Contact: Clem Teng (Investors) (213) 244-3966 Larry Pickett (News Media) (213) 244-2585 FOR IMMEDIATE RELEASE January 27, 1998 PACIFIC ENTERPRISES ANNOUNCES EARNINGS FOR 1997, 4TH QUARTER LOS ANGELES - Pacific Enterprises (NYSE-PET), the parent of Southern California Gas Co., today reported net income of $184 million or $2.22 per share of common stock for 1997, compared to 1996 earnings of $203 million or $2.37 per common share. Excluding merger-related and nonrecurring items in both periods, earnings increased by 7 percent to $2.41 per share in 1997 from $2.26 per share in 1996. For the fourth quarter of 1997, the company reported net income of $40 million or 47 cents per share, compared to net income of $48 million or 56 cents per share for the same period of 1996. These results include merger-related expenses of 4 cents and 5 cents per share, respectively, for each period. -MORE- 4TH QUARTER EARNINGS --2 Willis B. (Bill) Wood Jr., Pacific Enterprises chairman and chief executive officer, said that 1997 was an excellent year for PE and its shareholders, driven by the performance of it's major subsidiary, Southern California Gas Co. (SoCalGas) which exceeded the rate of return on rate base authorized by the California Public Utilities Commission (CPUC) and by other company efforts to position itself for the new energy marketplace. Consolidated results included 1997 net income of $231 million for SoCalGas, compared with $193 million in 1996. Results in 1996 were impacted by an after-tax, non-cash charge of $27 million related to a previous accounting estimate for a comprehensive settlement between SoCalGas and the CPUC. This charge impacted SoCalGas' net income, but had no effect on PE's consolidated income. For the fourth quarter of 1997, SoCalGas reported earnings of $49 million, compared with $57 million for the fourth quarter of 1996. Wood noted that SoCalGas' 1997 results were achieved within the implementation parameters of the Performance Based Regulation (PBR) order by the CPUC which went into effect Aug. 1. The impact of this order was partially offset by the greater volumes of gas transported during 1997 due to higher demand for gas used to generate electricity; by lower operating expenses and; by a 60-basis-point increase in the authorized common equity component in the utility's capital structure. -MORE- 4TH QUARTER EARNINGS --3 " We continue to believe that the PBR overall encourages a more competitive environment which provides SoCalGas with the opportunity to achieve its authorized return," noted Wood. Gas volumes delivered by SoCalGas in 1997 totaled 930 billion cubic feet (BCF), compared with 884 BCF in 1996. Gas transported for utility electric generation customers totaled 158 BCF for 1997 compared to 139 BCF in 1996. According to Wood, other achievements in 1997 that enhance shareholder value include: - - A 1997 total return to the shareholders of 30 percent which includes stock price appreciation and assumed reinvested dividends. - - A progression of regulatory approvals on the company's proposed merger with Enova Corporation (NYSE-ENA), parent of San Diego Gas & Electric. The Federal Energy Regulatory Commission (FERC) conditionally approved the merger on June 25, 1997; the Nuclear Regulatory Commission approved the merger on August 19, 1997; and the California Attorney General's office approved the merger on November 21, 1997. Final regulatory approvals must be gained from the CPUC, FERC, the U.S. Department of Justice and the Securities and Exchange Commission. -MORE- 4TH QUARTER EARNINGS -4 It is expected that all regulatory approvals will be granted and the new company, to be called Sempra Energy, will be operational in the summer of 1998. - - Maintenance of PE's strong financial position demonstrated by its excellent debt-to-total-capital