Heavy Costs Clog Piedmont Natural Gas in First-Quarter 2015, Full-Year Capex Reduced to $585 Million

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Researched by Industrial Info Resources (Sugar Land, Texas)--Despite a solid jump in customer growth in its service area, natural gas services provider Piedmont Natural Gas Company (NYSE:PNY) (Charlotte, North Carolina), which primarily serves North Carolina, South Carolina and Tennessee, saw lower revenues and higher operating costs in the first quarter of its 2015 fiscal year, including higher contract labor and payroll expenses. Net income was reported to be $92.98 million, a 4.71% decrease from first-quarter 2014.

As part of its growing Oil & Gas Pipelines Project Database, Industrial Info is tracking the development of Piedmont's $18 million natural gas compressor station in Pelzer, South Carolina. The facility, which will include a 2,200 hp engine-driven compressor gas package, will service a 1.5-mile pipeline that will transport up to 75 million standard cubic feet per day of natural gas to Duke Energy's (NYSE:DUK) (Charlotte, North Carolina) W.S. Lee generation facility, also in Pelzer. Industrial Info also is tracking progress at Piedmont-owned facilities in or near six North Carolina cities: Battleboro, Clayton, Concord, Elizabethtown, Lumberton and Waynesboro.

Total operating revenues stood at $607.27 million, a 7.67% decrease from first-quarter 2014. Although the company benefited from improving economic conditions in its three-state service area and saw a 15% increase in new customer additions, industrial and secondary-market margins were lower and temperatures were significantly colder than expected. Piedmont incurred higher operating expenses and lower contributions from Illinois-based SouthStar Energy Services, which it co-owns with AGL Resources Incorporated (NYSE:GAS) (Atlanta, Georgia).

"Income from joint ventures was $8 million during the first quarter, almost $2 million lower than 2014," said Karl W. Newlin , the chief financial officer and senior vice president of Piedmont, in a conference call. "This was a result of lower income at SouthStar Energy, due to lower value derivatives stemming from changes in natural gas prices, mainly lower, partially offset by increased AFUDC [allowance for funds used during construction] at Constitution [pipeline system]."

Higher depreciation expenses were attributed to an increase in plant-in-service costs. Still, margins improved from the same period last year, due to a lower cost of gas and new rates in North Carolina.

Piedmont executives expect full-year 2015's utility capital expenditures and contributions to joint-venture programs to total about $585 million, which is down from the $605 million estimate made at the end of the previous quarter. The company's customer growth rate is expected to be generally higher, at between 1.6% and 2%.

"In fiscal year 2015, our expected contributions [from the Constitution Pipeline and Atlantic Coast Pipeline joint ventures] have decreased, while they have increased for fiscal year 2016," said Thomas E. Skains , the chairman, president and chief executive officer, in the conference call. "This is a result of Constitution's revised construction and in-service schedule. We expect Constitution to begin construction this summer and put the pipeline in service during the second half of 2016. Constitution also has revised its total project cost estimate upward to $875 million, including AFUDC."

The Constitution Pipeline System, which will carry up to 650 million standard cubic feet per day of natural gas from northeastern Pennsylvania to New York and New England, is owned by subsidiaries of Williams Partners LP (NYSE:WPZ) (Tulsa, Oklahoma), Cabot Oil & Gas Corporation (NYSE:COG) (Houston, Texas), WGL Holdings Incorporated (NYSE:WGL) (Washington, D.C.) and Piedmont. For more information, see December 4, 2014, article - Constitution Natural Gas Pipeline Receives FERC Approval.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.