Gas Natural Inc. Reports First Quarter 2012 Results and Announces Monthly Dividend of $0.045 per Share

- First quarter Natural Gas Operations earnings impacted by unseasonably warm weather

- Board of Directors declared a monthly dividend of $0.045 per share to shareholders of record as of May 15, 2012. The dividend will be payable on May 31, 2012.

News provided by

Gas Natural Inc.

May 15, 2012, 06:35 ET

MENTOR, Ohio, May 15, 2012 /PRNewswire/ -- Gas Natural Inc. (NYSE MKT: EGAS) ("Gas Natural" or the "Company"), a natural gas utility company serving approximately 70,000 customers in seven states, reported financial results for the first quarter ended March 31, 2012.

Consolidated net income for the first quarter of 2012 was $3.3 million, or $0.40 per diluted share, compared with $4.3 million, or $0.52 per diluted share, for the first quarter of 2011. The decline was the result of the Natural Gas Operations segment, where net income was down by $906,000 from the first quarter of 2011, primarily due to significantly warmer weather in all of the Company's service territories.

Richard M. Osborne, Gas Natural's chairman and chief executive officer, commented, "We remain encouraged by the natural gas market despite experiencing lower income for the first quarter, where all of our service territories were impacted by the unusually warm temperatures. We plan to continue our investments to satisfy the growing customer interest in our North Carolina and Maine utilities and expect to augment our growth with acquisitions. Combined with operational efficiencies, we believe this growth strategy will drive future results."

Gas Natural acquired the stock of Public Gas Company, Inc. (PGC) for $1.6 million from Kentucky Energy Development, LLC, on April 1, 2012. PGC is a regulated natural gas distribution company serving approximately 1,600 customers in eight counties in the eastern part of Kentucky.

On April 18, 2012, the Company entered into a non-binding term sheet to acquire John D. Oil and Gas Marketing Company, LLC ("JDOGM"), an Ohio limited liability company. JDOGM is an established natural gas marketing company serving customers in Northern Ohio. This acquisition would give Gas Natural the opportunity to expand its natural gas marketing efforts into Northern Ohio and to evaluate the potential of various natural gas shale plays in Ohio.

Richard M. Osborne is the majority owner and manager of JDOGM. This transaction has been approved by a special committee of the Board that evaluated the opportunity. The acquisition is dependent upon final documentation and regulatory and shareholder approval. As a result, there can be no guaranty the transaction will be completed.

Natural Gas Operations Segment

The Company annually distributes over 32 billion cubic feet of natural gas to approximately 70,000 customers through regulated utilities operating in Kentucky, Maine, Montana, North Carolina, Ohio, Pennsylvania, and Wyoming.

Natural Gas Operations Income Statement

		Three Months Ended March 31,
($ in thousands)		2012	2011

Natural Gas Operations
Operating revenues		$ 29,848	$ 38,220
	Gas Purchased	17,237	24,717
Gross Margin		12,611	13,503
	Operating expenses	6,729	6,616
Operating income		5,882	6,887
	Other income	114	195

Income before interest and taxes		5,996	7,082
	Interest expense	(637)	(387)

Income before income taxes		5,359	6,695
	Income tax expense	(2,006)	(2,436)

Net Income		$ 3,353	$ 4,259

For the first quarter of 2012, the Natural Gas Operations segment contributed net income of $3.4 million, a decrease of 21.3%, or $906,000, from $4.3 million in the same period of 2011. The change reflects the weather that was warmer across the service territories than the temperature in last year's first quarter.

Operating income was $5.9 million, or 46.7% of gross margin, for first quarter 2012 compared with $6.9 million, or 51.0% of gross margin, for 2011.

First quarter interest expense was up $250,000 to $637,000 reflecting higher debt balances.

Full service distribution volumes delivered decreased 652 MMcf to 3,502 MMcf in the first quarter of 2012.

Other Operating Segments

The Marketing and Production segment reported net income of $95,000 for the first quarter 2012 compared with $86,000 for the same period in 2011. This slight increase was primarily the result of additional customers in our marketing operation leading to higher sales volumes and revenue offset by a reduction in production revenues. The Pipeline Operations segment contributed net income of $38,000, an increase of $1,000 from the first quarter 2011. The Propane Operations segment, acquired on August 1, 2011, contributed a net loss of $95,000 in the quarter.

