restructuring initiatives
implemented over the past year. Also improving results were increased revenue
from Columbia Transmission's market expansion project, which began operations in
November 1997, and the effect of Columbia Gulf Transmission Co.'s regulatory
settlement in May 1998. In the second quarter of 1997, restructuring costs of
$7.9 million were recorded.
The distribution segment's second-quarter operating income of $13.4
million declined $7.9 million from the same period in 1997 due to significantly
warmer weather and, thus, reduced gas usage for heating. While last year's
weather was 44 percent colder than normal, this year's weather was 11 percent
warmer than normal, which, taken together,
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decreased period-to-period results $26 million. Offsetting the impact of the
warmer weather were lower operating expenses and higher revenues from certain
gas management activities that Columbia Gas of Ohio was allowed to retain under
the terms of its 1997 rate settlement.
Operating income of $8.5 million for the exploration and production
segment increased $3.1 million over the second quarter of 1997, reflecting
higher gas production and prices. Production increased 23 percent to 10.3
billion cubic feet (Bcf) from 8.4 Bcf, due in part to an acquisition in
mid-1997. Gas prices averaged $2.81 per thousand cubic feet (Mcf), up 14 cents
per Mcf over the same period last year.
Beginning with the second quarter of 1998, Columbia is reporting the
marketing operations as a separate segment. The marketing segment reflects
Columbia Energy Services Corp.'s sales and trading results for natural gas and
electricity as well as for related energy service products. The marketing
segment reported an operating loss of $7.6 million, primarily reflecting
increased investment in its infrastructure and higher expenses associated with
additions to staff. In the same period last year, this segment had a loss of
$400,000. Columbia Energy's power marketing activity, which began in December
1997, improved second-quarter results. Gas sales volume was 347.4 Bcf for the
second quarter, an increase of 225.7 Bcf over last year.
The business segment that includes propane, power generation and
liquefied natural gas (LNG) had an operating loss of $200,000, unchanged from
last year.
RECORD WARM WEATHER AFFECTS FIRST-HALF RESULTS
Net Income
Columbia's net income for the first half of 1998 was $170.3 million,
a decrease of $27.3 million from the same period last year. After restating for
the stock split, earnings decreased 34 cents per share to $2.04 per share. This
decrease was largely due to the record-breaking first-quarter warm weather that
continued into the second quarter, making the first six months of 1998 the
warmest on record for Columbia.
Significant items increasing income for the first half of 1998
included (1) a $15.9 million after-tax reduction in the cost of postretirement
benefits, reflecting a buyout of a portion of those liabilities with an
insurance carrier; (2) $10 million from tax planning initiatives; (3) $8.7
million from the sale of certain gas storage volumes; (4) lower operating
expenses for the rate-regulated subsidiaries; and (5) increased gas production
and prices for the
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E&P segment. These benefits were offset partially by Columbia's investment in
its marketing operations.
Significant improvements in 1997 included (1) $12.8 million from the
implementation of tax planning initiatives; (2) $12.4 million as a result of
Columbia Transmission's regulatory settlement that included the sale of storage
base gas; and (3) $5.5 million from a gain on the deactivation of a storage
field.
Operating Income (Loss) by Segment
Operating income from Columbia's transmission and storage segment
for the six months ended June 30, 1998, was $176.6 million, an increase of $20.3
million over the same period last year. The improvement reflected the sale of
certain gas storage volumes, reduced operation and maintenance costs through the
implementation of restructuring initiatives, and the effect of Columbia Gulf's
recent regulatory settlement. In 1997 operating income increased $19.1 million
due to the impact of Columbia Transmission's regulatory settlement and was
reduced $7.9 million for restructuring charges.
The local distribution segment's operating income of $133.5 million
declined $28.4 million from last year due largely to the effect of 20 percent
warmer weather, which alone reduced income $52 million. This adverse weather
impact plus higher gross receipts taxes were offset partially by the favorable
effects of a reduction in postretirement benefit costs, lower operation and
maintenance costs and the Columbia Gas of Ohio regulatory settlement.
The exploration and production segment's $22.9 million operating
income reflected an increase of $5.8 million over the first half of 1997. The
improvement was due to 21 percent higher gas production and a 14 percent
increase in the average price received for gas sales. The higher average gas
price reflected the benefit of locking in prices last fall when prices were
higher than in 1998. The increased production was attributable largely to the
1997 acquisition of an Appalachian producer. Gas production for the first half
of 1998 was 20.2 Bcf at an average price of $3.09 per Mcf. In 1997 a $4.1
million improvement was recorded for a contract buyout by a cogeneration
facility.
