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. 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;
  2. 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;
  3. 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;
  4. Changes in the price of natural gas or oil;
  5. Impairments under the SEC’s full cost ceiling test for natural gas and oil reserves;
  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. The impact of information technology, cybersecurity or data security breaches;
  20. Economic disruptions or uninsured losses resulting from major accidents, fires, severe weather, natural disasters, terrorist activities or acts of war;
  21. Significant differences between the Company’s projected and actual capital expenditures and operating expenses; or
  22. 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 First Quarter Earnings and Provides Appalachian Operations Update

02/04/2016

WILLIAMSVILLE, N.Y.--(BUSINESS WIRE)-- National Fuel Gas Company (“National Fuel” or the “Company”) (NYSE:NFG) today announced consolidated results for the first quarter of its 2016 fiscal year (the quarter ended December 31, 2015) and provided an update on the Company's upstream and midstream operations in Appalachia.

FISCAL 2016 FIRST QUARTER EARNINGS SUMMARY

  • Consolidated net loss of $189.1 million, or $2.23 per share
  • Operating results, excluding items impacting comparability, of $66.5 million, or $0.78 per share
  • $252.6 million, or $2.97 per share, after-tax impairment of oil and gas properties
  • $204.8 million consolidated adjusted EBITDA (see non-GAAP reconciliation on page 23)
  • Production of 38.1 Bcfe, a 21% decrease from prior year and 1% increase from the last quarter
  • Price-related natural gas production curtailments of 14.6 Bcf in Appalachia
  • Average natural gas and crude oil prices after hedging of $3.16 per Mcf and $59.76 per Bbl, respectively
  • Pipeline and Storage operating revenues of $75.5 million, a 3.2% increase over prior year's first quarter
  • Weather 27.4% warmer than normal and 25.5% warmer than the prior year in Utility's Pa. service territory

APPALACHIAN OPERATIONS UPDATE SUMMARY

  • Currently operating two rigs in Appalachia, with plans to go to one rig by March 2016
  • Northern Access 2016 pipeline expansion project timeline revised to target November 1, 2017, in service
  • Fiscal 2016 capital expenditure budget reduced by a total of $470 million
  • Company does not anticipate a need to access the long-term debt or equity capital markets through 2016
                   

OPERATING RESULTS

 
Three Months Ended
December 31,
(in thousands except per share amounts) 2015   2014
Reported GAAP earnings (loss) $ (189,109 ) $     84,740
Items impacting comparability:
Impairment of oil and gas properties (E&P) 252,562
Joint development agreement professional fees (E&P) 3,043    
Operating Results $ 66,496   $     84,740
 
Reported GAAP earnings (loss) per share $ (2.23 ) $ 1.00
Items impacting comparability:
Impairment of oil and gas properties (E&P) 2.97
Joint development agreement professional fees (E&P) 0.04
Earnings per share impact of dilutive shares (All segments) 0.01
Rounding (0.01 )  
Operating Results per share $ 0.78   $     1.00
 

APPALACHIAN OPERATIONS UPDATE

Due to ongoing low prices in the natural gas market, National Fuel is revising its near-term upstream and midstream development plans in Appalachia, while its long-term strategic plans remain intact.

Seneca Resources Corporation (“Seneca”), the Company's wholly owned exploration and production subsidiary, has elected to further reduce the pace of its drilling program in the Marcellus Shale. Having already dropped one of its three rigs in January, Seneca plans to lay down an additional rig in March and operate a single rig in Appalachia for the remainder of fiscal 2016 and fiscal 2017. While Seneca's operational success in the Marcellus has significantly improved the economics of its development program, near-term natural gas prices have fallen to levels such that a reduction in activity is warranted. Seneca's program will utilize a single completions crew to complete its drilled well inventory and manage water logistics, thereby allowing it to maintain operational efficiencies and meet current firm transportation and firm sales commitments while significantly reducing the Company's upstream capital commitments over the near term. Seneca's projected fiscal 2016 production is largely unaffected by the planned decrease in drilling activity. Further, the reduction in activity is also not expected to have any impact on the Marcellus joint development agreement announced on December 2, 2015.

As a result of Seneca's slowed drilling activity and other considerations, the Company is revising the target in-service date for the Northern Access 2016 expansion project to November 1, 2017, and slowing the build-out of the Clermont Gathering System. The Northern Access project, originally scheduled for late calendar 2016 in-service, is a $455 million pipeline expansion of the Company's National Fuel Gas Supply Corporation and Empire Pipeline systems designed to transport and deliver 490,000 Dth per day of natural gas production from Seneca-operated wells to multiple markets in the northeast U.S., including Western New York and the Dawn market center that serves the Midwest and Ontario, Canada. The revised project timeline allows the Company additional time to complete all development activities and prepare for efficient construction of the project facilities. National Fuel will continue to pursue timely authorization from the Federal Energy Regulatory Commission ("FERC") to construct the project to meet the schedule and will preserve the option to accelerate construction as market and regulatory conditions and resource availability might allow.

As the owner and controlling operator of both the upstream acreage and midstream infrastructure subsidiaries, National Fuel has the ability to modify the timing and level of its coordinated Appalachian development activities to quickly and appropriately respond to changing market conditions. Seneca, as the fee owner of predominately all of the natural gas rights in the Western Development Area in Pennsylvania, is largely unencumbered by lease expirations that would commit it to drill the acreage in any set period of time. Additionally, the Northern Access project capacity is subscribed completely by Seneca, allowing for the coordination of production volumes and build-out of necessary pipeline capacity. With the stability provided by the Company's rate-regulated downstream and midstream businesses, the Company enjoys significant operational and financial flexibility to ensure that capital is deployed in an efficient and cost-effective fashion and financed in a manner that positions the Company and its shareholders for long-term value creation.

Based on the modified activity levels, National Fuel is updating its capital spending guidance for fiscal 2016. Business segment and consolidated guidance for the Company's fiscal 2016 capital expenditures is summarized in the table below. The Exploration and Production segment's capital expenditure guidance range would be reduced by an additional $90 to $110 million if Seneca's Marcellus joint development partner exercises their right to participate in the remaining 38 wells as outlined in the joint development agreement.

         
Updated
FY 2016 Guidance
Previous

FY 2016 Guidance

Capital Expenditures (Millions)
Exploration & Production $150 - $200 $200 - $250
Pipeline & Storage $125 - $175 $500 - $550
Gathering $85 - $95 $125 - $150
Utility $95 - $105 $90 - $110
Consolidated Capital Expenditures $455 - $575 $915 - $1,060
 

Due to the anticipated decrease in projected upstream and midstream capital expenditures and a strong hedge position that will provide attractive and certain realizations on a majority of Seneca's production in fiscal 2016, National Fuel is projecting a modest outspend through the end of fiscal 2016 that should be met with cash on the balance sheet.

