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 Second Quarter Earnings

04/28/2016

WILLIAMSVILLE, N.Y.--(BUSINESS WIRE)-- National Fuel Gas Company (“National Fuel” or the “Company”) (NYSE:NFG) today announced consolidated results for the second quarter of its 2016 fiscal year and for the six months ended March 31, 2016.

FISCAL 2016 SECOND QUARTER EARNINGS SUMMARY

  • Consolidated net loss of $147.7 million, or $1.74 per share
  • Operating results, excluding items impacting comparability, of $82.8 million, or $0.97 per share
  • Impairment of oil and gas properties, after-tax, of $230.5 million, or $2.72 per share
  • Consolidated adjusted EBITDA $224.4 million (see non-GAAP reconciliation on page 24)
  • Production of 39.2 Bcfe, a 9.7% increase from prior year and 3.0% increase from the first quarter
  • Price-related production curtailments of 9.1 Bcf in Appalachia, a 5.5 Bcf decrease from the first quarter
  • Average natural gas and crude oil prices after hedging of $2.99 per Mcf and $53.01 per Bbl, respectively
  • Weather 12% warmer than normal and more than 26% warmer than the prior year contributes to $6.9 million, or $0.08 per share, reduction in Utility segment earnings
 

OPERATING RESULTS

 
  Three Months Ended   Six Months Ended
March 31, March 31,
(in thousands except per share amounts) 2016   2015 2016   2015
Reported GAAP earnings (loss) $ (147,687 ) $ 16,669 $ (336,796 ) $ 101,409
Items impacting comparability:
Impairment of oil and gas properties (E&P) 230,517 69,474 483,080 69,474
Joint development agreement professional fees (E&P)     3,043    
Operating Results $ 82,830   $ 86,143   $ 149,327   $ 170,883
 
Reported GAAP earnings (loss) per share $ (1.74 ) $ 0.20 $ (3.97 ) $ 1.19
Items impacting comparability:
Impairment of oil and gas properties (E&P) 2.72 0.82 5.70 0.82
Joint development agreement professional fees (E&P) 0.04
Earnings per share impact of dilutive shares (All segments) (0.01 )   (0.02 )  
Operating Results per share $ 0.97   $ 1.02   $ 1.75   $ 2.01
 

MANAGEMENT COMMENTS

Ronald J. Tanski, President and Chief Executive Officer of National Fuel Gas Company, stated: "Weather was more than 26 percent warmer than last year’s second quarter across our service territory, and commodity prices were approximately 18 percent lower than last year. Each of these factors had their expected result, lowering the Company’s earnings for the quarter. Additionally, as low commodity prices continue to weigh on all energy companies, we were required to make another adjustment to the balance sheet value of our oil and natural gas reserves.

"Each of our business segments, however, delivered excellent operational results. We have reduced Seneca’s drilling activities by moving to a one-rig drilling program. That will help us to live within cash flow, and more closely align our natural gas production levels with the capacity of our Northern Access project, which has a targeted in-service date of November 2017.

"While near-term commodity market prices remain low, we are well hedged at acceptable prices for the remainder of this year and next fiscal year. We have also seen a firming of prices for our 2018 to 2020 fiscal years, reflecting the expectation that supply and demand will come into balance. We have taken advantage of these pricing signals and have begun to layer in hedges for those future years that lock in acceptable economics for our drilling program.

"Our plans remain on track to add value for our shareholders and grow the Company through the continued development of strategic pipeline infrastructure projects and the ongoing prudent development and production of natural gas from our large acreage holdings.”

DISCUSSION OF SECOND QUARTER RESULTS BY SEGMENT

The following discussion of the earnings of each segment is summarized in a tabular form on pages 8 through 11 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"). Seneca explores for, develops and produces natural gas and oil reserves, primarily in Pennsylvania and California.

     
(in thousands except per share amounts)

Quarter Ended
March 31, 2016

Quarter Ended
March 31, 2015

Variance
Net Income / (Loss) $ (213,335 ) $ (53,562 ) $ (159,773 )
Net Income / (Loss) Per Share $ (2.52 ) $ (0.63 ) $ (1.89 )
Adjusted EBITDA $ 79,608 $ 95,615 $ (16,007 )
 

The quarter over quarter variance is mainly due to a non-cash, after-tax charge of $230.5 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. An impairment is also possible in the first quarter of fiscal 2017.

Excluding this item, Operating Results in the Exploration and Production segment in the current year’s second quarter were $17.2 million, or $0.20 per share, compared to $15.9 million, or $0.19 per share, in the prior year’s second quarter, an increase of $1.3 million or $0.01 per share. The increase in Operating Results is mainly due to higher natural gas production and lower per unit lease operating expense ("LOE") and depreciation, depletion and amortization ("DD&A") expense, offset partially by lower realized natural gas and crude oil prices after hedging.

Seneca's total net second quarter fiscal 2016 production was 39.2 billion cubic feet equivalent ("Bcfe"), an increase of 3.5 Bcfe, or 9.7 percent, from the prior fiscal year's second quarter, and an increase of 1.2 Bcfe, or 3.0 percent, versus the first quarter of fiscal 2016. Net natural gas production for the quarter was 34.9 Bcf, an increase of 3.5 Bcf, or 11.1 percent, versus prior year due mainly to new incremental firm transportation capacity that became available to Seneca during the first quarter of fiscal 2016. The new transportation capacity allows Seneca to deliver and sell a portion of its Marcellus Shale production under long-term firm sales contracts at the premium-priced Dawn market index in Ontario, Canada. Seneca voluntarily curtailed approximately 9.1 Bcf of net natural gas production during the quarter, down 5.5 Bcf from the estimated 14.6 Bcf of net production curtailed during the first quarter. Crude oil production for the quarter was approximately 723 thousand barrels ("Mbbl"), relatively flat when compared to the prior year.

