Good morning. My name is Katharine and I will be your conference operator. At this time, I would like to welcome everyone to the fourth quarter 2008 OGE Energy earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator instructions) Mr. Tidwell, you may begin your conference.

Thank you. And good morning, everyone and welcome to OGE Energy Corp.'s fourth quarter 2008 earnings call. I'm Todd Tidwell, Director of Investor Relations and with me today I have Pete Delaney, Chairman, President and CEO of OGE Energy Corp.; Scott Forbes, Interim CFO of OGE Energy Corp.; Keith Mitchell, Senior Vice President and COO of Enogex; Steve Merrill, Vice President and CFO of Enogex; Howard Motley, Vice President of Regulatory Affairs; and Max Myers, Treasurer and several other members of the management team to address any questions that you may have. In terms of the call today, we will first hear from Pete Delaney, followed by an explanation of full year and fourth quarter results from Scott Forbes. Then an overview of regulatory issues from Howard Motley and finally, as always we will answer your questions. I would like to remind you that this conference is being webcast and you may follow along on our Web site at www.oge.com. We do have a new Web site today and the link can be found under Financials in the center of the web page. In addition, the conference call and accompanying slides, including required non-GAAP reconciliation information, will be archived following the call on that same Web site. Before we begin the presentation, I would like to direct your attention to the Safe Harbor statement regarding forward-looking statements. This is an SEC requirement for financial statements and simply states that we cannot guarantee forward-looking financial results, but this is our best estimate to-date. I will now turn the call over to Pete Delaney for his opening comments. Pete?

Good morning and welcome to our fourth quarter earnings call. As Scott Forbes will provide a more detailed overview of our financial results, I will keep my remarks to five main themes that frame our outlook for the Company. First, from a financial standpoint, 2008 was another year of solid performance with earnings on an operating basis in line with the record levels of prior years and well within our beginning of the year guidance of $2.30 to $2.50. Reported earnings of $2.49 per share include several one-time charges relative to last year's earnings of $2.64. And at the utility, despite continued growth, customer count grew at 1% and retail sales grew at 2%, which is in-line with growth over the last several years. Regulatory lag ate into net income. Enogex recorded net income for the second year in a row, record net income for the second year in a row as commodity spreads reached all-time high. Secondly, the Oklahoma economy remains much more constructive than in other regions and we expect continued sales and customer growth in 2009, although at a lower rate than we had in 2008. The metro area unemployment rate remains well below the national average at just below 5% and for 2009, job growth of 0.2% is expected, that's about 1100 jobs. And housing prices are projected to hold up with pricing gains of 3% through the coming year. Relative to other areas, this is quite positive. The outlook for our industrial segment is mixed with several manufacturers in our area reducing production, but at the same time, we have new customers coming on line. In 2009, we are expecting an additional 45 megawatts of incremental capacity will be required to serve the load of specific large, commercial and industrial electrical projects currently underway. Net…

Thank you, Pete. For the full year 2008, we reported net income of $231.4 million or $2.49 per average diluted share as compared to net income of $244.2 million or $2.64 per average diluted share in 2007. The 2008 earnings include several one-time charges that reduced earnings per share by $0.18. On Slide #3, you can see the contribution by business unit on a comparative basis. Please keep in mind that in 2008, the marketing business is included with the holding company results, while in 2007 it was included in Enogex. Over the next few slides, I will go into more detail regarding the results by business. At OG&E, net income for 2008 was $143 million or $1.54 per share, as compared to net income of $161.7 million or $1.75 per share in 2007. Some of the primary drivers are as follows Gross margin on revenues increased $34.6 million or 4.3%. I will provide details on gross margin on the next slide. Operating and maintenance expense increased $30.9 million or 9.6%. $9.5 million of the increase was due to a one-time charge for overcapitalized costs in prior years. The remaining increase resulted from higher payroll and benefits, increased contract services associated with overhauls at several of OG&E's power plants, increased vegetation management costs, higher fuel costs for our transportation fleet and lower O&M in 2007 as labor associated with the December 2007 ice storm was capitalized as part of a regulatory asset. Depreciation and amortization expense increased $13.7 million or 9.7% due to additional assets being placed in service, including the Redbud power plant that we purchased in late September. Other income and expense is down due to a one-time write-off of $7.7 million of the Redrock plant abandonment costs and $1.5 million of storm costs as part of a…

