AltaGas Generates Record First Quarter Earnings of $11.0 million
TSX: ALA.UN
CALGARY--(CCNMatthews - May 12) -
FIRST QUARTER 2004 HIGHLIGHTS
(All financial figures are in Canadian dollars unless otherwise stated.)
/T/
- AltaGas Services Inc. delivered record first quarter net income of
$11.0 million or $0.24 per share, compared to $10.2 million or $0.23
per share for the same period of 2003. Net income growth for the first
quarter of 2004 reflects increased throughput in the Gathering and
Processing and Energy Services segments, partially offset by lower
margins in the Energy Services segment and warmer weather and
regulatory adjustments in the Natural Gas Distribution segment.
- Funds generated from operations for the first quarter of 2004 were
$21.6 million compared to $21.9 million the first quarter of 2003.
These cash flows were used to fund investment of $18.4 million,
dividends of $5.1 million and reduce AltaGas Services Inc.'s total
debt by $2.6 million during the quarter. As a result of the debt
reduction, AltaGas Services Inc.'s debt to total capitalization ratio
decreased to 51.5 percent from 52.2 percent at December 31, 2003.
- Commenting on the quarter, David Cornhill, Chairman and Chief
Executive Officer, said "We had a very solid first quarter in all of
our businesses. Producers have been extremely active in many of
AltaGas' operating areas and we have seen the result of this activity
in record tie-in rates for the quarter." Mr. Cornhill added, "We
expect pricing and operations to improve in all of our segments and
that, looking forward, every quarter this year will surpass last
year."
- On April 29, 2004, the securityholders of AltaGas Services Inc.
voted 99.9 percent in favour of a plan of arrangement to reorganize
the business of AltaGas Services Inc. into an income trust called
AltaGas Income Trust (Trust). The plan of arrangement was approved
by the Court of Queen's Bench of Alberta on April 30, 2004, and was
effected on May 1, 2004. The Plan of Arrangement allowed for
securityholders to receive either Trust Units or limited partnership
units (Exchangeable Units) that are exchangeable into Trust Units on
a one-for-one basis. The Trust currently has approximately 33.7
million Trust Units and 12.2 million Exchangeable Units issued and
outstanding. The income trust structure will allow the Trust
to reduce future cash tax liability at the corporate level thereby
increasing the amount of cash available for distribution to
unitholders.
- The Trust will commence monthly distributions on June 15, 2004 to
holders of Trust Units and Exchangeable Units of record on
May 25, 2004. The amount of the distribution on that date will be
$0.15 for each Trust Unit and each Exchangeable Unit. The Trust's
Units began trading on May 5, 2004 on the Toronto Stock Exchange (TSX)
under the trading symbol ALA.UN. The Exchangeable Units do not trade
on the TSX.
- Commenting on the re-organization, David Cornhill, Chairman and Chief
Executive Officer, said, "On April 1, 2004, AltaGas Services Inc.
celebrated its tenth anniversary as an operating company. We are very
proud of the value we have created over the past ten years and we are
confident that our change in structure will enhance the value creation
opportunities that AltaGas is pursuing. As AltaGas Income Trust, our
discipline will continue and our fundamental business strategy will
remain the same, based on the acquisition and expansion of
infrastructure-based midstream assets. We expect to continue to be
efficiently managed by the same qualified team of professionals that
has grown AltaGas into a leader in the Canadian midstream industry.
We will remain financially conservative, focused on operational
excellence, and we will continue to grow our business."
- On March 18, 2004, AltaGas Services Inc. announced that it has entered
into a purchase and sale agreement with BP Canada Energy Resources
Company (BP) to acquire BP's 48 2/3 percent interest in the Edmonton
Ethane Extraction Plant located at Edmonton, Alberta for approximately
$46 million. The acquisition, expected to close during the second
quarter of 2004, will increase AltaGas' net extraction processing
capacity to 539 Mmcf/d.
/T/
<<
CONSOLIDATED FINANCIAL HIGHLIGHTS
Three Months Ended March 31
($ millions) 2004 2003(4)
-------------------------------------------------------------------------
Revenue 193.5 203.4
Net revenue (1) 57.2 54.4
EBITDA (2) 31.2 30.7
Net income 11.0 10.2
Funds generated from operations 21.6 21.9
-------------------------------------------------------------------------
Three Months Ended March 31
Results per share (dollars except number of shares) 2004 2003(4)
-------------------------------------------------------------------------
EBITDA (2) 0.68 0.68
Net income 0.24 0.23
Funds generated from operations 0.47 0.48
Dividends paid per share 0.11 0.08
Basic shares outstanding for the period (millions) (3) 45.9 45.3
Shares outstanding at period end (millions) 45.9 45.3
-------------------------------------------------------------------------
Certain comparative figures have been reclassified to conform to the
current financial presentation.
(1) Net revenue is gross revenue less the costs of the purchase of
natural gas for resale and the costs to purchase power under power
purchase arrangements.
(2) Earnings before interest expense, income taxes, and amortization.
EBITDA is provided to assist investors in determining the ability
of AltaGas to generate cash from operations. This measure does not
have any standardized meaning prescribed by generally accepted
accounting principles and may not be comparable to similar
measures presented by other companies.
(3) Based on the weighted average number of shares outstanding for the
period.
(4) Prior periods have been restated for the impacts of the adoption of
CICA Handbook requirement for accounting for asset retirement
obligations
/T/
CONFERENCE CALL
AltaGas will hold a conference call on May 13, 2004 at 9:00 a.m. (ET) to
comment on its 2004 first quarter results. The discussion will be followed by
a question and answer period.
To participate in the conference call, you may dial 416-913-8746 or 1-800-
814-4860 toll-free. Shortly after the conclusion of the live call, the replay
will be available by dialing 416-640-1917 or 1-877-289-8525. The pass code is
21047496 followed by the pound key. The replay will expire at midnight (ET)
on May 20, 2004.
ABOUT ALTAGAS
AltaGas moves energy from its source to the end user, adding value through
the process. AltaGas has over $900 million of assets and a market
capitalization of approximately $950 million. Its steadily expanding asset
base today includes natural gas gathering and processing facilities,
interests in ethane and natural gas liquids extraction plants, and
transmission pipelines. AltaGas distributes natural gas to Alberta customers
through AltaGas Utilities Inc., to customers in the Northwest Territories
through the Ikhil Gas Project and distributes gas in Nova Scotia through its
interest in Heritage Gas Limited. AltaGas provides energy services to
customers, including marketing of natural gas and natural gas liquids and
sale of power from its power purchase based arrangements.