The marketing segment recorded an operating loss of $13.1 million
compared with operating income of $600,000 in the first half of 1997. Columbia
made significant investments in the marketing segment's infrastructure, a cost
that more than offset an increase of 200-plus percent in the volume sold, which
in the first half of 1998 was 711.6 Bcf, an increase of
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483.2 Bcf. The volume increase was predominately in the lower-margin wholesale
market.
Operating income of $7.3 million for the propane, power generation
and LNG segment was $2.8 million lower than for the same period last year. This
decrease reflects the negative effect of warmer weather on propane operations in
1998 as well as a $3.2 million one-time benefit in 1997 for the assumption of a
cogeneration transportation contract.
Other Income (Deductions)
Other income of $5.5 million decreased $14.9 million from last year
while interest expense of $80.1 million increased $1.8 million. These changes
were due primarily to lower interest income on temporary cash investments,
increased interest expense on short-term borrowing and to an $8.5 million gain
recorded last year for the deactivation of a storage field.
Income Taxes
Income tax expense of $80.2 million for the first half of 1998
decreased $5.2 million from the same period last year, reflecting lower pre-tax
income. Additionally, both years benefited from reduced taxes as a result of
implementing tax planning initiatives.
Columbia Energy Group, located in Northern Virginia, is one of the
nation's leading energy companies, with assets of more than $6 billion. Its
operating companies are engaged in all phases of the natural gas business plus
marketing, energy management services, propane sales and electric power
generation, sales and trading. Columbia companies, directly or indirectly, serve
more than 7 million natural gas customers - 12 percent of the nation's total -
in 15 states and the District of Columbia.
Information about Columbia Energy Group is available on the World
Wide Web at www.columbiaenergygroup.com. Columbia stock trades on the New York
Stock Exchange under the symbol CG.
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CONTACTS FOR FINANCIAL COMMUNITY:
THOMAS L. HUGHES: (703) 295-0429
MELISSA E. BOCKELMANN: (703) 295-0427
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COLUMBIA ENERGY GROUP
Summary of Financial and Operating Data
THREE MONTHS SIX MONTHS
ENDED JUNE 30 ENDED JUNE 30
---------------------- ----------------------
1998 1997 1998 1997
---- ---- ---- ----
INCOME STATEMENT DATA
- ---------------------
($ millions)
Energy sales ........................................ 1,149.0 629.5 2,748.6 1,960.2
Less: Products purchased............................. 936.8 400.3 2,156.0 1,297.0
------- ------ ------- -------
Gross Margin......................................... 212.2 229.2 592.6 663.2
Transportation....................................... 121.5 120.3 282.7 268.8
Production gas sales................................. 11.7 8.4 29.1 13.7
Other................................................ 40.2 49.2 103.7 89.5
------- ------ ------- -------
Total Net Revenues...................................... 385.6 407.1 1,008.1 1,035.2
------- ------ ------- -------
Operating Expenses
Operation and maintenance............................ 216.9 227.4 423.0 450.9
Depreciation and depletion........................... 52.8 49.2 126.0 120.4
Other taxes.......................................... 45.0 46.2 134.0 123.0
------- ------ ------ --------
Total Operating Expenses................................ 314.7 322.8 683.0 694.3
------- ------ ------ --------
Operating Income........................................ 70.9 84.3 325.1 340.9
------- ------ ------ --------
Other Income (Deductions)
Interest income and other, net....................... 3.2 6.1 5.5 20.4
Interest expense and related charges................. (38.5) (38.0) (80.1) (78.3)
------- ------ ------ --------
Total Other Income (Deductions)......................... (35.3) (31.9) (74.6) (57.9)
------- ------ ------ --------
Income before Income Taxes ............................. 35.6 52.4 250.5 283.0
Income Taxes............................................ 12.8 17.5 80.2 85.4
------- ------ ------ --------
Net Income ............................................. 22.8 34.9 170.3 197.6
======= ====== ====== ========
PER SHARE DATA (a)
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Earnings Per Common Share ($)........................ 0.27 0.42 2.04 2.38
Average Common Shares
Outstanding (millions)............................ 83.3 83.1 83.3 83.0
Diluted Earnings Per Common Share ($)................ 0.27 0.42 2.03 2.37
Diluted Average Common Shares (millions)............. 83.7 83.3 83.7 83.3
(a) All per share amounts and average common shares outstanding have been
restated to reflect a three-for-two common stock split in the form of a
stock dividend effective June 15, 1998.
