Commentary on this conference call may contain forward-looking statements within the meaning of the federal securities laws.  National Fuel Gas Company (the “Company”) is providing this cautionary statement to make applicable and 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, the Company.

Forward-looking statements include, without limitation, statements regarding future prospects, plans, objectives, goals, projections, estimates of oil and gas quantities, strategies, future events or performance and underlying assumptions, capital structure, anticipated capital expenditures, completion of construction projects, projections for pension and other post-retirement benefit obligations, impacts of the adoption of new accounting rules, and possible outcomes of litigation or regulatory proceedings, as well as statements that are identified by the use of the words "anticipates," "estimates," "expects," "forecasts," "intends," "plans," "predicts," "projects," "believes," "seeks," "will," "may" and similar expressions.  All forward-looking statements, whether written or oral and whether made by or on behalf of the Company, are expressly qualified by these cautionary statements. Forward-looking statements involve risks and uncertainties which could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements.

The Company's expectations, beliefs and projections are expressed in good faith and are believed by the Company to have a reasonable basis, but there can be no assurance that management's expectations, beliefs or projections will result or be achieved or accomplished.

In addition to other factors, the following are important factors that, in the view of the Company, could cause actual results to differ materially from those discussed in the forward-looking statements:

  1. Delays or changes in costs or plans with respect to Company projects or related projects of other companies, including difficulties or delays in obtaining necessary governmental approvals, permits or orders or in obtaining the cooperation of interconnecting facility operators;
  2. Governmental/regulatory actions, initiatives and proceedings, including those involving rate cases (which address, among other things, target rates of return, rate design and retained natural gas), environmental/safety requirements, affiliate relationships, industry structure, and franchise renewal;
  3. Changes in laws, regulations or judicial interpretations to which the Company is subject, including those involving derivatives, taxes, safety, employment, climate change, other environmental matters, real property, and exploration and production activities such as hydraulic fracturing;
  4. Impairments under the SEC’s full cost ceiling test for natural gas and oil reserves;
  5. Changes in the price of natural gas or oil;
  6. Financial and economic conditions, including the availability of credit, and occurrences affecting the Company’s ability to obtain financing on acceptable terms for working capital, capital expenditures and other investments, including any downgrades in the Company’s credit ratings and changes in interest rates and other capital market conditions;
  7. Factors affecting the Company’s ability to successfully identify, drill for and produce economically viable natural gas and oil reserves, including among others geology, lease availability, title disputes, weather conditions, shortages, delays or unavailability of equipment and services required in drilling operations, insufficient gathering, processing and transportation capacity, the need to obtain governmental approvals and permits, and compliance with environmental laws and regulations;
  8. Increasing health care costs and the resulting effect on health insurance premiums and on the obligation to provide other post-retirement benefits;
  9. Changes in price differentials between similar quantities of natural gas or oil at different geographic locations, and the effect of such changes on commodity production, revenues and demand for pipeline transportation capacity to or from such locations;
  10. Other changes in price differentials between similar quantities of natural gas or oil having different quality, heating value, hydrocarbon mix or delivery date;
  11. The cost and effects of legal and administrative claims against the Company or activist shareholder campaigns to effect changes at the Company;
  12. Uncertainty of oil and gas reserve estimates;
  13. Significant differences between the Company’s projected and actual production levels for natural gas or oil;
  14. Changes in demographic patterns and weather conditions;
  15. Changes in the availability, price or accounting treatment of derivative financial instruments;
  16. Changes in laws, actuarial assumptions, the interest rate environment and the return on plan/trust assets related to the Company’s pension and other post-retirement benefits, which can affect future funding obligations and costs and plan liabilities;
  17. Changes in economic conditions, including global, national or regional recessions, and their effect on the demand for, and customers’ ability to pay for, the Company’s products and services;
  18. The creditworthiness or performance of the Company’s key suppliers, customers and counterparties;
  19. Economic disruptions or uninsured losses resulting from major accidents, fires, severe weather, natural disasters, terrorist activities, acts of war, cyber attacks or pest infestation;
  20. Significant differences between the Company’s projected and actual capital expenditures and operating expenses; or
  21. Increasing costs of insurance, changes in coverage and the ability to obtain insurance.

Forward-looking statements include estimates of oil and gas quantities. Proved oil and gas reserves are those quantities of oil and gas which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible under existing economic conditions, operating methods and government regulations. Other estimates of oil and gas quantities, including estimates of probable reserves, possible reserves, and resource potential, are by their nature more speculative than estimates of proved reserves. Accordingly, estimates other than proved reserves are subject to substantially greater risk of being actually realized.

Any forward-looking statements contained in this conference call speak only as of the date of this call. The Company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date of this conference call.  Investors are urged to consider closely the disclosure in our Form 10-K and Forms 10-Q, available at www.investor.nationalfuelgas.com. You can also obtain these forms on the SEC’s website at www.sec.gov.

By clicking “Accept” below, you acknowledge the above.

press-release-details
Press release details

National Fuel Reports Fourth Quarter and Full Year Fiscal 2017 Earnings

11/02/2017

WILLIAMSVILLE, N.Y.--(BUSINESS WIRE)-- National Fuel Gas Company (“National Fuel” or the “Company”) (NYSE:NFG) today announced consolidated results for the three months and fiscal year ended September 30, 2017.

FISCAL 2017 FOURTH QUARTER SUMMARY

  • Consolidated net income of $45.6 million, or $0.53 per share, compared to consolidated net income of $37.6 million, or $0.44 per share, and operating results of $56.6 million, or $0.66 per share, in the prior year (see reconciliation below)
  • Consolidated adjusted EBITDA of $142.8 million (non-GAAP reconciliation on page 25)
  • Net production of 40.4 Bcfe, a 1% increase from the prior year
  • Price-related natural gas production curtailments of 2.5 Bcf in Appalachia
  • Average natural gas prices, after the impact of hedging, of $2.91 per Mcf, down $0.18 per Mcf from the prior year
  • Average oil prices, after the impact of hedging, of $54.77 per Bbl, down $5.24 per Bbl from the prior year
  • Gathering revenues of $25.0 million, up 6% from the prior year, on 44.9 Bcf of gathering system throughput

FISCAL 2017 HIGHLIGHTS

  • Consolidated net income of $283.5 million, or $3.30 per share, compared to consolidated net loss of $291.0 million, or $3.43 per share, and operating results of $263.6 million, or $3.09 per share, in the prior year (see reconciliation below)
  • Consolidated adjusted EBITDA of $777.0 million (non-GAAP reconciliation on page 25)
  • Cash provided by operations exceeded net cash used in investing activities by $262 million
  • Gathering net income of $40.4 million, a 32% increase from the prior year
  • Net production of 173.5 Bcfe, an 8% increase from the prior year
  • Proved reserves at September 30, 2017, of 2.2 Tcfe, an increase of 17% from September 30, 2016
  • Seneca finding and development costs, excluding revisions, of $0.60 per Mcfe
  • Increased shareholder dividend for the 47th consecutive year to an annualized distribution of $1.66 per share
       

OPERATING RESULTS

 
Three Months Ended Fiscal Year Ended
September 30, September 30,
(in thousands except per share amounts) 2017     2016 2017     2016
Reported GAAP earnings (loss) $ 45,577 $ 37,553 $ 283,482 $ (290,958 )
Items impacting comparability:
Impairment of oil and gas properties (E&P) 32,756 948,307
Tax impact of impairment of oil and gas properties (13,757 ) (398,287 )
Joint development agreement professional fees (E&P) 7,855
Tax impact of joint development agreement professional fees       (3,299 )
Operating results $ 45,577   $ 56,552   $ 283,482   $ 263,618  
 
Reported GAAP earnings (loss) per share $ 0.53 $ 0.44 $ 3.30 $ (3.43 )
Items impacting comparability:
Impairment of oil and gas properties (E&P) 0.38 11.18
Tax impact of impairment of oil and gas properties (0.16 ) (4.69 )
Joint development agreement professional fees (E&P) 0.09
Tax impact of joint development agreement professional fees (0.04 )
Earnings per share impact of diluted shares       (0.02 )
Operating results per diluted share $ 0.53   $ 0.66   $ 3.30   $ 3.09  
 

MANAGEMENT COMMENTS

Ronald J. Tanski, President and Chief Executive Officer of National Fuel Gas Company, stated: “National Fuel ended its 2017 fiscal year on a strong note. Our Exploration and Production segment continues to make progress in the appraisal and optimization of our Utica shale potential. Utica well completions helped drive the 17 percent increase in our proved reserves while lowering our finding and development costs in Appalachia to $0.51 per Mcf. Our Gathering segment meanwhile capped-off an outstanding year that saw its earnings grow by 32 percent. In spite of commodity price volatility and regulatory challenges, the Company generated positive free cash flow for the second consecutive year, which allowed us to continue to grow our dividend, maintain the safety and reliability of our pipeline systems, and position our upstream and midstream businesses for the next leg of growth in Appalachia.

