EX-99 3 exh99_1.txt EXH. 99.1 (PRESS RELEASE) NEWS RELEASE November 4, 2003 FOR RELEASE AT 6:00 A.M. EST TUESDAY, NOV. 4, 2003 NWN REPORTS RESULTS FOR QUARTER, NINE MONTHS ENDED 9/30/03 PORTLAND, Ore. - Northwest Natural Gas Company (NYSE: NWN), dba NW Natural, recorded a consolidated loss applicable to common stock of $6.5 million or 25 cents a diluted share for the quarter ended Sept. 30, 2003, compared to a loss of $6.6 million or 26 cents a diluted share for the equivalent period a year earlier, Mark S. Dodson, president and chief executive officer, said Tuesday. A third quarter loss is customary for NW Natural, reflecting low summertime use of natural gas. "NW Natural's better results for this year's third quarter show the growing earnings contribution from our gas storage business and the success of the decoupling mechanism that went into effect in Oregon a year ago," Dodson said. "These factors helped to offset the impact of weak economic conditions in the region, a smaller earnings contribution from gas cost savings and off-system sales, and higher expenses in a number of areas." Third Quarter Detail -------------------- NW Natural incurred a loss applicable to common stock of $7.8 million or 30 cents a diluted share from gas utility operations in the third quarter of 2003, compared to a loss of $7.5 million or 29 cents a share in the third quarter of 2002. The Company earned $1.3 million or 5 cents a diluted share from its gas storage, subsidiary and other non-utility operations in the third quarter of 2003, compared to earnings of $0.9 million or 3 cents a share from these operations in the third quarter of 2002. Operating margin (gross revenues minus cost of sales) in the third quarter was $39.5 million, up $1.4 million or 4 percent from last year. Margin was higher in this year's third quarter primarily due to contributions from NW Natural's decoupling mechanism. NW Natural's "Conservation Tariff," approved by the Oregon Public Utility Commission (OPUC) effective Oct. 1, 2002, was designed to recover lost margin due to changes in residential and commercial customers' consumption patterns. The tariff included a partial decoupling mechanism that breaks the link between the Company's earnings and the quantity of energy consumed by its customers, so the Company does not have an incentive to discourage customers' conservation efforts. NW Natural deferred $1.5 million of lost margin in the third quarter of 2003 for future recovery under the decoupling mechanism, equivalent to 4 cents a diluted share of earnings. Total gas deliveries in the third quarter were 173 million therms, down about 1 percent from last year. Sales to residential and commercial customers were 48 million therms, down 13 percent from last year, while sales and transportation deliveries to industrial customers were 125 million therms, up 4 percent from last year. Margin in the third quarter from the residential and commercial markets was $0.8 million, or 3 percent, lower than last year, primarily reflecting weak economic conditions in the commercial sector. Margin from the industrial market (not including electric generation customers) was $0.4 million, or 5 percent, lower than last year, also reflecting weak economic conditions in the industrial manufacturing sector as well as transfers of some industrial customers from higher-margin to lower-margin tariff schedules or service agreements. NW Natural earned $1.0 million, after tax and revenue sharing, from its gas storage business segment in the third quarter of 2003. These earnings were equivalent to 4 cents a diluted share, compared to earnings from storage services of $0.4 million or 1 cent a share in the third quarter of 2002. The Company provides interstate gas storage services to customers in the interstate market from its Mist gas storage field, using storage capacity that has been developed in advance of core utility customers' requirements. Results from this segment also include earnings from a contract with an independent energy trading company that seeks to optimize the use of NW Natural's assets by trading temporarily unused portions of its gas storage capacity and upstream pipeline transportation capacity. NW Natural has a Purchased Gas Adjustment (PGA) tariff in Oregon under which it absorbs 33 percent of any excess cost of gas, or retains 33 percent of any savings, both as compared to the gas commodity prices built into rates. The Company also has an off-system gas sales program under which it shares margins realized from