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atmos enerrgy LehmanConf0907

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1) The document is the presentation for the Lehman Brothers Energy & Power Conference by Robert W. Best, Chairman, President, and CEO of Atmos Energy Corporation on September 6, 2007. 2) Atmos Energy Corporation is a natural gas distribution company operating in 12 states as well as complementary nonutility businesses in 22 states. 3) Atmos has pursued a strategy of growth through acquisitions, successfully integrating over 20 acquisitions, and now serves over 3 million customers, making it the largest pure-gas distribution company in the US.

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Lehman Brothers Energy & Power Conference Robert W. Best Chairman, President & CEO September 6, 2007 Forward Looking Statements The matters discussed or incorporated by reference in this presentation may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact included in this presentation are forward-looking statements made in good faith by the company and are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. When used in this presentation or in any of our other documents or oral presentations, the words “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “objective,” “plan,” “projection,” “seek,” “strategy” or similar words are intended to identify forward-looking statements. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those discussed in this presentation, including the risks relating to regulatory trends and decisions, our ability to continue to access the capital markets, and the other factors discussed in our filings with the Securities and Exchange Commission. These factors include the risks and uncertainties discussed in our Annual Report on Form 10-K for the fiscal year ended September 30, 2006, and the Quarterly Report on Form 10-Q for the three and nine-month periods ended June 30, 2007. Although we believe these forward-looking statements to be reasonable, there can be no assurance that they will approximate actual experience or that the expectations derived from them will be realized. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Further, we will only update earnings guidance through our quarterly and annual earnings releases. All estimated financial metrics for fiscal year 2007 and beyond that appear in this presentation are current as of the date noted on each relevant slide. 2
Overview Company Profile The nation’s largest pure-gas distribution company and complementary nonutility businesses Solid financial foundation Track record of creating shareholder value • Consistent earnings growth • 23 consecutive years of increasing dividends Focused strategy over time • Grow through prudent acquisitions • Maximize core natural gas utility earnings capability • Complement core utility business through select nonutility operations 3 Growth Through Acquisitions Scope of Operations • Utility operates in 12 states (gold) • Nonutility operates in 22 states (gray) 4
Growth Through Acquisitions History of Successful Business Integration Acquisition Company Customers Purchase Date Acquired Acquired Price $ (000s) 1986 Trans Louisiana Gas 69,000 44,100 1987 Western Kentucky Gas 147,000 85,100 1993 Greeley Gas Company 98,000 111,717 1997 United Cities Gas Co. 307,000 469,485 2000 ANG Missouri Assets 48,000 32,000 2001 55% interest in Woodward - 26,657 2001 Louisiana Gas Service 279,000 363,399 2002 Mississippi Valley Gas 261,500 220,200 2004 ComFurT Gas Inc. 1,800 2,000 2004 TXU Gas Company 1,500,000 1,916,696 5 Growth Through Acquisitions Largest Pure-Play LDC Based on Customers (customers in millions) 3.5 3.18 3.0 2.5 2.24 2.02 2.0 1.71 1.5 1.01 0.99 1.0 0.63 0.62 0.46 0.5 0.32 0.0 ATO ATG OKE SWX WGL PNY LG NWN NJR SJI Note: Companies are represented by their stock ticker symbol and include AGL Resources, The Laclede Group, New Jersey Resources, Northwest Natural Gas, Oneok, Piedmont Natural Gas, South Jersey Industries, Southwest Gas and WGL Holdings. As of September 30, 2006 6
Growth Through Acquisitions Acquisition Considerations Geographic Fit Opportunity to Realize and Retain Cost Savings Regulatory Environment Allowed Rate of Return Rate Design Comparable Transaction Multiples Customer Growth Opportunities Nonutility Opportunities Immediate Earnings Accretion Impact on Credit Metrics Stock, Cash or Combination Integration Risk ROIC Exceeds Cost of Capital (DCF) 7 Maximizing Core Utility Contribution Atmos Energy Corporation Atmos Energy Corporation (Natural Gas Utility Divisions) (Natural Gas Utility Divisions) Atmos Energy Holdings, Inc. Atmos Energy Holdings, Inc. (Nonutility Businesses) (Nonutility Businesses) Colorado-Kansas Colorado-Kansas Atmos Energy Marketing Atmos Energy Marketing Kentucky/Mid-States Kentucky/Mid-States • • Storage (Trading) Storage (Trading) • • Transportation (Marketing) Transportation (Marketing) Louisiana Louisiana Atmos Pipeline & Storage Atmos Pipeline & Storage Mid-Tex Mid-Tex • • Atmos Pipeline-Texas Atmos Pipeline-Texas • • Non-Texas Assets Non-Texas Assets Mississippi Mississippi West Texas West Texas Other Nonutility Other Nonutility 8
Maximizing Core Utility Contribution Leading Utility Efficiency Metrics vs. Peers Customers Served 2006 Utility O&M Expense Per Customer per Utility Employee $250 800 $200 $218 723 600 $150 532 400 $100 $112 200 $50 $0 0 Atmos Energy Peer Group Avg. Atmos Energy Peer Group Avg. Note: Results are based on fiscal 2006 performance for Atmos and most recent information available for the peer group. Companies in the peer group include AGL Resources, KeySpan, Laclede, New Jersey Resources, Nisource, Northwest Natural Gas, Oneok, Piedmont Natural Gas, Southwest Gas and WGL Holdings. 9 Maximizing Core Utility Contribution Stabilizing Utility Margin Sensitivity Weather Normalization Adjustment (WNA) for Mid-Tex and Louisiana divisions became effective for the 2006-2007 winter heating season, which reduced our margin exposure to weather from 17 percent to 5 percent. 2003–2004 2004–2006 2006–2007 Heating Season Heating Seasons Heating Season (Before TXU Gas) (Post-TXU Gas) 9% 5% 35% 36% 51% 48% 13% 17% 86% Weather Weather- Nonweather- Normalized Sensitive Margin Sensitive Margin* * Non-weather sensitive margin is gas consumption not correlated to weather, i.e., gas clothes dryer, gas water heater, gas cooking, and includes monthly fixed charge 10
