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SEMCO Energy, Inc. Reports First Quarter Results

PORT HURON, Mich., May 5 /PRNewswire/ -- William L. Johnson, President and Chief Executive Officer of SEMCO Energy, Inc. (Nasdaq: SMGS), formerly Southeastern Michigan Gas Enterprises, Inc., reported that net income for the first three months of 1997 increased to $9,589,000 ($.77 per share) from $8,742,000 ($.71 per share) for the first quarter of 1996.

Quarter Results

Gross margin on gas sales from the Company's gas utility operations decreased by $919,000 (3.5%) as gas volumes sold for the three month period ended March 31, 1997 decreased 6% from the same period in 1996. Volumes decreased, despite the addition of over 7,900 customers (3.5%), primarily due to 11% warmer temperatures.

SEMCO Energy Services, a wholly owned subsidiary of the Company, posted increased gas marketing revenue of $74,293,000 (89%) on increased volumes totaling 23,971,000 thousand cubic feet (Mcf) (79%). This resulted in an increase in gas marketing margin of $1,721,000, net of gas marketer incentive compensation. The improved performance of the Company's marketing operations are attributable to the new Northeast and Mid-Atlantic marketing offices opened in late 1995 and late 1996, respectively, and the Midwest office, which was expanded to include the Chicago and Wisconsin markets in late 1995.

Other income (loss), net, improved to income of $79,000 in the first quarter of 1997 from a loss of $274,000 in the first quarter of 1996. This improvement highlights the impact of the Company's December 1996 write-down of its investment in the NOARK Pipeline System. Due to the write-down, the Company did not record any loss for NOARK in the first quarter of 1997. In the first quarter of 1996, the Company recorded a loss of $426,000 on its investment in NOARK.

Twelve-Month Results

Excluding the December 1996 $21 million after-tax write-down of NOARK ($1.69 per share), net income was $12,882,000 ($1.04 per share) and $12,616,000 ($1.02 per share), for the twelve-month periods ended March 31, 1997 and 1996, respectively.

Gas sales margin generated by the Company's utilities increased $332,000 (.5%) for the twelve month period ended March 31, 1997, compared to the same period a year earlier. Ten percent warmer weather offset most of the impact of adding over 6,400 gas sales customers.

Gas marketing revenues and volumes increased $211,540,000 (121%) and 67,790,000 Mcf (79%), respectively, from the prior period, generating a $2,307,000 increase in marketing margin, net of gas marketer incentive compensation. The twelve-month comparison of marketing activities highlights the increased volumes from SEMCO's establishment of new marketing offices in late-1995 and 1996.

Other income (loss), net, decreased from a loss of $243,000 for the twelve months ended March 31, 1996 to a loss of $460,000 in the same period ending March 31, 1997. The twelve-month results for 1996 include a non-recurring gain of $1,251,000, net of tax, on the settlement of a lawsuit involving NOARK. Excluding this gain, the loss from NOARK, net of tax, was $1,276,000 for the twelve-month period ended March 31, 1997 compared to $1,870,000 for the same period ended March 31, 1996.

    Further detail is shown in the following table (unaudited):

                                                Quarter Ended March 31,
                                                 1997            1996
                                                     (unaudited)
    Financial Summary
      Total Operating Revenues               $252,735,000   $176,128,000
        Gas Distribution Margin              $ 25,519,000   $ 26,438,000
        Gas Marketing Margin                 $  5,264,000   $  1,689,000
        Transportation Revenue               $  3,952,000   $  3,518,000
      Operating Income                       $ 12,741,000   $ 11,859,000
      Other Income (Loss), Net               $     79,000   $   (274,000)
      Net Income                             $  9,589,000   $  8,742,000
      Earnings Per Share*                    $        .77   $        .71
      Dividends Per Share*                   $        .20   $        .19
      Average Common Shares Outstanding*       12,401,000     12,394,000

    Operations Summary
      Volumes -- million cubic feet
        Gas Sold                                   18,524         19,743
        Gas Marketed                               54,245         30,274
        Gas Transported                             6,270          5,947
      Gas Sales Customers - Average               235,515        227,558
      Degree Days - Percent of Normal                  96%           108%
                  - Actual                          3,168          3,546


                                            Twelve Months Ended March 31,
                                                1997            1996
                                                     (unaudited)
    Financial Summary
      Total Operating Revenues               $624,237,000   $394,361,000
        Gas Distribution Margin              $ 67,317,000   $ 66,985,000
        Gas Marketing Margin                 $  9,564,000   $  3,984,000
        Transportation Revenue               $ 12,792,000   $ 12,423,000
      Operating Income                       $ 24,977,000   $ 23,625,000
      Other Income (Loss), Net               $   (460,000)  $   (243,000)
      Write-down of NOARK investment, net    $(21,000,000)  $     -0-
      Net Income (Loss)                      $ (8,118,000)  $ 12,616,000
      Earnings (Loss) Per Share*             $       (.65)  $       1.02
      Net Income, excluding the NOARK
        write-down                           $ 12,882,000   $ 12,616,000
      Earnings Per Share, excluding the
        NOARK write-down*                    $       1.04   $       1.02
      Dividends Per Share*                   $        .79   $        .75
      Average Common Shares Outstanding*       12,399,000     12,408,000

    Operations Summary
      Volumes -- million cubic feet
        Gas Sold                                   42,538         43,444
        Gas Marketed                              153,399         85,609
        Gas Transported                            20,855         22,311
      Gas Sales Customers - Average               228,801        222,302
      Degree Days - Percent of Normal                  99%           110%
                  - Actual                          6,721          7,457

*Adjusted to give retroactive effect to 5% stock dividend in May 1996. Per share amounts and average shares outstanding do not reflect the 5% stock dividend payable in May 1997.
SOURCE SEMCO Energy, Inc.
CONTACT: Robert F. Caldwell, Executive Vice President and CFO of SEMCO Energy, 810-989-4101

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements in this press release regarding SEMCO Energy's business which are not historical facts are "forward-looking statements" that involve risks and uncertainties. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see "Risk Factors" in the Company's Annual Report or Form 10-K for the most recently ended fiscal year.

 
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