“As we enter 2018, we are optimistic that the ongoing build-out of pipeline infrastructure in the region will help local pricing and provide a tailwind while we continue to work through the regulatory process with our Northern Access project. In any event, just as we have always done, we will continue to manage our business in a way that minimizes the risk to our earnings and cash flows, maintains a strong balance sheet to preserve financial flexibility as opportunities in the market arise, and prioritizes economic returns that add long-term value for our shareholders.”

DISCUSSION OF RESULTS BY SEGMENT

The following discussion of the earnings of each segment is summarized in a tabular form on pages 9 through 12 of this report. It may be helpful to refer to those tables while reviewing this discussion. Note that management defines operating results as reported GAAP earnings before items impacting comparability and adjusted EBITDA as reported GAAP earnings before the following items: interest expense, income taxes, depreciation, depletion and amortization, interest and other income, impairments, and items impacting comparability.

Upstream Business

Exploration and Production Segment

The Exploration and Production segment operations are carried out by Seneca Resources Corporation ("Seneca"). Seneca explores for, develops and produces natural gas and oil reserves, primarily in Pennsylvania and California.

       
Three Months Ended Fiscal Year Ended
September 30, September 30,
(in thousands except per share amounts) 2017     2016     Variance 2017     2016     Variance
Net Income / (Loss) $ 30,354     $ 16,744     $ 13,610 $ 129,326     $ (452,842 )     $ 582,168
Net Income / (Loss) Per Share (Diluted) $ 0.35 $ 0.20 $ 0.15 $ 1.50 $ (5.34 ) $ 6.84
Adjusted EBITDA $ 75,303 $ 95,157 $ (19,854 ) $ 360,979 $ 363,830 $ (2,851 )
 

The $13.6 million increase in the Exploration and Production segment’s fourth quarter earnings was primarily attributable to the non-recurrence of a $32.8 million ($19.0 million after-tax) ceiling test impairment charge recorded to reduce the book value of Seneca’s oil and gas properties in the prior year. Excluding the impairment charge, results for the segment declined $5.4 million, or $0.07 per share, as the impact of higher net production and the benefit of a lower effective income tax rate was more than offset by a decline in realized natural gas and oil prices, an increase in lease operating and transportation (“LOE”) expense, and higher other operating expenses.

Seneca’s fourth quarter net production was 40.4 billion cubic feet equivalent (“Bcfe”), an increase of 0.5 Bcfe, or 1 percent, from the prior year. Net natural gas production increased 0.8 Bcf, or 2 percent, due to significantly reduced price-related curtailments across Seneca’s Appalachian producing areas and higher production in the Western Development Area (“WDA”) from new wells completed and brought online during the year, partially offset by natural declines from Marcellus locations in the Eastern Development Area (“EDA”). As a result of depressed local daily spot prices in Pennsylvania, Seneca voluntarily curtailed an estimated 2.5 Bcf of net natural gas production in the fourth quarter, which was down from an estimated 6.2 Bcf of curtailments in the prior year. Seneca’s oil production decreased 49 thousand barrels ("Mbbl") due mainly to a reduction in well workover activity in prior quarters and modifications to steaming operations at its North Midway Sunset field in California.

Seneca's average realized natural gas price, after the impact of hedging and all marketing and transportation costs, was $2.91 per thousand cubic feet ("Mcf"), a decrease of $0.18 per Mcf from the prior year. Seneca's average realized oil price, after the impact of hedging, was $54.77 per barrel ("Bbl"), a decrease of $5.24 per Bbl. The decline in Seneca’s realized natural gas and oil prices is primarily attributable to the expiration of physical firm sales and financial hedge contracts over the past 12 months that had favorable pricing relative to current market prices and hedge book. Seneca's average realized natural gas and oil prices benefited from an uplift of $0.47 per Mcf and $7.33 per Bbl, respectively, from financial hedges settled during the quarter.

LOE increased $4.6 million, or $0.10 per Mcf equivalent ("Mcfe") on a cost per unit of production basis, due primarily to an increase in well workover and repair activities as well as higher steam volumes at North Midway Sunset in California. The elevated activities are expected to arrest, and in some cases reverse, natural field production declines in fiscal 2018. LOE expense in California is projected to return to normal levels over the next few quarters. Other operating expenses increased $2.9 million versus the prior year due mainly to a one-time payment made to reimburse a third-party pipeline operator for development costs on a project that Seneca has future contracted firm transportation capacity. Seneca will recoup the full amount of the payment when facilities are ultimately constructed.

A decrease in Seneca’s effective tax rate increased the segment’s earnings by $7.2 million in the fourth quarter. This decrease was largely due to an anticipated increase in the sale of future natural gas production at delivery points in the southeastern U.S. utilizing firm transportation capacity on the Atlantic Sunrise project, which decreased the effective tax rate used in the calculation of Seneca’s deferred taxes. Seneca holds approximately 190 million cubic feet ("MMcf") per day of capacity on Atlantic Sunrise, which commenced construction during the fourth quarter and is expected to be in-service before the end of the Company’s 2018 fiscal year.

For fiscal 2017, the $582.2 million increase in the Exploration and Production segment’s earnings was primarily attributable to the non-recurrence of two items that reduced earnings in the prior year. In fiscal 2016, Seneca recorded a $948.3 million ($550.0 million after-tax) ceiling test impairment charge to reduce the book value of Seneca’s oil and gas properties. Seneca also incurred $7.9 million ($4.6 million after-tax) in the prior year for professional and legal expenses related to the joint development agreement ("JDA") to develop certain Marcellus wells. Excluding these items, annual results for the segment improved $27.6 million, or $0.31 per share, due primarily to the impact of higher net production, lower general and administrative ("G&A") and depreciation, depletion and amortization (“DD&A”) expenses, and the benefit of a lower effective income tax rate, partially offset by a decline in realized natural gas and oil prices.

Seneca generated net production of 173.5 Bcfe in fiscal 2017, an increase of 12.4 Bcfe, or 8 percent, versus the prior year and the highest annual output in the Company’s history. Seneca's average realized natural gas and oil prices, after the impact of hedging and all marketing and transportation costs, were $2.95 per Mcf and $53.87 Bbl, respectively, a decrease of $0.07 per Mcf and $4.04 per Bbl from fiscal 2016.

G&A expense, excluding the joint development agreement costs, declined $4.0 million, or $0.05 per Mcfe, due to lower personnel costs. DD&A expense decreased $27.4 million as the decline in Seneca’s full cost pool depletion rate more than offset the impact of higher production. Seneca’s per unit DD&A decreased by $0.22 per Mcfe to $0.65 per Mcfe due mainly to a lower depletable fixed asset balance resulting from the ceiling test impairment charges recorded in fiscal 2016. LOE expense increased by $12.1 million in fiscal 2017, in-line with production growth, resulting in per unit LOE expense holding flat versus the prior year at $0.96 per Mcfe.

