Oregon utility owner Northwest Natural Gas Co. took a $142 million charge in the fourth quarter of 2017 to write down the value of its Gill Ranch storage facility in California as it moves toward a potential sale of the asset.
The facility was conceived in 2007 amid surging natural gas prices and supply concerns, both of which abated when producers started to tap supplies of shale gas. Gill Ranch, near Fresno, Calif., was also hurt by a large number of competing facilities, CEO David Anderson said on a conference call.
"The abundant supply of natural gas resulted in substantial reduction in prices, volatility and in seasonal spreads, all of which negatively affected the value of storage in California," Anderson said on the Feb. 23 call. "During the fourth quarter, we completed a comprehensive strategic review process that evaluated various alternatives for Gill Ranch, including a potential sale, and determined Gill Ranch was a noncore asset. The continued low contracting price for storage and information gained from a strategic review led us to re-evaluate the carrying value of the facility."
NW Natural, which supplies gas to customers in its headquarter city of Portland, Ore., and nearby Vancouver, Wash., said its core utility business remains strong amid population growth in the region. The company had a 1.8% customer growth rate in 2017, the highest since 2007, Anderson said. The company has been refurbishing a pair of LNG storage facilities it uses to supply gas to customers during the coldest winter days. It completed an approximately $25 million upgrade of its Newport LNG facility in 2017 and spent an initial $10 million at its Portland plant.
The city of Portland is building infrastructure to allow it to process renewable natural gas from its largest wastewater plant to meet pipeline specifications. Some of that gas will be used to power heavy-duty vehicles, and the rest will be put on NW Natural's pipeline system. "The vehicle refueling station component of the project is complete and we expect RNG to be flowing into Northwest Natural system by early 2019," Anderson said.
NW Natural reported adjusted net income of $29.9 million, or $1.04 per share, for the fourth quarter of 2017, up from $28.3 million, or $1.00 per share, a year ago. The S&P Capital IQ consensus normalized earnings estimate for the fourth quarter was 98 cents per share.