NiSource's CEO Discusses Q1 2012 Results - Earnings Call Transcript

NiSource (NI)

Q1 2012 Earnings Call

May 01, 2012 9:00 am ET

Executives

Glen L. Kettering - Senior Vice President of Corporate Affairs

Robert C. Skaggs - Chief Executive Officer, President, Director and Interim Chief Executive Officer for Gas Distribution Segment

Stephen P. Smith - Chief Financial Officer and Executive Vice President

Analysts

Paul T. Ridzon - KeyBanc Capital Markets Inc., Research Division

Stephen J. Maresca - Morgan Stanley, Research Division

Carl L. Kirst - BMO Capital Markets U.S.

James L. Dobson - Wunderlich Securities Inc., Research Division

Charles J. Fishman - Morningstar Inc., Research Division

Faisel Khan - Citigroup Inc, Research Division

Craig Shere - Tuohy Brothers Investment Research, Inc.

Unknown Analyst

Yves Siegel - Crédit Suisse AG, Research Division

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Q1 2002 -- 2012 NiSource Earnings Conference Call. My name is Grant, and I'll be your operator for today. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Mr. Glen Kettering, Senior Vice President of Corporate Affairs. Please proceed.

Glen L. Kettering

Thank you, and good morning, everyone. On behalf of NiSource, I'd like to welcome you to our quarterly analyst call. Joining me this morning are Bob Skaggs, President and Chief Executive Officer; Steve Smith, Executive Vice President and Chief Financial Officer; and Randy Hulen, Managing Director of Investor Relations. The focus of today's call is to review our financial performance for the first quarter of 2012 and to provide a business update. We'll then open the call to your questions. At times during the call, we'll refer to the supplemental slides available on our website at nisource.com. I'd like to remind all of you that some of the statements made on this call will be forward-looking and those statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the statements. Information concerning such risks and uncertainties is included in the MD&A and Risk Factors sections of our periodic SEC filings. And now, I'll turn the call over to Bob Skaggs.

Robert C. Skaggs

Thanks, Glen, and good morning, and thanks for joining us. Our agenda today will be crisp to leave plenty of time for questions. So we'll review our first quarter earnings which continued to be solid, sustainable and on track with our 2012 outlook. In the process, we'll touch on key achievements and initiatives in each of our business units, progress, demonstrating the continued strength of our well established investment-driven growth strategy. And finally, before opening the line to questions, I'll touch again on our core financial commitments to investment-grade credit, long-term earnings growth and a strong, attractive and growing dividend.

Let's start with the first quarter highlights on Slide 3. In the supplemental deck is our earning report reflects our NiSource teams are continuing to build on the positive momentum we generated in 2011. We delivered first quarter results squarely in line with our plan, continued earnings growth from robust regulatory, modernization and expansion initiatives and a solid start to our record $1.4 billion capital investment program. All in all, the NiSource team continued to demonstrate its commitment, focus and solid execution during the first quarter. In fact, they believe we're well on our way towards upping our gain in 2012 as we generate even greater value for our customers, investors and other key stakeholders.

With that backdrop, let's take a look at our first quarter results starting with our financial highlights on Slide 4. As you can see, we delivered net operating earnings, non-GAAP of about $215 million or $0.76 per share for the 3 months ended March 31. That compares with about $207 million or $0.74 per share for the first quarter of 2011. Our operating earnings for the quarter grew from about $402 million to more than $435 million compared to the same period in 2011. As I noted earlier, these results our squarely in line with our 2012 earnings outlook. On a GAAP basis, our net income for the quarter was about $194 million. Schedules 1 and 2 to our earnings release showed the GAAP to non-GAAP reconciling items, the most significant of which was weather.

Let's now turn to our individual business unit results starting with our NiSource Gas Transmission & Storage, or NGT&S, operations highlighted on Slide 5. At NGT&S, CEO Jimmy Staton and his team have truly hit the ground sprinting in 2012. They are developing and deploying a robust, comprehensive strategy for modernizing our system, meeting customer needs and maximizing the value of our extensive pipeline and storage assets. And that includes our very attractive position in the Marcellus and Utica production regions. From a financial perspective, NGT&S grew operating earnings to about $139 million during the first quarter compared to about $118 million for the same period in 2011. Net revenues were up about $17 million, driven by a number of growth projects at NGT&S as well as the impact of new rates under our Columbia Gulf base rate settlement that took effect in May 2011. As you know, shale gas development in midstream opportunities are key focus for our team. One important 2012 project on that front is our midstream services, Big Pine gathering system. Anchored by a long-term agreement with XTO Energy, this 70-mile, $150 million project in Western Pennsylvania will offer an initial capacity of 425 million cubic feet per day with interconnections to multiple interstate pipelines. In service for that project is this December. Our midstream team also is pursuing opportunities in the liquids-rich portion of the Utica play in eastern Ohio. These prospects include proposals to provide gathering services as well as cryogenic processing.

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