Dynegy Inc. (ticker: DYN, exchange: New York Stock Exchange (.N))
News Release -
27-Apr-1999
Dynegy Reports First Quarter 1999 Results; Recurring Earnings per Share Increase 27 Percent to $0.14; Led by Strong Wholesale Gas and Power Segment Performance HOUSTON--(BUSINESS WIRE)--April 27, 1999--Dynegy Inc. (NYSE:DYN)
today reported first quarter 1999 net income of $28.1 million, or
$0.17 per diluted share, including a one-time net gain on an
investment sale of $5.8 million, or $0.03 per diluted share. This
compares to first quarter 1998 reported net income of $12.3 million,
or $0.07 per diluted share, including a 1998 severance charge of $6.3
million, or $0.04 per diluted share.
Dynegy's first quarter 1999 recurring net income of $22.3 million
increased 20 percent over the 1998 period, led by the strong
performance in its wholesale gas and power segment.
"This marks the beginning of an exciting year for Dynegy," said
Chuck Watson, Dynegy chairman and chief executive officer. "We are
pleased with our first quarter results and anticipate even stronger
performance throughout the year as new power generation assets are
placed in service and the crude oil and natural gas liquids pricing
environment continues its recovery."
Wholesale Gas and Power Segment
Dynegy's wholesale gas and power segment is composed of worldwide
power and natural gas marketing and trading, and power generation.
This segment is focused on energy convergence, or the marketing,
trading and arbitrage opportunities that exist among natural gas,
power and coal, which can be enhanced by the control and optimization
of related physical assets. Operating margin and equity earnings from
unconsolidated affiliates for the wholesale gas and power segment
increased 66 percent to $82.7 million in the first quarter 1999, from
$49.8 million in the 1998 quarter. The segment's earnings growth is
primarily attributable to Dynegy's rapidly expanding power business.
Power marketing and generation earnings, including operating
margin and equity earnings from Dynegy's joint venture power projects,
nearly tripled to $46.2 million during the 1999 first quarter, from
$14.2 million in 1998. This growth can be attributed to solid power
operations and marketing, as well as the addition of owned and
controlled generation capacity. Since the first quarter 1998, Dynegy
has increased its ownership in three power plants and increased owned
gross megawatts in operation by 54 percent.
"Our power generation franchise will be strengthened by the
addition of 1468 megawatts in the second quarter with projects in
California and Illinois in operation for the peak summer season. Power
generation is dramatically changing the make-up of Dynegy's earnings,"
said Watson. "Our power marketing and generation businesses have been
combined to maximize earnings capabilities and capitalize on the
synergies that exist between the two -- Dynegy's 'merchant leverage
effect.'"
"The power market is still in its infancy, characterized this
quarter by lower market volatility and a lack of liquidity. Dynegy's
strategy leverages existing power assets and provides attractive
returns, even in this immature market," Watson added.
Power marketing volumes were 13.1 million megawatt hours (MM Mwh)
in the first quarter 1999, compared to 25.0 MM Mwh in the first
quarter 1998. The quarterly decrease is principally due to
unseasonably warm weather and a lack of attractive trading
opportunities.
By the end of the second quarter, Dynegy will have more than 6800
megawatts owned, pending acquisition or under construction at 31
facilities in 9 states.
Natural gas marketing reported operating margin of $32.7 million
for the 1999 first quarter compared to $32.1 million in 1998. Mild
winter weather conditions prevailed throughout the country during most
of the first quarter, dampening seasonal opportunities in natural gas
and power. Global natural gas volumes increased 17 percent during the
quarter to 10.9 billion cubic feet per day (Bcf/d), from 9.3 Bcf/d in
1998, led by growth in both North America and the U.K.
Earnings before interest and taxes (EBIT) from the wholesale gas
and power segment more than doubled for the quarter, reaching $44.4
million, excluding an $8.9 million net pre-tax gain on the sale of an
investment, compared to EBIT of $21.4 million in the 1998 quarter.
Liquids Segment
This segment is composed of Dynegy's North American midstream
liquids operations, global natural gas liquids transportation and
marketing operations located throughout North America and the United
Kingdom, and North American crude oil marketing operations.
