Pacific Northern Gas Reports Second Quarter Results and Declares Increased Third Quarter Dividends
July 30 2009 - 9:54PM
Marketwired Canada
Pacific Northern Gas Ltd. (TSX:PNG)(TSX:PNG.PR.A) announced today that its Board
of Directors declared a 8.7 percent increase in the quarterly dividend to 25
cents per share on the Company's common shares. The dividend will be payable
September 22, 2009 to shareholders of record at the close of business on
September 4, 2009.
SECOND QUARTER CONSOLIDATED RESULTS
The net loss for the three months ended June 30, 2009 was $0.4 million, compared
with a net loss of $0.2 million for the corresponding period in 2008. After
providing for preferred share dividends, the loss per common share in the three
months ended June 30, 2009 was $0.13 compared with a loss per common share of
$0.08 for the same period in 2008.
The net loss for the quarter was higher in 2009 compared to 2008 by
approximately $0.2 million due mainly to the lower allowed rate of return on
common equity ("ROE") rate of 9.12 percent in 2009 compared to 9.27 percent in
2008 in the Western system and the Tumbler Ridge division of the Northeast
system and the lower ROE of 8.87 percent in 2009 compared to 9.02 percent in
2008 in the Fort St. John/Dawson Creek division of the Northeast system. In
addition, the Company had a lower than projected number of residential customers
compared to the 2009 forecast additions and lower than anticipated deliveries to
commercial and small industrial customers.
Included in the net loss for the three month periods ended June 30, 2009 and
2008 are charges, net of income taxes, of $0.03 million and $0.1 million,
respectively for the Company's share of KSL Project development expenditures
incurred by Pacific Trail Pipelines Limited Partnership ("PTP") on the project
to loop the Company's mainline transmission system from Kitimat to Summit Lake
(the "KSL Project"). The Company's share of planned development expenditures for
the KSL Project in the next six months of 2009 is estimated to be $0.1 million
before income taxes ($0.02 per share, net of income taxes). The Company's share
of further KSL Project development expenditures will continue to be expensed
until suitable commercial arrangements for firm gas transportation services by
PTP are in place.
Net income for the six months ended June 30, 2009 was $4.8 million, compared to
$4.3 million for the corresponding period in 2008. After providing for preferred
share dividends, earnings per common share in the six months ended June 30, 2009
were $1.26 compared to $1.13 for the same period in 2008. Net income for the six
months ended June 30, 2009 was higher by $0.5 million compared to 2008 due
mainly to lower KSL Project development expenditures incurred by PTP in 2009 and
higher than anticipated deliveries to small industrial customers on a year to
date basis, partially offset by the lower ROE rates in 2009 compared to 2008.
Included in net income for the six months ended June 30, 2009 and 2008 are
charges, net of income taxes of $0.1 million and $0.3 million, respectively for
the Company's share of KSL Project development expenditures.
Residential deliveries were lower by approximately 6 percent in the three month
period ended June 30, 2009 compared to the same period in 2008 and lower by 1
percent in the six month period ended June 30, 2009 compared to deliveries over
the same period in 2008. Total commercial deliveries were lower by 15 percent
and higher by 2 percent in the three month and six month periods ended June 30,
2009, respectively, relative to deliveries over the same periods in 2008.
Management believes that weather was a factor in the change in residential
deliveries as well as commercial deliveries as the weather was approximately 1
percent warmer in degree days in the three month period ended June 30, 2009, in
particular during the month of June 2009, and weather was approximately 3
percent colder for the six month period ended June 30, 2009 compared to the same
periods in 2008. The lower residential deliveries in the second quarter were
mainly due to a reduced customer use per account and lower than anticipated
number of customers in the Western system.
Industrial deliveries were lower by 6 percent and 7 percent for the three month
and six month periods ended June 30, 2009, respectively, compared to the same
periods in 2008 primarily due to lower deliveries to large industrial customers.
Specifically, deliveries to large industrial customers were lower by 21 percent
and by 19 percent for the three and six month periods ended June 30, 2009,
respectively, compared to the same periods in 2008, mainly due to lower
deliveries to West Fraser Mills Ltd. as the Company underwent a planned
maintenance shutdown during 2009. Deliveries to small industrial customers were
higher by 9 percent and by 7 percent for the three and six month periods ended
June 30, 2009, respectively, compared to the same periods in 2008 reflecting
higher deliveries to gas producers in the Fort St. John service area. Deferral
accounts are in place that recover or refund margin differences resulting from
deliveries to large industrial customers and to some small industrial customers
varying from the forecast approved for ratemaking purposes.
Operating revenues in the three months ended June 30, 2009 decreased to $14.1
million, as compared with $20.3 million in the corresponding period in 2008. The
decrease in operating revenues was primarily due to lower natural gas cost
recoveries from customers in 2009 compared to 2008, a decrease of $2.5 million
in revenues from the sale of gas surplus to the needs of the Company's sales
customers ("off system gas sales"), lower revenues from industrial customers
compared with the corresponding period in 2008, offset by a higher cost of
service in 2009. Any profit or loss realized on off system gas sales is deferred
for future recovery from, or refund to, the Company's sales customers. The
decrease in off system gas sales in the second quarter of 2009 reflects the
impact of a decrease in the quantity of gas supply purchased on a committed
basis in 2009 compared to 2008. Natural gas commodity prices, which are passed
through to the Company's sales customers without mark-up, can be very volatile
and result in significant variability of the Company's reported operating
revenues, but do not affect net income.
Operating revenues in the first six months of 2009 decreased to $62.5 million as
compared with $77.9 million in the first six months of 2008. The decrease in
operating revenues was primarily due to the lower off system sales of $9.5
million in the first six months of 2009 compared to $24.3 million during the
corresponding period in 2008, lower natural gas commodity prices reflected in
customer rates during the first six months of 2009 compared to 2008, and lower
deliveries to transportation service customers in the current economic
conditions.