MANAGEMENT COMMENTS

Ronald J. Tanski, President and Chief Executive Officer of National Fuel Gas Company, stated: “Operationally, the first quarter was a good start to our 2016 fiscal year, particularly for the Company's Pipeline and Storage segment. During the first quarter, we completed construction and placed in service three expansion projects for affiliated and non-affiliated customers. We continue to see opportunities to capitalize on our valuable midstream footprint in Appalachia and meet the increasing demand for pipeline infrastructure to move natural gas production from the Marcellus and Utica shales.

"However, persistently low commodity prices continued to weigh on our quarterly financial results, leading to a significant write-down of our natural gas and oil properties and lower price realizations on our natural gas and crude oil production. Magnified by warmer weather this winter in the Northeast, which also reduced earnings in our Utility segment, national and regional commodity prices have continued to trend lower, creating volatility in the energy markets and clouding the near-term outlook for the sector. While we remain committed to growing our uniquely integrated upstream and midstream asset base in a coordinated fashion over the long term, current market conditions compelled us to take precautionary and financially prudent steps to preserve the strength of our balance sheet and ensure that our long-term plans remain viable.

"Our decision to slow our pace of drilling in the Marcellus and revise the in-service date of the Northern Access expansion project demonstrates the ability of our integrated model to react quickly to changing market conditions. Our integrated structure and the coordinated nature of our upstream and midstream activities provides us significant stability and flexibility to efficiently deploy capital. Our rate-regulated midstream and downstream operations provide balance and a solid base of earnings and cash flows that allow us to maintain the safety and reliability of our pipeline systems, meet our fixed financial obligations, and fund our dividend.

"We have prudently managed and structured our business over the years to endure periods of extreme volatility in commodity prices. I am confident that National Fuel will stand ready and on strong footing to execute our long-term Appalachian growth strategy as we continue to work through this current business cycle.”

DISCUSSION OF RESULTS BY SEGMENT

The following discussion of the earnings of each segment is summarized in a tabular form on pages 9 and 10 of this report. It may be helpful to refer to those tables while reviewing this discussion.

Upstream Business

Exploration and Production Segment

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

         
(in thousands except per share amounts) Quarter Ended

December 31, 2015

Quarter Ended

December 31, 2014

Variance
Net Income / (Loss) $ (237,086 ) $ 26,720 $ (263,806 )
Net Income / (Loss) Per Share (Diluted) $ (2.80 ) $ 0.32 $ (3.12 )
Adjusted EBITDA $ 91,140 $ 135,431 $ (44,291 )
 

The quarter over quarter variance is mainly due to a non-cash, after-tax charge of $252.6 million to write down the value of Seneca’s oil and natural gas reserves under the full cost method of accounting. This accounting method requires that Seneca perform a quarterly “ceiling test” to compare the present value of future revenues from its oil and natural gas reserves based on an unweighted arithmetic average of the first day of the month oil and gas prices for each month within the 12-month period prior to the end of the reporting period (“the ceiling”) with the book value of those reserves at the balance sheet date. If the book value of the reserves exceeds the ceiling, a non-cash impairment charge must be recorded in order to reduce the book value of the reserves to the calculated ceiling. Unless oil and gas prices improve significantly, Seneca expects to incur additional impairment charges during the remainder of the fiscal year ending September 30, 2016.

Seneca also incurred $4.7 million ($3.0 million after-tax, or $0.04 per share) of professional and legal expenses relating to the joint development agreement that Seneca entered into during the first quarter. These transaction costs were recorded to General and Administrative ("G&A") expense.

Excluding these items, Operating Results in the Exploration and Production segment in the current year’s first quarter were $18.5 million, or $0.22 per share, compared to $26.7 million, or $0.32 per share, in the prior year’s first quarter, a decrease of $8.2 million or $0.10 per share. The decrease in Operating Results is mainly due to lower natural gas production and lower realized natural gas and crude oil prices after hedging, offset partially by a lower per unit depreciation, depletion and amortization expense ("DD&A") rate.

Seneca's total first quarter fiscal 2016 production was 38.1 billion cubic feet equivalent ("Bcfe"), a decrease of 10.1 Bcfe, or 21.0 percent, from the prior fiscal year's first quarter, and an increase of 0.4 Bcfe, or 1.1 percent, versus the fourth quarter of fiscal 2015. Natural gas and crude oil production for the quarter was 33.6 billion cubic feet (“Bcf”) and 748 thousand barrels ("Mbbl"), respectively. As a result of persistently low local spot prices in the Appalachian basin, Seneca voluntarily curtailed approximately 14.6 Bcf of natural gas production during the quarter. Absent price-related curtailments, Seneca's first quarter fiscal 2016 natural gas production would have been approximately 48.2 Bcf, or nearly 524 million cubic feet ("MMcf") per day.

Seneca's average realized natural gas price, after the impact of hedging, for the first quarter was $3.16 per thousand cubic feet ("Mcf"), reflecting $1.14 per Mcf of uplift from financial hedges settled during the quarter. Seneca's average realized oil price, after the impact of hedging, for the first quarter was $59.76 per barrel ("Bbl"), reflecting a $23.68 per Bbl uplift from financial hedges settled during the quarter. Seneca's remaining fiscal 2016 natural gas production is now 78 percent hedged at the midpoint of production guidance, with nearly 92 million Million British thermal units ("MMBtu") (88.7 Bcf) of production hedged at an average price of $3.53 per MMBtu. In California, Seneca's remaining fiscal 2016 oil production is now 46 percent hedged at an average hedge price of $87.70 per Bbl. For fiscal 2017, Seneca has over 97 million MMBtu (93 Bcf) of production hedged at an average hedge price of $3.66 per MMBtu and nearly 700,000 Bbls of oil production hedged at $75.19 per Bbl.

First quarter DD&A expense decreased $36.0 million versus the prior year first quarter. On a per unit basis, DD&A decreased $0.50 per Mcf equivalent ("Mcfe") to $1.16 per Mcfe due primarily to the ceiling test impairment charges recorded during the prior fiscal year and higher natural gas reserve balances at September 30, 2015.

First quarter lease operating expense (“LOE”) decreased by $7.8 million mostly due to lower production. On a per unit basis, LOE increased by $0.06 per Mcfe largely due to the pricing related curtailments discussed above, which increased the relative proportion of higher cost California oil production to the total.

The increase in Interest Expense is the result of a new long-term debt issuance that occurred during the quarter ended June 30, 2015.

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.