A decrease in Seneca’s effective tax rate increased the segment’s earnings by $10.6 million in fiscal 2017. The decrease in the effective tax rate was due mostly to the impact on deferred taxes of Seneca's Atlantic Sunrise capacity discussed above, as well as an enhanced oil recovery tax credit related to Seneca’s California properties. This credit was applicable this year as a result of relatively low domestic crude oil prices.

Year End Proved Reserves

Seneca’s total proved natural gas and crude oil reserves at September 30, 2017 increased 17 percent to 2,154 Bcfe from 1,849 Bcfe at September 30, 2016. In fiscal 2017, Seneca recorded 391 Bcfe of proved reserve extensions and discoveries, primarily from Utica and Marcellus locations in Appalachia, and 111 Bcfe of net positive revisions, due mainly to higher natural gas and oil prices during the year. Seneca sold 22 Bcfe of proved reserves associated with 16 Marcellus and Utica wells located in non-core areas of the WDA during the fiscal year. The Company’s total proved reserve base is now 92 percent natural gas and 8 percent crude oil. Seneca’s total proved undeveloped reserves (“PUDs”) at the end of fiscal 2017 were 612 Bcfe, or 28 percent of total proved reserves.

Adjusting for sales and revisions, Seneca replaced 225 percent of its production in fiscal 2017, up from the 117 percent reserve replacement achieved in fiscal 2016. The year over year improvement was due mainly to the success of Seneca’s Utica Shale appraisal program in the WDA, increased development activity in the EDA where Seneca added a rig this past May, and the general shift to developing more 100 percent working interest wells in the WDA as activity on JDA locations is set to conclude in fiscal 2018.

Seneca’s consolidated finding and development (“F&D”) cost, excluding the impact of positive revisions that were largely related to an increase in natural gas and oil prices, was $0.60 per Mcfe in fiscal 2017, driven primarily by Utica and Marcellus shale extensions and discoveries that achieved a drill-bit F&D cost of $0.51 per Mcfe in Appalachia. The Company’s three-year average consolidated F&D cost was $0.98 per Mcfe, down $0.34 per Mcfe from the three-year average of $1.32 per Mcfe at the end of fiscal 2016.

Midstream Businesses

Pipeline and Storage Segment

The Pipeline and Storage segment’s operations are carried out by National Fuel Gas Supply Corporation (“Supply Corporation”) and Empire Pipeline, Inc. (“Empire”). The Pipeline and Storage segment provides natural gas transportation and storage services to affiliated and non-affiliated companies through an integrated system of pipelines and underground natural gas storage fields in western New York and Pennsylvania.

       
Three Months Ended Fiscal Year Ended
September 30, September 30,
(in thousands except per share amounts) 2017     2016     Variance 2017     2016     Variance
Net Income / (Loss) $ 13,791     $ 16,816     $ (3,025 ) $ 68,446     $ 76,610     $ (8,164 )
Net Income / (Loss) Per Share (Diluted) $ 0.16 $ 0.20 $ (0.04 ) $ 0.80 $ 0.90 $ (0.10 )
Adjusted EBITDA $ 39,049 $ 46,517 $ (7,468 ) $ 180,328 $ 199,446 $ (19,118 )
 

The $3.0 million decrease in the Pipeline and Storage segment's fourth quarter earnings was primarily due to a decline in operating revenues and higher Operation and Maintenance (“O&M”) expense, offset partially by the impact of a lower effective income tax rate. Operating revenues decreased $3.7 million due to the scheduled reduction in Supply Corporation and Empire’s transportation rates that went into effect during the first quarter of fiscal 2017 resulting from their respective rate case settlements, lower reservation revenues resulting from recent contract terminations and restructurings, and a decline in short-term interruptible transportation service in the current quarter. O&M expense increased $3.4 million due mostly to costs associated with the overhaul of two compressor facilities and an increase in the reserve for preliminary engineering costs on projects in development.

The Pipeline and Storage segment’s fiscal 2017 earnings decreased $8.2 million from the prior year as lower operating revenues and higher O&M expenses were only partially offset by a decrease in DD&A expense and the impact of a lower effective income tax rate. Similar to the fourth quarter, operating revenues were negatively impacted by scheduled rate reductions related to Supply and Empire’s rate case settlements, as well as contract terminations and restructurings and lower demand for short-term interruptible transportation service. The increase in O&M expense was primarily due to higher personnel costs and an increase in compressor station maintenance expenses. DD&A expense decreased primarily due to Empire’s rate case settlement, which lowered the subsidiary’s depreciation rate.

Gathering Segment

The Gathering segment’s operations are carried out by National Fuel Gas Midstream Corporation’s subsidiary limited liability companies. The Gathering segment constructs, owns and operates natural gas gathering pipelines and compression facilities in the Appalachian region which currently delivers Seneca’s gross Appalachian production to the interstate pipeline system.

       
Three Months Ended Fiscal Year Ended
September 30, September 30,
(in thousands except per share amounts) 2017     2016     Variance 2017     2016     Variance
Net Income / (Loss) $ 9,003     $ 8,537     $ 466 $ 40,377     $ 30,499     $ 9,878
Net Income / (Loss) Per Share (Diluted) $ 0.10 $ 0.10 $ $ 0.47 $ 0.36 $ 0.11
Adjusted EBITDA $ 21,206 $ 20,963 $ 243 $ 94,380 $ 78,685 $ 15,695
 

The Gathering segment’s fourth quarter earnings increased 5 percent versus the prior year due to higher operating revenues and a lower effective tax rate, partially offset by higher operating expenses. Operating revenues increased $1.4 million, or 6 percent, from the prior year due mostly to higher throughput. The Company transported 44.9 Bcf on its gathering systems in the fourth quarter, an increase of 2.3 Bcf, or 5 percent, from the prior year. O&M expense increased $1.3 million due to higher personnel costs and expenses associated with operating new gathering and compression assets placed in service during the past year.

The Gathering segment’s fiscal 2017 earnings increased $9.9 million, or 32 percent, versus the prior year due mainly to higher operating revenues, offset slightly by higher O&M and DD&A expenses. The growth in Seneca’s gross natural gas production in Appalachia, which includes production from Marcellus joint development locations, helped drive a 20 percent increase in throughput across the Company’s gathering systems during the year. O&M expense increased $2.8 million due to higher personnel and contract labor costs associated with the continued growth of the segment. DD&A expense increased due to higher gross plant in service during the year.

Downstream Businesses

Utility Segment

The Utility segment operations are carried out by National Fuel Gas Distribution Corporation (“Distribution”), which sells or transports natural gas to customers located in western New York and northwestern Pennsylvania.

       
Three Months Ended Fiscal Year Ended
September 30, September 30,
(in thousands except per share amounts) 2017     2016     Variance 2017     2016     Variance
Net Income / (Loss) $ (4,168 )     $ (1,784 )     $ (2,384 ) $ 46,935     $ 50,960     $ (4,025 )
Net Income / (Loss) Per Share (Diluted) $ (0.05 ) $ (0.02 ) $ (0.03 ) $ 0.55 $ 0.60 $ (0.05 )
Adjusted EBITDA $ 11,846 $ 10,400 $ 1,446 $ 151,078 $ 148,683 $ 2,395
 

The Utility segment’s fourth quarter net loss increased $2.4 million from the prior year as an improvement in the segment’s operating loss was more than offset by higher interest expense, lower interest and other income, and the impact of a lower income tax benefit. The $1.5 million improvement in Distribution’s operating loss was largely attributable to the impact of new customer rates in Distribution’s New York service territory that went into effect following the rate case order issued in April as well as lower O&M expense. The decrease in interest and other income was primarily due to lower accrued interest income on regulatory reserve accounts, while interest expense was negatively impacted by a non-recurring regulatory adjustment that was recorded in the prior year.

