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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
Date of Report (Date of earliest event reported): February
18, 1998
CONSOLIDATED NATURAL GAS COMPANY
(Exact name of registrant as specified in its
charter)
Delaware 1-3196 13-
0596475
(State of incorporation) (Commission (IRS
Employer
File Number)
Identification No.)
CNG Tower, 625 Liberty Avenue, Pittsburgh, PA 15222-
3199
(Address of principal executive offices, including zip
code)
Registrant's telephone number, including area code: (412)
690-1000
Not Applicable
(Former name or former address, if changed since last
report.)
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ITEM 5. OTHER EVENTS
On February 17, 1998, Consolidated Natural Gas Company issued two
press releases concerning earnings, reserves, production and
other matters. Copies of these press releases are hereby
incorporated by reference and made a part of this filing as
Exhibits 1 and 2 hereto.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the
registrant has duly caused this report to be signed on its behalf
by the
undersigned hereunto duly authorized.
CONSOLIDATED NATURAL GAS
COMPANY
________________________________
(Registrant)
By D. M.
WESTFALL
______________________________
(D. M.
Westfall)
Senior Vice
President
February 18, 1998 and Chief Financial
Officer
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Exhibit 1
For further information: Cynthia Navadeh
412-690-1442
Consolidated Natural Gas Reports Record Earnings for 1997
Basic earnings per share: $3.21 in 1997 vs. $3.17 in 1996
Second year of record-setting results
Fourth quarter results also improve
PITTSBURGH, February 17, 1998 Consolidated Natural Gas
Company today reported record-setting financial results, with net
income of $304.4 million, or basic earnings per share of $3.21,
compared with $298.3 million, or $3.17, in 1996.
Diluted earnings per share were $3.15 in 1997, versus $3.13
in 1996.
In the fourth quarter of 1997, CNG had net income of $89.4
million, or basic earnings per share of 94 cents, compared with
$88.0 million, or 93 cents, a year earlier. Diluted earnings per
share were 92 cents in the 1997 fourth quarter, versus 91 cents a
year earlier.
Record production of oil and natural gas, along with
continued strict cost controls, were the major reasons for the
higher 1997 results. They more than offset the impact of warmer
weather and lower wellhead prices for oil and gas.
The 1997 results include a non-cash, after-tax charge of
$6.7 million, or 7 cents a share, in the fourth quarter to write
down a part of the cost of CNG's oil producing properties in
Canada. The write-down was caused by a significant decline in the
market prices for Canadian heavy oil production,
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and does not affect the company's properties in the United
States. CNG's 1996 results included special charges of $9.9
million after taxes, or 10 cents a share, related to workforce
reductions.
"Financially, 1997 was the best year in CNG's 55-year
history, topping the record set just the year before," said
George A. Davidson, Jr., chairman and chief executive officer.
"The exploration and production operations performed superbly,
contributing 26 percent of CNG's pretax operating income in 1997.
Our target for 1999 for this segment is $200 million in pretax
operating income.
"Our gas distribution and transmission companies in 1997
turned in the strong, stable performances we have come to expect,
continuing to focus on tough cost controls and improved
productivity measures. The energy marketing business is not yet
profitable, but has established itself as an important competitor
in a marketplace that is still growing and changing rapidly. CNG
Energy Services Corporation is the largest non-utility supplier
of energy to homeowners in the nation, with about 120,000
customers for competitively priced natural gas and electricity.
It has a similar number of customers for energy-related services,
making a total of some 235,000 retail customers."
CNG's operating revenues jumped by nearly $2 billion, to
$5.7 billion, in 1997. This reflects the fact that volumes of
natural gas sold and transported by the energy marketing segment
more than doubled in 1997. As is typical for businesses of its
kind, the energy marketing segment has high volumes and low
margins.
Results by Business Component
Here are the 1997 results for each of the companys four
business components:
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Exploration and Production
Pretax operating income for exploration and production was
$142.8 million in 1997, up 7 percent from $133.2 million a year
earlier. In the fourth quarter of 1997, pretax operating income
for exploration and production was $30.8 million, down from $43.5
million a year earlier. Both 1997 periods were affected by the
non-cash write-down of the Canadian oil producing properties, and
the fourth quarter also was affected by lower wellhead prices and
slightly lower gas production.
