OGE Energy Corp. reports higher earnings for 2012

OKLAHOMA CITY, Feb. 27, 2013 /PRNewswire/ --  OGE Energy Corp. (NYSE: OGE), parent company of Oklahoma Gas and Electric Company (OG&E) and OGE Enogex Holdings LLC (Enogex), today reported earnings of $3.58 per average diluted share in 2012, compared with earnings of $3.45 per average diluted share in 2011.

In 2012, OG&E, a regulated electric utility, reported net income of $280 million and contributed $2.83 per diluted share, compared with $263 million, or $2.65 per diluted share in 2011. Enogex, a midstream natural gas pipeline business, reported net income of $74 million, or $0.75 per diluted share in 2012, compared to net income of $82 million, or $0.83 per diluted share in 2011. The holding company posted breakeven results in 2012, compared with a loss of $0.03 per diluted share in the prior period.

"Execution of key multi-year initiatives was our focus for 2012," said Pete Delaney, OGE Energy chairman, president and CEO. "At the utility, we completed our smart meter deployment on time and under budget, and made appreciable progress in our transmission build out, which contributed to our strong utility earnings.  At Enogex, we continue to develop our existing acreage dedications, which should provide gathering and processing volume growth for years to come." 

Fourth Quarter Results

For the three months ended Dec. 31, 2012, OGE Energy reported earnings of $0.39 per diluted share, compared with $0.37 per diluted share in the fourth quarter of 2011. The increase was due to higher gross margins at OG&E primarily from increased transmission revenue, recovery of various utility investments and new customer growth in the fourth quarter compared to the same period last year partially offset by higher operating expenses and increased ownership in Enogex by OGE's equity partner.

Discussion of 2012 results

OGE Energy reported consolidated gross margin of $1.8 billion in 2012, compared with $1.6 billion in 2011. Operating income was $677 million in 2012, compared with $647 million in 2011. Net income was $355 million in 2012, compared with $343 million in 2011.

OG&E reported gross margin of $1.3 billion in 2012, compared with $1.2 billion in 2011. OG&E's higher net income, $280 million in 2012 compared with $263 million in 2011, was primarily attributed to recovery of various utility investments, transmission revenues associated with new projects, new customer growth and production tax credits related to wind farms, partially offset by higher operating and interest expenses.

Enogex reported gross margin of $489 million in 2012, compared to $441 million in 2011. Enogex's gross margin increased 11 percent from 2011, as a result of higher gathering, processing and condensate volumes. Enogex's higher gross margins were offset by increased operating and interest expenses associated with system expansion and increased ownership percentage in Enogex by OGE's equity partner. Enogex's net income attributable to OGE decreased in 2012 to $74 million compared with $82 million in 2011. OGE Energy's portion of EBITDA increased from $223 million in 2011 to $237 million in 2012.

2013 Outlook

OGE Energy consolidated earnings guidance for 2013 is $3.35 to $3.60 per averaged diluted share. The guidance assumes approximately 100 million average diluted shares outstanding and normal weather for the year.  More information regarding the Company's 2013 earnings guidance and the Company's 2012 financial results is contained in the Company's Form 10-K filed today with the Securities and Exchange Commission.

Conference Call Webcast

OGE Energy will host a conference call for discussion of the results and the outlook for 2013 at 8 a.m. CST on Wednesday, Feb. 27. 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 798,000 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.

Non-GAAP Financial Measures

Enogex has included in this release the non-GAAP financial measure EBITDA. Enogex defines EBITDA as net income attributable to Enogex Holdings before interest, income taxes and depreciation and amortization. EBITDA is a supplemental non-GAAP financial measure used by external users of the Company's financial statements such as investors, commercial banks and others, to assess:

  • the financial performance of Enogex's assets without regard to financing methods, capital structure or historical cost basis;
  • Enogex's operating performance and return on capital as compared to other companies in the midstream energy sector, without regard to financing or capital structure; and
  • the viability of acquisitions and capital expenditure projects and the overall rates of return on alternative investment opportunities.

Enogex provides a reconciliation of EBITDA to net income attributable to Enogex Holdings, which Enogex considers to be its most directly comparable financial measure as calculated and presented in accordance with GAAP. The non-GAAP financial measure of EBITDA should not be considered as an alternative to GAAP net income attributable to Enogex Holdings. EBITDA is not a presentation made in accordance with GAAP and has important limitations as an analytical tool. EBITDA should not be considered in isolation or as a substitute for analysis of Enogex's results as reported under GAAP. Because EBITDA excludes some, but not all, items that affect net income and is defined differently by different companies in Enogex's industry, Enogex's definition of EBITDA may not be comparable to a similarly titled measure of other companies. To compensate for the limitations of EBITDA as an analytical tool, Enogex believes it is important to review the comparable GAAP measure and understand the differences between the measures. A reconciliation of EBITDA is below and is available on OGE Energy's website: www.oge.com.

