Pacific Northern Gas Ltd.
TSX : PNG
TSX : PNG.PR.A

Pacific Northern Gas Ltd.

April 29, 2008 14:44 ET

Pacific Northern Gas Reports First Quarter Earnings and Declares Second Quarter Dividends

VANCOUVER, BRITISH COLUMBIA--(Marketwire - April 29, 2008) - Pacific Northern Gas Ltd. (TSX:PNG)(TSX:PNG.PR.A) announced today that net income for the three months ended March 31, 2008 was $4.5 million, compared with net income of $3.9 million for the corresponding period in 2007. After providing for preferred share dividends, the earnings per common share in the three months ended March 31, 2008 were $1.21 compared with earnings per common share of $1.06 for the same period in 2007.

Net income for the quarter was higher in 2008 compared to 2007 by approximately $0.6 million due mainly to the higher allowed return on equity ("ROE") rate of 9.27% in 2008 compared to 9.02% in 2007 in the Western system and the Tumbler Ridge division of the Northeast system and the higher ROE of 9.02% in 2008 compared to 8.77% in 2007 in the Fort St. John/Dawson Creek division of the Northeast system. In addition, the Company had higher than projected net residential customer additions and large commercial transportation volumes, primarily in the Northeast system, compared to the 2008 forecast additions and volumes used for ratemaking purposes.

The Company continues to pursue a project to loop its mainline transmission system from Kitimat to Summit Lake (the "KSL Project") through its 50 percent ownership of Pacific Trail Pipelines Limited Partnership ("PTP"). The KSL Project would provide gas transportation services for up to 1.0 billion cubic feet per day from the proposed Kitimat LNG Inc. liquefied natural gas ("LNG") receiving and regasification terminal (the "Terminal"), to be located approximately 15 kilometers southwest of Kitimat, and would entail the construction of approximately 470 kilometers of a 36 inch diameter pipeline and associated compression facilities, at a cost of $1.2 billion based on estimates made in 2006.

Included in net income for the three months ended March 31, 2008 are after-tax charges of $0.2 million or $0.07 per share relating to the Company's share of KSL Project development expenditures compared to $0.3 million or $0.09 per share for the corresponding period in 2007.

The Company's share of planned development expenditures for the KSL Project in the last nine months of 2008 is expected to be approximately $0.3 million before income taxes ($0.06 per share, net of income taxes). The Company's share of further KSL Project development expenditures will continue to be expensed until suitable commercial arrangements for firm gas transportation services by PTP are in place.

Residential deliveries were approximately 5 percent higher in the three months ended March 31, 2008 and total commercial deliveries were 6 percent higher, relative to deliveries over the same period in 2007. Management believes that weather was a key factor in the increase in both the residential and the commercial deliveries, as it was approximately 5 percent colder for the three month period ended March 31, 2008 compared to the same period in 2007. The weather was also, 4 percent colder than normal for the three month period ended March 31, 2008, with "normal" based on the average of actual temperatures in the Company's service areas for the preceding 10 years.

Industrial deliveries were lower by approximately 5 percent for the three month period ended March 31, 2008 compared to the same period in 2007. The decrease in industrial deliveries is comprised of a 1 percent decrease in large industrial customer deliveries and a 10 percent decrease in small industrial deliveries, primarily in the Western system. The reductions in small industrial customer deliveries relate primarily to customers in the forestry industry. Deferral accounts are in place that recover or refund margin differences resulting from deliveries to large industrial customers and to some small industrial customers varying from the forecast approved for ratemaking purposes.

Operating revenues in the three months ended March 31, 2008 decreased to $57.5 million compared with $58.9 million in the corresponding period in 2007. The decrease was primarily due to a reduction of $1.8 million from the sale of gas surplus from the Company's customer needs ("off system gas sales"). Any profit or loss realized on off system gas sales is deferred for future recovery from, or refund to, the Company's sales customers. The decrease in off system gas sales in the first quarter of 2008 reflects the impact of a reduction in the quantity of gas supply purchased on a committed basis in 2008 compared to 2007. Natural gas commodity prices, which are passed through to the Company's sales customers without mark-up, are volatile and can result in significant variability of the Company's reported operating revenues, but do not affect net income.

