Shares of Niska Gas Storage (NYSE: NKA) have been bouncing around since it reported earnings Tuesday morning. Despite missing earnings estimates by $0.05, with a profit of $0.22 EPS, shares jumped nearly 10% Tuesday before losing about half of those gains on Wednesday.

For now, it seems as if the company's 12% distribution for common unit holders is safe. Last November, the company had suspended disbursements to subordinated unit holders, who hold about half the stock, and expects that suspension to continue for the next fiscal year. The company's performance in the last quarter picked up as it generated $29.1 million of cash available for distribution for the quarter compared to just $63.7 million for the year. With about 34.5 million common units outstanding, the company needs to generate available cash of $48.3 million a year to keep its common distribution at the current rate. Next year's guidance is similar to the past year with $62.1 million and $72.1 million, while Niska had $117.5 million in fiscal 2011. Late last year, the company had forecast just $45 million to $55 million of available cash, so next year's guidance could also underestimate revenue.

Niska made some progress on other fronts as well, including an addition of 15 billion cubic feet of storage to its Wild Goose facility in California, increasing total capacity by 7% to 221 BCF. Total available storage in North America is about 4.1 trillion cubic feet, giving Niska a 5% share. Niska also retired another $35 million of debt, bringing principal payments to $156 million over the past year and helping to save $14 million in interest expense. The paybacks also ensure that the company maintains its interest coverage ratio above a minimum of 1.75 in order to continue distributing the same level of dividends.

On the call, management noted that fiscal 2012, which ended in March, was the warmest 12-month period in North America on record. The warm winter helped send gas prices plummeting and kept Niska's revenues down. Looking at the coming year, investors will want to keep an eye on natural gas prices, as well as the weather this winter. An increase in gas prices and volatility will help Niska, as would a colder winter. Also worth watching are the abnormally high levels of stored gas inventories, meaning that available space could run out by the end of the injection season in November. The Energy Information Administration said that if injection rates match five-year averages over the coming months, supplies would exceed storage by 375 BCF.

Commodity prices are notoriously hard to predict, and United States Natural Gas (AMEX: UNG), which has climbed about 30% from its bottom a month ago, is no different. After natural gas hit lows south of $2/MMBTU, producer cutbacks and utilities converting from coal have driven prices back up. According to some estimates, 14% of the nation's electricity supply has switched from coal to gas in the past few years. Among the companies making the move is Northeast Utilities (NYSE: NU), which proposed a $2.5 billion natural gas distribution system build-out in Connecticut earlier this week. Increases in consumption should benefit Niska by sending commodity prices up.

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