Seneca's average realized natural gas price, after the impact of hedging, for the second quarter was $2.99 per thousand cubic feet ("Mcf"), reflecting $1.12 per Mcf of uplift from financial hedges settled during the quarter. Seneca's average realized oil price, after the impact of hedging, for the second quarter was $53.01 per barrel ("Bbl"), reflecting a $25.95 per Bbl uplift from financial hedges settled during the quarter. Seneca's remaining fiscal 2016 natural gas production is now 80 percent hedged at the midpoint of production guidance, with nearly 67 million Million British thermal units ("MMBtu") (64.3 Bcf) of production hedged at an average price of $3.41 per MMBtu. In California, Seneca's remaining fiscal 2016 oil production is now 55 percent hedged at an average hedge price of $81.10 per Bbl. For fiscal 2017, Seneca has over 115 million MMBtu (110.8 Bcf) of natural gas production hedged at an average hedge price of $3.34 per MMBtu and nearly 700,000 Bbls of oil production hedged at $75.14 per Bbl.

LOE decreased by $3.8 million versus the prior year second quarter. On a per unit basis, LOE for the second quarter decreased by $0.20 per Mcf equivalent ("Mcfe") to $0.96 per Mcfe. The decrease is largely due to a reduction in steam fuel costs in Seneca's California division and lower salt water disposal and maintenance costs in Seneca's Appalachian division, offset slightly by higher average gathering and compression rates on Appalachian production.

DD&A expense decreased $20.2 million versus the prior year second quarter due to lower per unit DD&A, offset partially by the impact of higher production. On a per unit basis, DD&A decreased $0.66 per Mcfe to $0.95 per Mcfe due primarily to the ceiling test impairment charges recorded during the prior four quarters and higher natural gas reserve balances at September 30, 2015.

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
March 31, 2016

Quarter Ended
March 31, 2015

Variance
Net Income / (Loss) $ 21,194 $ 23,377 $ (2,183 )
Net Income / (Loss) Per Share (Diluted) $ 0.25 $ 0.27 $ (0.02 )
Adjusted EBITDA $ 53,672 $ 54,415 $ (743 )
 

The decrease in the Pipeline and Storage segment's earnings is due to higher Operation and Maintenance ("O&M"), DD&A and interest expenses, offset partially by higher transportation revenues from the three expansion projects that were placed in service during the first quarter of fiscal 2016. O&M increased $1.4 million versus prior year's second quarter due primarily to higher post-retirement benefit costs. DD&A for the quarter increased $1.1 million due to a higher gross plant in service, which was largely the result of the Company's recent expansion projects. The $1.7 million increase in interest expense is a result of the new long-term debt issuance that occurred during the quarter ended June 30, 2015.

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
March 31, 2016

Quarter Ended
March 31, 2015

Variance
Net Income / (Loss) $ 7,568 $ 6,405 $ 1,163
Net Income / (Loss) Per Share (Diluted) $ 0.09 $ 0.08 $ 0.01
Adjusted EBITDA $ 18,831 $ 15,165 $ 3,666
 

The increase in the Gathering segment's earnings is due primarily to higher gathering revenues, offset partially by higher O&M expense and interest costs. Gathering revenues increased $4.2 million, or 24 percent, versus prior year's second quarter mainly due to higher throughput on the Clermont Gathering System, a result of Seneca's increased production volumes in Appalachia during the quarter. The $1.8 million increase in interest expense is a result of the new long-term debt issuance that occurred during the quarter ended June 30, 2015.

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
March 31, 2016

Quarter Ended
March 31, 2015

Variance
Net Income / (Loss) $ 31,960 $ 38,238 $ (6,278 )
Net Income / (Loss) Per Share (Diluted) $ 0.38 $ 0.45 $ (0.07 )
Adjusted EBITDA $ 69,467 $ 80,233 $ (10,766 )
 

The decrease in the Utility segment's earnings is largely attributable to the impacts of warmer weather and a positive regulatory adjustment recorded in the second quarter of fiscal 2015, partially offset by lower O&M expense and other taxes. Weather in Distribution's New York and Pennsylvania service territories was more than 26 percent warmer than last year, resulting in lower retail residential and transportation customer throughput and revenues, which decreased the Utility segment's earnings by approximately $0.08 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. In the second quarter of fiscal 2015, the Utility segment recorded a positive $3.2 million after-tax regulatory adjustment to recognize the under collection from customers of a New York State regulatory assessment. A similar regulatory adjustment was not required for the second quarter of fiscal 2016, lowering earnings by $0.04 per share versus the prior year. The $5.4 million decrease in O&M expense is mainly due to lower personnel and pension costs and uncollectible customer accounts.

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.

     
(in thousands except per share amounts)

Quarter Ended
March 31, 2016

Quarter Ended
March 31, 2015

Variance
Net Income / (Loss) $ 3,484 $ 3,373 $ 111
Net Income / (Loss) Per Share (Diluted) $ 0.04 $ 0.04 $
Adjusted EBITDA $ 5,653 $ 5,444 $ 209
 

The Energy Marketing segment's second quarter earnings were relatively flat when compared to the prior year's second quarter, as the decrease in revenues from warmer weather was largely offset by declines in purchased gas costs.

Corporate and All Other

The Corporate and All Other category earnings of $1.4 million in the quarter ended March 31, 2016, compares to a net loss of $1.2 million in the prior year’s second quarter. The increase is due to lower income tax expense.

