NORTHWEST NATURAL GAS CO - FORM 8-K - EX-99.1 - PRESS RELEASE

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8-K - FORM 8-K - NORTHWEST NATURAL GAS CO	form8-kq32014.htm

Exhibit 99.1



FOR IMMEDIATE RELEASE:	November 4, 2014

NW Natural Reports Results for the

Three and Nine Months Ended September 30, 2014

___________________________________________________


•	Consolidated net loss was $8.7 million for the third quarter of 2014, or $0.32 per share, compared to $8.2 million, or $0.31 per share, in 2013.


•	Consolidated earnings for the nine months ended Sept. 30, 2014 were $30.2 million, or $1.11 per share, compared to $31.5 million, or $1.17 per share, in 2013.


•	Utility margin and net income increased $3.1 million and $0.8 million, respectively, during the third quarter of 2014 compared to last year, while gas storage operating revenues and net income decreased $2.7 million and $1.4 million, respectively.


•	Customer growth rate increased to 1.3% at Sept. 30, 2014, compared to 1.1% at Sept. 30, 2013.


•	NWN utility ranked first in residential customer satisfaction among large gas utilities in the West in the 2014 J.D. Power and Associates Study.


•	Utility received approval for new rate schedules designed to provide no-notice gas storage service under a currently proposed Mist expansion.


•	Dividend increase announced for the fourth quarter to $0.465 per share, which reflects the 59th consecutive year of increasing dividends paid and an indicated rate of $1.86 per share.

___________________________________________________

PORTLAND, ORE.—Northwest Natural Gas Company, dba NW Natural (NYSE: NWN), reported a consolidated net loss of $8.7 million for the third quarter of 2014, or $0.32 per share, compared to a net loss of $8.2 million, or $0.31 per share, for the third quarter of 2013. Consolidated net income was $30.2 million, or $1.11 per share, for the first nine months of 2014, compared to net income of $31.5 million, or $1.17 per share, for the first nine months of 2013. The Company's earnings are typically lower during the third quarter due to the effect of decreased heating requirements on utility results.

"During the quarter the Company received notice that it once again ranked first in the J.D. Power residential customer satisfaction survey of large gas utilities in the West. This is the 13^th consecutive year of top three rankings for the Company,” said Gregg Kantor, President and Chief Executive Officer. “We also announced in October a dividend increase for the fourth quarter, marking 59 consecutive years of increasing dividends paid. These achievements reflect the deep commitment we have to deliver great service to our customers and solid returns for our shareholders.”

Consolidated Results

Net income for the third quarter of 2014 was down $0.5 million compared to the same period last year due to a $3.1 million increase in utility margin, offset by a $2.7 million decrease in gas storage operating revenues and a $0.9 million decrease in other income.

Net income for the first nine months of 2014 was $1.3 million lower than the same period last year due to an $11.1 million increase in utility margin, offset by a $5.6 million decrease in gas storage operating revenues and a combined $7.5 million decrease in net income from operation and maintenance expense, depreciation expense, and other income.

Utility Results

For the three months ended Sept. 30, 2014, the utility's net loss decreased by $0.8 million to $8.8 million, compared to a $9.6 million net loss for the same period in 2013. The decrease was driven by a $3.1 million increase in utility margin primarily due to customer growth, improvements in industrial and commercial

margins, and additional rate-base returns on certain investments. Partially offsetting these margin gains were increases in operations and maintenance expense and depreciation expense, as well as a decrease in other income.

For the nine months ended Sept. 30, 2014, the utility's net income increased by $2.3 million to $29.4 million, compared to $27.1 million for the same period in 2013. Results reflected an increase in utility margin from customer growth, higher commercial and industrial margins, and rate-base returns on certain investments, partially offset by the same factors noted above.

