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Southern Union Announces 1Q Results; Announces Filing of Application to Export LNG; Reaffirms 2011 Guidance

^{Published on 2011-05-10 03:20:36 - Market Wire}
 

HOUSTON--([ BUSINESS WIRE ])--Southern Union Company (NYSE: SUG) today reported first quarter net earnings available for common stockholders of $60.7 million ($0.48 per share), compared with $54.3 million ($0.43 per share) in the prior year. Adjusted net earnings for the same period were $64.0 million ($0.51 per share), compared with $55.2 million ($0.44 per share) in the prior year. The following table provides a reconciliation of net earnings to adjusted net earnings:

George L. Lindemann, chairman and CEO, said, aWe are pleased to reaffirm our 2011 adjusted earnings guidance at this time. In addition, we are happy to have placed the Florida Gas Transmission Company Phase VIII Expansion Project into service on April 1^st. We are confident that this $2.48 billion project, which was placed into service on time and on budget, will create long-term value for the Companya™s shareholders through enhanced earnings and cash flows.a

Eric D. Herschmann, Vice Chairman, President and COO, added, aThe Company is happy to announce that Southern Union and BG LNG Services, LLC, a subsidiary of BG Group plc, have formed a joint venture which has filed an application with the US Department of Energy for long-term authorization to export domestically sourced liquefied natural gas from the Companya™s liquefied natural gas import terminal facility in Lake Charles, Louisiana. The project will require modification of the facility to construct natural gas liquefaction capability. The application provides for volumes of 2 bcf/d over a 25-year period, commencing on the earlier of the date of the first export or ten years from approval of the application.a

1Q 2011 Segment Results

• Southern Uniona™s transportation and storage segment posted EBIT of $122.1 million, compared with EBIT of $102.4 million in the prior year. The increase was primarily attributable to the LNG terminal infrastructure project placed in service in March 2010 and higher equity earnings from the Companya™s unconsolidated investment in Citrus largely driven by higher equity AFUDC resulting from Florida Gas Transmission Companya™s Phase VIII Expansion Project.
• The gathering and processing segment reported an adjusted EBIT loss of $7 million, compared with adjusted EBIT of $1.3 million in the prior year, primarily due to reduced throughput volumes from processing plant outages and producer well freeze-offs resulting from unusually cold weather in early 2011 and higher operating, maintenance and general expenses during the current quarter. Total processed volumes were 374,188 MMBtu/d in the 2011 period compared with 405,953 MMBtu/d in 2010. Notwithstanding the volume shortfall in the first quarter, the Company expects total processed volumes to increase year over year.
• The Companya™s distribution segment posted EBIT of $23.6 million compared to EBIT of $28.8 million in the prior year. This decrease was primarily due to higher operating, maintenance and general expenses and lower net operating revenues largely attributable to the impact of the new customer rates at Missouri Gas Energy effective February 28, 2010, which eliminated the impact of weather and conservation for the majority of Missouri Gas Energya™s revenues (resulting in lower reported revenues in the traditional heating season).
• Interest expense was $55.6 million in the quarter compared with $50.9 million in the prior year. Interest expense increased primarily due to the impact of the lower level of interest costs capitalized attributable to lower average capital project balances outstanding in 2011.
• Income taxes were $18.6 million in the current quarter compared with $30.8 million in the prior year. The decrease was primarily due to lower pre-tax earnings in the current quarter compared to the prior year, state tax credits recorded in the current quarter and higher income tax expense in 2010 resulting from the change in tax treatment of Medicare Part D subsidies.
• Preferred stock dividends were down $2.2 million in the current quarter versus the prior year due to the Companya™s redemption of its remaining outstanding preferred stock in July 2010.

2011 Earnings Guidance

Southern Union reaffirms its expected 2011 net earnings of $1.87 to $2.07 per share (GAAP basis) and adjusted net earnings of $1.75 to $1.95 per share. Adjusted net earnings exclude the mark-to-market impact of open economic hedges of processing spreads.

Quarterly Report on Form 10-Q

Southern Union will provide additional information about its first quarter 2011 results in its quarterly report on Form 10-Q expected to be filed today with the Securities and Exchange Commission. Once made, this filing may be accessed through the Investorsa™ section of the Companya™s web site at [ www.sug.com ].

Investor Call & Webcast

Southern Union will host a live investor call and webcast today at 9:00 a.m. Eastern time to discuss results, recent events and outlook. To access the call, dial 800-299-7635 (international callers dial 617-786-2901) and enter the passcode 42402696. A replay of the call will be available for one week after the event by dialing 888-286-8010 (international callers dial 617-801-6888) and entering passcode 31397775. The webcast may be accessed online through the Investorsa™ section of the Companya™s web site at [ www.sug.com ].

Non-GAAP Financial Measures

The Company uses adjusted net earnings (per share) and earnings before interest and taxes (aEBITa), or adjusted EBIT, as appropriate, as its primary measures of evaluating financial performance. The Company also believes these measures present its financial performance in a manner that is more consistent with the presentation used by the investment community in its evaluation of the Companya™s financial performance. Adjusted net earnings (per share), EBIT and adjusted EBIT are non-GAAP measures and should be used in conjunction with net earnings and other financial measures such as operating income or net cash flows provided by operating activities.