its sales in the off-system market of natural gas that was under contract with gas suppliers, but was not required for delivery to core market customers. NW Natural's share of the savings and margins realized from its gas commodity and off-system gas sales programs in the third quarter of 2003 contributed $0.5 million of margin, equivalent to 1 cent a diluted share of earnings. The equivalent result in the third quarter of 2002 was shared savings and margins of $1.6 million, equivalent to about 4 cents a diluted share of earnings. Nine-Month Results ------------------ The Company's earnings applicable to common stock for the nine months ended Sept. 30, 2003, were $24.0 million or 93 cents a diluted share, compared to earnings of $23.7 million or 93 cents a diluted share in the first nine months of 2002. Results for the first nine months of last year included a charge equivalent to 32 cents a diluted share for costs incurred in the Company's efforts to acquire Portland General Electric Company from Enron Corp. Total gas deliveries in the first nine months of 2003 were 750 million therms, down 50 million therms or about 6 percent from last year. Sales to residential and commercial customers were 378 million therms, down about 6 percent from last year, while sales and transportation deliveries to industrial customers were 372 million therms, down about 7 percent. Residential and commercial sales were depressed by warm weather, partially offset by customer growth, while industrial deliveries were depressed by weak economic conditions. Weather in the first nine months of 2003 was 6 percent warmer than average and 10 percent warmer than last year. NW Natural served about 564,000 customers at Sept. 30, 2003, representing 3.3 percent customer growth over the past 12 months. The margin contribution in the first nine months of 2003 from NW Natural's decoupling mechanism in Oregon was $3.0 million, equivalent to 7 cents a share of earnings. There was no margin contribution from this mechanism in the first nine months of 2002. NW Natural earned $3.4 million after tax and revenue sharing from its gas storage business segment in the first nine months of 2003, equivalent to 13 cents a diluted share, compared to earnings from the storage segment of $2.4 million or 9 cents a share in the first nine months of 2002. NW Natural's share of the savings and margins realized from the gas commodity and off-system gas sales programs under its PGA tariff contributed $5.3 million of margin in the first nine months of 2003, equivalent to 13 cents a diluted share of earnings. The equivalent result in the first nine months of 2002 was $12.0 million of margin, equivalent to 28 cents a share of earnings. Operations and maintenance expenses for the first nine months of 2003 were up $8.1 million, or 13 percent, over last year. This year's O&M expenses include higher pension expense as determined under Statement of Financial Accounting Standards (SFAS) No. 87 ($2.8 million), as well as higher costs for health benefits ($0.9 million) and business risk insurance premiums ($0.7 million). The higher expenses in these three categories reduced earnings through September by about 10 cents a share as compared to the equivalent expenses in the first nine months of last year. Updated Outlook for 2003 and Outlook for 2004 --------------------------------------------- NW Natural's chief financial officer, Bruce R. DeBolt, said the Company estimates that its results for the quarter ending Dec. 31, 2003, will be earnings in the range of 80 to 90 cents a share. Estimated earnings for the full year 2003 thus are in the range of $1.73 to $1.83 a share. He said the Company also estimates that earnings for 2004 will be in the range of $1.85 to $2.00 a share. NW Natural's earnings guidance for the balance of 2003 and 2004 reflects the estimated impact of rate increases authorized in the Company's recently completed general rate case in Oregon. These rate increases included initial rate changes that were effective Sept. 1, 2003, as well as rate changes to be applied in late 2003 and late 2004 upon completion of the phases of NW Natural's project for the extension of its natural gas pipeline from the Mist gas storage field. Consistent with prior earnings guidance, the estimates for the balance of 2003 and 2004 also assume average weather conditions. The OPUC's approval of a weather normalization mechanism in NW Natural's Oregon general rate case, along with the decoupling mechanism approved last year, will help