The biggest factor in the improved 1997 results was higher
production of both oil and natural gas. Oil production was up 53
percent, to a record 7.3 million barrels in 1997, mostly because
of Neptune, an oil project in the deep waters of the Gulf of
Mexico that began producing in March 1997. Production of natural
gas also increased, by 7 percent, to a record 155.3 billion cubic
feet. On a combined basis, CNG produced 199 billion cubic feet
equivalent of oil and natural gas, an all-time record, in 1997.
For the year as a whole, the higher production levels more
than compensated for declining prices. Mirroring market trends,
the average wellhead price for CNG's oil production in 1997 was
$16.07 a barrel, a decline of $1.53 from 1996, and the average
wellhead price for CNG's natural gas production was $2.43 a
thousand cubic feet, down 3 cents.
Further details of the company's exploration and production
operations are available in an accompanying news release.
Natural Gas Distribution
Pretax operating income for the company's four local gas
utilities was $266.6 million in 1997 compared with $258.4 million
in 1996. For the fourth quarter of 1997, pretax operating income
for this segment was $95.4 million,
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up from $82.5 million a year earlier. The results for both 1996
periods, however, included charges of $8.2 million for workforce
reductions.
Throughput the volume of gas sold and transported declined 1
percent in 1997, to 462.1 billion cubic feet. In the fourth
quarter, throughput increased 2 percent, to 141.8 billion cubic
feet.
Weather, a major factor in this segments results, was 1.9
percent colder than normal in 1997, but 4.3 percent warmer than
in 1996. The warmer weather countered some of the impact of lower
operation and maintenance expenses. In the fourth quarter of
1997, results were boosted by weather that was 2.2 percent colder
than a year earlier and cost controls.
Natural Gas Transmission
Pretax operating income for CNG's interstate gas pipeline
and storage component was $178.4 million in 1997, compared with
$178.8 million in 1996. For the fourth quarter, pretax operating
income for this segment was $39.7 million, down from $44.9
million a year earlier. Both 1997 periods were affected by a $5.8
million charge related to the company's withdrawal from a gas
storage development project.
Energy Marketing Services
CNG's unregulated energy marketing services segment had a
pretax operating loss of $17.1 million in 1997, versus a pretax
operating loss of $9.1 million in 1996. For the fourth quarter of
1997, energy marketing services had pretax operating income of
$2.2 million, versus a pretax operating loss of $1.3 million a
year earlier.
The higher operating loss in 1997 resulted mostly from the
establishment of reserves for pipeline settlements and
receivables. Lower gross margins and higher overhead costs also
contributed. The 1997 fourth quarter results
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reflect primarily more effective collection efforts and favorable
revisions of the pipeline and receivables reserves late in the
year.
Throughput for this part of the company was 856.4 billion
cubic feet of natural gas in 1997, an increase of 429.3 billion
from 1996. In the fourth quarter of 1997, throughput was 254.5
billion cubic feet, an increase of 130.6 billion. Electricity
marketed in 1997 totaled 25.2 million megawatt-hours, five times
the volume of 1996.
In addition, the energy marketing segment recorded a non-
operating charge of $7 million in 1997 for the write-down of the
carrying value of CNG's interests in four independent power
plants. This charge reduced overall results for this segment, but
did not affect its pretax operating loss.
Consolidated Natural Gas Company is one of the nations
largest producers, transporters and distributors of natural gas,
and offers energy marketing services throughout North America.
The company's natural gas transmission and distribution
operations serve customers in Ohio, Pennsylvania, Virginia, West
Virginia, New York and other states in the Northeast and Mid-
Atlantic regions. CNG explores for and produces natural gas and
oil in the United States and Canada. The company also selectively
participates in energy businesses abroad.