EARNINGS GUIDANCE

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

   

Consolidated Earnings Guidance

Updated FY 2016 Guidance

Previous FY 2016 Guidance

Consolidated Earnings per Share*

$2.80 to $2.95

$2.75 to $3.00

* Exclusive of ceiling test impairment charges

 
Capital Expenditures (Millions)
Exploration & Production $150 - $200 $150 - $200
Pipeline & Storage $130 - $160 $125 - $175
Gathering $75 - $85 $85 - $95
Utility $90 - $100 $95 - $105
Consolidated Capital Expenditures $445 - $545 $455 - $575
 
 
Exploration & Production Segment Operational Guidance
 
  Updated FY 2016 Guidance   Previous FY 2016 Guidance
NYMEX Natural Gas Price Assumption $2.15 $2.25
NYMEX Crude Oil Price Assumption $40.00 $40.00
Production (Bcfe) 158 to 175 150 to 180
Operating Costs ($/Mcfe)
LOE $0.95 - $1.05 $1.00 - $1.10
G&A ** $0.35 - $0.40 $0.40 - $0.45
DD&A $0.85 - $0.95 $0.90 - $1.00
** G&A per unit guidance excludes $4.7 million of joint development agreement professional fees
 

While the Company currently expects to incur additional ceiling test impairment charges in the remaining quarters of fiscal 2016, and possibly the first quarter of fiscal 2017, 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, April 29, 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 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) 877-706-7579, using conference ID number “84814628.” For those unable to listen to the live conference call, an audio replay will be available at approximately 3 p.m. Eastern Time at the same website link and by phone at (toll-free) 855-859-2056 or 404-537-3406, using conference ID number “84814628.” Both the webcast and telephonic replay will be available until the close of business on Friday, May 6, 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 MARCH 31, 2016
(Unaudited)
 
  Upstream  

Midstream
Businesses

 

Downstream
Businesses

   
   

Exploration &

Pipeline & Energy

Corporate/

(Thousands of Dollars) Production   Storage   Gathering   Utility   Marketing   All Other   Consolidated*
 
Second quarter 2015 GAAP earnings $ (53,562 ) $ 23,377 $ 6,405 $ 38,238 $ 3,373 $ (1,162 ) $ 16,669
Items impacting comparability:
Impairment of oil and gas producing properties 69,474                         69,474  
Second quarter 2015 operating results 15,912 23,377 6,405 38,238 3,373 (1,162 ) 86,143
 
Drivers of operating results
Higher (lower) crude oil prices (6,636 ) (6,636 )
Higher (lower) natural gas prices (14,873 ) (14,873 )
Higher (lower) natural gas production 8,275 8,275
Higher (lower) crude oil production (155 ) (155 )
Derivative mark to market adjustments (934 ) (934 )

Lower (higher) lease operating and transportation
expenses

2,503 2,503
Lower (higher) depreciation / depletion 13,105 (706 ) 12,399
 
Higher (lower) transportation revenues 740 740
Higher (lower) gathering and processing revenues 2,733 2,733
Lower (higher) operating expenses (921 ) 2,581 1,660
Lower (higher) property, franchise and other taxes 1,512 1,512
 
Regulatory true-up adjustments (3,214 ) (3,214 )
Warmer weather (6,919 ) (6,919 )
 
Higher (lower) margins 125 125
 
Lower (higher) interest expense (1,621 ) (1,080 ) (1,161 ) (3,862 )
 
Lower (higher) income tax expense / effective tax rate 692 1,121 1,813
 
All other / rounding 94     (216 )   (409 )   582     (14 )   1,483     1,520  
Second quarter 2016 operating results 17,182 21,194 7,568 31,960 3,484 1,442 82,830
Items impacting comparability:
Impairment of oil and gas producing properties (230,517 )                       (230,517 )
Second quarter 2016 GAAP earnings $ (213,335 )   $ 21,194     $ 7,568     $ 31,960     $ 3,484     $ 1,442     $ (147,687 )
 
* Amounts do not reflect intercompany eliminations
 
 
NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS PER SHARE
QUARTER ENDED MARCH 31, 2016
(Unaudited)
 
  Upstream  

Midstream
Businesses

 

Downstream
Businesses

   
   
Exploration & Pipeline & Energy

Corporate/

Production   Storage   Gathering   Utility   Marketing   All Other   Consolidated*
 
Second quarter 2015 GAAP earnings $ (0.63 ) $ 0.27 $ 0.08 $ 0.45 $ 0.04 $ (0.01 ) $ 0.20
Items impacting comparability:
Impairment of oil and gas producing properties 0.82                         0.82  
Second quarter 2015 operating results 0.19 0.27 0.08 0.45 0.04 (0.01 ) 1.02
 
Drivers of operating results
Higher (lower) crude oil prices (0.08 ) (0.08 )
Higher (lower) natural gas prices (0.17 ) (0.17 )
Higher (lower) natural gas production 0.10 0.10
Higher (lower) crude oil production
Derivative mark to market adjustments (0.01 ) (0.01 )

Lower (higher) lease operating and transportation
expenses

0.03 0.03
Lower (higher) depreciation / depletion 0.15 (0.01 ) 0.14
 
Higher (lower) transportation revenues 0.01 0.01
Higher (lower) gathering and processing revenues 0.03 0.03
Lower (higher) operating expenses (0.01 ) 0.03 0.02
Lower (higher) property, franchise and other taxes 0.02 0.02
 
