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NERCO REPORTS FIRST QUARTER RESULTS, PLANS TO SELL ASSETS

 NERCO REPORTS FIRST QUARTER RESULTS, PLANS TO SELL ASSETS
 PORTLAND, Ore., May 6 /PRNewswire/ -- NERCO Inc. (NYSE: NER, Toronto) today reported a net loss of $178.2 million, or $4.55 per share, for the first quarter ended March 31, 1992. This compares with net income of $21.5 million, or 55 cents per share, for the same period a year ago. Consolidated revenues for the quarter fell 20 percent to $165 million from $206 million a year ago, reflecting the loss of $54 million of revenues related to operations transferred and contracts sold or settled in 1991.
 Natural gas prices fell to their lowest level in 12 years in February 1992. The company's effective sales price realized for natural gas fell 18 percent in the first quarter. As a result of this significant decline in natural gas prices, the company recorded a non- cash after-tax charge of $150 million to reduce the carrying value of proved and unproved oil and gas assets. The write-down reduced the carrying value of the proved portion of the company's oil and gas assets to the undiscounted value of future cash flows from estimated production based upon market prices at which the company sold gas on March 31, 1992. The company also recorded a $28 million after-tax charge for estimated losses on certain oil and gas and coal asset dispositions expected in 1992. Excluding these write-downs, the company would have reported a net loss of $200,000, or 1 cent per share.
 The company reported an operating loss of $269.2 million, a decrease of $315.0 million due to the write-downs and lower revenues. Without the write-downs, the company's operating income would have been $12 million during the first quarter of 1992 compared to $45.3 million a year ago. Income taxes decreased by $114.4 million primarily due to the income tax benefit associated with the write- downs.
 Operating cash flow -- comprised of net income plus depreciation, depletion and amortization, deferred taxes, and the non-cash charges -- decreased in the first quarter from $62.9 million to $50.6 million primarily due to lower product prices.
 The company's credit ratings were recently lowered as a result of low natural gas prices. Moody's Investors Service Inc. downgraded the company's medium term notes to Ba2 from Baa3 and its commercial paper program to Not Prime from Prime-3. As a result of the downgrade, the company lost its access to the commercial paper market and certain uncommitted borrowing lines. However, the effect on the company's ability to access credit markets to support its operations has been minimized due to the $180 million available capacity remaining under its committed revolving credit facilities. The company believes this capacity is sufficient to satisfy its liquidity requirements in 1992.
 The company's recently amended principal credit facility contains covenants that limit borrowing, the sale of assets, investments and the payment of dividends. On March 31, 1992, approximately $40 million was available for payment of future dividends. Additional losses would reduce the amount available for future dividends.
 NERCO Inc. President & Chief Executive Officer Lawrence E. Heiner said the company is evaluating the potential sale of certain assets from its business units. "NERCO's plan is to raise in excess of $200 million through asset dispositions in order to significantly reduce debt, strengthen our capital structure, and position the company to improve its credit ratings. The decision as to which assets will be sold will be dependent on completion of the evaluation process and market acceptance. Accordingly, assets of an aggregate value substantially in excess of $200 million are currently being considered for possible sale."
 COAL
 NERCO Coal Corp. revenues were negatively affected by lower sales volumes and effective sales prices resulting from the transfer of coal operations in December 1991 and relatively soft spot coal market prices during the quarter. Total sales volumes were 6.9 million tons during the first quarter of 1992 compared to 8.4 million tons for the comparable period in 1991. Operations transferred in 1991 provided 2.1 million tons of coal during the first quarter of 1991. Coal sales prices averaged $12.13 per ton in 1992 versus $14.32 per ton in 1991.
 Operating income fell $34 million in 1992 due to decreased revenues, a contract settlement which contributed $8 million of the coal segment's operating income in the first quarter of 1991, and a $20 million provision for an estimated pre-tax loss on the disposition of non-strategic coal assets.
 OIL AND GAS
 NERCO Oil & Gas Inc. reported increased volumes for all products as a result of an acquisition made in April 1991. Total produced natural gas volumes increased from 16.7 billion cubic feet (BCF) to 25.1 BCF. Oil and natural gas liquid volumes increased from 376,000 barrels to 497,000 barrels, and 256,000 barrels to 329,000 barrels, respectively.
 Effective sales prices fell for all three products in the first quarter of 1992 compared to the same period a year ago. Natural gas prices fell 18 percent to $1.34 per thousand cubic feet (MCF), oil prices declined 12 percent to $17.86 per barrel, and natural gas liquid prices were off 28 percent to $9.87 per barrel. However, natural gas prices recently improved and the company received $1.38 and $1.49 per MCF for its natural gas in the months of April and May, respectively.