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Consolidated Natural Gas Company (CNG)
Years Ended December 31, 1997 1996
Total operating revenues $5,710,020,000
$3,794,309,000
Net income (A)$ 304,380,000 (B)$
298,273,000
Earnings per common share - basic (A)$3.21
(B)$3.17
Earnings per common share - diluted $3.15
$3.13
Average common shares - basic 94,868,000
94,076,000
Average common shares - diluted 100,460,000
99,215,000
Three Months Ended December 31, 1997 1996
Total operating revenues $1,850,090,000
$1,229,218,000
Net income (A)$ 89,366,000 (C)$
87,974,000
Earnings per common share - basic (A)$0.94
(C)$0.93
Earnings per common share - diluted $0.92
$0.91
Average common shares - basic 95,176,000
94,494,000
Average common shares - diluted 100,859,000
100,177,000
(A) Includes a non-cash charge related to the writedown of
Canadian oil producing properties amounting to $6.7 million after
taxes, or 7 cents a share (basic). Without this item, net income
would have been $311.1 million, or $3.28 a share (basic), in 1997
and $96.1 million, or $1.01 a share (basic), in the fourth
quarter.
(B) Includes special charges related to workforce reductions
amounting to $9.9 million after taxes, or 10 cents a share
(basic). Without this item, net income would have been $308.2
million, or $3.27 a share (basic), in 1996.
(C) Includes special charges related to workforce reductions
amounting to $7.8 million after taxes, or 8 cents a share
(basic). Without this item, net income would have been $95.8
million, or $1.01 a share (basic) in the fourth quarter of 1996.
CNG's recent news releases are available 24 hours a day on the
Internet, by fax machine, or by voice recording. On the
Internet, use CNG's web site: http://www.cng.com For faxing,
call 1-800-758-5804 on a touch-tone phone and enter CNG's
extension number, which is 203456. From a menu, you will then be
able to select releases that will be faxed to you immediately
without charge. For voice recordings, call 1-888-CNG-NEWS. This
line is toll-free.
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This press release contains forward-looking statements. The
company wishes to caution readers that the assumptions which form
the basis for forward-looking statements with respect to or that
may impact earnings for fiscal 1998, and thereafter, include many
factors that are beyond the company's ability to control or
estimate precisely, such as estimates of future market conditions
and the behavior of other market participants. Other factors
include, but are not limited to, weather conditions, economic
conditions in the companys service territory, fluctuations in
energy-related commodity prices, conversion activity, other
marketing efforts and other uncertainties.
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Exhibit 2
For further information: Dan Donovan
412-690-1370
CNG Provides Details For Record Production Year
Reserve additions over 150 percent of production for 4th straight
year
CNG ranked 4th in Gulf of Mexico deepwater production
Overall production up 15 percent from 1996
PITTSBURGH, February 17, 1998 Consolidated Natural Gas
Company, which has announced the highest pretax operating income
in its exploration and production segment since 1985, today gave
the following additional details about its 1997 exploration and
production operations.
Production for 1997 was 199 billion cubic feet equivalent
(Bcfe), a company record and an increase of 15 percent from 1996.
Both natural gas production (155 billion cubic feet) and oil
production (7.3 million barrels) were the highest for the company
since its inception in 1942. The company ranked 14th in Gulf of
Mexico production for the first six months of 1997, according to
a study by the James K. Dodson Company published in Offshore
Magazine. CNG was the fourth largest producer in water depths
over 1,500 feet, ranking behind Shell Deepwater Production, Inc.,
BP Exploration, Inc., and Mobil Exploration and Producing, Inc.,
according to the study.
"Record production, low per-unit costs and strong prospects
for the future are the reasons we have nearly doubled our
exploration and production capital budgets for the next five
years," said George A. Davidson, Jr., chairman and chief
executive officer. "Over the last five years, we have spent $1
billion. Over the next five years, we plan to spend $1.9
billion."
Production has increased 64 percent in the last two years,
and CNG has targeted another double-digit increase in 1998. CNG
expects a full year's production from Neptune, a deepwater
project in the Gulf of Mexico, which began to produce in March
1997. Neptune, where CNG has a 50 percent interest, is producing
near its facility capacity of 25,000 barrels of oil a day and is
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being adapted so it can handle 35,000 barrels of oil and 32
million cubic feet of natural gas a day.
Nautilus and Nemo, two projects in the Main Pass area of the
Gulf of Mexico, are expected to come on-line late in 1998.
Facilities at Nautilus are being constructed to handle 180
million cubic feet and 20,000 barrels a day, an increase over the
originally announced capacity for the two projects. CNG owns 65
percent of Nautilus, 100 percent of Nemo and is the operator of
both.
