OGE Energy Corp. reports third quarter results
Thursday, November 02, 2017 7:00:00 AM ET
OGE Energy Corp. (OGE ), the parent company of Oklahoma Gas and Electric Company ("OG&E"), and holder of 25.7 percent limited partner interest and 50 percent general partner interest in Enable Midstream Partners, LP, today reported earnings of $0.92 per diluted share for the three months ended September 30, 2017 compared to $0.92 per diluted share for the third quarter of 2016.
OG&E, a regulated electric utility, contributed earnings of $0.81 per share in the third quarter, compared with earnings of $0.80 per share in the third quarter last year. OGE Energys interest in the natural gas midstream operations contributed earnings of $0.10 compared to $0.11 per share in the year-ago quarter. The holding company posted earnings of $0.01 per share in both the third quarters of 2017 and 2016.
"Third quarter earnings were impacted primarily by cool summer weather in our utility service territory with performance on plan in other areas." said OGE Energy Corp. Chairman, President and CEO Sean Trauschke. "Our focus remains on executing and completing projects in the best interests of our customers in a safe and cost efficient manner."
Discussion of Third Quarter 2017 OGE Energys net income was $183 million in the third quarter, compared to $184 million in the year-ago quarter.
OG&Es net income was $162 million compared to $160 million in the year-ago quarter. The increase in net income was due in part to non-cash earnings used to recover financing costs during construction of the Mustang and Sooner plants. These earnings were partially offset by lower gross margin as a result of mild summer weather.
Natural Gas Midstream Operations contributed net income to OGE Energy Corp. of $21 million for the third quarter of 2017 compared to $23 million for the same period in 2016. Higher gross margin was offset by increased operating and interest expenses. Enable Midstream issued cash distributions to OGE of approximately $35 million in both the third quarters of 2017 and 2016.
2017 Earnings Outlook The Companys 2017 OG&E earnings guidance is projected to be $1.50 to $1.52 per average diluted share, tightened and adjusted for mild summer weather, from the previously issued guidance of $1.58 to $1.70 per average diluted share. The projected earnings from the natural gas midstream business remains unchanged between $0.35 and $0.39 per average diluted share. OGE Energy consolidated earnings guidance for 2017 is projected to be $1.85 to $1.91 per average diluted share, from the previously issued guidance of $1.93 to $2.09 per average diluted share. More information regarding the Companys 2017 earnings guidance is contained in the Companys 2016 Form 10-K and Form 10-Q for the quarter ended March 31, 2017 and the quarter ended September 30, 2017 as filed with the Securities and Exchange Commission.
Conference Call Webcast OGE Energy will host a conference call for discussion of the results on Thursday, November 2, at 8 a.m. CST. The conference will be available through www.oge.com. OGE Energy Corp. is the parent company of OG&E, a regulated electric utility with approximately 841,000 customers in Oklahoma and western Arkansas. In addition, OGE holds a 25.7 percent limited partner interest and a 50 percent general partner interest of Enable Midstream, created by the merger of OGEs Enogex LLC midstream subsidiary and the pipeline and field services businesses of Houston-based CenterPoint Energy.
Non-GAAP Financial Measures OG&E has included in this release the non-GAAP financial measure Gross Margin. Gross Margin is defined by OG&E as operating revenues less fuel, purchased power and certain transmission expenses. Gross margin is a non-GAAP financial measure because it excludes depreciation and amortization, and other operation and maintenance expenses. Expenses for fuel and purchased power are recovered through fuel adjustment clauses and as a result changes in these expenses are offset in operating revenues with no impact on net income. OG&E believes gross margin provides a more meaningful basis for evaluating its operations across periods than operating revenues because gross margin excludes the revenue effect of fluctuations in these expenses. Gross margin is used internally to measure performance against budget and in reports for management and the Board of Directors. OG&Es definition of gross margin may be different from similar terms used by other companies.
Reconciliation of Gross Margin to Revenue attributable to OG&E
Three Months Ended
(In millions) 2017 2016
Operating revenues $ 716.8 $ 743.9
Cost of sales 255.7 269.8
Gross Margin $ 461.1 $ 474.1
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; the ability to obtain timely and sufficient rate relief to allow for recovery of items such as capital expenditures, fuel costs, operating costs, transmission costs and deferred expenditures; prices and availability of electricity, coal, natural gas and NGLs; the timing and extent of changes in commodity prices, particularly natural gas and NGLs, the competitive effects of the available pipeline capacity in the regions Enable serves, and the effects of geographic and seasonal commodity price differentials, including the effects of these circumstances on re-contracting available capacity on Enables interstate pipelines; the timing and extent of changes in the supply of natural gas, particularly supplies available for gathering by Enables gathering and processing business and transporting by Enables interstate pipelines, including the impact of natural gas and NGLs prices on the level of drilling and production activities in the regions Enable serves; business conditions in the energy and natural gas midstream industries, including the demand for natural gas, NGLs, crude oil and midstream services; competitive factors including the extent and timing of the entry of additional competition in the markets served by the Company; the impact on demand for our services resulting from cost-competitive advances in technology, such as distributed electricity generation and customer energy efficiency programs; technological developments, changing markets and other factors that result in competitive disadvantages and create the potential for impairment of existing assets; factors affecting utility operations such as unusual weather conditions; catastrophic weather-related damage; unscheduled generation outages, unusual maintenance or repairs; unanticipated changes to fossil fuel, natural gas or coal supply costs or availability due to higher demand, shortages, transportation problems or other developments; environmental incidents; or electric transmission or gas pipeline system constraints; availability and prices of raw materials for current and future construction projects; the effect of retroactive pricing of transactions in the SPP markets or adjustments in market pricing mechanisms by the SPP; 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 Companys markets; environmental laws, safety laws or other regulations that may impact the cost of operations or restrict or change the way the Company operates its facilities; 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 cyberattacks and other catastrophic events; creditworthiness of suppliers, customers and other contractual parties; social attitudes regarding the utility, natural gas and power industries; identification of suitable investment opportunities to enhance shareholder returns and achieve long-term financial objectives through business acquisitions and divestitures; increased pension and healthcare costs; costs and other effects of legal and administrative proceedings, settlements, investigations, claims and matters; difficulty in making accurate assumptions and projections regarding future revenues and costs associated with the Companys equity investment in Enable that the Company does not control; and other risk factors listed in the reports filed by the Company with the Securities and Exchange Commission including those listed in Risk Factors in the Companys Form 10-K for the year ended December 31, 2016.
