Exhibit 99.2
April 20, 2000
TO: Members of the Financial Community
SUBJECT: 2000 First Quarter Results
DUKE ENERGY EARNINGS PER SHARE
Duke Energy Corporation earned $1.06 per share for the first quarter of 2000.
Earnings per share for the first quarter last year were $0.83, excluding the
extraordinary gain of $1.82 on the sale of the Midwest Pipelines. Earnings
before interest and taxes (EBIT) for the first quarter of 2000 were $859
million, a 26% increase over the same period last year.
Strong earnings results for the quarter were driven by significant growth in the
Energy Services and Field Services business segments. The Energy Services group
as a whole increased its EBIT by 380%. This substantial earnings growth resulted
from both acquisitions and strategic sales of assets. Also contributing to the
strong growth was Field Services, which saw a 475% growth in EBIT, benefiting
from much improved natural gas liquids (NGL) prices and the acquisition of
UPFuels last year. Duke Ventures grew its earnings by 31%, while the Northeast
Pipelines increased earnings more than 10% as a result of increased earnings
from expansion projects. Franchised Electric benefited from strong sales to
residential and commercial customers this quarter to increase its EBIT by more
than 8%.
A detailed reconciliation of Earnings per Share for the first quarter is
attached.
FIELD SERVICES
EBIT for the first quarter of 2000 was $69 million, up from $12 million last
year. The significant growth in EBIT is primarily a result of the UPFuels
acquisition and several other asset purchases since the first quarter of 1999.
Field Services continued to enjoy strong NGL prices, which averaged $0.50 per
gallon this quarter compared to $0.23 for the first quarter last year.
During the quarter, Field Services acquired by transfer from Duke Energy the
general partnership interest and responsibility of TEPPCO Partners, L.P. On
March 31, 2000, Field Services completed the combination of its assets with
Phillips Petroleum's gas gathering, processing and marketing unit to form a new
company, also called Duke Energy Field Services (DEFS). Field Services also
closed on March 31 the acquisition of gathering and processing assets in Central
Oklahoma from Conoco Inc. and Mitchell Energy & Development Corporation.
1
An analysis of Field Services' margins by contract type is attached.
NORTH AMERICAN WHOLESALE ENERGY
North American Wholesale Energy, which is primarily Duke Energy North America
(DENA), reported EBIT of $56 million for the first quarter of 2000, compared to
$27 million for the same period last year. The $63 million gain on the sale of
the Hidalgo generation facility was partially offset by reduced earnings from
the California generation facilities and increased development costs.
Duke Energy North America continued to demonstrate its ability to actively
manage its energy portfolio to capture market premiums and recycle capital to
achieve higher expected returns. Proceeds from the sale of its remaining 78.5
percent ownership in the Hidalgo Energy Project have been deployed to three new
construction projects, the Hinds and Attala projects in Mississippi and the
McClain project in Oklahoma. These three projects are expected to be in
operation by June 2001.
INTERNATIONAL ENERGY
International Energy, comprised of the regional energy businesses of Duke Energy
International (DEI), reported first quarter EBIT of $102 million. EBIT for the
first quarter of 1999 was $(1) million. The significant increase in EBIT was
attributable to new earnings from acquisitions in Australia and Latin America
and a $54 million gain on sale of the LNG ships.
During the quarter, DEI continued to build its regional energy business in Latin
America by acquiring an additional 51% of Paranapanema, a Brazilian generating
company, and closing on the purchase of generating assets in Argentina. In
Australia, construction on the Eastern Gas Pipeline is more than 75% complete
and still on track to be in service by September 2000. DEI also announced its
first acquisition in Europe by purchasing from ExxonMobil, its natural gas
marketing company in the Netherlands. DEI plans to expand its European
operations into both gas and power trading in the near future.
TRADING AND MARKETING
Trading and Marketing reported EBIT of $22 million, an increase of $4 million
compared to the first quarter last year. This quarter's positive results were
largely due to increased earnings from new acquisitions and new businesses,
partially offset by lower financial trading margins.
Duke Energy Merchants continued to grow its commodity portfolio by acquiring
Northridge Energy, a West Coast refined products trader. DEM also made equity
investments in Canadian 88, securing additional equity gas, and Agrifos
Fertilizer, adding another commodity to the trading portfolio. Trading and
Marketing continued to expand its long-term origination business by entering
into agreements with Irving Oil, Detroit Edison and Northeast Utilities.
