Pacific Northern Gas Reports Fourth Quarter Earnings and Declares Increased Dividends
March 04 2009 - 6:44PM
Marketwired Canada
Pacific Northern Gas Ltd. (TSX:PNG)(TSX:PNG.PR.A) announced today that its Board
of Directors declared a 4.5 percent increase in the quarterly dividend to 23
cents per share on the Company's Common Shares. The dividend will be payable
March 23, 2009 to shareholders of record at the close of business on March 16,
2009. The Company also announced today, by way of a separate press release, that
it has obtained the approval of the Toronto Stock Exchange (the "TSX") to
commence a normal course issuer bid.
FOURTH QUARTER CONSOLIDATED RESULTS
Net income for the quarter ended December 31, 2008 was $3.2 million, compared
with $2.6 million for the quarter ended December 31, 2007. After providing for
preferred share dividends, earnings per common share in the fourth quarter of
2008 were $0.84, compared with $0.70 for the quarter ended December 31, 2007.
Included in the results for the fourth quarter of 2008 are charges, net of
income taxes, totaling $0.2 million relating to the Company's share of KSL
Project expenditures, or $0.05 per share compared to after-tax charges of $0.3
million or $0.07 per share in the corresponding period in 2007. The KSL Project
is a project to loop the mainline transmission system from Kitimat to Summit
Lake to serve a LNG terminal proposed by Kitimat LNG Inc.
Net income for 2008 was $5.9 million, compared with $4.4 million for 2007. After
providing for preferred share dividends, earnings per common share for 2008 were
$1.53 compared with $1.11 for 2007. Included in net income for 2008 are
after-tax charges of $0.6 million, or $0.16 per share, compared with after-tax
charges of $1.4 million, or $0.38 per share for 2007, relating to the Company's
share of KSL Project expenditures. Net income available to common shareholders
increased by $1.6 million mainly due to lower KSL Project expenditures incurred
in 2008 compared to 2007, higher gas deliveries to commercial customers and
higher allowed rates of return on common equity. The allowed weighted average
return on common equity increased from 8.97 percent in 2007 to 9.22 percent in
2008.
Operating revenues in 2008 increased to $132.8 million compared with $129.5
million in 2007. There was an increase of $3.3 and $3.6 million in gas sales to
residential customers and small commercial customers, respectively, resulting in
higher revenue in 2008 compared to 2007. The increase in operating revenues was
offset by lower off-system sales of gas surplus to customer needs, from $32.5
million in 2008 compared to $36.1 million in 2007. Natural gas commodity prices,
which are passed through to the Company's sales customers without mark-up, can
be volatile and result in significant variability of the Company's reported
operating revenues and cost of sales.
Operating revenues in the fourth quarter of 2008 increased to $41.1 million as
compared with $40.6 million in the same period in 2007. The increase in
operating revenues in the fourth quarter is mainly due to an increase in gas
sales of $1.5 million to residential, $2.0 million to commercial and $0.9
million in small and large industrial customers offset by a $3.8 million
reduction of off system sales in the fourth quarter of 2008 compared to the
fourth quarter of 2007 and higher deliveries to customers. Operating revenues
from gas sales increased mainly due to the higher commodity cost of gas embedded
in rates as a result of the increased market prices during the summer months.
Deliveries to residential and commercial customers in 2008 were higher by 100
terajoules, or 1.6 percent, compared to deliveries in 2007 due primarily to
colder weather in 2008 compared to 2007. These deliveries also exceeded the
forecast used for rate making purposes but this did not significantly impact net
income due to the existence of a deferral account that captured the after-tax
value of the revenue variance, amounting to $0.34 million ($0.07 million in
2007). Deliveries to small industrial customers declined in 2008 compared to
2007 primarily in the forestry sector. Low lumber prices and the high Canadian
dollar negatively impacted lumber production levels. Two sawmills in the Western
system shut down operations pending recovery of lumber markets while another cut
back production levels.
Operating margin in 2008 increased to $46.7 million, as compared with $45.0
million in 2007. This increase of $1.7 million of operating margin was due to
the higher weighted average allowed return on equity of 9.22 percent in 2008
compared to 8.97 percent in 2007 and due to higher than anticipated deliveries
to large commercial customers in 2008. In addition, a deferral account initiated
in 2008 to account for differences between forecast and actual deliveries to
some small industrial customers in the forestry sector in the Western system
helped to mute the impact of lower deliveries than forecast.
Operating margin in the fourth quarter of 2008 increased to $14.3 million,
compared to $13.6 million in the corresponding period in 2007, due to the higher
than anticipated deliveries to large commercial customers and due to higher cost
of service for 2008 mainly as a result of the higher allowed return on equity
authorized by the British Columbia Utilities Commission (the "Commission").
The Company continues to pursue a project to loop its mainline transmission
system from Kitimat to Summit Lake (the "KSL Project") through its 50 percent
ownership of Pacific Trail Pipelines Limited Partnership ("PTP"), a 50/50
partnership between the Company and Galveston LNG Inc., the parent company of
Kitimat LNG Inc. On June 27, 2008, PTP received its Environmental Assessment
Certificate from the B.C. Environmental Assessment Office ("BCEAO") for the KSL
Project. Approvals from the Canadian Environmental Assessment Agency ("CEAA")
are expected to be granted before the end of the first quarter in 2009.
