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Gas News Release
February 9, 1999
Consolidated Natural Gas Reports 1998 Earnings
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Earnings per share from continuing operations: $3.00
in 1998 vs. $3.30 in 1997; $1.01 vs. 92 cents in fourth quarter
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Warmest weather in 52 years, lower oil and natural
gas prices hurt results
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Cost-cutting and higher production lift fourth quarter
PITTSBURGH - Consolidated Natural Gas Company today reported
that income from continuing operations for 1998 was $287.7 million, or $3.00 a
diluted share, compared with $318.9 million, or $3.30 a diluted share, in 1997.
For the three months ended December 31, 1998, income from
continuing operations was $97.2 million, or $1.01 a diluted share, compared
with $89.1 million, or 92 cents a diluted share for the same period in 1997.
Results for the quarter and all of 1998 were hurt by the
negative impacts of significantly warmer weather in the service territories
of CNG's local gas distribution companies and lower oil and natural gas wellhead
prices caused by a slump in those markets. The weather in CNG's service territories
was 18 percent warmer than normal in 1998, the warmest year since 1946.
Results in the 1998 fourth quarter also benefited from lower
operating expenses compared with 1997, but were hurt by a pretax charge of $9.4
million for previously announced workforce reduction costs. The 1997 fourth
quarter included a noncash charge of $10.4 million pretax related to the impairment
of Canadian oil-producing properties.
Income from continuing operations includes all of CNG's operations
except wholesale energy marketing and trading. CNG announced in April 1998 that
it would exit that business, results of which now fall under discontinued operations.
Net income, which includes income from both continuing and
discontinued operations, for all of 1998 was $238.8 million, or $2.49 a diluted
share, versus $304.4 million, or $3.15 a diluted share, for 1997. The 1998 net
income was reduced by 51 cents a diluted share because of discontinued operations,
including 33 cents a diluted share for costs related to the shutdown of the
company's wholesale energy marketing and trading business. Net income for the
1998 fourth quarter was $95.0 million, or 99 cents a diluted share, versus $89.4
million, or 92 cents a diluted share, in the comparable 1997 period.
"The 1998 results were disappointing for CNG coming
off two consecutive years of record earnings," said George A. Davidson,
Jr., chairman and chief executive officer. "However, 1998 was also marked
by a number of significant accomplishments that should benefit the company in
1999 and beyond." Among the accomplishments cited by Mr. Davidson were:
-- A record-setting year by CNG's exploration and production
operations, which added 413 billion cubic feet equivalent (Bcfe) of reserves,
equal to more than 204 percent of production. Included in the reserve additions
were 39 billion cubic feet of reserves purchased by CNG Producing Company from
The Peoples Natural Gas Company, a CNG local distribution company. This is the
fifth consecutive year CNG Producing has added reserves of at least 150 percent
of production and the third consecutive year of increased production.
-- Reorganizing the management of CNG's four local gas distribution
companies and its gas transmission and storage subsidiary under a single management
team to improve the efficiency of those operations and better position them
for growth.
-- Installation of common financial systems at CNG and its
subsidiaries that are resulting in lower costs as well as more timely reporting.
Results by Business Segment
Here are the full-year and fourth quarter 1998 results for
each of the company's primary business segments.
Pretax operating income for exploration and production in
1998 was $116.6 million, compared with $142.8 million in 1997. For the fourth
quarter, pretax operating income for this segment was $35.6 million, compared
with $30.8 million a year earlier.
Primarily due to the effects of an active storm season in
the Gulf of Mexico that caused well shut-ins and delays in completing new facilities,
gas production for all of 1998 remained about flat at 154.9 billion cubic feet
(Bcf), compared with 155.3 Bcf in 1997. Natural gas production increased 8 percent
in the fourth quarter, to 41.4 Bcf from 38.4 Bcf a year earlier.
In 1998, oil production was up 8 percent, to 7.9 million
barrels from 7.3 million barrels. Oil production increased by 4 percent in the
fourth quarter, to 2.1 million barrels, versus 2.0 million barrels a year earlier.
On a gas-equivalent basis, production was up 2 percent in
1998 to 202.3 Bcfe from 199.2 Bcfe in 1997 and up 7 percent in the fourth quarter
to 53.8 Bcfe from 50.4 Bcfe. However, the impact of the Asian economic crisis
on oil demand and an abundance of natural gas related to mild U.S. weather resulted
in lower wellhead prices that more than offset the benefits of production gains.
The average wellhead price for CNG's natural gas production in 1998 was $2.26
a thousand cubic feet (Mcf), compared with $2.43 an Mcf in 1997. For the fourth
quarter, the average wellhead price for gas was $2.17 an Mcf, compared with
$2.54 an Mcf a year earlier.
CNG's average wellhead price for oil in 1998 was $11.54 a
barrel, compared with $16.07 a barrel in 1997. In the fourth quarter of 1998,
the average wellhead price for oil was $9.74 a barrel, compared with $15.69
a barrel a year earlier.