When used in this press release, the words "anticipate," "estimate," and
similar expressions are intended to identify forward-looking statements. Such
statements are subject to certain risks, uncertainties and assumptions that
could cause actual results to differ materially from those contemplated in
the forward looking statements. These risks and uncertainties include
operating performance, regulatory and environmental issues, weather and
economic conditions, competition and financing availability. For additional
information on these and other factors see the reports filed by AltaGas with
Canadian securities regulators. AltaGas disclaims any intention or obligation
to update or revise any forward looking information whether as a result of
new information or future event.
REPORT TO SHAREHOLDERS
FOR THE THREE MONTHS ENDED MARCH 31, 2004
MANAGEMENT'S DISCUSSION & ANALYSIS
The following discussion and analysis dated May 12, 2004 should be read in
conjunction with the accompanying unaudited consolidated financial statements
of AltaGas Services Inc. (AltaGas or the Company) for the three months ended
March 31, 2004 and the notes thereto and with the Management's Discussion and
Analysis contained in the Company's annual report for the year ended December
31, 2003.
Prospective data, comments and analysis are also provided wherever
appropriate to assist existing and new investors to see the business from a
corporate management viewpoint. Such disclosure is subject to the reasonable
constraints of maintaining the confidentiality of certain information which,
if published would probably have an adverse impact on the competitive
position of the Corporation.
On April 29, 2004, AltaGas' shareholders voted in favor of reorganizing
AltaGas' business into an income trust. The Plan of Arrangement received
court approval on April 30, 2004 and was effective May 1, 2004. The AltaGas
Income Trust (the Trust) began trading on the Toronto Stock Exchange on May
5, 2004 under the trading symbol ALA.UN.
/T/
CONSOLIDATED FINANCIAL RESULTS
CONSOLIDATED OPERATING RESULTS Three months ended March 31
($ millions) 2004 2003(1)
-------------------------------------------------------------------------
Revenue 193.5 203.4
Net revenue(2) 57.2 54.4
Net income 11.0 10.2
Funds generated from operations(2) 21.6 21.9
Net additions to capital assets 14.3 7.5
-------------------------------------------------------------------------
(1) Prior periods have been restated for the impacts of the adoption of
CICA Handbook requirement for accounting for asset retirement
obligations
(2) Non-GAAP financial measure. See discussion below.
COMMON SHARE STATISTICS Three months ended March 31
(dollars except per share amounts) 2004 2003
-------------------------------------------------------------------------
Net income per share(1) $ 0.24 $ 0.23
Dividends per share(1) $ 0.11 $ 0.08
Common and preferred shares outstanding (millions)
Basic 45.9 45.3
End of period 45.9 45.3
-------------------------------------------------------------------------
(1) Per share amounts are based on the basic number of shares outstanding
during the period.
/T/
AltaGas' first quarter 2004 net income is the highest the Company has earned
in a first quarter of a year since formation and continues the growth trend
achieved throughout the Corporation's 10 year history.
Revenue for the first quarter of 2004 is 5 percent lower than the same period
last year due mainly to the lower average prices received for natural gas and
power sold in the Natural Gas Distribution and Energy Services segments.
Net revenue, which is gross revenue less cost of sales, increased 5 percent
for the first quarter 2004 compared to first quarter 2003. In the extraction
component and the Natural Gas Distribution and Energy Services segments, net
revenue better reflects performance than does revenue, as changes in the
market price of natural gas and power purchased for resale affect both
revenue and the cost of goods sold.
Volumes in the Gathering and Processing segment increased in all operating
components. In the Energy Services segment, power component volumes were
higher quarter over quarter, due to the addition on April 1, 2003 of volumes
from the Genesee energy contract. Natural Gas Distribution volumes at AltaGas
Utilities Inc. declined slightly year over year due to warmer average weather
in 2004 versus 2003, offsetting an increase in the customer base. Heritage
Gas activated its natural gas distribution system on December 20, 2003 and
served its first customer on December 23, 2003. AltaGas' 24.9 percent share
of Heritage Gas' net earnings did not have a material impact on the
consolidated results in the first quarter of 2004.
AltaGas' earnings before interest, taxes and amortization increased 2 percent
for the quarter ended March 31, 2004 compared to the same quarter of 2003.
Amortization expense was up 2 percent, due mainly to Gathering and Processing
segment acquisitions and expansions during 2003 and the first quarter of
2004.
Lower average debt levels and higher interest rates resulted in effectively
flat interest expense when compared to the same period in 2003.
Income tax expense for the first quarter of 2004 is less than reported for
the same period of 2003 even though income before tax was higher. The income
of the company is subject to a variety of tax rates and rate reductions
currently and in the future. The consolidated income tax rate varies from
quarter to quarter depending on the mix and the anticipated timing of the
income stream being subject to taxation. The lower first quarter 2004 income
tax rate is a result of federal reductions mid-year 2003, a provincial rate
reduction arising out of the March 19, 2004 Alberta Budget and a higher
relative proportion of income arising from the Gathering and Processing
segment, which attracts a lower current rate.
Financial results for the balance of 2004 are expected to continue to
strengthen in the Gathering and Processing segment. Drilling activity in the
majority of the company's operating areas is expected to remain strong given
the favorable commodity pricing environment. In addition, the pursuit of
exploitation opportunities in existing operating areas and improved processes
are all expected to increase processed volumes. In the Energy Services
segment, power prices are expected to be higher providing improved results on
the unhedged portion of the company's power portfolio.
NON-GAAP FINANCIAL MEASURES
The company provides certain financial measures in this Management Discussion
and Analysis that do not have any standardized meaning prescribed by Canadian
generally accepted accounting principles (GAAP). These non-GAAP financial
measures may not be comparable to similar measures presented by other
companies.
The purpose of these financial measures and their reconciliation to GAAP
financial measures is shown below. All of the measures have been calculated
in accordance with previous disclosures by the Company. All amounts are in
millions of dollars unless otherwise noted.
/T/
Three months ended March 31
FUNDS GENERATED FROM OPERATIONS 2004 2003 % Change
Non-GAAP financial measure 21.6 21.9 (1)
Add (deduct): Net change in non-cash
working capital 2.6 8.8 (70)
-------------------------------------------------------------------------
Cash from operations (GAAP financial measure) 24.2 30.7 (21)
-------------------------------------------------------------------------
/T/
Funds generated from operations is provided to assist in determining the
ability of AltaGas to generate cash from operations after interest and taxes
without regard to changes in the Corporation's working capital in the period.