2
OTHER ENERGY SERVICES
Other Energy Services, comprised of Duke/Fluor Daniel, Duke Engineering &
Services (DE&S), and DukeSolutions, reported first quarter EBIT of $7 million, a
$12 million increase over the same period last year. Earnings growth resulted
from increased earnings from new projects and decreased operating expenses.
DukeSolutions turned earnings positive at the end of the first quarter. DE&S
signed contracts this quarter to provide engineering services to Texas
Utilities' Comanche Peak Nuclear Station and operation services at the High Flux
Isotope Reactor at the Oak Ridge National Laboratory. Duke/Fluor Daniel has more
than 10,000 MW under contract with both Duke Energy businesses and outside
parties, maintaining its leadership position in the fossil-fuel generation
construction business.
NATURAL GAS TRANSMISSION
Natural Gas Transmission's EBIT for the first quarter of 2000 was $152 million.
EBIT for the first quarter of 1999 was $138 million, excluding $70 million
attributable to the Midwest Pipelines, which were sold in the first quarter of
1999. The $14 million increase primarily resulted from additional earnings from
the East Tennessee acquisition and successful market expansion projects.
During the quarter, Duke Energy acquired the East Tennessee Natural Gas Company,
which will integrate with the Texas Eastern system. The gas demand in this
region is growing at a faster pace than the national average and East Tennessee
is well positioned to serve this growing market for both consumers and electric
generation. Also during the quarter, Duke Energy entered into a 50/50
partnership with The Williams Cos. to jointly develop, construct and operate the
Buccaneer Gas Pipeline Project to serve the growing Florida market. This
pipeline will cross the Gulf of Mexico from Alabama to Central Florida.
FRANCHISED ELECTRIC
EBIT for Franchised Electric was $441 million for the first quarter of 2000, a
$34 million increase over last year primarily driven by increased sales to new
and existing retail customers. Electric Transmission is included with Duke Power
for financial reporting purposes.
Increased sales to retail customers boosted total kilowatt-hour sales for the
quarter by 5.2%. Sales to general service and residential customers increased
5.7% and 4.5%, respectively. Total industrial sales declined slightly, by 0.2%,
during the quarter. The average number of customers for the quarter increased
2.6%.
Heating degree hours were 3.7% lower than in the first quarter last year.
Nuclear outage days for the first quarter of 2000 totaled 45, compared to 26 for
the same period last year. Capacity utilization of our nuclear facilities was
94%, compared to 98% last year.
3
DUKE VENTURES
The Duke Ventures business segment, comprised of Crescent Resources, DukeNet
Communications and Duke Capital Partners, reported EBIT of $17 million for the
first quarter of 2000, an increase of $4 million over the same period last year.
The increase in EBIT is primarily due to reduced operating losses for the PCS
business at DukeNet Communications.
During the quarter, Duke Energy announced the formation of Duke Capital
Partners, a wholly owned finance company that will provide lending, investment
banking and asset management services to the wholesale and commercial energy
markets. The new entity will focus on serving the financing needs of customers
and partners of Duke Energy businesses. Also during the quarter, DukeNet
Communications, the telecommunications business of Duke Energy, announced plans
to expand its 11,500-mile fiber optic cable network to a national network
through interconnect agreements to deliver bandwidth capacity to major
commercial customers.
CONFERENCE CALL NOTICE
Today at 2:00 p.m. EDST, Rick Priory, Chairman, President and CEO, and Rich
Osborne, Executive Vice President and Chief Financial Officer, will hold a
conference call to review First Quarter 2000 earnings. A question and answer
session will follow.
Please dial (800/946-0712) or for international callers (719/457-2641) with
confirmation code 852156. Please call at least 5 to 10 minutes prior to 2:00
p.m. EDST. A playback of the call will be available through May 1, 2000 and can
be heard by calling (888/203-1112) or (719/457-0820) for international callers
with the code for both being 852156.
In addition, you will be able to participate in a live webcast of today's
conference call. Go to the company's website, www.duke-energy.com and follow the
instructions. By accessing the website, interested parties may see slides and
listen to the audio of the conference call but will be unable to ask questions.
