EXHIBIT 99.1
NEWS RELEASE
JANUARY 29, 2004
FOR RELEASE AT 6:00 A.M. EST
NW NATURAL REPORTS EARNINGS FOR FOURTH QUARTER,
12 MONTHS ENDED DEC. 31, 2003
PORTLAND, Ore. - Northwest Natural Gas Company (NYSE: NWN), dba NW
Natural, reported consolidated earnings applicable to common stock of $45.7
million for the fiscal year ended Dec. 31, 2003, compared to $41.5 million in
2002, Mark S. Dodson, president and chief executive officer, said Thursday.
Earnings in 2003 were $1.76 a diluted share, compared to earnings of
$1.62 a diluted share in 2002. The results for 2002 included charges equivalent
to 33 cents a share relating to a terminated acquisition.
"NW Natural finished strong in 2003, despite the effects of a weak
economy and warm weather in much of the year," Dodson explained. "Continuing
customer growth, earnings from our interstate storage segment, the successful
result in our Oregon general rate case and our decoupling and weather
normalization mechanisms all contributed to a strong fourth quarter and fiscal
year and provide momentum going into 2004."
For the quarter ended Dec. 31, 2003, NW Natural's consolidated earnings
applicable to common stock were $21.7 million, up 22 percent from $17.8 million
in the fourth quarter of 2002. Earnings for the fourth quarter were 83 cents a
diluted share, up from 69 cents a diluted share last year.
Dodson said that in 2003, besides achieving solid earnings, NW
Natural:
o grew its customer base by more than 3 percent for the 17th year in a
row, adding 18,083 customers to its gas distribution system during the
year;
o increased earnings from its business segment for interstate gas
storage services from 14 cents a share in 2002 to 17 cents a share in
2003;
o secured a permit for the construction of a major extension of its
pipeline from the Mist Storage Field to the Portland metropolitan area
and completed the first 11.7-mile segment of the pipeline, below
budget and on time for the 2003-04 heating season;
o successfully completed its general rate case in Oregon with a result
that included phased rate increases, the recovery of costs relating to
its gas storage investments and higher operating expenses, and
approval of a new weather normalization mechanism; and
o paid dividends on common stock of $1.27 a share, making 2003 the 48th
consecutive year in which the Company's dividend payments have
increased.
Fourth Quarter Detail
- ---------------------
Total gas deliveries in the fourth quarter were 350 million therms, up
7 percent from last year. Net utility margin, after allowances for demand
charges and other items, was $89.4 million, 12 percent higher than last year's
$80.0 million.
Sales to residential and commercial customers in the fourth quarter of
2003 were 204 million therms, up 8 percent from last year despite slightly
warmer weather. Weather for the fourth quarter was 7 percent warmer than average
and 1 percent warmer than last year. The Company's new weather normalization
mechanism in Oregon contributed $2.1 million of margin in the fourth quarter,
equivalent to 5 cents a share, making up a significant portion of the
weather-related margin loss. The mechanism was not effective until the middle of
October, a month that was 28 percent warmer than average in NW Natural's service
area (measured in degree-days) and 34 percent warmer than last year.
Gas deliveries to industrial and electric generation customers in the
fourth quarter were 146 million therms, up 6 percent from 137 million therms
last year. Margin in these sectors in the fourth quarter was $10.1 million, up
from $9.7 million last year. The higher deliveries and margin in the industrial
market in the fourth quarter primarily reflect the addition of a large new
customer and some rate design changes approved in the Oregon general rate case.
Earnings from NW Natural's gas storage business segment in the fourth
quarter of 2003 were $0.9 million, equivalent to 3 cents a diluted share,
compared to $1.2 million or 4 cents a share in the fourth quarter of 2002. These
results include income from interstate gas storage services as well as income
from a contract with an independent trading company that seeks to optimize the
use of NW Natural's assets by trading temporarily unused portions of its gas
storage capacity and upstream pipeline transportation capacity. NW Natural
provides gas storage services to customers in the interstate market from its
Mist gas storage field, using storage capacity that has been developed in
advance of core utility customers' requirements. Results from the gas storage
segment were higher in the fourth quarter of 2002 due to a larger contribution
of income in that quarter from the asset optimization contract.