/T/
Three months ended March 31
NET REVENUE 2004 2003 % Change
-------------------------------------------------------------------------
Non-GAAP financial measure 57.2 54.4 5
Add: Cost of goods sold 136.3 149.0 (9)
-------------------------------------------------------------------------
Revenue (GAAP financial measure) 193.5 203.4 (5)
-------------------------------------------------------------------------
/T/
Net revenue is provided in the extraction component and the Natural Gas
Distribution and Energy Services segments as net revenue better reflects
organic growth in the business than does revenue, as changes in the market
price of natural gas and power purchased for resale affect both revenue and
the cost of goods sold. This reconciliation shows the difference between
revenue and net revenue amounts in the table for Financial and Operating
Results for the Gathering and Processing segment.
/T/
RESULTS OF OPERATIONS BY SEGMENT
OPERATING INCOME Three months ended March 31
($ millions, unless otherwise noted) 2004 2003(1) % Change
-------------------------------------------------------------------------
Gathering and Processing 12.0 9.7 24
Energy Services 5.3 6.0 (12)
Natural Gas Distribution 3.9 5.2 (25)
-------------------------------------------------------------------------
21.2 20.9 1
-------------------------------------------------------------------------
(1) Prior periods have been restated for the impacts of the adoption of
CICA Handbook requirements on accounting for asset retirement
obligations
/T/
Operating income in the Gathering and Processing segment in the first quarter
2004 showed significant improvement when compared to the same period in 2003,
while operating income from the Energy Services and Natural Gas Distribution
segments was lower than in the same quarter of the prior year. Key drivers
for the business results of each segment are discussed at the component level
in the information below.
GATHERING AND PROCESSING
The Gathering and Processing segment includes the field gathering and
processing, extraction, and transmission components, and in the "other"
component, AltaGas' investments in businesses ancillary to the gathering and
processing business.
/T/
FINANCIAL RESULTS Three months ended March 31
($ millions, unless otherwise noted) 2004 2003(1) % Change
-------------------------------------------------------------------------
Revenue 44.7 43.3 3
Net revenue 37.8 34.2 11
Operating and administrative 19.5 18.4 6
Amortization expense 6.3 6.1 3
Operating income 12.0 9.7 24
-------------------------------------------------------------------------
(1) Prior periods have been restated for the impacts of the adoption of
CICA Handbook requirements on accounting for asset retirement
obligations
OPERATING STATISTICS Three months ended March 31
2004 2003 % Change
-------------------------------------------------------------------------
Field gathering and processing
Capacity (Mmcf/d) 901 847 6
Throughput (gross Mmcf/d)(2) 560 535 5
Capacity utilization (percent) (2) 62 63 (2)
Average working interest (percent) (1) 87 88 (1)
Extraction
Inlet capacity (Mmcf/d) 349 349 -
Production (Bbls/d) 9,047 6,416 41
Transmission Volumes (Mmcf/d) (2)(3) 396 319 24
-------------------------------------------------------------------------
(1) As at March 31
(2) First quarter average
(3) Excludes condensate pipeline volumes
/T/
AltaGas' natural gas processing capacity ranks it as one of the top ten
Canadian processors of natural gas and one of the top four largest Canadian
midstream processors. The Gathering and Processing segment includes more than
6000 kilometers of gathering lines, 69 processing facilities, interests in
four extraction facilities and six transmission pipelines. These long-life
assets provide service to a diverse customer base under arrangements which
include a significant portion of cost of service, fixed fee and recovery of
operating cost contracts. Commodity price exposure is minimal and revenues
are generally volume driven. Future opportunities derive from the requirement
that all natural gas must be processed to meet downstream pipeline
specifications en route to the end user. With its extensive gathering
infrastructure and the ability to quickly redeploy assets due to the mobile
nature of its field gathering and processing plant, the Company is well
positioned to offer producers quick access to markets for their natural gas.
For the three months ended March 31, 2004 net revenue for AltaGas' Gathering
and Processing segment was $37.8 million, compared to $34.2 million for the
first quarter of 2003. Net revenue growth in this segment was the result of
increased volumes in the field gathering and processing, extraction and
transmission components.
Volumes processed in the field gathering and processing component in the
first quarter of 2004 rose due to the December, 2003 acquisition of the
Rainbow Lake facilities in northwestern Alberta and from the record number of
well tie-ins experienced during the quarter. Gas drilling activity in the
Western Canadian Sedimentary Basin continued to strengthen during the first
quarter of 2004. A record 155 wells were tied in to AltaGas' field gathering
and processing facilities compared with 85 during the same period in 2003.
Previous strong tie-in activity, along with the new volumes from the Rainbow
Lake facility acquisition more than offset normal natural production declines
and increased AltaGas' gross average throughput to 560 Mmcf/d during the
first quarter of 2004 compared to 535 Mmcf/d during the first quarter of
2003. These volume increases resulted in field gathering and processing net
revenue of $26.5 million in the first quarter of 2004 compared to $24.3
million during the same period in 2003.
During the first quarter of 2004, AltaGas continued its program of internal
expansion, completing three development projects in its field gathering and
processing areas. At Martin Creek, booster compression was installed, which
will increase throughput by 5 Mmcf/d. At the company's Doris facilities,
construction of a pipeline was completed that will open up new access to
processing areas and increase throughput by 4 Mmcf/d, with the potential to
double by year-end. During the quarter, AltaGas also purchased the remaining
25 percent of its Namaka facility bringing its ownership to 100 percent. All
three development projects are supported by producer commitments designed to
minimize AltaGas' financial exposure to throughput declines.
In the extraction component, processed volumes for the first quarter of 2004
increased to 9,047 Bbls/d of ethane and natural gas liquids (NGLs) compared
to an average of 6,416 Bbls/d for the same period in 2003. The higher average
production for the first three months of 2004 is a result of modifications to
the Empress EnCana extraction facility that increased ethane production
effective the fourth quarter of 2003 and the full quarter impact of the
Joffre ethane extraction plant commissioning, which was commissioned during
the first quarter of 2003. As a result of the higher volumes, net revenue for
the extraction component grew 18 percent during the first quarter of 2004
compared to the first quarter of 2003, reaching $3.5 million.
Extraction continues to be a vital link in AltaGas' midstream energy value
chain and AltaGas is committed to growing its extraction asset portfolio.
Late in the first quarter of 2004, AltaGas entered into a purchase and sale
agreement with BP Canada Energy Resources Company (BP) for BP's 48 2/3
percent interest in the Edmonton Ethane Extraction Plant (EEEP) located at
Edmonton, Alberta. The plant has a licensed inlet capacity of 390 Mmcf/d of
natural gas and gross natural gas liquids production of approximately 15,000
Bbls/d of specification ethane and 6,000 Bbls/d of propane-plus product. The
$46.0 million acquisition, expected to close during the second quarter of
2004, increases AltaGas' net extraction processing capacity to 539 Mmcf/d.
