atmos enerrgy aga2008

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atmos enerrgy aga2008

  1. 1. AGA Financial Forum Robert W. Best Chairman, President & CEO May 6, 2008 Forward Looking Statements The matters discussed or incorporated by reference in this presentation may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact included in this presentation are forward-looking statements made in good faith by the company and are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. When used in this presentation or in any of our other documents or oral presentations, the words “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “objective,” “plan,” “projection,” “seek,” “strategy” or similar words are intended to identify forward-looking statements. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those discussed in this presentation, including the risks relating to regulatory trends and decisions, our ability to continue to access the capital markets, and the other factors discussed in our filings with the Securities and Exchange Commission. These factors include the risks and uncertainties discussed in our Annual Report on Form 10-K for the fiscal year ended September 30, 2007 and in our Quarterly Report on Form 10-Q for the three and six months ended March 31, 2008. Although we believe these forward-looking statements to be reasonable, there can be no assurance that they will approximate actual experience or that the expectations derived from them will be realized. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Further, we will only update earnings guidance through our quarterly and annual earnings releases. All estimated financial metrics for fiscal year 2008 and beyond that appear in this presentation are current as of the date noted on each relevant slide. 2
  2. 2. Overview Company Profile The nation’s largest pure-gas distribution company Solid financial foundation Track record of creating shareholder value • Consistent earnings growth • 24 consecutive years of increasing dividends Focused strategy over time • Grow through prudent acquisitions • Maximize core regulated earnings capability • Complement core regulated businesses through select nonregulated operations 3 Overview Expanding Footprint Promotes Annual EPS Growth of 4 - 6%, on average Regulated gas distribution operates in 12 states (gold) Nonregulated operates primarily in the Midwest & Southeast (gray) 4
  3. 3. Overview Diluted Earnings Per Share Contribution Shows Steady Growth 6.1% $1.95-$2.05 CAGR $1.92 $2.10 $1.82 $1.72 $1.58 $1.80 0.55-0.59 0.69 Nonregulated 0.34 $1.50 0.84 Operations 0.42 $1.20 Regulated Operations $0.90 1.40-1.46 1.38 1.23 $0.60 1.16 0.98 $0.30 $0.00 2004 2005 2006 2007 2008E 5 Overview Annual Dividend Remains Steady $1.30E $1.40 $1.20 $1.00 $0.80 $0.60 $0.40 $0.20 $0.00 '8 '8 '8 '8 '8 '8 '9 '9 '9 '9 '9 '9 '9 '9 '9 '9 '0 '0 '0 '0 '0 '0 '0 '0 '0 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 Note: Amounts are adjusted for mergers and acquisitions. For fiscal 2008, $1.30 is the indicated annual dividend. 6
  4. 4. Overview Financial Metrics Continue to Improve 2 1 Return on Invested Capital (ROIC) Times Interest Earned Ratios 3.5 18.0% 16.4% 3.00 3.05 15.5% 16.0% 3.0 2.75 2.75 14.5% 14.4% 2.59 2.55 2.55 14.0% 2.5 13.1% 12.7% 12.0% 2.0 10.0% 1.5 2003 2004 2005 2006 2007 5 Yr Avg 2002 2003 2004 2005 2006 2007 2008E Weighted Average Cost of Debt Debt Capitalization Ratio 8.0% 65 7.4% 60.9% 6.9% 59.3% 7.0% 60 6.4% 6.1% 6.1% 6.0% 5.9% 55 6.0% 53.6% 5.6% 53.7% 50 5.0% 45 43.3% 4.0% 40 2003 2004 2005 2006 2007 3.0% 2001 2002 2003 2004 2005 2006 2007 2008E (1) ROIC - Return on invested capital is calculated using the following GAAP financial measures: Income before interest expense and income taxes plus common stock dividends paid, divided by the average of the year’s beginning and ending long-term debt plus common equity. This measure is used to more precisely evaluate operational performance and management effectiveness. (2) The times interest earned ratio measures the ability to satisfy annual interest costs. 