AGL Resources Reports Second Quarter 2008 Results; Reaffirms Fiscal 2008 Earnings Guidance



    
    -- Reported GAAP diluted earnings per share (EPS) of $(0.15), compared to
    EPS of $0.40 per diluted share for second quarter 2007

    -- Earnings, excluding the impact of hedge gains and losses and inventory
    valuation adjustments for the wholesale services operating segment, were
    $0.30 per diluted share for second quarter 2008 vs. $0.27 per diluted
share
    for the prior-year period.

    -- Company reaffirms 2008 earnings guidance in the range of $2.75 to $2.85
    per diluted share

    
    ATLANTA, July 31 /CNW/ -- AGL Resources Inc. (NYSE:   ATG) today reported a
net loss of $11 million, or $(0.15) per diluted share, for the second quarter
of 2008, compared with net income of $30 million, or $0.40 per diluted share,
reported for the second quarter of 2007.
    The company's second-quarter 2008 results include a loss of $0.45 per
diluted share resulting from $55 million in pre-tax hedge losses in the
wholesale services segment related to a significant increase in forward NYMEX
(New York Mercantile Exchange) natural gas prices, and the widening of
transportation basis spreads, during the quarter, as described more fully in a
press release the company issued on July 10, 2008.
    The impacts of hedge gains and losses, as well as any required lower-of-
cost-or-market inventory valuation adjustments, on earnings for the wholesale
services segment primarily affect the timing of earnings recognition and are
not reflective of the economic value of the underlying storage inventory or
natural gas transportation transactions.  Second-quarter 2008 and 2007
earnings, exclusive of the impact of these items, are $0.30 per diluted share,
compared with $0.27 per diluted share, respectively.
    For the six months ended June 30, 2008, net income was $78 million, or
$1.01 per diluted share, compared with net income of $132 million, or $1.70
per diluted share for the same period last year.  Earnings for the six months
ended June 30, 2008 and 2007, excluding the impact of hedge gains or losses
and lower-of-cost-or-market inventory valuation adjustments, were $1.59 per
diluted share, compared with $1.62 per diluted share last year.
    "We continue to operate in challenging market conditions, but our results
for the quarter and year-to-date show that our business fundamentals are solid
and we are positioned for growth despite those challenges," said John W.
Somerhalder II, AGL Resources' chairman, president and chief executive
officer.  "As a result, we continue to expect fiscal 2008 earnings in the
range of $2.75 to $2.85 per share."
    
    Q2 2008 RESULTS BY BUSINESS SEGMENT
    Distribution Operations
    
    The distribution operations segment contributed second-quarter 2008 EBIT
(earnings before interest and taxes) of $57 million, compared with $64 million
during the same period last year.  Operating margin decreased $3 million,
driven primarily by lower margins related to a revision in estimated unbilled
gas volumes for Elizabethtown Gas and lower gas storage carrying costs at
Atlanta Gas Light, offset partially by higher pipeline replacement revenues
for Atlanta Gas Light.  During the second quarter of 2008, the average number
of end-use customers was up 0.1 percent over the same period last year.
    Operating expenses during the quarter were up $3 million, primarily
reflecting higher bad debt expenses resulting from higher natural gas prices
and increased depreciation expense.
    
    Retail Energy Operations
    
    The retail energy operations segment (SouthStar Energy Services)
contributed EBIT of $5 million for the second quarter of 2008, equivalent to
its contribution for the same period last year.  Operating margin declined $2
million primarily due to weather that was 19 percent warmer during the second
quarter 2008 as compared to the same period last year.
    Operating expenses in the second quarter of 2008 were down $1 million as
compared to the prior-year period, reflecting lower payroll and other
operating costs offset by slightly higher bad debt expense largely due to
higher natural gas prices.
    
