Monday, diversified natural gas company Southern Union Co. (SUG) reported a drop in earnings for the first quarter, reflecting a slew of one-time items and a decline in revenues. On an adjusted basis, earnings beat analysts' consensus by nine cents. Southern Union also reaffirmed its earnings forecast for fiscal year 2009, citing stable fee-based revenues.
For the first quarter, the Houston, Texas-based company's net earnings available for common stockholders plunged to $44.10 million or $0.36 per share from $79.00 million or $0.64 per share in the prior-year quarter.
Results for the quarter included a $10.10 million, or $0.08 per share, charge to increase the provision for repair and abandonment costs as a result of damage caused by Hurricane Ike and a $9.72 million, or $0.08 per share, mark-to-market unrealized loss on open economic hedges processing spreads. Net earnings exclude a $9.2 million, or $0.07 per share, mark-to-market gain on economic hedges.
Excluding items, net earnings available for common stockholders was $73.10 million or $0.59 per share. On average, seven analysts polled by Thomson Reuters expected the company to earn $0.50 per share for the first quarter. Analysts' estimates typically exclude special items.
In the fourth quarter, the company had reported net earnings of $120.89 million or $0.97 per share, and adjusted earnings of $59.33 million or $0.47 per share.
Operating revenues for the latest first quarter dropped sharply to $684.00 million from $953.00 million in the previous-year quarter, yet topped analysts' consensus revenue estimate of $655.80 million. For the sequentially preceding quarter, operating revenues were $727.12 million.
Net operating revenues for the quarter declined 11% to $287.00 million from $324.00 million, while adjusted net operating revenues decreased to $317.00 million from $324.00 million in the same quarter of last year.
For the quarter under review, Southern Union's transportation and storage segment generated operating revenues of $192.30 million from $187.10 million last year, largely due to increase in parking revenue and reservation revenue, offset by a decrease in transportation commodity revenue. Gathering and processing segment revenues for the quarter dropped to $168.31 million from $416.00 million and distribution segment revenues decreased to $322.02 million from $349.00 million in the previous-year quarter
Cost of gas and other energy for the quarter plunged to $380.10 million from $610.20 million in the corresponding quarter of last year. Total operating expenses for the quarter was $592.20 million compared to $799.14 million in the year-ago quarter.
Amongst others in the sector, Merrillville, Indiana-based Energy holding company NiSource Inc. (NI)on May 1 reported a net income for the first quarter that rose to $148.4 million or $0.54 per share from $99.3 million or $0.36 per share in the year-ago period. The group's net revenues for the quarter increased to $1.07 billion from $1.04 billion in the same period last year, while gross revenues dropped to $2.7 billion from $3.3 billion a year ago.
Looking forward, for fiscal year 2009, Southern Union continues to expect ongoing earnings within a range of $1.45-$1.60 per share, and adjusted net earnings of $1.75 - $1.90 per share.
Wall Street analysts expect the company to report earnings for the year of $1.67 per share.
Southern Union stated that adjusted net earnings guidance attribute the impact of previously accrued mark-to-market unrealized gains on economic hedges of 2009 processing spreads to 2009 adjusted net earnings and exclude the increase to the provision for repair and abandonment costs as a result of damage to the company's Sea Robin pipeline system caused by Hurricane Ike.
In Monday's regular trading session, SUG is trading at $17.03, down $0.10 or 0.58%, on a volume of 0.26 million shares on the NYSE. In the past 52 weeks, the stock trended in a broad range of $10.60 - $27.73, with a three-month average of 1.21 million shares.
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