Balance Sheet and Cash Management

Cash and cash equivalents as of March 31, 2012 were $7.9 million, down $2.6 million from the December 31, 2011 balance of $10.5 million.

Cash provided by operating activities decreased by $3.2 million to $8.4 million in the first quarter 2012 compared with $11.5 million in the first quarter of 2011. The decrease in cash from operations was principally due to working capital changes including the recoverable cost of gas, accounts payable and accounts receivable.

Capital expenditures for first quarter 2012 totaled $4.4 million and were primarily focused on expanding the Company's Natural Gas Operations segment and included investments to actively expand systems in North Carolina and Maine to meet the high customer interest in natural gas in those areas. Capital spending in the same period in 2011 was $2.8 million.

The Company maintains two revolving credit facilities with $17.7 million in use at March 31, 2012 compared with $23.2 million at the end of 2011. Long-Term debt was $31.4 million at March 31, 2012 and December 31, 2011.

About Gas Natural Inc.

Gas Natural Inc. distributes and sells natural gas to end-use residential, commercial, and industrial customers. It distributes approximately 32 billion cubic feet of natural gas to approximately 70,000 customers through regulated utilities operating in Kentucky, Maine, Montana, North Carolina, Ohio, Pennsylvania, and Wyoming. The Company's other operations include interstate pipeline, natural gas production, propane and natural gas marketing. The Company's Montana public utility was originally incorporated in 1909. Its strategy for growth is to expand throughput in the Maine and North Carolina markets while looking for acquisitions that are either adjacent to its existing utilities or in under saturated markets.

The Company regularly posts information at its website: www.ewst.com.

Safe Harbor Regarding Forward-Looking Statements

The Company is including the following cautionary statement in this release to make applicable and to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for any forward-looking statements made by, or on behalf of, Gas Natural Inc. Forward-looking statements are all statements other than statements of historical fact, including, without limitation, those that are identified by the use of the words "anticipates," "estimates," "expects," "intends," "plans," "predicts," "believes" and similar expressions. Such statements are inherently subject to a variety of risks and uncertainties that could cause actual results to differ materially from those expressed. Factors that may affect forward-looking statements and the Company's business generally include but are not limited to the Company's ability to successfully integrate the operations of the companies it has recently acquired and consummate additional acquisitions, the Company's continued ability to make dividend payments, the Company's ability to implement its business plan, fluctuating energy commodity prices, the possibility that regulators may not permit the Company to pass through all of its increased costs to its customers, changes in the utility regulatory environment, wholesale and retail competition, the Company's ability to satisfy its debt obligations, including compliance with financial covenants, weather conditions, litigation risks, and various other matters, many of which are beyond the Company's control, the risk factors and cautionary statements made in the Company's public filings with the Securities and Exchange Commission, and other factors that the Company is currently unable to identify or quantify, but may exist in the future. Gas Natural Inc. expressly undertakes no obligation to update or revise any forward-looking statement contained herein to reflect any change in Gas Natural Inc.'s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

For more information contact:

Gas Natural Inc.	Investor Relations: Kei Advisors LLC
Thomas J. Smith, Chief Financial Officer	Deborah K. Pawlowski, Chairman & CEO
Phone: (440) 974-3770	Phone: (716) 843-3908
Email: [email protected]	Email: [email protected]

FINANCIAL TABLES FOLLOW

Gas Natural Inc. and Subsidiaries
Condensed Consolidated Statements of Income and Comprehensive Income
(Unaudited)

	Three Months Ended
	March 31,
	2012	2011
REVENUES
Natural gas operations	$ 29,848,085	$ 38,219,583
Marketing and production	1,907,094	1,825,502
Pipeline operations	107,784	106,324
Propane operations	1,909,158	-
Total revenues	33,772,121	40,151,409

COST OF SALES
Natural gas purchased	17,236,894	24,716,908
Marketing and production	1,395,416	1,399,407
Propane purchased	1,431,269	-
Total cost of sales	20,063,579	26,116,315

