Energy services holding company AGL Resources Inc. (GAS - Analyst Report) reported weaker-than-expected first quarter 2013 earnings, hurt by low and volatile natural gas prices.
AGL Resources – which became the largest domestic natural gas-only distribution entity with about 4.5 million customers across seven states following the Dec 2011 acquisition of Naperville, IL-based Nicor Inc. – announced earnings per share of $1.31, below the Zacks Consensus Estimate of $1.35.
However, compared with the year-earlier period, AGL Resources’ earnings per share rose by 12.9% – from $1.16 (excluding merger-related expenses) to $1.31 – amid higher energy use on the back of lower-than-expected temperatures, as against the unusually warm last one.
Total operating revenues, at $1,709.0 million, were ahead of the Zacks Consensus Estimate of $1,422.0 million and were also up from the year-ago level of $1,404.0 million.
Distribution Operations: The segment, comprising seven utilities, reported earnings before interest and taxes (EBIT) of $218.0 million, up from $194.0 million achieved during the first quarter of 2012. The result was positively influenced by favorable weather conditions and enhanced revenues from AGL Resources’ regulatory infrastructure programs.
Retail Operations: Comprising SouthStar Energy Services, Nicor Services, Nicor Solutions and Nicor Advanced Energy, this segment achieved an EBIT of $70.0 million against a profit of $60.0 million in the year-earlier period. The quarter’s performance benefited from a colder-than-normal winter and contribution from the Jan acquisition of 500,000 retail warranty contracts.
Wholesale Services: The unit, which includes Sequent Energy Management, reported a profit of $15.0 million, lower than $19.0 million recorded in the prior-year quarter. Hedge losses affected the segments’ performance, partially offset by better commercial activities.
Midstream Operations: This segment, mainly comprising natural gas storage facilities, reported EBIT of $2.0 million, down from $3.0 million earned during the first quarter of 2012. The decline was on account of higher operating expenses, to an extent negated by improved operating margin and other income.
Cargo Shipping: This segment generated profits of $2.0 million in the reported quarter, double that of the year-earlier period. The positive comparison was driven by a rise in cargo capacity and lower depreciation and amortization expense incurred by AGL Resources.
AGL Resources management reiterated its earnings guidance of $2.50–$2.70 per share for 2013. But excluding the Wholesale Services segment, the same is expected in the range of $2.40 to $2.50 per share.
AGL Resources currently carries a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.
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