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OGE Energy Corp. Announces 3rd Quarter Results

Posted on: Thursday, 1 November 2007, 09:00 CDT

OKLAHOMA CITY, Nov. 1 /PRNewswire-FirstCall/ -- OGE Energy Corp. , the parent company of Oklahoma Gas and Electric Company (OG&E) and Enogex Inc., today reported earnings of $1.37 per diluted share for the three months ended Sept. 30, 2007, compared with earnings of $1.31 per diluted share for the third quarter of 2006.

Higher earnings in the 2007 quarter were primarily due to increased gross margins at Enogex, which reported improved operating income in each of its business segments in the third quarter compared to a year ago, and a lower effective tax rate for OG&E.

OG&E, a regulated electric utility, posted earnings of $1.18 per diluted share in the third quarter, compared with $1.16 per diluted share last year. Enogex, a natural gas pipeline business, recorded earnings of $0.22 per diluted share, compared with $0.13 per diluted share in the year-ago quarter. The holding company posted a loss of $0.03 per diluted share, compared to earnings of $0.02 per diluted share a year ago.

"It was another quarter of solid business performance, especially in light of the mild summer weather we experienced," said Peter B. Delaney, OGE Energy chairman, president and CEO. "We continue to execute on our strategy, including the succession plan for new leadership instituted by our late chairman, Steve Moore. He left us with plans for growth and we will pursue those plans as we move ahead."

For the nine months ended Sept. 30, OGE Energy reported net income of $207 million, or $2.24 per diluted share, compared with $240 million, or $2.61 per diluted share in the first nine months of 2006 (when income from continuing operations was $204 million, or $2.22 per diluted share). Gross margins were $895 million in the first nine months of 2007, up from $887 million in the 2006 period; operating income was $382 million in the first nine months of 2007, compared with $390 million in the same period of 2006.

Discussion of Third Quarter 2007

OGE Energy reported consolidated operating revenues of $1 billion in the third quarter of 2007, compared with $1.1 billion a year earlier. The third- quarter gross margin on revenues was $392 million, compared with $382 million in the year-earlier quarter. Operating income was $218 million in the third quarter, compared with $221 million in the year-earlier quarter. Net income was $127 million in the third quarter, compared to $121 million a year ago.

OG&E reported gross margin on revenues of $306 million in the third quarter, compared with $315 million in the comparable quarter last year, primarily due to lower revenues associated with summertime weather that was 5 percent cooler compared to the third quarter of 2006. Lower margins were offset, however, by a lower effective tax rate due primarily to wind power production credits that began in 2007 associated with OG&E's Centennial wind farm. Net income at OG&E was $109 million, compared with $107 million in the third quarter of 2006.

Enogex reported gross margin on revenues of $86 million in the third quarter, compared with $67 million in the comparable quarter last year. Margins were higher in all business segments -- transportation and storage, gathering and processing and marketing -- with higher volumes, increased well connects and system growth amid a sustained robust business environment in natural gas and related products. Net income at Enogex was $20 million, compared with $12 million in the third quarter of 2006.

2007 Outlook

OGE Energy consolidated earnings guidance for 2007 remains $2.30 - $2.50 per diluted share. The guidance assumes approximately 92.5 million average diluted shares outstanding and normal weather for the remainder of the year.

The 2007 guidance includes: -- OG&E, $1.49 to $1.59 per diluted share on net income of $138 million to $147 million. -- Enogex, $0.83 to $0.92 per share on net income of $77 million to $85 million. -- Holding company, a loss of $0.01 to $0.02 per share on a net loss of $1 million to $2 million. Conference Call Webcast

OGE Energy will host a conference call for discussion of the results and the outlook for the rest of 2007 on Thursday, Nov. 1, at 8 a.m. CST. The conference, hosted by James R. Hatfield, senior vice president and CFO, will be available through http://www.oge.com/.

OGE Energy is the parent company of Oklahoma Gas and Electric Company (OG&E), which serves approximately 762,000 customers in a service territory spanning 30,000 square miles in Oklahoma and western Arkansas, and of Enogex Inc., a natural gas pipeline business with principal operations in Oklahoma.