NW Natural completed the first phase of its South Mist Pipeline
Extension (SMPE), an 11.7-mile segment from the Molalla gate station on the
Williams-West interstate pipeline system to a point near Aurora, Ore., and put
it into service in mid-November. This segment of the SMPE, which serves a
rapidly growing section of the Company's service area, was instrumental in
maintaining service to customers during a cold weather episode in the week of
Jan. 5, 2004, when NW Natural set new records for daily gas sendout. Results for
the fourth quarter include $0.6 million of deferred revenues for the recovery of
costs relating to this pipeline segment, pursuant to the treatment of the SMPE
in NW Natural's Oregon general rate case.
Fiscal Year Detail
- ------------------
NW Natural earned $1.57 a diluted share from utility operations in
2003, compared to $1.76 a share from utility operations in 2002. In addition,
the Company earned 17 cents a diluted share in 2003 from interstate gas storage
operations, up from 14 cents a share in 2002; and 2 cents a diluted share from
subsidiary and other non-utility operations, compared to a loss of 28 cents a
share in 2002. The loss from non-utility operations in 2002 included charges
equivalent to 33 cents a diluted share relating to NW Natural's effort to
purchase Portland General Electric Company from Enron.
NW Natural's total gas sales and transportation deliveries in 2003,
excluding deliveries of gas stored for others, were 1.1 billion therms, down 2
percent from 2002. Net utility margin, after allowances for demand charges and
other items, was $279 million, about the same as last year.
Gas sales to residential and commercial customers in 2003 were 582
million therms, down about 1 percent from 2002. Weather in 2003 was 6 percent
warmer than average and 7 percent warmer than 2002.
Margin from the residential and commercial market sectors was $309
million, up 3 percent from $299 million in 2002. The negative impact of warmer
weather was more than offset by the effects of rate increases and customer
growth. The higher margin in 2003 reflects the full-year impact of rate
increases effective in Oregon on Oct. 1, 2002, designed to recoup the margin
lost due to changes in customers' consumption patterns. The higher margin also
reflects rate increases effective Sept. 1, 2003, resulting from NW Natural's
general rate case in Oregon. NW Natural had 578,150 customers at year-end 2003,
up 3.2 percent from year-end 2002. The Company estimates that customer growth
contributed 16 million therms to sales volumes and $6.7 million to margin
revenues during the year.
Gas deliveries to industrial and electric generation customers in 2003
were 518 million therms, down 3 percent from last year. Margin from sales and
transportation in these markets was $37.7 million, down about 17 percent from
last year. Results for 2003 reflect weak economic conditions during the year,
but also some cost-related changes in the design of industrial rates in the
Oregon general rate case that reduced industrial margins. Results in 2002
included $4.5 million of margin, equivalent to 11 cents a share of earnings,
from contracts for service to electric generation customers that expired at
mid-year 2002.
NW Natural earned $4.3 million from its gas storage business segment in
2003, compared to $3.6 million in 2002. In both cases the income is net of
amounts shared with core utility customers.
NW Natural's partial decoupling mechanism in Oregon contributed $3.5
million of margin in 2003, equivalent to 8 cents a diluted share of earnings,
compared to $1.7 million of margin or 4 cents a share in 2002. The decoupling
mechanism, approved by the Public Utility Commission of Oregon in the fall of
2002 as part of NW Natural's Conservation Tariff, was designed to recover lost
margin due to changes in residential and commercial consumption patterns.
NW Natural has a Purchased Gas Adjustment tariff in Oregon under which
it absorbs 33 percent of any excess cost of gas, or retains 33 percent of any
savings, both as compared to the gas commodity prices built into rates. The
Company also retains 33 percent of the margin when it sells surplus gas
commodity off-system, distributing 67 percent to its customers. NW Natural's
share of the commodity savings and off-system margin realized from its gas
purchasing program in 2003 contributed $5.2 million of margin for the year,
equivalent to 12 cents a diluted share of earnings. Last year these factors
contributed $11.7 million of margin, equivalent to 28 cents a share of earnings.