AltaGas' share of plant products will be sold under long term contracts and a
long term gas supply contract provides secure feedstock supply to EEEP.
During the first quarter of 2004, net revenue in AltaGas' transmission
component grew 13 percent to $7.0 million from $6.2 million in the first
quarter of 2003. AltaGas' total average transmission volumes increased to 396
Mmcf/d for the first quarter of 2004 from 319 Mmcf/d for the same period in
2003. This is primarily a result of increased drilling and completion
activities in the Suffield area.
Net additions to capital assets in the Gathering and Processing segment were
$10.9 million during the first quarter of 2004, up from $5.3 million in 2003.
In 2004 $8.7 million was invested in acquisitions and expansions, including
approximately $7.0 million for a deposit on BP Canada Energy Resources
Company's 48 2/3 percent interest in EEEP. The balance of $2.2 million in
2004 was spent to maintain throughput at existing field gathering and
processing, extraction and transmission facilities and pipelines.
ENERGY SERVICES
The Energy Services segment is comprised of the power services, gas services
and oil and gas production components. The financial results of the power
services component account for 94 percent of overall segment financial
results and as such the commentary in this section will be restricted to the
contributions from power services.
/T/
Financial Results Three months ended
March 31
($ millions, unless otherwise noted) 2004 2003 % Change
-------------------------------------------------------------------------
Revenue 133.4 148.8 (10)
Net revenue(1) 9.8 9.7 1
Operating income(2) 5.3 6.0 (12)
-------------------------------------------------------------------------
(1) Gross revenue less cost of sales
(2) Gross revenue less costs of sales less operating and general and
administration expense and amortization
Operating Statistics Three months ended
March 31
2004 2003 % Change
-------------------------------------------------------------------------
Volume of power sold (thousands of MWh) 863 660 31
Average price received on the sale of power
($/MWh) (1) 45.78 46.07 (1)
Alberta Power Pool average spot price
($/MWh) (1) 48.78 83.85 (42)
-------------------------------------------------------------------------
(1) Average for the period
/T/
The Energy Services segment generated net revenue of $9.8 million for the
first quarter of 2004 compared to $9.7 million for the same period in 2003.
In the first quarter of 2004 AltaGas had 453 megawatts of power capacity
which represents approximately 6 percent of Alberta's power capacity. Power
supply was 100 megawatts higher than first quarter of 2003 as a result of the
addition of the Genesee energy contract volumes on April 1, 2003.
Increases in revenues in this segment resulting from the additional volumes
were partially offset by higher transmission and interconnection charges from
Sundance B, outages at both the Sundance and Genesee plants during the first
quarter of 2004 and to true ups on transmission charges by the Alberta
Electric System Operator (AESO or the Operator - formerly the Transmission
Authority). AESO is entitled to recover or refund variances between revenues
collected through transmission charges and expenses incurred by the Operator
through true up adjustments calculated quarterly. For first quarter of 2004,
the adjustment resulted in a charge to income while in the first quarter of
2003 the adjustment was in AltaGas' favour.
AltaGas does not engage in speculative trading of power but reduces its
exposure to power price volatility by using a balanced portfolio of contracts
to lock in power margins. The average price AltaGas received from power sales
in the first quarter of 2004 was $45.78 per MWh compared to $46.07 per MWh in
the first quarter of 2003. Average Alberta Power Pool spot prices were $48.78
per MWh and $83.85 per MWh in the first quarters 2004 and 2003 respectively.
In this segment, the Corporation also reports the results of the oil and gas
production component and the gas services component. AltaGas is not in the
business of exploration and development of natural gas reserves. However,
associated with certain of its facility acquisitions, AltaGas has accumulated
a portfolio of oil and natural gas reserves that it continues to hold and
produce.
/T/
NATURAL GAS DISTRIBUTION
The Natural Gas Distribution segment includes AltaGas Utilities Inc.
(AltaGas Utilities or AUI), AltaGas' one-third interest in Inuvik Gas Ltd.
(Inuvik Gas) and its 24.9 percent interest in Heritage Gas Limited
(Heritage Gas).
Financial Results Three months ended
March 31
($ millions, unless otherwise noted) 2004 2003 % Change
-------------------------------------------------------------------------
Revenue 48.1 58.3 (17)
Net revenue(1) 9.7 10.6 (8)
Operating income(2) 3.9 5.2 (25)
-------------------------------------------------------------------------
(1) Gross revenue less cost of sales
(2) Gross revenue less costs of sales less operating and general and
administration expense and amortization
Operating Statistics(1) Three months ended
March 31
2004 2003 % Change
-------------------------------------------------------------------------
Volume of natural gas distributed
Sales (Bcf) 5.5 5.9 (7)
Transportation (Bcf) 3.0 1.9 58
Degree day variance (percent)(2) 2.0 9.2 (78)
Number of customers(3) 59,528 58,700 1
-------------------------------------------------------------------------
(1) AUI only
(2) Variance from 20 year average. Positive variances are favorable
(3) At March 31
/T/
In the first quarter of 2004, net revenue in AltaGas' Natural Gas
Distribution segment was $9.7 million compared to $10.6 million for the same
period in 2003. This decrease is due partially to warmer weather in 2004
compared to the first quarter of 2003 and to the impact of completion of
negotiations on AUI's general rate application filed with the Alberta
utilities regulator. AUI and Heritage Gas are provincially regulated as to
natural gas rates and terms and conditions of service. Customer rates are
based on anticipated sales as well as the revenue required to recover
estimated cost of service and an allowed return on rate base. Rate base
generally consists of the aggregate of the utility's approved investment in
plant, property and equipment in service, less accumulated deprecation plus
an allowance for working capital. Return on rate base is comprised of
regulatory allowed financing costs and return on common equity. The recent
negotiations resulted in final allowable rates for interest expense and
return on equity lower than AUI anticipated and a charge to net income of
$0.5 million in the first quarter of 2004 related to previously recorded 2003
results.
The natural gas distribution business is highly seasonal with the majority of
natural gas deliveries occurring during the winter heating season. Gas sales
during the winter typically account for approximately two-thirds of annual
distribution net revenue, resulting in strong first and fourth quarter
results and second and third quarters that show either small profits or
losses.
Net additions to capital assets in the Natural Gas Distribution segment were
$1.8 million during the quarter ended March 31, 2004 compared to $1.4 million
for the same period in 2003. Of the additions in 2004, $1.0 million were
related to costs associated with routine system betterment projects and new
business development.
LIQUIDITY
Funds generated from operations were $21.6 million in the first quarter of
2004 compared to $21.9 million for the same period in 2003.