Customer growth. NW Natural's customer growth rate for the trailing 12-month period ended Sept. 30, 2014 was 1.3%, with the Company serving approximately 700,000 customers. This compares to a growth rate of 1.1% for the same period in 2013. The Company added about 9,000 new customers during the last 12 months, compared to 7,800 customers added a year ago.

Utility Volumes and Margin.



	Three Months Ended				Nine months ended
	September 30,				September 30,				Change						% Change
Dollars and therms in thousands	2014		2013		2014		2013		QTD			YTD			QTD		YTD
Gas sales & transportation deliveries	152,329		159,133		766,799		771,420		(6,804		)	(4,621		)	(4.3	)%	(0.6	)%
Utility margin	$	50,134	$	47,050	$	250,223	$	239,151	$	3,084		$	11,072		6.6	%	4.6	%

For the quarter, total gas sales and transportation deliveries decreased 6.8 million therms, or 4%, compared to the same period last year due to warmer weather particularly in September, which delayed fall re-connections to gas service. However, utility margin for the quarter increased 7%, or $3.1 million, over last year due to customer growth and added rate-base returns on gas reserve and other investments as well as contributions related to our decoupling mechanism, which adjusts margin for changes in average use by residential and commercial customers.

For the nine-month period, total gas sales and transportation deliveries decreased 4.6 million therms, or 1%, mainly due to weather that was 6% warmer than last year and 8% warmer than average. Utility margin for the first nine months increased 5%, or $11.1 million, compared to last year primarily due to a $13.0 million increase from customer growth in all sectors, higher industrial margins, and added rate-base returns on our gas reserve and other investments. These increases were partially offset by $2.6 million of losses from the impact of higher gas costs on our incentive sharing mechanism.

North Mist Gas Storage Rate Schedules. The Company received approval for two new rate schedules from the OPUC in October 2014. These schedules are intended to allow the Company to provide no-notice gas storage service from Mist and are specifically designed to support services associated with the proposed expansion. The expansion would be supported by a contract with Portland General Electric (NYSE: POR) to serve gas-fired electric power generation facilities at Port Westward, which is located approximately 15 miles from Mist. This expansion project is subject to final approval of project costs, as well as notice to proceed from PGE, and the receipt of various other permits, certain regulatory approvals, and other conditions. If the Company receives final approval of projected costs and a notice to proceed from PGE in the fourth quarter of 2014, the Company would expect the expansion to proceed with an in-service date of 2017.

Gas Reserves. In the second quarter of 2014, the Company was notified by Jonah Energy LLC of investment opportunities in the sections of the Jonah field where the Company has ownership interests. The Company elected to participate in additional wells drilled in 2014 and may have the opportunity to participate in more wells in the future. The Company currently expects to invest approximately $10 million in 2014 under the amended agreement bringing the total investment under both the original and amended agreement in 2014 to approximately $29 million.

The Company filed an application requesting regulatory deferral in Oregon for these additional investments. We intend to file seeking cost recovery for additional wells drilled in 2014. A decision on the wells drilled in 2014 will occur when the parties and Commission review our filing seeking cost recovery and is expected in 2015. The cumulative investment of approximately $8 million in these additional wells has been accounted for as a utility investment.

Gas Storage Results

For the third quarter of 2014, gas storage net income decreased $1.4 million compared to the same period last year. The decrease was mainly driven by a $2.7 million drop in operating revenues from re-contracting certain expiring storage capacity for the 2014-15 gas storage year at substantially lower market prices than in previous years.

For the first nine months of 2014, gas storage net income decreased $4.0 million to $0.5 million, compared to $4.5 million for the same period in 2013. The decrease reflected a $5.6 million reduction in operating revenues due to re-contracting certain expiring capacity described above and a $1.7 million increase in power and repair costs at our Gill Ranch facility. The power costs increased due to higher injections into storage during the second quarter to replenish low storage levels following higher withdrawals this past winter. The repair cost increase reflected work at our Gill Ranch facility, which has now been in operation for three annual cycles. The Company is developing long-term repair and maintenance plans as well as evaluating potential capital improvements that may be needed to enhance the operations of the facility.

