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    atmos enerrgy lehman090208 atmos enerrgy lehman090208 Document Transcript

    • Lehman Brothers Energy & Power Conference Robert W. Best Chairman, President & CEO September 2, 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 nine months ended June 30, 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
    • Overview The Nation’s Largest Pure Gas Distribution Company Regulated gas distribution operates in 12 states (gold) Nonregulated operates primarily in the Midwest & Southeast (gray) 3 Overview Diluted Earnings Per Share Contribution Shows Steady Growth $1.95-$2.05 6.1% CAGR $1.92 $2.10 $1.82 $1.72 $1.58 0.42-0.46 $1.80 0.69 Nonregulated 0.34 $1.50 0.84 Operations 0.42 $1.20 Regulated Operations $0.90 1.53-1.59 1.38 1.23 $0.60 1.16 0.98 $0.30 $0.00 2004 2005 2006 2007 2008E 4 As of August 5, 2008
    • 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. 5 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 3 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% 53.7% 53.6% 5.6% 51.5% 50 5.0% 45 43.3% 4.0% 40 2003 2004 2005 2006 2007 Jun-08 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. 6 (1) (2) (3) As of December 2007
    • 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 7 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 8
    • 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 9 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 4,7 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. Excludes Colorado, Iowa and Illinois for a total of 137,657 customers. 1 Includes Missouri, Kansas and Georgia for a total of 258,102 customers. 2 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. 7 Includes Mid-Tex Division for a total of 1,500,000 customers. 10
    • Mid-Tex Division 2008 Rate Outcome Summary Systemwide Settlement RRC Order Increase in Revenues (438 of 439 Cities) (City of Dallas & Environs) 100% ~80% ~20% Effective 4/1/08 $10 Million Rate Increase __ __ $19.6 Million Rate Increase Effective 7/8/08 Pending; $33.5 Million RRM Filing __ Effective 10/1/08 Included in RRM filing $10.3 Million GRIP Filing Recovery Effective 11/08 (est.) Effective 10/1/08 Gas Cost Recovery of Bad Debt Effective 7/1/08 Effective 10/1/08 Capital Structure 52% Debt; 48% Equity Effective 7/1/08 Effective 10/1/08 $1 Million Conservation Program Effective 10/1/08 9.6% Authorized Return on Equity (ROE) 10.0% 11 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 $0.0 2003 2004 2005 2006 2007 2008-2012E Annual Mechanism GRIP General Rate Case Aggregate 12 As of August 5, 2008
    • Regulated Transmission and Storage Strategically Positioned Atmos Pipeline –Texas Favorably positioned; spans Texas gas supply basins and growing consumer market Pipeline Operations • Connects to major market hubs- Waha, Katy and Carthage • 6,300 miles of intrastate pipeline • Estimated transportation volume of 780 Bcf in fiscal 2008 • Current average volume of approximately 2.0 Bcf/d • Demonstrated peak day deliveries of 3.5 Bcf/d Five Storage Facilities • One salt cavern, four reservoirs West Texas Division • 39 Bcf working gas capacity • 1.2 Bcf/d maximum withdrawal Mid-Tex Division • 270 MMcf/d maximum injection Atmos Pipeline-Texas Atmos Energy Headquarters 13 Regulated Transmission and Storage Atmos Pipeline – Texas Growth Drivers 775-785 699 750 Growth Drivers 581 Transportation Volumes 555 600 Pursue capacity and 587-590 505 compression growth 450 (Bcf) 411 opportunities 374 300 Increased through-system 150 1188-195 194 volumes primarily from 181 170 producers in Barnett Shale 0 2005 2006 2007 2008E Margin expansion through Mid-Tex Division Third Party ancillary services such as 188-194 200 parking and lending, balancing, 163 Margin Composition 175 blending, and compression 141 138 150 93-97 ($millions) Gas price volatility increasing 78 125 64 60 basis differentials between 100 Texas hubs 75 95-97 85 50 78 77 25 0 2005 2006 2007 2008E Tariff Based Market Based 14 As of August 5, 2008
    • Regulated Transmission and Storage Barnett Shale y alle on V Cott sier Bos s d San Permian Location of gas supply basins 15 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 16