GROSS MARGIN	13,708,542	14,035,094

OPERATING EXPENSES
Distribution, general, and administrative	5,212,920	4,657,320
Maintenance	296,235	285,227
Depreciation and amortization	1,243,344	1,035,077
Accretion	38,080	34,610
Taxes other than income	937,490	853,965
Total operating expenses	7,728,069	6,866,199

OPERATING INCOME	5,980,473	7,168,895

LOSS FROM UNCONSOLIDATED AFFILIATE	(2,741)	(62,957)
OTHER INCOME (EXPENSE), net	(72,053)	115,680
INTEREST EXPENSE	(664,069)	(413,179)

INCOME BEFORE INCOME TAXES	5,241,610	6,808,439

INCOME TAX EXPENSE	(1,958,763)	(2,533,685)

NET INCOME	3,282,847	4,274,754

OTHER COMPREHENSIVE INCOME
Unrealized gain on available
for sale securities, net of tax	9,146	18,766

COMPREHENSIVE INCOME	$ 3,291,993	$ 4,293,520

EARNINGS PER SHARE - BASIC AND DILUTED	$ 0.40	$ 0.52

WEIGHTED AVERAGE DIVIDENDS DECLARED
PER COMMON SHARE	$ 0.135	$ 0.135

WEIGHTED AVERAGE SHARES
OUTSTANDING - BASIC	8,154,734	8,150,239

WEIGHTED AVERAGE SHARES
OUTSTANDING - DILUTED	8,162,957	8,158,079

Gas Natural Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)

	March 31,	December 31,
	2012	2011
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$ 7,880,046	$ 10,504,845
Marketable securities	382,500	367,875
Accounts receivable
Trade, less allowance for doubtful accounts of $807,433
and $630,632, respectively	8,527,414	9,381,625
Related parties	555,626	519,084
Unbilled gas	2,653,169	4,232,854
Note receivable - related parties, current portion	10,437	10,256
Inventory
Natural gas and propane	1,821,005	6,967,739
Materials and supplies	2,053,111	1,958,858
Prepaid income taxes	72,920	1,584,869
Prepayments and other	605,425	741,101
Recoverable cost of gas purchases	3,231,242	2,627,416
Deferred tax asset	1,137,100	1,061,314
Total current assets	28,929,995	39,957,836

PROPERTY, PLANT AND EQUIPMENT, net	100,021,399	97,612,257

OTHER ASSETS
Notes receivable - related parties, less current portion	32,731	35,408
Regulatory assets
Property taxes	519,781	590,464
Income taxes	452,645	452,645
Rate case costs	204,192	205,714
Debt issuance costs, net	909,150	869,593
Goodwill	14,607,952	14,607,952
Customer relationships	633,625	639,333
Investment in unconsolidated affiliate	327,610	330,351
Restricted cash	958,647	949,907
Other assets	114,751	159,954
Total other assets	18,761,084	18,841,321

TOTAL ASSETS	$ 147,712,478	$ 156,411,414

Gas Natural Inc. and Subsidiaries
Condensed Consolidated Balance Sheets, Continued
(Unaudited)

	March 31,	December 31,
	2012	2011
LIABILITIES AND CAPITALIZATION
CURRENT LIABILITIES
Checks in excess of amounts on deposit	$ 407,656	$ 1,027,376
Lines of credit	17,651,000	23,160,000
Accounts payable
Trade	5,817,447	8,755,623
Related parties	98,712	191,763
Notes payable, current portion	8,109	7,885
Accrued liabilities
Taxes other than income	2,531,315	3,018,964
Vacation	134,420	115,940
Employee benefit plans	214,885	140,149
Interest	307,079	30,688
Deferred payments received from levelized billing	2,053,060	2,948,188
Customer deposits	672,594	707,062
Property tax settlement, current portion	242,128	242,128
Related parties	448,455	635,192
Other current liabilities	1,303,687	1,280,670
Overrecovered gas purchases	1,362,448	2,237,827
Total current liabilities	33,252,995	44,499,455

