Piedmont Natural Gas (PNY)

Q3 2012 Earnings Call

September 10, 2012 11:00 am ET

Executives

Nicholas Giaimo

Thomas E. Skains - Chairman, Chief Executive Officer and President

Karl W. Newlin - Chief Financial Officer and Senior Vice President

Analysts

Travis Miller - Morningstar Inc., Research Division

Spencer E. Joyce - Hilliard Lyons, Research Division

David E. Parker - Robert W. Baird & Co. Incorporated, Research Division

Presentation

Operator

Good day, and welcome to the Piedmont Natural Gas Third Quarter 2012 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the call over to Mr. Nick Giaimo. Please go ahead -- please begin, sir.

Nicholas Giaimo

Thank you, Rochelle. Good morning, everyone, and thank you for joining the Piedmont Natural Gas Third Quarter 2012 Earnings Conference Call. This call is open to the general public and is being webcast live over the Internet. If you would like to access the webcast of this call or view the slides of the accompanying presentation, please visit our website at piedmontng.com and choose the For Investors link. On the right hand side of that page, you'll find the appropriate links.

On the call today, presenting prepared remarks, we have Tom Skains, President, Chairman and Chief Executive Officer; and Karl Newlin, Senior Vice President and Chief Financial Officer. Other officers of the company are also in attendance to take your questions.

Finally, this call may include forward-looking statements and our actual results may materially differ from those statements. More information about the risks and uncertainties relating to these forward-looking statements may be found in Piedmont's third quarter 2012 Form 10-Q filed Friday, September 7, with the SEC.

And with that, I'll turn the call over to Tom.

Thomas E. Skains

Thank you, Nick. And good morning, everybody, and thank you for joining us for our third quarter 2012 earnings conference call. As you know, on Friday we filed our 10-Q and issued our third quarter earnings release. This morning, I'm going to talk about our recent accomplishments and provide you with a general update on the company. Then I'll turn the call over to Karl to give you a more detailed discussion of our third quarter financial results and our updated 2012 guidance.

Beginning with Slide 2. Due to the seasonal nature of our business, we typically experienced losses during the summer months that make up our third quarter. This quarter, we recorded a net loss of $4.6 million or $0.06 per diluted share, which was improved from a net loss of $8.7 million or $0.12 per share in the third quarter of 2011. We continue to be encouraged by customer growth in our service area. During the quarter, we added 2,670 new customers to our system and have added more than 8,700 customers year-to-date.

With the completion of our first 4 power generation delivery projects for Duke Energy, our focus this quarter has been on our fifth project for the Sutton facility. The Sutton project continues to progress on schedule, and I'll speak to it in more detail in just a moment.

Finally, on Friday, we reaffirmed our 2012 earnings per share guidance range of $1.58 to $1.68 per share. At the end of the first quarter, we directed investors towards the lower half of that range and confirmed that emphasis at the end of the second quarter.

Following this quarter, though, we're pointing back up to the middle of the range. Karl will provide you with more details in our guidance after my remarks.

Slide 3 shows our seasonal net loss of $4.6 million, which is more than $4 million improved from the third quarter of last year. Growth and margin and increased contributions from SouthStar and Cardinal and lower interest expense more than offset an increase in O&M expense.

On Slide 4, we've highlighted our gross customer additions for both the quarter and the year. As you can see, third quarter customer gains of 2,670 customers were 19% higher than the third quarter of last year. And for the year-to-date, we've added 8,728 customers, which is 21% improved from the same period in 2011.

We're encouraged that growth was across all categories and every quarter this year. We believe our growth trend reflects an improvement in the new construction markets in our service territory, and they certainly reflect the competitive pricing dynamics of natural gas compared to other fuels in our conversion markets. As a result, we anticipate modest continued improvements and customer growth.

Turning to Slide 5. As you know, in 2009, we introduced a portfolio of 5 power generation delivery projects to serve new combined-cycle natural gas power generation facilities in North Carolina, all now owned by Duke Energy. Those projects total more than $500 million of capital expenditures for our company. On our last call, I announced that we placed the Wayne County project into service on June 1, joining our other completed projects at Richmond County and at the Buck and Dan River facilities. With 4 projects behind us, our effort now is focused on the Sutton project, the largest of all of the projects. All major material had been received for that project that we broke ground last quarter. The project construction is going well, and Sutton remains on schedule for its targeted in-service date of June 2013.

With that, I'd now like to turn the call over to our Senior Vice President and Chief Financial Officer, Karl Newlin.

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