AGL Resources Expects Second-Quarter 2008 Earnings Results to Be Lower Than the Prior-Year Quarter; Full-Year Earnings Guidance
10 Julio 2008 - 7:00AM
PR Newswire (US)
Rising Natural Gas Prices Result in Reported Losses on Hedges Used
by Wholesale Services to Lock in Margins; Earnings Will Be Realized
When Natural Gas Inventory is Withdrawn from Storage ATLANTA, July
10 /PRNewswire-FirstCall/ -- AGL Resources Inc. (NYSE:ATG) today
announced, and reminded the investment community, that its reported
earnings are subject to volatility due to changes in natural gas
prices. The company's Wholesale Services operating segment utilizes
derivative instruments, generally in the form of natural gas
futures contracts, to hedge natural gas storage inventory. These
instruments are recorded at fair value, with unrealized gains and
losses from the change in value reflected in earnings, while the
related storage inventory is generally recorded at historical cost.
The hedged value of the storage transactions is ultimately realized
when the gas is withdrawn from inventory and delivered to
customers. In addition, the widening of future basis spreads can
result in losses on futures contracts used to hedge the value of
pipeline transportation capacity. Consequently, due to the
continued increase in forward NYMEX (New York Mercantile Exchange)
natural gas prices during the second quarter of 2008 relative to
the prior-year quarter, and the widening of transportation basis
spreads, both marked as of June 30, 2008, the company expects its
second-quarter 2008 reported earnings results to be significantly
impacted by pre-tax hedge losses in the range of $53 to $57 million
($33 to $36 million after-tax), or an approximate $0.43 to $0.47
reduction to diluted earnings per share. A significant portion of
the reported hedge losses is expected to be recovered in the third
and fourth quarters of 2008 as the natural gas inventory is
withdrawn from storage and delivered to customers and the hedging
instruments are settled, assuming all factors remain the same. This
expectation could change if Wholesale Services adjusts its daily
injection and withdrawal plans in response to changes in market
conditions in future months. During the second quarter of 2007, a
decrease in forward NYMEX prices for natural gas and the narrowing
of basis spreads resulted in reported gains of $19 million, or
$0.15 per diluted share, on Wholesale Services' storage and
transportation hedges, as detailed in the 2007 second quarter Form
10-Q filed with the Securities and Exchange Commission. "Our
Wholesale Services business remains on track to generate economic
value for the full year that is consistent with our expectations
and with the guidance we provided our investors," said John W.
Somerhalder II, chairman, president and chief executive officer of
AGL Resources. "However, the dramatic increase we have seen in
natural gas prices clearly has had a significant impact on our
accounting results that we expect to report for the second quarter.
We wanted to provide some early transparency around those results,
given last year's reported second-quarter results and current
FirstCall expectations. Our corporate guidance for the full year
remains $2.75 to $2.85 per share." AGL Resources does not provide
or publish forecasts of quarterly earnings or other quarterly
results, and this announcement is not intended to change that
policy. AGL Resources will report its second-quarter and
year-to-date earnings results on Thursday, July 31, 2008, prior to
the market opening, followed by a conference call with the investor
community at 9 a.m. ET. The company will discuss second-quarter and
year-to-date 2008 earnings results in more detail at that time. The
conference call will be webcast, and can be accessed via the
investor relations section of the company's Web site
(http://www.aglresources.com/), or by dialing 800/291-5365 in the
United States or 617/614-3922 outside the United States. The
confirmation code is 23322361. A replay of the conference call will
be available by dialing 888/286-8010 in the United States or
617/801-6888 outside the United States, with a confirmation code of
78764000. A replay of the call also will be available on the
investor relations section of the company's Web site for seven days
following the call. About AGL Resources AGL Resources (NYSE:ATG),
an Atlanta-based energy services company, serves approximately 2.3
million customers in six states. The company also owns
Houston-based Sequent Energy Management, an asset manager serving
natural gas wholesale customers throughout North America. As a 70
percent owner in the SouthStar partnership, AGL Resources markets
natural gas to consumers in Georgia under the Georgia Natural Gas
brand. The company also owns and operates Jefferson Island Storage
& Hub, a high-deliverability natural gas storage facility near
the Henry Hub in Louisiana. For more information, visit
http://www.aglresources.com/. Forward-Looking Statements Certain
expectations and projections regarding our future performance
referenced in this press release are forward-looking statements.
Forward- looking statements involve matters that are not historical
facts and because these statements involve anticipated events or
conditions, forward-looking statements often include words such as
"anticipate," "assume," "believe," "can," "could," "estimate,"
"expect," "forecast," "future," "goal," "indicate," "intend,"
"may," "outlook," "plan," "predict," "project," "seek," "should,"
"target," "will," "would," or similar expressions. Our expectations
are not guarantees and are based on currently available
competitive, financial and economic data along with our operating
plans. While we believe our expectations are reasonable in view of
the currently available information, our expectations are subject
to future events, risks and uncertainties, and there are several
factors -- many beyond our control -- that could cause results to
differ significantly from our expectations. Such events, risks and
uncertainties include, but are not limited to, changes in price,
supply and demand for natural gas and related products; the impact
of changes in state and federal legislation and regulation; actions
taken by government agencies on rates and other matters;
concentration of credit risk; utility and energy industry
consolidation; impact of acquisitions and divestitures; direct or
indirect effects on AGL Resources' business, financial condition or
liquidity resulting from a change in our credit ratings or the
credit ratings of our counterparties or competitors; interest rate
fluctuations; financial market conditions and general economic
conditions; uncertainties about environmental issues and the
related impact of such issues; the impact of changes in weather
upon the temperature-sensitive portions of the business; impacts of
natural disasters such as hurricanes upon the supply and price of
natural gas; acts of war or terrorism; and other factors which are
provided in detail in our filings with the Securities and Exchange
Commission, which we incorporate by reference in this press
release. Forward-looking statements are only as of the date they
are made, and we do not undertake to update these statements to
reflect subsequent changes. DATASOURCE: AGL Resources Inc. CONTACT:
Financial, Steve Cave, +1-404-584-3801, cell +1-678-642-4258, , or
Media, Jack Holt, +1-404-584-4255, cell +1-404-217-0284, Web site:
http://www.aglresources.com/
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