Maximizing Core Utility Contribution Successfully Executing on the Utility Rate Strategy GRIP/ Purchased Accelerated Decoupling/ Gas Cost Number of Percentage Gas Cost Capital Rate Bad Debt Customers of Total Adjustments WNA Recovery Stabilization Recovery Texas 1,800,000 57% Partial Louisiana 350,000 11% Mississippi 270,000 8% Remaining Jurisdictions 760,000 24% Partial Partial Partial Partial means applicable within certain jurisdictions within the category. 11 Maximizing Core Utility Earnings Recent Regulatory Activity Missouri – favorable rate settlement • Provides decoupling mechanism via straight fixed/variable rate design • Third Atmos jurisdiction to achieve decoupling Mid-Tex – rate order issued in March 2007 • WNA mechanism utilizing 10 year weather experience • Capital structure of 52% debt and 48% equity; 10% authorized ROE • Annual revenue increase of about $4.8 million • GRIP-related refund of $2.9 million Kentucky – final order issued in July 2007 • Increase of $5.5 million in base rates • Increase spread proportionately to individual customer classes • Effective with service rendered on and after August 1, 2007 Louisiana – completed rate stabilization filing • 2006 RSC for LGS service area for about $0.7 million effective July 1, 2007 Tennessee – pending rate case • Filed for an increase of $11.1 million on May 4, 2007 • Requested 11.75% ROE • Requested a customer utilization adjustment to address declining use Texas – annual GRIP filings • 2006 GRIP filing on May 31, 2007, for a $12.5 million revenue increase for the Mid-Tex utility division and a $13.2 million revenue increase for Atmos Pipeline -Texas • Filings for 2006 expenditures for the West Texas and Lubbock jurisdictions expected in the coming months 12
Maximizing Core Utility Contribution Approved Annual Rate Increases in the Regulated Operations $50.0 $35-$45 $39.0 $40.0 4.7 ($ in Millions) $30.0 $18.6 $20.0 $16.2 34.3 $10.0 $6.3 4.5 1.8 $0.0 2003 2004 2005 2006 2007- 2011E Annually GRIP Non-GRIP Aggregated As of August 8, 2007 13 Maximizing Core Utility Contribution Authorized Regulatory Return on Equity (ROE)* 13.0 12.2 12.0 12.0 11.6 11.3 11.3 11.0 11.0 10.5 10.5- 10.1 10.0 11.5 9.8 10.0 9.5- Percent 10.5 9.0 8.0 7.0 6.0 5.0 T lo k X CO LA GA IL IA MO VA /AP MS aril oc .T TX bb W id- Am Lu M Consolidated GAAP ROE at 9/30/06 was 8.9% * ROE not stated in state commission’s decision in Kansas, Kentucky and Tennessee 14
Complementary Nonutility Operations Atmos Energy Corporation Atmos Energy Corporation (Natural Gas Utility Divisions) (Natural Gas Utility Divisions) Atmos Energy Holdings, Inc. Atmos Energy Holdings, Inc. (Nonutility Businesses) (Nonutility Businesses) Colorado-Kansas Colorado-Kansas Atmos Energy Marketing Atmos Energy Marketing Kentucky/Mid-States Kentucky/Mid-States • • Storage (Trading) Storage (Trading) • • Transportation (Marketing) Transportation (Marketing) Louisiana Louisiana Atmos Pipeline & Storage Atmos Pipeline & Storage Mid-Tex Mid-Tex • • Atmos Pipeline-Texas Atmos Pipeline-Texas • • Non-Texas Assets Non-Texas Assets Mississippi Mississippi West Texas West Texas Other Nonutility Other Nonutility 15 Complementary Nonutility Operations Nonutility Business Segments Complement Core Utility Business Gas Marketing Utilizes storage and transportation assets that are leased or managed to: • provide bundled city gate services (including base load sales, peaking sales, risk management and demand based storage services) to municipal, industrial, power generator, LDC and affiliate utility customers and • capture time and location price differentials (arbitrage) through various trading strategies Pipeline & Storage Includes acquired pipeline and storage assets from TXU Gas (over 6,100 miles of intrastate pipelines and 5 storage facilities). Effective 10/1/04, these pipeline operations are regulated assets but functionally report under the nonutility businesses Owns or leases storage and pipeline assets in Texas, Kentucky and Louisiana that are utilized to provide storage and transportation services to municipal, industrial, power generator and affiliate utility customers 16
Complementary Nonutility Operations Atmos Energy Marketing Gross Profit Margin Composition 2007E Impacted by customer volume demand Marketing Marketing Sales prices are: • Cost plus profit margin $50 - $53 Million (Bundled gas deliveries & • Cost plus demand charges (Bundled gas deliveries & peaking sales) peaking sales) Margins: More predictable Impacted by gas price spread values in the market (arbitrage opportunity) Asset Optimization Physical storage capabilities Asset Optimization Available storage and transport $45 - $52 Million (Storage & transportation capacity (Storage & transportation 14.2 Bcf proprietary contracted capacity management) management) 28.5 Bcf customer-owned / AEM- managed storage = Margins: More variable Total margins reflect: Stability from marketing margins $95 - $105 Million Total AEM Total AEM Upside from optimizing our storage Margins Margins and transportation assets to capture arbitrage value Margins: Stable with potential upside As of August 8, 2007 17 Complementary Nonutility Operations Atmos Pipeline & Storage Ownership of Strategic Asset Base Provides Revenue Growth & Stability Atmos Pipeline & Storage Storage Assets – 43 Bcf Pipeline Assets East Diamond Reservoir 2.2 Bcf of storage in KY Atmos Pipeline –Texas > 6,100 miles of intrastate pipe in Texas Barnsley Reservoir 1.3 Bcf of storage in KY Trans LA Gas Pipeline 21 miles of 24” pipe in Louisiana 25 % interest in Napoleonville 0.4 Bcf of Salt storage in LA 5 Storage Fields in Texas 39 Bcf of storage Upstream pipeline services and storage-type services provided to Atmos Energy’s Mid-Tex Division, affiliates & third parties 18
Complementary Nonutility Operations Atmos Pipeline - Texas Regulated Asset Base in Texas Provides Revenue Growth and Stability Pipeline Operations 1,800 miles of backbone intrastate pipeline Integrated with Mid-Tex Division LDC Five storage facilities Working storage capacity of 39 Bcf Completed four major projects in 2006 on the pipeline which is expected to add about $15 million of additional revenue in fiscal 2007 Additional opportunities exist in the highly productive Barnett Shale reservoir Pipeline transports and stores gas, and provides other pipeline services for distribution, industrial, electric generation, cross haul and other shippers 19 Complementary Nonutility Operations Atmos Pipeline & Storage Eastern Kentucky Natural Gas Gathering Project Update May 10, 2006, announced plans to construct a natural gas gathering system in eastern Kentucky, referred to as the Straight Creek Project Recently redesigned and renamed the Phoenix Gas Gathering Project Approximately 40 miles and consists of 12-inch and 20- inch pipe, as currently designed Capacity as currently designed is 50 mmcf per day Capital requirements of about $50 million Not expected to have a financial impact on fiscal 2008 earnings 20