For fiscal 2017, the Utility segment’s earnings decreased $4.0 million as higher utility margin (operating revenues less purchased gas costs) was more than offset by an increase in O&M, DD&A, and interest expenses and a decrease in interest and other income. Utility margin increased $9.2 million due mainly to an increase in normalized customer usage, the benefit of new customer rates in New York, and the impact of regulatory adjustments. O&M expense increased $6.1 million due mainly to higher personnel costs. DD&A expense increased $4.0 million due to higher average plant balances during the year, which was primarily driven by the replacement of Distribution’s customer information system that was placed in service in May of fiscal 2016.

Energy Marketing Segment

The Energy Marketing segment's operations are carried out by National Fuel Resources, Inc. (“NFR”). NFR markets natural gas to industrial, wholesale, commercial, public authority, and residential customers primarily in western and central New York and northwestern Pennsylvania, offering competitively priced natural gas to its customers.

       
Three Months Ended Fiscal Year Ended
September 30, September 30,
(in thousands except per share amounts) 2017     2016     Variance 2017     2016     Variance
Net Income / (Loss) $ (614 )     $ 231     $ (845 ) $ 1,509     $ 4,348     $ (2,839 )
Net Income / (Loss) Per Share (Diluted) $ (0.01 ) $ $ (0.01 ) $ 0.02 $ 0.05 $ (0.03 )
Adjusted EBITDA $ (1,134 ) $ 87 $ (1,221 ) $ 2,080 $ 6,655 $ (4,575 )
 

The Energy Marketing segment's fourth quarter earnings decreased slightly versus the prior year, resulting in a net loss of $0.6 million, or $0.01 per share. For fiscal 2017, the $2.8 million decline in the Energy Marketing segment’s earnings was due largely to lower customer margins. NFR’s customer margins were negatively impacted by stronger natural gas prices at local purchase points relative to NYMEX-based customer sales contracts during the winter heating season.

Corporate and All Other

The Corporate and All Other category’s net loss of $2.8 million for the fourth quarter was relatively unchanged from the $3.0 million net loss in the prior year. For fiscal 2017, the Corporate and All Other category had a net loss of $3.1 million compared to a net loss of $0.5 million in the prior year. The $2.6 million increase in the net loss was primarily attributable to the non-recurrence of life insurance proceeds and the related tax benefits that were recognized in the prior year.

GUIDANCE

National Fuel is revising its fiscal 2018 earnings guidance to be within a range of $2.75 to $3.05 per share, or $2.90 per share at the midpoint of the range. The $0.40 per share decrease from the fiscal 2017 earnings of $3.30 per share is being driven primarily by lower expected price realizations after hedging on Seneca’s natural gas and oil production and higher expected operating costs at the Company’s regulated businesses, offset partially by the impact of normal weather on the Utility segment's earnings and an increase in projected natural gas production in Appalachia, which will benefit earnings for the Company’s Exploration and Production and Gathering segments.

Additional details on the Company's forecast assumptions and business segment guidance for fiscal 2018 are outlined in the table below.

   
Updated FY 2018 Guidance
Consolidated Earnings per Share $2.75 to $3.05
 
Capital Expenditures (Millions)
Exploration and Production (1) $275 - $325
Pipeline and Storage $110 - $140
Gathering $60 - $80
Utility

$90 - $100

Consolidated Capital Expenditures $535 - $645
 
Exploration & Production Segment Guidance
 
Commodity Price Assumptions
NYMEX natural gas price $3.00 /MMBtu
Appalachian basin spot price $2.40 /MMBtu
NYMEX (WTI) crude oil price $50.00 /Bbl
California oil price (% of WTI) 95%
 
Production (Bcfe)
East Division - Appalachia (2) 165 to 180
West Division - California

~ 20

Total Production 185 to 200
 
E&P Operating Costs ($/Mcfe)
LOE $0.90 - $1.00
G&A $0.30 - $0.35
DD&A $0.65 - $0.70
 
Other Business Segment Guidance
Gathering Segment Revenues (Millions) $115 - $125
Pipeline and Storage Segment Revenues (Millions) ~$295
 
(1)   Net of conveyance proceeds received from joint development partner for working interest in joint development wells.
(2) Seneca East Division - Appalachia production guidance assumes approximately 32 Bcf of spot sales at the midpoint of guidance.
 

EARNINGS TELECONFERENCE

The Company will host a conference call on Friday, November 3, 2017, at 11 a.m. Eastern Time to discuss this announcement. There are two ways to access this call. For those with Internet access, visit the NFG Investor Relations News & Events page at National Fuel’s website at investor.nationalfuelgas.com. For those without Internet access, audio access is also provided by dialing (toll-free) 833-287-0795, using conference ID number “96083185.” For those unable to listen to the live conference call, an audio replay will be available approximately two hours following the teleconference at the same website link and by phone at (toll-free) 800-585-8367 using conference ID number “96083185.” Both the webcast and a telephonic replay will be available until the close of business on Friday, November 10, 2017.

National Fuel is an integrated energy company reporting financial results for five operating segments: Exploration and Production, Pipeline and Storage, Gathering, Utility, and Energy Marketing. Additional information about National Fuel is available at www.nationalfuelgas.com.

Certain statements contained herein, including statements identified by the use of the words “anticipates,” “estimates,” “expects,” “forecasts,” “intends,” “plans,” “predicts,” “projects,” “believes,” “seeks,” “will,” “may” and similar expressions, and statements which are other than statements of historical facts, are “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties, which could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. The Company’s expectations, beliefs and projections contained herein are expressed in good faith and are believed to have a reasonable basis, but there can be no assurance that such expectations, beliefs or projections will result or be achieved or accomplished. In addition to other factors, the following are important factors that could cause actual results to differ materially from those discussed in the forward-looking statements: delays or changes in costs or plans with respect to Company projects or related projects of other companies, including difficulties or delays in obtaining necessary governmental approvals, permits or orders or in obtaining the cooperation of interconnecting facility operators; governmental/regulatory actions, initiatives and proceedings, including those involving rate cases (which address, among other things, target rates of return, rate design and retained natural gas), environmental/safety requirements, affiliate relationships, industry structure, and franchise renewal; changes in laws, regulations or judicial interpretations to which the Company is subject, including those involving derivatives, taxes, safety, employment, climate change, other environmental matters, real property, and exploration and production activities such as hydraulic fracturing; impairments under the SEC’s full cost ceiling test for natural gas and oil reserves; changes in the price of natural gas or oil; financial and economic conditions, including the availability of credit, and occurrences affecting the Company’s ability to obtain financing on acceptable terms for working capital, capital expenditures and other investments, including any downgrades in the Company’s credit ratings and changes in interest rates and other capital market conditions; factors affecting the Company’s ability to successfully identify, drill for and produce economically viable natural gas and oil reserves, including among others geology, lease availability, title disputes, weather conditions, shortages, delays or unavailability of equipment and services required in drilling operations, insufficient gathering, processing and transportation capacity, the need to obtain governmental approvals and permits, and compliance with environmental laws and regulations; increasing health care costs and the resulting effect on health insurance premiums and on the obligation to provide other post-retirement benefits; changes in price differentials between similar quantities of natural gas or oil sold at different geographic locations, and the effect of such changes on commodity production, revenues and demand for pipeline transportation capacity to or from such locations; other changes in price differentials between similar quantities of natural gas or oil having different quality, heating value, hydrocarbon mix or delivery date; the cost and effects of legal and administrative claims against the Company or activist shareholder campaigns to effect changes at the Company; uncertainty of oil and gas reserve estimates; significant differences between the Company’s projected and actual production levels for natural gas or oil; changes in demographic patterns and weather conditions; changes in the availability, price or accounting treatment of derivative financial instruments; changes in laws, actuarial assumptions, the interest rate environment and the return on plan/trust assets related to the Company’s pension and other post-retirement benefits, which can affect future funding obligations and costs and plan liabilities; changes in economic conditions, including global, national or regional recessions, and their effect on the demand for, and customers’ ability to pay for, the Company’s products and services; the creditworthiness or performance of the Company’s key suppliers, customers and counterparties; economic disruptions or uninsured losses resulting from major accidents, fires, severe weather, natural disasters, terrorist activities, acts of war, cyber attacks or pest infestation; significant differences between the Company’s projected and actual capital expenditures and operating expenses; or increasing costs of insurance, changes in coverage and the ability to obtain insurance. The Company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date thereof.