Regulatory true-up adjustments (0.04 ) (0.04 )
Warmer weather (0.08 ) (0.08 )
 
Higher (lower) margins
 
Lower (higher) interest expense (0.02 ) (0.01 ) (0.01 ) (0.04 )
 
Lower (higher) income tax expense / effective tax rate 0.01 0.01 0.02
 
All other / rounding (0.01 )       (0.01 )   0.01         0.01      
Second quarter 2016 operating results 0.20 0.25 0.09 0.38 0.04 0.01 0.97
Items impacting comparability:
Impairment of oil and gas producing properties (2.72 ) (2.72 )
Earnings per share impact of diluted shares                     0.01     0.01  
Second quarter 2016 GAAP earnings $ (2.52 )   $ 0.25     $ 0.09     $ 0.38     $ 0.04     $ 0.02     $ (1.74 )
 
* Amounts do not reflect intercompany eliminations
 
 
NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS
SIX MONTHS ENDED MARCH 31, 2016
(Unaudited)
 
Upstream  

Midstream
Businesses

 

Downstream
Businesses

   
   
Exploration & Pipeline & Energy

Corporate/

(Thousands of Dollars) Production   Storage   Gathering   Utility   Marketing   All Other   Consolidated*
 
Six months ended March 31, 2015 GAAP earnings $ (26,842 ) $ 44,155 $ 18,028 $ 60,831 $ 6,199 $ (962 ) $ 101,409
Items impacting comparability:
Impairment of oil and gas producing properties 69,474                         69,474  
Six months ended March 31, 2015 operating results 42,632 44,155 18,028 60,831 6,199 (962 ) 170,883
 
Drivers of operating results
Higher (lower) crude oil prices (15,613 ) (15,613 )
Higher (lower) natural gas prices (15,199 ) (15,199 )
Higher (lower) natural gas production (14,463 ) (14,463 )
Higher (lower) crude oil production (1,210 ) (1,210 )
Derivative mark to market adjustments (1,795 ) (1,795 )

Lower (higher) lease operating and transportation
expenses

7,562 7,562
Lower (higher) depreciation / depletion 36,527 (1,500 ) (1,261 ) 33,766
 
Higher (lower) transportation revenues 2,391 2,391
Higher (lower) gathering and processing revenues (1,044 ) (1,044 )
Lower (higher) operating expenses (733 ) (675 ) 3,601 713 2,906
Lower (higher) property, franchise and other taxes 1,847 (460 ) 1,387
 
Regulatory true-up adjustments (3,671 ) (3,671 )
Warmer weather (12,839 ) (12,839 )
Higher (lower) usage 1,130 1,130
 
Higher (lower) margins (1,546 ) (1,546 )
 
Higher (lower) AFUDC** 1,108 1,108
 
Lower (higher) interest expense (4,399 ) (2,053 ) (2,962 ) (9,414 )
 
Lower (higher) income tax expense / effective tax rate 1,973 2,141 4,114
 
All other / rounding (187 )   (438 )   404     (459 )   54     1,500     874  
Six months ended March 31, 2016 operating results 35,702 42,470 12,490 50,566 4,707 3,392 149,327
Items impacting comparability:
Impairment of oil and gas producing properties (483,080 ) (483,080 )
Joint development agreement professional fees (3,043 )                       (3,043 )
Six months ended March 31, 2016 GAAP earnings $ (450,421 )   $ 42,470     $ 12,490     $ 50,566     $ 4,707     $ 3,392     $ (336,796 )
 
* 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
SIX MONTHS ENDED MARCH 31, 2016
(Unaudited)
 
  Upstream  

Midstream
Businesses

 

Downstream
Businesses

   
   
Exploration & Pipeline & Energy

Corporate/

Production   Storage   Gathering   Utility   Marketing   All Other   Consolidated*
 
Six months ended March 31, 2015 GAAP earnings $ (0.32 ) $ 0.52 $ 0.21 $ 0.71 $ 0.07 $ $ 1.19
Items impacting comparability:
Impairment of oil and gas producing properties 0.82                         0.82  
Six months ended March 31, 2015 operating results 0.50 0.52 0.21 0.71 0.07 2.01
 
Drivers of operating results
Higher (lower) crude oil prices (0.18 ) (0.18 )
Higher (lower) natural gas prices (0.18 ) (0.18 )
Higher (lower) natural gas production (0.17 ) (0.17 )
Higher (lower) crude oil production (0.01 ) (0.01 )
Derivative mark to market adjustments (0.02 ) (0.02 )

Lower (higher) lease operating and transportation
expenses

0.09 0.09
Lower (higher) depreciation / depletion 0.43 (0.02 ) (0.01 ) 0.40
 
Higher (lower) transportation revenues 0.03 0.03
Higher (lower) gathering and processing revenues (0.01 ) (0.01 )
Lower (higher) operating expenses (0.01 ) (0.01 ) 0.04 0.01 0.03
Lower (higher) property, franchise and other taxes 0.02 (0.01 ) 0.01
 
Regulatory true-up adjustments (0.04 ) (0.04 )
Warmer weather (0.15 ) (0.15 )
Higher (lower) usage 0.01 0.01
 
Higher (lower) margins (0.02 ) (0.02 )
 
Higher (lower) AFUDC** 0.01 0.01
 
Lower (higher) interest expense (0.05 ) (0.02 ) (0.03 ) (0.10 )
 
