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SEC Filings

10-Q
SOUTHERN CO GAS filed this Form 10-Q on 11/04/2016
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Weather did not have a significant impact on Southern Company Gas' consolidated EBIT during the third quarter 2016 and 2015. For combined year-to-date 2016, the unfavorable EBIT impact from the warmer-than-normal weather was $8 million, net of the impact of weather hedging, compared to an $11 million favorable weather impact for the corresponding period in 2015, when weather was significantly colder than normal.
Customer Count
The number of customers at gas distribution operations and energy customers at gas marketing services can be impacted by natural gas prices, economic conditions, and competition from alternative fuels. The customer metrics presented in the following table highlight the average number of customers to which Southern Company Gas provided services for the specified periods.
 
 
Third Quarter
 
2016 vs. 2015
 
Year-to-Date
 
2016 vs. 2015
 
 
2016
 
2015
 
% change
 
2016
 
2015
 
% change
 
 
(in thousands)
 
 
 
(in thousands)
 
 
Gas distribution operations
 
4,525

 
4,488

 
0.8
 %
 
4,559

 
4,526

 
0.7
 %
Gas marketing services
 
 

 
 

 
 
 
 

 
 

 
 

Energy customers
 
626

 
642

 
(2.5
)%
 
642

 
646

 
(0.6
)%
Service contracts
 
1,191

 
1,164

 
2.3
 %
 
1,198

 
1,159

 
3.4
 %
Market share of energy customers in Georgia
 
29.4
%
 
29.7
%
 
 
 
29.3
%
 
29.8
%
 
 
Southern Company Gas anticipates overall customer growth trends at gas distribution operations for 2016 to continue improving based on an expectation of continued improvement in the new housing market and low natural gas prices.
Gas marketing services' market share in Georgia has decreased slightly primarily as a result of a highly competitive marketing environment, which Southern Company Gas expects for the foreseeable future. Southern Company Gas will continue efforts in its gas marketing services segment to enter into targeted markets and expand its energy customers and service contracts.
Volumes of Natural Gas Sold
Southern Company Gas' natural gas volume metrics for gas distribution operations and gas marketing services, as shown in the following table, illustrate the effects of weather and customer demand for natural gas compared to the prior year. Wholesale gas services’ physical sales volumes represent the daily average natural gas volumes sold to customers.
 
 
Third Quarter
 
2016 vs. 2015
 
Year-to-Date
 
2016 vs. 2015
 
 
2016
 
2015
 
% change
 
2016
 
2015
 
% change
Gas distribution operations (mmBtu in millions)
 
 
 
 
 
 
 
 
 
 
 
 
Firm
 
71

 
75

 
(5.3
)%
 
467

 
519

 
(10.0
)%
Interruptible
 
22

 
23

 
(4.3
)
 
71

 
74

 
(4.1
)
Total
 
93

 
98

 
(5.1
)%
 
538

 
593

 
(9.3
)%
Gas marketing services (mmBtu in millions)
 
 

 
 

 
 

 
 

 
 

 
 

Firm:
 
 
 
 
 
 
 
 
 
 
 
 
Georgia
 
3

 
4

 
(25.0
)%
 
25

 
27

 
(7.4
)%
Illinois
 
1

 
1

 

 
8

 
10

 
(20.0
)
Other emerging markets
 
2

 
1

 
100.0

 
9

 
8

 
12.5

Interruptible:
 
 
 
 
 
 
 
 
 
 
 
 
Large commercial and industrial
 
3

 
3

 

 
10

 
11

 
(9.1
)
Total
 
9

 
9

 
 %
 
52

 
56

 
(7.1
)%
Wholesale gas services
 
 

 
 

 
 

 
 

 
 

 
 

Daily physical sales (mmBtu in millions/day)
 
7.6

 
6.4

 
18.8
 %
 
7.6

 
6.7

 
13.4
 %
Natural Gas Capacity Under Firm Subscription
Within gas midstream operations, Southern Company Gas' natural gas storage business seeks to have a significant portion of its working natural gas capacity under firm subscription, but also takes into account current and expected market conditions. The prices for natural gas storage capacity have increased in 2016 relative to the last few years, which is expected to continue as supply and demand quantities reach equilibrium with sustained economic improvement, expected exports of liquefied natural gas, and projected demand increases in response to low prices and expanded uses for natural gas. The following table illustrates the overall monthly average firm subscription rates per storage facility and the amount of firm capacity subscription for the periods presented. The amounts shown exclude 2.8 million mmBtu contracted by Sequent at September 30, 2016, at an average monthly rate of $0.054 and 5.0 million mmBtu contracted by Sequent at September 30, 2015, at an average monthly rate of $0.080.


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