Thanks, Scott. In August 2008, OG&E filed an application with the Arkansas Public Service Commission requesting to increase its rates to $26.4 million. On January 13th of this year, the staff filed testimony recommending $12 million. The hearing is scheduled for April, the 7th. A Commission decision is expected in June 2009 based on a 10-month statutory time table and new rates are targeted for implementation in July of this year. Also, last year, in October 2008, OG&E filed an application requesting recovery of $600,000 of storm costs incurred in 2008 that exceeded the amount of recovery in our base rates in the Arkansas jurisdiction. In December, the Commission authorized OG&E to defer these costs and address in the pending rate case without any guarantee. In January of 2009 when the staff filed their recommendation, the $12 million recommendation, they recommended recovery of these storm costs in the rate case. In the Oklahoma jurisdiction, OG&E plans to file a rate case around February 26. The amount of the request will range between $100 million and $110 million. We will be proposing a 12.25% return on equity with a 54% common equity level. In the upcoming Oklahoma rate case, 100 basis points is worth approximately $25.5 million. A Commission decision is expected in August of this year based on the 180-day statutory timing for processing a rate case. The implementation of new rates is targeted for September 2009. In December 2008, OG&E also filed an application with the Oklahoma Commission to harden our electric system from storms we experience every year due to wind, ice and tornadoes. The Company is requesting an approval of a five-year program with a recovery rider. The program targets $115 million for capital expenditures in underground facilities over the five years and an additional $10 million annually for vegetation management. The hearing is scheduled for March 25, 2009 and a Commission order is expected in the second quarter. If approved by the Oklahoma Commission, our target is to implement this program and the recovery rider in the third quarter of this year. Two other regulatory actions in Oklahoma. On January 15, OG&E filed an application requesting approval of certain NERC compliance projects as part of the Company's updated security plan. If approved by the Commission, the annual revenue requirement for these projects is approximately $900,000, which should be recoverable through a previously approved security rider. The Commission decision is expected in the third quarter of this year. Finally, the Oklahoma staff filed an application in September 2008 for a prudence review of the 2007 costs recovered through the Company's fuel cost adjustment. On January 26, 2009, the Company filed the minimum filing requirement established by the Commission rules. At this time, a procedure schedule has not been issued. Back to you, Pete.

Thank you, Howard. Now, we will take your questions.

(Operator instructions) Our first question comes from the line of Brian Russo with Ladenburg Thalmann. Your line is open. Brian Russo – Ladenburg Thalmann: Good morning. Just a question on the 2009 outlook, it looks like you have increased OG&E expectations slightly, maintaining the low end of the Enogex EPS. But the holding company negative drag has been reduced quite meaningfully and I was just curious to know what was the driver of that?

Scott?

Hi, Brian. It's lower borrowings as well as interest rates less than what we had forecast back in October. Brian Russo – Ladenburg Thalmann: Okay. And in terms of your external capital needs, if I understood you correctly, your equity needs are satisfied with the remaining DRIP program, but depending on incremental CapEx or other needs, you may consider equity offering?

Sure, we will take a look at the variety of factors we talked about, but at this point, we think the remaining balance of $34 million is where we are looking for this year. Brian Russo – Ladenburg Thalmann: What's your target equity ratio?

Well, at the utility, of course, we are maintaining a 54% equity ratio and overall, the target is somewhere around 50% for the holding company. Brian Russo – Ladenburg Thalmann: Okay. And I think in your 10-K and the '09 outlook, you are assuming 10% volume growth at Enogex. I think that compares to a previous forecast of 7%. And I was wondering what the drivers were there. And then, secondly, are you seeing any shut-ins or slow-down in drilling given where gas prices are today?

Yes, Keith, Chief Operating Officer of Enogex, will handle that call. Keith?

Yes, we are seeing a lot of activity in certain areas that we do have some growth and that's why you see the volumes growth still remains strong. We have seen some areas where we have had some rigs laid down, but some of the areas that we have some of our growth projects in have remained strong. So that's why you see the growth. Brian Russo – Ladenburg Thalmann: Okay, so even with gas prices below $5, you are not seeing any shut-ins?