Lower (higher) income tax expense / effective tax rate 0.02 0.03 0.05
 
All other / rounding (0.01 )                       (0.01 )
Six months ended March 31, 2016 operating results 0.42 0.50 0.15 0.59 0.05 0.04 1.75
Items impacting comparability:
Impairment of oil and gas producing properties (5.70 ) (5.70 )
Joint development agreement professional fees (0.04 ) (0.04 )
Earnings per share impact of diluted shares             0.01     0.01         0.02  
Six months ended March 31, 2016 GAAP earnings $ (5.32 )   $ 0.50     $ 0.15     $ 0.60     $ 0.06     $ 0.04     $ (3.97 )
 
* 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 Six Months Ended
March 31, March 31,
(Unaudited) (Unaudited)

SUMMARY OF OPERATIONS

2016   2015 2016   2015
Operating Revenues:
Utility and Energy Marketing Revenues $ 248,173 $ 374,141 $ 417,005 $ 640,380
Exploration and Production and Other Revenues 144,570 166,139 297,454 371,917
Pipeline and Storage and Gathering Revenues 56,389   55,847   109,868   107,739  
449,132 596,127 824,327 1,120,036
Operating Expenses:
Purchased Gas 81,623 190,600 123,691 317,690
Operation and Maintenance:
Utility and Energy Marketing 57,309 62,764 104,858 112,461
Exploration and Production and Other 42,964 50,906 88,539 94,401
Pipeline and Storage and Gathering 21,541 19,575 41,109 38,965
Property, Franchise and Other Taxes 21,305 24,916 41,662 45,845
Depreciation, Depletion and Amortization 63,947 82,687 134,498 185,433
Impairment of Oil and Gas Producing Properties 397,443   120,348   832,894   120,348  
686,132 551,796 1,367,251 915,143
 
Operating Income (Loss) (237,000 ) 44,331 (542,924 ) 204,893
 
Other Income (Expense):
Interest Income 278 46 2,077 1,303
Other Income 3,236 1,388 5,654 2,571
Interest Expense on Long-Term Debt (28,994 ) (22,376 ) (59,366 ) (44,687 )
Other Interest Expense

(1,237

) (1,584 ) (2,617 ) (2,375 )
 
Income (Loss) Before Income Taxes (263,717 ) 21,805 (597,176 ) 161,705
 
Income Tax Expense (Benefit) (116,030 ) 5,136   (260,380 ) 60,296  
 
Net Income (Loss) Available for Common Stock $ (147,687 ) $ 16,669   $ (336,796 ) $ 101,409  
 
Earnings (Loss) Per Common Share:
Basic $ (1.74 ) $ 0.20   $ (3.97 ) $ 1.20  
Diluted $ (1.74 ) $ 0.20   $ (3.97 ) $ 1.19  
 
Weighted Average Common Shares:
Used in Basic Calculation 84,806,982 84,317,508 84,728,680 84,262,471
Used in Diluted Calculation 84,806,982 85,133,142 84,728,680 85,175,961
 
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
March 31,   September 30,
(Thousands of Dollars)   2016   2015
 
ASSETS
Property, Plant and Equipment $ 9,451,538 $ 9,261,323
Less - Accumulated Depreciation, Depletion and Amortization     4,879,363       3,929,428
Net Property, Plant and Equipment     4,572,175       5,331,895
 
Current Assets:
Cash and Temporary Cash Investments 93,700 113,596
Hedging Collateral Deposits 9,963 11,124
Receivables - Net 137,718 105,004
Unbilled Revenue 35,140 20,746
Gas Stored Underground 8,599 34,252
Materials and Supplies - at average cost 33,430 30,414
Unrecovered Purchased Gas Costs 1,245
Other Current Assets     56,714       60,665
Total Current Assets     376,509       375,801
 
Other Assets:
Recoverable Future Taxes 172,417 168,214
Unamortized Debt Expense 1,953 2,218
Other Regulatory Assets 270,941 278,227
Deferred Charges 17,063 15,129
Other Investments 104,273 92,990
Goodwill 5,476 5,476
Prepaid Post-Retirement Benefit Costs 26,344 24,459
Fair Value of Derivative Financial Instruments 253,716 270,363
Other     157       167
Total Other Assets     852,340       857,243
Total Assets   $ 5,801,024     $ 6,564,939
 
CAPITALIZATION AND LIABILITIES
Capitalization:
Comprehensive Shareholders' Equity
Common Stock, $1 Par Value Authorized - 200,000,000
Shares; Issued and Outstanding - 84,892,747 Shares
and 84,594,383 Shares, Respectively $ 84,893 $ 84,594
Paid in Capital 756,001 744,274
Earnings Reinvested in the Business 699,399 1,103,200
Accumulated Other Comprehensive Income     82,186       93,372
Total Comprehensive Shareholders' Equity 1,622,479 2,025,440
Long-Term Debt, Net of Unamortized Discount and Debt Issuance Costs     2,085,123       2,084,009
Total Capitalization     3,707,602       4,109,449
 
Current and Accrued Liabilities:
Notes Payable to Banks and Commercial Paper
Current Portion of Long-Term Debt
Accounts Payable 111,054 180,388
Amounts Payable to Customers 42,217 56,778
Dividends Payable 33,533 33,415
Interest Payable on Long-Term Debt 34,900 36,200
Customer Advances 33 16,236
Customer Security Deposits 16,101 16,490
Other Accruals and Current Liabilities 104,925 96,557
Fair Value of Derivative Financial Instruments     9,864       10,076
Total Current and Accrued Liabilities     352,627       446,140
 
