Monday, July 23, 2018

OGE, CenterPoint Earnings Calls Focus on Enable Midstream

By Tom Kleckner

CenterPoint Energy and OGE Energy both reported positive earnings Thursday, but company officials spent much of their time during conference calls with analysts discussing their gas-gathering and processing joint venture, Enable Midstream.

CenterPoint executives had promised an update during its call on efforts to sell or spin off its 54.1% share of the partnership. Instead, they could only say that a spinoff is no longer being considered because it would result in undesired credit metrics for the company. (See OGE Anticipates Legislative Review of Oklahoma Regulators.)

CenterPoint Energy lineman | CenterPoint Energy

“I’m hesitant to give another date in the future when hopefully this will be closed out,” CEO Scott Prochazka told analysts. “We hope to move this to conclusion pretty quickly.”

CenterPoint said multiple parties are conducting due diligence to potentially acquire shares of Enable but would not comment on the status. The Houston-based company last month extended another right of first offer to OGE.

“We would like to reduce our exposure to the oil and gas sector,” Prochazka said. “If we’re not able to affect an outright sale, we would like to lighten our ownership through a public sale.”

The process of “diluting” CenterPoint’s ownership share has been ongoing since last year.

“It’s admittedly taken longer than suspected,” CenterPoint CFO Bill Rogers said. “We took some time to get confidence in the forecasts over multiple years that we could then present to multiple buyers. Any potential purchaser wants to get comfortable with their partner.”

“My view is we’re both aligned around wanting Enable to do well,” OGE CEO Sean Trauschke said during the Oklahoma City-based company’s earnings call, which preceded CenterPoint’s. “We continue to be pleased with its performance. Enable is doing everything it was set up to do, and there is significant untapped value in this business, and we are excited for what the future holds.”

OGE holds a 25.7% limited-partnership interest and a 50% management interest in Enable.

Trauschke said OGE has received about $70 million in distributions from Enable this year and noted the company recently announced a second-quarter distribution of $35 million.

Enable Midsteam’s structure | Enable Midstream Partners

Formed in 2013, Enable’s assets include about 12,900 miles of gathering pipelines, 14 major processing plants with 2.5 Bcfd of processing capacity, 7,800 miles of interstate pipelines, 2,200 miles of intrastate pipelines and eight storage facilities with 85 Bcf of storage capacity.

Enable was trading at $15.42/share Friday, up just over 20% in the last year.

Q2 Earnings Beat Investors’ Expectations

Quarterly earnings at both OGE and CenterPoint exceeded investors’ expectations.

OGE said lower operating expenses resulted in net income of $104.8 million ($0.52/share), up from $72 million ($0.35/share) a year ago. Analysts surveyed by Zacks Investment Research had predicted earnings of 47 cents/share.

OGE expects full-year earnings to be between $1.93 and $2.09/share.

Investors reacted to the news Thursday by pushing OGE’s share prices up 66 cents to $36.01 in after-hours trading. The stock is up 15.4% in the last year.

“I’m proud we aren’t talking about surprises: surprises like delays, cost overruns,” Trauschke said. “Quite simply, we’re getting things done in an environment where we don’t necessarily control variables like the weather or actions of others.”

CenterPoint reported net income of $125 million ($0.29/share), up from $73 million ($0.17/share) last year. The company attributed the good news to rate increases and customer growth.

Zacks’ analyst survey had projected earnings of 21 cents/share.

CenterPoint shares gained 83 cents Thursday, finishing at $28.47 after the market closed.