Sempra Energy Reports Second-Quarter Results, Raises Earnings Guidance for 2008
Posted on: Thursday, 7 August 2008, 09:00 CDT
Sempra Energy (NYSE: SRE) today reported second-quarter 2008 net income of $244 million, or $0.98 per diluted share, compared with $277 million, or $1.05 per diluted share, in the second quarter 2007. Second-quarter 2008 results reflected Sempra Energy's reduced ownership in its commodities business as the result of the formation on April 1 of RBS Sempra Commodities, the joint venture with The Royal Bank of Scotland (RBS).
For the first six months of 2008, Sempra Energy's net income was $486 million, or $1.90 per diluted share, compared with $505 million, or $1.91 per diluted share during the same period last year.
Sempra Energy today also announced an increase in its earnings guidance for 2008 to a range of $3.80 to $4 per share from the previous range of $3.65 to $3.85 per share.
"Through the first half of the year, we are ahead of plan in meeting our 2008 financial goals and have made significant progress in the expansion of our natural gas business," said Donald E. Felsinger, chairman and chief executive officer of Sempra Energy. "Additionally, our planned acquisition of EnergySouth, Inc. will increase our presence in the fastest-growing U.S. energy markets."
OPERATING HIGHLIGHTS
Sempra Utilities
Net income for Sempra Utilities -- San Diego Gas & Electric (SDG&E) and Southern California Gas Co. (SoCalGas) -- increased 11 percent to $117 million in the second quarter 2008 from $105 million in last year's second quarter.
SDG&E's second-quarter 2008 net income rose to $61 million from $51 million in the second quarter 2007, primarily due to performance incentive awards approved during the quarter by the California Public Utilities Commission (CPUC).
SoCalGas' net income in the second quarter 2008 was $56 million, compared with $54 million in the second quarter last year.
On July 31, 2008, the CPUC approved the four-year rate-case filed by SDG&E and SoCalGas. The terms of the approved rate-case allow for recovery of the forecasted operating costs and capital requirements necessary to operate the utilities. The rate adjustment for both utilities was retroactive to Jan. 1, 2008.
Sempra Commodities
Second-quarter net income for Sempra Commodities was $130 million in 2008, compared with net income of $155 million in 2007. Second-quarter 2008 net income included $93 million in equity earnings from the RBS Sempra Commodities joint venture and a $67 million gain on the transaction with RBS, offset by $30 million in charges, primarily for litigation and tax issues.
Results for 2007 and the first quarter 2008 represented 100 percent of the earnings from the commodity-marketing business prior to the formation of RBS Sempra Commodities.
"Our global commodities joint venture with RBS is off to a great start," said Felsinger. "The integration of operations has been seamless and early financial results have exceeded expectations."
Sempra Generation
In the second quarter 2008, Sempra Generation's net income increased to $23 million from $10 million in the same quarter last year, due primarily to higher scheduled maintenance expenses in 2007.
Last month, Sempra Generation announced its first solar power project, a 10-megawatt, thin-film solar facility adjacent to the company's El Dorado Energy natural gas-fueled power plant in Boulder City, Nev. Sempra Generation expects construction to be complete and the plant operational by year-end.
Sempra Pipelines & Storage
Second-quarter net income for Sempra Pipelines & Storage rose to $24 million in 2008 from $17 million in 2007, due primarily to the start-up of western operations of the Rockies Express natural gas pipeline during the recent quarter.
On July 28, Sempra Energy agreed to acquire Mobile, Ala.-based EnergySouth, Inc. for $510 million in cash. The acquisition, which is expected to close by year-end, includes majority ownership in two high-turn, salt-dome storage facilities on the Gulf Coast that, when fully developed, will have capacity of 57 billion cubic feet of natural gas serving the U.S. Southeast. Sempra Pipelines & Storage will be responsible for development and operation of the storage assets, as well as management of EnergySouth's Mobile Gas distribution utility.
Sempra LNG
Sempra LNG reported a net loss of $28 million in the second quarter 2008, compared with a $13 million net loss in the second quarter 2007, due primarily to higher income-tax expense, as well as a higher mark-to-market loss on a marketing agreement with RBS Sempra Commodities.
Parent & Other
During the second quarter 2008, Sempra Energy incurred a $22 million loss in Parent & Other, compared with $6 million in net income in last year's second quarter when the company benefited from an $18 million gain from an interest-rate swap.