    Wholesale Services
    
    The wholesale services segment, consisting primarily of Sequent Energy
Management, had an EBIT loss of $65 million for the second quarter of 2008,
compared with EBIT of $6 million for the prior-year period.  Operating margin
decreased $68 million relative to the prior-year period, primarily due to
losses on the instruments used to hedge storage and transportation positions
as a result of rising natural gas prices and the widening of transportation
basis spreads during the quarter.  These losses were partially offset by
stronger commercial activity and the absence of a required lower-of-cost-or-
market adjustment to inventory during the quarter as compared to the prior-
year period.
    As of June 30, 2008, Sequent expected operating revenues from future
storage withdrawals of approximately $55 million in 2008 and $16 million in
2009, assuming all factors remain the same.  This expectation could change as
Sequent adjusts its daily injection and withdrawal plans in response to
changes in market conditions and as forward NYMEX prices fluctuate.  Based
upon the current projection of year-end storage positions at December 31,
2008, a $1.00 change in the first quarter 2009 forward NYMEX prices would
result in a $4 million impact to Sequent's reported EBIT for the year ending
December 31, 2008 (after regulatory sharing).
    Operating expenses increased $3 million during the second quarter as
compared to the prior-year period, reflecting increased payroll and other
operating costs related to continued growth and expansion of the business.
    
    Energy Investments
    
    The energy investments segment contributed EBIT of $10 million for the
second quarter of 2008, as compared with EBIT of $2 million during the
prior-year period.  These results reflect an increase of $9 million in
operating margin due to $8 million in higher operating margin contributions
from AGL Networks related to a network expansion project, as well as higher
interruptible and firm revenue at Jefferson Island Storage & Hub.  Operating
expenses increased $2 million as a result of the network expansion for AGL
Networks and slightly higher operating costs for the Jefferson Island
facility.
    
    INTEREST EXPENSE AND INCOME TAXES
    
    Interest expense for the second quarter of 2008 was $26 million, down $1
million from the second quarter of 2007.  The decrease reflects lower
short-term interest rates, partially offset by higher average debt
outstanding.  Income taxes for the second quarter of 2008 decreased $26
million as compared to the prior-year period, reflecting lower consolidated
earnings.
    
    COMMON SHARES OUTSTANDING
    
    Second-quarter 2008 earnings per share reflect a 2.2 percent decline in
weighted average diluted shares outstanding compared to the prior-year period,
primarily as a result of the company's share repurchase program.  Earnings per
share for the six months ended June 30, 2008 reflect a 1.9 percent decline in
weighted average diluted shares outstanding.
    
    2008 EARNINGS OUTLOOK
    
    AGL Resources continues to project fiscal 2008 earnings to be in the
range of $2.75 to $2.85 per diluted share.  This earnings expectation assumes
normal weather, average volatility in natural gas pricing and no material
mark-to- market or lower-of-cost-or-market inventory valuation adjustment
impacts. Changes in these events or other circumstances the company cannot
anticipate could materially impact earnings, and could result in earnings for
2008 significantly above or below this outlook.
    
    EARNINGS CONFERENCE CALL/WEBCAST
    
    AGL Resources will host its second-quarter 2008 earnings conference call
and webcast on Thursday, July 31, 2008 at 9 a.m. Eastern Time.  The webcast
can be accessed via the Investor Relations section of the AGL Resources Web
site at www.aglresources.com , or by dialing 800/291-5365 in the United States
or 617/614-3922 outside the United States. The confirmation code is 23322361.
A replay of the conference call will be available by dialing 888/286-8010 in
the United States or 617/801-6888 outside the United States, with a
confirmation code of 78764000. A replay of the call also will be available on
the investor relations section of the company's Web site for seven days
following the call.
    
    About AGL Resources
    
    AGL Resources (NYSE:   ATG), an Atlanta-based energy services company,
serves approximately 2.3 million customers in six states. The company also
owns Houston-based Sequent Energy Management, an asset manager serving natural
gas wholesale customers throughout North America. As a 70 percent owner in the
SouthStar partnership, AGL Resources markets natural gas to consumers in
Georgia under the Georgia Natural Gas brand. The company also owns and
operates Jefferson Island Storage & Hub, a high-deliverability natural gas
storage facility near the Henry Hub in Louisiana. For more information, visit
www.aglresources.com .
    
