OGE Energy Corporation (OGE)

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OGE Energy Corp. (OGE)

Q1 2010 Earnings Call

May 06, 2010 9:00 am ET

Executives

Todd Tidwell - Director of IR

Pete Delaney - Chairman, President and CEO

Sean Trauschke - VP and CFO

Keith Mitchell - COO

Howard Motley - VP, Regulatory Affairs, OG&E Electric Services

Analysts

Jay Dobson - Wunderlich Securities

Brian Russo - Ladenburg Thalmann

Presentation

Operator

At this time, I would like to welcome everyone to the OGE first quarter Earnings Call. (Operator Instructions)

Mr. Todd Tidwell, you may begin your conference.

Todd Tidwell

Thank you. Good morning everyone and welcome to OGE Energy Corp's first quarter 2010 earnings call. I'm Todd Tidwell, Director of Investor Relations. And with me today I have Pete Delaney, Chairman, President and CEO of OGE Energy Corp; and Sean Trauschke, Vice President and CFO of OGE Energy Corp; and several other members of the management team to address any questions that you may have.

In terms of the call today, we will first hear from Pete, followed by an explanation of first quarter results from Sean. And finally, as always, we will answer your questions.

I would like to remind you that this conference is being webcast and you may follow along on our website at www.oge.com. In addition, the conference call and the accompanying slides will be archived following the call on that same website.

Before we begin the presentation, I would like to direct your attention to the Safe Harbor statement regarding forward-looking statements. This is an SEC requirement for financial statements and simply states that we cannot guarantee forward-looking financial results, but this is our best estimate to date.

In addition, there is a Regulation G reconciliation for ongoing earnings in the [end] index.

I will now turn the call over to Pete Delaney for his opening comments.

Pete Delaney

Welcome to our first quarter earnings call. This morning I'll discuss our recent accomplishments and forward initiatives and our outlook for our businesses, and Sean will review our financial results in more detail.

Our first quarter results were good. Income from ongoing operations came in at $0.36 per share, up $0.18 in the first quarter over last year. We did take $0.11 non-cash charge related to the elimination of the tax deduction of the Medicare Part D subsidy, and Sean will discuss that in more detail in a minute.

The utility delivered a strong quarter, driven largely by cool weather in our service area and the rate recovery on the significant capital investments that we've made in utility to maintain our reliability and to bring renewable energy resources to our customers.

At Enogex, earnings were up significantly as we continued to experience volume growth in the gathering and processing businesses, coupled with the rebound in natural gas liquids prices. Enogex had record NGL (inaudible) production in the first quarter of this year as our investments in the prolific natural gas basins in our area are producing positive results. These rich natural gas liquids streams not only benefit Enogex's returns, but also provide good economics for our customer and the producer.

Our new Clinton [call center] facility that came into service last year located in the heart of these basins has improved the efficiency of our NGL recoveries, which translates into higher liquids volumes and better financial results. We continue to anticipate the gathering and processing volume growth will be 7% and 12% respectively this year.

As our stock price reached our prior record close of $41.01, it reflected on the differences in our financial profile since February of 2007 when we hit a previous all-time high. We have invested over $2.5 billion in our businesses, while strengthening our credit profile.

And at the midpoint of our guidance, utility earnings this year were $0.45 per share or about 26%. And those earnings represent a much higher portion of consolidated earnings which themselves are up 15% to 20% from the 2007, assuming the midpoint to high end of our 2010 guidance. And the dividend is 7% higher. So we feel good about where we're positioned today to continue to grow our earnings and dividends to provide a solid shareholder return.

Moving on to the Oklahoma, economy continues to remain steady and has not experienced severe economic impact that has plagued much of the country. The latest unemployment data for the metropolitan area is over 1 million, shows Oklahoma City with the second lowest unemployment rate in the nation at 6.7%. This is well below the national average of 10%.

However, our state and local government, like many others, were facing serious budget constraints. We do see we're continuing to add utility customers near our historical growth rate of about 1% per year.

Our industrial load is recovering and while not back to 2008 levels, it has shown growth for three consecutive quarters. We expect to add an additional 20 megawatt from industrial load this year. That said, we remain vigilant and are mindful of the challenges faced by many in our area.

Turning specifically to some of our key initiatives to position us to meet our goal of no new fossil fuel generation until 2020, the Windspeed transmission line which was energized at the end of March and will provide much needed transport capacity for renewable generation in the western part of our state. This was the first major transmission project this company has undertaken in many, many years. And I'd like to recognize our members involved in the project for completing this line on time and on budget.

Read the rest of this transcript for free on seekingalpha.com