LONG-TERM LIABILITIES
Deferred investment tax credits	171,114	176,379
Deferred tax liability	3,200,808	2,908,167
Asset retirement obligation	1,727,161	1,689,081
Customer advances for construction	916,349	880,851
Regulatory liability for income taxes	83,161	83,161
Regulatory liability for gas costs	40,217	57,570
Total long-term liabilities	6,138,810	5,795,209

NOTES PAYABLE, less current portion	31,342,594	31,344,723

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
Preferred stock; $0.15 par value, 1,500,000 shares authorized,
no shares issued or outstanding	-	-
Common stock; $0.15 par value, 15,000,000 shares authorized,
8,155,426 and 8,154,301 shares issued and
outstanding, respectively	1,223,314	1,223,145
Capital in excess of par value	41,993,623	41,978,799
Accumulated other comprehensive income	89,551	80,405
Retained earnings	33,671,591	31,489,678
Total stockholders' equity	76,978,079	74,772,027

TOTAL CAPITALIZATION	108,320,673	106,116,750

TOTAL LIABILITIES AND CAPITALIZATION	$ 147,712,478	$ 156,411,414

Gas Natural Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 2012 and 2011 (Unaudited)


	2012	2011
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$ 3,282,847	$ 4,274,754
Adjustments to reconcile net income to net cash provided
by operating activities
Depreciation and amortization	1,243,344	1,035,077
Accretion	38,080	34,610
Amortization of debt issuance costs	77,022	11,046
Stock based compensation	14,993	16,329
Loss on sale of assets	7,747	6,948
Loss from unconsolidated affiliate	2,741	62,957
Investment tax credit	(5,265)	(5,265)
Deferred income taxes	211,376	-
Changes in assets and liabilities
Accounts receivable, including related parties	817,669	196,584
Unbilled gas	1,579,685	1,692,493
Natural gas and propane inventory	5,146,734	4,774,494
Accounts payable, including related parties	(2,982,618)	(1,639,066)
Recoverable/refundable cost of gas purchases	(1,479,205)	817,957
Prepayments and other	135,676	206,372
Other assets	1,442,540	1,363,535
Other liabilities	(1,158,078)	(1,314,320)
Net cash provided by operating activities	8,375,288	11,534,505

CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(4,366,485)	(2,811,832)
Proceeds from sale of fixed assets	17,302	4,000
Proceeds from related party note receivable	2,496	2,329
Investment in unconsolidated affiliate	-	(132,000)
Customer advances for construction	35,498	(10,917)
Contributions in aid of construction	48,210	(5,362)
Net cash used in investing activities	(4,262,979)	(2,953,782)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from lines of credit	2,551,000	2,500,000
Repayment on lines of credit	(8,060,000)	(9,650,000)
Repayments of notes payable	(1,905)	(252,796)
Debt issuance costs	(116,579)	-
Restricted cash	(8,740)	-
Dividends paid	(1,100,884)	(1,100,275)
Net cash used in financing activities	(6,737,108)	(8,503,071)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(2,624,799)	77,652

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	10,504,845	13,026,585

CASH AND CASH EQUIVALENTS, END OF PERIOD	$ 7,880,046	$ 13,104,237

Gas Natural Inc. and Subsidiaries
Segments of Operations

Three Months Ended March 31, 2012
		Marketing
	Natural Gas	and	Pipeline	Propane	Corporate and
	Operations	Production	Operations	Operations	Other	Consolidated

OPERATING REVENUES	$ 29,933,151	$ 3,625,788	$ 107,784	$ 1,909,158	$ -	$ 35,575,881
Intersegment eliminations	(85,065)	(1,718,695)	-	-	-	(1,803,760)
Total operating revenue	29,848,086	1,907,093	107,784	1,909,158	-	33,772,121

COST OF SALES	17,321,959	3,114,111	-	1,431,269	-	21,867,339
Intersegment eliminations	(85,065)	(1,718,695)	-	-	-	(1,803,760)
Total cost of sales	17,236,894	1,395,416	-	1,431,269	-	20,063,579