7 Overview Investment Grade Credit Ratings Allow Financial Flexibility Moody’s Rating Senior Unsecured Debt: Baa3 Commercial Paper: P-3 Outlook: stable Standard & Poor’s Senior Unsecured Debt: BBB Commercial Paper: A-2 Outlook: positive Fitch Senior Unsecured Debt: BBB+ Commercial Paper: F-2 Outlook: stable 8
  5. 5. Regulated Operations Atmos Energy Corporation Atmos Energy Corporation (Regulated Operations) (Regulated Operations) Atmos Energy Holdings, Inc. Atmos Energy Holdings, Inc. Gas Distribution Divisions Gas Distribution Divisions Transmission & Storage (Nonregulated Operations) Transmission & Storage (Nonregulated Operations) Colorado-Kansas Colorado-Kansas Atmos Energy Marketing Atmos Energy Marketing Kentucky/Mid-States Kentucky/Mid-States • • Marketing Marketing • • Asset Optimization Asset Optimization Louisiana Louisiana Atmos Pipeline, Storage Atmos Pipeline, Storage Mid-Tex Mid-Tex and Other and Other • • Non-Texas Assets (Storage & Pipeline) Non-Texas Assets (Storage & Pipeline) Mississippi Mississippi • • Midstream Midstream • • Other Other West Texas West Texas Atmos Pipeline -Texas Atmos Pipeline -Texas 9 Regulated Natural Gas Distribution Profit Drivers in the Distribution Business Regulated Gas Distribution Operates in 12 States (gold) Customer and meter growth Growing rate base Managing costs Executing our rate strategy 10
  6. 6. Regulated Natural Gas Distribution Successfully Executing on the Rate Strategy GRIP/ Purchased Accelerated Decoupling/ Gas Cost Number of Percentage Gas Cost Capital Rate Bad Debt Customers of Total Adjustments WNA Recovery Stabilization Recovery 4, 6 6 1,800,000 Partial Texas 57% Partial Louisiana 350,000 11% Mississippi 270,000 8% Remaining 1 2 3 5 Jurisdictions 770,000 24% Partial Partial Partial Partial means applicable within certain jurisdictions within the category. 1 Excludes Colorado, Iowa and Illinois for a total of 137,657 customers. 2 Includes Missouri, Kansas and Georgia for a total of 258,102 customers. 3 Includes Missouri for a total of 59,672 customers. 4 Includes Amarillo for a total of 69,772 customers. 5 Includes Kansas and Virginia for a total of 151,545 customers. 6 Includes Mid-Tex Division customers residing in cities covered by settlement agreements. 11 Regulated Operations Recent Regulatory Activity Aids Margin Growth Mid-Tex – pending rate case • Settlement agreement reached with all major parties, except City of Dallas • Includes an initial increase of $10 million on a systemwide basis, effective April 1, 2008 • Rate review mechanism (RRM) effective for a three-year trial period – initial filing of $33.5 million made on April 14, 2008, with implementation Oct. 1st • Proposal for decision on City of Dallas appeal is expected May 16th with final decision scheduled for June 27th Louisiana – pending annual rate stabilization filings • Filed for approximately $2.6 million in March 2008 for LGS jurisdiction • Approved $2.1 million increase for Trans La jurisdiction, effective April 1, 2008 Kansas – pending rate case • Filed for $5 million in September 2007 • Tentative $2.1 million settlement with staff, final order expected May 2008 Georgia – pending rate case • Filed for over $6 million in March 2008, decision expected September 2008 • Forward-looking filing with test year ending March 30, 2009 Atmos Pipeline - Texas – 2007 GRIP filing for revenue increase of approximately $7.0 million implemented on April 15th 12
