OG&E 2012 Annual Report Download - page 17

OGE Energy Corp. 15
• Assumed increase of approximately 10 to 15 percent in gathered
volumes over 2012;
• Assumed increase of approximately 10 to 15 percent in processable*
volumes over 2012;
• At the midpoint of Enogex’s natural gas gathering and processing
assumption Enogex has assumed:
- An average processing contract mix of 48 percent fixed-fee,
23 percent percent-of-liquids, 19 percent percent-of-proceeds
and 10 percent keep-whole;
- Average natural gas price of $3.38 per million British thermal unit
(“MMBtu”) in 2013;
- Average NGLs price of $0.82 per gallon in 2013;
- Average price per gallon of condensate of $2.13 in 2013;
- Ethane is projected to be in rejection for 2013;
- Approximately 50 percent of NGLs volumes are expected to flow
to Mt. Belvieu; and
- A 10 percent change in the average NGLs price for the entire year
impacts net income approximately $5 million;
•Enogex has assumed operating expenses of approximately $325 million
to $335 million, with operation and maintenance expenses comprising
54 percent of the total;
•A pre-tax gain of approximately $10 million associated with asset sales
in the first quarter of 2013;
•Interest expense of approximately $30 million to $35 million;
•An effective tax rate of approximately 38 percent; and
•Bronco Midstream Holdings, LLC, Bronco Midstream Holdings II, LLC,
(collectively the “ArcLight group”) will own approximately 22 percent of
Enogex Holdings by the end of 2013.
2014 Volume Projections for Enogex:
•Assumed increase of approximately five to 10 percent in gathered
volumes over 2013; and
•Assumed increase of approximately 10 to 20 percent in processable*
volumes over 2013.
*Processable volumes are the natural gas production that are on Enogex’s gathering systems that
are available to be processed, some of which is moved off of the system and is not processed
under one of Enogex’s processing agreements. Processable volumes include condensate volumes
which are captured in the gathering pipeline and therefore not included in plant inlet volumes.
EBITDA is a supplemental non-GAAP financial measure used by external
users of the Company’s financial statements such as investors, commer-
cial banks and others; therefore, the Company has included the table
below which provides a reconciliation of projected EBITDA to projected
net income attributable to Enogex Holdings at the midpoint of Enogex
Holdings’ earnings assumptions for 2013, which does not include the
effect of income taxes whereas OGE Energy’s portion of Enogex Holdings’
net income included in OGE Energy’s earnings guidance does reflect
the effect of income taxes. Enogex Holding’s net income shown in the
EBITDA table does not include the effect of income taxes because
Enogex Holdings is a partnership and is not subject to income taxes.
Each partner is responsible for paying their own income taxes. For a dis-
cussion of the reasons for the use of EBITDA, as well as its limitations
as an analytical tool, see “Non-GAAP Financial Measure” below.
(In millions, year ended December 31) 2013
Reconciliation of projected EBITDA to projected
net income attributable to Enogex Holdings
Net income attributable to Enogex Holdings $132
Add:
Interest expense, net 33
Depreciation and amortization expense(C) 123
EBITDA $288
OGE Energy’s portion $228
(A) Based on the midpoint of Enogex Holdings’ earnings guidance for 2013.
(B) As of November 1, 2010, Enogex Holdings’ earnings are no longer subject to tax (other than
Texas state margin taxes) and are taxable at the individual partner level.
(C) Includes amortization of certain customer-based intangible assets associated with the acquisi-
tion from Cordillera Energy Partners III, LLC (“Cordillera”) in November 2011, which is included
in gross margin for financial reporting purposes.
Results of Operations
The following discussion and analysis presents factors that affected
the Company’s consolidated results of operations for the years ended
December 31, 2012, 2011 and 2010 and the Company’s consolidated
financial position at December 31, 2012 and 2011. The following infor-
mation should be read in conjunction with the Consolidated Financial
Statements and Notes thereto. Known trends and contingencies of a
material nature are discussed to the extent considered relevant.
(In millions, except per share data,
year ended December 31) 2012 2011 2010
Operating income $÷676.9 $÷646.7 $÷593.9
Net income attributable to OGE Energy $÷355.0 $÷342.9 $÷295.3
Basic average common
shares outstanding 98.6 97.9 97.3
Diluted average common
shares outstanding 99.1 99.2 98.9
Basic earnings per average common
share attributable to OGE Energy
common shareholders $÷÷3.60 $÷÷3.50 $÷÷3.03
Diluted earnings per average common
share attributable to OGE Energy
common shareholders $÷÷3.58 $÷÷3.45 $÷÷2.99
Dividends declared per common share $1.5950 $1.5175 $1.4625
In reviewing its consolidated operating results, the Company
believes that it is appropriate to focus on operating income as reported
in its Consolidated Statements of Income as operating income indicates
the ongoing profitability of the Company excluding the cost of capital
and income taxes.
(In millions, year ended December 31) 2012 2011 2010
Operating income (loss) by
business segment
OG&E (Electric Utility) $489.4 $472.3 $413.7
Enogex (Natural Gas Midstream Operations)
Natural gas transportation and storage(A) 45.1 56.4 60.4
Natural gas gathering and processing 140.5 118.7 123.9
Other operations(B) 1.9 (0.7) (4.1)
Consolidated operating income $676.9 $646.7 $593.9
(A) During the third quarter of 2012, the operations and activities of EER were fully integrated
with those of Enogex through the creation of a new commodity management organization.
The operations of EER, including asset management activities, have been included in the natural
gas transportation and storage segment and have been restated for all prior periods presented.
(B) Other Operations primarily includes the operations of the holding company and consolidating
eliminations.
(A)(B)