The company added 315 Bcfe to its reserves in 1997 through
additions, revisions and purchases, the highest since 1985 and
equaling 158 percent of production. Over the last four years,
CNG has replaced 170 percent of production. CNG now has close to
1.5 trillion cubic feet equivalent of reserves, an increase of
about 38 percent since the end of 1993. With increased capital
spending and continued success, the company expects reserves to
reach 2 trillion cubic feet equivalent by the end of 2002.
Finding and development costs of 88 cents per thousand cubic
feet equivalent (Mcfe) for 1997 reflected higher costs
experienced throughout the industry in 1997. The five-year
average finding and development costs for the years 1993 through
1997 is 80 cents per Mcfe. The five-year average excludes the
original 1992 booking of reserves for CNG's other deepwater
project, Popeye, but includes most of Popeyes costs. About 75
percent of CNG's 1997 capital was spent on offshore exploration
and production projects.
The company's depreciation, depletion and amortization
(DD&A) rate declined for the fifth straight year to 88 cents per
Mcfe. The DD&A rate has declined from $1.19 in 1992, including a
13-cent drop due to a write-down of producing properties in 1995.
CNG average lifting costs were 33 cents per Mcfe in 1997, as the
company continues to have one of the lowest in the industry.
Lifting costs remained low, despite increased industry
costs, said Pat Riley, president of CNG Producing Company.
"That's the result of the hard work, ingenuity and efficiency of
our talented staff."
A fourth-quarter 1997 write-down of the value of CNG's
Canadian properties resulted in a non-cash reduction of earnings
of $6.7 million, or 7 cents a share. The write-down was a result
of a significant decline in market prices for Canadian heavy oil
production late in the year. The Canadian
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properties comprise less than 3 percent of CNG's total oil and
gas reserves. The company's U.S. properties are not affected by
the write-down.
"I'm proud of the year we had in 1997, but there is still
more we can accomplish," Riley said. "In 1998, we plan to spend
60 percent of our capital budget on our bread-and-butter area,
the Continental Shelf of the Gulf of Mexico. We will spend about
20 percent on deepwater and another 20 percent onshore. Domestic
exploration remains a good opportunity for CNG."
Consolidated Natural Gas Company (CNG) is one of the
nation's largest producers, transporters, distributors and
marketers of natural gas, and offers a variety of energy
marketing services throughout North America. The company's
natural gas transmission and distribution operations serve
customers in Ohio, Pennsylvania, Virginia, West Virginia, New
York and other states in the Northeast and Mid-Atlantic regions.
CNG explores for and produces natural gas and oil in the United
States and Canada, and makes selective investments abroad.
CNG's recent news releases are available 24 hours a day on the
Internet, by fax machine, or by voice recording. On the
Internet, use CNG's web site: www.cng.com For faxing, call 1-
800-758-5804 on a touch-tone phone and enter CNG's company
extension, which is 203456. From a menu, you will then be able
to select releases that will be faxed to you immediately without
charge. For voice recordings, call 1-888-CNG-NEWS. This line is
toll-free.
This press release contains forward-looking statements. The
company wishes to caution readers that the assumptions which form
the basis for forward-looking statements with respect to or that
may impact earnings for fiscal 1998, and thereafter, include many
factors that are beyond the company's ability to control or
estimate precisely, such as estimates of future market conditions
and the behavior of other market participants. Other factors
include, but are not limited to, weather conditions, operational
risks associated with the exploration and production business,
fluctuations in energy-related commodity prices, and other
uncertainties.
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Summary of E&P Operations Statistics
Reserves (Bcfe)
At January 1, 1997 1,343
At December 31, 1997 1,445
Production
1997 1996
Gas (Bcf)
Non-regulated 155.3 144.5
Regulated 2.8 3.0
Total 158.1 147.5
Oil (000 Bbls)
Non-regulated 7,312 4,766
Regulated - -
Total 7,312 4,766
Average Wellhead Prices 1997 1996
(Non-regulated only)
Gas (per Mcf) $ 2.43 $ 2.46
Oil (per Bbl) $16.07 $17.60
Performance factors
1997 Reserve Replacement 158%
4-year Reserve Replacement 170%
1997 Finding Cost (per Mcfe) $0.88
5-year AverageFinding Cost (per Mcfe) $0.80
1997 Depreciation, Depletion
and Amortization (per Mcfe) $0.88