    Forward-Looking Statements
    
    Certain expectations and projections regarding our future performance
referenced in this press release are forward-looking statements. Forward-
looking statements involve matters that are not historical facts and because
these statements involve anticipated events or conditions, forward-looking
statements often include words such as "anticipate," "assume," "believe,"
"can," "could," "estimate," "expect," "forecast," "future," "goal,"
"indicate," "intend," "may," "outlook," "plan," "predict," "project," "seek,"
"should," "target," "will," "would," or similar expressions. Our expectations
are not guarantees and are based on currently available competitive, financial
and economic data along with our operating plans. While we believe our
expectations are reasonable in view of the currently available information,
our expectations are subject to future events, risks and uncertainties, and
there are several factors -- many beyond our control -- that could cause
results to differ significantly from our expectations.
    Such events, risks and uncertainties include, but are not limited to,
changes in price, supply and demand for natural gas and related products; the
impact of changes in state and federal legislation and regulation; actions
taken by government agencies on rates and other matters; concentration of
credit risk; utility and energy industry consolidation; impact of acquisitions
and divestitures; direct or indirect effects on AGL Resources' business,
financial condition or liquidity resulting from a change in our credit ratings
or the credit ratings of our counterparties or competitors; interest rate
fluctuations; financial market conditions and general economic conditions;
uncertainties about environmental issues and the related impact of such
issues; the impact of changes in weather upon the temperature-sensitive
portions of the business; impacts of natural disasters such as hurricanes upon
the supply and price of natural gas; acts of war or terrorism; and other
factors which are provided in detail in our filings with the Securities and
Exchange Commission, which we incorporate by reference in this press release.
Forward-looking statements are only as of the date they are made, and we do
not undertake to update these statements to reflect subsequent changes.
    
    Supplemental Information
    
    Company management evaluates segment financial performance based on
earnings before interest and taxes (EBIT), which includes the effects of
corporate expense allocations and on operating margin. EBIT is a non-GAAP
(accounting principles generally accepted in the United States of America)
financial measure. Items that are not included in EBIT are financing costs,
including debt and interest expense and income taxes. The company evaluates
each of these items on a consolidated level and believes EBIT is a useful
measurement of our performance because it provides information that can be
used to evaluate the effectiveness of our businesses from an operational
perspective, exclusive of the costs to finance those activities and exclusive
of income taxes, neither of which is directly relevant to the efficiency of
those operations.
    Operating margin is a non-GAAP measure calculated as operating revenues
minus cost of gas, excluding operation and maintenance expense, depreciation
and amortization, and taxes other than income taxes. These items are included
in the company's calculation of operating income. The company believes
operating margin is a better indicator than operating revenues of the
contribution resulting from customer growth, since cost of gas is generally
passed directly through to customers.
    Company management further evaluates consolidated earnings excluding the
impacts of hedge gains and losses and lower-of-cost-or-market inventory
valuation adjustments in its wholesale services operating segment.  Company
management believes this is a useful measurement of our performance because it
provides information from an operational and an economic perspective,
exclusive of the impacts of hedge gains and losses and from lower-of-cost-or-
market inventory valuation adjustments in its wholesale services operating
segment that are largely driven by changes in NYMEX (New York Mercantile
Exchange) natural gas prices and transportation basis spreads both of which
are impacted by overall market conditions.
    EBIT, operating margin and consolidated earnings excluding the impacts of
hedge gains and losses and lower-of-cost-or-market inventory valuation
adjustments in its wholesale services operating segment should not be
considered as alternatives to, or more meaningful indicators of, the company's
operating performance than operating income or net income as determined in
accordance with GAAP. In addition, the company's EBIT, operating margin or
consolidated earnings excluding the impacts of hedge gains and losses and
lower-of-cost-or-market inventory valuation adjustments in its wholesale
services operating segment may not be comparable to similarly titled measures
of another company.
    Reconciliation of non-GAAP financial measures referenced in this press
release and otherwise in the earnings conference call and webcast is attached
to this press release and is available on the company's website at
www.aglresources.com under the Investor Relations section.



    
                                AGL Resources Inc.
                   Condensed Statements of Consolidated Income
                        For the Three and Six Months Ended
                              June 30, 2008 and 2007
                                    Unaudited
                     (In millions, except per share amounts)
    

    
                               Three Months               Six Months
                                            Fav/                        Fav/
                       6/30/2008 6/30/2007 (Unfav) 6/30/2008 6/30/2007 (Unfav)
    

    
    Operating Revenues      $444      $467   $(23)    $1,456    $1,440    $16
    

    
    Cost of Gas              275       233    (42)       932       828   (104)
    Operation and
     Maintenance Expenses    114       111     (3)       233       227     (6)
    Depreciation and
     Amortization             38        36     (2)        74        71     (3)
    Taxes Other Than Income   11         9     (2)        23        20     (3)
    

    
    Total Operating
     Expenses                438       389    (49)     1,262     1,146   (116)
    

    
    Operating Income           6        78    (72)       194       294   (100)
    Other Income               3         -      3          4         1      3
    Minority Interest         (1)       (2)     1        (17)      (24)     7
    Interest expense, net    (26)      (27)     1        (56)      (58)     2
    