         
(in thousands except per share amounts) Quarter Ended

December 31, 2015

Quarter Ended

December 31, 2014

Variance
Net Income / (Loss) $ 21,276 $ 20,778 $ 498
Net Income / (Loss) Per Share (Diluted) $ 0.25 $ 0.25 $
Adjusted EBITDA $ 50,741 $ 48,893 $ 1,848
 

The increase in the Pipeline and Storage segment's earnings is due to higher transportation revenues, offset partially by higher DD&A and property tax expenses. Transportation revenues increased $2.5 million, or 4.6 percent, as a result of higher non-affiliated revenues generated from the Mercer Expansion project, which was placed in service in November 2014, as well as revenues generated from three additional expansion projects that were placed in service during the first quarter of fiscal 2016. The Tuscarora Lateral, Westside Expansion and Modernization and Northern Access 2015 projects added a combined 364,000 dekatherms (Dth) of new firm transportation capacity to the Supply Corporation and Empire systems under long-dated contracts for affiliated and non-affiliated customers. DD&A and property tax expenses increased $1.2 million and $0.6 million, respectively, mostly due to a higher gross plant in service, which was largely the result of the Company's recent expansion projects.

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 pipeline gathering facilities in the Appalachian region and currently provides the gathering infrastructure for transporting Seneca’s Marcellus Shale production to the interstate pipeline system.

         
(in thousands except per share amounts) Quarter Ended

December 31, 2015

Quarter Ended

December 31, 2014

Variance
Net Income / (Loss) $ 4,921 $ 11,623 $ (6,702 )
Net Income / (Loss) Per Share (Diluted) $ 0.06 $ 0.14 $ (0.08 )

Adjusted EBITDA

$ 16,458 $ 22,763 $ (6,305 )
 

The decrease in the Gathering segment's earnings is due primarily to lower gathering revenues, higher DD&A expense, and higher interest expense. Gathering revenues decreased $5.8 million as a result of lower Seneca production volumes in Appalachia compared to the prior year’s first quarter. DD&A expense increased $2.1 million due to a higher average gross plant in-service balance, resulting primarily from Clermont Gathering system facilities that were placed in service over the previous twelve months. The increase in Interest Expense is the result of a new long-term debt issuance that occurred during the quarter ended June 30, 2015, as well as lower capitalized interest expense on plant construction in progress.

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.

         
(in thousands except per share amounts) Quarter Ended

December 31, 2015

Quarter Ended

December 31, 2014

Variance
Net Income / (Loss) $ 18,606 $ 22,594 $ (3,988 )
Net Income / (Loss) Per Share (Diluted) $ 0.22 $ 0.26 $ (0.04 )
Adjusted EBITDA $ 45,918 $ 53,431 $ (7,513 )
 

The decrease in the Utility segment's earnings is largely attributable to the impact of warmer weather in Distribution's Pennsylvania service territory, partially offset by lower Operation and Maintenance ("O&M") expense. Weather in Distribution's Pennsylvania service territory was 25.5% warmer than last year, resulting in lower retail residential and transportation customer throughput and revenues, which decreased the Utility segment's earnings by approximately $0.04 per share. The impact of weather variations on earnings in Distribution's New York service territory is largely mitigated by the New York rate jurisdiction's weather normalization clause. The decrease in O&M expense is mainly due to lower bad debt expense and a reduction in personnel costs.

Energy Marketing Segment

National Fuel Resources, Inc. (“NFR”) comprises the Company’s Energy Marketing segment. 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.

         
(in thousands except per share amounts) Quarter Ended

December 31, 2015

Quarter Ended

December 31, 2014

Variance
Net Income / (Loss) $ 1,223 $ 2,826 $ (1,603 )
Net Income / (Loss) Per Share (Diluted) $ 0.01 $ 0.03 $ (0.02 )
Adjusted EBITDA $ 1,846 $ 4,641 $ (2,795 )
 

The decrease in the Energy Marketing segment's earnings is due to lower margins. Margins were negatively impacted by warmer weather, which lowered retail customer usage, and lower per unit margins, which were the result of stronger pricing basis in the Northeast.

Corporate and All Other

The Corporate and All Other category earnings of $2.0 million in the quarter ended December 31, 2015, compares to earnings of $0.2 million in the prior year’s first quarter. The increase is due to lower income tax expense.

EARNINGS GUIDANCE

The Company is updating earnings guidance for fiscal 2016 to reflect first quarter results and revised forecast assumptions. Updated consolidated earnings guidance and Exploration and Production segment operational guidance is summarized in the tables below:

     
Consolidated Earnings Guidance
Updated FY 2016 Guidance   Previous FY 2016 Guidance
Consolidated Earnings per Share* $2.75 to $3.00 $2.70 to $3.00
*Exclusive of ceiling test impairment charges
 
 
Exploration & Production Segment Operational Guidance
      Updated FY 2016 Guidance   Previous FY 2016 Guidance
NYMEX Natural Gas Price Assumption $2.25 $2.75
NYMEX Crude Oil Price Assumption $40.00 $50.00
Production (Bcfe) 150 to 180 139 to 202
Operating Costs ($/Mcfe)
LOE $1.00 - $1.10 $1.00 - $1.10
G&A $0.40 - $0.45 $0.40 - $0.45
DD&A $0.90 - $1.00 $1.00 - $1.10
 

While the Company currently expects to incur additional ceiling test impairment charges in the remaining quarters of fiscal 2016, the amount of these charges is not reasonably determinable at this time. The amount of any ceiling test charge is determined at the end of the applicable quarter and will depend on many factors, including additions to or subtractions from proved reserves, fluctuations in oil and gas prices, and income tax effects related to the differences between the book and tax basis of the Company’s oil and gas properties. Some or all of these factors are likely to be significant. Because the amount of the expected ceiling test impairment charges is not reasonably determinable at this time, the Company is unable to provide earnings guidance other than on a non-GAAP basis that excludes those charges.

EARNINGS TELECONFERENCE

The Company will host a conference call on Friday, February 5, 2016, 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 investor relations page at National Fuel’s website at investor.nationalfuelgas.com. For those without Internet access, access is also provided by dialing (toll-free) 1-866-202-0886, using passcode “36905811.” For those unable to listen to the live conference call, a replay will be available at approximately 3 p.m. Eastern Time at the same website link and by phone at (toll-free) 1-888-286-8010, using passcode “20223279.” Both the webcast and telephonic replay will be available until the close of business on Friday, February 12, 2016.