stabilize residential and commercial margin revenues at levels close to those reflected in the rate case. NW Natural will file a general rate case in Washington during the fourth quarter of 2003, with new rates expected to be in effect during the fourth quarter of 2004. The filing will be designed to recover the Company's higher costs of service including its costs for the expansion of its gas storage facilities, a new service center in Clark County, Washington, and other system improvements. Dividends Declared ------------------ The Board of Directors of NW Natural has increased the quarterly dividend on the Company's common stock, declaring a dividend of 32.5 cents a share on the common stock as well as regular quarterly dividends on its preferred stock. The dividends will be paid on Nov. 14, 2003, to shareholders of record on Oct. 31, 2003. Conference Call Arrangements ---------------------------- As previously reported, NW Natural will conduct a conference call and Webcast starting at 11:30 a.m. EST (8:30 a.m. Pacific Time) on Nov. 4 to review the Company's third quarter and year-to-date financial results as well as its guidance for the balance of 2003 and 2004. To hear the conference call live, please call 800.901.5213, or 617.786.2962 for callers outside the United States. Participants will be asked for their name, company name, phone number, the name of the conference they will be joining ("NW Natural") and the participant passcode (46073103). A replay of the call will be available two hours after completion of the conference on Nov. 4 and until Tuesday, Nov. 18. To access the recording, call 888.286.8010, and enter the conference identification number 55655544. To hear the conference by Webcast, log on to NW Natural's corporate Website at www.nwnatural.com and select the Webcast icon on the home page. A replay of the Webcast will be available two hours after the conference concludes. NOTE: This report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. The Company's future operating results will be affected by various uncertainties and risk factors, many of which are beyond the Company's control, including governmental policy and regulatory action, the competitive environment and economic factors, as well as weather conditions. For a more complete description of these uncertainties and risk factors, see the Company's filings with the Securities and Exchange Commission on Form 10-K for the year ended Dec. 31, 2002, and on Form 10-Q for the quarters ended March 31 and June 30, 2003. -0- PRESS CONTACT: Steve Sechrist 503/226-4211 Ext. 3517 INVESTOR CONTACT: James Boehlke 503/721-2451 503/226-4211 Ext. 2451 NORTHWEST NATURAL GAS COMPANY Comparative Income Statement (Consolidated - Unaudited)
Three Months Ended ------------------ Increase 9/30/03 9/30/02 (Decrease) ------- ------- ---------- 1.Gross Operating Revenues $ 69,481,000 $ 78,717,000 $ (9,236,000) 2.Net Income (Loss) $ (6,546,000) $ (6,008,000) $ (538,000) a/3.Earnings (Loss) Applicable to Common Stock $ (6,546,000) $ (6,590,000) $ 44,000 4.Average Shares of Common Stock Outstanding 25,777,000 25,492,000 285,000 a/5.Basic Earnings (Loss) Per Share of Common Stock $ (0.25) $ (0.26) $ 0.01 a/6.Diluted Earnings (Loss) Per Share of Common Stock $ (0.25) $ (0.26) $ 0.01 Year to Date ------------ Increase 9/30/03 9/30/02 (Decrease) ------- ------- ---------- 1.Gross Operating Revenues $ 393,509,000 $ 459,153,000 $ (65,644,000) 2.Net Income $ 24,320,000 $ 25,447,000 $ (1,127,000) a/3.Earnings Applicable to Common Stock $ 24,026,000 $ 23,680,000 $ 346,000 4.Average Shares of Common Stock Outstanding 25,692,000 25,389,000 303,000 a/5.Basic Earnings Per Share of Common Stock $ 0.94 $ 0.93 $ 0.01 a/6.Diluted Earnings Per Share of Common Stock $ 0.93 $ 0.93 $ - a/ After allowance for preferred and preference stock dividend requirements.
NORTHWEST NATURAL GAS COMPANY Comparative Income Statement (Consolidated - Unaudited)
Twelve Months Ended ------------------- Increase 9/30/03 9/30/02 (Decrease) ------- ------- ---------- 1.Gross Operating Revenues $ 575,732,000 $ 695,555,000 $ (119,823,000) 2.Net Income $ 42,665,000 $ 49,838,000 $ (7,173,000) a/3.Earnings Applicable to Common Stock $ 41,858,000 $ 47,477,000 $ (5,619,000) 4.Average Shares of Common Stock Outstanding 25,658,000 25,340,000 318,000 a/5.Basic Earnings Per Share of Common Stock $ 1.63 $ 1.87 $ (0.24) a/6.Diluted Earnings Per Share of Common Stock $ 1.62 $ 1.86 $ (0.24) < a/ After allowance for preferred and preference stock dividend requirements.
