AGL Resources Inc. announced that its third-quarter 2011 earnings results are expected to be in the range of $(0.07) to $(0.01) per diluted share.
Adjusted earnings results, which exclude the impact of costs associated with the merger with Nicor, are expected to be in the range of $(0.01) to $0.05 per diluted share. Based on these results and the outlook for the remainder of the year, the company currently expects full-year 2011 earnings, excluding any earnings impacts associated with the Nicor merger, to be in the range of $2.90 to $3.00 per diluted share, compared to its previously announced guidance range of $3.10 to $3.20 per diluted share. This reduction in the earnings guidance range is principally due to third quarter and expected fourth quarter performance for Sequent Energy Management, part of AGL Resources’ Wholesale Services segment.
Third-quarter 2011 results for Sequent Energy are expected to reflect a significant negative variance to the prior year, driven by lower natural gas price spreads and lower price volatility that limited Sequent’s opportunity to generate margin from its storage and transportation positions and to cover its fixed costs and demand charges. The negative variance also reflects the effect of new pipeline constraints and a lack of available pipeline transportation capacity, particularly in the Marcellus Shale producing region where Sequent has natural gas receipt requirements. From an accounting perspective, relative to the prior-year period, Sequent’s results were impacted by lower hedge gains and higher LOCOM (lower-of-cost-or-market) adjustments to reduce the carrying value of Sequent’s storage inventory to market.
The company’s current expectation is that earnings in the Wholesale Services segment for 2011 will be significantly below the previously projected 2011 EBIT (earnings before interest and taxes) contribution of $53 million included in the company’s prior earnings guidance. In the third quarter of 2011, the Wholesale Services segment currently expects to report an EBIT loss of approximately $(37) million, compared to EBIT of $15 million for the third quarter of 2010. For the nine months ended September 30, 2011, the Wholesale Services segment currently expects to report an EBIT loss of approximately $(9) million, compared to EBIT of $38 million for the nine months ended September 30, 2010. These weaker results are expected to be partially offset by lower incentive compensation expense and improved results in the company’s Distribution Operations segment.
[mappress] Source: AGL Resources, October 18, 2011