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: 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; 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; 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; 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; 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 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 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; 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; increasing health care costs and the resulting effect on health insurance premiums and on the obligation to provide other post-retirement benefits; 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 DECEMBER 31, 2015
(Unaudited)
 
 
Upstream

Midstream
Businesses

Downstream
Businesses

 
Exploration & Pipeline & Energy Corporate /
(Thousands of Dollars) Production   Storage   Gathering   Utility   Marketing   All Other   Consolidated*
 
First quarter 2015 GAAP earnings $ 26,720 $ 20,778 $ 11,623 $ 22,594 $ 2,826 $ 199 $ 84,740
 
Drivers of operating results
Higher (lower) crude oil prices (8,914 ) (8,914 )
Higher (lower) natural gas prices (1,930 ) (1,930 )
Higher (lower) natural gas production (21,134 ) (21,134 )
Higher (lower) crude oil production (1,119 ) (1,119 )
Derivative mark to market adjustments (860 ) (860 )
Lower (higher) lease operating and transportation expenses 5,060 5,060
Lower (higher) depreciation / depletion 23,422 (794 ) (1,397 ) 21,231
 
Higher (lower) transportation revenues 1,652 1,652
Higher (lower) gathering and processing revenues (3,776 ) (3,776 )
Lower (higher) operating expenses 1,023 400 1,423
 
Warmer weather (4,578 ) (4,578 )
 
Higher (lower) margins (1,671 ) (1,671 )
 
Higher (lower) AFUDC** 1,027 1,027
 
Lower (higher) interest expense (2,778 ) (974 ) (1,802 ) (5,554 )
 
Lower (higher) income tax expense / effective tax rate 1,020 1,020
 
All other / rounding 52     (413 )   273     (433 )   68     332     (121 )
First quarter 2016 operating results 18,519 21,276 4,921 18,606 1,223 1,951 66,496
Items impacting comparability:
Impairment of oil and gas producing properties (252,562 ) (252,562 )
Joint development agreement professional fees (3,043 )                       (3,043 )
First quarter 2016 GAAP earnings $ (237,086 )   $ 21,276     $ 4,921     $ 18,606     $ 1,223     $ 1,951     $ (189,109 )
 
* 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
QUARTER ENDED DECEMBER 31, 2015
(Unaudited)
 
 
Upstream

Midstream
Businesses

Downstream
Businesses

 
Exploration & Pipeline & Energy Corporate /
Production   Storage   Gathering   Utility   Marketing   All Other   Consolidated*
 
First quarter 2015 GAAP earnings $ 0.32 $ 0.25 $ 0.14 $ 0.26 $ 0.03 $ $ 1.00
 
Drivers of operating results
Higher (lower) crude oil prices (0.10 ) (0.10 )
Higher (lower) natural gas prices (0.02 ) (0.02 )
Higher (lower) natural gas production (0.25 ) (0.25 )
Higher (lower) crude oil production (0.01 ) (0.01 )
Derivative mark to market adjustments (0.01 ) (0.01 )
Lower (higher) lease operating and transportation expenses 0.06 0.06
Lower (higher) depreciation / depletion 0.28 (0.01 ) (0.02 ) 0.25
 
Higher (lower) transportation revenues 0.02 0.02
Higher (lower) gathering and processing revenues (0.04 ) (0.04 )
Lower (higher) operating expenses 0.01 0.01
 
Warmer weather (0.05 ) (0.05 )
 
Higher (lower) margins (0.02 ) (0.02 )
 
Higher (lower) AFUDC** 0.01 0.01
 
Lower (higher) interest expense (0.03 ) (0.01 ) (0.02 ) (0.06 )
 
Lower (higher) income tax expense / effective tax rate 0.01 0.01
 
All other / rounding (0.02 )   (0.01 )               0.01     (0.02 )
First quarter 2016 operating results 0.22 0.25 0.06 0.22 0.01 0.02 0.78
Items impacting comparability:
Impairment of oil and gas producing properties (2.97 ) (2.97 )
Joint development agreement professional fees (0.04 ) (0.04 )
Earnings per share impact of diluted shares (0.01 ) (0.01 )
Rounding                     0.01     0.01  
First quarter 2016 GAAP earnings $ (2.80 )   $ 0.25     $ 0.06     $ 0.22     $ 0.01     $ 0.03     $ (2.23 )
 
* 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
December 31,
(Unaudited)

SUMMARY OF OPERATIONS

2015   2014
Operating Revenues $ 375,195   $ 523,909  
 
Operating Expenses:
Purchased Gas 42,068 127,091
Operation and Maintenance 112,692 112,582
Property, Franchise and Other Taxes 20,357 20,929
Depreciation, Depletion and Amortization 70,551 102,747
Impairment of Oil and Gas Producing Properties 435,451    
681,119 363,349
 
Operating Income (Loss) (305,924 ) 160,560
 
Other Income (Expense):
Interest Income 1,799 1,258
Other Income 2,418 1,183
Interest Expense on Long-Term Debt (30,372 ) (22,311 )
Other Interest Expense (1,380 ) (790 )
 
Income (Loss) Before Income Taxes (333,459 ) 139,900
 
Income Tax Expense (Benefit) (144,350 ) 55,160  
 
Net Income (Loss) Available for Common Stock $ (189,109 ) $ 84,740  
 
Earnings (Loss) Per Common Share:
Basic $ (2.23 ) $ 1.01  
Diluted $ (2.23 ) $ 1.00  
 
Weighted Average Common Shares:
Used in Basic Calculation 84,651,233 84,208,645
Used in Diluted Calculation 84,651,233 85,118,516
 
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
     
December 31,   September 30,
(Thousands of Dollars)       2015   2015
 
ASSETS
Property, Plant and Equipment $9,311,376 $9,261,323
Less - Accumulated Depreciation, Depletion and Amortization       4,428,593     3,929,428
Net Property, Plant and Equipment       4,882,783     5,331,895
 
Current Assets:
Cash and Temporary Cash Investments 36,329 113,596
Hedging Collateral Deposits 9,551 11,124
Receivables - Net 211,112 105,004
Unbilled Revenue 40,178 20,746
Gas Stored Underground 28,811 34,252
Materials and Supplies - at average cost 32,389 30,414
Other Current Assets       66,145     60,665
Total Current Assets       424,515     375,801
 
Other Assets:
Recoverable Future Taxes 172,205 168,214
Unamortized Debt Expense 2,085 2,218
Other Regulatory Assets 275,721 278,227
Deferred Charges 16,410 15,129
Other Investments 108,209 92,990
Goodwill 5,476 5,476
Prepaid Post-Retirement Benefit Costs 25,357 24,459
Fair Value of Derivative Financial Instruments 277,409 270,363
Other       162     167
Total Other Assets       883,034     857,243
Total Assets       $6,190,332     $6,564,939
 
CAPITALIZATION AND LIABILITIES
Capitalization:
Comprehensive Shareholders' Equity
Common Stock, $1 Par Value Authorized - 200,000,000
Shares; Issued and Outstanding - 84,739,068 Shares
and 84,594,383 Shares, Respectively $84,739 $84,594
Paid in Capital 748,867 744,274
Earnings Reinvested in the Business 880,619 1,103,200
Accumulated Other Comprehensive Income       98,456     93,372
Total Comprehensive Shareholders' Equity 1,812,681 2,025,440
Long-Term Debt, Net of Unamortized Discount and Debt Issuance Costs       2,084,562     2,084,009
Total Capitalization       3,897,243     4,109,449
 
Current and Accrued Liabilities:
Notes Payable to Banks and Commercial Paper 31,400
Current Portion of Long-Term Debt
Accounts Payable 126,917 180,388
Amounts Payable to Customers 45,076 56,778
Dividends Payable 33,472 33,415
Interest Payable on Long-Term Debt 30,285 36,200
Customer Advances 23,425 16,236
Customer Security Deposits 16,757 16,490
Other Accruals and Current Liabilities 95,830 96,557
Fair Value of Derivative Financial Instruments       7,969     10,076
Total Current and Accrued Liabilities       411,131     446,140
 
