Thursday, Natural gas and electricity provider Dominion Resources Inc. (D) posted a sharp decline in first-quarter profit, weighed by hefty impairment and other charges. Meanwhile, operating earnings per share declined, but topped the Street view. In addition, the company issued operating earnings forecast for the second quarter and affirmed its 2009 outlook.
The Richmond, Virginia-based company's first-quarter net income was $248 million or $0.42 per share, compared to $680 million or $1.18 per share in the prior year quarter.
The recent-quarter results included a $272 million impairment charge as a result of the quarterly ceiling test performed on our gas and oil properties under the full cost method accounting. Also included in the quarterly results was a $50 million net loss related to investments in nuclear decommissioning trust funds, a $26 million of earnings from Peoples and Hope and a $25 million net expense related to other items.
Operating earnings for the latest quarter totaled $569 million or $0.97 per share, compared to $578 million or $1.00 per share in the same quarter of last year.
On average, 11 analysts polled by Thomson Reuters expected the company to report earnings of $0.88 per share. Analysts' estimates typically exclude special items.
The downfall of operating earnings per share in the latest quarter primarily reflected higher income tax expense due to the absence of certain state tax benefits recognized in 2008 and lower gas and oil production in the company's E&P operations, as a result of the expiration of overriding royalty interests associated with former volumetric production payment agreements.
Higher contributions from the merchant generation and producer services businesses and favorable weather in the regulated electric service territory partially offset these negatives.
Quarterly operating revenues advanced to $4.78 billion from the previous year's revenue of $4.35 billion, and surpassed five Wall Street analysts' consensus revenue estimate of $4.12 billion.
Thomas Farrell, chairman, president and chief executive officer, said, "Our merchant businesses delivered exceptional results this quarter. Combined with better-than-expected results from producer services, favorable utility weather and lower-than-expected interest expense, our operating earnings exceeded the top end of our guidance range."
Looking forward to the second quarter, the energy company projects operating earnings to range between $0.61 and $0.66 per share. This compares to operating earnings of $0.50 per share in the second-quarter of 2008. Drivers expected to compare favorably to 2008 include higher contributions from the merchant generation, producer services and gas transmission businesses.
Further, Farrell said, "The strong quarterly financial performance gives us confidence that our operating earnings for 2009 should reach $3.20 to $3.30 per share."
Among other players in the sector, American Electric Power Co., Inc. (AEP) posted a decline in its first-quarter profit, hurt by falling demand amid the economic downturn, with revenues remaining flat with last year. However, ongoing earnings per share for the quarter topped analysts' expectations, while quarterly revenues missed the Wall Street consensus.
Net income for the quarter was $360 million or $0.89 per share, lower than $573 million or $1.43 per share in the prior-year quarter. Revenues were flat with the same quarter last year at $3.5 billion. American Electric Power expects earnings to grow at 2%- 4% over the next year or so. The company also expects to return to a 4%-8% growth rate when the economy improves.
The Greensburg, Pennsylvania-based Allegheny Energy Inc. (AYE) is due to issue financial results for the first quarter before market opens on May 5. Analysts are looking for earnings of $0.74 per share on revenues of $1.07 billion.
The Merrillville, Indiana-based Nisource Inc. (NI) plans to report first-quarter results on May 1, with analysts projecting earnings of $0.62 per share on revenues of $2.66 billion.
Dominion Resources shares, which have been trading between $27.15 and $48.50 in the past 52 weeks, are currently trading at $30.15, up 55 cents or 1.84%.
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