Subject to a number of conditions, construction of the KSL Project by PTP is
planned to commence in 2011 for completion in mid-2013 when the LNG export
terminal is planned to begin operation. Conditions to construction include the
securing of contracts for use of PTP's transportation capacity, financing for
construction of the KSL Project, and additional regulatory approvals for the KSL
Project, including approvals under the Canadian Environmental Assessment Act, a
Certificate of Public Convenience and Necessity from the Commission and other
permits from the B.C. Oil and Gas Commission. The Company can give no assurances
that these conditions will be satisfied or that construction of the LNG export
terminal by Kitimat LNG or the KSL Project by PTP will proceed. Upon completion
of the KSL Project, and subject to regulatory and shareholder approvals, the
Company's existing mainline transmission system will be transferred to PTP and
integrated with the KSL Project facilities. The Company will continue to own and
operate its existing gas distribution systems, including its Customer Care
Centre in Terrace.
Kitimat LNG and Mitsubishi Corporation ("MC") announced in January 2009 the
signing of a Heads of Agreement that sets forth the terms pursuant to which MC
will contract significant terminal capacity and acquire a minority equity stake
in Kitimat LNG's proposed LNG export terminal. With MC's expected involvement as
an anchor tenant in the Kitimat LNG export terminal, the Company anticipates MC
will also become an anchor tenant for the KSL Project, requiring associated
natural gas transportation service of approximately 200 million cubic feet
("MMcf") per day to the export terminal. PTP and Kitimat LNG have received other
non-binding expressions of interest from parties interested in pipeline and
terminal capacity and discussions with these parties are continuing.
The Company's share of planned development expenditures for the KSL Project in
2009 is expected to be approximately $0.2 million ($0.14 million after income
taxes). Following environmental certification, expenditures on the KSL Project
will be minimized until suitable commercial arrangements for firm gas
transportation services by PTP are in place at which point development costs of
the project would be capitalized.
The 2009 revenue requirements applications for each of the Company's divisions
were filed with the Commission in late November 2008 for approval of new rates
to take effect January 1, 2009. The Commission approved interim rates effective
January 1, 2009 at the levels set forth in the applications and set down a
negotiated settlement process to commence on March 23, 2009.
In November 2008, the Commission confirmed that the automatic return on equity
adjustment formula resulted in an 8.47 percent rate of return for a low risk
benchmark utility in 2009 resulting in an allowable rate of return on common
equity of 9.12 percent applicable to the Western system and to the Tumbler Ridge
division 2009. The Commission's formula resulted in an allowable rate of return
on common equity of 8.87 percent applicable to the Fort St. John/Dawson Creek
division for 2009.
Headquartered in Vancouver, British Columbia, Pacific Northern Gas Ltd.
(TSX:PNG)(TSX:PNG.PR.A) owns and operates natural gas transmission and
distribution systems. The Company's western transmission line extends from the
Spectra Energy (formerly Duke Energy) gas transmission system north of Prince
George to tidewater at Kitimat and Prince Rupert, and provides service to 12
communities and a number of industrial facilities. In the northeast, Pacific
Northern's subsidiary Pacific Northern Gas (N.E.) Ltd. provides gas distribution
service in the Dawson Creek, Fort St. John and Tumbler Ridge areas. Further
information is available on the Company's website at: www.png.ca.
Fourth Quarter Consolidated Results (unaudited)
Three Month Period Ended
December 31, 2008 ($ thousands, except for per share data)
2008 2007
Operating revenues $ 41,144 $ 40,568
Cost of sales 26,859 27,015
--------- ---------
Operating margin 14,285 13,553
Net income applicable to common shares $ 3,075 $ 2,552
Earnings per common share - basic $ 0.84 $ 0.70
Earnings per common share - diluted $ 0.84 $ 0.69
Operating cash flow before non-cash
working capital changes $ 3,807 $ 3,387
Additions to plant, property and equipment (2,631) (2,707)
Decrease in deferred charges 547 777
Issue of long term debt 4,000 2,000
Repayment of long term debt (1,800) (1,800)
Increase (decrease) in bank indebtedness (1,471) 8,947
Dividends paid (975) (902)
Consolidated Results
Year Ended
December 31, 2008 ($ thousands, except for per share data)
2008 2007
Operating revenues $ 132,839 $ 129,464
Cost of sales 86,124 84,446
--------- ---------
Operating margin 46,715 45,018
Net income applicable to common shares $ 5,600 $ 4,036
Earnings per common share - basic $ 1.53 $ 1.11
Earnings per common share - diluted $ 1.52 $ 1.10
Operating cash flow before non-cash
working capital changes $ 8,691 $ 7,297
Additions to plant, property and equipment (10,373) (8,855)
Increase in deferred charges 1,141 971
Issue of long term debt 4,000 16,622
Repayment of long term debt (2,300) (17,660)
Increase (decrease) in bank indebtedness (5,949) 3,872
Dividends paid (3,562) (3,260)
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