Operations and maintenance expenses in 2003 were up $11.3 million, or
13 percent, over last year. The increase in O&M expenses included higher pension
expense as determined under Statement of Financial Accounting Standards (SFAS)
No. 87 ($3.1 million), as well as higher costs for health benefits ($0.9
million) and business risk insurance premiums ($0.9 million). The higher
expenses in these three categories reduced earnings for the year by about 12
cents a share as compared to the equivalent expenses in 2002. Expenses in these
categories at approximately their current levels were included in expenses for
ratemaking purposes in NW Natural's Oregon general rate case.
Updated Outlook for 2004
- ------------------------
NW Natural's chief financial officer, Bruce R. DeBolt, confirmed the
Company's prior estimate that its earnings in 2004 will be in the range of $1.85
to $2.00 a share. He explained that the estimate assumes average weather
conditions, although NW Natural's weather normalization mechanism in Oregon
should continue to reduce the impact of weather variations on its results from
utility operations.
Dividends Declared
- ------------------
The Board of Directors of NW Natural has declared a quarterly dividend
of 32.5 cents a share on the Company's common stock. The dividends will be paid
on Feb. 13, 2004, to shareholders of record on Jan. 30, 2004.
Conference Call Arrangements
- ----------------------------
As previously reported, NW Natural will conduct a conference call and
Webcast starting at 11:30 a.m. EST (8:30 a.m. Pacific Time) on Jan. 29 to review
the Company's fourth quarter and fiscal year financial results as well as its
updated guidance for 2004.
To hear the conference call live, please call 800.901.5213, or
617.786.2962 from international points including Canada. Participants will be
asked for their name, company name, phone number, the name of the conference
they will be joining ("NW Natural") and the conference passcode (73540231). A
replay of the call will be available two hours after completion of the
conference on Jan. 29 and until Thursday, Feb. 12. To access the recording, call
888.286.8010, and enter the conference replay passcode number 20171081.
To hear the conference by Webcast, log on to NW Natural's corporate
Website at www.nwnatural.com and select the Webcast icon on the home page. A
replay of the Webcast will be available two hours after the conference
concludes.
NOTE: This report contains forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended. The
Company's future operating results will be affected by various uncertainties and
risk factors, many of which are beyond the Company's control, including
governmental policy and regulatory action, the competitive environment and
economic factors, as well as weather conditions. For a more complete description
of these uncertainties and risk factors, see the Company's filings with the
Securities and Exchange Commission on Form 10-K for the year ended Dec. 31,
2002, and on Form 10-Q for the quarters ended March 31, June 30, and Sept. 30,
2003.
-0-
PRESS CONTACT: Steve Sechrist
503/226-4211 Ext. 3517
INVESTOR CONTACT: James Boehlke
503/721-2451
503/226-4211 Ext. 2451
NORTHWEST NATURAL GAS COMPANY
Comparative Income Statement
(Consolidated - Unaudited)
Three Months Ended
-------------------
12/31/03 12/31/02 Increase
-------- -------- ----------
1.Gross Operating Revenues $ 217,747,000 $ 182,223,000 $ 35,524,000
2.Net Income $ 21,671,000 $ 18,345,000 $ 3,326,000
3.Earnings Applicable to
Common Stock $ 21,671,000 $ 17,832,000 $ 3,839,000
4.Average Shares of
Common Stock
Outstanding 25,888,000 25,555,000 333,000