GROSS MARGIN	$ 12,611,192	$ 511,677	$ 107,784	$ 477,889	$ -	$ 13,708,542

OPERATING EXPENSES	6,729,273	331,084	38,506	566,413	62,793	7,728,069

OPERATING INCOME (LOSS)	$ 5,881,919	$ 180,593	$ 69,278	$ (88,524)	$ (62,793)	$ 5,980,473

NET INCOME (LOSS)	$ 3,352,534	$ 95,315	$ 38,223	$ (94,841)	$ (108,384)	$ 3,282,847

As of March 31, 2012
Goodwill	$ 14,607,952	$ -	$ -	$ -	$ -	$ 14,607,952
Investment in unconsolidated affiliate	$ -	$ 327,610	$ -	$ -	$ -	$ 327,610

Total assets	$ 133,685,618	$ 5,365,659	$ 811,489	$ 3,332,796	$ 64,887,107	$ 208,082,669
Intersegment eliminations	(48,284,824)	(1,229,052)	13,406	(2,212,617)	(8,657,104)	(60,370,191)
Total assets	$ 85,400,794	$ 4,136,607	$ 824,895	$ 1,120,179	$ 56,230,003	$ 147,712,478

*(Unaudited)*
Three Months Ended March 31, 2011
		Marketing
	Natural Gas	and	Pipeline	Propane	Corporate and
	Operations	Production	Operations	Operations	Other	Consolidated

OPERATING REVENUES	$ 38,309,893	$ 4,340,252	$ 106,324	$ -	$ -	$ 42,756,469
Intersegment eliminations	(90,310)	(2,514,750)	-	-	-	(2,605,060)
Total operating revenue	38,219,583	1,825,502	106,324	-	-	40,151,409

COST OF SALES	24,807,218	3,914,157	-	-	-	28,721,375
Intersegment eliminations	(90,310)	(2,514,750)	-	-	-	(2,605,060)
Total cost of sales	24,716,908	1,399,407	-	-	-	26,116,315

GROSS MARGIN	$ 13,502,675	$ 426,095	$ 106,324	$ -	$ -	$ 14,035,094

OPERATING EXPENSES	6,615,808	199,497	42,324	-	8,570	6,866,199

OPERATING INCOME (LOSS)	$ 6,886,867	$ 226,598	$ 64,000	$ -	$ (8,570)	$ 7,168,895

NET INCOME (LOSS)	$ 4,259,125	$ 85,782	$ 36,802	$ -	$ (106,955)	$ 4,274,754

As of March 31, 2011
Goodwill	$ 14,607,952	$ -	$ -	$ -	$ -	$ 14,607,952
Investment in unconsolidated affiliate	$ -	$ 748,859	$ -	$ -	$ -	$ 748,859

Total assets	$ 105,779,527	$ 5,238,233	$ 721,458	$ -	$ 76,953,664	$ 188,692,882
Intersegment eliminations	(45,389,522)	(2,825,763)	(54,123)	-	(10,646,010)	(58,915,418)
Total assets	$ 60,390,005	$ 2,412,470	$ 667,335	$ -	$ 66,307,654	$ 129,777,464

Gas Natural Inc. and Subsidiaries
Natural Gas Operations
*(Unaudited)*

Utility Throughput
				Three Months Ended March 31,
	(in million cubic feet (MMcf))			2012	2011

	Full Service Distribution
		Residential		1,811	2,164
		Commercial		1,638	1,950
		Industrial		53	40
			Total full service	3,502	4,154

	Transportation			2,954	2,684
	Bucksport			3,662	3,801

			Total Volumes	10,118	10,639

Heating Degree Days
			Three Months Ended		Percent (Warmer) Colder
			March 31,		2012 Compared to
		Normal	2012	2011	Normal	2011
	Great Falls, MT	3,180	2,914	3,662	(8.36%)	(20.43%)
	Cody, WY	3,030	2,738	3,277	(9.64%)	(16.45%)
	Bangor, ME	3,735	3,273	3,808	(12.37%)	(14.05%)
	Elkin, NC	2,117	1,616	2,096	(23.67%)	(22.90%)
	Youngstown, OH	3,118	2,413	3,308	(22.61%)	(27.06%)