ATLANTA, April 30 /PRNewswire-FirstCall/ -- AGL Resources Inc. ( NYSE:ATG ) today reported first quarter net income of $89 million, or $1.17 per basic and $1.16 per diluted share, compared to net income of $102 million, or $1.31 per basic share ($1.30 per diluted share) reported for the prior-year period.

   The company's earnings results reflect lower contributions from the retail energy operations and wholesale services segments, offset slightly by improved results in the energy investments segment. Results for the distribution operations segment were flat year-over-year.

   "I am very pleased with the performance of each of our business units given the current set of challenging economic and market conditions during the quarter," said John W. Somerhalder II, AGL Resources' chairman, president and chief executive officer. "Our quarterly results continued to validate our belief that the fundamentals of our business remain strong and position us well for the rest of the year."

  Q1 2008 RESULTS BY BUSINESS SEGMENT

  Distribution Operations

   First quarter 2008 earnings in the distribution operations segment were flat relative to the prior-year period. Both operating margin and operating expenses were flat during the quarter as compared to the same period in 2007.

   During the first quarter of 2008, customer growth increased about 0.3 percent as compared to the first quarter of 2007, reflecting a net addition of 8,000 customers.

Retail Energy Operations

   The retail energy operations segment, consisting of SouthStar Energy Services, contributed EBIT of $46 million for the first quarter of 2008, compared to $63 million for the same period in 2007.

   Operating margin decreased $21 million as compared to the prior-year quarter. Rising commodity prices and reduced opportunities related to the management of storage and transportation assets throughout the first quarter of 2008 negatively impacted SouthStar's operating margins by $16 million. More favorable market conditions and decreasing gas prices in 2007 enabled SouthStar to recognize higher operating margins in the first quarter of 2007. The remainder of the operating margin decline during the first quarter of 2008, relative to the prior year period, resulted from a consent agreement with the Georgia Public Service Commission ($3 million) related to Georgia retail pricing and lower margins in Ohio and Florida ($2 million).

   Operating expenses increased $2 million, reflecting higher marketing and sales expenses and slightly higher bad debt expense during the quarter as compared to the prior-year quarter.

   Minority interest decreased $6 million as a result of lower operating income in first quarter 2008 as compared with the same period in 2007.

Wholesale Services

   The wholesale services segment, consisting primarily of Sequent Energy Management, contributed $1 million in EBIT in first quarter 2008, an $8 million decrease from its results during the first quarter of 2007. Sequent had stronger commercial activity during the quarter than in the prior-year period, a $5 million increase, slightly exceeding its expectations for economic value generation during the quarter.

   Although commercial activity was stronger year-over-year, increases in future natural gas prices and transportation values reduced reported results for the period as changes in those factors affect the valuation of storage and transportation hedges. In the first quarter of 2008, losses of $11 million associated with storage hedge positions were $5 million higher than during the prior-year period, as a result of more dramatic increases in forward NYMEX prices. In addition, Sequent recorded losses of $4 million during the current-year quarter associated with transportation capacity hedges due to the widening of future locational spreads. Sequent had no significant gains or losses on transportation capacity hedges during the first quarter of 2007. These conditions led to a reduction in reported operating margin of $4 million year-over-year.

   Wholesale services' operating expenses increased $4 million, primarily due to higher payroll and other operating costs associated with continued growth and expansion of the business, including the acquisition of Compass Energy, a commercial and industrial marketer, during 2007.

Energy Investments

   The energy investments segment contributed EBIT of $5 million for the first quarter of 2008, as compared with EBIT of $2 million during the prior-year period. These results reflect an increase of $2 million in operating margin due to higher interruptible and firm revenue at Jefferson Island Storage & Hub, as well as higher revenues from AGL Networks resulting from a network expansion project. Operating expenses declined $1 million because of lower project development expense during the quarter relative to the prior-year period.