                           
 
NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS
QUARTER ENDED SEPTEMBER 30, 2017
(Unaudited)
 
 
Upstream

Midstream
Businesses

Downstream
Businesses

 
Exploration & Pipeline & Energy Corporate /
(Thousands of Dollars) Production     Storage     Gathering     Utility     Marketing     All Other     Consolidated*
 
Fourth quarter 2016 GAAP earnings $ 16,744 $ 16,816 $ 8,537 $ (1,784 ) $ 231 $ (2,991 ) $ 37,553
Items impacting comparability:
Impairment of oil and gas producing properties 32,756 32,756

Tax impact of impairment of oil and gas producing
 properties

(13,757 )                                   (13,757 )
Fourth Quarter 2016 operating results 35,743 16,816 8,537 (1,784 ) 231 (2,991 ) 56,552
 
Drivers of operating results
Higher (lower) crude oil prices (2,303 ) (2,303 )
Higher (lower) natural gas prices (4,202 ) (4,202 )
Higher (lower) natural gas production 1,677 1,677
Higher (lower) crude oil production (1,891 ) (1,891 )
Derivative mark to market adjustments (765 ) (765 )

Lower (higher) lease operating and transportation
 expenses

(3,021 ) (3,021 )
 
Higher (lower) transportation revenues (2,364 ) (2,364 )
Higher (lower) gathering and processing revenues 926 926
Lower (higher) other operating expenses (1,952 ) (2,185 ) (869 ) 541 (4,465 )
 
Impact of new rates 554 554
 
Higher (lower) margins (703 ) (703 )
 
Higher (lower) interest income (560 ) (560 )
 
Lower (higher) interest expense (738 ) (738 )
 
Lower (higher) income tax expense / effective tax rate 7,215 1,453 536 (1,837 ) 7,367
 
All other / rounding (147 )     71       (127 )     (344 )     (142 )     202       (487 )

Fourth quarter 2017 GAAP earnings and operating
results

$ 30,354       $ 13,791       $ 9,003       $ (4,168 )     $ (614 )     $ (2,789 )     $ 45,577  
 
* Amounts do not reflect intercompany eliminations
 
                         
NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS PER SHARE
QUARTER ENDED SEPTEMBER 30, 2017
(Unaudited)
 
 
Upstream

Midstream
Businesses

Downstream
Businesses

 
Exploration & Pipeline & Energy Corporate /
Production     Storage   Gathering     Utility     Marketing     All Other     Consolidated*
 
Fourth quarter 2016 GAAP earnings $ 0.20 $ 0.20 $ 0.10 $ (0.02 ) $ $ (0.04 ) $ 0.44
Items impacting comparability:
Impairment of oil and gas producing properties 0.38 0.38

Tax impact of impairment of oil and gas producing
 properties

(0.16 )                                 (0.16 )
Fourth quarter 2016 operating results 0.42 0.20 0.10 (0.02 ) (0.04 ) 0.66
 
Drivers of operating results
Higher (lower) crude oil prices (0.03 ) (0.03 )
Higher (lower) natural gas prices (0.05 ) (0.05 )
Higher (lower) natural gas production 0.02 0.02
Higher (lower) crude oil production (0.02 ) (0.02 )
Derivative mark to market adjustments (0.01 ) (0.01 )

Lower (higher) lease operating and transportation
 expenses

(0.04 ) (0.04 )
 
Higher (lower) transportation revenues (0.03 ) (0.03 )
Higher (lower) gathering and processing revenues 0.01 0.01
Lower (higher) other operating expenses (0.02 ) (0.03 ) (0.01 ) 0.01 (0.05 )
 
Impact of new rates 0.01 0.01
 
Higher (lower) margins (0.01 ) (0.01 )
 
High (lower) interest income (0.01 ) (0.01 )
 
Lower (higher) interest expense (0.01 ) (0.01 )
 
Lower (higher) income tax expense / effective tax rate 0.08 0.02 0.01 (0.02 ) 0.09
 
All other / rounding           (0.01 )     (0.01 )           0.02        

Fourth quarter 2017 GAAP earnings and operating
results

$ 0.35       $ 0.16     $ 0.10       $ (0.05 )     $ (0.01 )     $ (0.02 )     $ 0.53  
 
* Amounts do not reflect intercompany eliminations
                           
NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS
TWELVE MONTHS ENDED SEPTEMBER 30, 2017
(Unaudited)
 
Upstream

Midstream
Businesses

Downstream
Businesses

 
Exploration & Pipeline & Energy Corporate /
(Thousands of Dollars) Production     Storage     Gathering     Utility     Marketing     All Other     Consolidated*
 
Fiscal 2016 GAAP earnings $ (452,842 ) $ 76,610 $ 30,499 $ 50,960 $ 4,348 $ (533 ) $ (290,958 )
Items impacting comparability:
Impairment of oil and gas producing properties 948,307 948,307

Tax impact of impairment of oil and gas producing
 properties

(398,287 ) (398,287 )
Joint development agreement professional fees 7,855 7,855

Tax impact of joint development agreement professional
 fees

(3,299 )                                   (3,299 )
Fiscal 2016 operating results 101,734 76,610 30,499 50,960 4,348 (533 ) 263,618
 
Drivers of operating results
Higher (lower) crude oil prices (7,198 ) (7,198 )
Higher (lower) natural gas prices (7,318 ) (7,318 )
Higher (lower) natural gas production 26,571 26,571
Higher (lower) crude oil production (6,884 ) (6,884 )

Lower (higher) lease operating and transportation
 expenses

(7,851 ) (7,851 )
Lower (higher) depreciation / depletion 17,808 1,350 (571 ) (2,577 ) 16,010
 
Higher (lower) transportation revenues (6,885 ) (6,885 )
Higher (lower) gathering and processing revenues 11,852 11,852
Lower (higher) other operating expenses 2,193 (4,377 ) (1,799 ) (3,335 ) (1,181 ) (8,499 )
Lower (higher) property, franchise and other taxes (1,060 ) (753 ) (1,813 )
 
Regulatory true-up adjustments 464 464
Higher (lower) usage 2,543 2,543
Impact of new rates 1,481 1,481
 
Higher (lower) margins (2,634 ) (1,027 ) (3,661 )
 
Higher (lower) AFUDC** (484 ) (913 ) (1,397 )
 
Higher (lower) interest income (581 ) (581 )
 
Lower (higher) interest expense 1,126 (592 ) 534
 
Lower (higher) income tax expense / effective tax rate 10,609 3,185 (948 ) (460 ) 12,386
 
All other / rounding (404 )     (200 )     396       433       (205 )     90       110  
Fiscal 2017 GAAP earnings and operating results $ 129,326       $ 68,446       $ 40,377       $ 46,935       $ 1,509       $ (3,111 )     $ 283,482  
 
* Amounts do not reflect intercompany eliminations
** AFUDC = Allowance for Funds Used During Construction
 
                           
NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS PER SHARE
TWELVE MONTHS ENDED SEPTEMBER 30, 2017
(Unaudited)
 