Deferred Credits:
Deferred Income Taxes 999,399 1,137,962
Taxes Refundable to Customers 94,468 89,448
Unamortized Investment Tax Credit 644 731
Cost of Removal Regulatory Liability 184,784 184,907
Other Regulatory Liabilities 113,187 108,617
Pension and Other Post-Retirement Liabilities 205,431 202,807
Asset Retirement Obligations 158,108 156,805
Other Deferred Credits       125,937     128,073
Total Deferred Credits       1,881,958     2,009,350
Commitments and Contingencies          
Total Capitalization and Liabilities       $6,190,332     $6,564,939
 
   
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
December 31,
(Thousands of Dollars)   2015   2014
 
Operating Activities:
Net Income (Loss) Available for Common Stock $ (189,109 ) $ 84,740
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by Operating Activities:
Impairment of Oil and Gas Producing Properties 435,451
Depreciation, Depletion and Amortization 70,551 102,747
Deferred Income Taxes (140,013 ) 33,207
Excess Tax Benefits Associated with Stock-Based Compensation Awards (226 ) (7,667 )
Stock-Based Compensation 960 3,078
Other 3,418 2,358
Change in:
Hedging Collateral Deposits 1,573 (10,734 )
Receivables and Unbilled Revenue (31,150 ) (60,947 )
Gas Stored Underground and Materials and Supplies 3,466 9,386
Other Current Assets (5,254 ) (5,635 )
Accounts Payable (20,784 ) 19,378
Amounts Payable to Customers (11,702 ) 2,249
Customer Advances 7,189 1,431
Customer Security Deposits 267 630
Other Accruals and Current Liabilities (14,353 ) (6,416 )
Other Assets 885 2,142
Other Liabilities   2,904     19,132  
Net Cash Provided by Operating Activities   $ 114,073     $ 189,079  
 
Investing Activities:
Capital Expenditures $ (186,437 ) $ (244,927 )
Net Proceeds from Sale of Oil and Gas Producing Properties 10,574
Other   (15,756 )   (1,229 )
Net Cash Used in Investing Activities   $ (191,619 )   $ (246,156 )
 
Financing Activities:
Changes in Notes Payable to Banks and Commercial Paper $ 31,400 $ 87,300
Excess Tax Benefits Associated with Stock-Based Compensation Awards 226 7,667
Dividends Paid on Common Stock (33,415 ) (32,400 )
Net Proceeds From Issuance of Common Stock   2,068     1,548  
Net Cash Provided by Financing Activities   $ 279     $ 64,115  
 
Net Increase (Decrease) in Cash and Temporary Cash Investments (77,267 ) 7,038
Cash and Temporary Cash Investments at Beginning of Period   113,596     36,886  
Cash and Temporary Cash Investments at December 31   $ 36,329     $ 43,924  
 
         
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
 
UPSTREAM BUSINESS
 
 
Three Months Ended
(Thousands of Dollars, except per share amounts) December 31,

EXPLORATION AND PRODUCTION SEGMENT

2015   2014   Variance
Total Operating Revenues $ 151,965     $ 204,665     $ (52,700 )
 
Operating Expenses:
Operation and Maintenance:
General and Administrative Expense 19,955 15,685 4,270
Lease Operating and Transportation Expense 39,022 46,807 (7,785 )
All Other Operation and Maintenance Expense 3,145 2,841 304
Property, Franchise and Other Taxes 3,385 3,901 (516 )
Depreciation, Depletion and Amortization 44,033 80,067 (36,034 )
Impairment of Oil and Gas Producing Properties 435,451         435,451  
544,991     149,301     395,690  
 
Operating Income (Loss) (393,026 ) 55,364 (448,390 )
 
Other Income (Expense):
Interest Income 667 510 157
Interest Expense (14,582 )   (10,308 )   (4,274)
 
Income (Loss) Before Income Taxes (406,941 ) 45,566 (452,507 )
Income Tax Expense (Benefit) (169,855 )   18,846     (188,701 )
Net Income (Loss) $ (237,086 )   $ 26,720     $ (263,806 )
 
Net Income (Loss) Per Share (Diluted) $ (2.80 )   $ 0.32     $ (3.12 )
 
         
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
 
MIDSTREAM BUSINESSES
 
 
Three Months Ended
(Thousands of Dollars, except per share amounts) December 31,

PIPELINE AND STORAGE SEGMENT

2015   2014   Variance
Revenues from External Customers $ 53,354 $ 51,745 $ 1,609
Intersegment Revenues 22,183     21,461     722  
Total Operating Revenues 75,537     73,206     2,331  
 
Operating Expenses:
Purchased Gas 458 266 192
Operation and Maintenance 17,593 17,884 (291 )
Property, Franchise and Other Taxes 6,745 6,163 582
Depreciation, Depletion and Amortization 10,256     9,035     1,221  
35,052     33,348     1,704  
 
Operating Income 40,485 39,858 627
 
Other Income (Expense):
Interest Income 111 85 26
Other Income 1,582 557 1,025
Interest Expense (8,038 )   (6,539 )   (1,499 )
 
Income Before Income Taxes 34,140 33,961 179
Income Tax Expense 12,864     13,183     (319 )
Net Income $ 21,276     $ 20,778     $ 498  
 
Net Income Per Share (Diluted) $ 0.25     $ 0.25     $  
 
 
Three Months Ended
December 31,

GATHERING SEGMENT

2015   2014   Variance
Revenues from External Customers $ 125 $ 146 $ (21 )
Intersegment Revenues 18,640     24,428     (5,788 )
Total Operating Revenues 18,765     24,574     (5,809 )
 
Operating Expenses:
Operation and Maintenance 2,273 1,776 497
Property, Franchise and Other Taxes 34 35 (1 )
Depreciation, Depletion and Amortization 4,210     2,061     2,149  
6,517     3,872     2,645  
 
Operating Income 12,248 20,702 (8,454 )
 
Other Income (Expense):
Interest Income 34 27 7
Other Income 1 1
Interest Expense (3,070 )   (298 )   (2,772 )
 
Income Before Income Taxes 9,213 20,432 (11,219 )
Income Tax Expense 4,292     8,809     (4,517 )
Net Income $ 4,921     $ 11,623     $ (6,702 )
 
Net Income Per Share (Diluted) $ 0.06     $ 0.14     $ (0.08 )
 
         
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
 
DOWNSTREAM BUSINESSES
 
 
Three Months Ended
(Thousands of Dollars, except per share amounts) December 31,

UTILITY SEGMENT

2015   2014   Variance
Revenues from External Customers $ 143,848 $ 210,073 $ (66,225 )
Intersegment Revenues 3,664     4,534     (870 )
Total Operating Revenues 147,512     214,607     (67,095 )
 
