LAS VEGAS, Nov. 2 /PRNewswire-FirstCall/ -- Southwest Gas Corporation
(NYSE: SWX) recorded a net loss of $0.26 per share for the third quarter of
2006, a $0.17 improvement from the loss of $0.43 per share recorded during
the third quarter of 2005. Net loss for the third quarter of 2006 was $10.7
million, compared to a loss of $16.4 million in the prior period. Due to
the seasonal nature of the business, net losses during the second and third
quarters are normal and not generally indicative of earnings for a complete
twelve-month period.
    According to Jeffrey W. Shaw, Chief Executive Officer, "The improvement
in operating results over the same period a year ago is due largely to
higher operating margin associated with the new rates in place in Arizona,
coupled with continued customer growth. And while the pace of growth has
slowed somewhat recently, we remain well above industry averages.
Additionally, operating expenses are moderating as we use technology to
curb labor cost increases and maintain effective customer-to-employee
ratios." Shaw went on to say, "We are quite pleased with our results for
the second and third quarters of 2006. We now look optimistically to the
winter heating season in hopes of a continued trend of improved operating
results."
    For the twelve months ended September 30, 2006, consolidated net income
was $67.4 million, or $1.69 per basic share, compared to $54 million, or
$1.44 per basic share, during the twelve-month period ended September 30,
2005. Results for the current twelve-month period include a $10 million, or
$0.16 per share, nonrecurring charge recorded in the fourth quarter of 2005
related to an injuries and damages incident, partially offset by
approximately $0.07 per share related to a favorable nonrecurring property
tax settlement reached in the second quarter of 2006.
                    Natural Gas Operations Segment Results
    Third Quarter
    Operating margin, defined as operating revenues less the cost of gas
sold, increased approximately $14 million, or 13 percent, in the third
quarter of 2006 compared to the third quarter of 2005. During the last
twelve months, the Company added 75,000 customers, an increase of over four
percent. New customers contributed an incremental $4 million in operating
margin during the quarter. Rate relief added approximately $10 million ($9
million in Arizona) in operating margin compared to the prior year.
    Operating expenses for the quarter increased $3.9 million, or three
percent, compared to the third quarter of 2005 primarily due to general
cost increases and incremental operating costs associated with serving
additional customers. Net financing costs increased $485,000, or two
percent, between periods primarily due to an increase in average debt
outstanding and higher rates on variable-rate debt.
    Twelve Months to Date
    Operating margin increased $36 million between periods. Customer growth
contributed an incremental $26 million and rate relief in Arizona and
California added $24 million. Differences in heating demand caused
primarily by weather variations between periods resulted in a $14 million
operating margin decrease as warmer-than-normal temperatures were
experienced during both periods.
    Operating expenses increased $23.3 million, or five percent, between
periods reflecting the previously noted $10 million nonrecurring injuries
and damages charge, along with general increases in labor and maintenance
costs, and incremental operating costs associated with serving additional
customers. These costs were partially offset by the property tax settlement
and lower property tax rates in Arizona.
    Other income improved $6 million primarily due to higher returns on
long-term investments, increased interest income on higher deferred
purchased gas cost balances, and interest income related to the property
tax settlement. Net financing costs rose $4.1 million, or five percent,
between periods primarily due to an increase in average debt outstanding
and higher rates on variable-rate debt.
    Southwest Gas Corporation provides natural gas service to 1,752,000
customers in Arizona, Nevada, and California. Its service territories are
centered in the fastest-growing region of the country.
    This press release may contain statements which constitute "forward-
looking statements" within the meaning of the Securities Litigation Reform
Act of 1995 (Reform Act). All such forward-looking statements are intended
to be subject to the safe harbor protection provided by the Reform Act. A
number of important factors affecting the business and financial results of
the Company could cause actual results to differ materially from those
stated in the forward-looking statements. These factors include, but are
not limited to, the impact of weather variations on customer usage,
customer growth rates, changes in natural gas prices, the ability to
recover costs through the PGA mechanism, the effects of
regulation/deregulation, the timing and amount of rate relief, changes in
rate design, changes in gas procurement practices, changes in capital
requirements and funding, the impact of conditions in the capital markets
on financing costs, changes in construction expenditures and financing,
changes in operations and maintenance expenses, future liability claims,
changes in pipeline capacity for the transportation of gas and related
costs, acquisitions and management's plans related thereto, competition,
and the ability to raise capital in external financings. In addition, the
Company can provide no assurance that its discussions regarding certain
trends relating to its financing, operations, and maintenance expenses will
continue in future periods.
                  SOUTHWEST GAS CONSOLIDATED EARNINGS DIGEST
                   (In thousands, except per share amounts)

    QUARTER ENDED SEPTEMBER 30,                         2006           2005

    Consolidated Operating Revenues                 $351,800       $313,278
    Net Loss                                         $10,736        $16,444
    Average Number of Common Shares Outstanding       40,982         38,528
    Loss Per Share                                     $0.26          $0.43

    NINE MONTHS ENDED SEPTEMBER 30,                     2006           2005

    Consolidated Operating Revenues               $1,459,643     $1,217,288
    Net Income                                       $37,153        $13,568
    Average Number of Common Shares Outstanding       40,221         37,780
    Basic Earnings Per Share                           $0.92          $0.36
    Diluted Earnings Per Share                         $0.91          $0.36

    TWELVE MONTHS ENDED SEPTEMBER 30,                   2006           2005

    Consolidated Operating Revenues               $1,956,638     $1,677,784
    Net Income                                       $67,408        $54,014
    Average Number of Common Shares Outstanding       39,957         37,392
    Basic Earnings Per Share                           $1.69          $1.44
    Diluted Earnings Per Share                         $1.67          $1.43

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