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COLUMBIA ENERGY GROUP
Summary of Financial and Operating Data (continued)
OPERATING INCOME (LOSS) BY SEGMENT
($ millions)
TRANSMISSION AND STORAGE OPERATIONS
-----------------------------------
THREE MONTHS SIX MONTHS
ENDED JUNE 30 ENDED JUNE 30
---------------------- ----------------------
1998 1997 1998 1997
---- ---- ---- ----
OPERATING REVENUES
Transportation revenues............................... 134.5 136.8 314.6 317.0
Storage revenues...................................... 45.7 48.3 92.3 91.8
Other revenues........................................ 4.9 22.6 23.1 29.7
------ ------ ------ ------
Total Operating Revenues................................. 185.1 207.7 430.0 438.5
------ ------ ------ ------
OPERATING EXPENSES
Operation and maintenance............................. 89.0 102.5 174.5 201.4
Depreciation.......................................... 24.0 26.6 50.0 52.9
Other taxes........................................... 13.3 13.8 28.9 27.9
------ ------ ------ ------
Total Operating Expenses................................. 126.3 142.9 253.4 282.2
------ ------ ------ ------
OPERATING INCOME......................................... 58.8 64.8 176.6 156.3
====== ====== ====== ======
DISTRIBUTION OPERATIONS
-----------------------
THREE MONTHS SIX MONTHS
ENDED JUNE 30 ENDED JUNE 30
---------------------- -----------------------
1998 1997 1998 1997
---- ---- ---- ----
NET REVENUES
Sales revenues........................................ 276.5 342.8 1,020.5 1,368.0
Less: Cost of gas sold................................ 158.3 207.5 639.8 926.6
------ ------ -------- --------
Net Sales Revenues.................................... 118.2 135.3 380.7 441.4
------ ------ -------- --------
Transportation revenues............................... 35.8 33.3 93.5 75.4
Less: Associated gas costs........................... 4.4 3.3 10.0 6.2
------ ------ -------- --------
Net Transportation Revenues........................... 31.4 30.0 83.5 69.2
------ ------ -------- --------
Net Revenues............................................. 149.6 165.3 464.2 510.6
------ ------ -------- --------
OPERATING EXPENSES
Operation and maintenance............................. 92.0 102.6 183.9 212.8
Depreciation.......................................... 16.7 12.4 50.5 48.0
Other taxes........................................... 27.5 29.0 96.3 87.9
------ ------ -------- --------
Total Operating Expenses ................................ 136.2 144.0 330.7 348.7
------ ------ -------- --------
OPERATING INCOME......................................... 13.4 21.3 133.5 161.9
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COLUMBIA ENERGY GROUP
Summary of Financial and Operating Data (continued)
EXPLORATION AND PRODUCTION OPERATIONS
-------------------------------------
THREE MONTHS SIX MONTHS
ENDED JUNE 30 ENDED JUNE 30
---------------------- -----------------------
1998 1997 1998 1997
---- ---- ---- ----
OPERATING REVENUES
Gas revenues....................................... 28.8 25.8 62.4 53.7
Other revenues..................................... 3.6 0.9 7.4 2.0
----- ----- ----- -----
Total Operating Revenues.............................. 32.4 26.7 69.8 55.7
----- ----- ----- -----
OPERATING EXPENSES
Operation and maintenance.......................... 12.4 11.4 22.8 20.1
Depreciation and depletion......................... 8.7 7.8 18.9 14.6
Other taxes........................................ 2.8 2.1 5.2 3.9
----- ----- ----- -----
Total Operating Expenses.............................. 23.9 21.3 46.9 38.6
----- ----- ----- -----
OPERATING INCOME...................................... 8.5 5.4 22.9 17.1
===== ===== ===== =====
MARKETING OPERATIONS
--------------------
THREE MONTHS SIX MONTHS
ENDED JUNE 30 ENDED JUNE 30
---------------------- ----------------------
1998 1997 1998 1997
---- ---- ---- ----
NET REVENUES
Energy revenues.................................... 873.2 295.9 1,738.6 602.0
Less: Products purchased........................... 861.5 291.7 1,715.6 592.5
----- ----- ------- -----
Net Energy Revenues................................... 11.7 4.2 23.0 9.5
----- ----- -------- -----
OPERATING EXPENSES
Operation and maintenance.......................... 18.0 4.3 33.5 8.2
Depreciation....................................... 0.7 0.1 1.4 0.2
Other taxes........................................ 0.6 0.2 1.2 0.5
----- ----- -------- ----
Total Operating Expenses.............................. 19.3 4.6 36.1 8.9
----- ----- -------- -----
OPERATING INCOME (LOSS)............................... (7.6) (0.4) (13.1) 0.6
===== ===== ======== =====
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COLUMBIA ENERGY GROUP
Summary of Financial and Operating Data (continued)
PROPANE, POWER GENERATION AND LNG OPERATIONS
--------------------------------------------
THREE MONTHS SIX MONTHS
ENDED JUNE 30 ENDED JUNE 30