  7. 7. Regulated Operations Approved Annual Rate Increases in the Regulated Operations $60.0 $50 - $60 $50.0 $40.1 ($ Millions) $39.0 $40.0 2.9 1.4 $30.0 25.6 $18.6 34.3 $20.0 $16.2 2.8 5.7 $10.0 $6.3 15.8 11.6 1.8 10.5 4.5 3.3 $0.0 2003 2004 2005 2006 2007 2008-2012E Annual Mechanism GRIP General Rate Case Aggregate 13 Regulated Transmission and Storage Strategically Positioned Atmos Pipeline –Texas Favorably positioned; spans Texas gas supply basins and growing consumer market Pipeline Operations • Connects to major market hubs- Waha, Katy and Carthage • 6,300 miles of intrastate pipeline • Estimated transportation volume of 740 Bcf in fiscal 2008 • Current average volume of approximately 2.0 Bcf/d • Demonstrated peak day deliveries of 3.5 Bcf/d Five Storage Facilities • One salt cavern, four reservoirs West Texas Division • 39 Bcf working gas capacity • 1.2 Bcf/d maximum withdrawal Mid-Tex Division • 270 MMcf/d maximum injection Atmos Pipeline-Texas Atmos Energy Headquarters 14
  8. 8. Regulated Transmission and Storage Atmos Pipeline – Texas Growth Drivers 735-745 699 750 Growth Drivers Transportation Volumes 581 555 600 Pursue capacity and 547-550 compression growth 505 450 (Bcf) 411 opportunities 374 300 Increased through-system 150 1188-195 194 volumes primarily from 181 170 producers in Barnett Shale 0 2005 2006 2007 2008E Margin expansion through Mid-Tex Division Third Party ancillary services such as 200 172-177 parking and lending, balancing, 163 Margin Composition 175 blending, and compression 141 138 150 ($millions) 78-81 Gas price volatility increasing 78 125 64 60 basis differentials between 100 Texas hubs 75 94-96 85 50 78 77 25 0 2005 2006 2007 2008E Tariff Based Market Based 15 Regulated Transmission and Storage Barnett Shale y alle on V Cott sier Bos s d San Permian Location of gas supply basins 16
  9. 9. Nonregulated Operations Organization Structure Atmos Energy Corporation Atmos Energy Corporation (Regulated Operations) (Regulated Operations) Atmos Energy Holdings, Inc. Atmos Energy Holdings, Inc. Gas Distribution Divisions Gas Distribution Divisions Transmission & Storage (Nonregulated Operations) Transmission & Storage (Nonregulated Operations) Colorado-Kansas Colorado-Kansas Atmos Energy Marketing Atmos Energy Marketing Kentucky/Mid-States Kentucky/Mid-States • • Marketing Marketing • • Asset Optimization Asset Optimization Louisiana Louisiana Atmos Pipeline, Storage Atmos Pipeline, Storage Mid-Tex and Other Mid-Tex and Other • Non-Texas Assets (Storage & Pipeline) • Non-Texas Assets (Storage & Pipeline) Mississippi • • Midstream Mississippi Midstream • • Other Other West Texas West Texas Atmos Pipeline -Texas Atmos Pipeline -Texas 17 Nonregulated Operations Atmos Energy Marketing Customers (gray states) About 1,100 customers Target market is Atmos Energy’s natural gas distribution footprint Focus on areas where we manage, lease or own storage and transportation assets Regional offices allow for more direct customer access 18