    
    (Loss) Earnings Before
     Income Taxes            (18)       49    (67)       125       213    (88)
    Income Tax Expense
     (Benefit)                (7)       19     26         47        81     34
    

    
    Net (loss) Income       $(11)      $30   $(41)       $78      $132   $(54)
    

    
    (Loss) Earnings
     Per Common Share
       Basic              $(0.15)    $0.40 $(0.55)     $1.02     $1.71 $(0.69)
       Diluted            $(0.15)    $0.40 $(0.55)     $1.01     $1.70 $(0.69)
    Shares Outstanding
       Basic                76.2      77.5    1.3       76.2      77.5    1.3
       Diluted              76.2      77.9    1.7       76.4      77.9    1.5
    



    
                                AGL Resources Inc.
                                  EBIT Schedule
                        For the Three and Six Months Ended
                              June 30, 2008 and 2007
                                    Unaudited
                     (In millions, except per share amounts)
    

    
                               Three Months               Six Months
                                            Fav/                        Fav/
                       6/30/2008 6/30/2007 (Unfav) 6/30/2008 6/30/2007 (Unfav)
    

    
    Distribution Operations  $57       $64    $(7)      $180      $187    $(7)
    Retail Energy Operations   5         5      -         51        68    (17)
    Wholesale Services       (65)        6    (71)       (64)       15    (79)
    Energy Investments        10         2      8         15         4     11
    Corporate                  1        (1)     2         (1)       (3)     2
    Consolidated EBIT          8        76    (68)       181       271    (90)
    Interest Expense, net     26        27      1         56        58      2
    Income Tax Expense
     (Benefit)                (7)       19     26         47        81     34
    Net (loss) income       $(11)      $30   $(41)       $78      $132   $(54)
    

    
    (Loss) Earnings per
     Common Share
       Basic              $(0.15)    $0.40 $(0.55)     $1.02     $1.71 $(0.69)
       Diluted            $(0.15)    $0.40 $(0.55)     $1.01     $1.70 $(0.69)
    



    
                                AGL Resources Inc.
             Reconciliation of Operating Margin to Operating Revenues
                        For the Three and Six Months Ended
                              June 30, 2008 and 2007
                                    Unaudited
                                  (In millions)
    

    
                               Three Months               Six Months
                                             Fav/                        Fav/
                       6/30/2008 6/30/2007 (Unfav) 6/30/2008 6/30/2007 (Unfav)
    

    
    Operating Revenues      $444      $467   $(23)    $1,456    $1,440    $16
    Cost of Gas              275       233    (42)       932       828   (104)
    Operating Margin        $169      $234   $(65)      $524      $612   $(88)
    



    
                                AGL Resources Inc.
      Earnings excluding wholesale services' hedge losses (gains) and LOCOM
                        For the Three and Six Months Ended
                              June 30, 2008 and 2007
                                    Unaudited
                     (In millions, except per share amounts)
    

    
                                          Three Months          Six Months
                                      6/30/2008 6/30/2007  6/30/2008 6/30/2007
    

    
    Net Income/(loss) - as reported      $(11)      $30        $78      $132
    

    
    Hedge losses (gains) at wholesale
     services                              55       (19)        70       (13)
    Lower-of-cost-or-market (LOCOM)
     adjustment at wholesale services       -         3          -         3
    

    
    Net impact of hedge gains and losses
     and LOCOM at wholesale services
    

    
       Pre-tax                             55       (16)        70       (10)
       Consolidated effective tax rate   37.6%     37.9%      37.6%     37.9%
       After-tax                           34       (10)        44        (6)
    

    
    Net income, excluding wholesale
     services' hedge gains and losses
     and LOCOM                            $23       $20       $122      $126
    

    
    Diluted weighted average shares      76.2      77.9       76.4      77.9
    

    
    Diluted EPS, excluding wholesale
     services' hedge gains and losses
     and LOCOM                          $0.30     $0.27      $1.59     $1.62

    




For further information:

For further information: Financial, Steve Cave, +1-404-584-3801, Cell:
+1-678-642-4258, scave@aglresources.com, Media, Jack Holt, +1-404-584-4255,
Cell: +1-404-217-0284, jholt@aglresources.com, both of AGL Resources Inc. Web
Site: http://www.aglresources.com

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