Financial Measures Earnings Per Share Compared to Company Guidance Reflects Management’s Commitment to Shareholders $2.00 $1.90-$2.00 1.82 $1.75 1.72 $1.80-$1.90 1.54 1.58 $ per share $1.65-$1.75 $1.50 1.45 $1.55-$1.60 $1.52-$1.58 $1.43-$1.60 $1.25 $1.00 $0.75 $0.50 2002 2003 2004 2005 2006 2007E As of August 8, 2007 21 Financial Measures Historical and Estimated Net Income Contribution by Segment 9% 3% 95% 6% 19% 23% 24% 28% 75% 86% 5% Pipeline & Storage Percent 17% 73% 26% 55% 40% Natural Gas Marketing 60% 46% Other Nonutility 35% 36% Utility 15% (1)% -5% 2003 2004 2005 2006 2007E As of August 8, 2007 22
Financial Measures Return on Invested Capital (ROIC*) Remains Strong 18.0% 16.4% 15.8% 16.0% 15.5% 15.0% 14.5% 14.0% 12.7% 12.0% 10.0% 2002 2003 2004 2005 2006 5 Yr Avg *ROIC - Return on invested capital is calculated using the following GAAP financial measures: Income before interest expense and income taxes plus common stock dividends paid, divided by the average of the year’s beginning and ending long-term debt plus common equity. This measure is used to more precisely evaluate operational performance and management effectiveness. 23 Financial Measures Times Interest Earned Ratios* 3.5 3.05 2.89 3.0 2.83 2.75 2.55 2.59 2.55 2.5 2.0 1.5 2001 2002 2003 2004 2005 2006 2007E *The times interest earned ratio measures the ability to satisfy annual interest costs As of August 8, 2007 24
Financial Measures Weighted Average Cost of Debt Remains Low 9.0 8.0 7.4 6.9 7.0 6.4 6.0 5.9 5.9 Percent 6.0 5.6 5.0 4.0 3.0 2.0 1.0 2001 2002 2003 2004 2005 2006 2007E As of August 8, 2007 25 Financial Measures Annual Dividend for the Years 1984 – 2007 $1.28 $1.20 $1.00 $0.80 $0.60 $0.40 $0.20 $0.00 '8 '8 '8 '8 '8 '8 '9 '9 '9 '9 '9 '9 '9 '9 '9 '9 '0 '0 '0 '0 '0 '0 '0 '0 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 Note: Amounts are adjusted for mergers and acquisitions. 26
Financial Measures Dividend Payout Ratio Steadily Reduced Payout Dividend / Share 85% $1.50 81% 80% 79% $1.40 78% 77% 75% 1.28 $1.30 72% 1.26 70% 1.24 69% $1.20 1.22 1.20 1.18 64-67% 1.16 65% $1.10 60% $1.00 2001 2002 2003 2004 2005 2006 2007E Current Dividend Yield Approximately 4.5% Average LDC Payout Ratio = 65% As of August 8, 2007 27 Financial Measures Ample Liquidity Maintained From Multiple Sources Atmos Energy Corporation has $918 million in committed unsecured credit facilities • $600 million 5-year facility (expires December 2011) to backstop our CP program • $300 million 364-day facility (expires November 2007) to utilize only if liquidity under $600 million CP program is exhausted • $18 million credit facility supplements daily cash needs Atmos Energy has additional $25 million uncommitted facility for miscellaneous letters of credit Atmos Energy Marketing has a $580 million receivables- based demand credit facility • Primary purpose is to provide standby L/C’s to AEM’s gas suppliers • Fully guaranteed by Atmos Energy Holdings (sub of Atmos) • Non-recourse to Atmos Energy Corporation 28
Financial Measures Shelf Registration and Recent Offerings On December 4, 2006, Atmos Energy filed a registration statement with the SEC to issue up to $900 million in common stock and/or debt securities On December 13, 2006, we completed the sale of 6.3 million shares priced at $31.50 • Approximately $192 million in net proceeds • 100% of proceeds used to reduce short-term debt • Reduced debt capitalization ratio from 60.9% (at 9/30/06) to 54.9% (at 12/31/06) • Dilutes fiscal 2007 net income per diluted share by approximately 5 cents On June 14, 2007,issued $250 million of 6.35% senior notes due 2017 • Effective interest rate was 6.45% inclusive of debt issue costs • Net proceeds of approximately $247 million plus available cash of $53 million were used to redeem the company’s $300 million of unsecured floating rate senior notes on July 15, 2007 • Debt-to-capitalization ratio was to 55.0% at June 30, 2007 • Had repayment occurred as of June 30, 2007, the debt to capitalization ratio would have been 51.7% 29 Financial Measures Improved Debt Capitalization Ratio Achieved stated goal of 50-55% in July 2007 65 (MV Gas) (TXU Gas) 59.3% 59.3% 60.9% 60 54.9% 55.0% 55 53.6% 51.9% 50 51.7% 45 43.6% 40 2 3 4 * 6 7 7 7* 00 00 00 05 * 00 0 06 0 0 0 2 2 2 0 2 /2 20 20 20 al al al l2 al 31 1/ 0/ 5/ sc sc sc a sc / 3 /3 6 /3 /1 Fi Fi Fi sc Fi 12 7 Fi * Upon redemption of $300 million of unsecured floating rate senior notes ** TXU Gas acquisition effective 10/1/04 30
Financial Measures Investment Grade Credit Ratings Moody’s Rating Senior Unsecured Debt: Baa3 Commercial Paper: P-3 Outlook: stable Standard & Poor’s Senior Unsecured Debt: BBB Commercial Paper: A-2 Outlook: positive Fitch Senior Unsecured Debt: BBB+ Commercial Paper: F-2 Outlook: stable 31 Financial Measures Compelling Valuation and Total Return Propositions Forward P/E Estimates 5 Year Expected Total Return 18.0 13.9% 15.0 16.4x 10.3% 1.6 16.0 15.4x 12.0 8.6% 14.0x 9.0 4.6 12.3 14.0 3.7 6.0 4.9 5.7 3.0 12.0 Peer Group Atmos S&P 500 S&P 500 Peer Group Atmos Avg. Energy Avg. Energy 5 year growth rate dividend yield Source: Bloomberg @ 8/30/07 Companies in the peer group include AGL Resources, Laclede, New Jersey Resources, Nisource, Northwest Natural Gas, Oneok, Piedmont Natural Gas, Southwest Gas and WGL Holdings. 32
Our Focus Enterprise Deliver predictable earnings 4 – 6% annually Dedicated to maintaining financial flexibility and enhancing credit profile Committed to adding value to shareholders Utility Pursue rate reform in each of our Utility jurisdictions • Margin decoupling • Reduce/eliminate lag • Recovery of gas cost portion of bad debt expense Redeploy capital spending to jurisdictions with accelerated recovery Earn at the authorized level in each jurisdiction Maintain leadership position in utility efficiency Nonutility Develop internal projects in our Nonutility segment that provide substantial financial returns Execute commercial growth strategies in all businesses Develop successful gathering system projects Identify other growth opportunities 33 Appendix 34