    • 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 17 Nonregulated Operations Atmos Energy Marketing – Margin Composition 2008E Impacted by customer volume demand Delivered Gas Sales prices are: Delivered Gas • Cost plus profit margin $65 - $70 Million (Bundled gas deliveries & • Cost plus demand charges (Bundled gas deliveries & peaking sales) peaking sales) Margins: More predictable Impacted by gas price spread values in the market (arbitrage opportunity) Physical storage capabilities Asset Optimization $10 - $15 Million Asset Optimization Available storage and transport capacity (Storage & transportation (Storage & transportation 7.8 Bcf proprietary contracted capacity management) management) 27 Bcf customer-owned / AEM- managed storage Margins: More variable = Total margins reflect: $75 - $85 Million Stability from delivered gas margins Total AEM Total AEM Upside from optimizing our storage Margins Margins and transportation assets to capture arbitrage value Margins: Stable with potential upside 18 As of August 5, 2008
    • Nonregulated Operations Delivered Gas Volumes Continue Growth Trend 450-485 Key Growth Drivers 500 424 Gross Sales Volumes 400 337 Retain existing customers 273 265 300 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 Delivered Gas Unit Margins provided to customers 0.23 Access to storage assets (cents per Mcf) 0.20 0.14-0.15 0.15 Gas price volatility 0.10 0.00 2004 2005 2006 2007 2008E 19 As of August 5, 2008 Nonregulated Operations Nonregulated Atmos Energy Marketing Delivered Gas and Asset Optimization Margins 150.0 Delivered Gas Margins have remained 130.6 fairly constant at about $60 million, with 130.0 the exception of Fiscal 2006 due to effects 17.2 104.3 of Hurricane Katrina 110.0 26.2 Asset Optimization Margins remained 62.0 18.4 ($ millions) 75.0-85.0 fairly constant between $25 million - $30 90.0 million annually until fiscal 2008 when the 10.0-15.0 28.0 28.8 effects of dampened market volatility can 70.0 be seen 50.0 Fiscal 2008 marketing segment margins 87.2 are expected to be between $75 million 65.0-70.0 60.0 57.1 30.0 and $85 million, excluding any mark-to- market impact 10.0 Mark-to-market accounting impact is recognized in Unrealized Margins. An (10.0) (26.0) example of the accounting can be found in the appendix to this presentation (30.0) 2005 2006 2007 2008E Delivered Gas Asset Optimization Unrealized Margins 20 As of August 5, 2008
    • 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 storage caverns could Legend of Nearby Pipelines potentially be developed Regency ANR LIG CGT Successful non-binding TGT TGP Fort Necessity open season completed in Salt Dome TLG July 2008 21 Financial Review Consolidated Earnings Guidance – Fiscal 2008E Atmos Energy continues to expect earnings to be in range of $1.95 - $2.05 per diluted share for the 2008 fiscal year Assumptions include: Contribution from natural gas marketing segment reflecting significantly less volatility in gas price spreads o Total expected gross margin contribution from the marketing segment in the range of $75 million to $85 million, excluding any material mark-to-market impact at September 30, 2008 Continued successful execution of rate strategy and collection efforts Bad debt expense of no more than $15 million Average annual short-term interest rate of 6.5% Note: Changes in these events or other circumstances that the company cannot currently anticipate could materially impact earnings, and could result in earnings for fiscal 2008 significantly above or below this outlook. 22 As of August 5, 2008
    • Financial Review Projected Net Income by Segment ($ millions, except EPS) 2008E 2005 2006 2007 $ 95 - 99 $ 53 $ 81 $ 73 Natural Gas Distribution 43 - 44 27 28 34 Regulated Trans & Storage 27 - 30 58 23 46 Natural Gas Marketing 11 - 12 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 23 As of August 5, 2008 Financial Review Capital Expenditures ($ millions) Regulated Regulated Nonregulated Gas Distribution Transmission & Storage $365-$371 $327.4 $100 $400 $19-21 $25 $71-73 $350 $59.3 $20 $75 $300 285- 4-5 $250 288 $15 228.3 $50 $200 $5.7 61-62 57.2 $10 $150 15-16 1.1 $25 $100 $5 4.6 $50 99.1 80-83 10-11 2.1 $0 $0 $0 2007 2008E 2007 2008E 2007 2008E Maintenance Capital Growth Capital Consolidated fiscal 2008 CAPEX projection is $455-$465 million 24 As of August 5, 2008