Upstream

Midstream
Businesses

Downstream
Businesses

 
Exploration & Pipeline & Energy Corporate /
Production     Storage     Gathering     Utility     Marketing     All Other     Consolidated*
 
Fiscal 2016 GAAP earnings $ (5.34 ) $ 0.90 $ 0.36 $ 0.60 $ 0.05 $ $ (3.43 )
Items impacting comparability:
Impairment of oil and gas producing properties 11.18 11.18

Tax impact of impairment of oil and gas producing
 properties

(4.69 ) (4.69 )
Joint development agreement professional fees 0.09 0.09

Tax impact of joint development agreement professional fees

(0.04 ) (0.04 )

Earnings per share impact of diluted shares

(0.01 )                             (0.01 )     (0.02 )
Fiscal 2016 operating results 1.19 0.90 0.36 0.60 0.05 (0.01 ) 3.09
 
Drivers of operating results
Higher (lower) crude oil prices (0.08 ) (0.08 )
Higher (lower) natural gas prices (0.09 ) (0.09 )
Higher (lower) natural gas production 0.31 0.31
Higher (lower) crude oil production (0.08 ) (0.08 )

Lower (higher) lease operating and transportation
 expenses

(0.09 ) (0.09 )
Lower (higher) depreciation / depletion 0.21 0.02 (0.01 ) (0.03 ) 0.19
 
Higher (lower) transportation revenues (0.08 ) (0.08 )
Higher (lower) gathering and processing revenues 0.14 0.14
Lower (higher) other operating expenses 0.03 (0.05 ) (0.02 ) (0.04 ) (0.01 ) (0.09 )
Lower (higher) property, franchise and other taxes (0.01 ) (0.01 ) (0.02 )
 
Regulatory true-up adjustments 0.01 0.01
Higher (lower) usage 0.03 0.03
Impact of new rates 0.02 0.02
 
Higher (lower) margins (0.03 ) (0.01 ) (0.04 )
 
Higher (lower) AFUDC** (0.01 ) (0.01 ) (0.02 )
 
Higher (lower) interest income (0.01 ) (0.01 )
 
Lower (higher) interest expense 0.01 (0.01 )
 
Lower (higher) income tax expense / effective tax rate 0.12 0.04 (0.01 ) (0.01 ) 0.14
 
All other / rounding (0.02 )     (0.01 )                             (0.03 )
Fiscal 2017 GAAP earnings and operating results $ 1.50       $ 0.80       $ 0.47       $ 0.55       $ 0.02       $ (0.04 )     $ 3.30  
 
* Amounts do not reflect intercompany eliminations
** AFUDC = Allowance for Funds Used During Construction
 
               
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 
(Thousands of Dollars, except per share amounts)
Three Months Ended Twelve Months Ended
September 30, September 30,
(Unaudited) (Unaudited)

SUMMARY OF OPERATIONS

2017     2016 2017     2016
Operating Revenues:
Utility and Energy Marketing Revenues $ 92,456 $ 83,620 $ 755,485 $ 624,602
Exploration and Production and Other Revenues 144,049 155,734 617,666 611,766
Pipeline and Storage and Gathering Revenues 50,432   53,118   206,730   216,048  
286,937 292,472 1,579,881 1,452,416
Operating Expenses:
Purchased Gas 10,905 814 275,254 147,982
Operation and Maintenance:
Utility and Energy Marketing 40,497 41,038 199,293 192,512
Exploration and Production and Other 42,946 36,235 145,099 160,201
Pipeline and Storage and Gathering 29,184 24,477 98,200 88,801
Property, Franchise and Other Taxes 20,627 19,791 84,995 81,714
Depreciation, Depletion and Amortization 55,383 56,117 224,195 249,417
Impairment of Oil and Gas Producing Properties   32,756     948,307  
199,542 211,228 1,027,036 1,868,934
 
Operating Income (Loss) 87,395 81,244 552,845 (416,518 )
 
Other Income (Expense):
Interest Income 1,269 1,595 4,113 4,235
Other Income 2,316 2,647 7,043 9,820
Interest Expense on Long-Term Debt (29,230 ) (29,083 ) (116,471 ) (117,347 )
Other Interest Expense (686 ) 241   (3,366 ) (3,697 )
 
Income (Loss) Before Income Taxes 61,064 56,644 444,164 (523,507 )
 
Income Tax Expense (Benefit) 15,487   19,091   160,682   (232,549 )
 
Net Income (Loss) Available for Common Stock $ 45,577   $ 37,553   $ 283,482   $ (290,958 )
 
Earnings (Loss) Per Common Share
Basic $ 0.53   $ 0.44   $ 3.32   $ (3.43 )
Diluted $ 0.53   $ 0.44   $ 3.30   $ (3.43 )
 
Weighted Average Common Shares:
Used in Basic Calculation 85,512,637 85,016,408 85,364,929 84,847,993
Used in Diluted Calculation 86,238,287 85,629,858 86,021,386 84,847,993
 
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
   
September 30,     September 30,
(Thousands of Dollars)     2017     2016
 
ASSETS
Property, Plant and Equipment $9,945,560 $9,539,581
Less - Accumulated Depreciation, Depletion and Amortization     5,271,486       5,085,099  
Net Property, Plant and Equipment     4,674,074       4,454,482  
 
Current Assets:
Cash and Temporary Cash Investments 555,530 129,972
Hedging Collateral Deposits 1,741 1,484
Receivables - Net 112,383 133,201
Unbilled Revenue 22,883 18,382
Gas Stored Underground 35,689 34,332
Materials and Supplies - at average cost 33,926 33,866
Unrecovered Purchased Gas Costs 4,623 2,440
Other Current Assets     51,505       59,354  
Total Current Assets     818,280       413,031  
 
Other Assets:
Recoverable Future Taxes 181,363 177,261
Unamortized Debt Expense 1,159 1,688
Other Regulatory Assets 174,433 320,750
Deferred Charges 30,047 20,978
Other Investments 125,265 110,664
Goodwill 5,476 5,476
Prepaid Post-Retirement Benefit Costs 56,370 17,649
Fair Value of Derivative Financial Instruments 36,111 113,804
Other     742       604  
Total Other Assets     610,966       768,874  
Total Assets     $6,103,320       $5,636,387  
 
CAPITALIZATION AND LIABILITIES
Capitalization:
Comprehensive Shareholders' Equity
Common Stock, $1 Par Value Authorized - 200,000,000
Shares; Issued and Outstanding - 85,543,125 Shares
and 85,118,886 Shares, Respectively $85,543 $85,119
Paid in Capital 796,646 771,164
Earnings Reinvested in the Business 851,669 676,361
Accumulated Other Comprehensive Loss     (30,123 )     (5,640 )
Total Comprehensive Shareholders' Equity 1,703,735 1,527,004
Long-Term Debt, Net of Current Portion and Unamortized Discount and Debt Issuance Costs     2,083,681       2,086,252  
Total Capitalization     3,787,416       3,613,256  
 
Current and Accrued Liabilities:
Notes Payable to Banks and Commercial Paper
Current Portion of Long-Term Debt 300,000
Accounts Payable 126,443 108,056
Amounts Payable to Customers 19,537
Dividends Payable 35,500 34,473
Interest Payable on Long-Term Debt 35,031 34,900
Customer Advances 15,701 14,762
Customer Security Deposits 20,372 16,019
Other Accruals and Current Liabilities 111,889 74,430
Fair Value of Derivative Financial Instruments     1,103       1,560  
Total Current and Accrued Liabilities     646,039       303,737  
 
Deferred Credits:
Deferred Income Taxes 891,287 823,795
Taxes Refundable to Customers 95,739 93,318
Cost of Removal Regulatory Liability 204,630 193,424
Other Regulatory Liabilities 113,716 99,789
Pension and Other Post-Retirement Liabilities 149,079 277,113
Asset Retirement Obligations 106,395 112,330
Other Deferred Credits     109,019       119,625  
Total Deferred Credits     1,669,865       1,719,394  
Commitments and Contingencies            
Total Capitalization and Liabilities     $6,103,320       $5,636,387  
 
