AGL Resources Reports Third Quarter Earnings Results



    ATLANTA, Nov. 1 /CNW/ -- AGL Resources Inc. (NYSE:   ATG) today reported
third quarter net income of $13 million, or $0.17 per basic (and diluted)
share, compared with $36 million, or $0.46 per basic (and diluted) share
reported for the third quarter of 2006.
    The company's third-quarter results reflect lower results in the
Wholesale Services segment, partially offset by improved results in the
Distribution Operations and Retail Energy Operations segments.
    "As we announced last week, our third quarter results and our outlook for
the year have been impacted by lower volatility in the natural gas wholesale
market throughout the quarter, which has reduced profits generated from our
trading activities," said John W. Somerhalder II, president and chief
executive officer.  "However, our other business segments remain on track to
meet or exceed our expectations for the year."
    
    Q3 2007 RESULTS BY BUSINESS SEGMENT
    Distribution Operations
    
    The Distribution Operations segment contributed earnings before interest
and taxes (EBIT) of $55 million, a $5 million increase over the prior year
quarter.  A $6 million improvement in operating margin was driven by higher
customer growth at Atlanta Gas Light, as well as higher customer growth and
usage at Elizabethtown Gas and Virginia Natural Gas.  Operating expenses were
up $1 million.
    For the third quarter 2007, the average number of end-use customers was
2.245 million, a 1.1 percent increase over the comparable average for third
quarter 2006.  Additionally, the Distribution Operations segment continued to
improve its performance as measured by other key operating metrics.  On an
EBIT-per-customer basis, the segment improved to $25 for 2007, compared with
$22 in 2006.  Operation and maintenance expenses per customer declined to $35
in 2007, as compared with $37 in 2006.
    
    Retail Energy Operations
    
    The Retail Energy Operations segment, comprised primarily of SouthStar,
had an EBIT loss of $1 million for third quarter 2007, compared with an EBIT
loss of $2 million in third quarter 2006.
    A $3 million improvement in operating margin resulted primarily from
higher retail price spreads and activities associated with commercial
operations, as well as slightly higher late payment fees.
    Operating expenses increased $2 million, primarily due to additional
expenses associated with business development activities and higher customer
service expenses.
    
    Wholesale Services
    
    The Wholesale Services segment (Sequent) contributed EBIT of $1 million
in third quarter 2007, compared with a $40 million contribution for the same
period in 2006.
    Operating margin declined $42 million relative to the prior year period
due to a $27 million reduction in storage hedge gains associated with less
dramatic decreases in forward NYMEX prices compared to the prior period. There
also was a $12 million reduction in the amount of transportation hedge gains. 
In the prior year period there were $11 million of gains on transportation
hedges driven by the narrowing of future locational spreads compared to this
year's third quarter, where $1 million of hedge losses were reported.  In
addition, because of lower volatility and narrowing spreads in the natural gas
wholesale market, Sequent's commercial activity during the third quarter of
2007 was $22 million lower than in the same period in 2006. These declines
were offset partially by a $19 million favorable change in the amount of
lower-of-cost-or-market (LOCOM) adjustment required year-over-year. As a
result of lower NYMEX natural gas prices during third quarter 2007, Sequent
recorded a LOCOM adjustment of $1 million, while it recorded a $20 million
adjustment for the third quarter of 2006.
    Operating expenses at Sequent declined $3 million relative to the prior
year quarter, primarily as a result of lower incentive compensation costs due
to lower operating margins.
    
    Energy Investments
    
    The Energy Investments segment contributed $3 million in EBIT during the
third quarter of 2007, equal to its contribution in the prior year quarter.  A
$1 million decline in operating margin resulted from lower sales at AGL
Networks.  Operating expenses declined $1 million as a result of lower
business development expenses for the quarter relative to the prior year
period.
    
    INTEREST EXPENSE AND INCOME TAXES
    
    Interest expense for the third quarter 2007 increased $2 million, as
compared with third quarter of 2006, primarily due to higher short-term
interest rates and the $3 million premium paid in connection with the early
redemption of $75 million in junior subordinated debentures, which was
recorded as interest expense for the quarter ended September 30, 2007.  These
increases were offset partially by lower average debt balances.  The company's
debt-to-capitalization ratio as of September 30, 2007 was 57 percent, which is
equal to the prior year comparable quarter and as of December 31, 2006.
    Income taxes for third quarter 2007 decreased $14 million, as compared to
the prior year period, primarily the result of the lower consolidated
earnings.
    
    YEAR-TO-DATE RESULTS
    
    For the nine months ended September 30, 2007, earnings were $1.88 per
basic share ($1.87 per diluted share), compared with $2.13 per basic share
($2.12 per diluted share) for the same period in 2006.  Net income for the
nine months ended September 30, 2007 was $145 million, compared with $165
million for the nine months ended September 30, 2006.
    The lower year-to-date earnings results were driven primarily by the
lower contributions from the Wholesale Services segment, as a result of the
diminished natural gas price volatility and the narrowing of spreads relative
to the prior year.  As a result, the EBIT contribution from this segment was
down $57 million year-to-date through September 30, 2007, relative to the
prior year period.
    Year-to-date through September 30, 2007, the Distribution Operations
segment EBIT is up $10 million relative to the prior year period, primarily
the result of higher customer growth and usage.  The Retail Energy Operations
segment's EBIT contribution is up $15 million for the period relative to the
prior year, primarily due to higher average customer usage, higher retail
price spreads, increased customer count and additional margin generated in the
Ohio retail market.  The Energy Investments segment's EBIT contribution of $7
million year-to-date is equal to its 2006 results for the same period.
    