Operating margin and equity earnings from Dynegy's joint ventures
decreased to $52.4 million in the 1999 first quarter from $62.9
million in the 1998 quarter. The reduction in earnings resulted
primarily from a 20 percent decline in average natural gas liquids
prices quarter-over-quarter, partially offset by stronger downstream
marketing and fractionation performance and the benefits of Dynegy's
restructuring efforts taken in late 1998.
Total processing volumes decreased to 117 thousand barrels per day
(MBbls/d) in the first quarter 1999, from 128 MBbls/d in the 1998
quarter. The volume decrease is principally a result of straddle plant
shutdowns caused by the unfavorable economics of lower spreads between
natural gas and natural gas liquids prices.
Downstream liquids marketing and fractionation operating margins
increased to $18.2 and $10.8 million in the 1999 first quarter, or 32
and 49 percent, respectively.
The liquids segment reported $10.8 million EBIT in the first
quarter 1999, compared to $24.8 million recurring EBIT in the first
quarter 1998, excluding $6.9 million pre-tax severance charges.
"Crude oil and natural gas liquids prices have recently
experienced a significant recovery," said Watson. "As this recovery
continues, Dynegy's operating leverage to improved prices, coupled
with cost structure improvements, will result in significantly
increased earnings from our liquids segment in the future."
Other Factors Affecting Earnings
Dynegy's consolidated EBIT increased 19 percent to $55.2 million
in the first quarter of 1999, excluding an $8.9 million pre-tax gain
on an investment sale. This compares to a consolidated EBIT of $46.2
million in 1998, excluding a $9.6 million pre-tax severance charge.
The increase is principally a result of significantly higher operating
margin from the wholesale gas and power segment, partially offset by
lower operating margin from the liquids segment and higher
depreciation and general and administrative expenses. Depreciation
increased quarter-over-quarter principally as a result of an expanded
portfolio of power generation assets. General and administrative
expenses increased primarily due to higher corporate overhead to
support the infrastructure of a larger, more diverse base of
operations.
Dynegy Inc., formerly NGC Corporation, is one of the leading
marketers of energy products and services in North America. The name
Dynegy reflects the company's evolution from a natural gas marketing
company to a dynamic energy company with a full energy network to meet
the growing challenges of the energy market of the future. Through its
leadership positions in energy marketing, independent power
generation, and gathering, processing, and transportation, the company
provides energy solutions to its customers primarily in North America
and the United Kingdom.
This press release includes forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. Although Dynegy believes that
its expectations are reasonable, it can give no assurance that these
expectations will prove to have been correct. Important factors that
could cause actual results to differ materially from those in the
forward-looking statements herein include fluctuations in commodity
prices for natural gas, electricity, natural gas liquids, crude oil,
or coal; competitive practices in the industries in which Dynegy
competes; operations and systems risks; environmental liabilities,
which are not covered by indemnity or insurance; software, hardware or
third-party failures resulting from Year 2000 issues; general economic
and capital market conditions, including fluctuations in interest
rates; and the impact of current and future laws and governmental
regulations (particularly environmental regulations) affecting the
energy industry in general, and Dynegy's operations in particular.
DYNEGY INC.
UNAUDITEDCONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In Thousands, Except Per Share Data)
Three Months Ended
March 31,
1999 1998
Operating Revenues $3,044,973 $3,315,569
Cost of Sales 2,924,896 3,218,580
Operating Margin 120,077 96,989
Depreciation 31,288 25,532
Severance Charge -- 9,644
General and Administrative Expenses 49,542 42,606
Operating Income 39,247 19,207
Equity in Earnings of Unconsolidated
Subsidiaries 15,063 15,755
Interest Expense (19,234) (16,005)
Minority Interest in Income of a Subsidiary (4,158) (4,158)
Other Income and Expenses, Net 9,765 1,612
Income Before Income Taxes 40,683 16,411
Income Tax Provision 12,612 4,072
Net Income $ 28,071 $ 12,339
Earnings Before Interest and Taxes
(As Reported) $ 64,075 $ 36,574
Earnings Before Interest and Taxes
(Normalized) (1) $ 55,206 $ 46,218
Basic Earnings Per Share of Common Stock $ 0.18 $ 0.08
Diluted Earnings Per Share
of Common Stock $ 0.17 $ 0.07
Normalized Earnings Per Share
of Common Stock (1) $ 0.14 $ 0.11
Basic Shares Outstanding 154,893 151,533
Diluted Shares Outstanding 164,487 166,282
(1) Adjusted for the $8.9 million pre-tax gain on the sale of an
investment effective January 1, 1999, and the $9.6 million
pre-tax severance charge recognized in the first quarter of
1998.
