OGE Energy Corp. Ongoing Earnings Increase 17% for 2010
OKLAHOMA CITY, Feb. 17, 2011 /PRNewswire/ — OGE Energy Corp. (NYSE: OGE), parent company of Oklahoma Gas and Electric Company (OG&E) and OGE Enogex Holdings LLC (Enogex), reported non-GAAP earnings on an ongoing basis of $3.10 per diluted share in 2010, compared with $2.66 per diluted share in 2009.
Earnings on an ongoing basis exclude the one-time charge of $11 million to write off previously recognized Medicare Part D tax benefits affected by the national health care law enacted in 2010. Including this one-time charge, GAAP earnings in 2010 were $2.99 per diluted share.
In 2010, OG&E reported net income of $216 million and contributed $2.18 per diluted share, compared with $200 million, or $2.06 per diluted share in 2009. Enogex reported net income of $91 million, or $0.92 per diluted share in 2010, compared to net income of $61 million, or $0.63 per diluted share in 2009.
“We are pleased to report record earnings for 2010,” said Pete Delaney, OGE Energy chairman and CEO. “OG&E’s record earnings reflect our continued investment in the infrastructure associated with positioning our utility for the future. Enogex success was driven by record gathering and processing volumes in a favorable commodity price environment. We are excited about the opportunities associated with our 2011 investment plan, the largest capital spend in our company’s history.”
Fourth Quarter Results
For the three months ended Dec. 31, 2010, OGE Energy reported earnings of $0.31 per diluted share, compared with $0.35 per diluted share in the fourth quarter of 2009. The decrease was due primarily to expected higher operating expenses in the fourth quarter compared to the same period last year partially offset by higher gross margins.
Discussion of 2010 results
OGE Energy reported consolidated gross margin of $1.53 billion in 2010, compared with $1.31 billion in 2009. Operating income was $594 million in 2010, compared with $492 million in 2009. Net income was $295 million in 2010, compared with $258 million in 2009.
OG&E reported gross margin of $1.1 billion in 2010, compared with $955 million in 2009. OG&E’s higher net income, $216 million in 2010 compared with $200 million in 2009, was primarily attributed to rate relief associated with wind, transmission and infrastructure investments and warmer summer weather resulting in a 25 percent increase in cooling degree days in 2010.
Enogex reported gross margin of $423 million in 2010, compared to $358 million in 2009. Higher net income at Enogex, $91 million in 2010 compared to $61 million in 2009, was primarily due to record volumes of natural gas gathered and liquids processed, plus higher commodity prices for the year.
2011 Outlook
OGE Energy consolidated earnings guidance for 2011 is $3.00 to $3.20 per averaged diluted share. The guidance assumes approximately 99.5 million average diluted shares outstanding and normal weather for the year. More information regarding the Company’s 2011 earnings guidance and 2010 financial results is contained in the Company’s Form 10-K filed today with the Securities and Exchange Commission.
Non-GAAP Financial Measures
Ongoing Earnings and Ongoing Earnings per Average Diluted Share, which exclude the one-time non-cash charge of approximately $11.4 million or $0.11 per average diluted share associated with the elimination of the tax deduction for the Medicare Part D subsidy as a result of the recent health care legislation, are non-GAAP financial measures. OGE Energy’s management believes that ongoing earnings and ongoing earnings per average diluted share provide a more meaningful comparison of earnings results and are more representative of OGE Energy’s fundamental core earnings power. OGE Energy’s management uses ongoing earnings and ongoing earnings per average diluted share internally for financial planning and analysis, for reporting of results to the Board of Directors, and when communicating its earnings outlook to analysts and investors. Reconciliations of ongoing earnings and ongoing earnings per average diluted share are below and are available on OGE Energy’s website: www.oge.com.
Conference Call Webcast
OGE Energy will host a conference call for discussion of the results and the outlook for 2011 on Thursday, Feb. 17, at 8 a.m. CST. The conference will be available through www.oge.com.