Operating Expenses:
Purchased Gas 45,068 101,711 (56,643 )
Operation and Maintenance 46,599 48,907 (2,308 )
Property, Franchise and Other Taxes 9,927 10,558 (631 )
Depreciation, Depletion and Amortization 11,618     11,151     467  
113,212     172,327     (59,115 )
 
Operating Income 34,300 42,280 (7,980 )
 
Other Income (Expense):
Interest Income 85 18 67
Other Income 697 498 199
Interest Expense (7,334 )   (6,943 )   (391 )
 
Income Before Income Taxes 27,748 35,853 (8,105 )
Income Tax Expense 9,142     13,259     (4,117 )
Net Income $ 18,606     $ 22,594     $ (3,988 )
 
Net Income Per Share (Diluted) $ 0.22     $ 0.26     $ (0.04 )
 
 
Three Months Ended
December 31,

ENERGY MARKETING SEGMENT

2015   2014   Variance
Revenues from External Customers $ 24,984 $ 56,166 $ (31,182 )
Intersegment Revenues 311     206     105  
Total Operating Revenues 25,295     56,372     (31,077 )
 
Operating Expenses:
Purchased Gas 21,723 50,230 (28,507 )
Operation and Maintenance 1,723 1,499 224
Property, Franchise and Other Taxes 3 2 1
Depreciation, Depletion and Amortization 70     51     19  
23,519     51,782     (28,263 )
 
Operating Income 1,776 4,590 (2,814 )
 
Other Income (Expense):
Interest Income 50 39 11
Other Income 10 24 (14 )
Interest Expense (19 )   (3 )   (16 )
 
Income Before Income Taxes 1,817 4,650 (2,833 )
Income Tax Expense 594     1,824     (1,230 )
Net Income $ 1,223     $ 2,826     $ (1,603 )
 
Net Income Per Share (Diluted) $ 0.01     $ 0.03     $ (0.02 )
 
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
         
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
 
Three Months Ended
(Thousands of Dollars, except per share amounts) December 31,

ALL OTHER

2015   2014   Variance
Total Operating Revenues $ 706     $ 884     $ (178 )
Operating Expenses:
Operation and Maintenance 75 530 (455 )
Property, Franchise and Other Taxes 143 150 (7 )
Depreciation, Depletion and Amortization 182     215     (33 )
400     895     (495 )
 
Operating Income (Loss) 306 (11 ) 317
 
Other Income (Expense):
Interest Income 19 12 7
Other Income     1     (1 )
 
Income Before Income Taxes 325 2 323
Income Tax Expense 136     8     128  
Net Income (Loss) $ 189     $ (6 )   $ 195  
 
Net Income (Loss) Per Share (Diluted) $     $     $  
 
 
Three Months Ended
December 31,

CORPORATE

2015   2014   Variance
Revenues from External Customers $ 213 $ 230 $ (17 )
Intersegment Revenues 967     886     81  
Total Operating Revenues 1,180     1,116     64  
Operating Expenses:
Operation and Maintenance 2,891 3,052 (161 )
Property, Franchise and Other Taxes 120 120
Depreciation, Depletion and Amortization 182     167     15  
3,193     3,339     (146 )
 
Operating Loss (2,013 ) (2,223 ) 210
 
Other Income (Expense):
Interest Income 31,743 25,300 6,443
Other Income 128 102 26
Interest Expense on Long-Term Debt (30,372 ) (22,311 ) (8,061 )
Other Interest Expense 753     (1,432 )   2,185  
 
Income (Loss) Before Income Taxes 239 (564 ) 803
Income Tax Expense (Benefit) (1,523 )   (769 )   (754 )
Net Income $ 1,762     $ 205     $ 1,557  
 
Net Income Per Share (Diluted) $ 0.03     $     $ 0.03  
 
 
Three Months Ended
December 31,

INTERSEGMENT ELIMINATIONS

2015   2014   Variance
Intersegment Revenues $ (45,765 )   $ (51,515 )   $ 5,750  
Operating Expenses:
Purchased Gas (25,181 ) (25,116 ) (65 )
Operation and Maintenance (20,584 )   (26,399 )   5,815  
(45,765 )   (51,515 )   5,750  
 
Operating Income
 
Other Income (Expense):
Interest Income (30,910 ) (24,733 ) (6,177 )
Interest Expense 30,910     24,733     6,177  
Net Income $     $     $  
 
Net Income Per Share (Diluted) $     $     $  
 
         
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 
SEGMENT INFORMATION (Continued)
(Thousands of Dollars)
 
 
Three Months Ended
December 31,
(Unaudited)
Increase
2015 2014 (Decrease)
 

Capital Expenditures:

Exploration and Production $ 88,125 (1) (2) $ 157,711 (3) (4) $ (69,586 )
Pipeline and Storage 31,621 (1) (2) 16,027 (3) (4) 15,594
Gathering 21,744 (1) (2) 14,948 (3) (4) 6,796
Utility 19,917 (1) (2) 21,175 (3) (4) (1,258 )
Energy Marketing 7   75   (68 )
Total Reportable Segments 161,414 209,936 (48,522 )
All Other
Corporate 48   26   22  
Total Capital Expenditures $ 161,462   $ 209,962   $ (48,500 )
 

(1)

    Capital expenditures for the three months ended December 31, 2015, include accounts payable and accrued liabilities related to capital expenditures of $43.7 million, $19.0 million, $18.8 million, and $12.5 million in the Exploration and Production segment, Pipeline and Storage segment, Gathering segment and Utility segment, respectively. These amounts have been excluded from the Consolidated Statement of Cash Flows at December 31, 2015, since they represent non-cash investing activities at that date.
 

(2)

Capital expenditures for the three months ended December 31, 2015, exclude capital expenditures of $46.2 million, $33.9 million, $22.4 million and $16.5 million in the Exploration and Production segment, Pipeline and Storage segment, Gathering segment and Utility segment, respectively. These amounts were in accounts payable and accrued liabilities at September 30, 2015 and paid during the three months ended December 31, 2015. These amounts were excluded from the Consolidated Statement of Cash Flows at September 30, 2015, since they represented non-cash investing activities at that date. These amounts have been included in the Consolidated Statement of Cash Flows at December 31, 2015.
 

(3)

Capital expenditures for the three months ended December 31, 2014, include accounts payable and accrued liabilities related to capital expenditures of $82.3 million, $3.0 million, $11.0 million, and $5.4 million in the Exploration and Production segment, Pipeline and Storage segment, Gathering segment and Utility segment, respectively. These amounts have been excluded from the Consolidated Statement of Cash Flows at December 31, 2014, since they represent non-cash investing activities at that date.
 