You must dial into the conference call number listed above if you would like the
opportunity to participate in the question and answer portion of the conference
call.
If you have any questions about these or other matters, please call John
Arensdorf (704/382-5087) or me (704/382-8695).
Sue Becht
Vice President, Investor Relations
4
DUKE ENERGY CORPORATION
RECONCILIATION OF CONSOLIDATED EARNINGS
1ST QTR
--------
1999 EARNINGS PER SHARE $ 2.65
*Extraordinary gain on sale of Midwest Pipelines (1.82)
--------
1999 EPS BEFORE EXTRAORDINARY ITEM 0.83
1999 RECONCILING ITEMS:
- -----------------------
1Q Earnings from Midwest Pipelines (0.12)
1Q Gain on sale of Mecklenburg Cogen facility (0.01)
2000 RECONCILING ITEMS:
- -----------------------
Franchised Electric: Increased electric sales, net
of fuel and purchased power 0.06
Gas Transmission: Increased earnings from
expansion projects 0.03
Field Services: Increased in NGL pricing, net
of hedging 0.05
Increased earnings from
acquisitions 0.05
Trading and Marketing: Increased earnings from new
business 0.05
Decreased financial trading
margins (0.04)
North American Monetization of power positions 0.12
Wholesale Energy: Decreased earnings from
California assets (0.03)
Increased development costs (0.02)
International Energy: Increased earnings from new
acquisitions 0.08
Gain on sale of LNG ships 0.09
Other Energy Services: Increased earnings from new
projects 0.01
Decreased operating expenses 0.01
Duke Ventures: Reduced operating loss at DukeNet
Communications 0.01
Other Items: Increased interest expense (0.09)
Increased interest on trust
preferred securities (0.02)
Decrease in Minority Interest
Expense 0.02
Other reconciling items, net (0.02)
--------
FIRST QUARTER 2000 EARNINGS PER SHARE $ 1.06
========
DUKE ENERGY FIELD SERVICES
GAS VOLUME / MARGIN BY CONTRACT TYPE
BASIS OF PRESENTATION:
Margins for POP (Percentage of Proceeds) and Keepwhole contracts are stated on the basis
of the natural gas feedstock used in our processing activity.
2000 1999 1999 1999 1999
Qtr 1 Qtr 4 Qtr 3 Qtr 2 Qtr 1
----- ----- ----- ----- -----
CONTRACT TYPE:
POP: Gas Volume - TBtu/d 2.1 2.1 2.2 2.2 1.2
(Long NGL/Long gas) Margin (Dollars in Millions) $ 78.7 $ 70.3 $ 66.5 $ 49.0 $ 23.2
Margin/MMbtu $ 0.40 $ 0.36 $ 0.32 $ 0.25 $ 0.21
KEEPWHOLE: Gas Volume - TBtu/d 1.8 1.7 1.5 1.5 1.0
(Long NGL/Short gas) Margin (Dollars in Millions) $ 57.4 $ 38.4 $ 31.7 $ 20.1 $ 6.0
Margin/MMbtu $ 0.35 $ 0.24 $ 0.23 $ 0.15 $ 0.07
FEE: GAS Gas Volume - TBtu/d 4.7 4.5 4.5 4.6 2.5
(Primarily gathering Margin (Dollars in Millions) $ 49.0 $ 47.4 $ 47.3 $ 45.4 $ 26.5
& transport) Margin/MMbtu $ 0.12 $ 0.12 $ 0.11 $ 0.11 $ 0.12
FEE: NGL NGL Volume - MBbl/day (7) 175.4 164.8 170.3 159.6 30.2
(NGL transport & Margin (Dollars in Millions) $ 11.4 $ 12.0 $ 15.8 $ 11.1 $ 1.9
fractionation) Margin/Gallon $ 0.02 $ 0.02 $ 0.02 $ 0.02 $ 0.02
NGL MARKETING Margin (Dollars in Millions) $ 19.9 $ 4.9 $ 4.6 $ 5.3 $ 1.1
OTHER: Margin (Dollars in Millions) (4),(5) $ 8.3 $ 6.8 $ 1.7 $ 0.6 $ 6.5
------- ------- ------- ------- -------
TOTAL MARGIN $ 224.6 $ 179.8 $ 167.5 $ 131.5 $ 65.2
Direct Operating and G&A Expense $ (77.8) $ (73.6) $ (69.0) $ (63.6) $ (45.0)
DD&A $ (37.3) $ (38.9) $ (34.8) $ (35.5) $ (19.8)
Other Income (6) $ (40.8) $ (19.6) $ (15.2) $ 3.6 $ 11.4
------- ------- ------- ------- -------
EBIT - Field Services $ 68.7 $ 47.7 $ 48.5 $ 36.0 $ 12.0
Total Gas Volume per above (TBtu/d) 8.6 8.3 8.2 8.3 4.7
Volumes Doublecounted (TBtu/d) (2.6) (2.4) (2.4) (3.0) (1.3)
------- ------- ------- ------- -------
Reported Gas Volumes (TBtu/d) 6.0 5.9 5.8 5.3 3.4
NYMEX HENRY HUB (1) $ 2.52 $ 2.59 $ 2.59 $ 2.14 $ 1.75
WGHTD AVG NGL PRICE (2) $ 0.50 $ 0.41 $ 0.40 $ 0.31 $ 0.23
FRAC SPREAD (3) $ 3.32 $ 2.20 $ 2.07 $ 1.49 $ 0.95