Financial Measures – Fiscal 2007E Earnings Guidance – Fiscal 2007E Atmos Energy anticipates earnings to be at the lower end of the previously announced range of $1.90 to $2.00 per fully diluted share for the 2007 fiscal year Refined assumptions include: Approximately 5 cent dilutive effect of the December equity offering Total gross profit margin contribution from the marketing segment expected to be in the range of $95 million to $105 million, due to the continued reduction in natural gas price volatility Continued execution of rate strategy and collection efforts Normal weather in non-WNA jurisdictions Bad debt expense of no more than $18 million Average short-term interest rate @ 6.3% No material acquisitions Note: Changes in events or other circumstances that the company cannot currently anticipate could result in earnings for fiscal 2007 that are significantly above or below this outlook. As of August 8, 2007 35 Financial Measures – Fiscal 2007E Projected Net Income by Segment ($ millions, except EPS) 2004 2005 2006 2007E Utility $ 63 $ 81 $ 53 $ 77 - 79 Natural Gas Marketing 17 23 58 43 - 46 Pipeline & Storage 3 31 36 46 - 48 Other 3 1 1 1 - 2 Total 86 136 148 167 - 175 Avg. Diluted Shares 54.4 79.0 81.4 87.7 Earnings Per Share $ 1.58 $ 1.72 $ 1.82 $1.90 - $2.00 For fiscal 2007, we project between $365-$385 million in capital expenditures As of August 8, 2007 36
Financial Measures – Fiscal 2007E Projected Cash Flow ($ millions) 2004 2005 2006 2007E Cash flows from operations $ 271 $ 387 $ 311 $ 515 - 535 Maintenance/Non-growth capital (126) (243) (287) (265-275) Dividends (67) (99) (102) (112) Cash available for debt reduction $ 78 $ 45 $ (78) $ 138 - 148 and growth projects As of August 8, 2007 37 Maximizing Core Utility Contribution Year-Over-Year Weather Effect by Division, as adjusted for WNA * • As of June 30, 2007, Fiscal YTD consolidated gross profit was s ed ate adversely affected by i t p da St about $2.5 million, as a a ip n x id- S oli i ss result of weather that sia Percent (Warmer) Colder than Normal Te /K /M ns was 1 percent colder ss ui d- CO KY Co Lo Mi Mi than normal, as 10 adjusted for WNA 4% 5% • As of June 30, 2006, 5 Fiscal YTD consolidated 1% 2% 0% 1% gross profit was 0 adversely affected by 2% 2% 2% $47.5 million due to (5) weather that was 13 (10) percent warmer than normal, as adjusted for 13% WNA (15) (20) • Louisiana and Mid-Tex divisions implemented 22% weather-normalized (25) rates during fiscal 2007, (30) 28% which accounted for an increase in gross profit (35) of $10.8 million year Fiscal 2007 Fiscal 2006 over year * West Texas Division had no weather impact in either period 38
Atmos Energy Marketing Economic Value vs. GAAP Reported Results We commercially manage our storage assets by capturing arbitrage value through optimization strategies that create embedded (forward) value in the portfolio. We financially report the transactions for external reporting purposes in accordance with GAAP. GAAP Reported Value is the period to period net change in fair value of the portfolio reported in the income statement that results from the process of marking to market the physical storage volumes and corresponding financial instruments in an interim period. Economic Value is the period to period forward margin of our storage portfolio that results from the process of calculating our weighted average cost of inventory (WACOG), and our weighted average sales price of our forward financials (WASP), then multiplying the difference times inventory volumes. This margin will be realized in cash when the hedged transaction is executed or when financials are settled and then reset to stay hedged against physical volumes. Economic Value represents the “forward” economic margin of the transactions, while GAAP reported results reflect that portion of our “forward” margin that has been recorded in the income statement. Volatility in earnings includes the impact of the accounting treatment of our storage portfolio and is reflective of relatively high price volatility of the prompt month, and the relatively low volatility of the offsetting forward months. 39 Atmos Energy Marketing Economic Value vs. GAAP Reported Results Reported GAAP Reported GAAP Economic Value* Value Value (Commercial Value) - -Physical and Financial Physical and Financial - Physical and Financial Positions Positions Positions $(7.2) MM $(7.2) MM $41.2 MM Market Spread Embedded margin difference *Realizing Economic Value $48.4 MM is dependent on ability to execute – deliver physical gas & close financial hedges Supporting data appears on the following slide At June 30, 2007 40
Atmos Energy Marketing Economic Value vs. GAAP Reported Results - Three Months Ended Physical Economic Value (EV) GAAP Reported Value - MTM Market Spread Period Volume ($ per mmcf) Total Total Total Ending (Bcf) WASP WACOG EV ($ in millions) ($ per mmcf) ($ in millions) ($ per mmcf) ($ in millions) 3/31/2006 23.6 10.3880 9.0806 1.3074 30.8 (1.5195) (35.8) 2.8269 66.6 6/30/2006 19.0 10.2353 8.7417 1.4936 28.4 (3.0297) (57.7) 4.5233 86.1 2006 Variance (4.6) $ (0.1527) $ (0.3389) $ 0.1862 $ (2.4) (1.5102) $ (21.9) $ 1.6964 $ 19.5 3/31/2007 19.6 8.2196 7.6701 0.5495 10.8 (1.2347) (24.2) 1.7842 35.0 6/30/2007 21.5 9.5409 7.6238 1.9171 41.2 (0.3343) (7.2) 2.2514 48.4 2007 Variance 1.9 $ 1.3213 $ (0.0463) $ 1.3676 $ 30.4 0.9004 $ 17.0 $ 0.4672 $ 13.4 WASP: Weighted average sales price for gas held in storage WACOG: Weighted average cost of AEM’s gas in storage EV: “Economic Value” which equals gas sales price (WASP) minus cost of gas (WACOG) on a per unit basis 41 Atmos Energy Marketing Economic Value vs. GAAP Reported Results - Nine Months Ended Physical Economic Value (EV) GAAP Reported Value - MTM Market Spread Period Volume ($ per mmcf) Total Total Total Ending (Bcf) WASP WACOG EV ($ in millions) ($ per mmcf) ($ in millions) ($ per mmcf) ($ in millions) 9/30/2005 6.9 6.3466 4.4435 1.9031 13.1 (2.1502) (14.8) 4.0533 27.9 6/30/2006 19.0 10.2353 8.7417 1.4936 28.4 (3.0297) (57.7) 4.5233 86.1 2006 Variance 12.1 $ 3.8887 $ 4.2982 $ (0.4095) $ 15.3 (0.8795) $ (42.9) $ 0.4700 $ 58.3 9/30/2006 14.5 11.9716 7.8329 4.1387 60.0 (1.1076) (16.0) 5.2463 76.0 6/30/2007 21.5 9.5409 7.6238 1.9171 41.2 (0.3343) (7.2) 2.2514 48.4 2007 Variance 7.0 $ (2.4307) $ (0.2091) $ (2.2216) $ (18.8) 0.7733 $ 8.8 $ (2.9949) $ (27.6) WASP: Weighted average sales price for gas held in storage WACOG: Weighted average cost of AEM’s gas in storage EV: “Economic Value” which equals gas sales price (WASP) minus cost of gas (WACOG) on a per unit basis 42
Atmos Energy Marketing Conceptual Illustration of MTM Effect on Storage Prompt Month January Economic Gas Daily Hedge 2007 P&L Value Month Inject Withdraw Gas Cost/Mcf Index Hedge Volume Price Futures Spread $MM $MM June 1 Bcf 0 $7.00 N/A Sell 1 Bcf $11.00 $11.00 $4.00 $0 $4.0 Futures July 0 0 $7.00 $6.00 N/A 1 Bcf - $10.50 $4.50 ($0.5) $4.0 Sept. 0 0 $7.00 $6.00 N/A 1 Bcf - $11.50 $5.50 ($1.0) $4.0 Jan. 0 1 Bcf $7.00 $10.00 Buy 1 Bcf - $10.00 $0.00 $5.5 $4.0 Futures Total $4.0 $4.0 43 Atmos Energy Marketing Cash Versus Futures Spread “Spread” refers to the difference between cash prices (Gas Daily) and futures prices (NYMEX) for the month of delivery. The greater the change in the spread, the larger our unrealized gain/loss. The hurricanes in 2005 created unusual volatility in natural gas prices, which caused spreads to widen considerably during that period. Historically, spreads have tended to be less than $1.00/Mcf. 44