Deferred Credits:
Deferred Income Taxes 844,916 1,137,962
Taxes Refundable to Customers 93,674 89,448
Unamortized Investment Tax Credit 557 731
Cost of Removal Regulatory Liability 189,421 184,907
Other Regulatory Liabilities 101,104 108,617
Pension and Other Post-Retirement Liabilities 216,852 202,807
Asset Retirement Obligations 171,991 156,805
Other Deferred Credits     122,280       128,073
Total Deferred Credits     1,740,795       2,009,350
Commitments and Contingencies          
Total Capitalization and Liabilities   $ 5,801,024     $ 6,564,939
 
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
  Six Months Ended
March 31,
(Thousands of Dollars)   2016   2015
 
Operating Activities:
Net Income (Loss) Available for Common Stock $ (336,796 ) $ 101,409

Adjustments to Reconcile Net Income (Loss) to Net Cash
Provided by Operating Activities:

Impairment of Oil and Gas Producing Properties 832,894 120,348
Depreciation, Depletion and Amortization 134,498 185,433
Deferred Income Taxes (283,912 ) 10,351
Excess Tax Benefits Associated with Stock-Based Compensation Awards (226 ) (9,024 )
Stock-Based Compensation 2,518 5,985
Other 6,106 4,709
Change in:
Hedging Collateral Deposits 1,161 (12,992 )
Receivables and Unbilled Revenue (28,211 ) (88,339 )
Gas Stored Underground and Materials and Supplies 22,637 29,085
Unrecovered Purchased Gas Costs (1,245 )
Other Current Assets 4,177 4,184
Accounts Payable (31,786 ) 62,832
Amounts Payable to Customers (14,561 ) 11,051
Customer Advances (16,203 ) (18,735 )
Customer Security Deposits (389 ) 2,702
Other Accruals and Current Liabilities 22,420 53,491
Other Assets 3,754 1,826
Other Liabilities   (4,073 )   43,186  
Net Cash Provided by Operating Activities   $ 312,763     $ 507,502  
 
Investing Activities:
Capital Expenditures $ (358,981 ) $ (493,341 )
Net Proceeds from Sale of Oil and Gas Producing Properties 104,938
Other   (18,249 )   (1,262 )
Net Cash Used in Investing Activities   $ (272,292 )   $ (494,603 )
 
Financing Activities:
Changes in Notes Payable to Banks and Commercial Paper $ $ 71,900
Excess Tax Benefits Associated with Stock-Based Compensation Awards 226 9,024
Dividends Paid on Common Stock (66,887 ) (64,842 )
Net Proceeds From Issuance of Common Stock   6,294     3,574  
Net Cash (Used in) Provided by Financing Activities   $ (60,367 )   $ 19,656  
 
Net Increase (Decrease) in Cash and Temporary Cash Investments (19,896 ) 32,555
Cash and Temporary Cash Investments at Beginning of Period   113,596     36,886  
Cash and Temporary Cash Investments at March 31   $ 93,700     $ 69,441  
 
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
 
UPSTREAM BUSINESS
 
  Three Months Ended   Six Months Ended
(Thousands of Dollars, except per share amounts) March 31, March 31,

EXPLORATION AND PRODUCTION SEGMENT

2016   2015   Variance 2016 2015 Variance
Total Operating Revenues $ 143,783     $ 165,521     $ (21,738 ) $ 295,749   $ 370,186   $ (74,437 )
   
Operating Expenses:
Operation and Maintenance:
General and Administrative Expense 19,143 18,042 1,101 39,099 33,727 5,372
Lease Operating and Transportation Expense 37,568 41,417 (3,849 ) 76,590 88,224 (11,634 )
All Other Operation and Maintenance Expense 4,247 4,905 (658 ) 7,391 7,748 (357 )
Property, Franchise and Other Taxes 3,217 5,542 (2,325 ) 6,602 9,443 (2,841 )
Depreciation, Depletion and Amortization 37,274 57,436 (20,162 ) 81,307 137,503 (56,196 )
Impairment of Oil and Gas Producing Properties 397,443     120,348     277,095   832,894   120,348   712,546  
498,892     247,690     251,202   1,043,883   396,993   646,890  
 
Operating Loss (355,109 ) (82,169) (272,940 ) (748,134 ) (26,807) (721,327 )
 
Other Income (Expense):
Interest Income 27 663 (636 ) 693 1,173 (480 )
Interest Expense (13,546 )   (11,053 )   (2,493) (28,128 ) (21,360 ) (6,768 )
 
Loss Before Income Taxes (368,628 ) (92,559 ) (276,069 ) (775,569 ) (46,994 ) (728,575 )
Income Tax Benefit (155,293 )   (38,997 )   (116,296 ) (325,148 ) (20,152 ) (304,996 )
Net Loss $ (213,335 )   $ (53,562 )   $ (159,773 ) $ (450,421 ) $ (26,842 ) $ (423,579 )
 
Net Loss Per Share (Diluted) $ (2.52 )   $ (0.63 )   $ (1.89 ) $ (5.32 ) $ (0.32 ) $ (5.00 )
 
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
 
MIDSTREAM BUSINESSES
 
  Three Months Ended   Six Months Ended
(Thousands of Dollars, except per share amounts) March 31, March 31,

PIPELINE AND STORAGE SEGMENT

2016     2015     Variance 2016   2015   Variance
Revenues from External Customers $ 56,276   $ 55,758   $ 518 $ 109,630 $ 107,504 $ 2,126
Intersegment Revenues 23,292     23,054     238   45,477   44,515   962  
Total Operating Revenues 79,568     78,812     756   155,107   152,019   3,088  
 
