OGE Energy Corp. Announces 1st Quarter Results

OKLAHOMA CITY, May 7 /PRNewswire-FirstCall/ -- OGE Energy Corp. , the parent company of Oklahoma Gas and Electric Company (OG&E) and Enogex LLC, today reported earnings of $0.14 per diluted share for the three months ended March 31, 2008, compared with $0.19 per share for the first quarter of 2007.

Enogex, an unregulated natural gas pipeline business, recorded earnings of $0.24 per share, compared with $0.17 per share in the year-ago quarter. OG&E, a regulated electric utility, posted a loss of $0.12 per share, compared with earnings of $0.02 per share in the comparable period last year. The holding company, including results from its marketing business, posted earnings of $0.02 per share in the first quarter, compared with break-even results in the first quarter of 2007.

"We are pleased with our progress to position OGE for growth, as strong business fundamentals continue in both businesses," said Pete Delaney, chairman, president and CEO of OGE Energy. "Enogex continues to take advantage of the positive midstream environment, as evidenced by the 95 percent increase in spending on capital projects this year compared to 2007 to support our customers' natural gas production. Sales growth at OG&E remains in line with historical levels as the economy in our service area continues to outperform the national economy."

Discussion of First Quarter 2008

OGE Energy reported consolidated operating revenues of $995 million in the first quarter of 2008, compared with $882 million a year earlier. The first-quarter gross margin on revenues was $246 million, compared with $215 million in the year-earlier quarter. Operating income was $48 million in the first quarter, compared with $46 million in the year-earlier quarter. Net income was $13 million in the first quarter, compared to $17 million a year ago.

OG&E reported gross margin on revenues of $146 million in the first quarter, compared with $141 million in the comparable quarter last year. The increase was due primarily to customer growth and higher rates.

OG&E reported a $20 million increase in operation and maintenance (O&M) expenses, $94 million in the first quarter of 2008 compared with $74 million a year earlier, due to various factors. These factors included a one-time, pre-tax charge of $9.5 million in the 2008 first quarter to correct the method of applying employee-related and overhead costs to capital projects. In March 2008, OG&E determined that its method of applying O&M costs to capital projects had unintentionally resulted in the over-capitalization of some of those costs in prior years. Other factors affecting O&M expenses were an overhaul of a generating unit in one of OG&E's power plants that was completed in the first quarter of 2008 and significant capital expenditures in response to a January 2007 ice storm, which had the effect of reducing O&M spending in the first quarter of 2007.

Largely as a result of these increases in O&M expenses, OG&E recorded a first-quarter 2008 net loss of $11.3 million, compared with net income of $1.9 million a year ago.

Enogex reported gross margin on revenues of $95 million in the first quarter, compared with $74 million in the comparable quarter last year. The increase was primarily due to higher margins, volumes and commodity price spreads in the gathering and processing business. Net income was $23 million in the first quarter, compared with $16 million in the same period last year.

2008 Outlook

OGE Energy has reaffirmed its 2008 consolidated earnings guidance at $2.40 - $2.60 per diluted share. Though the consolidated earnings guidance has not changed, the guidance for individual business segments has been revised to reflect an increase in projected earnings at Enogex, due primarily to more favorable commodity price assumptions, and a decrease in projected earnings at OG&E, due primarily to the increased O&M expenses discussed above. The guidance assumes approximately 93.1 million average diluted shares outstanding, normal weather and excludes any gains on asset sales.

The 2008 guidance includes: -- OG&E, $1.50 to $1.61 per share on net income of $140 million to $150 million. -- Enogex, $0.95 to $1.08 per share on net income of $88 million to $101 million. -- Holding company, a loss of $0.04 to $0.05 per share on a net loss of $4 million to $5 million. Conference Call Webcast

OGE Energy will host a conference call for discussion of the results and the outlook for 2008 on Wednesday, May 7, at 8 a.m. CDT. The conference, hosted by James R. Hatfield, senior vice president and CFO, will be available through http://www.oge.com/.

OGE Energy is the parent company of Oklahoma Gas and Electric Company (OG&E), which serves more than 765,000 customers in a service territory spanning 30,000 square miles in Oklahoma and western Arkansas, and of Enogex LLC, a midstream natural gas pipeline business with principal operations in Oklahoma.

Some of the matters discussed on this news release may contain forward-looking statements that are subject to certain risks, uncertainties and assumptions. Such forward-looking statements are intended to be identified in this document by the words "anticipate", "believe", "estimate", "expect", "intend", "objective", "plan", "possible", "potential", "project" and similar expressions. Actual results may vary materially. Factors that could cause actual results to differ materially include, but are not limited to: general economic conditions, including the availability of credit, actions of rating agencies and their impact on capital expenditures; the Company's ability and the ability of its subsidiaries to obtain financing on favorable terms; prices of electricity, coal, natural gas and natural gas liquids, each on a stand-alone basis and in relation to each other; business conditions in the energy and natural gas midstream industries; competitive factors including the extent and timing of the entry of additional competition in the markets served by the Company; unusual weather; availability and prices of raw materials for current and future construction projects; federal or state legislation and regulatory decisions (including the approval of regulatory filings related to the proposed acquisition of the Redbud power plant) and initiatives that affect cost and investment recovery, have an impact on rate structures or affect the speed and degree to which competition enters the Company's markets; environmental laws and regulations that may impact the Company's operations; changes in accounting standards, rules or guidelines; the discontinuance of regulated accounting principles under SFAS No. 71; creditworthiness of suppliers, customers and other contractual parties; the higher degree of risk associated with the Company's nonregulated business compared with the Company's regulated utility business; the impact of the proposed initial public offering of limited partner interests of OGE Enogex Partners L.P.; and other risk factors listed in the reports filed by the Company with the Securities and Exchange Commission including Risk Factors and Exhibit 99.01 to the Company's Form 10-K for the year ended December 31, 2007.