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atmos enerrgy LehmanConf0907

  • 1. Lehman Brothers Energy & Power Conference Robert W. Best Chairman, President & CEO September 6, 2007 Forward Looking Statements The matters discussed or incorporated by reference in this presentation may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact included in this presentation are forward-looking statements made in good faith by the company and are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. When used in this presentation or in any of our other documents or oral presentations, the words “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “objective,” “plan,” “projection,” “seek,” “strategy” or similar words are intended to identify forward-looking statements. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those discussed in this presentation, including the risks relating to regulatory trends and decisions, our ability to continue to access the capital markets, and the other factors discussed in our filings with the Securities and Exchange Commission. These factors include the risks and uncertainties discussed in our Annual Report on Form 10-K for the fiscal year ended September 30, 2006, and the Quarterly Report on Form 10-Q for the three and nine-month periods ended June 30, 2007. Although we believe these forward-looking statements to be reasonable, there can be no assurance that they will approximate actual experience or that the expectations derived from them will be realized. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Further, we will only update earnings guidance through our quarterly and annual earnings releases. All estimated financial metrics for fiscal year 2007 and beyond that appear in this presentation are current as of the date noted on each relevant slide. 2
  • 2. Overview Company Profile The nation’s largest pure-gas distribution company and complementary nonutility businesses Solid financial foundation Track record of creating shareholder value • Consistent earnings growth • 23 consecutive years of increasing dividends Focused strategy over time • Grow through prudent acquisitions • Maximize core natural gas utility earnings capability • Complement core utility business through select nonutility operations 3 Growth Through Acquisitions Scope of Operations • Utility operates in 12 states (gold) • Nonutility operates in 22 states (gray) 4
  • 3. Growth Through Acquisitions History of Successful Business Integration Acquisition Company Customers Purchase Date Acquired Acquired Price $ (000s) 1986 Trans Louisiana Gas 69,000 44,100 1987 Western Kentucky Gas 147,000 85,100 1993 Greeley Gas Company 98,000 111,717 1997 United Cities Gas Co. 307,000 469,485 2000 ANG Missouri Assets 48,000 32,000 2001 55% interest in Woodward - 26,657 2001 Louisiana Gas Service 279,000 363,399 2002 Mississippi Valley Gas 261,500 220,200 2004 ComFurT Gas Inc. 1,800 2,000 2004 TXU Gas Company 1,500,000 1,916,696 5 Growth Through Acquisitions Largest Pure-Play LDC Based on Customers (customers in millions) 3.5 3.18 3.0 2.5 2.24 2.02 2.0 1.71 1.5 1.01 0.99 1.0 0.63 0.62 0.46 0.5 0.32 0.0 ATO ATG OKE SWX WGL PNY LG NWN NJR SJI Note: Companies are represented by their stock ticker symbol and include AGL Resources, The Laclede Group, New Jersey Resources, Northwest Natural Gas, Oneok, Piedmont Natural Gas, South Jersey Industries, Southwest Gas and WGL Holdings. As of September 30, 2006 6
  • 4. Growth Through Acquisitions Acquisition Considerations Geographic Fit Opportunity to Realize and Retain Cost Savings Regulatory Environment Allowed Rate of Return Rate Design Comparable Transaction Multiples Customer Growth Opportunities Nonutility Opportunities Immediate Earnings Accretion Impact on Credit Metrics Stock, Cash or Combination Integration Risk ROIC Exceeds Cost of Capital (DCF) 7 Maximizing Core Utility Contribution Atmos Energy Corporation Atmos Energy Corporation (Natural Gas Utility Divisions) (Natural Gas Utility Divisions) Atmos Energy Holdings, Inc. Atmos Energy Holdings, Inc. (Nonutility Businesses) (Nonutility Businesses) Colorado-Kansas Colorado-Kansas Atmos Energy Marketing Atmos Energy Marketing Kentucky/Mid-States Kentucky/Mid-States • • Storage (Trading) Storage (Trading) • • Transportation (Marketing) Transportation (Marketing) Louisiana Louisiana Atmos Pipeline & Storage Atmos Pipeline & Storage Mid-Tex Mid-Tex • • Atmos Pipeline-Texas Atmos Pipeline-Texas • • Non-Texas Assets Non-Texas Assets Mississippi Mississippi West Texas West Texas Other Nonutility Other Nonutility 8
  • 5. Maximizing Core Utility Contribution Leading Utility Efficiency Metrics vs. Peers Customers Served 2006 Utility O&M Expense Per Customer per Utility Employee $250 800 $200 $218 723 600 $150 532 400 $100 $112 200 $50 $0 0 Atmos Energy Peer Group Avg. Atmos Energy Peer Group Avg. Note: Results are based on fiscal 2006 performance for Atmos and most recent information available for the peer group. Companies in the peer group include AGL Resources, KeySpan, Laclede, New Jersey Resources, Nisource, Northwest Natural Gas, Oneok, Piedmont Natural Gas, Southwest Gas and WGL Holdings. 9 Maximizing Core Utility Contribution Stabilizing Utility Margin Sensitivity Weather Normalization Adjustment (WNA) for Mid-Tex and Louisiana divisions became effective for the 2006-2007 winter heating season, which reduced our margin exposure to weather from 17 percent to 5 percent. 2003–2004 2004–2006 2006–2007 Heating Season Heating Seasons Heating Season (Before TXU Gas) (Post-TXU Gas) 9% 5% 35% 36% 51% 48% 13% 17% 86% Weather Weather- Nonweather- Normalized Sensitive Margin Sensitive Margin* * Non-weather sensitive margin is gas consumption not correlated to weather, i.e., gas clothes dryer, gas water heater, gas cooking, and includes monthly fixed charge 10