    • Financial Review Compelling Valuation and Total Return Proposition Forward P/E Estimates 5 Year Expected Total Return 16.0 14.2% 15.0 14.9x 15.0 2.1 14.3x 12.0 9.6% 9.0% 14.0 13.1x 9.0 13.0 12.1 4.9 3.9 6.0 12.0 5.1 4.7 3.0 11.0 Peer Group S&P 500 Atmos Atmos S&P 500 Peer Group Avg. Energy Energy Avg. 5 year growth rate dividend yield Source: Bloomberg @ 8/26/08 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. 25 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 26
    • Slide Appendix 27 Regulated Operations Recent Regulatory Activity Aids Margin Growth Mid-Tex – rate case completed • Settlement agreement reached with all major parties in January and February 2008, except City of Dallas and environs customers • Final order issued by the Texas Railroad Commission in June 2008 applicable to the City of Dallas and environs • Details included on slides located in the presentation appendix Louisiana – annual rate stabilization filings complete • Approved $1.7 million increase in June 2008 for LGS jurisdiction (about 265,000 customers) effective immediately • Approved $2.1 million increase for Trans La jurisdiction (about 80,000 customers) effective April, 2008 Kansas – rate case settled • Filed for $5 million in September 2007 • Reached $2.1 million “black box” settlement with staff, effective May 2008 (about 124,000 customers) Georgia – pending rate case • Filed for over $6 million in March 2008, decision expected September 2008 (about 76,000 customers) • 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 Mid-Tex Division – 2007 GRIP filing on a system-wide basis filed in May 2008 of $10.3 million; anticipate implementation November 2008 of approximately $2.0 million annually for the customers in the City of Dallas and unincorporated areas 28
    • Regulated Natural Gas Distribution Rate Case Settlement in Mid-Tex Division Settlement agreement reached with 438 of 439 cities served in Mid-Tex Division, representing approximately 80% of Mid-Tex customers Includes initial increase of $10 million on a systemwide basis, implemented in the consumption charge and effective April 1, 2008 Implements Rate Review Mechanism (RRM) effective for a three-year trial period Reflects annual changes in cost of service and rate base, replaces GRIP filings for the Settlement Cities Lowers base customer charge to $7.00 for residential customers, effective October 1, 2008 Two basic components of this mechanism: o Prospective component adjusts rates for the next year, including known and measurable changes in O&M; and o True-up component adjusts the prior year, up or down, to the authorized ROE April 14, 2008, made initial RRM filing with the settling cities for $33.5 million on a systemwide basis, with October 1st implementation Future RRM filings by March 1st, to be effective July 15th Authorized ROE of 9.6%; capital structure of 52% debt / 48% equity Establishes a conservation program effective October 1, 2008 Funded annually with $1 million contributions each by the company and customers 29 Regulated Natural Gas Distribution Rate Case Decision in Mid-Tex Division June 24, 2008, Railroad Commission of Texas issued final order applicable to approximately 20% of customers Includes City of Dallas and environs customers The remaining 80% of Mid-Tex division customers (438 of 439 cities) were entities who reached earlier settlement; therefore not affected by this order Systemwide annual revenue increase of about $19.6 million; July 8, 2008 implementation; increased residential customer charge to $14 Capital structure of 52% debt / 48% equity Authorized ROE of 10.0%; Allowed Rate of Return of 7.98% Systemwide Rate Base of $1.128 billion; Systemwide Authorized Net Plant of $1.244 billion Recovery of bad debt gas cost through a Gas Cost Recovery (GCR) mechanism beginning October 1, 2008 Establishes a conservation & energy efficiency program Effective October 1, 2008; funded annually with $1 million contributions each by the company and customers Test year ended June 30, 2007 30