Operating margin in the three months ended March 31, 2008 increased to $16.4 million, as compared with $15.7 million in the same period in 2007. The higher operating margin in the first quarter is primarily the result of the higher delivery rates to recover the increased 2008 cost of service of approximately $1.0 million compared to 2007, of which approximately $0.4 million has been recovered in the first quarter of 2008. In addition, operating margin increased as a result of higher than anticipated net residential customer additions and commercial transportation volumes.

Included in project development expenditures and other income deductions for the three months ended March 31, 2008 are the Company's share of KSL Project development expenditures expensed by PTP amounting to $0.4 million, before income taxes.

PTP continues to pursue environmental certification by both the B.C. Environmental Assessment Office ("BCEAO") and Canadian Environmental Assessment Agency ("CEAA") of the KSL Project. PTP's Environmental Assessment Certificate application for the KSL Project is under review and the related assessment report is scheduled to be completed in May 2008. The Company expects that the BCEAO and CEAA approvals will be granted in the second and third quarters of 2008, respectively. Subject to a number of other conditions, construction of the KSL Project by PTP is expected to commence in 2009 for completion in 2011 when the Terminal is expected to begin operation. Conditions to construction include the securing of LNG supply by Kitimat LNG Inc., financing for construction of the Terminal and KSL Project, and regulatory approvals for the KSL Project. The regulatory approvals for the KSL Project, include the BCEAO Environmental Assessment Certificate, approvals under the Canadian Environmental Assessment Act, a Certificate of Public Convenience and Necessity from the Commission and other permits required from the B.C. Oil and Gas Commission. The Company can give no assurances that these conditions will be satisfied or that construction of the KSL Project by PTP will proceed.

The Board of Directors declared a semi-annual dividend of 84.375 cents per share on the Company's 6-3/4 percent cumulative, redeemable, preferred shares, payable July 1, 2008 to the shareholders of record at the close of business on June 16, 2008.

The Board of Directors also declared a quarterly dividend of 22 cents per share on the Company's common shares, payable June 23, 2008 to shareholders of record at the close of business on June 6, 2008.

Pacific Northern Gas Ltd., for purposes of the Income Tax Act (Canada), and any similar provincial or territorial legislation, designates all dividends paid by Pacific Northern Gas Ltd. after December 31, 2005 to be "eligible dividends" unless otherwise notified by the Company. An eligible dividend paid to a Canadian resident is entitled to the enhanced dividend tax credit.

Headquartered in Vancouver, British Columbia, Pacific Northern Gas Ltd. (TSX:PNG)(TSX:PNG.PR.A) owns and operates natural gas transmission and distribution systems. The Company's western transmission line extends from the Spectra Energy (formerly Duke Energy) gas transmission system north of Prince George to tidewater at Kitimat and Prince Rupert, and provides service to 12 communities and a number of industrial facilities. In the northeast, Pacific Northern's subsidiary Pacific Northern Gas (N.E.) Ltd. provides gas distribution service in the Dawson Creek, Fort St. John and Tumbler Ridge areas. Further information is available on the Company's website at: www.png.ca.



First Quarter Consolidated Results
Three Month Period Ended
March 31 ($ thousand, except for per share data)

2008 2007

Operating revenues $57,529 $58,960
Cost of sales 41,173 43,208
------- -------
Operating margin 16,356 15,752

Net income applicable to common shares $ 4,427 $ 3,843
Earnings per common share - basic $ 1.21 $ 1.06
Earnings per common share - diluted $ 1.20 $ 1.04

Operating cash flow $ 5,198 $ 4,781
Additions to plant, property and
equipment (2,053) (2,527)
Decrease in deferred charges 566 314
Repayment of long term debt - (644)
Decrease in bank indebtedness (1,800) (3,774)
Dividends paid (806) (729)


Contact Information

  • Pacific Northern Gas Ltd.
    Janet Kennedy
    Vice President, Finance
    (604) 691-5684
    Website: www.png.ca