UGI Reports Lower Earnings from Gas Marketing

UGI Corp. reported that its Midstream & Marketing segment, which includes UGI Energy Services, reported lower earnings for the three months ended December 31, 2011 of $13.9 million, versus $18.1 million a year ago.

The decline was due to warmer than normal weather during the 2011 quarter, and the lower volatility in the commodity markets which decreased opportunities for asset management.

Midstream & Marketing's net income also declined as the benefits of increased natural gas storage income were more than offset by lower earnings from natural gas marketing, electric generation, and capacity management activities.

Quarterly revenues for the segment were $238.8 million, down from $279.6 million a year ago. Revenues decreased primarily due to lower revenues from natural gas marketing activities resulting from modestly lower volumes sold and lower average natural gas prices. Partially offsetting this decrease were increased revenues from retail power sales and gas storage services.

Total margin for the quarter was relatively flat, at $40.0 million, versus $39.5 million a year ago, as greater natural gas storage margin ($6.3 million) was largely offset by lower natural gas marketing margins and lower total margin from capacity management and electric generation.

Unit margins from gas marketing have "held up," executives said, with the lower volumes rather unit margins accounting for the lower gas marketing margins.

Also negatively impacting earnings were greater operating, administrative, and depreciation expenses associated with electric generation assets as well as higher operating expenses associated with energy marketing and gas storage services.