ratio of 51 percent, along with $153 million in short-term investments and cash at year-end with no outstanding bank debt. - - The repurchase of 1.5 million shares of common stock during 1997, bringing total shares under the repurchase program to 2.4 million shares. - - Completion of the acquisitions with Enova of AIG Trading Corporation and CES/Way International, dramatically expanding the company's portfolio of competitive energy services and capabilities. - - Expansion of domestic operations with new natural gas distribution projects in North Carolina and Maine under regional joint ventures and partnerships by Energy Pacific, the joint venture company of Pacific Enterprises and Enova. Wood noted that these business ventures demonstrate significant moves by the company to position itself as a major player in the new national and international energy marketplace. Such moves, however, did affect Pacific Enterprise's earnings for the year with costs for the launch of new unregulated products and services and the higher level of international activity. -MORE- 4TH QUARTER EARNINGS --5 Pacific Enterprises' Energy Management Services (EMS), which is responsible for interstate and offshore gas pipeline operations and unregulated energy products and services, had losses of approximately $5 million for 1997 compared to net income of $6 million for the same period last year. The loss was partially due to a reduction of revenues related to the mid-year sale of Pacific Energy, completed on June 30, 1997, which included EMS' alternate energy electric generating assets. The sale was required prior to completion of the merger with Enova because of Pacific Enterprises ownership of these "Qualifying Facility" assets, which cannot be more than 50 percent owned by an electric utility holding company. Pacific Enterprises International had losses of $8 million for the 12 months of 1997 compared with losses of $5 million for 1996. Looking forward to 1998, it is expected that activities in the unregulated businesses, both domestic and international, will continue to incur start-up losses. Also, as a result of the impact of PBR on SoCalGas operations, Wood explained that it will be more difficult for the utility to achieve the level of returns above those authorized by the CPUC, that it has recently experienced. -MORE- 4TH QUARTER EARNINGS --6 Southern California Gas Co., PE's major subsidiary, is the nation's largest natural gas distributor with 4.8 million meters serving 17 million customers. In addition to its regulated operations, Pacific Enterprises also markets a wide range of unregulated energy products and services, including natural gas, and owns interests in international utility operations, interstate and offshore natural gas pipelines and centralized heating and cooling for large building complexes. ### PACIFIC ENTERPRISES AND SUBSIDIARY COMPANIES Three Months Ended Twelve Months Ended December 31, December 31, --------------------- --------------------- 1997 1996 1997 1996 - ------------------------------------------------------ ------ ------ ------ ------- (DOLLARS ARE IN MILLIONS, EXCEPT SHARE AND PER-SHARE AMOUNTS) REVENUE Operating Revenue $743 $776 $2,738 $2,563 Other Income 9 9 39 25 ------ ------ ------ ------ Total 752 785 2,777 2,588 ------ ------ ------ ------ EXPENSES Cost of Gas Distributed 272 295 1,059 866 Operating Expenses 293 302 918 910 Depreciation and Amortization 64 63 256 255 Other 28 27 106 106 ------ ------ ------ ------ Total 657 687 2,339 2,137 ------ ------ ------ ------ INCOME FROM OPERATIONS BEFORE INTEREST AND TAXES 95 98 438 451 INTEREST 25 21 103 97 ------ ------ ------ ------ INCOME FROM OPERATIONS BEFORE INCOME TAXES 70 77 335 354 INCOME TAXES 30 29 151 151 ------ ------ ------ ------ NET INCOME 40 48 184 203 DIVIDENDS ON PREFERRED STOCK 