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UTILICORP REVISES AQUILA ENERGY STRATEGY, ADOPTS FULL COST ACCOUNTING, PROJECTS LOWER 3Q EARNINGS, CITES DIVIDEND MAINTENANCE, '93 IMPROVEMENT

UTILICORP REVISES AQUILA ENERGY STRATEGY, ADOPTS FULL COST ACCOUNTING, PROJECTS LOWER 3Q EARNINGS, CITES DIVIDEND MAINTENANCE, '93 IMPROVEMENT
 DETROIT, Sept. 15 /PRNewswire/ -- UtiliCorp United (NYSE: UCU) today briefed the Detroit financial community on the company's Aquila Energy subsidiary's revised strategy, the adoption of the full cost accounting method, the projected lower third quarter earnings, dividend maintenance and the outlook for 1993.
 Aquila Energy is one of the nation's largest independent marketers of natural gas, and is also involved in the gathering and processing of natural gas, and the acquisition and production of gas and oil reserves. The subsidiary was formed in 1986 to take advantage of the many marketing and transportation opportunities created by deregulation of the natural gas industry. Aquila contributed 25 percent of UtiliCorp's restated consolidated net income in 1991.
 Aquila's revised strategy is responsive to recent marketplace changes and is aimed at minimizing earnings volatility in the future. It provides that long-lived reserves support long-term contracts, relies less on the 30-day spot market for profits and the reserve portfolio in total supports the subsidiary's long-term marketing efforts.
 UtiliCorp Chairman and President Richard C. Green Jr. said Aquila's revised strategy now supports a conservative exploratory drilling program. Aquila's drilling program is predominantly related to its purchase from Shell Western E&P Inc. of gas properties in the Andarko Basin in Oklahoma in late 1991.
 "In the future, we plan to take advantage of proven reserves with targeted success rates of 80 percent. In 1992, we may spend up to $5 million for this type of drilling and our 1993 proposed investments are under review," Green said.
 As a result of the revised Aquila strategy UtiliCorp has adopted full cost accounting for its oil and gas properties. The company formerly used the successful efforts method.
 "The revised strategy positions Aquila for the market impact of Order 636 (unbundling of interstate gas pipelines) and is expected to minimize earnings volatility in the future," Green said.
 "As part of our overall review of Aquila operations, it was determined that the full cost method more closely reflects how we view the operational issues including drilling opportunities relating to reserves," Green said. "More than half of other utilities with oil and gas reserves use the full cost method."
 Green also released UtiliCorp's third quarter and year to date earnings estimates reported using the full cost method and the restated earnings figures from last year.
 For the third quarter ending Sept. 30, 1992, UtiliCorp projects net income of $9.1 million, compared to $13.5 million restated in the 1991 period, and primary earnings per share are expected to be $.21 compared with $.40 restated in last year's quarter. The company projects revenues of $259 million compared to $194 million restated in the prior year third quarter.
 The effects of the accounting change to full cost increased estimated primary earnings per common share by $.02 in the current quarter and $.04 per common share in the prior year's quarter.
 Average common shares outstanding have increased from 28.8 million in last year's third quarter to 34.9 million in this year's quarter. The increase is primarily due to a public offering of approximately 5 million new shares in late 1991.
 For the first nine months of 1992, UtiliCorp expects revenues of $879 million compared to $700 million restated in the same period of 1991.
 Primary earnings per common share for the 1992 three-quarter period are expected to be $.75 on net income of $31.6 million, compared to $1.52 on restated net income of $49.1 million in the prior year's period.
 On a year-to-date basis the change in accounting is estimated to have no effect in the current year, but increases primary earnings per common share by $.06 in the previous year's period.
 The quarter and nine-month results will be affected by temperate weather throughout the year, significant margin reductions on Aquila's long-term, fixed-price gas contracts, the need for utility rate relief and a second quarter charge against earnings of $7.4 million after taxes. The charge resulted from an apparent misappropriation of funds at the company's Aquila Energy Resources subsidiary. Also, income from Aquila's gas production operations was temporarily disrupted in the third quarter by damage to offshore facilities by Hurricane Andrew. No significant ongoing impact from the storm is expected.
 "There are positive factors in the third quarter," Green said. "Aquila Southwest Energy, formerly Aquila-Clajon, is doing very well, and our most recent utility acquisition, WestPlains Energy, contributed third quarter earnings. Our UtilCo Group subsidiary is growing and providing increased contributions to earnings, and a great deal of progress is being made in our rate cases."
 Ten rate cases are expected to be completed at the company's utilities over the next 12 months. UtiliCorp's Missouri Public Service division filed for an 8.5 percent electric rate increase in July in Missouri that would boost annual revenues by $19.4 million. The rate increase is expected to take effect in mid-1993.
 UtiliCorp's Peoples Natural Gas division has received interim rate relief in Iowa and Minnesota and has rate cases near completion in Kansas and Colorado. The West Virginia Power division and West Kootenay Power Canadian subsidiary also have electric rate increase requests pending.
 "Currently we are working through circumstances that are impacting us for 1992. Financial results in 1992 are expected to be substantially below those of 1991 and below the annualized common dividend rate of $1.60 per share. UtiliCorp management will recommend to the company's board of directors that the current dividend rate on common stock remain unchanged. We expect a significant turnaround in financial performance in 1993," Green concluded.
 Based in Kansas City, UtiliCorp provides gas and electric service to nearly a million customers in eight states and the province of British Columbia. The company is also engaged in various non-regulated energy and utility related enterprises.
 -0- 9/15/92
 /CONTACT: Phil Hermanson of UtiliCorp, 816-421-3541/
 (UCU) CO: UtiliCorp United; Aquila Energy ST: Minnesota, Missouri, British Columbia IN: UTI SU: ERP


GK -- NY034 -- 9569 09/15/92 11:07 EDT
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Date:Sep 15, 1992
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