OGE Energy is the parent company of Oklahoma Gas and Electric Company (OG&E), which serves approximately 783,000 customers in a service territory spanning 30,000 square miles in Oklahoma and western Arkansas, and of OGE Enogex Holdings LLC, a natural gas pipeline business with principal operations in Oklahoma.
Some of the matters discussed in 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, access to existing lines of credit, access to the commercial paper markets, actions of rating agencies and their impact on capital expenditures; the ability of the Company and its subsidiaries to access the capital markets and obtain financing on favorable terms; prices and availability 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 and natural gas midstream industries; 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 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 accounting principles for certain types of rate-regulated activities; whether OG&E can successfully implement its Smart Grid program to install meters for its customers and integrate the Smart Grid meters with its customer billing and other computer information systems; advances in technology; 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 and other risk factors listed in the reports filed by the Company with the Securities and Exchange Commission including those listed in Risk Factors and Exhibit 99.01 to the Company’s Form 10-K for the year ended December 31, 2010.
OGE Energy Corp
Reconciliation of Ongoing Earnings (Loss) to GAAP Earnings (Loss)
2009 GAAP
2010 Ongoing 2010 GAAP and Ongoing
Earnings One-Time Earnings Earnings
(in
millions) (Loss) Charge* (Loss) (Loss)**
------ ------- ------ --------
OG&E $222.7 ($7.0) $215.7 $200.4
Enogex 93.1 (2.0) 91.1 61.3
Holding
Co. (9.1) (2.4) (11.5) (3.4)
---- ---- ----- ----
Consolidated $306.7 ($11.4) $295.3 $258.3
====== ====== ====== ======
Reconciliation of Ongoing Earnings per Average Diluted Share to GAAP
Earnings per Average Diluted Share
2009 GAAP
2010 Ongoing 2010 GAAP and Ongoing
Earnings One-Time Earnings Earnings
Per Share Charge* Per Share Per Share**
------------ -------- --------- -----------
OG&E $2.25 ($0.07) $2.18 $2.06
Enogex 0.94 (0.02) 0.92 0.63
Holding
Co. (0.09) (0.02) (0.11) (0.03)
----- ----- ----- -----
Consolidated $3.10 ($0.11) $2.99 $2.66
* The Patient Protection Act and Affordable Care Act of 2009 and the
Health Care and Education Reconciliation Act of 2010 were signed
into law on March 23, 2010 and March 30, 2010, respectively. These
Acts change the tax treatment of federal subsidies paid to sponsors
of retiree health benefit plans that provide prescription drug
benefits. As a result, OGE recognized a one-time, non-cash charge
of approximately $11.4 million or $0.11 per average diluted share.
** There were no one-time charges for the year ended December 31,
2009 therefore, ongoing and GAAP earnings are the same.
Note: Consolidated Statements of Income, Financial and Statistical Data attached.
OGE Energy Corp.