1 1 4 5 PREFERRED STOCK ORIGINAL ISSUE DISCOUNT - - - 2 ------ ------ ------ ------ NET INCOME APPLICABLE TO COMMON STOCK $39 $47 $180 $196 ------ ------ ------ ------ ------ ------ ------ ------ NET INCOME PER SHARE OF COMMON STOCK: BASIC $0.47 $0.56 $2.22 $2.37 ------ ------ ------ ------ ------ ------ ------ ------ DILUTED $0.47 $0.56 $2.21 $2.36 ------ ------ ------ ------ ------ ------ ------ ------ WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING (IN THOUSANDS) 81,158 82,652 81,124 82,626 ------ ------ ------ ------ ------ ------ ------ ------ - -------------------------------------------------------------------------------------------------------------- KEY CONSOLIDATED BALANCE SHEET STATISTICS December 31, --------------------- 1997 1996 - ------------------------------------------------------ ------ ------ (DOLLARS ARE IN MILLIONS, EXCEPT PER-SHARE AMOUNTS) SHORT-TERM DEBT $354 $262 CURRENT PORTION LONG-TERM DEBT 148 149 LONG-TERM DEBT 1,118 1,225 PREFERRED STOCK 175 175 COMMON EQUITY 1,389 1,360 ------ ------ TOTAL CAPITALIZATION $3,184 $3,171 ------ ------ ------ ------ DEBT TO TOTAL CAPITALIZATION 51% 52% BOOK VALUE PER SHARE $17.13 $16.58 PARENT CASH AND CASH EQUIVALENTS $151 $234 SOUTHERN CALIFORNIA GAS COMPANY SUPPLEMENTAL OPERATING DATA Three Months Ended Twelve Months Ended December 31 December 31, --------------------------------------------------- 1997 1996 1997 1996 - ------------------------------------------------------- --------------------------------------------------- GAS VOLUMES (BCF) Residential 73 74 237 233 Commercial/Industrial 20 21 80 82 ------ ------ ------ ------ Gas Volumes Sold 93 95 317 315 ------ ------ ------ ------ Residential 1 1 3 3 Commercial/Industrial 81 77 308 292 Utility Electric Generation 30 30 158 139 Wholesale 35 36 138 130 Exchange 2 1 6 5 ------ ------ ------ ------ Gas Volumes Transported or Exchanged 149 145 613 569 ------ ------ ------ ------ Total Throughput 242 240 930 884 ------ ------ ------ ------ ------ ------ ------ ------ Core 96 97 323 314 Noncore 146 143 607 570 ------ ------ ------ ------ Total Throughput 242 240 930 884 ------ ------ ------ ------ ------ ------ ------ ------ REVENUES (IN MILLIONS) Residential $569 $489 $1,736 $1,613 Commercial/Industrial 195 184 756 708 Utility Electric Generation 15 9 76 70 Wholesale 19 22 67 70 Exchange - - 1 1 ------ ------ ------ ------ Gas Revenues in Rates 798 704 2,636 2,462 Regulatory Balancing Accounts and Other (58) 25 5 (40) ------ ------ ------ ------ Total Utility Operating Revenues $740 $729 $2,641 $2,422 ------ ------ ------ ------ ------ ------ ------ ------ AVERAGE RATES ($/MCF) Residential $7.69 $6.52 $7.23 $6.83 Commercial/Industrial 1.93 1.88 1.95 1.89 Utility Electric Generation 0.50 0.30 0.48 0.50 Wholesale 0.54 0.61 0.49 0.54 Exchange 0.10 0.16 0.17 0.10 System Average Gas Sold 3.30 2.93 2.83 2.79 Core 7.36 6.30 6.94 6.59 Noncore 0.63 0.68 0.65 0.69 GAS PURCHASED (BCF) Total Market Gas 57 71 229 226 Affiliates 24 24 95 96 Other Long-Term Supplies 2 2 5 12 ------ ------ ------ ------ Total Gas Purchased 83 97 329 334 ------ ------ ------ ------ ------ ------ ------ ------ System Average Cost of Gas Purchased (Excluding Fixed Costs and Adjusted for Comprehensive Settlement), $/MCF $2.92 $2.66 $2.58 $1.88 OTHER OPERATING STATISTICS Degree Days 431 472 1,126 1,195 New Meters Added 12,435 11,607 43,720 44,406 Total Number of Active Meters (in thousands) - - 4,830 4,790 Capital Expenditures (in millions) $49 $73 $159 $197 Weighted Average Rate Base (in millions) - - $2,734 $2,777 Utility Book Value Per Share of PE Common Stock - - $16.89 $16.95 Authorized Return on Rate Base - - 9.49% 9.42% Authorized Return on Common Equity - - 11.60% 11.60% Achieved Return on Common Equity* - - 16.74% 14.35% *(ADJUSTED FOR NON-RECURRING SETTLEMENTS)