  10. 10. Nonregulated Operations Business Mix Core Business Core Business Business Opportunities Asset Optimization Mid-Stream Development Delivered Gas Business Extract (optimize) the value of Aggregate & Purchase Gas Gather, process and store Services owned, leased or managed Supply, Transport, producer volumes for storage and transportation Storage/Load Balancing, downstream delivery to assets as markets provide Risk Management and other markets. opportunities via price bundled services volatility Capture additional value of Develop or acquire gathering, Strategy Find cost effective sources storage and transportation processing or storage assets of gas and deliver to assets thru arbitrage and that will provide steady, customers reliably and at a segmenting strategies, predictable income and support competitive price. within risk limits. marketing opportunities. Provide creative solutions Expand leased storage and Reduce gas costs through and services to meet transportation capacity thru value-added services provided customers gas requirements new customer relationships to producers. More predictable margins Variable margins, with upside. Stable, fee-based income. Margins from primarily 90 day to 365 Driven by gas price volatility Driven by gathering, day contracts creating arbitrage potential, processing, and storage Driven by customer demand physical storage capabilities, services. for gas volumes, services costs and available storage and competition. and transport capacity. 19 Nonregulated Operations Atmos Energy Marketing – Margin Composition 2008E Impacted by customer volume demand Sales prices are: Delivered Gas Delivered Gas • Cost plus profit margin 60% - 70% • Cost plus demand charges (Bundled gas deliveries & (Bundled gas deliveries & peaking sales) peaking sales) Margins: More predictable Impacted by gas price spread values in the market (arbitrage opportunity) & MTM accounting treatment Physical storage capabilities Asset Optimization 30% - 40% Asset Optimization Available storage and transport capacity (Storage & transportation • 12.9 Bcf proprietary contracted capacity (Storage & transportation management) • 39.1 Bcf customer-owned / AEM-managed management) storage Margins: More variable = Total margins reflect: Stability from delivered gas margins Total AEM Total AEM Stable with potential Upside from optimizing our storage Margins Margins upside and transportation assets to capture arbitrage value 20
  11. 11. Nonregulated Operations Delivered Gas Volumes Continue Growth Trend Key Growth Drivers 500 Consolidated Sales Volumes 415-450 371 400 Retain existing customers 284 300 238 223 Saturate existing markets BCF Expand into targeted growth 200 markets (Texas, Alabama, etc.) 100 Expand asset management 0 business 2004 2005 2006 2007 2008E Unit margin expansion from 0.31 premium value-added services 0.30 0.25 Consolidated Delivered Gas 0.23 provided to customers Access to storage assets (cents per Mcf) Unit Margins 0.15 0.20 0.14 Gas price volatility 0.10 0.00 2004 2005 2006 2007 2008E 21 Nonregulated Operations Nonregulated Atmos Energy Marketing Delivered Gas and Asset Optimization Margins Remain Steady 150.0 Delivered Gas Margins have remained 130.6 fairly constant at about $60 million, with 130.0 the exception of Fiscal 2006 due to effects 17.2 104.3 of Hurricane Katrina 110.0 90.0-100.0 26.2 Asset Optimization Margins trending 62.0 18.4 ($ millions) between $25 million - $30 million annually 90.0 30.0-35.0 Fiscal 2008 marketing segment margins 28.0 28.8 70.0 are expected to be between $90 million and $100 million, excluding any mark-to- 50.0 market impact 87.2 60.0 57.1 60.0-65.0 Mark-to-market accounting impact is 30.0 recognized in Unrealized Margins and an example of the accounting can be found 10.0 in the appendix to this presentation. (10.0) (26.0) (30.0) 2005 2006 2007 2008E Delivered Gas Asset Optimization Unrealized Margins 22