FOOTNOTES:
(1) Represents last day closing of Nymex Henry Hub.
(2) Represents monthly average Belvieu and Conway pricing weighted with the Company's NGL component mix.
(3) Represents the difference between an average mmbtu price of five representative pipeline indices and the
Company's weighted average NGL price per gallon converted to an Mmbtu price equivalent.
(4) The margins associated with the Company's joint ventures are allocated to the proper Contract Type above;
the Operating, G&A, and Depreciation expenses associated with these joint ventures are included in "Other".
(5) "Other" includes Condensate Sales, Helium Margin, Operating Costs /G&A/Depreciation related to Joint Ventures,
and other miscellaneous items.
(6) "Other Income" includes earnings from TEPPCO, risk management activity, and gain/(loss) on asset sales.
(7) This volume represents equity and third party volumes transported on the Company's liquid pipeline assets and
fractionated volume associated with our 'non-operating' interest in certain facilities at Mont Belvieu.
MARCH 2000
QUARTERLY HIGHLIGHTS
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
--------------------------------
(IN MILLIONS, EXCEPT WHERE NOTED) 2000 1999
- -------------------------------------------------------------------------------------------------------------------
COMMON STOCK DATA
Earnings Per Share (before extraordinary item)
Basic $ 1.06 $ 0.83
Dilutive 1.06 0.83
Earnings Per Share
Basic 1.06 2.65
Dilutive 1.06 2.64
Dividends Per Share 0.55 0.55
Actual Shares Outstanding 367 364
Weighted Average Shares Outstanding
Basic 367 363
Dilutive 367 364
- -------------------------------------------------------------------------------------------------------------------
INCOME
Operating Revenues $ 7,236 $ 4,178
Earnings Before Interest and Taxes (EBIT) 859 683
Interest Expense 185 132
Minority Interests (a) 31 35
Income Taxes 250 209
Extraordinary Gain - 660
Net Income 393 967
Preferred Stock Dividends and Redemption Premiums 5 5
Earnings Available for Common Stockholders $ 388 $ 962
- -------------------------------------------------------------------------------------------------------------------
CAPITALIZATION
Common Equity 41% 51%
Minority Interest 5% 1%
Preferred Stock 1% 2%
Trust Preferred Securities 6% 5%
Total Debt 47% 41%
- -------------------------------------------------------------------------------------------------------------------
SEC Fixed Charges Coverage 4.2 4.6
Total Debt $ 10,787 $ 7,230
Book Value Per Share 25.18 24.07
- -------------------------------------------------------------------------------------------------------------------
CAPITAL AND INVESTMENT EXPENDITURES
Franchised Electric $ 177 $ 125
Natural Gas Transmission 428 42
Field Services 128 1,445
Trading and Marketing 97 5
North American Wholesale Energy 238 86
International Energy 447 296
Other Energy Services 11 8
Duke Ventures 64 64
- -------------------------------------------------------------------------------------------------------------------
EBIT BY BUSINESS SEGMENT
Franchised Electric $ 441 $ 407
Natural Gas Transmission 152 208
Field Services 69 12
Trading and Marketing 22 18
North American Wholesale Energy 56 27
International Energy 102 (1)
Other Energy Services 7 (5)
Duke Ventures 17 13
Other Operations (13) (17)
------------- ------------
Total Segment EBIT 853 662
EBIT attributable to Minority Interests 6 21
------------- ------------
Total EBIT $ 859 $ 683
============= ============
- -------------------------------------------------------------------------------------------------------------------
(a) Includes expense related to the Trust Preferred Securities of $27 million
and $18 million for the three months ended March 31, 2000 and 1999,
respectively.
