AGL Resources Reports Second Quarter Earnings Results and Reaffirms 2007 Earnings Guidance

    (*)  Second quarter basic earnings per share of $0.40 compared with $0.25
       for the prior year period

    (*)  Quarterly results reflect operating margin improvements in each
       business segment

    (*)  Year-to-date results increased 3 percent to $1.71 per basic share

    (*)  Company reaffirms 2007 earnings guidance in the range of $2.75 to
       $2.85 per basic share

    ATLANTA, Aug. 2 /CNW/ -- AGL Resources Inc. (NYSE:   ATG) today reported
second quarter net income of $30 million, or $0.40 per basic (and diluted)
share, compared with $19 million, or $0.25 per basic (and diluted) share
reported for the second quarter of 2006.
    AGL Resources reaffirmed its 2007 full-year guidance of $2.75 to $2.85
per share based on year-to-date earnings and a continued positive outlook for
the remainder of the year.
    "Our second quarter results reflect improved operating margins in each of
our business segments," said John W. Somerhalder II, president and chief
executive officer of AGL Resources.  "Our strong year-to-date results position
us well to meet our 2007 goals and the earnings guidance we previously
provided to investors."
    Distribution Operations
    The Distribution Operations segment contributed earnings before interest
and taxes (EBIT) of $64 million, a $5 million increase over the prior year
quarter.  The improvement was driven by a $3 million increase in operating
margin and a $2 million reduction in operating expenses.
    Margin improvements resulted primarily from customer growth and higher
levels of customer usage.  For the second quarter 2007, the average number of
end-use customers was 2.3 million, a 1 percent increase over the comparable
average for second quarter 2006.  Customer usage increased, in part due to
colder weather occurring mostly in April 2007 and lower natural gas prices as
compared to the prior year period.  Operating expenses decreased $2 million
largely due to lower outside services expenses during the current year quarter
as compared to last year.
    Retail Energy Operations
    The Retail Energy Operations segment, comprised primarily of SouthStar,
contributed $5 million of EBIT for second quarter 2007, a $5 million increase
over the prior year period, driven mainly by $9 million in higher operating
margin.  The increase in operating margin resulted from $6 million in improved
results associated with the management of commodity risk and other asset
management activities, offset by slightly lower retail price spreads.  The
additional $3 million margin increase was driven by colder weather during the
period, relative to the same period in 2006.
    Retail Energy Operations' operating expenses increased $2 million for
second quarter 2007 as compared to the prior year quarter, due to SouthStar's
continued growth and improved operations resulting in higher customer care
costs, depreciation expense related to a risk management system implemented in
fourth quarter 2006 and higher compensation costs.  These expenses were offset
slightly by lower bad debt expense relative to the prior year period. Minority
interest increased $2 million as a result of higher operating income for the
second quarter of 2007, as compared to the same period in 2006.
    Wholesale Services
    The Wholesale Services segment (Sequent Energy Management) contributed
EBIT of $6 million in second quarter 2007, compared with $1 million for the
same period in 2006.  Sequent's operating margin increase of $4 million was
driven by an additional $7 million in unrealized gains on storage and
transportation hedges resulting from declining forward NYMEX prices and the
narrowing of locational spreads in future periods.  In addition, Sequent
experienced a $3 million reduction in the required lower-of-cost-or-market
(LOCOM) inventory adjustments recorded for the current year quarter as
compared to similar adjustments recorded last year, net of $2 million in
hedging recoveries during the second quarter of 2006.  Sequent's commercial
activity during the second quarter of 2007 was $6 million lower than the prior
year period, mainly due to mild weather, decreased inventory storage spreads,
lower market volatility and the deferral of certain planned storage
withdrawals until future periods.
    Operating expenses at Sequent decreased $1 million, primarily due to
lower incentive compensation costs associated with the decreased commercial
activity for the second quarter of 2007, as compared to last year.
    Energy Investments
    The Energy Investments segment contributed $2 million in EBIT during the
second quarter of 2007, equal to its contribution in the prior year quarter. A
$1 million improvement in operating margin resulting from higher revenues at
Jefferson Island Storage & Hub was offset by development expenses associated
with the Golden Triangle Storage project in Texas.
    Interest expense for the second quarter 2007 decreased $2 million, as
compared with second quarter of 2006, primarily due to lower average debt
balances, offset by higher short-term interest rates.  The company's debt-to-
capitalization ratio as of June 30, 2007 was 53 percent, compared with 57
percent as of June 30, 2006 and December 31, 2006.
    Income taxes for second quarter 2007 increased $7 million, as compared to
the prior year period, primarily the result of higher corporate earnings.
    For the six months ended June 30, 2007, earnings were $1.71 per basic
share ($1.70 per diluted share), compared with $1.66 per basic share ($1.65
per diluted share) for the same period in 2006.  The improved earnings were
driven by strong results from the Retail Energy Operations and Distribution
Operations segments, offset by lower results in the Wholesale Services
segment.  Consolidated EBIT for the six months ended June 30, 2007 was $271
million, compared with $267 million for the six months ended June 30, 2006.
    AGL Resources' reaffirmed earnings guidance of $2.75 to $2.85 per share
assumes normal weather and average volatility in natural gas prices.  However,
changes in these events or other circumstances the company cannot anticipate
could materially impact earnings, and could result in earnings for 2007
significantly 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.
    AGL Resources will host its second quarter 2007 earnings conference call
and webcast on Thursday, August 2, 2007, at 9 a.m. ET.  The call can be
accessed via the Investor Relations section of the AGL Resources Web site at, or by dialing 866/831-6247 (in the United States) or
617/213-8856 (outside the United States), and using the confirmation code
44027980.  The webcast replay of the call will be available on the Web site
through the close of business on Thursday, August 9, 2007.  The telephone
replay of the call can be accessed by dialing (888) 286-8010, using passcode
80468434.  International callers should dial (617) 801-6888 and use the same
    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
    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 under the Investor Relations section.