  12. 12. Nonregulated Operations Business Development Strategy Currently, over 15 potential projects under review Includes gathering, light processing, pipeline and storage projects Capital investment ranges between $3 million to $300 million per project, some are multi-year projects Fiscal 2008 budget includes approximately $33 million for development of these identified projects Park City Natural Gas Gathering System in Western Kentucky In January 2008, filed with the Federal Energy Regulatory Commission (FERC) to construct and operate a salt-cavern gas storage project in Louisiana 23 Nonregulated Operations Park City Gathering System in Kentucky 23 mile low-pressure gas gathering system northeast of Bowling Green, KY with delivery into TGT’s Slaughter/Bowling Green lateral Initially, 47 of 60 wells connected via polyethylene pipe with expected capacity of over 10,000 Mcf/d The gas contains about 16% nitrogen and will be treated by a facility, jointly owned by Atmos and HNNG Total cost of about $10 million; $3 million of capital spent in fiscal 2007 and about $7 million expected in fiscal 2008 24
  13. 13. Nonregulated Operations Ft. Necessity Gas Storage Project in Louisiana Initial project includes development of three 5 Bcf Salt Storage Project caverns with six-turn Franklin Parish, LA injection and withdrawal capabilities Storage facility adjacent to large interstate pipelines Pending FERC approval, first cavern projected to be operational in 2011; the other two caverns operational by 2012 and 2014 Depending on market demand, four additional Legend of Nearby Pipelines storage caverns could Regency ANR potentially be developed LIG CGT TGT TGP Fort Necessity Non-binding open season Salt Dome TLG expected Q3 Fiscal 2008 25 Financial Review Consolidated Earnings Guidance – Fiscal 2008E Atmos Energy continues to anticipate earnings to be in the range of $1.95 - $2.05 per fully diluted share for the 2008 fiscal year Assumptions include: • Contribution from natural gas marketing segment reflecting less volatility in gas prices o Total expected gross margin contribution from the marketing segment in the range of $90 million to $100 million, excluding any material mark-to- market impact • Continued successful execution of rate strategy and collection efforts • Bad debt expense of no more than $15 million • Average annual short-term interest rate @ 6.5% • No material acquisitions Note: Changes in these events or other circumstances that the company cannot currently anticipate could materially impact earnings, and could result in earnings for fiscal 2008 significantly above or below this outlook. 26
  14. 14. Financial Review Projected Net Income by Segment ($ millions, except EPS) 2008E 2005 2006 2007 $ 86 - 90 $ 53 $ 81 $ 73 Natural Gas Distribution 40 - 42 27 28 34 Regulated Trans & Storage 38 - 40 58 23 46 Natural Gas Marketing 12 - 13 10 4 15 Pipeline, Storage & Other 176 - 185 148 136 168 Total 90.1 81.4 79.0 87.7 Avg. Diluted Shares $1.95 - $2.05 $ 1.82 $ 1.72 $ 1.92 Earnings Per Share 27 Financial Review Ample Cash Flow Generated ($ millions) 2007 2006 2008E 2005 $ 387 $ 311 $ 547 $ 540 - 560 Cash flows from operations (243) (287) (287) (325-335) Maintenance/Non-growth capital (99) (102) (112) (117) Dividends $ 148 $ 78 - 88 $ 45 Available Cash $ (78) 28
  15. 15. Financial Review Capital Expenditures ($ millions) Regulated Regulated Nonregulated Gas Distribution Transmission & Storage $35-38 $347-$354 $327.4 $100 $400 $68-73 $40 $350 $59.3 2-4 $75 $300 $30 265- $250 270 228.3 $50 $200 58-61 $20 57.2 $150 33-34 $5.7 $25 $100 $10 1.1 $50 99.1 82-84 10-12 4.6 2.1 $0 $0 $0 2007 2008E 2007 2008E 2007 2008E Maintenance Capital Growth Capital Consolidated fiscal 2008 CAPEX projection is $450-$465 million 29 Financial Review Compelling Valuation and Total Return Proposition Forward P/E Estimates 5 Year Expected Total Return 16.0 13.9% 15.2x 15.0 1.9 15.0 14.5x 12.0 9.1% 8.9% 14.0 13.5x 9.0 12.0 3.9 4.7 6.0 13.0 5.1 4.4 3.0 12.0 Peer Group S&P 500 Atmos Atmos S&P 500 Peer Group Avg. Energy Energy Avg. 5 year growth rate dividend yield Source: Bloomberg @ 4/25/08 Peer group averages exclude Atmos Companies in the peer group include AGL Resources, Laclede, New Jersey Resources, Nisource, Northwest Natural Gas, Oneok, Piedmont Natural Gas, Southwest Gas and WGL Holdings. 30