 Oil and gas operating income decreased $283.3 million primarily due to the non-cash asset write-downs totaling $261.7 million. Excluding the write-downs, the oil and gas segment had an operating loss of $13.0 million compared to operating income of $8.6 million in the first quarter of 1991. The loss was due to significantly lower prices and an increase in depletion expense. Of the $261.7 million charge, $179.1 million was for a write-down of proved properties, $58.6 million for unproved properties and $24 million was for the estimated loss on disposition of certain properties. "While these results are disappointing, operating income should improve in future periods as a result of reduced depletion expense," Heiner said.
 During the first quarter of 1992, the average depreciation, depletion and amortization (DD&A) rate on the company's production was $1.28 per thousand cubic feet of natural gas equivalents (MCFE). In the month of April 1992, the DD&A rate was approximately $1.00 per MCFE.
 Heiner also disclosed that NERCO has retained Petrie Parkman & Co. to assist in the sale of certain oil and gas assets.
 MINERALS
 The minerals segment reported first quarter gold sales volumes of 40,000 ounces compared with 43,000 in 1991. Silver sales volumes were 1.2 million ounces versus 1.1 million ounces a year ago. Average effective sales prices in the quarter for gold were $410 per ounce compared to $459 per ounce in 1991. Silver average effective sales prices in the quarter were $4.39 per ounce in 1992, up from $3.70 per ounce in 1991. Operating income for the minerals segment increased $900,000 to $2.2 million primarily due to increased silver margins and increased gains on asset dispositions.
 Heiner also disclosed that the company had recently retained J.P. Morgan to assist with the evaluation of strategic alternatives for its precious metals business, including the possible sale of its minerals subsidiary. The ultimate outcome and financial effects of this process cannot be predicted because the evaluation is in its early stage.
 1992 OUTLOOK
 "Given the relatively depressed market for most of our products, we are taking necessary steps to reduce costs and generate cash. In addition to the expected asset dispositions, we have reduced planned capital expenditures for 1992 from $230 million to $200 million. In addition, we are developing a more focused long-term strategy centered on the competitive strengths of our natural resource businesses which offer the highest potential for growth. We are also concentrating on building more flexibility into our financial structure and business strategies in order to effectively manage the cyclical nature of our natural resource businesses," Heiner added.
 NERCO Inc. is a diversified natural resources company with interests in low-sulfur coal, oil and natural gas, and precious metals. Approximately 82 percent of NERCO's common stock is beneficially owned by PacifiCorp (NYSE: PPW).
 NERCO Inc.
 FINANCIAL SUMMARY
 (Amounts in thousands, except per share)
 Three Months Ended March 31: 1992 1991
 Revenues:
 Coal $ 94,900 $135,900
 Oil & Gas 46,800 45,600
 Precious Metals 23,300 24,500
 Total Revenues $165,000 $206,000
 Operating Income/(Loss):
 Coal $ 4,600 $ 38,600
 Oil & Gas (274,700) 8,600
 Precious Metals 2,200 1,300
 Corporate Expense & Other (1,800) (3,200)
 Total Operating Income/(Loss) (269,700) 45,300
 Interest Expense (12,000) (11,300)
 Interest and Other Income/(Expense) (100) 200
 Minority Interest (200) (2,100)
 Income/(Loss) Before Income Taxes (282,000) 32,100
 Income Tax Provision (Benefit) (103,800) 10,600
 Net Income/(Loss) $(178,200) $ 21,500
 Earnings/(Loss) per Share $ (4.55) $ 0.55
 Dividends paid per share $ 0.16 $ 0.16
 Average shares outstanding 39,200 39,100
 Total Debt $755,600 $537,700
 Total Shareholders' Equity $639,500 $611,300
 NERCO INC.
 STATISTICAL DATA SUMMARY
 (Amounts in thousands, except gas volumes and sales prices)
 Three Months Ended March 31: 1992 1991
 Sales Volumes:
 Coal (tons):
 Operations 4,818 6,496
 Purchased for Resale 2,131 1,942
 Total Tons Sold 6,949 8,438
 Gas and Oil:
 Gas (bcf) 25.1 16.7
 Gas Purchased for Resale (bcf) 0.2 2.2
 Oil (barrels) 497 376
 Natural Gas Liquids (barrels) 329 256
 Precious Metals (ounces):
 Sales
 Gold 40 43
 Silver 1,220 1,135
 Production
 Gold 37 37
 Silver 818 726
 Average Effective Sales Prices:
 Coal/ton $12.13 $14.32
 Gas/mcf 1.34 1.63
 Oil/bbl 17.86 20.30
 NGL/bbl 9.87 13.77
 Gold/oz. 410 459
 Silver/oz. 4.39 3.70
 -0- 5/6/92
 /CONTACT: John C. Cummings, 503-731-6649, or Richard T. O'Brien, 503-731-6732, both of NERCO Inc./
 (NER) CO: NERCO Inc. ST: Oregon IN: MNG OIL SU: ERN


LM -- SE002 -- 6889 05/06/92 08:17 EDT
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Date:May 6, 1992
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