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OGE Energy Posts Q3 Earnings Beat

Zacks Equity Research

OGE Energy Corp. (OGE), a distributor of natural gas and electricity primarily in the south central United States, reported third quarter 2013 earnings of $1.08 per share, surpassing the Zacks Consensus Estimate of 93 cents and the year-ago figure by 14.9%.

The upswing in the bottom line reflects sizeable returns from the company’s transmission projects and customer growth, partially offset by a cooler summer.

Oklahoma Gas and Electric Company (“OG&E”), a division of OGE Energy, contributed earnings of 86 cents per share in the reported quarter, up from 84 cents in the year-ago quarter.

OGE Energy's interest in natural gas midstream operations contributed earnings of 23 cents per share compared with earnings from Enogex of 9 cents per share in the year-ago quarter.

The results take into account the split in the company’s stock price (2 new shares for 1 old share) that came into effect on Jul 1, 2013.

Operational Highlights

OGE Energy’s operating revenues in the third quarter declined 35% year over year to $723.2 million. This was chiefly attributable to lower residential and off-system sales.

Sales of electricity to residential customers were 2.9 megawatt-hour (:MWH) versus 3.2 MWH in the year-ago period. Sales to commercial customers were 2.0 MWH versus 2.1 MWH in the year-ago quarter. Sales to industrial customers were 1.1 MWH versus 1.0 MWH in the year-ago period.

OGE Energy’s consolidated gross profit was $450.2 million in the reported quarter, down 21.5% from the year-ago quarter.

Total operating expenses in the quarter under review slipped 29.8% year over year to $189.3 million. Operating income of $260.9 million declined 14.2% year over year.

In May 2013, OGE Energy, CenterPoint Energy Inc. (CNP), and ArcLight Capital Partners, LLC sealed their ambitious midstream partnership, Enable Midstream Partners, the governance of which will be shared by CenterPoint Energy and OGE on an equal basis. OGE Energy holds a 28.5% limited partner interest and 50% general partner interest in Enable Midstream Partners, LP.

Natural Gas Midstream Operations recorded an equity income of $46 million for the third quarter of 2013 compared with $18 million in the corresponding year-ago period.


OGE Energy increased its consolidated earnings guidance for 2013 to the range of $1.80 to $1.90 per average diluted share from the earlier range of $1.68 to $1.80 per average diluted share. The guidance primarily considers the accretive impact of the formation of Enable Midstream Partners.

Other Releases

Edison International (EIX) announced adjusted earnings of $1.42 per share for the third quarter of 2013, well ahead of the Zacks Consensus Estimate of $1.21 by 17.4%.

NiSource Inc. (NI) posted operating earnings from continuing operation of 18 cents per share in the third quarter of 2013, in line with the Zacks Consensus Estimate.

Our Take

The buoyant economy in Oklahoma will continue to help expand the company’s customer footprint. In addition, OGE Energy’s aggressive investments in alternative energy will spur its future growth momentum given the current pro-environment drive in the U.S.

The company will capitalize on its midstream capabilities given robust gas production in Oklahoma and the Texas Panhandle region. Presently, OGE Energy retains a short-term Zacks Rank #2 (Buy).

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