Operating margin in the three months ended June 30, 2009 decreased slightly to
$8.8 million compared to $8.9 million in the same period in 2008. The slightly
lower operating margin in the second quarter is primarily the result of the
lower allowed ROE rates in 2009 compared to 2008.
Operating margin in the six months ended June 30, 2009 increased to $25.9
million, as compared with $25.3 million in the same period in 2008. The higher
operating margin in the first six months of 2009 is primarily the result of the
increase in the cost of service in 2009 compared to 2008 and higher than
anticipated deliveries to small industrial customers.
The Company continued its focus on reducing the $20 million of common equity on
its balance sheet that is in excess of the common equity that is currently
allowed by the Commission for the purpose of determining rates. The normal
course issuer bid commenced by the Company in March this year, in combination
with the increased common dividends declared by the Company, are to stabilize
its common equity capitalization ratio this year. To further address this
situation the Company has sought relief from the Commission through an
application filed on July 16, 2009. The Company is seeking approval to increase
the Company's deemed common equity from 40 to 47.5 percent and to increase its
risk premium relative to the benchmark utility return on equity ("ROE") by 10
basis points from 65 to 75 basis points. Its wholly owned subsidiary, Pacific
Northern Gas (N.E.) Ltd. ("PNG(N.E.)") jointly applied to increase its deemed
common equity from 36 to 42.5 percent and to increase its risk premium relative
to the benchmark ROE by 35 basis points from 40 to 75 basis points for the Fort
St. John/Dawson Creek division and from 65 to 75 basis points for the Tumbler
Ridge division. The application proposes a regulatory timetable for Commission
review of the application that culminates with an oral public hearing commencing
on November 16, 2009 with a decision expected in January 2010. The requested
changes for all divisions will be reflected in the 2010 revenue requirements
applications.
Forward-Looking Statements
This news release includes forward-looking statements. Forward-looking
statements relate to, among other things, anticipated financial performance,
business prospects, strategies, regulatory developments, new services, market
forces, commitments and technological developments. Many of these statements can
be identified by words such as "believe", "expects", "expected", "will",
"intends", "projects", "anticipates", "estimates", "continues" or similar words.
Pacific Northern Gas ("the Company") believes the expectations reflected in such
statements are reasonable but no assurance is given that such expectations will
be correct. All forward-looking statements are based on management's beliefs and
assumptions based on information available at the time the assumption was made
and on its experience and perception of historical trends, current conditions
and expected further developments as well as other factors deemed appropriate in
the circumstances.
By its nature, such forward-looking information is subject to various risks and
uncertainties that are known and unknown, including those material risks
discussed in the Company's 2009 Annual Information Form under "Risk Factors"
which could cause the Company's actual results and experience to differ
materially from the anticipated results or other expectations expressed. Such
risks and uncertainties include but are not limited to: general economic
conditions and markets; gas supply and availability; gas commodity price
volatility; competition; decisions by regulators; seasonal weather patterns;
federal and provincial climate change initiatives; financing of investments as
well as the value of such investments; the cost and availability of capital; the
impact on the Company's liquidity if it were to go offside of the covenants in
its debt facilities; successful execution of strategic initiatives; the ability
of the Company to attract and retain quality employees and the impact of
accounting changes including the transition to International Financial Reporting
Standards. Readers are cautioned not to place undue reliance on this
forward-looking information, which is given as of the date it is expressed in
this news release or otherwise, and the Company undertakes no obligation to
update publicly or revise any forward-looking information, whether as a result
of new information, future events or otherwise, except as required by applicable
securities laws.
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 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.
Pacific Northern Gas Ltd., for purposes of the Income Tax Act (Canada), and any
similar provincial or territorial legislation, designates all dividends paid by
Pacific Northern Gas Ltd. after December 31, 2005 to be "eligible dividends"
unless otherwise notified by the Company. An eligible dividend paid to a
Canadian resident is entitled to the enhanced dividend tax credit.
Second Quarter Consolidated Results
Three Month Period Ended
June 30 ($ thousand, except for per share data)
2009 2008
Operating revenues $14,141 $20,332
Cost of gas 5,303 11,394
------ ------
Operating margin 8,838 8,938
Net loss applicable to common shares ($484) ($289)
Loss per common share - basic ($0.13) ($0.08)
Loss per common share - diluted ($0.13) ($0.08)
Operating cash flow $226 $449
Additions to plant, property and equipment (1,904) (2,411)
Decrease (increase) in deferred charges 1,420 178
Repayment of long term debt (3,000) -
Decrease in bank indebtedness - (5,670)
Dividends paid (997) (975)
Second Quarter Consolidated Results
Six Month Period Ended June 30
($ thousand, except for per share data)
2009 2008
Operating revenues $62,459 $77,861
Cost of gas 36,591 52,567
------ ------
Operating margin 25,868 25,294
Net income applicable to common shares $4,587 $4,137
Earnings per common share - basic $1.26 $1.13
Earnings per common share - diluted $1.26 $1.12
Operating cash flow $5,106 $5,683
Additions to plant, property and equipment (3,152) (4,214)
Decrease (increase) in deferred charges 2,189 737
Repayment of long term debt (3,000) -
Decrease in bank indebtedness (2,998) (7,470)
Dividends paid (1,839) (1,781)
Second Quarter Consolidated Results
As at
($ thousand, except for per share data)
June 30 December 31
2009 2008
Cash, cash equivalents and short term investments $9,592 $577
Common Shareholders' Equity 85,533 83,724
------ ------
Book Value per Common Share $23.87 $22.88
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