Operating Expenses:
Purchased Gas 245 289 (44 ) 703 555 148
Operation and Maintenance 19,060 17,642 1,418 36,653 35,526 1,127
Property, Franchise and Other Taxes 6,591 6,466 125 13,336 12,629 707
Depreciation, Depletion and Amortization 10,865     9,778     1,087   21,121   18,813   2,308  
36,761     34,175     2,586   71,813   67,523   4,290  
 
Operating Income 42,807 44,637 (1,830 ) 83,294 84,496 (1,202 )
 
Other Income (Expense):
Interest Income 179 122 57 290 207 83
Other Income 413 332 81 1,994 889 1,105
Interest Expense (8,453 )   (6,793 )   (1,660 ) (16,491 ) (13,333 ) (3,158 )
 
Income Before Income Taxes 34,946 38,298 (3,352 ) 69,087 72,259 (3,172 )
Income Tax Expense 13,752     14,921     (1,169 ) 26,617   28,104   (1,487 )
Net Income $ 21,194     $ 23,377     $ (2,183 ) $ 42,470   $ 44,155   $ (1,685 )
 
Net Income Per Share (Diluted) $ 0.25     $ 0.27     $ (0.02 ) $ 0.50   $ 0.52   $ (0.02 )
 
 
Three Months Ended Six Months Ended
March 31, March 31,

GATHERING SEGMENT

2016     2015     Variance 2016   2015   Variance
Revenues from External Customers $ 113 $ 89 $ 24 $ 238 $ 235 $ 3
Intersegment Revenues 21,545     17,365     4,180   40,184   41,793   (1,609 )
Total Operating Revenues 21,658     17,454     4,204   40,422   42,028   (1,606 )
 
Operating Expenses:
Operation and Maintenance 2,775 2,232 543 5,047 4,008 1,039
Property, Franchise and Other Taxes 52 57 (5 ) 85 92 (7 )
Depreciation, Depletion and Amortization 3,589     3,798     (209 ) 7,799   5,858   1,941  
6,416     6,087     329   12,931   9,958   2,973  
 
Operating Income 15,242 11,367 3,875 27,491 32,070 (4,579 )
 
Other Income (Expense):
Interest Income 68 32 36 101 58 43
Other Income 1 1 2 2
Interest Expense (1,918 )   (132 )   (1,786 ) (4,987 ) (430 ) (4,557 )
 
Income Before Income Taxes 13,393 11,268 2,125 22,607 31,700 (9,093 )
Income Tax Expense 5,825     4,863     962   10,117   13,672   (3,555 )
Net Income $ 7,568     $ 6,405     $ 1,163   $ 12,490   $ 18,028   $ (5,538 )
 
Net Income Per Share (Diluted) $ 0.09     $ 0.08     $ 0.01   $ 0.15   $ 0.21   $ (0.06 )
 
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
 
DOWNSTREAM BUSINESSES
 
  Three Months Ended   Six Months Ended
(Thousands of Dollars, except per share amounts) March 31, March 31,

UTILITY SEGMENT

2016     2015     Variance 2016   2015   Variance
Revenues from External Customers $ 212,737   $ 309,974   $ (97,237 ) $ 356,585 $ 520,047 $ (163,462 )
Intersegment Revenues 5,364     6,521     (1,157 ) 9,028   11,055   (2,027 )
Total Operating Revenues 218,101     316,495     (98,394 ) 365,613   531,102   (165,489 )
 
Operating Expenses:
Purchased Gas 81,181 161,966 (80,785 ) 126,250 263,677 (137,427 )
Operation and Maintenance 56,293 61,732 (5,439 ) 102,893 110,638 (7,745 )
Property, Franchise and Other Taxes 11,160 12,564 (1,404 ) 21,088 23,122 (2,034 )
Depreciation, Depletion and Amortization 11,659     11,333     326   23,277   22,484   793  
160,293     247,595     (87,302 ) 273,508   419,921   (146,413 )
 
Operating Income 57,808 68,900 (11,092 ) 92,105 111,181 (19,076 )
 
Other Income (Expense):
Interest Income 122 7 115 207 25 182
Other Income 706 497 209 1,404 995 409
Interest Expense (7,158 )   (7,204 )   46   (14,491 ) (14,148 ) (343 )
 
Income Before Income Taxes 51,478 62,200 (10,722 ) 79,225 98,053 (18,828 )
Income Tax Expense 19,518     23,962     (4,444 ) 28,659   37,222   (8,563 )
Net Income $ 31,960     $ 38,238     $ (6,278 ) $ 50,566   $ 60,831   $ (10,265 )
 
Net Income Per Share (Diluted) $ 0.38     $ 0.45     $ (0.07 ) $ 0.60   $ 0.71   $ (0.11 )
 
 
Three Months Ended Six Months Ended
March 31, March 31,

ENERGY MARKETING SEGMENT

2016     2015     Variance 2016   2015   Variance
Revenues from External Customers $ 35,436 $ 64,167 $ (28,731 ) $ 60,420 $ 120,333 $ (59,913 )
Intersegment Revenues 312     211     101   624   417   207  
Total Operating Revenues 35,748     64,378     (28,630 ) 61,044   120,750   (59,706 )
 
Operating Expenses:
Purchased Gas 28,321 57,142 (28,821 ) 50,044 107,371 (57,327 )
Operation and Maintenance 1,773 1,790 (17 ) 3,496 3,289 207
Property, Franchise and Other Taxes 1 2 (1 ) 4 5 (1 )
Depreciation, Depletion and Amortization 69     51     18   139   101   38  
30,164     58,985     (28,821 ) 53,683   110,766   (57,083 )
 
Operating Income 5,584 5,393 191 7,361 9,984 (2,623 )
 