Internet Broadcast
Sempra Energy will broadcast a live discussion of its earnings results over the Internet today at 1 p.m. EDT with senior management of the company. Access is available by logging onto the Web site at www.sempra.com. For those unable to log onto the live webcast, the teleconference will be available on replay a few hours after its conclusion by dialing (888) 203-1112 and entering the passcode 2594824.
Sempra Energy, based in San Diego, is a Fortune 500 energy services holding company with 2007 revenues of more than $11 billion. The Sempra Energy companies' 13,500 employees serve more than 29 million consumers worldwide.
Income-statement information by business unit is available on Sempra Energy's Web site at http://www.sempra.com/downloads/2Q2008.pdf
This press release contains statements that are not historical fact and constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. When the company uses words like "believes,""expects,""anticipates,""intends,""plans,""estimates,""may,""would,""could,""should," or similar expressions, or when the company discusses its strategy or plans, the company is making forward-looking statements. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. Future results may differ materially from those expressed in the forward-looking statements. Forward-looking statements are necessarily based upon various assumptions involving judgments with respect to the future and other risks, including, among others: local, regional, national and international economic, competitive, political, legislative and regulatory conditions and developments; actions by the California Public Utilities Commission, California State Legislature, California Department of Water Resources, Federal Energy Regulatory Commission, Federal Reserve Board, U.K. Financial Services Authority and other regulatory bodies in the United States and other countries; capital market conditions, inflation rates, interest rates and exchange rates; energy and trading markets, including the timing and extent of changes in commodity prices; the availability of electric power, natural gas and liquefied natural gas; weather conditions and conservation efforts; war and terrorist attacks; business, regulatory, environmental, and legal decisions and requirements; the status of deregulation of retail natural gas and electricity delivery; the timing and success of business development efforts; the resolution of litigation; and other uncertainties, all of which are difficult to predict and many of which are beyond the control of the company. These risks and uncertainties are further discussed in the company's reports filed with the Securities and Exchange Commission that are available through the EDGAR system without charge at its Web site, www.sec.gov, and on the company's Web site, www.sempra.com.
Sempra Pipelines & Storage, Sempra Generation, Sempra LNG and Sempra Commodities are not the same companies as the utility, San Diego Gas & Electric (SDG&E) or Southern California Gas Company (SoCalGas), and Sempra Pipelines & Storage, Sempra Generation, Sempra LNG and Sempra Commodities are not regulated by the California Public Utilities Commission.
SEMPRA ENERGY Table A STATEMENTS OF CONSOLIDATED INCOME Three months ended Six months ended June 30, June 30, ---------------- ---------------- (Dollars in millions, except per share amounts) 2008 2007 2008 2007 ------- ------- ------- ------- (unaudited) Revenues Sempra Utilities $ 1,887 $ 1,620 $ 4,177 $ 3,679 Sempra Global and parent 616 1,041 1,596 1,986 ------- ------- ------- ------- Total revenues 2,503 2,661 5,773 5,665 ------- ------- ------- ------- Expenses and Other Income Sempra Utilities: Cost of natural gas (784) (603) (2,019) (1,653) Cost of electric fuel and purchased power (220) (163) (383) (312) Sempra Global and parent: Cost of natural gas, electric fuel and purchased power (513) (278) (922) (614) Other cost of sales (17) (221) (153) (540) Operation and maintenance (549) (747) (1,252) (1,382) Depreciation and amortization (171) (171) (346) (340) Franchise fees and other taxes (71) (68) (154) (149) Gains on sale of assets 109 4 114 6 Equity earnings (losses): RBS Sempra Commodities LLP 146 - 146 - Other 9 (6) 15 (12) Other income, net 17 51 36 68 Interest income 10 24 24 50 Interest expense (38) (66) (98) (136) Preferred dividends of subsidiaries (3) (3) (5) (5) ------- ------- ------- ------- Income from continuing operations before income taxes and equity earnings of certain unconsolidated subsidiaries 428 414 776 646 Income tax expense (202) (143) (329) (206) Equity earnings, net of income tax 18 9 39 67 ------- ------- ------- ------- Income from continuing operations 244 280 486 507 Discontinued operations, net of income tax - (3) - (2) ------- ------- ------- ------- Net income $ 244 $ 277 $ 486 $ 505 ======= ======= ======= ======= Basic earnings per share: Income from continuing operations $ 0.99 $ 1.08 $ 1.93 $ 1.95 Discontinued operations, net of income tax - (0.01) - (0.01) ------- ------- ------- ------- Net income $ 0.99 $ 1.07 $ 1.93 $ 1.94 ======= ======= ======= ======= Weighted-average number of shares outstanding (thousands) 245,576 260,198 252,100 259,830 ======= ======= ======= ======= Diluted earnings per share: Income from continuing operations $ 0.98 $ 1.06 $ 1.90 $ 1.92 Discontinued operations, net of income tax - (0.01) - (0.01) ------- ------- ------- ------- Net income $ 0.98 $ 1.05 $ 1.90 $ 1.91 ======= ======= ======= ======= Weighted-average number of shares outstanding (thousands) 249,677 264,963 256,169 264,518 ======= ======= ======= ======= Dividends declared per share of common stock $ 0.35 $ 0.31 $ 0.67 $ 0.62 ======= ======= ======= ======= SEMPRA ENERGY Table B CONSOLIDATED BALANCE SHEETS June 30, December 31, (Dollars in millions) 2008 2007 ------------ ------------ (unaudited) Assets Current assets: Cash and cash equivalents $ 230 $ 668 Short-term investments 413 - Restricted cash - 1 Accounts receivable, net 997 1,074 Income taxes receivable 180 99 Deferred income taxes 147 247 Trading-related receivables and deposits, net - 2,719 Derivative trading instruments - 2,170 * Commodities owned - 2,231 * Inventories 125 224 Regulatory assets 39 106 Fixed-price contracts and other derivatives 285 28 Other 94 397 * ------------ ------------ Total current assets 2,510 9,964 ------------ ------------ Investments and other assets: Regulatory assets arising from fixed-price contracts and other derivatives 274 309 Regulatory assets arising from pension and other postretirement benefit obligations 166 162 Other regulatory assets 497 460 Nuclear decommissioning trusts 685 739 Investment in RBS Sempra Commodities LLP 1,985 - Other investments 1,261 1,243 Sundry 806 956 ------------ ------------ Total investments and other assets 5,674 3,869 ------------ ------------ Property, plant and equipment, net 15,571 14,884 ------------ ------------ Total assets $ 23,755 $ 28,717 ============ ============ Liabilities and Shareholders' Equity Current liabilities: Short-term debt $ 829 $ 1,064 Accounts payable 879 1,563 Due to unconsolidated affiliates 54 60 Trading-related payables - 2,265 * Derivative trading instruments - 1,672 * Commodities sold with agreement to repurchase - 500 Dividends and interest payable 145 145 Regulatory balancing accounts, net 604 481 Current portion of long-term debt 302 7 Fixed-price contracts and other derivatives 317 53 Other 1,146 1,210 * ------------ ------------ Total current liabilities 4,276 9,020 ------------ ------------ Long-term debt 4,809 4,553 ------------ ------------ Deferred credits and other liabilities: Due to unconsolidated affiliate 102 102 Customer advances for construction 153 153 Pension and other postretirement benefit obligations, net of plan assets 433 434 Deferred income taxes 668 531 Deferred investment tax credits 59 61 Regulatory liabilities arising from removal obligations 2,516 2,522 Asset retirement obligations 1,148 1,129 Other regulatory liabilities 250 265 Fixed-price contracts and other derivatives 312 332 Deferred credits and other 958 949 ------------ ------------ Total deferred credits and other liabilities 6,599 6,478 ------------ ------------ Preferred stock of subsidiaries 179 179 ------------ ------------ Minority interests 209 148 ------------ ------------ Shareholders' equity 7,683 8,339 ------------ ------------ Total liabilities and shareholders' equity $ 23,755 $ 28,717 ============ ============ * December 31, 2007 amounts have been reclassified due to the adoption of FASB Staff Position FIN 39-1. SEMPRA ENERGY Table C CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS Six months ended June 30, ------------------------ (Dollars in millions) 2008 2007 ----------- ----------- (unaudited) Cash Flows from Operating Activities: Net income $ 486 $ 505 Adjustments to reconcile net income to net cash provided by operating activities: Discontinued operations - 2 Depreciation and amortization 346 340 Deferred income taxes and investment tax credits 51 (39) Equity earnings (200) (55) Gains on sale of assets (114) (6) Fixed-price contracts and other derivatives 62 (28) Other 40 18 Net changes in other working capital components 226 918 Changes in other assets (10) 33 Changes in other liabilities (27) (10) ----------- ----------- Net cash provided by continuing operations 860 1,678 Net cash used in discontinued operations - (3) ----------- ----------- Net cash provided by operating activities 860 1,675 ----------- ----------- Cash Flows from Investing Activities: Expenditures for property, plant and equipment (1,114) (889) Proceeds from sale of assets, net of cash sold 2,071 61 Expenditures for investments (2,180) (5) Distributions from investments 16 - Purchases of nuclear decommissioning and other trust assets (173) (341) Proceeds from sales by nuclear decommissioning and other trusts 177 300 Decrease in notes receivable from unconsolidated affiliates 60 - Dividends received from unconsolidated affiliates - 4 Other (15) (9) ----------- ----------- Net cash used in investing activities (1,158) (879) ----------- ----------- Cash Flows from Financing Activities: Common dividends paid (166) (152) Issuances of common stock 11 28 Repurchases of common stock (1,002) - Increase in short-term debt, net 496 374 Issuance of long-term debt 593 4 Payments on long-term debt (73) (654) Other 1 7 ----------- ----------- Net cash used in financing activities (140) (393) ----------- ----------- Increase (decrease) in cash and cash equivalents (438) 403 Cash and cash equivalents, January 1 668 920 Cash assumed in connection with FIN(R) consolidation - 29 ----------- ----------- Cash and cash equivalents, June 30 $ 230 $ 1,352 =========== =========== SEMPRA ENERGY Table D BUSINESS UNIT EARNINGS AND CAPITAL EXPENDITURES & INVESTMENTS (Unaudited) Three months ended Six months ended June 30, June 30, ---------------- ------------------ (Dollars in millions) 2008 2007 2008 2007 ------- ------- ------- ------- Net Income Sempra Utilities: San Diego Gas & Electric $ 61 $ 51 $ 135 $ 113 Southern California Gas 56 54 113 109 ------- ------- ------- ------- Total Sempra Utilities 117 105 248 222 Sempra Global: Sempra Commodities 130 155 189 226 Sempra Generation 23 10 68 64 Sempra Pipelines & Storage 24 17 50 33 Sempra LNG (28) (13) (37) (23) ------- ------- ------- ------- Total Sempra Global 149 169 270 300 Parent & Other (22) 6 (32) (15) ------- ------- ------- ------- Continuing Operations 244 280 486 507 Discontinued Operations, Net of Income Tax - (3) - (2) Consolidated Net Income $ 244 $ 277 $ 486 $ 505 ======= ======= ======= ======= Three months ended Six months ended June 30, June 30, ---------------- ------------------ (Dollars in millions) 2008 2007 2008 2007 ------- ------- ------- ------- Capital Expenditures and Investments* Sempra Utilities: San Diego Gas & Electric $ 194 $ 148 $ 665 ** $ 305 Southern California Gas 126 105 242 191 ------- ------- ------- ------- Total Sempra Utilities 320 253 907 496 ------- ------- ------- ------- Sempra Global: Sempra Commodities - 12 37 25 Sempra Generation 2 3 13 4 Sempra Pipelines & Storage 93 58 302 137 Sempra LNG 152 138 249 224 ------- ------- ------- ------- Total Sempra Global 247 211 601 390 ------- ------- ------- ------- Parent & Other 4 2 186 ** 8 ------- ------- ------- ------- Consolidated Capital Expenditures and Investments $ 571 $ 466 $ 1,694 $ 894 ======= ======= ======= ======= * Investments do not include the $1.6 billion contribution to RBS Sempra Commodities in the second quarter of 2008. ** Amounts for SDG&E and Parent & Other include the purchase of $236 and $177, respectively, of