---------------------- ----------------------
1998 1997 1998 1997
---- ---- ---- ----
NET REVENUES
Propane revenues.............................. 11.3 12.7 37.6 41.2
Less: Products purchased...................... 5.6 7.0 18.5 23.2
------ ----- ------ -----
Net Propane Revenues.......................... 5.7 5.7 19.1 18.0
Power Generation.............................. 2.3 2.3 3.8 8.4
Other Revenues................................ 2.0 2.6 4.4 5.4
------ ----- ------ -----
Net Revenues..................................... 10.0 10.6 27.3 31.8
------ ----- ------ -----
OPERATING EXPENSES
Operation and maintenance..................... 8.5 9.4 16.8 18.9
Depreciation.................................. 1.2 0.9 2.2 1.7
Other taxes................................... 0.5 0.5 1.0 1.1
------ ----- ------ -----
Total Operating Expenses......................... 10.2 10.8 20.0 21.7
------ ----- ------ -----
OPERATING INCOME (LOSS).......................... (0.2) (0.2) 7.3 10.1
====== ===== ====== =====
CORPORATE
---------
THREE MONTHS SIX MONTHS
ENDED JUNE 30 ENDED JUNE 30
---------------------- ----------------------
1998 1997 1998 1997
---- ---- ---- ----
OPERATING (LOSS)................................. (2.0) (6.6) (2.1) (5.1)
==== ==== ===== ====
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COLUMBIA ENERGY GROUP
Summary of Financial and Operating Data (continued)
JUNE 30, 1998 DECEMBER 31, 1997
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CAPITALIZATION
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($ millions)
Common Stock Equity
Common stock, $10 par value,
outstanding 83,371,109 and 55,495,460 shares,
respectively...................................................... 833.7 554.9
Additional paid in capital........................................ 758.3 754.2
Retained earnings................................................. 344.0 482.7
Unearned employee compensation.................................... (0.9) (1.1)
Accumulated Other Comprehensive Income:
Foreign currency translation adjustment........................ (0.1) -
-------- --------
Total Common Stock Equity............................................... 1,935.0 1,790.7
Long-Term Debt.......................................................... 2,002.2 2,003.5
-------- -------
Total Capitalization.................................................... 3,937.2 3,794.2
======== =======
Short-Term Debt......................................................... 45.9 328.1
======== =======
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COLUMBIA ENERGY GROUP
Summary of Financial and Operating Data (continued)
THREE MONTHS SIX MONTHS
ENDED JUNE 30 ENDED JUNE 30
---------------------- ----------------------
1998 1997 1998 1997
---- ---- ---- ----
AVERAGE PRICE OF GAS PRODUCTION ($ PER Mcf)
U.S................................................... 2.81 2.67 3.09 2.72
Canada................................................ 2.66 - 2.79 -
OPERATING DATA
Gas Production (billion cubic feet):
U.S................................................... 10.2 8.4 20.1 16.7
Canada................................................ 0.1 - 0.1 -
------ ------ ------ -------
Total................................................. 10.3 8.4 20.2 16.7
====== ====== ====== =======
Propane gallons sold (millions).......................... 10.0 12.1 34.8 36.9
====== ====== ====== =======
Marketing volumes sold
Gas sales (billion cubic feet)........................ 347.4 121.7 711.6 228.4
Power sales (thousand megawatt hours)................. 3,048 - 3,353 -
THROUGHPUT
Transmission (billion cubic feet):
Transportation
Columbia Transmission
Market area...................................... 166.9 196.4 523.6 574.2
Columbia Gulf
Main-line........................................ 151.1 161.9 281.8 312.9
Short-haul....................................... 59.4 57.0 121.6 119.0
Intrasegment eliminations........................ (147.4) (160.6) (272.4) (305.4)
------ ------ ------ -----
Total Throughput.......................................... 230.0 254.7 654.6 700.7
====== ====== ====== =====
Distribution (billion cubic feet):
Gas sales................................................ 28.8 41.0 129.0 163.8
Transportation........................................... 62.5 61.0 146.6 133.0
------ ------ ----- ------
Total Throughput.......................................... 91.3 102.0 275.6 296.8
Off-system sales......................................... 22.4 10.9 51.4 42.2
------ ------ ------ ------
Total Sold and Transported................................ 113.7 112.9 327.0 339.0
====== ====== ===== ======
DEGREE DAYS-DISTRIBUTION SERVICE TERRITORY
Actual................................................. 518 837 2,837 3,530
Normal................................................. 580 580 3,527 3,527
% Colder (warmer) than normal.......................... (11) 44 (20) -
% Colder (warmer) than prior period.................... (38) 19 (20) (7)