  • 6. Maximizing Core Utility Contribution Successfully Executing on the Utility Rate Strategy GRIP/ Purchased Accelerated Decoupling/ Gas Cost Number of Percentage Gas Cost Capital Rate Bad Debt Customers of Total Adjustments WNA Recovery Stabilization Recovery Texas 1,800,000 57% Partial Louisiana 350,000 11% Mississippi 270,000 8% Remaining Jurisdictions 760,000 24% Partial Partial Partial Partial means applicable within certain jurisdictions within the category. 11 Maximizing Core Utility Earnings Recent Regulatory Activity Missouri – favorable rate settlement • Provides decoupling mechanism via straight fixed/variable rate design • Third Atmos jurisdiction to achieve decoupling Mid-Tex – rate order issued in March 2007 • WNA mechanism utilizing 10 year weather experience • Capital structure of 52% debt and 48% equity; 10% authorized ROE • Annual revenue increase of about $4.8 million • GRIP-related refund of $2.9 million Kentucky – final order issued in July 2007 • Increase of $5.5 million in base rates • Increase spread proportionately to individual customer classes • Effective with service rendered on and after August 1, 2007 Louisiana – completed rate stabilization filing • 2006 RSC for LGS service area for about $0.7 million effective July 1, 2007 Tennessee – pending rate case • Filed for an increase of $11.1 million on May 4, 2007 • Requested 11.75% ROE • Requested a customer utilization adjustment to address declining use Texas – annual GRIP filings • 2006 GRIP filing on May 31, 2007, for a $12.5 million revenue increase for the Mid-Tex utility division and a $13.2 million revenue increase for Atmos Pipeline -Texas • Filings for 2006 expenditures for the West Texas and Lubbock jurisdictions expected in the coming months 12
  • 7. Maximizing Core Utility Contribution Approved Annual Rate Increases in the Regulated Operations $50.0 $35-$45 $39.0 $40.0 4.7 ($ in Millions) $30.0 $18.6 $20.0 $16.2 34.3 $10.0 $6.3 4.5 1.8 $0.0 2003 2004 2005 2006 2007- 2011E Annually GRIP Non-GRIP Aggregated As of August 8, 2007 13 Maximizing Core Utility Contribution Authorized Regulatory Return on Equity (ROE)* 13.0 12.2 12.0 12.0 11.6 11.3 11.3 11.0 11.0 10.5 10.5- 10.1 10.0 11.5 9.8 10.0 9.5- Percent 10.5 9.0 8.0 7.0 6.0 5.0 T lo k X CO LA GA IL IA MO VA /AP MS aril oc .T TX bb W id- Am Lu M Consolidated GAAP ROE at 9/30/06 was 8.9% * ROE not stated in state commission’s decision in Kansas, Kentucky and Tennessee 14
  • 8. Complementary Nonutility Operations Atmos Energy Corporation Atmos Energy Corporation (Natural Gas Utility Divisions) (Natural Gas Utility Divisions) Atmos Energy Holdings, Inc. Atmos Energy Holdings, Inc. (Nonutility Businesses) (Nonutility Businesses) Colorado-Kansas Colorado-Kansas Atmos Energy Marketing Atmos Energy Marketing Kentucky/Mid-States Kentucky/Mid-States • • Storage (Trading) Storage (Trading) • • Transportation (Marketing) Transportation (Marketing) Louisiana Louisiana Atmos Pipeline & Storage Atmos Pipeline & Storage Mid-Tex Mid-Tex • • Atmos Pipeline-Texas Atmos Pipeline-Texas • • Non-Texas Assets Non-Texas Assets Mississippi Mississippi West Texas West Texas Other Nonutility Other Nonutility 15 Complementary Nonutility Operations Nonutility Business Segments Complement Core Utility Business Gas Marketing Utilizes storage and transportation assets that are leased or managed to: • provide bundled city gate services (including base load sales, peaking sales, risk management and demand based storage services) to municipal, industrial, power generator, LDC and affiliate utility customers and • capture time and location price differentials (arbitrage) through various trading strategies Pipeline & Storage Includes acquired pipeline and storage assets from TXU Gas (over 6,100 miles of intrastate pipelines and 5 storage facilities). Effective 10/1/04, these pipeline operations are regulated assets but functionally report under the nonutility businesses Owns or leases storage and pipeline assets in Texas, Kentucky and Louisiana that are utilized to provide storage and transportation services to municipal, industrial, power generator and affiliate utility customers 16
  • 9. Complementary Nonutility Operations Atmos Energy Marketing Gross Profit Margin Composition 2007E Impacted by customer volume demand Marketing Marketing Sales prices are: • Cost plus profit margin $50 - $53 Million (Bundled gas deliveries & • Cost plus demand charges (Bundled gas deliveries & peaking sales) peaking sales) Margins: More predictable Impacted by gas price spread values in the market (arbitrage opportunity) Asset Optimization Physical storage capabilities Asset Optimization Available storage and transport $45 - $52 Million (Storage & transportation capacity (Storage & transportation 14.2 Bcf proprietary contracted capacity management) management) 28.5 Bcf customer-owned / AEM- managed storage = Margins: More variable Total margins reflect: Stability from marketing margins $95 - $105 Million Total AEM Total AEM Upside from optimizing our storage Margins Margins and transportation assets to capture arbitrage value Margins: Stable with potential upside As of August 8, 2007 17 Complementary Nonutility Operations Atmos Pipeline & Storage Ownership of Strategic Asset Base Provides Revenue Growth & Stability Atmos Pipeline & Storage Storage Assets – 43 Bcf Pipeline Assets East Diamond Reservoir 2.2 Bcf of storage in KY Atmos Pipeline –Texas > 6,100 miles of intrastate pipe in Texas Barnsley Reservoir 1.3 Bcf of storage in KY Trans LA Gas Pipeline 21 miles of 24” pipe in Louisiana 25 % interest in Napoleonville 0.4 Bcf of Salt storage in LA 5 Storage Fields in Texas 39 Bcf of storage Upstream pipeline services and storage-type services provided to Atmos Energy’s Mid-Tex Division, affiliates & third parties 18
  • 10. Complementary Nonutility Operations Atmos Pipeline - Texas Regulated Asset Base in Texas Provides Revenue Growth and Stability Pipeline Operations 1,800 miles of backbone intrastate pipeline Integrated with Mid-Tex Division LDC Five storage facilities Working storage capacity of 39 Bcf Completed four major projects in 2006 on the pipeline which is expected to add about $15 million of additional revenue in fiscal 2007 Additional opportunities exist in the highly productive Barnett Shale reservoir Pipeline transports and stores gas, and provides other pipeline services for distribution, industrial, electric generation, cross haul and other shippers 19 Complementary Nonutility Operations Atmos Pipeline & Storage Eastern Kentucky Natural Gas Gathering Project Update May 10, 2006, announced plans to construct a natural gas gathering system in eastern Kentucky, referred to as the Straight Creek Project Recently redesigned and renamed the Phoenix Gas Gathering Project Approximately 40 miles and consists of 12-inch and 20- inch pipe, as currently designed Capacity as currently designed is 50 mmcf per day Capital requirements of about $50 million Not expected to have a financial impact on fiscal 2008 earnings 20