       
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Twelve Months Ended
September 30,
(Thousands of Dollars)     2017     2016
 
Operating Activities:
Net Income (Loss) Available for Common Stock $ 283,482 $ (290,958 )
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by Operating Activities:
Impairment of Oil and Gas Producing Properties 948,307
Depreciation, Depletion and Amortization 224,195 249,417
Deferred Income Taxes 117,975 (246,794 )
Excess Tax Benefits Associated with Stock-Based Compensation Awards (1,868 )
Stock-Based Compensation 12,262 5,755
Other 16,476 12,620
Change in:
Hedging Collateral Deposits (257 ) 9,640
Receivables and Unbilled Revenue (3,380 ) (6,408 )
Gas Stored Underground and Materials and Supplies (1,417 ) (3,532 )
Unrecovered Purchased Gas Costs (2,183 ) (2,440 )
Other Current Assets 7,849 3,179
Accounts Payable 17,192 (40,664 )
Amounts Payable to Customers (19,537 ) (37,241 )
Customer Advances 939 (1,474 )
Customer Security Deposits 4,353 (471 )
Other Accruals and Current Liabilities 27,004 3,453
Other Assets (2,885 ) 1,941
Other Liabilities     2,183       (13,483 )
Net Cash Provided by Operating Activities     $ 684,251       $ 588,979  
 
Investing Activities:
Capital Expenditures $ (450,335 ) $ (581,576 )
Net Proceeds from Sale of Oil and Gas Producing Properties 26,554 137,316
Other     1,216       (9,236 )
Net Cash Used in Investing Activities     $ (422,565 )     $ (453,496 )
 
Financing Activities:
Excess Tax Benefits Associated with Stock-Based Compensation Awards $ $ 1,868
Dividends Paid on Common Stock (139,063 ) (134,824 )
Net Proceeds From Issuance of Long-Term Debt 295,151
Net Proceeds From Issuance of Common Stock     7,784       13,849  
Net Cash Provided by (Used in) Financing Activities     $ 163,872       $ (119,107 )
 
Net Increase in Cash and Temporary Cash Investments 425,558 16,376
Cash and Temporary Cash Investments at Beginning of Period     129,972       113,596  
Cash and Temporary Cash Investments at September 30     $ 555,530       $ 129,972  
 
                       
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
 
UPSTREAM BUSINESS
 
 
Three Months Ended Twelve Months Ended
(Thousands of Dollars, except per share amounts) September 30, September 30,

EXPLORATION AND PRODUCTION SEGMENT

2017     2016     Variance 2017     2016     Variance
Total Operating Revenues $ 142,952       $ 154,530       $ (11,578 ) $ 614,599       $ 607,113       $ 7,486  
 
Operating Expenses:
Operation and Maintenance:
General and Administrative Expense 15,060 14,928 132 58,734 70,598 (11,864 )
Lease Operating and Transportation Expense 43,110 38,463 4,647 165,991 153,914 12,077
All Other Operation and Maintenance Expense 5,301 2,429 2,872 13,469 12,832 637
Property, Franchise and Other Taxes 4,178 3,553 625 15,426 13,794 1,632
Depreciation, Depletion and Amortization 27,212 27,377 (165 ) 112,565 139,963 (27,398 )
Impairment of Oil and Gas Producing Properties       32,756       (32,756 )       948,307       (948,307 )
94,861       119,506       (24,645 ) 366,185       1,339,408       (973,223 )
 
Operating Income (Loss) 48,091 35,024 13,067 248,414 (732,295) 980,709
 
Other Income (Expense):
Interest Income 257 78 179 707 858 (151 )
Interest Expense (13,432 )     (13,552 )     120   (53,702 )     (55,434 )     1,732  
 
Income (Loss) Before Income Taxes 34,916 21,550 13,366 195,419 (786,871 ) 982,290
Income Tax Expense (Benefit) 4,562     4,806     (244 ) 66,093   (334,029 ) 400,122  
Net Income (Loss) $ 30,354       $ 16,744       $ 13,610   $ 129,326       $ (452,842 )     $ 582,168  
 
Net Income (Loss) Per Share (Diluted) $ 0.35       $ 0.20       $ 0.15   $ 1.50       $ (5.34 )     $ 6.84  
 
                       
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
 
MIDSTREAM BUSINESSES
 
 
Three Months Ended Twelve Months Ended
(Thousands of Dollars, except per share amounts) September 30, September 30,

PIPELINE AND STORAGE SEGMENT

2017     2016     Variance 2017     2016     Variance
Revenues from External Customers $ 50,403 $ 53,047 $ (2,644 ) $ 206,615 $ 215,674 $ (9,059 )
Intersegment Revenues 21,421     22,483     (1,062 ) 87,810   90,755   (2,945 )
Total Operating Revenues 71,824     75,530     (3,706 ) 294,425   306,429   (12,004 )
 
Operating Expenses:
Purchased Gas 90 (10 ) 100 271 1,048 (777 )
Operation and Maintenance 25,618 22,256 3,362 86,135 79,402 6,733
Property, Franchise and Other Taxes 7,067 6,767 300 27,691 26,533 1,158
Depreciation, Depletion and Amortization 10,545       11,128       (583 ) 41,196       43,273       (2,077 )
43,320       40,141       3,179   155,293       150,256       5,037  
 
Operating Income 28,504 35,389 (6,885 ) 139,132 156,173 (17,041 )
 
Other Income (Expense):
Interest Income 483 242 241 1,467 770 697
Other Income 568 583 (15 ) 2,511 3,235 (724 )
Interest Expense (8,540 )     (8,309 )     (231 ) (33,717 )     (33,327 )     (390 )
 
Income Before Income Taxes 21,015 27,905 (6,890 ) 109,393 126,851 (17,458 )
Income Tax Expense 7,224       11,089       (3,865 ) 40,947       50,241       (9,294 )
Net Income $ 13,791       $ 16,816       $ (3,025 ) $ 68,446       $ 76,610       $ (8,164 )
 
Net Income Per Share (Diluted) $ 0.16       $ 0.20       $ (0.04 ) $ 0.80       $ 0.90       $ (0.10 )
 
 
Three Months Ended Twelve Months Ended
September 30, September 30,

GATHERING SEGMENT

2017     2016     Variance 2017     2016     Variance
Revenues from External Customers $ 29 $ 71 $ (42 ) $ 115 $ 374 $ (259 )
Intersegment Revenues 24,937       23,471       1,466   107,566       89,073       18,493  
Total Operating Revenues 24,966       23,542       1,424   107,681       89,447       18,234  
 
Operating Expenses:
Operation and Maintenance 3,884 2,547 1,337 13,380 10,613 2,767
Property, Franchise and Other Taxes (124 ) 32 (156 ) (79 ) 149 (228 )
Depreciation, Depletion and Amortization 4,154       3,876       278   16,162       15,282       880  
7,914       6,455       1,459   29,463       26,044       3,419  
 
Operating Income 17,052 17,087 (35 ) 78,218 63,403 14,815
 
Other Income (Expense):
Interest Income 353 109 244 994 297 697
Other Income 1 (1 ) 1 5 (4 )
Interest Expense (2,403 )     (2,091 )     (312 ) (9,142 )     (8,872 )     (270 )
 
Income Before Income Taxes 15,002 15,106 (104 ) 70,071 54,833 15,238
Income Tax Expense 5,999       6,569       (570 ) 29,694       24,334       5,360  
Net Income $ 9,003       $ 8,537       $ 466   $ 40,377       $ 30,499       $ 9,878  
 
