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OGE Energy Corp. (OGE - Analyst Report), a distributor of natural gas and electricity primarily in the south central United States, reported second quarter 2013 earnings of 46 cents per share, missing the Zacks Consensus Estimate and the year-ago figure by a penny.

A regulated electric utility company, Oklahoma Gas and Electric Company (“OG&E”), contributed earnings of 40 cents per share in the reported quarter, up from 37 cents in the year-ago quarter.

OGE Energy's interest in the natural gas midstream operations contributed earnings of 7 cents per share compared with earnings from Enogex of 10 cents per share in the year-ago quarter.

The results take into account the split in the company’s stock price (2 new shares for 1 old share) that became effective Jul 1, 2013.

Operational Metrics

OGE Energy’s operating revenues of $734.2 million declined 14% year over year.

Electric Utility revenues were $574.6 million, up from $528 million in the second quarter of 2012. Natural Gas Midstream Operations revenues were $159.6 million, down 52% year over year.

Sales of electricity to residential customers were 2.1 MWH versus 2.2 MWH in the year-ago period. Sales to commercial customers were 1.8 MWH, flat year over year. Sales to industrial customers were 1 MWH, flat year over year.

OGE Energy’s consolidated gross profit was $363.6 million in the reported quarter, down from $455.7 million in the second quarter of 2012.

Total operating expenses in the quarter under review were $219.7 million, down 18.1% year over year. Operating income of $143.9 million declined 18.8% year over year.

Business Highlights

During the quarter, OGE Energy, CenterPoint Energy Inc. (CNP - Analyst Report), and ArcLight Capital Partners, LLC had 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.

Thereby, OGE Energy is now the parent company of OG&E, and holder of 28.5% limited partner interest and 50% general partner interest in Enable Midstream Partners.

Guidance

OGE Energy expects consolidated earnings for 2013 in the range of $1.68 to $1.80 per average diluted share. The guidance reflects normal weather for the remainder of 2013 and includes the impact from OGE Energy's equity interest in Enable Midstream Partners.

At the Peers

Integrys Energy Group, Inc. (TEG - Analyst Report) reported second quarter 2013 pro forma earnings of 45 cents per share, up 66.7% from the year-ago quarter. Earnings also breezed past the Zacks Consensus Estimate of 32 cents by 40.6%.

Diversified utility, NiSource Inc. (NI - Analyst Report) posted net operating earnings of 23 cents per share in the second quarter of 2013, a penny or 4.2% lower than the Zacks Consensus Estimate. Earnings were however 4.5% higher than the year-ago quarter.

Our Take

OGE Energy’s earnings failed to meet the Zacks Consensus Estimate by a penny. However, we expect its master limited partnership deal to bring in great opportunities, going forward. The company presently retains a short-term Zacks Rank #2 (Buy).

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