(4)

Capital expenditures for the year ended December 31, 2014, exclude capital expenditures of $80.1 million, $28.1 million, $20.1 million and $8.3 million in the Exploration and Production segment, Pipeline and Storage segment, Gathering segment and Utility segment, respectively. These amounts were in accounts payable and accrued liabilities at September 30, 2014 and paid during the three months ended December 31, 2014. These amounts were excluded from the Consolidated Statements of Cash Flows at September 30, 2014, since they represented non-cash investing activities at that date. These amounts have been included in the Consolidated Statement of Cash Flows at December 31, 2014.
 
                     

DEGREE DAYS

 
Percent Colder
(Warmer) Than:
Three Months Ended December 31 Normal 2015 2014 Normal (1) Last Year (1)
 
Buffalo, NY 2,253 1,677 2,136 (25.6) (21.5)
Erie, PA 2,044 1,484 1,991 (27.4) (25.5)
 

(1)

    Percents compare actual 2015 degree days to normal degree days and actual 2015 degree days to actual 2014 degree days.
 
         
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 

EXPLORATION AND PRODUCTION INFORMATION

 
 
Three Months Ended
December 31,
Increase
2015 2014 (Decrease)
 

Gas Production/Prices:

Production (MMcf)
Appalachia 32,788 42,798 (10,010 )
West Coast 783   773   10  
Total Production 33,571   43,571   (10,000 )
 
Average Prices (Per Mcf)
Appalachia $ 1.98 $ 2.95 $ (0.97 )
West Coast 3.65 5.61 (1.96 )
Weighted Average 2.02 3.00 (0.98 )
Weighted Average after Hedging 3.16 3.25 (0.09 )
 

Oil Production/Prices:

Production (Thousands of Barrels)
Appalachia 6 9 (3)
West Coast 742 762 (20)
Total Production 748 771 (23)
 
Average Prices (Per Barrel)
Appalachia $ 39.78 $ 75.56 $ (35.78 )
West Coast 36.05 66.86 (30.81 )
Weighted Average 36.08 66.96 (30.88 )
Weighted Average after Hedging 59.76 78.09 (18.33 )
 
Total Production (Mmcfe) 38,059 48,197 (10,138)
 

Selected Operating Performance Statistics:

General & Administrative Expense per Mcfe (1) $ 0.52 $ 0.33 $ 0.19
Lease Operating and Transportation Expense per Mcfe (1)(2) $ 1.03 $ 0.97 $ 0.06
Depreciation, Depletion & Amortization per Mcfe (1) $ 1.16 $ 1.66 $ (0.50 )
 

(1)

    Refer to page 14 for the General and Administrative Expense, Lease Operating Expense and Depreciation, Depletion, and Amortization Expense for the Exploration and Production segment.

(2)

Amounts include transportation expense of $0.51 and $0.53 per Mcfe for the three months ended December 31, 2015 and December 31, 2014, respectively.
 
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
       

EXPLORATION AND PRODUCTION INFORMATION

 
Hedging Summary for the Remaining Nine Months of Fiscal 2016
 

Volume

Average Hedge Price

Oil Swaps
Brent 404,000   BBL $ 94.63 / BBL
NYMEX 640,000 BBL $ 83.33 / BBL
Total 1,044,000 BBL $ 87.70 / BBL
 
Gas Swaps
NYMEX 28,440,000 MMBTU $ 3.92 / MMBTU
Dominion Transmission Appalachian (DOM) 14,130,000 MMBTU $ 3.78 / MMBTU
Michigan Consolidated City Gate (Mich Con) 9,000,000 MMBTU $ 4.10 / MMBTU
Dawn Ontario (DAWN) 9,990,000 MMBTU $ 3.92 / MMBTU
Fixed Price Physical Sales 30,426,000 MMBTU $ 2.75 / MMBTU
Total 91,986,000 MMBTU $ 3.53 / MMBTU
 
Hedging Summary for Fiscal 2017
 

Volume

Average Hedge Price

Oil Swaps
Brent 231,000 BBL $ 92.14 / BBL
NYMEX 465,000 BBL $ 66.77 / BBL
Total 696,000 BBL $ 75.19 / BBL
 
Gas Swaps
NYMEX 29,530,000 MMBTU $ 4.20 / MMBTU
DOM 12,720,000 MMBTU $ 3.87 / MMBTU
Mich Con 3,000,000 MMBTU $ 4.10 / MMBTU
DAWN 19,100,000 MMBTU $ 3.70 / MMBTU
Fixed Price Physical Sales 32,893,000 MMBTU $ 3.03 / MMBTU
Total 97,243,000 MMBTU $ 3.66 / MMBTU
 
Hedging Summary for Fiscal 2018
 

Volume

Average Hedge Price

Oil Swaps
Brent 51,000 BBL $ 91.00 / BBL
NYMEX 24,000 BBL $ 90.52 / BBL
Total 75,000 BBL $ 90.85 / BBL
 
Gas Swaps
NYMEX 20,350,000 MMBTU $ 3.62 / MMBTU
DAWN 1,800,000 MMBTU $ 3.40 / MMBTU
Fixed Price Physical Sales 8,010,000 MMBTU $ 3.21 / MMBTU
Total 30,160,000 MMBTU $ 3.50 / MMBTU
 
Hedging Summary for Fiscal 2019
 

Volume

Average Hedge Price

Gas Swaps
NYMEX 11,400,000 MMBTU $ 3.39 / MMBTU
Fixed Price Physical Sales 5,840,000 MMBTU $ 3.25 / MMBTU
Total 17,240,000 MMBTU $ 3.34 / MMBTU
 
Hedging Summary for Fiscal 2020
 

Volume

Average Hedge Price

Gas Swaps
NYMEX 2,000,000 MMBTU $ 3.49 / MMBTU
Fixed Price Physical Sales 2,928,000 MMBTU $ 3.25 / MMBTU
Total 4,928,000 MMBTU $ 3.35 / MMBTU
 
               
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 

EXPLORATION AND PRODUCTION INFORMATION

 

Gross Wells in Process of Drilling

Three Months Ended December 31, 2015

Total

East

West

Company

Wells in Process - Beginning of Period
Exploratory 4.000 (1) 0.000 4.000
Developmental 96.000 (1) 0.000 96.000
Wells Commenced
Exploratory 0.000 0.000 0.000
Developmental 31.000 13.000 44.000
Wells Completed
Exploratory 0.000 0.000 0.000
Developmental 11.000 12.000 23.000
Wells Plugged & Abandoned
Exploratory 0.000 0.000 0.000
Developmental 0.000 0.000 0.000
Wells in Process - End of Period
Exploratory 4.000 0.000 4.000
Developmental 116.000 1.000 117.000
 
(1)     Gross exploratory wells were increased by 4 and developmental wells were decreased by 4.
 