                                 AGL Resources Inc.
                     Condensed Statements of Consolidated Income
                         For the Three and Six Months Ended
                               June 30, 2007 and 2006
                       (In millions, except per share amounts)

                                       Three Months          Six Months
                                   06/30  06/30  Fav/    06/30  06/30  Fav/
                                   2007   2006  (Unfav)  2007   2006  (Unfav)

    Operating Revenues           $467   $436    $31  $1,440  $1,480   $(40)

    Cost of Gas                   233    219    (14)    828     874     46

      Operation and Maintenance
       Expenses                     111    113      2     227     230      3

      Depreciation and
       Amortization                  36     34     (2)     71      68     (3)

    Taxes Other Than Income         9     10      1      20      20      -

    Total Operating Expenses      389    376    (13)  1,146   1,192     46

    Operating Income               78     60     18     294     288      6

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

    Minority Interest              (2)     -     (2)    (24)    (19)    (5)

      Earnings Before Interest &
       Taxes                         76     60     16     271     267      4

    Interest Expense               27     29      2      58      59      1

      Earnings Before Income
       Taxes                         49     31     18     213     208      5

    Income Taxes                   19     12     (7)     81      79     (2)

    Net Income                    $30    $19    $11    $132    $129     $3

      Earnings Per Common Share
            Basic                 $0.40  $0.25  $0.15   $1.71   $1.66  $0.05
            Diluted               $0.40  $0.25  $0.15   $1.70   $1.65  $0.05

      Shares Outstanding
            Basic                  77.5   77.7   (0.2)   77.5    77.8   (0.3)
            Diluted                77.9   78.1   (0.2)   77.9    78.2   (0.3)

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

                                       Three Months          Six Months
                                   06/30  06/30  Fav/   06/30  06/30   Fav/
                                   2007   2006  (Unfav) 2007   2006   (Unfav)
       Operations                   $64    $59     $5    $187    $182     $5
      Retail Energy
       Operations                     5      -      5      68      54     14
      Wholesale Services              6      1      5      15      33    (18)
      Energy Investments              2      2      -       4       4      -
      Corporate                      (1)    (2)     1      (3)     (6)     3
      Consolidated EBIT              76     60     16     271     267      4
      Interest Expense               27     29      2      58      59      1
      Income Taxes                   19     12     (7)     81      79     (2)
      Net Income                    $30    $19    $11    $132    $129     $3

      Earnings per Common
      Basic                       $0.40  $0.25  $0.15   $1.71   $1.66  $0.05
      Diluted                     $0.40  $0.25  $0.15   $1.70   $1.65  $0.05

                                AGL Resources Inc.
             Reconciliation of Operating Margin to Operating Revenues
                       For the Three and Six Months Ended
                              June 30, 2007 and 2006
                                  (In millions)

                                       Three Months          Six Months
                                   06/30  06/30  Fav/   06/30  06/30   Fav/
                                   2007   2006  (Unfav) 2007   2006   (Unfav)

        Operating Revenues         $467   $436    $31  $1,440  $1,480   $(40)

        Cost of Gas                 233    219    (14)    828     874     46

        Operating Margin           $234   $217    $17    $612    $606     $6

For further information:

For further information: Financial, Steve Cave, +1-404-584-3801, Cell, 
+1-678-642-4258,, or Media, Jack Holt, 
+1-404-584-4255, Cell, +1-404-217-0284,, both of AGL 
Resources Web Site:

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