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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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) JUNE 24, 1998
MCN ENERGY GROUP INC
(Exact name of registrant as specified in its charter)
MICHIGAN 1-10070 38-2820658
State of Incorporation (Commission File (I.R.S. Employer
Number) Identification No.)
500 GRISWOLD STREET, DETROIT, MICHIGAN 48226
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(313) 256-5500
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Item 5. OTHER EVENTS
On June 24, 1998 MCN Energy Group Inc. issued the following press releases:
MCN ENERGY GROUP APPOINTS MCNIC PRESIDENT, CEO
Detroit, June 24, 1998 - MCN Energy Group Inc. (NYSE-MCN) today said Joseph T.
Williams has been appointed president and chief executive officer of MCN
Investment Corporation (MCNIC), replacing Rai Bhargava, who has resigned to
pursue personal entrepreneurial interests.
"Joe was brought on board a year ago to lead our oil and gas unit," MCN
Chairman, President and CEO Alfred R. Glancy III said. "He has been in the
energy business 38 years and has top management experience at several large
companies, overseeing both domestic and international operations. He has a
solid background and now will lead a talented team of people who have developed
and continue to refine MCNIC's broad portfolio of energy-related projects."
Williams was appointed president and CEO of MCNIC's oil and gas
subsidiary in July 1997. He continues to hold those titles in his new role.
Williams began his career with The California Company (Chevron) upon graduation
in 1960 from The University of Texas at Austin with a Bachelor of Science
degree in petroleum engineering. He remained with various Chevron affiliates
in areas of increasing responsibility for 18 years, half of which were spent in
overseas assignments, including Saudi Arabia and the United Kingdom. In 1978,
he joined Mitchell Energy & Development Corporation in Houston, where he served
as president of the administrative division and, earlier, as senior vice
president of planning and acquisition. In 1981, he founded Sovran Energy
Corporation in Houston. In 1983, he joined Lear Petroleum Corporation in
Dallas, where he eventually became president, CEO and chairman. Williams
accepted the position of president and CEO of Dalen Resources Corporation (a
subsidiary of PG&E Enterprises) in 1989, and became vice chairman and CEO of
Dallas-based Enserch Exploration upon its purchase of Dalen from PG&E in 1995.
Glancy noted that Bhargava brought Williams into the organization last
year because of his leadership capabilities and extensive energy-related
experience.
"Rai built a highly capable team that has implemented a successful
portfolio-management strategy since 1992," Glancy said. "We are grateful for
Rai's many contributions to MCN's growth, and wish him well in his future
endeavors."
MCN Energy Group Inc. is a diversified energy holding company with more than $4
billion of assets, and with markets and investments throughout North America and
in Asia. The company operates through two major business groups: Diversified
Energy, operating through MCN Investment Corporation, is involved in oil and
gas exploration and production, natural gas gathering, transmission,
processing and storage, energy marketing, electric power generation and
distribution, and other energy-related businesses; Gas Distribution consists
principally of Michigan Consolidated Gas Company, a natural gas distribution
and transmission company serving 1.2 million customers in more than 500
communities throughout Michigan. Information about MCN Energy Group is
available on the World Wide Web at http://www.mcnenergy.com.
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MCN ENERGY GROUP SEES SECOND-QUARTER CHARGE,
REFOCUSES E&P STRATEGY, UPDATES EARNINGS EXPECTATIONS
Detroit, June 24, 1998 -- MCN Energy Group Inc. (NYSE:MCN) today said it
expects to incur an after-tax charge to earnings for the second quarter of up
to $225 million, primarily due to the impact of low oil and gas prices on its
exploration and production (E&P) business and the under-performance of certain
exploration properties. Substantially all of the charge will be non-cash.
SECOND-QUARTER CHARGE
"The energy price issue is an industry-wide phenomenon," MCN Chairman,
President and CEO Alfred R. Glancy III said. "Full-cost-accounting E&P
companies such as ours are being hit particularly hard because the Securities
and Exchange Commission requires oil and gas reserves to be valued at current
or contract prices at the end of each quarter. This 'ceiling test' sets a low
value on the reserves based on a temporary plunge in energy prices, rather than
reflecting the actual anticipated long-term value of those reserves."