Reconciliation of projected EBITDA to projected net income attributable to Enogex Holdings


Twelve Months Ended

(In millions)

December 31, 2013 (A)(B)





Net income attributable to Enogex Holdings

$

132


Add:   




Interest expense, net


33


Depreciation and amortization expense (C)


123


EBITDA

$

288


 OGE Energy's portion

$

228


(A)

Based on the midpoint of Enogex Holdings' earnings guidance for 2013.

(B)

As of November 1, 2010, Enogex Holdings' earnings are no longer subject to tax (other than Texas state margin taxes) and are taxable at the individual partner level.

(C)

Includes amortization of certain customer-based intangible assets associated with the acquisition from Cordillera Energy Partners III, LLC in November 2011, which is included in gross margin for financial reporting purposes.

 

Reconciliation of EBITDA to net income attributable to Enogex Holdings






Three Months Ended

December 31,

 

Twelve Months Ended

December 31,

(In millions)


2012



2011


2012



2011

Net income attributable to Enogex Holdings

$

21.6


$

37.2

$

147.8


$

155.9

Add:   











Interest expense, net


8.9



5.7


32.6



22.9

Income tax expense (A)


0.1



0.1


0.2



0.2

Depreciation and amortization expense (B)


35.2



21.1


111.6



77.2

EBITDA

$

65.8


$

64.1

$

292.2


$

256.2

OGE Energy's portion

$

52.6


$

53.6

$

236.6


$

222.9












(A)

As of November 1, 2010, Enogex Holdings' earnings are no longer subject to tax (other than Texas state margin taxes) and are taxable at the individual partner level.

(B)

Includes amortization of certain customer-based intangible assets associated with the acquisition from Cordillera Energy Partners III, LLC in November 2011, which is included in gross margin for financial reporting purposes.

 

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 as well as inflation rates and monetary fluctuations; prices and availability of electricity, coal, natural gas and natural gas liquids, each on a stand-alone basis and in relation to each other as well as the processing contract mix between percent-of-liquids, percent-of-proceeds, keep-whole and fixed-fee; 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; the cost of protecting assets against, or damage due to, terrorism or cyber attacks and other catastrophic events; 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, 2012.

 

OGE Energy Corp.

consolidated statements of income

(unaudited)

Three Months Ended


Twelve Months Ended


December 31


December 31


2012


2011


2012


2011


(In millions, except per share data)









OPERATING REVENUES








Electric Utility operating revenues

$  465.5


$  445.9


$2,141.2


$2,211.5

Natural Gas Midstream Operations operating revenues

396.6


439.3


1,530.0


1,704.4

Total operating revenues

862.1


885.2


3,671.2


3,915.9









COST OF GOODS SOLD (exclusive of depreciation and amortization shown below)








Electric Utility cost of goods sold

182.9


193.3


819.0


966.0

Natural Gas Midstream Operations cost of goods sold

301.6


342.8


1,099.7


1,311.9

Total cost of goods sold

484.5


536.1


1,918.7


2,277.9









Gross margin on revenues

377.6


349.1


1,752.5


1,638.0









OPERATING EXPENSES








Other operation and maintenance

153.8


148.9


601.5


581.2

Depreciation and amortization

100.9


81.3


371.0


307.1

Impairment of assets

0.1


1.3


0.4


6.3

Gain on insurance proceeds

-


(3.0)


(7.5)


(3.0)

Taxes other than income

25.5


23.7


110.2


99.7

   Total operating expenses

280.3


252.2


1,075.6


991.3









OPERATING INCOME

97.3


96.9


676.9


646.7









OTHER INCOME (EXPENSE)








Interest income

0.1


0.1


0.6


0.5

Allowance for equity funds used during construction

1.3


4.3


6.2


20.4

Other income

4.7


8.2


17.0


19.3

Other expense

(5.4)


(9.5)


(16.5)


(21.7)

Net other income

0.7


3.1


7.3


18.5









INTEREST EXPENSE








Interest on long-term debt

40.6


37.5


158.9


146.1

Allowance for borrowed funds used during construction

(0.7)


(2.3)


(3.5)


(10.4)