DYNEGY INC.
WHOLESALE GAS AND POWER SEGMENT
EARNINGS BEFORE INTEREST AND TAXES
($ In Thousands)
Three Months Ended
March 31,
1999 1998
(Unaudited)
Operating Margin:
Power Marketing and Generation $37,432 $ 7,080
Natural Gas Marketing (1) 32,674 32,145
Total Wholesale Gas and Power Margin 70,106 39,225
Equity Investments:
Power Marketing and Generation 8,787 7,153
Accord Energy Limited 4,500 4,500
Other Gas Marketing Investments (649) (1,054)
Total Wholesale Gas and Power
Equity Earnings 12,638 10,599
Subtotal 82,744 49,824
Depreciation 8,561 5,728
General and Administrative Expenses 31,539 27,306
Other Items (2) 10,653 1,876
Earnings Before Interest and Taxes $53,297 $18,666
Normalized Earnings Before Interest
and Taxes (3) $44,428 $21,389
Natural Gas Sales (Bcf/d):
Domestic (4) 7.0 6.5
Canadian (5) 2.3 2.1
United Kingdom (6) 1.6 0.7
10.9 9.3
Electric Power Marketing:
Million Megawatt Hours Sold 13.1 25.0
Power Generation:
Million Megawatt Hours Generated - Gross 3.6 3.3
Million Megawatt Hours Generated - Net 2.4 2.1
(1) Includes Canadian and UK gas marketing operations.
(2) Includes the $8.9 million pre-tax gain on the sale of an
investment.
(3) Adjusted for the segment's share of the $8.9 million pre-tax gain
on the sale of an investment effective January 1, 1999, and the
$9.6 million pre-tax severance charge recognized in the first
quarter of 1998.
(4) Includes immaterial amounts of inter-affiliate gas sales.
(5) Represents volumes sold by Dynegy Inc.'s Canadian subsidiary.
(6) Represents volumes sold by Dynegy Inc.'s United Kingdom subsidiary.
DYNEGY INC.
LIQUIDS SEGMENT
EARNINGS BEFORE INTEREST AND TAXES
($ In Thousands, Except Commodity Prices)
Three Months Ended
March 31,
1999 1998
(Unaudited)
Operating Margin
Upstream:
Natural Gas Processing:
Field Plants $15,710 $22,616
Straddle Plants 1,197 5,180
Natural Gas Gathering and
Transmission (1) 1,433 4,056
Downstream:
Fractionation 10,840 7,252
Natural Gas Liquids Marketing 18,156 13,718
LPG Sales (2) (2,009) 2,233
Crude Oil Marketing (3) 4,644 2,709
Total Liquids Businesses Margin 49,971 57,764
Total Liquids Businesses Equity
Earnings 2,425 5,156
Subtotal 52,396 62,920
Depreciation 22,727 19,804
General and Administrative Expenses 18,003 24,944
Other Items (888) (264)
Earnings Before Interest and Taxes $10,778 $17,908
Normalized Earnings Before Interest
and Taxes (4) $10,778 $24,829
Natural Gas Processing (MBbls/d):
Field Plants 88.5 86.7
Straddle Plants 28.6 40.8
117.1 127.5
Fractionation Volumes (MBbls/d) 161.3 254.7
Natural Gas Liquids Sold (MBbls/d) 462.0 431.7
LPG Sales by Global Operations (MBbls/d) 77.4 59.6
Crude Oil Sold (MBbls/d) 153.0 195.2
Natural Gas Gathering and Transmission (Bcf/d) 0.2 0.4
Average Commodity Prices:
Henry Hub Natural Gas (First of the Month) $1.75 $2.19
Crude Oil - Cushing 10.39 13.75
Natural Gas Liquids 0.23 0.29
(1) Sale of Ozark Gas Transmission completed August 8, 1998.
(2) Includes marketing activities directed from Dynegy Inc.'s office
in the United Kingdom.
(3) Includes Canadian crude oil marketing operations.
(4) Adjusted for the segment's share of the $8.9 million pre-tax gain
on the sale of an investment effective January 1, 1999, and
the $9.6 million pre-tax severance charge recognized in the
first quarter of 1998.
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Dynegy Inc.