consolidated statements of income
Three Months Twelve Months
(unaudited) Ended Ended
December 31 December 31
----------- -----------
2010 2009 2010 2009
---- ---- ---- ----
(In millions, except per share data)
OPERATING
REVENUES
Electric Utility
operating
revenues $430.1 $411.3 $2,109.9 $1,751.2
Natural Gas
Midstream
Operations
operating
revenues 398.4 362.4 1,607.0 1,118.5
----- ----- ------- -------
Total operating
revenues 828.5 773.7 3,716.9 2,869.7
COST OF GOODS
SOLD (exclusive
of depreciation
and amortization
shown below)
Electric Utility
cost of goods
sold 195.4 189.4 952.6 748.7
Natural Gas
Midstream
Operations cost
of goods sold 302.8 276.8 1,234.8 809.0
----- ----- ------- -----
Total cost of
goods sold 498.2 466.2 2,187.4 1,557.7
----- ----- ------- -------
Gross margin on
revenues 330.3 307.5 1,529.5 1,312.0
OPERATING
EXPENSES
Other operation
and maintenance 148.8 131.7 549.8 466.8
Depreciation and
amortization 77.2 69.9 292.4 265.7
Taxes other than
income 22.9 22.1 93.4 87.6
---- ---- ---- ----
Total operating
expenses 248.9 223.7 935.6 820.1
----- ----- ----- -----
OPERATING INCOME 81.4 83.8 593.9 491.9
OTHER INCOME
(EXPENSE)
Interest income - - - 1.4
Allowance for
equity funds
used during
construction 4.2 4.4 11.4 15.1
Other income 7.9 7.5 13.7 27.5
Other expense (9.1) (7.4) (17.9) (16.3)
---- ---- ----- -----
Net other income 3.0 4.5 7.2 27.7
INTEREST EXPENSE
Interest on long-
term debt 36.0 36.7 139.3 137.3
Allowance for
borrowed funds
used during
construction (2.0) (2.4) (5.5) (8.3)
Interest on
short-term debt
and other
interest charges 1.2 2.0 5.9 8.4
--- ---
Interest expense 35.2 36.3 139.7 137.4
---- ---- ----- -----
INCOME BEFORE
TAXES 49.2 52.0 461.4 382.2
INCOME TAX
EXPENSE 15.4 16.9 161.0 121.1
---- ---- ----- -----
NET INCOME 33.8 35.1 300.4 261.1
Less: Net income
attributable to
noncontrolling
interest 3.1 0.9 5.1 2.8
--- --- --- ---
NET INCOME
ATTRIBUTABLE TO
OGE ENERGY $30.7 $34.2 $295.3 $258.3
===== ===== ====== ======
BASIC AVERAGE
COMMON SHARES
OUTSTANDING 97.5 96.9 97.3 96.2
DILUTED AVERAGE
COMMON SHARES
OUTSTANDING 99.2 98.1 98.9 97.2
BASIC EARNINGS
PER AVERAGE
COMMON SHARE
ATTRIBUTABLE TO
OGE ENERGY
COMMON
SHAREHOLDERS $0.32 $0.35 $3.03 $2.68
===== ===== ===== =====
DILUTED EARNINGS
PER AVERAGE
COMMON SHARE
ATTRIBUTABLE TO
OGE ENERGY
COMMON
SHAREHOLDERS $0.31 $0.35 $2.99 $2.66
===== ===== ===== =====
OGE Energy Corp.
financial and statistical data
Three Months
(unaudited) Ended
December 31
-----------
2010 2009
---- ----
(In millions)
ELECTRIC UTILITY
Operating revenues by classification
Residential $165.0 $160.6
Commercial 111.5 103.7
Industrial 48.0 43.8
Oilfield 37.2 32.1
Public authorities and street light 43.0 40.9
Sales for resale 15.3 13.6
Provision for rate refund 0.4 -
System sales revenues 420.4 394.7
Off-system sales revenues 2.0 6.2
Other 7.7 10.4
Total operating revenues $430.1 $411.3
====== ======
Sales of electricity -MWH (a) sales
by classification
Residential 2.0 1.9
Commercial 1.6 1.5
Industrial 0.9 0.9
Oilfield 0.8 0.7
Public authorities and street light 0.7 0.8
Sales for resale 0.3 0.3
--- ---
System sales 6.3 6.1
Off-system sales - 0.2
--- ---
Total sales 6.3 6.3
=== ===
Number of customers 782,558 776,550
Average cost of energy per KWH (b) -
cents
Natural gas 3.939 4.410
Coal 1.993 1.783
Total fuel 2.818 2.759
Total fuel and purchased power 2.998 3.041
Degree days
Heating
Actual 1,223 1,510
Normal 1,403 1,403
Cooling
Actual 42 11
Normal 61 61
NATURAL GAS MIDSTREAM OPERATIONS