In the first quarter of 2004 $16.5 million of the funds generated from
operations were used to acquire and expand facilities, up slightly from $9.1
million in the first quarter of 2003. AltaGas invested $2.2 million in the
first quarter of 2004 to acquire additional Taylor NGL Limited Partnership
units. Dividend payments in first quarter 2004 of $5.1 million were higher
than the first quarter 2003 payments of $3.6 million due to the strength and
sustainability of AltaGas earnings.
AltaGas reduces financing costs and minimizes the effect of future interest
rate movements on its cash flows through the use of interest rate swaps. The
total amount of debt with variable interest rates that was fixed through
interest rate swaps at March 31, 2004 was $230.0 million. At March 31, 2004
interest rates had been fixed on approximately 84 percent of the
Corporation's total debt, including the swaps and AltaGas' $100.0 million of
medium term notes.
CONTRACTUAL OBLIGATIONS
There have been no material changes to AltaGas' contractual obligations,
including payments due for each of the next five years and thereafter, since
December 31, 2003. For further information on these contractual obligations,
refer to Management's Discussion and Analysis in AltaGas' 2003 Annual Report.
CAPITAL RESOURCES
AltaGas believes that its access to debt and equity markets, unutilized bank
credit facilities and cash generated from operations will provide it with
sufficient capital resources and liquidity to fund existing operations,
future AltaGas Income Trust distributions, and certain acquisition and
expansion opportunities in 2004. A description of the AltaGas' credit
facilities can be found in Notes 7 and 8 to the consolidated financial
statements included in AltaGas' 2003 Annual Report.
The use of debt or equity funding is determined on the basis of capital
structure. AltaGas' capital structure is determined by considering the norms
and risks associated with each of its business components and segments.
AltaGas funds all subsidiary borrowings.
At March 31, 2004, AltaGas had total debt outstanding of $394.3 million,
compared to $396.9 million at December 31, 2003. This $2.6 million debt
reduction, after investing activities of $18.4 million and dividends of $5.1
million demonstrates the cash flow generation capability of AltaGas' assets.
AltaGas' debt to total capitalization ratio decreased to 51.5 percent at
March 31, 2004 from 52.2 percent at December 31, 2003. As an income trust,
AltaGas will continue to decrease debt as a proportion of its capital
structure and will target a debt to total capitalization ratio between 45
percent and 50 percent.
OFF BALANCE SHEET ARRANGEMENTS
The Corporation is not party to any contractual arrangement under which an
unconsolidated entity may have any obligation under certain guarantee
contracts, a retained or contingent interest in assets transferred to an
unconsolidated entity or similar arrangement that serves as credit, liquidity
or market risk support to that entity for such assets. The Corporation has no
obligation under derivative instruments, nor under a material variable
interest in an unconsolidated entity that provides financing, liquidity,
market risk or credit risk support to the registrant, or engages in leasing,
hedging or research and development services with the registrant.
RELATED PARTIES
On March 19, 2004 AltaGas purchased 320,000 units of Taylor NGL Limited
Partnership (Taylor) at a cost of $2.2 million. Taylor's business is the
ownership and operatorship of facilities in the midstream sector of the
Western Canadian natural gas industry including a fifty percent interest in
the Joffre ethane extraction plant. AltaGas owns the other 50 percent
interest in that plant. AltaGas' interest in Taylor after this purchase is
18.5 percent.
PROPOSED TRANSACTIONS
On April 29, 2004, AltaGas' shareholders voted in favour of reorganizing
AltaGas' business into an income trust. The Plan of Arrangement received
court approval on April 30, 2004 and was effective May 1, 2004. The AltaGas
Income Trust began trading on the Toronto Stock Exchange on May 5, 2004 under
the trading symbol ALA.UN. As a mutual fund trust, AltaGas Income Trust owns
AltaGas' business and will make regular monthly cash distributions to
unitholders.
On March 18, 2004, AltaGas announced that it had entered into a purchase and
sale agreement with BP Canada Energy Resources Company (BP) to acquire BP's
48 2/3 percent interest in the Edmonton Ethane Extraction Plant located at
Edmonton, Alberta for approximately $46 million. The transaction is expected
to close during the second quarter of 2004 after the receipt of provincial
government approval of the transfer of operator licenses to AltaGas.
CHANGES IN ACCOUNTING POLICY
Effective January 1, 2004, the Company prospectively adopted the provisions
of the CICA's new Accounting Guideline "Hedging Relationships" that specifies
the circumstances in which hedge accounting is appropriate, including the
identification, documentation, designation and effectiveness of hedges, and
the discontinuance of hedge accounting. The Company has determined the
effectiveness of the hedges are well above thresholds required in the
provisions and therefore there has been no impact on the consolidated
financial statements.
Also effective January 1, 2004, AltaGas retroactively adopted the provisions
of the CICA Handbook Section 3870 regarding stock based compensation and
other stock based payments, which results in expensing of stock options
granted to employees. Implementation of this Section resulted in a decrease
to the first quarter 2004 net income of $0.1 million and an adjustment to
shareholders' equity accounts of $0.5 million.
CRITICAL ACCOUNTING ESTIMATES
Since a determination of many assets, liabilities, revenues and expenses is
dependent upon future events, the preparation of the Company's consolidated
financial statements requires the use of estimates and assumptions which have
been made using careful judgment. AltaGas' critical accounting estimates
continue to be amortization expense, asset retirement obligations and asset
impairment assessment. For further information on these critical accounting
estimates, refer to Management's Discussion and Analysis in AltaGas' 2003
Annual Report.
FINANCIAL INSTRUMENTS
AltaGas enters into financial derivative contracts such as swaps and collars
to manage exposure to fluctuations in commodity prices particularly in the
power component and interest rates on debt. These contracts are designed as
hedges and gains and losses relating to such contracts are deferred and
recognized in the same period and financial statement category as the
corresponding hedged transaction.
The most significant impact of these contracts on 2004 business has been to
provide revenue stability in the power component. Power Pool monthly average
spot prices ranged in the first quarter of 2004 from $45.46 per MWh to $56.51
per MWh. Through the use of financial hedges on the portion of its portfolio
deemed optimal by management, AltaGas moderated the impact of this
volatility.
OUTSTANDING SHARE DATA
AltaGas common and preferred shares outstanding at March 31, 2004 were
45,927,793, up from 45,716,844 at December 31, 2003. The most significant
change during the period related to the issue of shares for cash on the
exercise of options. At March 31, 2003 45,331,342 common and preferred shares
were outstanding.