  16. 16. Summary Company Profile The nation’s largest pure-gas distribution company Solid financial foundation Track record of creating shareholder value • Consistent earnings growth • 24 consecutive years of increasing dividends Focused strategy over time • Grow through prudent acquisitions • Maximize core regulated earnings capability • Complement core regulated businesses through select nonregulated operations 31 Slide Appendix 32
  17. 17. Consolidated Financial Results – Fiscal 2Q Net Income by Segment ($ in millions) ) Key Drivers Rate increase 5% $111.5 adjustments, primarily $106.5 in Texas $140.0 $120.0 Decrease in 5 .4 5 .9 nonregulated natural 5 .3 $100.0 11.0 gas marketing 15 .2 13 .3 $80.0 margins, primarily due to decrease in storage $60.0 and trading activities 8 5 .6 $40.0 7 6 .3 Increase in O&M $20.0 expenses, primarily due to higher $0.0 administrative costs 2Q 2007 2Q 2008 Natural gas distribution Regulated transm ission & storage Natural gas m arketing Pipeline, storage & other 33 Consolidated Financial Results – Fiscal YTD Net Income by Segment ($ in millions) ) Key Drivers Decrease in (1)% $187.8 nonregulated natural $185.3 $250.0 gas marketing margins, primarily due to 8.5 10.7 $200.0 decrease in storage and trading activities 25.9 46.0 $150.0 25.1 Rate increase 22.9 adjustments, primarily $100.0 in Texas 125.8 108.2 $50.0 Increase in O&M expenses primarily due $0.0 to higher employee and administrative costs YTD 2007 YTD 2008 Natural gas distribution Regulated transm ission & storage Natural gas m arketing Pipeline, storage & other 34
  18. 18. Consolidated Financial Results – Fiscal YTD Capital Expenditures Regulated Regulated Nonregulated Gas Distribution Transmission & Storage $174.0 $26.4 $200 $30 $4 $22.1 $143.7 $2.7 $2.6 $160 0.1 $20 $120 0.5 130.2 $2 98.4 26.4 19.5 $80 $10 2.5 2.2 $40 45.3 43.8 2.6 $0 $0 $0 YTD 2007 YTD 2008 YTD 2007 YTD 2008 YTD 2007 YTD 2008 Total Fiscal 2008 YTD Expenditures: $198.7 million Growth Capital Total Maintenance Capital: $149.8 million Total Growth Capital: $ 48.9 million Maintenance Capital 35 Consolidated Financial Results – Fiscal 2Q Natural Gas Marketing Segment Three Months Ended March 31 2008 2007 Change (In thousands, except physical position) Delivered gas $26,195 $14,252 $11,943 Asset optimization 27,737 77,724 (49,987) Unrealized margin (37,600) (68,923) 31,323 $16,332 $23,053 GROSS PROFIT ($6,721) Net physical position (Bcf) 20.7 19.6 1.1 36
  19. 19. Consolidated Financial Results – Fiscal YTD Natural Gas Marketing Segment Six Months Ended March 31 2008 2007 Change (In thousands, except physical position) Delivered gas $44,368 $34,321 $10,047 Asset optimization 27,212 71,934 (44,722) Unrealized margin (9,285) (20,068) 10,783 $62,295 $86,187 GROSS PROFIT ($23,892) Net physical position (Bcf) 20.7 19.6 1.1 37 Nonregulated Operations Atmos Energy Marketing Economic Value vs. GAAP Reported Results We commercially manage our storage assets by capturing arbitrage value through optimization strategies that create embedded (forward) value in the portfolio. We financially report the transactions for external reporting purposes in accordance with generally accepted accounting principles (“GAAP”). GAAP Reported Value is the period to period net change in fair value of the portfolio reported