Operating revenues $418.1 $382.8
Operating income $44.0 $39.2
Net income attributable to Enogex $22.2 $16.2
Net cash provided from operating
activities $63.0 $37.0
Capital expenditures $76.7 $57.3
Gathered volumes - Tbtu/d (c) 1.34 1.22
Incremental transportation volumes -
Tbtu/d (d) 0.27 0.53
Total throughput volumes -Tbtu/d 1.61 1.75
==== ====
Natural gas processed - Tbtu/d 0.85 0.73
Natural gas liquids sold (keep-
whole) - million gallons 50 41
Natural gas liquids sold (purchase
for resale) -million gallons 132 97
Natural gas liquids sold (percent-
of-liquids) - million gallons 8 7
Total natural gas liquids sold -
million gallons 190 145
=== ===
Average sales price per gallon $1.04 $0.99
Estimated realized keep-whole
spreads (e) $7.05 $5.84
Twelve Months
(unaudited) Ended
December 31
-----------
2010 2009
---- ----
(In millions)
ELECTRIC UTILITY
Operating revenues by classification
Residential $894.8 $717.9
Commercial 521.0 439.8
Industrial 212.5 172.1
Oilfield 162.8 132.6
Public authorities and street light 200.8 167.7
Sales for resale 65.8 53.6
Provision for rate refund - (0.6)
System sales revenues 2,057.7 1,683.1
Off-system sales revenues 21.7 31.8
Other 30.5 36.3
----
Total operating revenues $2,109.9 $1,751.2
======== ========
Sales of electricity -MWH (a) sales
by classification
Residential 9.6 8.7
Commercial 6.7 6.4
Industrial 3.8 3.6
Oilfield 3.1 2.9
Public authorities and street light 3.0 3.0
Sales for resale 1.4 1.3
--- ---
System sales 27.6 25.9
Off-system sales 0.5 1.0
--- ---
Total sales 28.1 26.9
==== ====
Number of customers 782,558 776,550
Average cost of energy per KWH (b) -
cents
Natural gas 4.638 3.696
Coal 1.911 1.747
Total fuel 3.012 2.474
Total fuel and purchased power 3.064 2.760
Degree days
Heating
Actual 3,528 3,456
Normal 3,631 3,631
Cooling
Actual 2,328 1,860
Normal 1,911 1,911
NATURAL GAS MIDSTREAM OPERATIONS
Operating revenues $1,707.7 $1,205.1
Operating income $184.3 $138.7
Net income attributable to Enogex $91.1 $61.3
Net cash provided from operating
activities $304.1 $36.9
Capital expenditures $234.2 $237.1
Gathered volumes - Tbtu/d (c) 1.32 1.25
Incremental transportation volumes -
Tbtu/d (d) 0.40 0.54
Total throughput volumes -Tbtu/d 1.72 1.79
==== ====
Natural gas processed - Tbtu/d 0.82 0.70
Natural gas liquids sold (keep-
whole) - million gallons 187 110
Natural gas liquids sold (purchase
for resale) -million gallons 470 351
Natural gas liquids sold (percent-
of-liquids) - million gallons 31 32
Total natural gas liquids sold -
million gallons 688 493
=== ===
Average sales price per gallon $0.96 $0.77
Estimated realized keep-whole
spreads (e) $5.74 $4.12
(a) Megawatt-hours.
(b) Kilowatt-hours.
(c) Trillion British thermal units per day.
(d) Incremental transportation volumes consist of natural gas moved only
on the transportation pipeline.
(e) The estimated realized keep-whole spread is an approximation of the
spread between the weighted-average sales price of the retained NGL
commodities and the purchase price of the replacement natural gas
shrink. The spread is based on the market commodity spread less any
gains or losses realized from keep-whole hedging transactions. The
market commodity spread is estimated using the average of the Oil
Price Information Service daily average posting at the Conway,
Kansas market for NGLs and the Inside FERC monthly index posting for
Panhandle Eastern Pipe Line Co., Texas, Oklahoma for the forward
month contract for natural gas prices.
SOURCE OGE Energy Corp.