MARCH 2000
QUARTERLY HIGHLIGHTS
(unaudited)
Three Months Ended
March 31,
----------------------------
(In millions, except where noted) 2000 1999
- --------------------------------------------------------------------------------
FRANCHISED ELECTRIC
Operating Revenues $ 1,115 $ 1,061
Operating Expenses 693 675
Other Income (Expenses) 19 21
----------- -----------
EBIT $ 441 $ 407
----------- -----------
Sales, GWh 20,554 19,537
- --------------------------------------------------------------------------------
NATURAL GAS TRANSMISSION
Operating Revenues $ 286 $ 402
Operating Expenses 146 202
Other Income (Expenses) 12 8
----------- -----------
EBIT $ 152 $ 208
----------- -----------
Throughput, TBtu 505 811
- --------------------------------------------------------------------------------
FIELD SERVICES
Operating Revenues $ 1,466 $ 344
Operating Expenses 1,393 332
Other Income (Expenses) (4) -
----------- -----------
EBIT $ 69 $ 12
----------- -----------
Natural Gas Gathered and Processed/
Transported, TBtu/day 6.0 3.4
Natural Gas Liquids Production, MBbl/d 231.2 107.6
Natural Gas Marketed, TBtu/day 0.5 0.4
Average Natural Gas Price per MMBtu $ 2.52 $ 1.75
Average Natural Gas Liquids Price per Gallon $ 0.50 $ 0.23
- --------------------------------------------------------------------------------
TRADING AND MARKETING
Operating Revenues $ 4,431 $ 2,286
Operating Expenses 4,414 2,257
Other Income (Expenses) 2 4
Minority Interest Expense (Benefit) (3) 15
----------- -----------
EBIT $ 22 $ 18
----------- -----------
Natural Gas Marketed, TBtu/day 12.0 11.0
Electricity Marketed, GWh 50,353 21,837
- --------------------------------------------------------------------------------
NORTH AMERICAN WHOLESALE ENERGY
Operating Revenues $ 142 $ 81
Operating Expenses 84 53
Other Income (Expenses) 2 3
Minority Interest Expense 4 4
----------- -----------
EBIT $ 56 $ 27
----------- -----------
Proportional MW Capacity Owned (a) 6,889 5,012
Estimated Proportional Investment In
Project Net Assets (a) $ 1,606(b) $ 1,502(b)
- --------------------------------------------------------------------------------
INTERNATIONAL ENERGY
Operating Revenues $ 154 $ 45
Operating Expenses 115 48
Other Income (Expenses) 68 4
Minority Interest Expense 5 2
----------- -----------
EBIT $ 102 $ (1)
----------- -----------
Proportional MW Capacity Owned (a) 4,205 906
Proportional Maximum Pipeline Capacity, MMcf/d (a) 332 332
Estimated Proportional Investment in Project
Net Assets (a) $ 2,882(c) $ 588(c)
- --------------------------------------------------------------------------------
OTHER ENERGY SERVICES
Operating Revenues $ 275 $ 154
Operating Expenses 268 159
----------- -----------
EBIT $ 7 $ (5)
----------- -----------
- --------------------------------------------------------------------------------
DUKE VENTURES
Operating Revenues $ 34 $ 26
Operating Expenses 17 13
----------- -----------
EBIT $ 17 $ 13
----------- -----------
- --------------------------------------------------------------------------------
(a) Includes under construction or under contract.
(b) Includes total proportional estimated costs to complete projects under
construction or contract of $542 million and $490 million as of March 31,
2000 and 1999, respectively.
(c) Includes total proportional estimated costs to complete projects under
construction or under contract of $90 million and $259 million as of March
31, 2000 and 1999, respectively.