in the income statement that results from the process of marking to market the physical storage volumes and corresponding financial instruments in an interim period. Economic Value is the period to period forward margin of our storage portfolio that results from the process of calculating our weighted average cost of inventory (WACOG), and our weighted average sales price of our forward financials (WASP), then multiplying the difference times inventory volumes. This margin will be realized in cash when the hedged transaction is executed or when financials are settled and then reset to stay hedged against physical volumes. • Economic Value represents the “forward” economic margin of the transactions, while GAAP reported results reflect that portion of our “forward” margin that has been recorded in the income statement. • Volatility in earnings includes the impact of the accounting treatment of our storage portfolio in accordance with GAAP and is reflective of relatively high price volatility of the prompt month, and the relatively low volatility of the offsetting forward months. 38
  20. 20. Nonregulated Operations Atmos Energy Marketing Economic Value vs. GAAP Reported Results Reported GAAP Economic Value* Reported GAAP Value (Commercial Value) Value - -Physical and Financial Physical and Financial - Physical and Financial Positions Positions Positions $10.8 MM $(0.6) MM $(0.6) MM Market Spread Embedded margin difference *Realizing Economic Value $11.4 MM is dependent on ability to execute – deliver physical gas & close financial hedges Supporting data appears on the following slide At March 31, 2008 39 Nonregulated Operations Atmos Energy Marketing Economic Value vs. GAAP Reported Results Three Months Ended Physical Economic Value (EV) GAAP Reported Value - MTM Market Spread ($ per mcf) Period Volume Total Total Total WASP WACOG EV Ending (Bcf) ($ in millions) ($ per mcf) ($ in millions) ($ per mcf) ($ in millions) 21.0 10.6691 7.7802 2.8889 1.5636 1.3253 12/31/2006 60.6 32.8 27.8 19.6 8.2196 7.6701 0.5495 (1.2347) 1.7842 3/31/2007 10.8 (24.2) 35.0 (1.4) $ (2.4495) $ (0.1101) $ (2.3394) $ (2.7983) $ (57.0) $ 0.4589 2007 Variance (49.8) $ 7.2 17.7 9.8199 7.3266 2.4933 1.8561 0.6372 12/31/2007 44.2 32.9 11.3 20.7 8.6763 8.1555 0.5208 (0.0296) 0.5504 3/31/2008 10.8 (0.6) 11.4 3.0 $ (1.1436) $ 0.8289 $ (1.9725) $ (1.8857) $ (33.5) $ (0.0868) $ 2008 Variance (33.4) 0.1 WASP: Weighted average sales price for gas held in storage WACOG: Weighted average cost of AEM’s gas in storage EV: “Economic Value” which equals gas sales price (WASP) minus cost of gas (WACOG) on a per unit basis 40
  21. 21. Nonregulated Operations Atmos Energy Marketing Economic Value vs. GAAP Reported Results Six Months Ended Physical Economic Value (EV) GAAP Reported Value - MTM Market Spread ($ per mcf) Period Volume Total Total Total WASP WACOG EV Ending (Bcf) ($ in millions) ($ per mcf) ($ in millions) ($ per mcf) ($ in millions) 14.5 11.9716 7.8329 4.1387 (1.1076) 5.2463 9/30/2006 60.0 (16.0) 76.0 19.6 8.2196 7.6701 0.5495 (1.2347) 1.7842 3/31/2007 10.8 (24.2) 35.0 5.1 $ (3.7520) $ (0.1628) $ (3.5892) $ (0.1271) $ (8.2) $ (3.4621) $ 2007 Variance (49.2) (41.0) 12.3 11.1547 7.8297 3.3250 0.8819 2.4431 9/30/2007 40.8 10.8 30.0 20.7 8.6763 8.1555 0.5208 (0.0296) 0.5504 3/31/2008 10.8 (0.6) 11.4 8.4 $ (2.4784) $ 0.3258 $ (2.8042) $ (0.9115) $ (11.4) $ (1.8927) $ 2008 Variance (30.0) (18.6) WASP: Weighted average sales price for gas held in storage WACOG: Weighted average cost of AEM’s gas in storage EV: “Economic Value” which equals gas sales price (WASP) minus cost of gas (WACOG) on a per unit basis 41

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