We have seen some in some areas and we have seen some rigs lay down, but even with the current gas prices, which right now in Oklahoma are around $3.50, we have continued to see drilling in some key development areas that we have infrastructure going in. Brian Russo – Ladenburg Thalmann: Okay, thank you very much.

Our next question comes from the line of Reza Hatefi. Your line is open.

Thank you very much. Could you break down your gross margin for your gathering and processing business? Again, the percentages that you expect from keep-whole versus percentage of liquids versus – I mean for the volumes that versus fee?

I think the question was – let me put that back to you. You are looking for I thought a breakdown of margin, not volume by –

Yes, margin –

– type of contract?

Both, actually, yes.

Both volumes and margins. Steve Merrill, Chief Financial Officer of Enogex.

With regard to margin, our gathering processing margin is about 56% of total margin, transportation storage about 44%, so that shifted considerably from '08 to almost pretty close to an even mix with regard to margin. With regard to our processing mix, our current mix is about 40% POL, keep-whole greater than 1080 is about 30%. Keep-whole less than 1080 – again, which we have the ability to reject ethane and flow that directly into the pipeline is 15%, almost 16% and then our fixed fees, 14%, which has almost doubled since 2007.

I see. Okay, great. And I notice that your gross margin guidance is $190 million to $220 million for 2009. How much of that is fixed fee?

That's all gathering and processing. That's the gathering and processing piece of our gross margin. The fixed fee portion of that – keep in mind, you got your gathered in there that is more fee-based.

Yes, Reza, this is Todd. We don't give out the margin on fixed fee. What I can tell you is though our projected inlet volumes, fixed fee is about 13% is being projected in 2009 of our inlet volumes and our total inlet volumes are about 262 million for 2009. So you can do the math there and determine what the MMBTU basis for fixed fee would be. And then you will just have to – obviously, for competitive reasons, we don't disclose that number on what we pay for fixed fee processing. But once you know what the MMBTU amount is, you can apply a price to that.

And I was wondering your frac spread guidance for 2009 is a little bit less than half of what it was realized in 2008, if I'm not mistaken, and roughly the same goes for NGL prices in '09 versus realized in '08. And your gathering and processing gross margin is only 25% or so – 20% or so lower than last year. Could you describe – is it because less of the margin is commoditized and thus even though the commodities are dropping by roughly 50% that's leading to gross margin only dropping by 20%? Could you talk about that a little bit?

Yes, remember, we also have volume growth in our gathering business. So you are seeing some of the loss of the commodity margin being offset by the fact that we are growing our volumes and we have the fees from our gathering volumes.

Great. Thank you very much.

And Reza, I might add also, this is Todd again that the actual processing margins that came in 2008 were about $143 million. That does not include Atoka. And if you look at our midpoint of our current guidance, we are at about $78 million to $80 million on processing. So it is – the drop in commodity spreads and liquids prices is built into the guidance.

Thank you.

Our next question comes from the line of Kyle Henderson [ph] with Prestadas Asset Management [ph]. Kyle Henderson – Prestadas Asset Management: Good morning. I want to make sure I understand the slide for your processing hedges, particularly for 2009. It looks like you have unhedged about 14 million gallons to 15 million gallons unhedged, is that correct?

Are you talking on total or just on the keep-whole or – Kyle Henderson – Prestadas Asset Management: I'm sorry. Yes, I am talking on total on your unhedged volumes there for your processing margins for your keep-whole contracts in 2009. I read that, it says about 14.7 million gallons or so of total unhedged.

That is on keep-whole, that is correct. Kyle Henderson – Prestadas Asset Management: And then it looks like you have a spread number of $654 per MMBTU.

Right. And that does not include ethane. Kyle Henderson – Prestadas Asset Management: That does not include ethane? Okay. What's the source of those numbers for the spreads there for the unhedged portion? Is that an estimate or what is that?

That's a price curve as of January 31st. Kyle Henderson – Prestadas Asset Management: Okay. And that's quoted out of Mont Belvieu, is that correct? Or where would that be – what would be the source I guess for that number?