industrial development bonds purchased in the first quarter of 2008. In the second quarter of 2008, Parent & Other purchased $75 of these bonds from SDG&E. SEMPRA ENERGY Table E OTHER OPERATING STATISTICS (Unaudited) Three months ended Six months ended June 30, June 30, ----------------- ----------------- SEMPRA UTILITIES 2008 2007 2008 2007 -------- -------- -------- -------- Revenues (Dollars in millions) SDG&E (excludes intercompany sales) $ 752 $ 655 $ 1,494 $ 1,360 SoCalGas (excludes intercompany sales) $ 1,135 $ 965 $ 2,683 $ 2,319 Gas Sales (Bcf) 81 84 225 225 Transportation and Exchange (Bcf) 136 123 274 243 -------- -------- -------- -------- Total Deliveries (Bcf) 217 207 499 468 -------- -------- -------- -------- Total Gas Customers (Thousands) 6,553 6,501 Electric Sales (Millions of kWhs) 4,021 3,869 8,296 8,059 Direct Access (Millions of kWhs) 750 716 1,515 1,494 -------- -------- -------- -------- Total Deliveries (Millions of kWhs) 4,771 4,585 9,811 9,553 -------- -------- -------- -------- Total Electric Customers (Thousands) 1,367 1,360 SEMPRA GENERATION -------- -------- -------- -------- Power Sold (Millions of kWhs) 5,506 4,148 11,118 9,525 SEMPRA PIPELINES & STORAGE (Represents 100% of these subsidiaries, although only the Mexican subsidiaries are 100% owned by Sempra Energy.) -------- -------- -------- -------- Natural Gas Sales (Bcf) Argentina 81 78 152 141 Mexico 12 11 24 22 Chile - - - - Natural Gas Customers (Thousands) Argentina 1,637 1,568 Mexico 95 98 Chile 39 39 Electric Sales (Millions of kWhs) Peru 1,354 1,258 2,716 2,527 Chile 568 621 1,232 1,286 Electric Customers (Thousands) Peru 822 799 Chile 557 541 SEMPRA ENERGY Table E (Continued) SEMPRA COMMODITIES The following information for the Sempra Commodities segment includes information related to RBS Sempra Commodities LLP. RBS Sempra Commodities LLP acquired the commodity-marketing businesses of Sempra Energy on April 1, 2008. For the three months ended June 30, 2008, the Sempra Commodities segment is composed primarily of the company's equity interest in RBS Sempra Commodities LLP, but also includes the results of Sempra Marketing. The margin and financial data below represents the total results of RBS Sempra Commodities LLP as calculated under International Financial Reporting Standards (IFRS). RBS Sempra Commodities LLP Operating Statistics (in millions of US dollars) Three months ended RBS Sempra Commodities LLP - June 30, Joint Venture level margin* 2008 -------- Geographical: North America $ 522 Europe/Asia 124 -------- Total $ 646 ======== Product Line: Natural Gas $ 306 Power 174 Oil - Crude & Products 92 Metals 42 Other 32 -------- Total $ 646 ======== * Margin consists of operating revenues less cost of sales (primarily transportation and storage costs) reduced by certain transaction-related execution costs (primarily brokerage and other fees) and net interest income/expense. Financial Information (in millions of US dollars) Three months ended RBS Sempra Commodities LLP June 30, 2008 ------------------ Joint Venture Sempra Total Share* Fee income and trading revenue, net of selling costs $ 646 Operating and other expenses (312) -------- Joint Venture distributable income $ 334 ======== Preferred return on capital $ 148 $ 60 1st allocation - 70% Sempra / 30% RBS 125 87 2nd allocation - 30% Sempra / 70% RBS 61 18 -------- -------- Distributable income $ 334 $ 165 ======== ======== Sempra Earnings from RBS Sempra Commodities LLP Three months ended (in millions of US dollars) June 30, 2008 -------- Sempra share of distributable income - IFRS basis $ 165 U.S. GAAP conversion impact (19) -------- Sempra equity earnings - U.S. GAAP basis 146 Income tax expense (53) -------- Sempra equity earnings from RBS Sempra Commodities LLP $ 93 ======== * After payment of the preferred return, Sempra receives 70% of the first $500 million and 30% of any remaining income. The preferred return and the $500 million tranche are prorated over the year.
Media Contact: Doug Kline Sempra Energy (877) 866-2066 www.sempra.com Financial Contact: Glen Donovan Sempra Energy (877) 736-7727 Email Contact
SOURCE: Sempra Energy
Source: MARKET WIRE
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