NORTHWEST NATURAL GAS COMPANY Financial Highlights (Thousands, except per share amounts) Third Quarter - 2003
3 MONTHS ENDED 9 MONTHS ENDED 12 MONTHS ENDED SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30 2003 2002 2003 2002 2003 2002 ------------------------- ---------------------------- ---------------------------- Gross Operating Revenues $ 69,481 $ 78,717 $ 393,509 $ 459,153 $ 575,732 $ 695,555 Cost of Sales 30,016 40,658 196,907 253,864 296,875 397,701 ------------------------- ---------------------------- ---------------------------- Operating Margin 39,465 38,059 196,602 205,289 278,857 297,854 Operating Expense: O&M 22,801 19,685 70,203 62,087 93,236 85,229 Other Taxes 6,719 6,781 24,886 25,635 33,327 35,651 DD&A 13,556 13,035 40,060 38,633 53,517 51,291 ------------------------- ---------------------------- ---------------------------- Total Operating Expenses 43,076 39,501 135,149 126,355 180,080 172,171 ------------------------- ---------------------------- ---------------------------- Operating Income (Loss) (3,611) (1,442) 61,453 78,934 98,777 125,683 Other Income (Expense) 771 248 1,535 (14,179) 824 (13,682) Interest Charges - Net 8,426 8,652 26,498 25,378 35,252 34,691 Income Tax Expense (Benefit) (4,720) (3,838) 12,170 13,930 21,684 27,472 ------------------------- ---------------------------- ---------------------------- Net Income (Loss) from Operations (6,546) (6,008) 24,320 25,447 42,665 49,838 Preferred and Preference Dividends - 582 294 1,767 807 2,361 ------------------------- ---------------------------- ---------------------------- Earnings (Loss) Applicable to Common Stock $ (6,546) $ (6,590) $ 24,026 $ 23,680 $ 41,858 $ 47,477 ========================= ============================ ============================ Common Shares Outstanding: Average for Period 25,777 25,492 25,692 25,389 25,658 25,340 End of period 25,849 25,527 25,849 25,527 25,849 25,527 Earnings (loss) per Share: Basic $ (0.25) $ (0.26) $ 0.94 $ 0.93 $ 1.63 $ 1.87 Diluted $ (0.25) $ (0.26) $ 0.93 $ 0.93 $ 1.62 $ 1.86 Dividends Paid Per Share $ 0.315 $ 0.315 $ 0.945 $ 0.945 $ 1.26 $ 1.26 Book Value Per Share - end of period $ 18.92 $ 18.61 $ 18.92 $ 18.61 $ 18.92 $ 18.61 Market Closing Price - end of period $ 29.000 $ 29.360 $ 29.000 $ 29.360 $ 29.000 $ 29.360 BALANCE SHEET DATA (AT END OF PERIOD): Total assets $ 1,336,579 $ 1,272,695 $ 1,336,579 $ 1,272,695 $ 1,336,579 $ 1,272,695 Common Stock Equity $ 489,166 $ 475,081 $ 489,166 $ 475,081 $ 489,166 $ 475,081 Long-term debt and redeemable preferred stock (including amounts due in one year) $ 458,472 $ 486,033 $ 458,472 $ 486,033 $ 458,472 $ 486,033 OPERATING STATISTICS: Total Customers-end of period 564,488 546,644 564,488 546,644 564,488 546,644 Gas Deliveries (therms) Res. & Comm. Customers 47,952 55,040 378,171 401,803 566,996 600,835 Industrial Firm 11,155 10,544 37,676 49,974 50,917 69,496 Industrial Interruptible 13,087 2,444 25,075 22,724 28,592 38,793 Transportation 101,158 107,927 309,234 325,275 429,958 421,391 ------------------------- ---------------------------- ---------------------------- Total 173,352 175,955 750,156 799,776 1,076,463 1,130,515 Gas Revenues Res. & Comm. Customers $ 48,190 $ 61,016 $ 329,447 $ 380,945 $ 492,010 $ 579,906 Industrial Firm 6,778 8,198 22,463 35,089 30,339 49,634 Industrial Interruptible 6,421 1,595 12,364 14,166 14,135 24,604 Transportation 3,857 5,984 14,710 19,867 20,863 26,009 Other revenues 2,084 363 7,331 2,442 8,907 2,406 ------------------------- ---------------------------- ---------------------------- Total $ 67,330 $ 77,156 $ 386,315 $ 452,509 $ 566,254 $ 682,559 Cost of gas sold $ 29,998 $ 40,637 $ 196,866 $ 253,075 $ 296,825 $ 392,323 Net operating revenues (utility margin) $ 37,332 $ 36,519 $ 189,449 $ 199,434 $ 269,429 $ 290,236 Degree Days Normal (20-year average) 93 97 2,603 2,607 4,212 4,214 Actual 43 75 2,456 2,724 3,964 4,281 Colder (warmer) than normal -54% -23% -6% 4% -6% 2%