Consolidated Operations and Maintenance (O&M) Expense

Operations and maintenance expense for the third quarter of 2014 increased $0.3 million, or 1%, compared to last year due to higher utility non-payroll expenses offset by lower incentive compensation accruals. For the first nine months of 2014, O&M expenses increased $3.5 million, or 3%, compared to the same period for 2013 due to higher utility system maintenance and safety program and professional service costs, increased power and repair costs at our Gill Ranch facility; and a comparative increase in bad debt expense at the utility reflecting an adjustment to the uncollectible provision account balance in 2013. Offsetting these increases was a decrease in employee incentive compensation accruals.

Other Income and Expense, Net

Other income and expense, net for the third quarter of 2014 decreased $0.9 million and for the nine month period decreased $1.2 million compared to the same periods last year. The decreases primarily reflected lower interest income on net deferred regulatory balances as a result of insurance proceeds credited to regulatory balances for environmental costs. Our environmental deferred cost account subject to interest accruals changed from a net regulatory asset balance of $56 million at January 1, 2014 to a net regulatory liability balance of $33 million at Sept. 30, 2014.

Cash Flows

Cash provided by operations for the first nine months of 2014 was $215 million, compared to $157 million for the same period in 2013. The variance mainly reflected the receipt of environmental insurance proceeds, which totaled $102 million pre-tax, offset by an $18.0 million decrease from changes in deferred gas costs balances due to higher actual gas prices than prices set in the purchased gas adjustment, and a decrease of $11.3 million from changes in deferred tax liabilities mainly due to the tax effect of deferred environmental recoveries.

Earnings Guidance for 2014

The Company reaffirmed earnings guidance for 2014 in the range of $2.15 to $2.35 per share. The Company’s 2014 earnings guidance assumes a continued economic recovery, customer growth from the utility segment, average weather conditions, no significant changes in prevailing legislative and regulatory policies or outcomes, and resolution of the environmental cost recovery mechanism during 2014.

Dividend Declaration

The board of directors of NW Natural declared a quarterly dividend of 46.5 cents a share on the Company’s common stock. The dividends will be payable on Nov. 14, 2014 to shareholders of record on Oct 31, 2014. Currently, the Company’s indicated annual dividend rate is $1.86 per share.

Conference Call Arrangements

As previously reported, NW Natural will conduct a conference call and webcast starting at 8 a.m. Pacific Time (11 a.m. Eastern Time) on Nov. 4, 2014 to review the Company's financial and operating results for the three and nine months ended Sept. 30, 2014.

To hear the conference call live, please dial 1-888-317-6016 within the United States and 1-855-669-9657 from Canada. International callers can dial 1-412-317-6016. To access the conference replay, please call 1-877-344-7529 and enter the conference identification pass code (10053125). To hear the replay from international locations, please dial 1-412-317-0088.

To hear the conference by webcast, log on to NW Natural's corporate website at www.nwnatural.com.

Forward-Looking Statements

This report, and other presentations made by NW Natural from time to time, may contain forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as "anticipates," "intends," "plans," "seeks," "believes," "estimates," "expects," and similar references to future periods. Examples of forward-looking statements include, but are not limited to, statements regarding the following: plans, objectives, goals, strategies, future events, economic recovery, investments, hedge efficacy, gas reserve investments and their financial value and benefit, customer growth, weather, commodity and other costs, customer rates or rate recovery, financial positions, revenues and earnings, dividends, performance, operations and maintenance and capital expenses, facility enhancements, storage facility expansion or conditions or timing thereof, timing or effects of future regulatory proceedings or future regulatory approvals, effects of regulatory mechanisms, including, but not limited to, the environmental cost recovery mechanism and gas reserve investments, contracting levels or pricing, and other statements that are other than statements of historical facts.

Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. We caution you therefore against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. Important factors that could cause actual results to differ materially from those in the forward-looking statements are discussed by reference to the factors described in Part I, Item 1A "Risk Factors", and Part II, Item 7 and Item 7A "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Quantitative and Qualitative Disclosure about Market Risk" in the Company's most recent Annual Report on Form 10-K and in Part I, Items 2 and 3 "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Quantitative and Qualitative Disclosures About Market Risk", and Part II, Item 1A, "Risk Factors", in the Company's quarterly reports filed thereafter.

All forward-looking statements made in this report and all subsequent forward-looking statements, whether written or oral and whether made by or on behalf of the Company, are expressly qualified by these cautionary statements. Any forward-looking statement speaks only as of the date on which such statement is made, and

we undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law. New factors emerge from time to time and it is not possible for the Company to predict all such factors, nor can it assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statements.

About NW Natural

NW Natural (NYSE:NWN) is headquartered in Portland, Ore., and provides natural gas service to about 700,000 residential, commercial, and industrial customers through 14,000 miles of mains and service lines in western Oregon and southwestern Washington. It is the largest independent natural gas utility in the Pacific Northwest with $2.8 billion in total assets. NW Natural and its subsidiaries currently own and operate underground gas storage facilities with designed storage capacity of approximately 31 Bcf in Oregon and California. Additional information is available at www.nwnatural.com.

# # #



Investor Contact:			Media Contact:
Bob Hess			Kim Heiting
Phone: 503-220-2388			Phone: 503-220-2366
Email: rsh@nwnatural.com			Email: kah@nwnatural.com



NORTHWEST NATURAL GAS COMPANY
Comparative Income Statements
(Consolidated - Unaudited)


		Three Months Ended
In thousands, except per share amounts	09/30/14			09/30/13			Change			% Change
Income from operations	$	(5,077	)	$	(3,787	)	$	(1,290	)	(34	)%
Net loss		(8,733	)		(8,233	)		(500	)	(6	)

Diluted average shares of common stock outstanding		27,189			26,987			202		1
Diluted loss per share of common stock		(0.32	)		(0.31	)		(0.01	)	(3	)

		Nine Months Ended
In thousands, except per share amounts	09/30/14			09/30/13			Change			% Change
Income from operations	$	83,217		$	83,502		$	(285	)	—	%
Net income		30,222			31,532			(1,310	)	(4	)

Diluted average shares of common stock outstanding		27,195			27,013			182		1
Diluted earnings per share of common stock		1.11			1.17			(0.06	)	(5	)

		Twelve Months Ended
In thousands, except per share amounts	09/30/14			09/30/13			Change			% Change
Income from operations	$	142,461		$	139,973		$	2,488		2	%
Net income		59,228			59,679			(451	)	(1	)

Diluted average shares of common stock outstanding		27,158			26,992			166		1
Diluted earnings per share of common stock		2.18			2.21			(0.03	)	(1	)



