OGE Energy Lags Earnings, Gives View - Analyst Blog
May 03 2013 - 3:34AM
Zacks
OGE Energy Corporation (OGE), a distributor of
natural gas and electricity primarily in the south central United
States, reported first quarter 2013 earnings of 23 cents per share,
missing the Zacks Consensus Estimate of 34 cents. Earnings were
also lower than the prior-year figure of 38 cents per share.
A regulated electric utility company, Oklahoma Gas and Electric
Company (“OG&E”), contributed earnings of 13 cents per share in
the reported quarter, flat year over year. Enogex, a midstream
natural gas business, contributed earnings of 12 cents per share,
down from 25 cents per share in the year-ago quarter. OGE Enogex
Holdings LLC posted a loss of 2 cents per share versus breakeven
results in the prior-year period.
Operational Metrics
OGE Energy’s operating revenues of $901.4 million increased from
$840.7 million in the first quarter of 2012.
Electric Utility revenues were $455.5 million, up from $426.7
million in the first quarter of 2012. Natural Gas Midstream
Operations revenues were $445.9 million, up 7.7% year over
year.
Sales of electricity to residential customers were 2.2 MWH versus
1.9 MWH in the year-ago period. Sales to Commercial customers were
1.5 MWH, flat year over year. Sales to Industrial customers were
0.9 MWH, down from 1MWH in the prior-year period.
OGE Energy’s consolidated gross profit was $348 million in the
reported quarter, down from $355 million in first quarter of
2012.
Total operating expenses in the quarter under review were $273
million, up 6.2% year over year. Operating income of $75.4 million
declined 23.3% year over year on the heels of higher expenses.
Segment Results
OG&E clocked gross profit of $243 million, up from $231 million
in the comparable quarter last year, driven by revenues associated
with transmission projects, favorable weather and new customer
growth.
Enogex’s gross margin on revenues was $105 million, down from $124
million in the prior-year quarter. The decline reflects lower gross
margins in the processing and transportation businesses. However,
the decline was partially offset by increase in processing and
gathered volumes.
Financial Update
Cash and cash equivalents as of Mar 31, 2013 were $7.1 million, up
from $1.8 million as of Dec 31, 2012. Long-term debt as of Mar 31,
2013 was $2,848.7 million, approximately flat with $2,848.6 million
as of Dec 31, 2012.
Guidance
OGE Energy expects consolidated earnings for 2013 in the range of
$3.35 to $3.60 per average diluted share. The guidance reflects
normal weather for the remainder of 2013. However, it does not take
into account any impact from the midstream partnership with
CenterPoint Energy, Inc. (CNP).
Recently, CenterPoint Energy, OGE Energy and ArcLight Capital
Partners, LLC declared the closing of a previously announced
partnership that includes CenterPoint Energy's interstate pipelines
and field services businesses and the midstream business of Enogex
LLC. The partnership will be managed by a general partner whose
governance will be shared by CenterPoint Energy and OGE on an equal
basis.
Our Take
OGE Energy failed to meet the Zacks Consensus Estimate on higher
operating expenses. Currently, the company is pursuing an
aggressive energy efficiency program, investing in renewable energy
technologies and upgrading its infrastructure. Going forward, these
initiatives would help in improving the top and bottom line.
However, we remain concerned about the volatility in its commodity
business and the unfavorable macro backdrop. The company presently
retains a short-term Zacks Rank #3 (Hold).
Stocks worth considering are The AES Corporation
(AES) and ALLETE, Inc. (ALE), both with a Zacks
Rank #2 (Buy).
AES CORP (AES): Free Stock Analysis Report
ALLETE INC (ALE): Free Stock Analysis Report
CENTERPOINT EGY (CNP): Free Stock Analysis Report
OGE ENERGY CORP (OGE): Free Stock Analysis Report
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