The exact charge to earnings will be determined following the quarter's
close, largely influenced by oil and gas prices at that time, Glancy said.
"The write-down we expect to take for the second quarter will allow MCN
to finish 1998 in position to resume a steady pace of earnings growth," he
said.
Glancy said a key issue being addressed by the anticipated write-down
is lower-than-expected exploratory drilling results in the company's
Midcontinent/Gulf Coast region.
"After completing a comprehensive review of our E&P operations, we have
concluded that we should return to our original, lower-risk strategy," Glancy
said.
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REFOCUSED E&P STRATEGY
Glancy said that, stemming from the review, the company is undertaking
a restructuring of its E&P unit, with the intent of exiting the exploratory part
of the business. "We have an attractive inventory of exploration properties
that will require some additional investment as we carefully move out of this
higher-risk area. We will be divesting these properties because they don't fit
our risk profile," he said.
"Moving forward, we intend to focus on projects such as our existing
Antrim shale, coalbed methane and conventional development drilling," he said.
"These plays provide both quick and consistent cashflows and earnings. We will
continue to look for new investment opportunities in such lower-risk areas, as
well as build upon our current holdings."
Glancy said that, as a result of the refocused E&P activities, capital
investments in the E&P business for each 1998 and 1999 will be approximately
half the previous year's level of $375 million.
"We will continue our overall strategy of growing through a diversified
portfolio approach," he said. "Capital investments are expected to be strong
in all of our businesses. As always, we will manage this portfolio with the
intent of maximizing shareholder value, which entails relatively frequent
acquisitions and divestitures of assets. Furthermore, we remain committed to
sharing earnings growth with shareholders by periodically increasing our
dividend and using the balance to help fund new investments."
LOWER EARNINGS EXPECTATIONS
Glancy said the company's diversified portfolio of energy-related
projects, as well as the continued excellent performance of its Michigan
Consolidated Gas subsidiary, is expected to help it overcome the E&P issues and
resume earnings growth. However, the company is no longer comfortable with
analysts' earnings expectations for both 1998 and 1999 due to lower anticipated
capital investments and reduced gas and oil production.
"Excluding the impact of the planned second-quarter charge, we now
expect 1998 earnings to be approximately 10 percent to 15 percent below last
year's $1.91 per share," he said. "We expect earnings to recover to a range of
at least $2 to $2.10 per share for 1999, assuming a return to normal weather
and contributions from coal fines tax credits."
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COAL FINES PROJECT UPDATE
On the subject of the coal fines project, Glancy said the company is in
the process of starting up operations. "We are working on a tight schedule but
remain optimistic of having all six plants in service by the June 30 deadline,"
he said. "Obviously, with only a few days remaining until the deadline,
there is still a risk that we will not have all the plants in service in time."
The coal fines project will recover particles of coal that have been a
waste-product of the mining process, producing briquettes that are expected to
qualify for Section 29 "synthetic fuel" tax credits.
MCN Energy Group Inc. is a diversified energy holding company with more than $4
billion of assets, and with markets and investments throughout North America
and in Asia. The company operates through two major business groups: Diversified
Energy, operating through MCN Investment Corporation, is involved in oil and
gas exploration and production, natural gas gathering, transmission, processing
and storage, energy marketing, electric power generation and distribution,
and other energy-related businesses; Gas Distribution consists principally of
Michigan Consolidated Gas Company, a natural gas distribution and transmission
company serving 1.2 million customers in more than 500 communities throughout
Michigan. Information about MCN Energy Group is available on the World Wide Web
at http://www.mcnenergy.com.
Statements included in this news release that are not historical in nature are
forward-looking within the meaning of the Private Securities Litigation Reform
Act of 1995. These statements involve certain risks and uncertainties that may
cause actual future results to differ materially from those contemplated,
projected, estimated or budgeted in such forward-looking statements. A
discussion of these risks and uncertainties is included in the company's
periodic reports filed with the Securities and Exchange Commission.
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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.
MCN ENERGY GROUP INC.
By /s/ Sebastian Coppola
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Sebastian Coppola
Senior Vice President and Treasurer
Date: June 25, 1998
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