NORTHWEST NATURAL GAS COMPANY
Consolidated Balance Sheets (Unaudited)				September 30,			September 30,
In thousands				2014			2013
Assets:
Current assets:
	Cash and cash equivalents		$	8,275		$	16,105
	Accounts receivable			30,468			29,821
	Accrued unbilled revenue			12,442			16,493
	Allowance for uncollectible accounts			(840	)		(802	)
	Regulatory assets			52,250			26,293
	Derivative instruments			5,587			1,452
	Inventories			86,600			75,419
	Gas reserves			21,455			18,083
	Income taxes receivable			7,639			909
	Deferred tax assets			5,100			—
	Other current taxes			19,158			11,936
		Total current assets		248,134			195,709
Non-current assets:
	Property, plant, and equipment			2,990,662			2,865,860
	Less: Accumulated depreciation			883,568			846,346
		Total property, plant, and equipment, net		2,107,094			2,019,514
	Gas reserves			131,745			115,218
	Regulatory assets			263,321			387,676
	Derivative instruments			602			1,682
	Other investments			67,980			67,548
	Restricted cash			3,000			4,000
	Other non-current assets			11,648			14,566
		Total non-current assets		2,585,390			2,610,204
		Total assets	$	2,833,524		$	2,805,913
Liabilities and equity:
Current liabilities:
	Short-term debt		$	190,000		$	141,300
	Current maturities of long-term debt			40,000			60,000
	Accounts payable			71,018			67,652
	Taxes accrued			11,876			11,302
	Interest accrued			10,427			11,143
	Regulatory liabilities			23,352			16,506
	Derivative instruments			5,520			8,275
	Other current liabilities			33,481			26,289
		Total current liabilities		385,674			342,467
Long-term debt				621,700			681,700
Deferred credits and other non-current liabilities:
	Deferred tax liabilities			499,809			463,566
	Regulatory liabilities			312,500			298,220
	Pension and other postretirement benefit liabilities			142,502			210,943
	Derivative instruments			551			1,404
	Other non-current liabilities			118,531			77,322
		Total deferred credits and other non-current liabilities		1,073,893			1,051,455
Equity:
	Common stock			371,657			361,789
	Retained earnings			386,461			377,096
	Accumulated other comprehensive loss			(5,861	)		(8,594	)
		Total equity		752,257			730,291
		Total liabilities and equity	$	2,833,524		$	2,805,913



NORTHWEST NATURAL GAS COMPANY					Nine Months Ended
Consolidated Statements of Cash Flows (Unaudited)					September 30,
In thousands					2014			2013
Operating activities:
	Net income			$	30,222		$	31,532
	Adjustments to reconcile net income to cash provided by operations:
		Depreciation and amortization			59,236			56,474
		Regulatory amortization of gas reserves			13,795			8,132
		Deferred tax liabilities, net			10,721			22,003
		Non-cash expenses related to qualified defined benefit pension plans			3,795			4,256
		Contributions to qualified defined benefit pension plans			(10,500	)		(8,900	)
		Deferred environmental recoveries, net of (expenditures)			89,537			(10,805	)
		Other			(1,692	)		(2,116	)
		Changes in assets and liabilities:
			Receivables		100,931			70,154
			Inventories		(25,931	)		(7,817	)
			Taxes accrued		(3,085	)		3,357
			Accounts payable		(28,762	)		(19,860	)
			Interest accrued		3,324			5,190
			Deferred gas costs		(22,173	)		(4,159	)
			Other, net		(4,554	)		9,961
		Cash provided by operating activities			214,864			157,402
Investing activities:
	Capital expenditures				(86,552	)		(86,287	)
	Utility gas reserves				(21,734	)		(41,777	)
	Proceeds from sale of assets				—			6,580
	Restricted cash				1,000			—
	Other				82			2,116
		Cash used in investing activities			(107,204	)		(119,368	)
Financing activities:
	Common stock issued, net				5,460			3,754
	Long-term debt issued				—			50,000
	Long-term debt retired				(80,000	)		—
	Change in short-term debt				1,800			(48,950	)
	Cash dividend payments on common stock				(37,442	)		(36,783	)
	Other				1,326			1,127
		Cash used in financing activities			(108,856	)		(30,852	)
Increase (decrease) in cash and cash equivalents					(1,196	)		7,182
Cash and cash equivalents, beginning of period					9,471			8,923
Cash and cash equivalents, end of period				$	8,275		$	16,105

Supplemental disclosure of cash flow information:
	Interest paid			$	30,701		$	28,353
	Income taxes paid				14,945			570



NORTHWEST NATURAL GAS COMPANY
Financial Highlights (Unaudited)
Third Quarter - 2014