  • 11. Financial Measures Earnings Per Share Compared to Company Guidance Reflects Management’s Commitment to Shareholders $2.00 $1.90-$2.00 1.82 $1.75 1.72 $1.80-$1.90 1.54 1.58 $ per share $1.65-$1.75 $1.50 1.45 $1.55-$1.60 $1.52-$1.58 $1.43-$1.60 $1.25 $1.00 $0.75 $0.50 2002 2003 2004 2005 2006 2007E As of August 8, 2007 21 Financial Measures Historical and Estimated Net Income Contribution by Segment 9% 3% 95% 6% 19% 23% 24% 28% 75% 86% 5% Pipeline & Storage Percent 17% 73% 26% 55% 40% Natural Gas Marketing 60% 46% Other Nonutility 35% 36% Utility 15% (1)% -5% 2003 2004 2005 2006 2007E As of August 8, 2007 22
  • 12. Financial Measures Return on Invested Capital (ROIC*) Remains Strong 18.0% 16.4% 15.8% 16.0% 15.5% 15.0% 14.5% 14.0% 12.7% 12.0% 10.0% 2002 2003 2004 2005 2006 5 Yr Avg *ROIC - Return on invested capital is calculated using the following GAAP financial measures: Income before interest expense and income taxes plus common stock dividends paid, divided by the average of the year’s beginning and ending long-term debt plus common equity. This measure is used to more precisely evaluate operational performance and management effectiveness. 23 Financial Measures Times Interest Earned Ratios* 3.5 3.05 2.89 3.0 2.83 2.75 2.55 2.59 2.55 2.5 2.0 1.5 2001 2002 2003 2004 2005 2006 2007E *The times interest earned ratio measures the ability to satisfy annual interest costs As of August 8, 2007 24
  • 13. Financial Measures Weighted Average Cost of Debt Remains Low 9.0 8.0 7.4 6.9 7.0 6.4 6.0 5.9 5.9 Percent 6.0 5.6 5.0 4.0 3.0 2.0 1.0 2001 2002 2003 2004 2005 2006 2007E As of August 8, 2007 25 Financial Measures Annual Dividend for the Years 1984 – 2007 $1.28 $1.20 $1.00 $0.80 $0.60 $0.40 $0.20 $0.00 '8 '8 '8 '8 '8 '8 '9 '9 '9 '9 '9 '9 '9 '9 '9 '9 '0 '0 '0 '0 '0 '0 '0 '0 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 Note: Amounts are adjusted for mergers and acquisitions. 26
  • 14. Financial Measures Dividend Payout Ratio Steadily Reduced Payout Dividend / Share 85% $1.50 81% 80% 79% $1.40 78% 77% 75% 1.28 $1.30 72% 1.26 70% 1.24 69% $1.20 1.22 1.20 1.18 64-67% 1.16 65% $1.10 60% $1.00 2001 2002 2003 2004 2005 2006 2007E Current Dividend Yield Approximately 4.5% Average LDC Payout Ratio = 65% As of August 8, 2007 27 Financial Measures Ample Liquidity Maintained From Multiple Sources Atmos Energy Corporation has $918 million in committed unsecured credit facilities • $600 million 5-year facility (expires December 2011) to backstop our CP program • $300 million 364-day facility (expires November 2007) to utilize only if liquidity under $600 million CP program is exhausted • $18 million credit facility supplements daily cash needs Atmos Energy has additional $25 million uncommitted facility for miscellaneous letters of credit Atmos Energy Marketing has a $580 million receivables- based demand credit facility • Primary purpose is to provide standby L/C’s to AEM’s gas suppliers • Fully guaranteed by Atmos Energy Holdings (sub of Atmos) • Non-recourse to Atmos Energy Corporation 28
  • 15. Financial Measures Shelf Registration and Recent Offerings On December 4, 2006, Atmos Energy filed a registration statement with the SEC to issue up to $900 million in common stock and/or debt securities On December 13, 2006, we completed the sale of 6.3 million shares priced at $31.50 • Approximately $192 million in net proceeds • 100% of proceeds used to reduce short-term debt • Reduced debt capitalization ratio from 60.9% (at 9/30/06) to 54.9% (at 12/31/06) • Dilutes fiscal 2007 net income per diluted share by approximately 5 cents On June 14, 2007,issued $250 million of 6.35% senior notes due 2017 • Effective interest rate was 6.45% inclusive of debt issue costs • Net proceeds of approximately $247 million plus available cash of $53 million were used to redeem the company’s $300 million of unsecured floating rate senior notes on July 15, 2007 • Debt-to-capitalization ratio was to 55.0% at June 30, 2007 • Had repayment occurred as of June 30, 2007, the debt to capitalization ratio would have been 51.7% 29 Financial Measures Improved Debt Capitalization Ratio Achieved stated goal of 50-55% in July 2007 65 (MV Gas) (TXU Gas) 59.3% 59.3% 60.9% 60 54.9% 55.0% 55 53.6% 51.9% 50 51.7% 45 43.6% 40 2 3 4 * 6 7 7 7* 00 00 00 05 * 00 0 06 0 0 0 2 2 2 0 2 /2 20 20 20 al al al l2 al 31 1/ 0/ 5/ sc sc sc a sc / 3 /3 6 /3 /1 Fi Fi Fi sc Fi 12 7 Fi * Upon redemption of $300 million of unsecured floating rate senior notes ** TXU Gas acquisition effective 10/1/04 30
  • 16. Financial Measures Investment Grade Credit Ratings Moody’s Rating Senior Unsecured Debt: Baa3 Commercial Paper: P-3 Outlook: stable Standard & Poor’s Senior Unsecured Debt: BBB Commercial Paper: A-2 Outlook: positive Fitch Senior Unsecured Debt: BBB+ Commercial Paper: F-2 Outlook: stable 31 Financial Measures Compelling Valuation and Total Return Propositions Forward P/E Estimates 5 Year Expected Total Return 18.0 13.9% 15.0 16.4x 10.3% 1.6 16.0 15.4x 12.0 8.6% 14.0x 9.0 4.6 12.3 14.0 3.7 6.0 4.9 5.7 3.0 12.0 Peer Group Atmos S&P 500 S&P 500 Peer Group Atmos Avg. Energy Avg. Energy 5 year growth rate dividend yield Source: Bloomberg @ 8/30/07 Companies in the peer group include AGL Resources, Laclede, New Jersey Resources, Nisource, Northwest Natural Gas, Oneok, Piedmont Natural Gas, Southwest Gas and WGL Holdings. 32
  • 17. Our Focus Enterprise Deliver predictable earnings 4 – 6% annually Dedicated to maintaining financial flexibility and enhancing credit profile Committed to adding value to shareholders Utility Pursue rate reform in each of our Utility jurisdictions • Margin decoupling • Reduce/eliminate lag • Recovery of gas cost portion of bad debt expense Redeploy capital spending to jurisdictions with accelerated recovery Earn at the authorized level in each jurisdiction Maintain leadership position in utility efficiency Nonutility Develop internal projects in our Nonutility segment that provide substantial financial returns Execute commercial growth strategies in all businesses Develop successful gathering system projects Identify other growth opportunities 33 Appendix 34
  • 18. Financial Measures – Fiscal 2007E Earnings Guidance – Fiscal 2007E Atmos Energy anticipates earnings to be at the lower end of the previously announced range of $1.90 to $2.00 per fully diluted share for the 2007 fiscal year Refined assumptions include: Approximately 5 cent dilutive effect of the December equity offering Total gross profit margin contribution from the marketing segment expected to be in the range of $95 million to $105 million, due to the continued reduction in natural gas price volatility Continued execution of rate strategy and collection efforts Normal weather in non-WNA jurisdictions Bad debt expense of no more than $18 million Average short-term interest rate @ 6.3% No material acquisitions Note: Changes in events or other circumstances that the company cannot currently anticipate could result in earnings for fiscal 2007 that are significantly above or below this outlook. As of August 8, 2007 35 Financial Measures – Fiscal 2007E Projected Net Income by Segment ($ millions, except EPS) 2004 2005 2006 2007E Utility $ 63 $ 81 $ 53 $ 77 - 79 Natural Gas Marketing 17 23 58 43 - 46 Pipeline & Storage 3 31 36 46 - 48 Other 3 1 1 1 - 2 Total 86 136 148 167 - 175 Avg. Diluted Shares 54.4 79.0 81.4 87.7 Earnings Per Share $ 1.58 $ 1.72 $ 1.82 $1.90 - $2.00 For fiscal 2007, we project between $365-$385 million in capital expenditures As of August 8, 2007 36