Net Income Per Share (Diluted) $ 0.10       $ 0.10       $   $ 0.47       $ 0.36       $ 0.11  
 
                       
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
 
DOWNSTREAM BUSINESSES
 
 
Three Months Ended Twelve Months Ended
(Thousands of Dollars, except per share amounts) September 30, September 30,

UTILITY SEGMENT

2017     2016     Variance 2017     2016     Variance
Revenues from External Customers $ 76,080 $ 67,870 $ 8,210 $ 626,899 $ 531,024 $ 95,875
Intersegment Revenues 1,758       2,367       (609 ) 13,072       13,123       (51 )
Total Operating Revenues 77,838       70,237       7,601   639,971       544,147       95,824  
 
Operating Expenses:
Purchased Gas 17,321 10,392 6,929 252,802 166,155 86,647
Operation and Maintenance 39,448 40,294 (846 ) 195,231 189,178 6,053
Property, Franchise and Other Taxes 9,223 9,151 72 40,860 40,131 729
Depreciation, Depletion and Amortization 13,080       13,107       (27 ) 52,582       48,618       3,964  
79,072       72,944       6,128   541,475       444,082       97,393  
 
Operating Income (Loss) (1,234 ) (2,707 ) 1,473 98,496 100,065 (1,569 )
 
Other Income (Expense):
Interest Income 633 1,415 (782 ) 1,051 1,737 (686 )
Other Income 197 593 (396 ) 774 2,342 (1,568 )
Interest Expense (7,037 )     (5,898 )     (1,139 ) (28,492 )     (27,582 )     (910 )
 
Income (Loss) Before Income Taxes (7,441 ) (6,597 ) (844 ) 71,829 76,562 (4,733 )
Income Tax Expense (Benefit) (3,273 )     (4,813 )     1,540   24,894       25,602       (708 )
Net Income (Loss) $ (4,168 )     $ (1,784 )     $ (2,384 ) $ 46,935       $ 50,960       $ (4,025 )
 
Net Income (Loss) Per Share (Diluted) $ (0.05 )     $ (0.02 )     $ (0.03 ) $ 0.55       $ 0.60       $ (0.05 )
 
 
Three Months Ended Twelve Months Ended
September 30, September 30,

ENERGY MARKETING SEGMENT

2017     2016     Variance 2017     2016     Variance
Revenues from External Customers $ 16,376 $ 15,750 $ 626 $ 128,586 $ 93,578 $ 35,008
Intersegment Revenues 194       30       164   794       884       (90 )
Total Operating Revenues 16,570       15,780       790   129,380       94,462       34,918  
 
Operating Expenses:
Purchased Gas 15,982 14,111 1,871 120,317 81,347 38,970
Operation and Maintenance 1,717 1,575 142 6,978 6,447 531
Property, Franchise and Other Taxes 5 7 (2 ) 5 13 (8 )
Depreciation, Depletion and Amortization 69       70       (1 ) 279       278       1  
17,773       15,763       2,010   127,579       88,085       39,494  
 
Operating Income (Loss) (1,203 ) 17 (1,220 ) 1,801 6,377 (4,576 )
 
Other Income (Expense):
Interest Income 153 136 17 571 422 149
Other Income 19 15 4 75 58 17
Interest Expense (10 )     (13 )     3   (47 )     (49 )     2  
 
Income (Loss) Before Income Taxes (1,041 ) 155 (1,196 ) 2,400 6,808 (4,408 )
Income Tax Expense (Benefit) (427 )     (76 )     (351 ) 891       2,460       (1,569 )
Net Income (Loss) $ (614 )     $ 231       $ (845 ) $ 1,509       $ 4,348       $ (2,839 )
 
Net Income (Loss) Per Share (Diluted) $ (0.01 )     $       $ (0.01 ) $ 0.02       $ 0.05       $ (0.03 )
 
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
                       
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
 
Three Months Ended Twelve Months Ended
(Thousands of Dollars, except per share amounts) September 30, September 30,

ALL OTHER

2017     2016     Variance 2017     2016     Variance
Total Operating Revenues $ 862       $ 978       $ (116 ) $ 2,173       $ 3,753       $ (1,580 )
Operating Expenses:
Operation and Maintenance 374 281 93 1,718 776 942
Property, Franchise and Other Taxes 151 145 6 596 593 3
Depreciation, Depletion and Amortization 136       373       (237 ) 661       1,260       (599 )
661       799       (138 ) 2,975       2,629       346  
 
Operating Income (Loss) 201 179 22 (802 ) 1,124 (1,926 )
Other Income (Expense):
Interest Income 66 35 31 213 117 96
Other Income       98       (98 )       98       (98 )
 
Income (Loss) Before Income Taxes 267 312 (45 ) (589 ) 1,339 (1,928 )
Income Tax Expense (Benefit) 111       130       (19 ) (247 )     561       (808 )
Net Income (Loss) $ 156       $ 182       $ (26 ) $ (342 )     $ 778       $ (1,120 )
 
Net Income (Loss) Per Share (Diluted) $ 0.01       $       $ 0.01   $ (0.01 )     $ 0.01       $ (0.02 )
 
 
Three Months Ended Twelve Months Ended
September 30, September 30,

CORPORATE

2017     2016     Variance 2017     2016     Variance
Revenues from External Customers $ 235 $ 226 $ 9 $ 894 $ 900 $ (6 )
Intersegment Revenues 895       1,091       (196 ) 3,825       3,991       (166 )
Total Operating Revenues 1,130       1,317       (187 ) 4,719       4,891       (172 )
Operating Expenses:
Operation and Maintenance 4,832 4,740 92 15,887 15,012 875
Property, Franchise and Other Taxes 127 136 (9 ) 496 501 (5 )
Depreciation, Depletion and Amortization 187       186       1   750       743       7  
5,146       5,062       84   17,133       16,256       877  
 
Operating Loss (4,016 ) (3,745 ) (271 ) (12,414 ) (11,365 ) (1,049 )
 
Other Income (Expense):
Interest Income 31,318 30,389 929 125,003 123,156 1,847
Other Income 1,532 1,357 175 3,682 4,082 (400 )
Interest Expense on Long-Term Debt (29,230 ) (29,083 ) (147 ) (116,471 ) (117,347 ) 876
Other Interest Expense (1,258 )     (705 )     (553 ) (4,159 )     (1,555 )     (2,604 )
 
Loss Before Income Taxes (1,654 ) (1,787 ) 133 (4,359 ) (3,029 ) (1,330 )
Income Tax Expense (Benefit) 1,291       1,386       (95 ) (1,590 )     (1,718 )     128  
Net Loss $ (2,945 )     $ (3,173 )     $ 228   $ (2,769 )     $ (1,311 )     $ (1,458 )
 
Net Loss Per Share (Diluted) $ (0.03 )     $ (0.04 )     $ 0.01   $ (0.03 )     $ (0.01 )     $ (0.02 )
 
 
Three Months Ended Twelve Months Ended
September 30, September 30,

INTERSEGMENT ELIMINATIONS

2017     2016     Variance 2017     2016     Variance
Intersegment Revenues $ (49,205 )     $ (49,442 )     $ 237   $ (213,067 )     $ (197,826 )     $ (15,241 )
Operating Expenses:
Purchased Gas (22,488 ) (23,679 ) 1,191 (98,136 ) (100,568 ) 2,432
Operation and Maintenance (26,717 )     (25,763 )     (954 ) (114,931 )     (97,258 )     (17,673 )
(49,205 )     (49,442 )     237   (213,067 )     (197,826 )     (15,241 )
 
Operating Income
 
Other Income (Expense):
Interest Income (31,994 ) (30,809 ) (1,185 ) (125,893 ) (123,122 ) (2,771 )
Interest Expense 31,994       30,809       1,185   125,893       123,122       2,771  
Net Income $       $       $   $       $       $  
 
Net Income Per Share (Diluted) $       $