Southwest Gas sees profit increase in first quarter

Local natural gas utility Southwest Gas Corp. improved its financial results in the first quarter, with higher earnings thanks to a rate change and cooler weather in some regional divisions.

The utility's net income was $64.6 million, or $1.43 a share, in the quarter ended March 31, up from $50 million, or $1.13 per share, a year earlier.

Quarterly revenue fell 3.1 percent to $668.8 million from $689.9 million.

The results bested analysts' estimates, which Thomson Reuters pegged at income of $1.32 a share on revenue of $664.5 million.

In a statement, Southwest Gas Chief Executive Officer Jeffrey Shaw called the results a "significant improvement" over the prior year's performance, and he credited rate relief for the company and colder winter weather in the utility's Arizona segment for the company's latest numbers. Arizona experienced one of its warmest winters in 100 years in 2009, but cooler temperatures prevailed a year later.

"Our sensible cost controls kept operating-cost increases to a minimum, which also contributed to the stronger earnings," Shaw added.

Southwest Gas' operating margin, defined as operating revenue minus the cost of gas sold, increased $23 million year over year in the first quarter. An increase in the rates that cover operating expenses provided $10 million of that increase. Higher heating demand generated the rest of the gain.

Though rates related to operating expenses such as taxes, capital investments and investor returns increased on Nov. 1, the state Public Utilities Commission simultaneously cut rates that Southwest Gas charges for fuel and interest costs. The end result was a 2.5 percent drop in wintertime natural gas bills.

Southwest Gas called customer growth in the 12 months before March 31 "negligible." The utility added 9,000 net new clients, for a total of 1.83 million customers in Nevada, Arizona and California.

The company also indicated that it could enjoy lower borrowing costs going forward: Financial analysis company Standard & Poor's recently revised its credit rating outlook for Southwest Gas from stable to positive.

Southwest Gas also announced a third-quarter cash dividend of 25 cents a share.

The company's shares fell 26 cents, or 0.84 percent, to close at $30.79 Thursday on the New York Stock Exchange.

Contact reporter Jennifer Robison
at jrobison@reviewjournal.com or 702-380-4512.