			Three Months Ended							Nine Months Ended							Twelve Months Ended
In thousands, except per share amounts, customer, and degree day data			September 30,							September 30,							September 30,
		2014			2013			Change	2014			2013			Change	2014			2013			Change
Operating revenues		$	87,199		$	88,195		(1)%	$	513,754		$	497,770		3%	$	774,502		$	727,246		6%

Operating expenses:
	Cost of gas		32,227			33,655		(4)		245,708			235,156		4		383,850			348,668		10
	Operations and maintenance		32,968			32,636		1		103,085			99,610		3		140,088			133,544		5
	General taxes		7,143			6,954		3		22,508			23,028		(2)		29,436			29,900		(2)
	Depreciation and amortization		19,938			18,737		6		59,236			56,474		5		78,667			75,161		5
	Total operating expenses		92,276			91,982		—		430,537			414,268		4		632,041			587,273		8
Income from operations			(5,077	)		(3,787	)	(34)		83,217			83,502		—		142,461			139,973		2
Other income and expense, net			407			1,300		(69)		2,052			3,270		(37)		3,451			4,157		(17)
Interest expense, net			10,805			11,347		(5)		34,024			33,543		1		45,653			44,537		3
Income before income taxes			(15,475	)		(13,834	)	(12)		51,245			53,229		(4)		100,259			99,593		1
Income tax expense			(6,742	)		(5,601	)	20		21,023			21,697		(3)		41,031			39,914		3
Net income (loss)		$	(8,733	)	$	(8,233	)	(6)	$	30,222		$	31,532		(4)	$	59,228		$	59,679		(1)

Common shares outstanding:
	Average diluted for period		27,189			26,987				27,195			27,013				27,158			26,992
	End of period		27,203			27,001				27,203			27,001				27,203			27,001

Per share information:
	Diluted earnings (loss) per share	$	(0.32)		$	(0.31)				1.11			1.17			$	2.18		$	2.21
	Dividends declared per share of common stock		0.460			0.455				1.380			1.365				1.84			1.82
	Book value per share, end of period		27.65			27.05				27.65			27.05				27.65			27.05
	Market closing price, end of period		42.25			41.98				42.25			41.98				42.25			41.98

Capital Structure, end of period:
	Common stock equity		46.9	%		45.3	%			46.9	%		45.3	%			46.9	%		45.3	%
	Long-term debt		38.8			42.2				38.8			42.2				38.8			42.2
	Short-term debt (including amounts due in one year)		14.3			12.5				14.3			12.5				14.3			12.5
	Total		100.0	%		100.0	%			100.0	%		100.0	%			100.0	%		100.0	%

Utility operating statistics:
Customers, end of period			695,902			687,018		1.3%		695,902			687,018		1.3%		695,902			687,018		1.3%
Utility volumes (therms):
	Residential and commercial sales		49,843			54,052				420,532			426,029				666,409			626,498
	Industrial sales and transportation		102,486			105,081				346,267			345,391				475,401			471,151
Total utility volumes sold and delivered			152,329			159,133				766,799			771,420				1,141,810			1,097,649
Utility operating revenues:
	Residential and commercial sales	$	68,369		$	67,584			$	451,557		$	434,105			$	690,702		$	641,602
	Industrial sales and transportation		15,588			14,625				53,955			49,373				73,462			67,862
	Other revenues		602			600				3,245			3,371				3,928			4,245
	Less: Revenue taxes		2,198			2,104				12,826			12,542				19,286			18,284
Total utility operating revenues			82,361			80,705				495,931			474,307				748,806			695,425
	Less: Cost of gas		32,227			33,655				245,708			235,156				383,850			348,668
Utility margin		$	50,134		$	47,050			$	250,223		$	239,151			$	364,956		$	346,757

Degree days:
	Average (25-year average)		95			95				2,641			2,641				4,240			4,249
	Actual		18			86		(79)%		2,438			2,581		(6)%		4,236			4,016		5%
Percent colder (warmer) than average weather			(81	)%		(9	)%			(8	)%		(2	)%			—	%		(5	)%

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