Pretax operating income for the company's four local gas
distribution utilities in 1998 was $208.2 million, compared with $266.6 million
in 1997. For the fourth quarter, pretax operating income was $76.1 million in
1998, compared with $95.4 million a year earlier.
Warmer weather in CNG's distribution service territories
was the main factor for the lower income in both 1998 periods. The weather was
18 percent warmer than normal for all of 1998 and 19 percent warmer than 1997.
The warmer-than-normal weather resulted in a 46-cent reduction in earnings a
diluted share in 1998. The weather was 12 percent warmer than normal in the
fourth quarter of 1998 and 16 percent warmer than a year earlier. The warmer-than-normal
weather resulted in an 8-cent reduction in earnings a diluted share. This amount
is net of the benefit of a new weather insurance program realized in the fourth
quarter.
Weather also adversely affected natural gas throughput at
the distribution companies. Throughput was 406.5 Bcf in all of 1998, compared
with 462.1 Bcf in 1997. For the fourth quarter, throughput was 124.7 Bcf in
1998, compared with 141.8 Bcf a year earlier.
Pretax operating income for CNG's interstate gas pipeline
and storage segment was $183.6 million in 1998, compared with $180.9 million
in 1997. For the fourth quarter, pretax operating income was $45.5 million in
1998, compared with $40.2 million a year earlier.
The warmer weather also reduced transmission gas throughput,
although pipeline rate design makes income in this segment much less sensitive
to weather variations. Throughput for all of 1998 was 612.5 Bcf, compared with
732.8 Bcf in 1997. In the fourth quarter, throughput was 172.6 Bcf in 1998,
compared with 211.5 Bcf a year earlier.
Consolidated Natural Gas Company is one of the nation's largest
producers, transporters, distributors and retail marketers of natural gas. The
company's natural gas transmission and distribution operations serve customers
in Pennsylvania, Ohio, Virginia, West Virginia, New York and other states in
the Northeast and Mid-Atlantic regions. CNG explores for and produces oil and
natural gas in the United States and Canada. The company also selectively participates
in energy businesses abroad.
CNG's recent news releases are available 24 hours a day on
the Internet, by fax machine, or by voice recording. On the Internet, use CNG's
Web site: www.cng.com. For faxing, call 1-800-758-5804 on a touch-tone phone
and enter CNG's extension number, which is 203456. From a menu, you will then
be able to select releases that will be faxed to you immediately without charge.
For voice recordings, call 1-888-CNG-NEWS. This line is toll-free.
This press release contains forward-looking statements. The
company wishes to caution readers that the assumptions which form the basis
for forward-looking statements with respect to or that may impact earnings for
fiscal 1999, and thereafter, include many factors that are beyond the company's
ability to control or estimate precisely, such as estimates of future market
conditions and the behavior of other market participants. Other factors include,
but are not limited to, weather conditions, economic conditions in the company's
service territory, fluctuations in energy-related commodity prices, conversion
activity, other marketing efforts and other uncertainties.
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| Total operating
revenues |
$2,760,406,000 |
$3,177,110,000 |
| Income from continuing
operations |
$ 287,711,000 |
$ 318,908,000 |
| Discontinued operations* |
$(48,945,000) |
$(14,528,000) |
| |
|
|
| Net income |
$ 238,766,000 |
$ 304,380,000 |
| Earnings per common
share -- diluted |
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|
| Income from continuing
operations |
$3.00 |
$3.30 |
| Discontinued operations* |
$(0.51) |
$(0.15) |
| Net income |
$2.49 |
$3.15 |
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| Earnings per common
share -- basic |
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| Income from continuing
operations |
$3.03 |
$3.36 |
| Discontinued operations* |
$(0.51) |
$(0.15) |
| Net income |
$2.52 |
$3.21 |
| |
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|
| Average common shares
- diluted |
96,335,000 |
100,460,000 |
| Average common shares
- basic |
94,836,000 |
94,868,000 |
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| Three Months Ended
December 31 |
1998 |
1997 |
| Total operating
revenues |
$807,365,000 |
$940,944,000 |
| Income from continuing
operations |
$97,237,000 |
$89,083,000 |
| Discontinued operations* |
$(2,221,000) |
$283,000 |
| |
|
|
| Net income -- |
$ 95,016,000 |
$ 89,366,000 |
| Earnings per common
share -- diluted |
|
|
| Income from continuing
operations |
$1.01 |
$0.92 |
| Discontinued operations* |
$(0.02) |
|
| Net income |
$0.99 |
$0.92 |
| |
|
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| Earnings per common
share -- basic -- |
|
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| Income from continuing
operations |
$1.02 |
$0.94 |
| Discontinued operations* |
$(0.02) |
|
| Net income |
$1.00 |
$0.94 |
| |
|
|
| Average common shares
- diluted |
96,178,000 |
100,859,000 |
| Average common shares
- basic |
95,348,000 |
95,176,000
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*The 1998 amount reflects the closing of the sale of CNG's
wholesale gas trading and marketing business and other adjustments to the reserve
CNG had estimated in 1998 in connection with its decision to discontinue that
business.
# # #
For further information contact:
Chet Wade
412-690-1361
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