5.Basic Earnings Per Share
of Common Stock $ 0.84 $ 0.70 $ 0.14
6.Diluted Earnings Per Share
of Common Stock $ 0.83 $ 0.69 $ 0.14
Twelve Months Ended
------------------- Increase
12/31/03 12/31/02 (Decrease)
-------- -------- ----------
1.Gross Operating Revenues $ 611,256,000 $ 641,376,000 $ (30,120,000)
2.Net Income $ 45,991,000 $ 43,792,000 $ 2,199,000
3.Earnings Applicable to
Common Stock $ 45,697,000 $ 41,512,000 $ 4,185,000
4.Average Shares of
Common Stock
Outstanding 25,741,000 25,431,000 310,000
5.Basic Earnings Per Share
of Common Stock $ 1.78 $ 1.63 $ 0.15
6.Diluted Earnings Per Share
of Common Stock $ 1.76 $ 1.62 $ 0.14
NORTHWEST NATURAL GAS COMPANY
Financial Highlights
(Thousands, except per share amounts)
Fourth Quarter - 2003
3 MONTHS ENDED 12 MONTHS ENDED
DECEMBER 31 DECEMBER 31
2003 2002 2003 2002
-------------------------- -------------------------
Gross Operating Revenues $ 217,747 $ 182,223 $ 611,256 $ 641,376
Cost of Sales 126,283 99,968 323,190 353,832
-------------------------- -------------------------
Operating Margin 91,464 82,255 288,066 287,544
-------------------------- -------------------------
Operating Expense:
O&M 26,217 23,033 96,420 85,120
Other Taxes 10,239 8,441 35,125 34,076
DD&A 14,189 13,457 54,249 52,090
-------------------------- -------------------------
Total Operating Expenses 50,645 44,931 185,794 171,286
-------------------------- -------------------------
Operating Income 40,819 37,324 102,272 116,258
Other Income (Expense) 615 (711) 2,150 (14,890)
Interest Charges - Net 8,601 8,754 35,099 34,132
Income Tax Expense 11,162 9,514 23,332 23,444
-------------------------- -------------------------
Net Income from Operations 21,671 18,345 45,991 43,792
Preferred and Preference Dividends - 513 294 2,280
-------------------------- -------------------------
Earnings Applicable to Common Stock $ 21,671 $ 17,832 $ 45,697 $ 41,512
========================== =========================
Common Shares Outstanding:
Average for Period 25,888 25,555 25,741 25,431
End of period 25,938 25,586 25,938 25,586
Earnings per Share:
Basic $ 0.84 $ 0.70 $ 1.78 $ 1.63
Diluted $ 0.83 $ 0.69 $ 1.76 $ 1.62
Dividends Paid Per Share $ 0.325 $ 0.315 $ 1.27 $ 1.26
Book Value Per Share - end of period $ 19.53 $ 18.88 $ 19.53 $ 18.88
Market Closing Price - end of period $ 30.75 $ 27.06 $ 30.75 $ 27.06
BALANCE SHEET DATA (AT END OF PERIOD):
Total assets $ 1,572,822 $ 1,342,791 $ 1,572,822 $ 1,342,791
Common Stock Equity $ 506,519 $ 483,103 $ 506,519 $ 483,103
Long-term debt and redeemable preferred stock $ 500,319 $ 454,195 $ 500,319 $ 454,195
(including amounts due in one year)
OPERATING STATISTICS:
Total Customers-end of period 578,150 560,067 578,150 560,067
Gas Deliveries (therms)
Res. & Comm. Customers 203,719 188,826 581,890 590,629
Industrial Firm 17,638 13,241 55,314 63,215
Industrial Interruptible 22,919 3,517 47,994 26,241
Transportation 105,320 120,724 414,554 445,999
------------------------- -------------------------
Total 349,596 326,308 1,099,752 1,126,084
Gas Revenues
Res. & Comm. Customers $ 189,876 $ 162,563 $ 519,323 $ 543,508
Industrial Firm 11,115 7,876 33,578 42,965
Industrial Interruptible 11,297 1,771 23,661 15,937
Transportation 3,252 6,153 17,962 26,020
Other revenues 129 1,576 7,460 4,018
------------------------- -------------------------
Total $ 215,669 $ 179,939 $ 601,984 $ 632,448
Cost of gas sold $ 126,262 $ 99,959 $ 323,128 $ 353,034
Net operating revenues (utility margin) $ 89,407 $ 79,980 $ 278,856 $ 279,414
Degree Days
Normal (20-year average) 1,603 1,609 4,206 4,216
Actual 1,496 1,508 3,952 4,232
Colder (warmer) than normal -7% -6% -6% 0%