Under the terms of the restructuring of AltaGas into an Income Trust
effective May 1, 2004, AltaGas securityholders exchanged their shares in the
company for mutual fund trust units and eligible securityholders also
received exchangeable units that are exchangeable into mutual fund trust
units on a one for one basis. At May 1, 2004 a total of 45,928,293 units were
outstanding comprising 3,394,216 Limited Partnership No. 1 exchangeable
units, 8,866,009 Limited Partnership No. 2 exchangeable units and 33,668,068
mutual fund trust units. The mutual fund trust units trade on the TSX under
the symbol ALA.UN. The exchangeable units do not trade on the TSX.
Holders of limited partnership units issued under the reorganization are
reminded that in order to obtain tax-deferred treatment (in full or in part)
with respect to the transfer of your common shares of AltaGas Services Inc.,
there is a requirement to complete the applicable income tax election form(s)
and submit that form (or those forms) to Computershare Trust Company of
Canada within 90 days of May 1, 2004, as more particularly set forth in
Section 2.4 of the Plan of Arrangement attached as Schedule A to Appendix C
to the Information Circular and Proxy Statement of AltaGas Services Inc.
dated March 26, 2004.
/T/
ALTAGAS SERVICES INC.
CONSOLIDATED BALANCE SHEETS
($ thousands)
-------------------------------------------------------------------------
March 31 December
2004 31
(unaudited) 2003
-------------------------------------------------------------------------
ASSETS
Current assets
Accounts receivable $ 86,046 $ 88,463
Inventory 321 1,879
Other 1,569 5,806
-------------------------------------------------------------------------
87,936 96,148
Capital assets 683,741 677,911
Energy services arrangements and contracts 99,541 101,035
Goodwill 18,860 18,860
Future income taxes 207 208
Investments and other assets 26,991 25,098
-------------------------------------------------------------------------
$ 917,276 $ 919,260
-------------------------------------------------------------------------
-------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities $ 65,946 $ 74,726
Short-term debt 10,582 4,493
Other 8,491 7,857
-------------------------------------------------------------------------
85,019 87,076
-------------------------------------------------------------------------
Long-term debt 383,732 392,358
Asset retirement obligations 14,230 13,962
Future income taxes 63,058 62,537
-------------------------------------------------------------------------
461,020 468,857
-------------------------------------------------------------------------
Shareholders' equity
Share capital (note 3) 269,826 268,040
Contributed surplus (note 2) 468 -
Retained earnings 100,943 95,287
-------------------------------------------------------------------------
371,237 363,327
-------------------------------------------------------------------------
$ 917,276 $ 919,260
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See accompanying notes to the consolidated financial statements
ALTAGAS SERVICES INC.
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(unaudited)
($ thousands except per share amounts)
-------------------------------------------------------------------------
Three months ended
March 31
-------------------------------------------------------------------------
2003
(restated,
2004 note 6)
-------------------------------------------------------------------------
REVENUE
Operating $ 193,129 $ 203,456
Other 390 22
-------------------------------------------------------------------------
193,519 203,478
-------------------------------------------------------------------------
EXPENSES
Cost of sales 136,329 149,112
Operating and administrative 26,048 23,727
Amortization 9,990 9,762
-------------------------------------------------------------------------
172,367 182,601
-------------------------------------------------------------------------
Operating income 21,152 20,877
Interest expense
Short-term debt 107 697
Long-term debt 5,428 4,853
-------------------------------------------------------------------------
Income before income taxes 15,617 15,327
Income taxes 4,578 5,087
-------------------------------------------------------------------------
Net income 11,039 10,240
Retained earnings, beginning of period 95,287 74,256
Change in accounting policy (note 2) (332)
Dividends (5,051) (3,627)
-------------------------------------------------------------------------
Retained earnings, end of period $ 100,943 $ 80,869
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net income per share (note 3)
Basic $ 0.24 $ 0.23
Diluted $ 0.24 $ 0.22
See accompanying notes to the consolidated financial statements
ALTAGAS SERVICES INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
(unaudited)
($ thousands)
-------------------------------------------------------------------------
Three months ended
March 31
-------------------------------------------------------------------------
2003
(restated,
2004 note 6)
-------------------------------------------------------------------------
Cash from operations
Net income $ 11,039 $ 10,240
Items not involving cash:
Amortization 9,990 9,762
Accretion of asset retirement obligations 183 219
Stock option compensation (note 2) 136 -
Future income taxes 521 1,603
Loss on sale of assets and investments 77 2
Equity income (453) (24)
Other 65 136
-------------------------------------------------------------------------
Funds generated from operations 21,558 21,938
Decrease in deferred revenue and other - 7
Net change in non-cash working capital 2,613 8,792
-------------------------------------------------------------------------
24,171 30,737
-------------------------------------------------------------------------
Investing activities
Acquisition of capital assets (16,483) (9,074)
Disposition of capital assets - 196
Acquisition of energy services arrangements
and contracts (12) (14)
Acquisition of investments and other assets (2,173) (425)
Disposition of investments and other assets 300 1,480
-------------------------------------------------------------------------
(18,368) (7,837)
-------------------------------------------------------------------------
Financing activities
Decrease in operating loans (2,538) (19,945)
Dividends (5,051) (3,627)
Net proceeds from issuance of common shares (note 3) 1,786 672
-------------------------------------------------------------------------
(5,803) (22,900)
-------------------------------------------------------------------------
Change in cash - -
Cash, beginning of period - -
-------------------------------------------------------------------------
Cash, end of period $ - $ -
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See accompanying notes to the consolidated financial statements
SELECTED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
($ thousands except per share amounts or where otherwise noted)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The interim consolidated financial statements of AltaGas Services
Inc. (the Company) have been prepared by management in accordance with
Canadian generally accepted accounting principles. The accounting
policies applied are consistent with those outlined in the Company's
annual consolidated financial statements for the fiscal year ended
December 31, 2003, except as noted below in note 2. These interim
consolidated financial statements for the quarter ending March 31, 2004
do not include all of the disclosures required in the annual financial
statements, and should be read in conjunction with the audited
consolidated financial statements included in AltaGas' 2003 Annual
Report.
2. CHANGE IN ACCOUNTING POLICY
Effective January 1, 2004, the Company adopted the new Canadian
Institute of Chartered Accountants standard for accounting for
stock-based compensation ("Section 3870"), which requires the use of the
fair value method to account for stock options. Based on the
Black-Scholes option valuation model, stock options are valued at the
date of the grant and recognized as compensation expense over their
expected life.
This change in accounting policy has been adopted retroactively
without prior period restatement. In accordance with Section 3870, only
stock options issued on, or after, the initial adoption date of the
section are recognized in the financial statements. No compensation
expense is recorded for stock options issued and outstanding prior to
January 1, 2002. This change in accounting policy resulted in a
reduction of opening retained earnings for 2004 and a charge to income in
the first quarter of 2004 as presented below as increases (decreases) in
the affected categories of the Consolidated Balance Sheets and
Consolidated Statements of Income and Retained Earnings.