    2007 EARNINGS OUTLOOK
    
    On October 22, AGL Resources announced it expects 2007 earnings to be at
the lower end of the previously announced earnings guidance range of $2.75 to
$2.85 per share, based on its year-to-date results through September 30, 2007
and its outlook for the remainder of the year.
    The expectation for 2007 earnings assumes normal winter weather
conditions in the fourth quarter, with no material impact to earnings from the
effect of forward natural gas price movements on storage and transportation
hedges in the Wholesale Services segment. Changes in these factors, as well as
other circumstances or events the company cannot currently anticipate, could
result in earnings for fiscal 2007 that are above or below this outlook.  The
factors that could cause such material changes are described more fully in the
"Forward Looking Statements" section of this press release and in the
company's SEC filings.
    
    Q3 2007 EARNINGS CONFERENCE CALL/WEBCAST
    
    AGL Resources will host its third quarter 2007 earnings conference call
and webcast on Thursday, November 1, 2007, at 9 a.m. ET.  The call can be
accessed via the Investor Relations section of the AGL Resources Web site at
www.aglresources.com, or by dialing 866/700-5192 (in the United States) or
617/213-8833 (outside the United States), and using the confirmation code
25466134.  The webcast replay of the call will be available on the Web site
through the close of business on Thursday, November 8, 2007.  The telephone
replay of the call can be accessed by dialing (888) 286-8010, using passcode
96410247.  International callers should dial (617) 801-6888 and use the same
passcode.
    
    About AGL Resources
    
    AGL Resources (NYSE:   ATG), an Atlanta-based energy services company,
serves more than 2.2 million customers in six states.  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
Houston-based Sequent Energy Management, an asset manager serving natural gas
wholesale customers throughout the nation.  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," "can," "could," "estimate," "expect," "forecast,"
"future," "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. 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 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.
    EBIT and operating margin 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 or operating margin 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 Nine Months Ended
                         September 30, 2007 and 2006
                   (In millions, except per share amounts)
                                 (Unaudited)
    


    Three Months                   Nine Months

    
                   9/30/2007 9/30/2006   Fav/     9/30/2007  9/30/2006  Fav/
                                        (Unfav)                        (Unfav)
    

    
    Operating
     Revenues         $369       $434    $(65)     $1,809     $1,914   $(105)
    

    
    Cost of Gas        159        190      31         987      1,064      77
    Operation
     and Maintenance
     Expenses          107        111       4         334        341       7
    

    
    Depreciation and
     Amortization       37         33      (4)        108        101      (7)
    

    
    Taxes Other
     Than Income        11         10      (1)         31         30      (1)
    

    
    Total Operating
     Expenses          314        344      30       1,460      1,536      76
    

    
    Operating
     Income             55         90     (35)        349        378     (29)
    

    
    Other Income
     (Loss)              -          -       -           1         (2)      3
    

    
    Minority
     Interest            -          -       -         (24)       (19)     (5)
    

    
    Earnings Before
     Interest & Taxes   55         90     (35)        326        357     (31)
    Interest Expense    34         32      (2)         92         91      (1)
    

    
    Earnings Before
     Income Taxes       21         58     (37)        234        266     (32)
    

    Income Taxes         8         22      14          89        101      12

    Net Income         $13        $36    $(23)       $145       $165    $(20)

    
    Earnings Per
     Common Share
       Basic         $0.17      $0.46  $(0.29)      $1.88      $2.13  $(0.25)
       Diluted       $0.17      $0.46  $(0.29)      $1.87      $2.12  $(0.25)
    Shares
     Outstanding
       Basic          77.0       77.5     0.5        77.4       77.6     0.2
       Diluted        77.4       77.9     0.5        77.8       78.1     0.3
    


    
                              AGL Resources Inc.
                                EBIT Schedule
                     For the Three and Nine Months Ended
                         September 30, 2007 and 2006
                   (In millions, except per share amounts)
                                 (Unaudited)
    


    Three Months                Nine Months

    
                       9/30/2007  9/30/2006  Fav/  9/30/2007 9/30/2006  Fav/
                                            (Unfav)                    (Unfav)
    

    
    Distribution
     Operations           $55        $50      $5       $242     $232     $10
    

    
    Retail Energy          (1)        (2)      1         67       52      15
     Operations
    

    Wholesale Services      1         40     (39)        16       73     (57)

    Energy Investments      3          3       -          7        7       -

    Corporate              (3)        (1)     (2)        (6)      (7)      1

    Consolidated EBIT      55         90     (35)       326      357     (31)

    Interest Expense       34         32      (2)        92       91      (1)

    
    Income Taxes            8         22      14         89      101      12
    Net Income            $13        $36    $(23)      $145     $165    $(20)
    

    
    Earnings per Common
     Share
      Basic             $0.17      $0.46  $(0.29)     $1.88    $2.13  $(0.25)
      Diluted           $0.17      $0.46  $(0.29)     $1.87    $2.12  $(0.25)
    


    
                              AGL Resources Inc.
           Reconciliation of Operating Margin to Operating Revenues
                     For the Three and Nine Months Ended
                         September 30, 2007 and 2006
                   (In millions, except per share amounts)
                                 (Unaudited)
    


    Three Months                Nine Months

    
                     9/30/2007  9/30/2006  Fav/   9/30/2007 9/30/2006  Fav/
                                          (Unfav)                     (Unfav)
    

    
    Operating Revenues  $369       $434    $(65)    $1,809    $1,914   $(105)
    Cost of Gas          159        190      31        987     1,064      77
    Operating Margin    $210       $244    $(34)      $822      $850    $(28)
    




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 Web
Site: http://www.aglresources.com

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AGL RESOURCES INC.

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