Some of the matters discussed on this news release may contain forward-looking statements that are subject to certain risks, uncertainties and assumptions. Such forward-looking statements are intended to be identified in this document by the words "anticipate", "believe", "estimate", "expect", "intend", "objective", "plan", "possible", "potential", "project" and similar expressions. Actual results may vary materially. Factors that could cause actual results to differ materially include, but are not limited to: general economic conditions, including the availability of credit, actions of rating agencies and their impact on capital expenditures; the Company's ability and the ability of its subsidiaries to obtain financing on favorable terms; prices of electricity, coal, natural gas and natural gas liquids, each on a stand-alone basis and in relation to each other; business conditions in the energy industry; competitive factors including the extent and timing of the entry of additional competition in the markets served by the Company; unusual weather; availability and prices of raw materials for current and future construction projects; federal or state legislation and regulatory decisions (including the decisions related to the deferral of capitalized costs associated with the cancelled Red Rock power plant project) and initiatives that affect cost and investment recovery, have an impact on rate structures or affect the speed and degree to which competition enters the Company's markets; environmental laws and regulations that may impact the Company's operations; changes in accounting standards, rules or guidelines; the discontinuance of regulated accounting principles under SFAS No. 71; creditworthiness of suppliers, customers and other contractual parties; the higher degree of risk associated with the Company's nonregulated business compared with the Company's regulated utility business; the impact of the proposed initial public offering of limited partner interests of OGE Enogex Partners L.P.; and other risk factors listed in the reports filed by the Company with the Securities and Exchange Commission including Risk Factors and Exhibit 99.01 to the Company's Form 10-K for the year ended December 31, 2006.