Interest on short-term debt and other interest charges

2.1


1.6


8.7


5.2

Interest expense

42.0


36.8


164.1


140.9









INCOME BEFORE TAXES

56.0


63.2


520.1


524.3









INCOME TAX EXPENSE 

12.5


20.0


135.1


160.7









NET INCOME 

43.5


43.2


385.0


363.6









Less: Net income attributable to noncontrolling interests

5.0


6.8


30.0


20.7









NET INCOME ATTRIBUTABLE TO OGE ENERGY

$    38.5


$    36.4


$   355.0


$   342.9

















BASIC AVERAGE COMMON SHARES OUTSTANDING

98.7


98.0


98.6


97.9

DILUTED AVERAGE COMMON SHARES OUTSTANDING

99.4


99.4


99.1


99.2









BASIC EARNINGS PER AVERAGE COMMON SHARE ATTRIBUTABLE TO OGE ENERGY COMMON SHAREHOLDERS

$    0.39


$    0.37


$     3.60


$     3.50









DILUTED EARNINGS PER AVERAGE COMMON SHARE ATTRIBUTABLE TO OGE ENERGY COMMON SHAREHOLDERS

$    0.39


$    0.37


$     3.58


$     3.45









DIVIDENDS DECLARED PER COMMON SHARE

$0.4175


$0.3925


$ 1.5950


$ 1.5175









 

 

 


OGE Energy Corp.

financial and statistical data

(unaudited)

Three Months Ended


Twelve Months Ended



December 31


December 31



2012


2011


2012


2011



(In millions)

ELECTRIC UTILITY









Operating revenues by classification









     Residential

$ 170.9


$ 172.3


$   878.0


$   943.5


     Commercial

119.4


113.7


523.5


531.3


     Industrial

48.3


47.8


206.8


216.0


     Oilfield

37.6


37.7


163.4


165.1


     Public authorities and street light

47.4


44.9


202.4


207.4


     Sales for resale

13.0


14.4


54.9


65.3


          System sales revenues

436.6


430.8


2,029.0


2,128.6


     Off-system sales revenues

7.0


0.7


36.5


36.2


     Other

21.9


14.4


75.7


46.7


          Total operating revenues

$ 465.5


$ 445.9


$2,141.2


$2,211.5











Sales of electricity - MWH (a) sales by classification 









     Residential

1.8


1.9


9.1


9.9


     Commercial

1.6


1.6


7.0


6.9


     Industrial

1.0


1.0


4.0


3.9


     Oilfield

0.8


0.8


3.3


3.2


     Public authorities and street light

0.8


0.8


3.3


3.2


     Sales for resale

0.3


0.3


1.3


1.4


          System sales

6.3


6.4


28.0


28.5


     Off-system sales

0.3


-


1.4


1.0


          Total sales

6.6


6.4


29.4


29.5











Number of customers

798,110


789,146


798,110


789,146











Weighted average cost of energy per KWH (b) - cents









     Natural gas

3.400


4.014


2.930


4.328


     Coal

2.367


2.129


2.310


2.064


     Total fuel

2.565


2.643


2.437


2.897


     Total fuel and purchased power

2.984


3.039


2.806


3.215











Degree days









     Heating - Actual

1,203


1,264


2,667


3,359


     Heating - Normal

1,329


1,403


3,349


3,631











     Cooling - Actual

77


89


2,561


2,776


     Cooling - Normal

74


61


2,092


1,911










NATURAL GAS MIDSTREAM OPERATIONS









Operating revenues

$ 422.6


$ 455.3


$1,608.6


$1,787.1


Operating income

$   33.2


$   43.4


$   185.6


$   175.0


Net income attributable to OGE Enogex Holdings

$   10.3


$   19.1


$     74.1


$     82.2


Net cash provided from operating activities

$   96.0


$   84.1


$   312.7


$   264.9


Capital expenditures

$ 141.2


$ 334.2


$   506.5


$   612.5











Gathered volumes - TBtu/d (c)

1.51


1.36


1.41


1.36


Incremental transportation volumes - TBtu/d (d)

0.65


0.53


0.67


0.58


   Total throughput volumes - TBtu/d

2.16


1.89


2.08


1.94











Natural gas processed - TBtu/d

1.04


0.88


0.98


0.79











Condensate sold - million gallons

9


6


35


27


Average condensate sales price per gallon

$   1.83


$   2.02


$     1.95


$     2.09











Natural gas liquids sold (keep-whole) - million gallons

29


34


162


167


Natural gas liquids sold (purchased for resale) - million gallons

179


150


667


487


Natural gas liquids sold (percent-of-liquids) - million gallons

6


7


24


25


Natural gas liquids sold (percent-of-proceeds) - million gallons

3


2


14


6


   Total natural gas liquids sold - million gallons

217


193


867


685











Average natural gas liquids sales price per gallon

$   0.93


$   1.09


$     0.89


$     1.16











Average natural gas sales price per MMBtu (e)

$   3.31


$   3.60


$     2.79


$     4.08











(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)

Million British thermal units.




SOURCE OGE Energy Corp.



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