Note: Consolidated Statements of Income, Financial and Statistical Data attached.
Oklahoma Gas and Electric Company
Financial and Statistical Data
Three Months Ended Nine Months Ended
September 30, September 30,
(Dollars in millions) 2017 2016 2017 2016
Operating revenues by classification
Residential $ 295.1 $ 351.9 $ 700.0 $ 750.0
Commercial 174.2 188.4 450.6 434.2
Industrial 58.0 60.4 156.3 147.4
Oilfield 43.4 47.3 124.6 118.4
Public authorities and street light 60.6 66.8 159.4 154.4
Sales for resale -- -- 0.1 0.2
System sales revenues 631.3 714.8 1,591.0 1,604.6
Provision for rate refund 29.2 (21.0) 25.0 (21.0)
Integrated market 14.0 13.2 16.8 33.0
Other 42.3 36.9 126.4 111.8
Total operating revenues $ 716.8 $ 743.9 $ 1,759.2 $ 1,728.4
MWh sales by classification (In millions)
Residential 2.9 3.2 6.9 7.3
Commercial 2.1 2.1 5.7 5.7
Industrial 0.9 1.0 2.7 2.8
Oilfield 0.8 0.8 2.4 2.4
Public authorities and street light 0.8 0.9 2.3 2.4
Sales for resale -- -- -- --
System sales 7.5 8.0 20.0 20.6
Integrated market 0.6 0.7 1.4 1.5
Total sales 8.1 8.7 21.4 22.1
Number of customers 840,519 832,234 840,519 832,234
Weighted-average cost of energy per kilowatt-hour (In cents)
Natural gas 2.747 2.688 2.795 2.366
Coal 2.049 2.222 2.100 2.251
Total fuel 2.253 2.337 2.231 2.175
Total fuel and purchased power 2.966 2.984 3.093 2.796
Heating - Actual 4 3 1,574 1,714
Heating - Normal 19 19 2,021 2,020
Cooling - Actual 1,223 1,450 1,847 2,082
Cooling - Normal 1,380 1,380 2,018 2,018
OGE Energy Corp.
Consolidated Statements of Income
Three Months Ended September Nine Months Ended September
(In millions, except per share data) 2017 2016 2017 2016
OPERATING REVENUES $ 716.8 $ 743.9 1,759.2 1,728.4
COST OF SALES 255.7 269.8 696.5 645.4
Other operation and maintenance 117.7 113.1 356.5 354.6
Depreciation and amortization 76.9 82.2 207.2 240.8
Taxes other than income 23.2 21.5 68.4 66.5
Total operating expenses 217.8 216.8 632.1 661.9
OPERATING INCOME 243.3 257.3 430.6 421.1
OTHER INCOME (EXPENSE)
Equity in earnings of unconsolidated affiliates 33.6 34.5 98.6 79.5
Allowance for equity funds used during construction 11.8 3.9 27.2 9.2
Other income 15.0 5.7 34.1 18.9
Other expense (2.0) (3.3) (9.3) (10.8)
Net other income 58.4 40.8 150.6 96.8
Interest on long-term debt 38.7 35.8 113.8 107.3
Allowance for borrowed funds used during construction (5.2) (2.0) (12.6) (4.7)
Interest on short-term debt and other interest charges 2.4 1.6 6.8 5.1
Interest expense 35.9 35.4 108.0 107.7
INCOME BEFORE TAXES 265.8 262.7 473.2 410.2
INCOME TAX EXPENSE 82.4 79.1 149.0 129.9
NET INCOME 183.4 183.6 324.2 280.3
BASIC AVERAGE COMMON SHARES OUTSTANDING 199.7 199.7 199.7 199.7
DILUTED AVERAGE COMMON SHARES OUTSTANDING 200.1 199.9 200.0 199.8
BASIC EARNINGS PER AVERAGE COMMON SHARE $ 0.92 $ 0.92 $ 1.62 $ 1.40
DILUTED EARNINGS PER AVERAGE COMMON SHARE $ 0.92 $ 0.92 $ 1.62 $ 1.40
DIVIDENDS DECLARED PER COMMON SHARE $ 0.33250 $ 0.30250 $ 0.93750 $ 0.85250
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SOURCE OGE Energy Corp.