INTEREST EXPENSE AND INCOME TAXES

   Interest expense for the first quarter of 2008 was $30 million, down $1 million from the first quarter of 2007, mainly the result of a decrease in short-term interest rates, partially offset by higher average debt outstanding.

   Income taxes for the first quarter of 2008 were $54 million, down $8 million compared to the first quarter of 2007, reflecting lower consolidated earnings for the quarter relative to the prior year. The effective tax rate was 37.6 percent, compared with 37.9 percent for the same period in 2007.

2008 EARNINGS OUTLOOK

   AGL Resources expects its 2008 earnings to be in the range of $2.75 to $2.85 per share. This earnings expectation assumes normal weather and average volatility in natural gas prices. However, changes in these events or other circumstances the company cannot anticipate could materially impact earnings, and could result in earnings for 2008 significantly above or below this outlook.

About AGL Resources

   AGL Resources ( NYSE:ATG ) , an Atlanta-based energy services company, serves more than 2.2 million customers in six states. The company also owns Houston-based Sequent Energy Management, an asset manager serving natural gas wholesale customers throughout North America. As a 70 percent owner in the SouthStar partnership, AGL Resources markets natural gas to consumers in Georgia under the Georgia Natural Gas brand. The company also owns and operates Jefferson Island Storage & Hub, a high-deliverability natural gas storage facility near the Henry Hub in Louisiana. For more information, visit www.aglresources.com .

                            AGL Resources Inc.
               Condensed Consolidated Statements of Income
                        For the Three Months Ended
                         March 31, 2008 and 2007
                 (In millions, except per share amounts)
                               (Unaudited)

                                                   Three Months

                                      3/31/2008    3/31/2007     Fav/(Unfav)

  Operating Revenues                   $1,012          $973           $39
  Cost of Gas                             657           595           (62)
  Operation and Maintenance Expenses      119           116            (3)
  Depreciation and Amortization            36            35            (1)
  Taxes Other Than Income                  12            11            (1)
  Total Operating Expenses                824           757           (67)
  Operating Income                        188           216           (28)
  Other Income                              1             1             -
  Minority Interest                       (16)          (22)            6
  Earnings Before Interest & Taxes        173           195           (22)
  Interest Expense                         30            31             1
  Earnings Before Income Taxes            143           164           (21)
  Income Taxes                             54            62             8
  Net Income                              $89          $102          $(13)

  Earnings Per Common Share
  Basic                                 $1.17         $1.31        $(0.14)
  Diluted                               $1.16         $1.30        $(0.14)

  Shares Outstanding
  Basic                                  76.0          77.5           1.5
  Diluted                                76.3          77.9           1.6



                            AGL Resources Inc.
                              EBIT Schedule
                        For the Three Months Ended
                         March 31, 2008 and 2007
                 (In millions, except per share amounts)
                               (Unaudited)

                                                 Three Months

                                      3/31/2008    3/31/2007     Fav/(Unfav)

  Distribution Operations                $123          $123            $-
  Retail Energy Operations                 46            63           (17)
  Wholesale Services                        1             9            (8)
  Energy Investments                        5             2             3
  Corporate                                (2)           (2)            -
  Consolidated EBIT                       173           195           (22)
  Interest Expense                         30            31             1
  Income Taxes                             54            62             8

  Net Income                              $89          $102          $(13)

  Earnings per Common Share

  Basic                                 $1.17         $1.31        $(0.14)

  Diluted                               $1.16         $1.30        $(0.14)



                            AGL Resources Inc.
         Reconciliation of Operating Margin to Operating Revenues
                        For the Three Months Ended
                         March 31, 2008 and 2007
                              (In millions)
                               (Unaudited)

                                                   Three Months

                                      3/31/2008    3/31/2007     Fav/(Unfav)

  Operating Revenues                   $1,012         $973           $39
  Cost of Gas                             657          595           (62)
  Operating Margin                       $355         $378          $(23)

Source: AGL Resources Inc.