About Southern Union Company

Southern Union Company, headquartered in Houston, is one of the nationa™s leading diversified natural gas companies, engaged primarily in the transportation, storage, gathering, processing and distribution of natural gas. The Company owns and operates one of the nationa™s largest natural gas pipeline systems with more than 20,000 miles of gathering and transportation pipelines and one of North Americaa™s largest liquefied natural gas import terminals, along with serving more than half a million natural gas end-user customers in Missouri and Massachusetts. For further information, visit [ www.sug.com ].

Cautionary Statements

This release contains aforward-looking statementsa within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.Forward-looking statements are based on managementa™s beliefs and assumptions.These forward-looking statements, which address the Companya™s expected business and financial performance, among other matters, are identified by terms and phrases such as:anticipate, believe, intend, estimate, expect, continue, should, could, may, plan, project, predict, will, potential, forecast and similar expressions.Forward-looking statements involve risks and uncertainties that may or could cause actual results to be materially different from the results predicted.Factors that could cause actual results to differ materially from those indicated in any forward-looking statement include, but are not limited to: changes in demand for natural gas or NGL and related services by customers, in the composition of the Companya™s customer base and in the sources of natural gas or NGL available to the Company; the effects of inflation and the timing and extent of changes in the prices and overall demand for and availability of natural gas or NGL as well as electricity, oil, coal and other commodities, bulk materials and chemicals; adverse weather conditions, such as warmer or colder than normal weather in the Companya™s service territories, as applicable, and the operational impact of natural disasters; changes in laws or regulations, third-party relations and approvals, and decisions of courts, regulators and/or governmental bodies affecting or involving the Company, including deregulation initiatives and the impact of rate and tariff proceedings before FERC and various state regulatory commissions; the speed and degree to which additional competition, including competition from alternative forms of energy, is introduced to the Companya™s business and the resulting effect on revenues; the impact and outcome of pending and future litigation and/or regulatory investigations, proceedings or inquiries; the ability to comply with or to successfully challenge existing and/ornew environmental, safety and other laws and regulations; unanticipated environmental liabilities; the uncertainty of estimates, including accruals and costs of environmental remediation; the impact of potential impairment charges; exposure to highly competitive commodity businesses and the effectiveness of the Company's hedging program; the ability to acquire new businesses and assets and integrate those operations into its existing operations, as well as its ability to expand its existing businesses and facilities; the timely receipt of required approvals by applicable governmental entities for the construction and operation of pipelines and other projects; the ability to complete expansion projects on time and on budget; the ability to control costs successfully and achieve operating efficiencies, including the purchase and implementation of new technologies for achieving such efficiencies; the impact of factors affecting operations such as maintenance or repairs, environmental incidents, natural gas pipeline system constraints and relations with labor unions representing bargaining-unit employees; the performance of contractual obligations by customers, service providers and contractors; exposure to customer concentrations with a significant portion of revenues realized from a relatively small number of customers and any credit risks associated with the financial position of those customers; changes in the ratings of the Companya™s debt securities; the risk of a prolonged slow-down in growth or decline in the United States economy or the risk of delay in growth or decline in the United States economy, including liquidity risks in United States credit markets; the impact of unsold pipeline capacity being greater than expected; changes in interest rates and other general market and economic conditions, and in the Companya™s ability to continue to access its revolving credit facility and to obtain additional financing on acceptable terms, whether in the capital markets or otherwise; declines in the market prices of equity and debt securities and resulting funding requirements for defined benefit pension plans and other postretirement benefit plans; acts of nature, sabotage, terrorism or other similar acts that cause damage to the Companya™s facilities orthe Companya™ssuppliers' or customers' facilities; market risks beyond the Companya™s control affecting its risk management activities including market liquidity, commodity price volatility and counterparty creditworthiness; the availability/cost of insurance coverage and the ability to collect under existing insurance policies; the risk that material weaknesses or significant deficiencies in internal controls over financial reporting could emerge or that minor problems could become significant; changes in accounting rules, regulations and pronouncements that impact the measurement ofresults of operations, the timing of when such measurements are to be made and recorded, and the disclosures surrounding these activities; the effects of changes in governmental policies and regulatory actions, including changes with respect to income and other taxes, environmental compliance, climate change initiatives and authorized rates of recovery of costs (including pipeline relocation costs); and other risks and unforeseen events, including other financial, operational and legal risks and uncertainties detailed from time to time in filings with the SEC.

These factors are not necessarily all of the important factors that could cause actual results to differ materially from those expressed in any of the Companya™s forward-looking statements.Other factors could also have material adverse effects on the Companya™s future results.These and other risks are described in greater detail in the Companya™s Annual Report on Form 10-K for the year ended December 31, 2010 and its other reports filed with the Securities and Exchange Commission.In light of these risks, uncertainties and assumptions, the events described in forward-looking statements might not occur or might occur to a different extent or at a different time than the Company has described.The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law.