Sunday, June 24, 2018

OGE Doesn’t Let Earnings Shortfall Mar ‘Good Year’

By Tom Kleckner

OGE Energy CEO Sean Trauschke isn’t the kind of guy to let a 2-cent shortfall ruin his good nature.

OGE net income

OGE Energy CEO Sean Trauschke | OGE

“Hi, how are you?” he said, enthusiastically greeting one financial analyst after another during Thursday’s fourth-quarter earnings call, often engaging them in friendly chit-chat. Employees say that’s Trauschke’s ebullient style, calling him a “genuine guy.”

OGE reported net income of $57.9 million ($0.29/share) in the fourth quarter of 2016, compared to $29.4 million ($0.15/share) the year prior. Although that missed the Zacks consensus estimate of 31 cents/share, investors pushed the company’s stock price up $1.15 to $36.10/share by Friday’s close.

For the year, the company reported net income of $338 million ($1.69/share), compared to  $271 million ($1.36/share) in 2015.

“It was a good year, both operationally and financially,” Trauschke said. “We do have a lot of good things happening at our company and in our communities.”

Trauschke said OGE’s utility, Oklahoma Gas and Electric, added 9,000 customers during the year, just above its historical growth rate of 1%, while adding 100 MW of load. He said a rebound in oil and gas prices is increasing the state’s economic activity, pointing out that Oklahoma City’s unemployment rate stands at 4%.

The CEO attributed the increase in yearly earnings to a $114 million impairment taken in 2015 against Enable Midstream Partners, a gas gathering and processing joint venture with Texas’ CenterPoint Energy. OGE’s 26.3% ownership in Enable resulted in a $141 million cash contribution, up slightly from $139 million the year before.

“This is free, unencumbered cash flow for OGE to use for our capex programs and support dividend growth,” CFO Steve Merrill said.

Oklahoma Gas & Electric Switchyard | OGE

CenterPoint, the majority partner, has been looking to sell or spin off its 55.4% share of Enable. (See CenterPoint Abandons REIT Plan; Offers Stake in Gas Partnership to OGE.)

OGE, which has the right of first offer and the right of first refusal on CenterPoint’s stake, made another bid for it Feb. 15 with an unnamed partner. CenterPoint rejected an earlier OGE offer in September.

“Enable [has] great assets and prime locations,” Trauschke said. “We are excited about what the future holds.”

OG&E asked the Oklahoma Corporation Commission for a $69 million rate increase last summer. An administrative law judge in December recommended a $41 million increase, and a hearing was held before the OCC on Feb. 2.

“We are confident in our case and optimistic regarding the ultimate outcome,” Trauschke said.

OGE issued guidance of $1.93 to $2.09/share for consolidated earnings in 2017, assuming normal weather.

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