*Note: Consolidated Statements of Income, Financial and Statistical Data attached. OGE Energy Corp. consolidated statements of income (unaudited) Three Months Ended Nine Months Ended September 30 September 30 2007 2006 2007 2006 (In millions, except per share data) OPERATING REVENUES Electric Utility operating revenues $633.2 $608.7 $1,403.8 $1,427.4 Natural Gas Pipeline operating revenues 411.3 521.9 1,435.6 1,747.3 Total operating revenues 1,044.5 1,130.6 2,839.4 3,174.7 COST OF GOODS SOLD (exclusive of depreciation shown below) Electric Utility cost of goods sold 315.1 281.8 728.6 725.3 Natural Gas Pipeline cost of goods sold 337.6 467.3 1,215.9 1,562.5 Total cost of goods sold 652.7 749.1 1,944.5 2,287.8 Gross margin on revenues 391.8 381.5 894.9 886.9 Other operation and maintenance 106.1 98.1 310.8 306.6 Depreciation 48.6 44.9 145.1 135.3 Impairment of assets 0.5 0.3 0.5 0.3 Taxes other than income 18.3 17.6 56.8 54.6 OPERATING INCOME 218.3 220.6 381.7 390.1 OTHER INCOME (EXPENSE) Interest income 0.3 1.5 1.4 4.6 Allowance for equity funds used during construction 0.3 2.3 0.7 2.5 Other income 7.0 0.4 13.1 7.9 Other expense (12.3) (2.3) (15.0) (12.4) Net other income (expense) (4.7) 1.9 0.2 2.6 INTEREST EXPENSE Interest on long-term debt 22.1 21.8 66.4 65.3 Allowance for borrowed funds used during construction (1.0) (1.3) (2.4) (3.8) Interest on short-term debt and other interest charges 4.4 9.2 10.7 11.1 Interest expense 25.5 29.7 74.7 72.6 INCOME FROM CONTINUING OPERATIONS BEFORE TAXES 188.1 192.8 307.2 320.1 INCOME TAX EXPENSE 61.3 70.8 100.6 116.1 INCOME FROM CONTINUING OPERATIONS 126.8 122.0 206.6 204.0 DISCONTINUED OPERATIONS Income (loss) from discontinued operations - (1.0) - 59.1 Income tax expense (benefit) - (0.4) - 23.1 Income (loss) from discontinued operations - (0.6) - 36.0 NET INCOME $126.8 $121.4 $206.6 $240.0 BASIC AVERAGE COMMON SHARES OUTSTANDING 91.8 91.1 91.7 90.9 DILUTED AVERAGE COMMON SHARES OUTSTANDING 92.5 92.4 92.4 92.0 BASIC EARNINGS PER AVERAGE COMMON SHARE Income from continuing operations $1.38 $1.34 $2.25 $2.24 Income (loss) from discontinued operations - (0.01) - 0.40 NET INCOME $1.38 $1.33 $2.25 $2.64 DILUTED EARNINGS PER AVERAGE COMMON SHARE Income from continuing operations $1.37 $1.32 $2.24 $2.22 Income (loss) from discontinued operations - (0.01) - 0.39 NET INCOME $1.37 $1.31 $2.24 $2.61 OGE Energy Corp. financial and statistical data (unaudited) Three Months Ended Nine Months Ended September 30 September 30 2007 2006 2007 2006 (In millions) ELECTRIC UTILITY Operating revenues by classification Residential $263.9 $273.8 $551.3 $584.6 Commercial 156.9 146.9 341.2 347.0 Industrial 68.9 62.9 165.7 172.9 Oilfield 41.3 37.8 103.7 103.5 Street light 2.2 3.1 6.9 9.3 Public authorities 58.9 54.0 130.0 128.8 Sales for resale 19.9 20.5 49.5 51.4 Provision for refund on gas transportation and storage case - - 0.1 - System sales revenues 612.0 599.0 1,348.4 1,397.5 Off-system sales revenues 12.9 1.2 33.3 2.3 Other 8.3 8.5 22.1 27.6 Total operating revenues $633.2 $608.7 $1,403.8 $1,427.4 Sales of electricity - MWH (a) sales by classification Residential 2.9 3.0 6.7 6.9 Commercial 1.9 1.8 4.8 4.8 Industrial 1.1 1.2 3.2 3.4 Oilfield 0.7 0.7 2.1 2.0 Street light 0.1 0.1 0.1 0.1 Public authorities 0.8 0.7 2.2 2.1 Sales for resale 0.4 0.5 1.1 1.2 System sales 7.9 8.0 20.2 20.5 Off-system sales - - 0.6 - Total sales 7.9 8.0 20.8 20.5 Number of customers 762,009 754,447 762,009 754,447 Average cost of energy per KWH (b) - cents Natural gas 6.296 6.684 6.904 6.914 Coal 1.143 1.141 1.118 1.115 Total fuel 3.412 3.053 3.031 3.122 Total fuel and purchased power 3.715 3.397 3.397 3.443 Degree days Heating Actual - 10 1,926 1,596 Normal 29 29 2,228 2,228 Cooling Actual 1,435 1,508 2,080 2,391 Normal 1,295 1,295 1,850 1,850 NATURAL GAS PIPELINE Operating revenues (before intercompany eliminations) $441.1 $557.2 $1,509.0 $1,838.0 Operating income $39.8 $25.5 $120.6 $97.2 Income from continuing operations $20.4 $12.7 $64.0 $54.4 Net cash provided from operating activities $14.7 $0.6 $69.0 $73.8 Capital expenditures from continuing operations $40.1 $16.4 $96.6 $50.2 New well connects (includes wells behind CRP's (c)) (d) 84 88 295 276 New well connects (excludes wells behind CRP's) (d) 40 55 137 154 Gathered volumes - Tbtu/d (e) 1.09 0.97 1.04 0.97 Incremental transportation volumes - Tbtu/d 0.52 0.53 0.48 0.48 Total throughput volumes - Tbtu/d 1.61 1.50 1.52 1.45 Natural gas processed - Tbtu/d 0.58 0.54 0.56 0.53 Natural gas liquids sold (keep- whole) - million gallons 62 64 178 181 Natural gas liquids sold (purchase for resale) - million gallons 30 33 83 76 Natural gas liquids sold (percentage of liquids) - million gallons 4 4 12 10 Total natural gas liquids produced - million gallons 96 101 273 267 Average sales price per gallon $1.079 $0.934 $0.982 $0.914 (a) Megawatt-hours. (b) Kilowatt-hours. (c) Central receipt points. (d) As reported to management by third parties. (e) Trillion British thermal units per day.

OGE Energy Corp.

CONTACT: Brian Alford, +1-405-553-3187, or financial contact, ToddTidwell, +1-405-553-3966, both of OGE Energy Corp.

Web site: http://www.oge.com/

Source: PRNewswire-FirstCall

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