    • Consolidated Financial Results – Fiscal 2008 3Q Net Income by Segment Key Drivers ($ in millions) ) Rate increases, primarily $(6.6) 51% in Texas $(13.4) $20.0 Increase in transportation volumes and fees at the $15.0 1.8 regulated pipeline $10.0 1.8 Decrease in nonregulated $5.0 10.3 natural gas marketing 6.1 $0.0 margins, primarily due to decrease in storage and ($5.0) (12.4) trading activities (15.7) ($10.0) Increase in O&M ($15.0) (6.3) expenses, primarily due to (5.6) ($20.0) higher administrative costs 3Q 2007 3Q 2008 Natural gas distribution Regulated transm ission & storage Natural gas m arketing Pipeline, storage & other 31 Consolidated Financial Results – Fiscal YTD Net Income by Segment ($ in millions) ) Key Drivers Rate increases, primarily in $178.7 2% Texas $250.0 $174.4 Decrease in nonregulated $200.0 natural gas marketing 10.4 12.5 margins, primarily due to 19.6 decrease in storage and $150.0 40.4 trading activities 35.3 29.1 $100.0 Increase in transportation volumes and fees at the 113.4 regulated pipeline $50.0 92.4 Increase in O&M expenses, $0.0 primarily due to higher YTD 2007 YTD 2008 administrative costs Natural gas distribution Regulated transmission & storage Natural gas marketing Pipeline, storage & other 32
    • Consolidated Financial Results – Fiscal YTD Capital Expenditures Regulated Regulated Nonregulated Gas Distribution Transmission & Storage $266.8 $300 $50 $8 $40.4 $37.1 $222.5 $5.7 $250 $40 $6 $3.4 $200 $30 2.1 208.2 $150 $4 154.6 35.1 $20 0.7 37.1 $100 $2 3.6 $10 2.7 $50 67.9 58.6 5.3 $0 $0 $0 YTD 2007 YTD 2008 YTD 2007 YTD 2008 YTD 2007 YTD 2008 Total Fiscal 2008 YTD Expenditures: $312.9 million Growth Capital Total Maintenance Capital: $245.4 million Total Growth Capital: $ 67.5 million Maintenance Capital 33 Consolidated Financial Results – Fiscal 2008 3Q Natural Gas Marketing Segment Three Months Ended June 30 Natural Gas Marketing Segment 2008 2007 Change (In thousands, except physical position) Delivered gas $11,231 $9,999 $1,232 Asset optimization (37,551) (33,376) (4,175) Unrealized margin 23,689 22,801 888 ($2,631) ($576) GROSS PROFIT ($2,055) Net physical position (Bcf) 17.5 21.5 (4.0) 34
    • Consolidated Financial Results – Fiscal YTD Natural Gas Marketing Segment Nine Months Ended June 30 Natural Gas Marketing Segment 2008 2007 Change (In thousands, except physical position) Delivered gas $55,599 $44,320 $11,279 Asset optimization (10,339) 38,558 (48,897) Unrealized margin 14,404 2,733 11,671 $59,664 $85,611 GROSS PROFIT ($25,947) Net physical position (Bcf) 17.5 21.5 (4.0) 35 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. 36
    • 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 $48.2 MM $34.3 MM $34.3 MM Market Spread *Potential Gross Profit $13.9 MM * There is no assurance that the economic value or the potential gross profit will be fully realized in the future. 37 At June 30, 2008 Nonregulated Operations Atmos Energy Marketing Economic Value vs. GAAP Reported Results Three Months Ended Physical Economic Value (EV) GAAP Reported Value - MTM Market Spread ($ per mcf) Period Volume Total Total Total WASP WACOG EV Ending (Bcf) ($ in millions) ($ per mcf) ($ in millions) ($ per mcf) ($ in millions) 19.6 8.2196 7.6701 0.5495 (1.2347) 1.7842 3/31/2007 10.8 (24.2) 35.0 21.5 9.5409 7.6238 1.9171 (0.3343) 2.2514 6/30/2007 41.2 (7.2) 48.4 1.9 $ 1.3213 $ (0.0463) $ 1.3676 0.9004 $ 0.4672 2007 Variance $ 30.4 $ 17.0 $ 13.4 20.7 8.6763 8.1555 0.5208 (0.0296) 0.5504 3/31/2008 10.8 (0.6) 11.4 17.5 11.0565 8.3037 2.7528 1.9616 0.7912 6/30/2008 48.2 34.3 13.9 (3.2) $ 2.3802 $ 0.1482 $ 2.2320 1.9912 $ 0.2408 2008 Variance $ 37.4 $ 34.9 $ 2.5 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 38
    • Nonregulated Operations Atmos Energy Marketing Economic Value vs. GAAP Reported Results Nine 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 21.5 9.5409 7.6238 1.9171 (0.3343) 2.2514 6/30/2007 41.2 (7.2) 48.4 7.0 $ (2.4307) $ (0.2091) $ (2.2216) $ 0.7733 $ (2.9949) $ 2007 Variance (18.8) $ 8.8 (27.6) 12.3 11.1547 7.8297 3.3250 0.8819 2.4431 9/30/2007 40.8 10.8 30.0 17.5 11.0565 8.3037 2.7528 1.9616 0.7912 6/30/2008 48.2 34.3 13.9 5.2 $ (0.0982) $ 0.4740 $ (0.5722) $ 1.0797 $ (1.6519) $ 2008 Variance 7.4 $ 23.5 (16.1) 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 39