March 31
2004
-------------------------------------------------------------------------
Consolidated Balance Sheet
Contributed surplus $ 468
Opening retained earnings (332)
-------------------------------------------------------------------------
Consolidated Income Statement
Operating and administrative $ 136
-------------------------------------------------------------------------
-------------------------------------------------------------------------
3. SHARE CAPITAL
Authorized:
- an unlimited number of common shares without nominal or par value.
- an unlimited number of preferred shares without nominal or par value.
Number
Common Shares Issued: of Shares Amount
-------------------------------------------------------------------------
December 31, 2003 36,716,844 $ 179,076
Issued for cash on exercise of options 208,949 1,747
Issued for compensation 2,000 39
-------------------------------------------------------------------------
March 31, 2004 36,927,793 $ 180,862
-------------------------------------------------------------------------
Preferred Shares Issued: Number
of Shares Amount
-------------------------------------------------------------------------
December 31, 2003 and March 31, 2004 9,000,000 $ 88,964
-------------------------------------------------------------------------
Total shares issued 45,927,793 $ 269,826
-------------------------------------------------------------------------
The Company has an employee stock option plan under which both
employees and directors are eligible to receive grants. At
March 31, 2004 3,800,000 common shares were reserved for issuance under
the plan. To March 31, 2004 options granted under the plan generally had
a term of ten years to expiry and vested no longer than over a four year
period. Options outstanding under the plan have a weighted average
exercise price of $9.31 and a weighted average remaining contractual life
of 8.29 years.
Weighted
Average
Number Exercise
of Options Price
-------------------------------------------------------------------------
Stock options outstanding, December 31, 2003 1,506,362 $ 8.74
Granted 107,000 15.07
Exercised (208,949) 8.37
Cancelled (19,925) 7.24
-------------------------------------------------------------------------
Stock options outstanding, March 31, 2004 1,384,488 $ 9.31
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Exercisable at March 31, 2004 451,025 $ 7.53
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The basic number of shares outstanding for the three months ended
March 31, 2004 was 45.9 million (March 31, 2003 - 45.3 million) and the
diluted number of shares outstanding for the three months ended
March 31, 2004 was 46.6 million (March 31, 2003 - 45.7 million).
4. RELATED PARTY TRANSACTIONS
During 2003, AltaGas acquired a 19.2 percent interest in the
outstanding limited partnership units of Taylor NGL Limited Partnership
("Taylor") for total consideration of $18.1 million.
On March 18, 2004, AltaGas purchased an additional 320,000 limited
partnership units of Taylor for $2.2 million. The purchase resulted in a
dilution of AltaGas' ownership in Taylor to 18.5 percent and an
unrealized dilutive gain of $192 thousand.
5. SEGMENTED INFORMATION
AltaGas is a midstream energy company with a portfolio of assets and
services used to move energy from the source to the end-user. The
Company has three reportable segments:
Gathering and Processing - natural gas gathering and processing,
natural gas transmission, and ethane and natural gas liquids extraction.
Energy Services - power services, gas services and oil and natural
gas production.
Natural Gas Distribution - natural gas distribution to end users and
related services.
Natural Inter-
For the three Gathering Gas segment
months ended and Energy Distri- Elimi-
March 31, 2004 Processing Services bution nation Total
-------------------------------------------------------------------------
Revenue $ 44,692 $ 133,409 $ 48,129 $ (32,711) $ 193,519
Cost of sales (6,900) (123,649) (38,387) 32,607 (136,329)
Operating and
administrative
expenses (19,545) (2,332) (4,275) 104 (26,048)
Amortization (6,276) (2,132) (1,582) - (9,990)
-------------------------------------------------------------------------
Operating income $ 11,971 $ 5,296 $ 3,885 $ - $ 21,152
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net additions to
capital assets $ 12,107 $ 302 $ 1,845 $ 14,254
Segment assets $ 629,007 $ 154,126 $ 134,143 $ 917,276
-------------------------------------------------------------------------
-------------------------------------------------------------------------
For the three
months ended Natural Inter-
March 31, 2003 Gathering Gas segment
(restated, and Energy Distri- Elimi-
note 6) Processing Services bution nation Total
-------------------------------------------------------------------------
Revenue $ 43,367 $ 148,803 $ 58,274 $ (46,966) $ 203,478
Cost of sales (9,133) (139,121) (47,710) 46,852 (149,112)
Operating and
administrative
expenses (18,515) (1,551) (3,775) 114 (23,727)
Amortization (6,052) (2,168) (1,542) - (9,762)
-------------------------------------------------------------------------
Operating income $ 9,667 $ 5,963 $ 5,247 $ - $ 20,877
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net additions to
capital assets $ 5,270 $ 859 $ 1,395 $ 7,524
Segment assets $ 596,220 $ 176,680 $ 145,754 $ 918,654
-------------------------------------------------------------------------
-------------------------------------------------------------------------
6. COMPARATIVE FIGURES
Certain comparative figures have been reclassified to conform to the
current financial statement presentation. Prior periods have been
restated for the impacts of the December 31, 2003 adoption of CICA
Handbook Section on accounting for asset retirement obligations.
7. SEASONALITY
The natural gas distribution business is highly seasonal with the
majority of natural gas deliveries occurring during the winter heating
season. Gas sales during the winter typically account for approximately
two-thirds of annual gas distribution revenue, resulting in strong first
and fourth quarter results and second and third quarters that show either
small profits or losses.
8. SUBSEQUENT EVENTS
On April 29, 2004, AltaGas' shareholders voted in favour of
reorganizing AltaGas' business into an income trust. The Plan of
Arrangement received regulatory and court approvals on April 30, 2004 and
the Trust began trading on the Toronto Stock Exchange on May 5, 2004
under the trading symbol ALA.UN. As a new open-ended investment trust,
AltaGas Income Trust owns AltaGas' existing business and will make
regular monthly cash distributions to unitholders.
On March 18, 2004, AltaGas announced that it entered into a purchase
and sale agreement with BP Canada Energy Resources Company ("BP") to
acquire BP's 48 2/3 percent interest in the Edmonton Ethane Extraction
Plant located at Edmonton, Alberta for approximately $46 million. The
transaction is expected to close during the second quarter of 2004 after
receipt of the provincial government approval of the transfer of operator
licenses to AltaGas.