Conway. Kyle Henderson – Prestadas Asset Management: Conway. Okay. What are you currently seeing right now in Conway?

They are in line with that current spreads right now. The market spreads about $3.63 at Conway, which would equate to a realized spread around $2.20, $2.30.

Right now would include ethane.

Correct. Including ethane. Kyle Henderson – Prestadas Asset Management: Okay. So at the risk of grossly oversimplifying here, if I were to mark that to market with where the curve is currently right now, it appears to me that because you got so much of this hedge, we are probably only talking about maybe $0.02 a share. Did I get that calculation roughly correct?

On upside? Kyle Henderson – Prestadas Asset Management: I'm sorry. If I were to mark it down to say the $2.20, $2.30 or so we are seeing at Conway, because you got so much of this – so much of your keep-whole already hedged, it appears that the impact is pretty minimal.

That's correct. It would really be roughly flat with where our current outlook is. Kyle Henderson – Prestadas Asset Management: Okay. So I guess the real question I have then is you have already guided Enogex to the lower end of a pretty wide variance. I understand there is some volumetric risk, but I wonder if you could walk me through what the rest of the risk is there at Enogex?

It's volumetric. It would be the remaining risk. We don't have much downside left on the commodity side. There is very little margin that is unhedged on the downside, so really it's volume risk at this point. Kyle Henderson – Prestadas Asset Management: Okay, very good. That's it. Thank you.

There is a little bit of natural gas link that's out there, so there is a little bit of risk associated with that, but most of it is on the processing side. Kyle Henderson – Prestadas Asset Management: I appreciate your responses. Thank you.

Our next question comes from the line of Jeff Coviello with Duquesne Capital. Your line is now open. Jeff Coviello – Duquesne Capital: Good morning, guys. How are you?

Hey, Jeff. Jeff Coviello – Duquesne Capital: I just wanted to ask a question about the basins you are in. You mentioned that the current gas prices, I think it’s around $3.50, you are still seeing your development growth in drilling. And I was just wondering if you thought that was from the fixed costs of picking up the acreage and they're just drilling in, or do you think that actually the reserves there are economic at $3.50 and even if gas prices stay here, you are still going to see growth?

Yes. Again, we have seen some rigs come down, but there are some key areas that are continuing to develop in that area. I think that if you look at the Woodford Shale and also some of these granite wash plays around where we have infrastructure going in, they've continued to develop at these rates. I think they have acreage that they want to continue to develop and hold. They also are looking for – they don't think that this will be sustained throughout the year or even going into the first part of next year. So they are continuing their developing plans instead of letting these rigs go. Jeff Coviello – Duquesne Capital: Got it. Okay. And o you have any sense of where, I mean roughly, at around what gas price you think you would see a permanent slowing? Is it $5, $6, $7 or is it – I know it's probably pretty low cost there to develop the gas.

Yes, I think it depends somewhat by the producer and their particular situation. Like I said, some producers are down and they don't expect to come back until prices say get because – say the $4 range, but we also have those that are saying at $3.50 they are going to continue to drill. Jeff Coviello – Duquesne Capital: Got it. Alright. That's helpful, guys. Thanks a lot.

Our next question comes from David Frank with Catapult Capital. Your line is open. David Frank – Catapult Capital: Hi, good morning guys.

Good morning. David Frank – Catapult Capital: Could you tell me or could you tell us what ROE is embedded at the utility for your guidance? What ROE assumption is embedded for your '09 guidance for this year?

In terms of the range, what falls out from our guidance? David Frank – Catapult Capital: Yes, approximately what do you expect the utility to earn; what kind of ROE in '09? What is reflected in your guidance for '09?

My recollection and checking the numbers that with our assumptions for 2009, and we do have – Howard went through we do have Arkansas which we expect to have a final order in the summer and we have our Oklahoma that – but overall, I think it comes in around 9.5% return on equity. Of course, we have an authorized at this point in time about 10.75%, so that was a regulatory lag I referred to in my comments. David Frank – Catapult Capital: So the utility earnings guidance of $1.83 to $1.98 for '09 assumes a 9.5% ROE versus roughly a 10.7% authorized?

Yes. I mean we don't make an assumption of what we earn. We do our projections – project through pricing volumes, cost management, and that range falls out. That range probably if you took the midpoint, my guess is it's around 9.5%.