  • 19. Financial Measures – Fiscal 2007E Projected Cash Flow ($ millions) 2004 2005 2006 2007E Cash flows from operations $ 271 $ 387 $ 311 $ 515 - 535 Maintenance/Non-growth capital (126) (243) (287) (265-275) Dividends (67) (99) (102) (112) Cash available for debt reduction $ 78 $ 45 $ (78) $ 138 - 148 and growth projects As of August 8, 2007 37 Maximizing Core Utility Contribution Year-Over-Year Weather Effect by Division, as adjusted for WNA * • As of June 30, 2007, Fiscal YTD consolidated gross profit was s ed ate adversely affected by i t p da St about $2.5 million, as a a ip n x id- S oli i ss result of weather that sia Percent (Warmer) Colder than Normal Te /K /M ns was 1 percent colder ss ui d- CO KY Co Lo Mi Mi than normal, as 10 adjusted for WNA 4% 5% • As of June 30, 2006, 5 Fiscal YTD consolidated 1% 2% 0% 1% gross profit was 0 adversely affected by 2% 2% 2% $47.5 million due to (5) weather that was 13 (10) percent warmer than normal, as adjusted for 13% WNA (15) (20) • Louisiana and Mid-Tex divisions implemented 22% weather-normalized (25) rates during fiscal 2007, (30) 28% which accounted for an increase in gross profit (35) of $10.8 million year Fiscal 2007 Fiscal 2006 over year * West Texas Division had no weather impact in either period 38
  • 20. Atmos Energy Marketing Economic Value vs. GAAP Reported Results We commercially manage our storage assets by capturing arbitrage value through optimization strategies that create embedded (forward) value in the portfolio. We financially report the transactions for external reporting purposes in accordance with GAAP. GAAP Reported Value is the period to period net change in fair value of the portfolio reported in the income statement that results from the process of marking to market the physical storage volumes and corresponding financial instruments in an interim period. Economic Value is the period to period forward margin of our storage portfolio that results from the process of calculating our weighted average cost of inventory (WACOG), and our weighted average sales price of our forward financials (WASP), then multiplying the difference times inventory volumes. This margin will be realized in cash when the hedged transaction is executed or when financials are settled and then reset to stay hedged against physical volumes. Economic Value represents the “forward” economic margin of the transactions, while GAAP reported results reflect that portion of our “forward” margin that has been recorded in the income statement. Volatility in earnings includes the impact of the accounting treatment of our storage portfolio and is reflective of relatively high price volatility of the prompt month, and the relatively low volatility of the offsetting forward months. 39 Atmos Energy Marketing Economic Value vs. GAAP Reported Results Reported GAAP Reported GAAP Economic Value* Value Value (Commercial Value) - -Physical and Financial Physical and Financial - Physical and Financial Positions Positions Positions $(7.2) MM $(7.2) MM $41.2 MM Market Spread Embedded margin difference *Realizing Economic Value $48.4 MM is dependent on ability to execute – deliver physical gas & close financial hedges Supporting data appears on the following slide At June 30, 2007 40
  • 21. Atmos Energy Marketing Economic Value vs. GAAP Reported Results - Three Months Ended Physical Economic Value (EV) GAAP Reported Value - MTM Market Spread Period Volume ($ per mmcf) Total Total Total Ending (Bcf) WASP WACOG EV ($ in millions) ($ per mmcf) ($ in millions) ($ per mmcf) ($ in millions) 3/31/2006 23.6 10.3880 9.0806 1.3074 30.8 (1.5195) (35.8) 2.8269 66.6 6/30/2006 19.0 10.2353 8.7417 1.4936 28.4 (3.0297) (57.7) 4.5233 86.1 2006 Variance (4.6) $ (0.1527) $ (0.3389) $ 0.1862 $ (2.4) (1.5102) $ (21.9) $ 1.6964 $ 19.5 3/31/2007 19.6 8.2196 7.6701 0.5495 10.8 (1.2347) (24.2) 1.7842 35.0 6/30/2007 21.5 9.5409 7.6238 1.9171 41.2 (0.3343) (7.2) 2.2514 48.4 2007 Variance 1.9 $ 1.3213 $ (0.0463) $ 1.3676 $ 30.4 0.9004 $ 17.0 $ 0.4672 $ 13.4 WASP: Weighted average sales price for gas held in storage WACOG: Weighted average cost of AEM’s gas in storage EV: “Economic Value” which equals gas sales price (WASP) minus cost of gas (WACOG) on a per unit basis 41 Atmos Energy Marketing Economic Value vs. GAAP Reported Results - Nine Months Ended Physical Economic Value (EV) GAAP Reported Value - MTM Market Spread Period Volume ($ per mmcf) Total Total Total Ending (Bcf) WASP WACOG EV ($ in millions) ($ per mmcf) ($ in millions) ($ per mmcf) ($ in millions) 9/30/2005 6.9 6.3466 4.4435 1.9031 13.1 (2.1502) (14.8) 4.0533 27.9 6/30/2006 19.0 10.2353 8.7417 1.4936 28.4 (3.0297) (57.7) 4.5233 86.1 2006 Variance 12.1 $ 3.8887 $ 4.2982 $ (0.4095) $ 15.3 (0.8795) $ (42.9) $ 0.4700 $ 58.3 9/30/2006 14.5 11.9716 7.8329 4.1387 60.0 (1.1076) (16.0) 5.2463 76.0 6/30/2007 21.5 9.5409 7.6238 1.9171 41.2 (0.3343) (7.2) 2.2514 48.4 2007 Variance 7.0 $ (2.4307) $ (0.2091) $ (2.2216) $ (18.8) 0.7733 $ 8.8 $ (2.9949) $ (27.6) WASP: Weighted average sales price for gas held in storage WACOG: Weighted average cost of AEM’s gas in storage EV: “Economic Value” which equals gas sales price (WASP) minus cost of gas (WACOG) on a per unit basis 42
  • 22. Atmos Energy Marketing Conceptual Illustration of MTM Effect on Storage Prompt Month January Economic Gas Daily Hedge 2007 P&L Value Month Inject Withdraw Gas Cost/Mcf Index Hedge Volume Price Futures Spread $MM $MM June 1 Bcf 0 $7.00 N/A Sell 1 Bcf $11.00 $11.00 $4.00 $0 $4.0 Futures July 0 0 $7.00 $6.00 N/A 1 Bcf - $10.50 $4.50 ($0.5) $4.0 Sept. 0 0 $7.00 $6.00 N/A 1 Bcf - $11.50 $5.50 ($1.0) $4.0 Jan. 0 1 Bcf $7.00 $10.00 Buy 1 Bcf - $10.00 $0.00 $5.5 $4.0 Futures Total $4.0 $4.0 43 Atmos Energy Marketing Cash Versus Futures Spread “Spread” refers to the difference between cash prices (Gas Daily) and futures prices (NYMEX) for the month of delivery. The greater the change in the spread, the larger our unrealized gain/loss. The hurricanes in 2005 created unusual volatility in natural gas prices, which caused spreads to widen considerably during that period. Historically, spreads have tended to be less than $1.00/Mcf. 44