OTHER INFORMATION
FINANCIAL SUMMARY BY BUSINESS SEGMENT
($ millions ) Q1/04 Q4/03 Q3/03 Q2/03 Q1/03
-------------------------------------------------------------------------
Revenue
Gathering and Processing
Field gathering and processing 27.8 29.0 26.5 24.8 25.1
Extraction 10.4 10.3 8.8 8.6 12.1
Transmission 7.0 6.7 6.7 6.4 6.2
Intercomponent elimination (0.5) (0.5) (0.9) (0.5) (0.1)
Energy Services 133.4 125.1 114.1 121.1 148.8
Natural Gas Distribution(1) 48.1 34.7 12.9 23.5 58.3
Intersegment elimination (32.7) (26.3) (10.2) (15.3) (47.0)
-------------------------------------------------------------------------
193.5 179.0 157.9 168.6 203.4
-------------------------------------------------------------------------
Net revenue
Gathering and Processing
Field gathering and processing 27.8 29.0 26.5 24.8 25.1
Extraction 3.5 3.6 2.2 2.3 3.0
Transmission 7.0 6.7 6.7 6.4 6.2
Intercomponent elimination (0.5) (0.5) (0.9) (0.5) (0.1)
Energy Services 9.8 13.1 14.0 12.5 9.7
Natural Gas Distribution(1) 9.7 9.2 4.9 5.8 10.6
Intersegment elimination (0.1) (0.1) (0.1) (0.1) (0.1)
-------------------------------------------------------------------------
57.2 61.0 53.3 51.2 54.4
-------------------------------------------------------------------------
Operating income
Gathering and Processing 12.0 13.5 10.2 9.0 9.7
Energy Services 5.3 8.7 9.5 8.3 6.0
Natural Gas Distribution(1) 3.9 3.7 (0.5) 0.3 5.2
-------------------------------------------------------------------------
21.2 25.9 19.2 17.6 20.9
-------------------------------------------------------------------------
(1) Q2 and Q3 2003 financial results and natural gas distributed (Bcf)
reflect the normal lower seasonal demand for natural gas in the
Natural Gas Distribution segment.
Notes: Certain comparative figures have been reclassified to conform to
the current financial statement presentation.
AltaGas adopted CICA Handbook guidelines on asset retirement
obligations in 2003. Prior year information has been restated for
the effect of this adoption.
OPERATING SUMMARY BY BUSINESS SEGMENT
Q1/04 Q4/03 Q3/03 Q2/03 Q1/03
-------------------------------------------------------------------------
Gathering and Processing
Field gathering and processing
Processing capacity
(gross Mmcf/d) (1) 901 861 835 838 847
Processed throughput
(gross Mmcf/d) (2) 560 523 514 510 535
Capacity utilization
(percent) (1) 62 61 62 61 63
Average working interest
(percent) (1) 87 90 88 88 88
Extraction
Inlet capacity (Mmcf/d) (1) 349 349 349 349 349
Production (Bbls/d) (2) 9,047 8,182 5,440 6,195 6,416
Transmission volumes (Mmcf/d)
(2) (4) 396 403 347 321 319
Energy Services
Volume of power sold
(thousands of MWh) 863 873 872 861 660
Price received on the sale of
power ($/MWh) (2) 45.78 46.97 48.28 46.55 46.07
Average Alberta Power Pool prices
($/MWh) (2) 48.78 54.78 62.39 50.88 83.85
Natural Gas Distribution(5)
Customers 59,528 59,543 58,941 58,671 58,700
Volume of natural gas distributed
Sales (Bcf) (6) 5.5 4.5 1.3 2.1 5.9
Transportation (Bcf) 3.0 3.0 2.6 2.2 1.9
Degree day variance (percent) (3) 2.0 3.4 (5.9) 15.4 9.2
-------------------------------------------------------------------------
(1) At period end.
(2) Quarter average.
(3) Variance from 20-year average. Positive variances are favourable.
(4) Excludes condensate transmission volumes.
(5) Excludes Inuvik Gas Ltd. and Heritage Gas Limited operating
statistics.
(6) Q2 and Q3 2003 financial results and natural gas distributed (Bcf)
reflect the normal lower seasonal demand for natural gas in the
Natural Gas Distribution segment.
/T/
DIVIDENDS
On January 11, 2001 the Corporation declared its first quarterly cash
dividend per fully paid common share and participating share in the capital
stock of the Company, which was paid on March 31, 2001. No dividends were
paid on any shares of AltaGas from the date of its incorporation to the end
of December 2000. The following table summarizes AltaGas' dividend history.
/T/
(dollars) 2004 2003 2002 2001
-------------------------------------------------------------------------
First quarter $ 0.11 $ 0.08 $ 0.06 $ 0.03
Second quarter not applicable 0.08 0.06 0.03
Third quarter not applicable 0.11 0.08 0.06
Fourth quarter not applicable 0.11 0.08 0.06
-------------------------------------------------------------------------
$ 0.11 $ 0.38 $ 0.28 $ 0.18
/T/
On April 29, 2004, AltaGas announced that AltaGas Income Trust will commence
monthly distributions on June 15, 2004 to holders of Trust Units and holders
of Exchangeable Units of record on May 25, 2004. The amount of the
distribution will be $0.15 for each Trust Unit and each Exchangeable Unit.
Distribution levels will be reviewed periodically by the Board of Directors
giving consideration to AltaGas' growth-related initiatives, financial
position, financing requirements, cash flow and other relevant factors.
EARNINGS COVERAGE RATIO
The following table sets forth AltaGas Services Inc.'s earnings coverage
ratio which is provided in connection with its continuous offering of medium
term notes. The financial ratio has been calculated based on Canadian
generally accepted accounting principles.
/T/
March 31 December 31
2004 2003
-------------------------------------------------------------------------
Earnings coverage on short and long term debt 3.8x 3.8x
-------------------------------------------------------------------------
DEFINITIONS
Bbls/d barrels per day
Bcf billion cubic feet
Mmcf/d million cubic feet per day
MW megawatt
MWh megawatt-hour
Net revenue gross revenue less the costs of the purchase of natural gas
for resale and the costs to purchase power under power
purchase arrangements
/T/
When used in this report, the words "outlook", "anticipate," "estimate," and
similar expressions are intended to identify forward-looking statements. Such
statements are subject to certain risks, uncertainties and assumptions that
could cause actual results to differ materially from those contemplated in
the forward-looking statements. These risks and uncertainties include
operating performance, regulatory and environmental issues, weather and
economic conditions, competition and financing availability. For additional
information on these and other factors see the reports filed by AltaGas with
Canadian securities regulators. AltaGas disclaims any intention or obligation
to update or revise any forward looking information whether as result of new
information or future events.
Media:
Dennis Dawson
(403) 691-7534
Email: dennis_dawson@altagas.ca
or
Investment Community:
Marilyn Pfaefflin
(403) 691-7540
Email: marilyn_pfaefflin@altagas.ca
Website: www.altagas.ca