*Note: Consolidated Statements of Income, Financial and Statistical Data attached.

OGE Energy Corp. consolidated statements of income (unaudited) Three Months Ended March 31 2008 2007 OPERATING REVENUES Electric Utility operating revenues $386.4 $340.7 Natural Gas Pipeline operating revenues 608.3 540.8 Total operating revenues 994.7 881.5 COST OF GOODS SOLD (exclusive of depreciation shown below) Electric Utility cost of goods sold 228.8 188.2 Natural Gas Pipeline cost of goods sold 520.0 478.7 Total cost of goods sold 748.8 666.9 Gross margin on revenues 245.9 214.6 Other operation and maintenance 125.2 98.8 Depreciation 50.7 48.7 Taxes other than income 21.9 20.9 OPERATING INCOME 48.1 46.2 OTHER INCOME (EXPENSE) Interest income 0.9 0.7 Other income 3.9 2.6 Other expense (4.1) (0.9) Net other income 0.7 2.4 INTEREST EXPENSE Interest on long-term debt 23.4 22.1 Allowance for borrowed funds used during construction (0.7) (0.6) Interest on short-term debt and other interest charges 6.5 2.7 Interest expense 29.2 24.2 INCOME BEFORE TAXES 19.6 24.4 INCOME TAX EXPENSE 6.6 7.2 NET INCOME $13.0 $17.2 BASIC AVERAGE COMMON SHARES OUTSTANDING 91.9 91.5 DILUTED AVERAGE COMMON SHARES OUTSTANDING 92.5 92.4 BASIC EARNINGS PER AVERAGE COMMON SHARE $0.14 $0.19 DILUTED EARNINGS PER AVERAGE COMMON SHARE $0.14 $0.19 OGE Energy Corp. financial and statistical data (unaudited) Three Months Ended March 31 2008 2007 ELECTRIC UTILITY Operating revenues by classification Residential $146.4 $134.7 Commercial 89.4 76.2 Industrial 46.6 41.3 Oilfield 32.6 27.8 Public authorities and street light 36.1 31.3 Sales for resale 15.3 13.9 System sales revenues 366.4 325.2 Off-system sales revenues 12.3 9.3 Other 7.7 6.2 Total operating revenues $386.4 $340.7 Sales of electricity - MWH (a) sales by classification Residential 2.2 2.0 Commercial 1.4 1.4 Industrial 1.0 1.0 Oilfield 0.7 0.7 Public authorities and street light 0.6 0.6 Sales for resale 0.4 0.3 System sales 6.3 6.0 Off-system sales 0.2 0.3 Total sales 6.5 6.3 Number of customers 765,165 758,244 Average cost of energy per KWH (b) - cents Natural gas 7.598 7.343 Coal 1.074 1.104 Total fuel 3.118 2.610 Total fuel and purchased power 3.440 2.946 Degree days Heating Actual 1,814 1,669 Normal 1,982 1,963 Cooling Actual 12 43 Normal 9 8 NATURAL GAS PIPELINE Operating revenues (before intercompany eliminations) (c) $266.7 $557.8 Operating income (c) $45.6 $30.2 Net income (c) $22.5 $15.5 Net cash provided from operating activities (c) $18.5 $49.7 Capital expenditures (c) $62.3 $25.5 New well connects (includes wells behind CRP's (d)) (e) 85 99 New well connects (excludes wells behind CRP's) (e) 39 46 Gathered volumes - Tbtu/d (f) 1.07 0.99 Incremental transportation volumes - Tbtu/d 0.40 0.39 Total throughput volumes - Tbtu/d 1.47 1.38 Natural gas processed - Tbtu/d 0.61 0.52 Natural gas liquids sold (keep-whole) - million gallons 53 51 Natural gas liquids sold (purchase for resale) - million gallons 40 27 Natural gas liquids sold (percent- of-liquids) - million gallons 5 4 Total natural gas liquids produced - million gallons 98 82 Average sales price per gallon $1.354 $0.860 Realized commodity spreads $7.03 $3.20 (a) Megawatt-hours. (b) Kilowatt-hours. (c) No results for OGE Energy Resources, Inc. ("OERI") for the first quarter of 2008 are included because, as of January 1, 2008, Enogex distributed the stock of OERI to OGE Energy. (d) Central receipt points. (e) As reported to management by third parties. (f) Trillion British thermal units per day.