               

Net Wells in Process of Drilling

Three Months Ended December 31, 2015

Total

East

West

Company

Wells in Process - Beginning of Period
Exploratory 4.000 (1) 0.000 4.000
Developmental 81.500 (1) 0.000 81.500
Wells Commenced
Exploratory 0.000 0.000 0.000
Developmental 31.000 13.000 44.000
Wells Completed
Exploratory 0.000 0.000 0.000
Developmental 11.000 12.000 23.000
Wells Plugged & Abandoned
Exploratory 0.000 0.000 0.000
Developmental 0.000 0.000 0.000
Well Interest Sold (2)
Exploratory 0.000 0.000 0.000
Developmental 6.400 0.000 6.400
Wells in Process - End of Period
Exploratory 4.000 0.000 4.000
Developmental 95.100 (2) 1.000 96.100
 
(1)     Net exploratory wells were increased by 4 and developmental wells were decreased by 4.
(2) Seneca's East Division sold an 80% working interest in 8 of the existing developmental wells in process to IOG during the three months ended December 31, 2015.
 
     
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 
 
Pipeline & Storage Throughput - (millions of cubic feet - MMcf)
 
Three Months Ended
December 31,
Increase
2015 2014 (Decrease)
Firm Transportation - Affiliated 24,709 29,086 (4,377 )
Firm Transportation - Non-Affiliated 151,123 157,236 (6,113 )
Interruptible Transportation 5,631   2,102   3,529  
181,463   188,424   (6,961 )
 
Gathering Volume - (MMcf)
Three Months Ended
December 31,
Increase
2015 2014 (Decrease)
Gathered Volume - Affiliated 33,800   44,872   (11,072 )
 
 
Utility Throughput - (MMcf)
Three Months Ended
December 31,
Increase
2015 2014 (Decrease)
Retail Sales:
Residential Sales 13,133 16,467 (3,334 )
Commercial Sales 1,827 2,284 (457 )
Industrial Sales 66   89   (23 )
15,026 18,840 (3,814 )
Off-System Sales 1,669 (1,669 )
Transportation 17,615   20,949   (3,334 )
32,641   41,458   (8,817 )
 
Energy Marketing Volume
Three Months Ended
December 31,
Increase
2015 2014 (Decrease)
Natural Gas (MMcf) 10,098   12,589   (2,491 )
 

NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES

NON-GAAP FINANCIAL MEASURES

In addition to financial measures calculated in accordance with generally accepted accounting principles (GAAP), this press release contains information regarding Operating Results and Adjusted EBITDA, which are non-GAAP financial measures. The Company believes that these non-GAAP financial measures are useful to investors because they provide an alternative method for assessing the Company's ongoing operating results, for measuring the Company’s cash flow and liquidity, and for comparing the Company’s financial performance to other companies. The Company's management uses these non-GAAP financial measures for the same purpose, and for planning and forecasting purposes. The presentation of non-GAAP financial measures is not meant to be a substitute for financial measures in accordance with GAAP.

Management defines Operating Results as reported GAAP earnings before items impacting comparability. The table at page 1 of this report reconciles National Fuel's reported GAAP earnings to Operating Results for the three months ended December 31, 2015 and 2014.

Management defines Adjusted EBITDA as reported GAAP earnings before the following items: interest expense, depreciation, depletion and amortization, interest and other income, impairments, items impacting comparability and income taxes.

The following tables reconcile National Fuel's reported GAAP earnings to Adjusted EBITDA for the three months ended December 31, 2015 and 2014:

   
Three Months Ended
December 31,
2015 2014
(in thousands)
Reported GAAP Earnings $ (189,109 ) $ 84,740
Depreciation, Depletion and Amortization 70,551 102,747
Interest and Other Income (4,217 ) (2,441 )
Interest Expense 31,752 23,101
Income Taxes (144,350 ) 55,160
Impairment of Oil and Gas Producing

Properties

435,451
Joint Development Agreement Professional Fees 4,682    
Adjusted EBITDA $ 204,760   $ 263,307  
 
Adjusted EBITDA by Segment
Pipeline and Storage Adjusted EBITDA $ 50,741 $ 48,893
Gathering Adjusted EBITDA 16,458   22,763  
Total Midstream Businesses Adjusted EBITDA 67,199 71,656
Exploration and Production Adjusted EBITDA 91,140 135,431
Utility Adjusted EBITDA 45,918 53,431
Energy Marketing Adjusted EBITDA 1,846 4,641
Corporate and All Other Adjusted EBITDA (1,343 ) (1,852 )
Total Adjusted EBITDA $ 204,760   $ 263,307  
 
   
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 
 

Quarter Ended December 31 (unaudited)

2015 2014
 
Operating Revenues $ 375,195,000   $ 523,909,000
 
Net Income (Loss) Available for Common Stock $ (189,109,000 ) $ 84,740,000
 
Earnings (Loss) Per Common Share:
Basic $ (2.23 ) $ 1.01
Diluted $ (2.23 ) $ 1.00
 
Weighted Average Common Shares:
Used in Basic Calculation 84,651,233   84,208,645
Used in Diluted Calculation 84,651,233   85,118,516
 

Twelve Months Ended December 31 (unaudited)

 
Operating Revenues $ 1,612,199,000   $ 2,086,918,000
 
Net Income (Loss) Available for Common Stock $ (653,276,000 ) $ 301,901,000
 
Earnings (Loss) Per Common Share:
Basic $ (7.73 ) $ 3.59
Diluted $ (7.73 ) $ 3.55
 
Weighted Average Common Shares:
Used in Basic Calculation 84,499,299   84,056,263
Used in Diluted Calculation 84,499,299   85,013,301
 

Source: National Fuel Gas Company

National Fuel Gas Company

Analysts:

Brian M. Welsch, 716-857-7875

or

Media:

Karen L. Merkel, 716-857-7654

Transfer Agent and Plan Administrator

EQ Shareowner Services (1)

  • U.S. Mail
    EQ Shareowner Services
    P.O. Box 64874
    St. Paul, MN 55164-0874
  • Overnight Delivery
    EQ Shareowner Services
    1110 Centre Pointe Curve, Suite 101
    Mendota Heights, MN 55120-4100


Toll-Free Telephone:  1-800-648-8166
Calling from outside the U.S. and Canada:  1-651-450-4064
Automated: 24 hours, 7 days a week
Attended:  8:00 am to 8:00 pm ET, Monday-Friday
Website:  www.shareowneronline.com
For additional Investor information, please click here.

(1) Effective February 1, 2018, the Wells Fargo Shareowner Service division of Wells Fargo Bank, N.A., has been sold to Equinity Group, plc.

Disclosure: Caution Concerning Forward-Looking Statements

National Fuel Gas Company is including the following cautionary statement in this corporate website 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 and matters discussed elsewhere in this website, 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. 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;
  2. 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;
  3. 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;
  4. Changes in the price of natural gas or oil;
  5. Impairments under the SEC’s full cost ceiling test for natural gas and oil reserves;
  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. The impact of information technology, cybersecurity or data security breaches;
  20. Economic disruptions or uninsured losses resulting from major accidents, fires, severe weather, natural disasters, terrorist activities or acts of war;
  21. Significant differences between the Company’s projected and actual capital expenditures and operating expenses; or
  22. 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.