That's exactly – David, this is Todd. And remember that we are only going to get about four months of Oklahoma rate relief and six months of Arkansas rate relief, so there is going to be a lag on that ROE. David Frank – Catapult Capital: Right. And was that ROE on your fully (inaudible) capital fees?

It's on our capital structure utility, the 54% roughly equity base average year. David Frank – Catapult Capital: And that takes into account all the investments you made?

Yes, through the date through December '08, really. David Frank – Catapult Capital: I am sorry, also on your one, the Tallgrass, I believe it was, the transmission project?

Correct. David Frank – Catapult Capital: Did you say you had already received FERC approval, and did you say something about incentives on that?

Max?

Sure. David, this is Max Myers. We did receive a FERC order at the end of 2008. We got 12.8 ROE as well as recovery, CWIP recovery and abandonment recovery as well. Now we are working with the STP and awaiting cost allocation methodology for the STP to move forward, but we did get FERC approval.

We do have another step, as Max said, so we don't have the authority to go ahead and start construction on that line. And with regards to the Southwest Power Pool, that process, the timeline is not as transparent as we would want it to be. So it's hard for us to project at which point in time we would be able to be moving forward, although we have timelines around I think trying to start in the middle of the year and complete that in 2013. Whether that will be met remains to be seen. David Frank – Catapult Capital: Could you remind us what is the portion of your investment on that line?

It would be half.

About $250 million. David Frank – Catapult Capital: $250 million. And on the other SPP transmission line you mentioned, I think that was – I forget the name that one.

Well, there is two other lines. There is the windspeed line from Oklahoma City to Woodward that we got regulatory pre-approval for that we are constructing now. And then we received a notice to construct from the SPP for a 345-kV line in Southeast Oklahoma. That's about $96 million. David Frank – Catapult Capital: Okay. Alright. Thank you very much.

Thank you.

Our next question comes from the line of Chris Shelton with Millennium Partners. Your line is open. Chris Shelton – Millennium Partners: Good morning, guys. Just wanted to get a little more color on the parent, what's driving the parent interest expense reduction. Did you said less borrowings? Was there anything driving the less borrowings? Did you cut CapEx or –?

Hi, Chris, it's really lower interest rates. If you recall back when we set guidance in October, we were at that point you know in the market where our short variable rate debt on our tax-exempt bonds was 8% for a two-week point in time. So variable rates at that point in time were very, very high, and it was that anomaly in the market back in October. So we took a pretty conservative view in terms of our 2009 short-term interest rates. Those rates have come back, as you know, and so it's just a reduction in the short-term interest rate assumption for '09. Chris Shelton – Millennium Partners: Okay. And so the level of borrowing is relatively the same from interest rate assumption?

That's correct. Chris Shelton – Millennium Partners: Okay. And then on the – I notice you've got and I think you said in the prepared remarks, a higher share count assumed in '09. Should we just assume that you execute the remaining portion of the dribble [ph] plan you guys have started?

That's correct. Chris Shelton – Millennium Partners: Okay. Alright. Thank you.

At this time, there are no further questions in queue.

Well, as you have seen, 2008 for OG&E was quite a year with many accomplishments and we're really excited also about our prospects for 2009. We have financial flexibility with ample borrowing capacity, also from a low payout ratio and also associated with the really limited maintenance or I would call nondiscretionary expenditures relative to our cash flow to manage through this financial crisis that we find ourselves in. We have a clear path for growth in the utility. We have $85 million of incremental revenues in 2009 and $35 million of incremental revenue in 2010 from 2008 rate case settlements. In addition, we filed a $26 million request in Arkansas that we talked about last year and we will be filing the $100 million rate filing in Oklahoma this month. We also believe Enogex will have opportunities in the current marketplace to improve its position relative to its competitors, continue experiencing increased gathering volumes in 2009. And in terms of profitability, we think, clearly, we have much more upside than downside based on processing spreads at this part of the cycle. And while the efforts to joint venture with Energy Transfer has ended at the current time, management will continue to explore strategies with the goal that OGE Energy stock would fully reflect the value of our midstream business. I thank you for your interest in the Company and have a great day.

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