Energy services company AGL Resources Inc. (AGL) reported Thursday a sharp decline in third-quarter profit, attributable mainly to lower gains on wholesales services segment's storage hedges. The company also said it expects earnings for the full year to be at the high end or slightly above its previously provided guidance range.
For the third quarter, net income attributable to AGL Resources dropped to $12 million or $0.16 per share from $65 million or $0.85 per share in the previous year.
On average, eight analysts polled by Thomson Reuters expected the company to report earnings of $0.23 per share for the third quarter. Analysts' estimates typically exclude special items. Operating revenues for the period plunged to $307 million from $539 million in the third quarter of the prior fiscal year. Three analysts were expecting revenue of $439.67 million in the third quarter.
Segment-wise, Wholesale services recorded operating loss of $2 million, compared to operating income of $86 million in the past year. The wide variation was attributable to $110 million in decreased gains on the instruments used to hedge storage as compared to last year. The drop in forward NYMEX natural gas prices in the year-ago quarter resulted in $105 million of storage hedge gains, compared with a $5 million storage hedge losses in the current year quarter. The segment's operating revenues fell to $10 million from $138 million.
Distribution Operations, the largest component of AGL's business, recorded operating income of $46 million, down from $58 million in fiscal 2008, reflecting higher pension, depreciation and payroll and benefits costs. Revenues declined year-over-year to $219 million from $272 million.
Operating loss of Retail Energy operations narrowed to $2 million from $21 million, as the prior year results included an $18 million lower-of-cost-or-market natural gas inventory valuation adjustment that significantly reduced natural gas prices. Revenues from the business slid to $100 million from $149 million in the year-ago quarter.
Energy Investments recorded operating income of $3 million, flat from the past year, as improvement in revenues at AGL Networks was offset by higher services costs at Jefferson Island Storage & Hub and an increase in depreciation at Golden Triangle Storage. Revenue from Energy Investments decreased to $11 million from $13 million.
Total operating expenses for the company reduced to $264 million from $413 million, while interest expense declined to $26 million from $29 million, due to a decrease in short-term interest rates and slightly lower average debt balances.
For the nine-month period, net income rose to $151 million or $1.97 per share from $143 million or $1.87 per share in fiscal 2008. Revenues came down to $1.68 billion from $1.99 billion in the same period last year.
Considering the better than expected results through the first three quarters of 2009 and the storage-related economic value created in wholesale services that would be realized as operating revenues in the fourth quarter, AGL Resources expects 2009 earnings to be at the top end or slightly above its earlier stated earnings guidance range of $2.65 - $2.75 per share. Analysts are currently looking for earnings of $2.71 per share on revenue of $2.58 billion for fiscal 2009.
AGL is currently trading at $35.81, down $0.16 or 0.44%, on the NYSE.
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