Other Income (Expense):
Interest Income 91 44 47 141 82 59
Other Income 15 43 (28 ) 24 67 (43 )
Interest Expense (7 )   (12 )   5   (25 ) (15 ) (10 )
 
Income Before Income Taxes 5,683 5,468 215 7,501 10,118 (2,617 )
Income Tax Expense 2,199     2,095     104   2,794   3,919   (1,125 )
Net Income $ 3,484     $ 3,373     $ 111   $ 4,707   $ 6,199   $ (1,492 )
 
Net Income Per Share (Diluted) $ 0.04     $ 0.04     $   $ 0.06   $ 0.07   $ (0.01 )
 
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
 
  Three Months Ended   Six Months Ended
(Thousands of Dollars, except per share amounts) March 31, March 31,

ALL OTHER

2016     2015     Variance 2016   2015   Variance
Total Operating Revenues $ 561     $ 388     $ 173   $ 1,266   $ 1,271   $ (5 )
Operating Expenses:    
Operation and Maintenance 164 (47 ) 211 239 482 (243 )
Property, Franchise and Other Taxes 161 158 3 304 307 (3 )
Depreciation, Depletion and Amortization 306     124     182   488   340   148  
631     235     396   1,031   1,129   (98 )
 
Operating Income (Loss) (70 ) 153 (223 ) 235 142 93
 
Other Income (Expense):
Interest Income 31 17 14 50 30 20
Other Income     1     (1 )   2   (2 )
 
Income (Loss) Before Income Taxes (39 ) 171 (210 ) 285 174 111
Income Tax Expense (Benefit) (16 )   73     (89 ) 119   81   38  
Net Income (Loss) $ (23 )   $ 98     $ (121 ) $ 166   $ 93   $ 73  
 
Net Income (Loss) Per Share (Diluted) $     $     $   $   $   $  
 
 
Three Months Ended Six Months Ended
March 31, March 31,

CORPORATE

2016     2015     Variance 2016   2015   Variance
Revenues from External Customers $ 226 $ 230 $ (4 ) $ 439 $ 460 $ (21 )
Intersegment Revenues 967     953     14   1,933   1,839   94  
Total Operating Revenues 1,193     1,183     10   2,372   2,299   73  
Operating Expenses:
Operation and Maintenance 4,147 4,839 (692 ) 7,038 7,891 (853 )
Property, Franchise and Other Taxes 123 127 (4 ) 243 247 (4 )
Depreciation, Depletion and Amortization 185     167     18   367   334   33  
4,455     5,133     (678 ) 7,648   8,472   (824 )
 
Operating Loss (3,262 ) (3,950 ) 688 (5,276 ) (6,173 ) 897
 
Other Income (Expense):
Interest Income 30,339 24,188 6,151 62,083 49,488 12,595
Other Income 2,101 514 1,587 2,230 616 1,614
Interest Expense on Long-Term Debt (28,994 ) (22,376 ) (6,618 ) (59,366 ) (44,687 ) (14,679 )
Other Interest Expense (734 )   (1,417 )   683   17   (2,849 ) 2,866  
 
Loss Before Income Taxes (550 ) (3,041 ) 2,491 (312 ) (3,605 ) 3,293
Income Tax Benefit (2,015 )   (1,781 )   (234 ) (3,538 ) (2,550 ) (988 )
Net Income $ 1,465     $ (1,260 )   $ 2,725   $ 3,226   $ (1,055 ) $ 4,281  
 
Net Income Per Share (Diluted) $ 0.02     $ (0.01 )   $ 0.03   $ 0.04   $   $ 0.04  
 
 
Three Months Ended Six Months Ended
March 31, March 31,

INTERSEGMENT ELIMINATIONS

2016     2015     Variance 2016   2015   Variance
Intersegment Revenues $ (51,480 )   $ (48,104 )   $ (3,376 ) $ (97,246 ) $ (99,619 ) $ 2,373  
Operating Expenses:
Purchased Gas (28,124 ) (28,797 ) 673 (53,306 ) (53,913 ) 607
Operation and Maintenance (23,356 )   (19,307 )   (4,049 ) (43,940 ) (45,706 ) 1,766  
(51,480 )   (48,104 )   (3,376 ) (97,246 ) (99,619 ) 2,373  
 
Operating Income
 
Other Income (Expense):
Interest Income (30,579 ) (25,027 ) (5,552 ) (61,488 ) (49,760 ) (11,728 )
Interest Expense 30,579     25,027     5,552   61,488   49,760   11,728  
Net Income $     $     $   $   $   $  
 
Net Income Per Share (Diluted) $     $     $   $   $   $  
 
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 
SEGMENT INFORMATION (Continued)
(Thousands of Dollars)
 
  Three Months Ended   Six Months Ended
March 31, March 31,
(Unaudited) (Unaudited)
    Increase     Increase
2016 2015 (Decrease) 2016 2015 (Decrease)
 

Capital Expenditures:

Exploration and Production $ 79,530 (1) $ 143,364 (3) $ (63,834 ) $ 167,654 (1)(2) $ 301,076 (3)(4) $ (133,422 )
Pipeline and Storage 26,075 (1) 41,643 (3) (15,568 ) 57,695 (1)(2) 57,671 (3)(4) 24
Gathering 12,778 (1) 35,601 (3) (22,823 ) 34,523 (1)(2) 50,549 (3)(4) (16,026 )
Utility 26,091 (1) 20,566 (3) 5,525 46,008 (1)(2) 41,740 (3)(4) 4,268
Energy Marketing 2   17   (15 ) 9   92   (83 )
Total Reportable Segments 144,476 241,191 (96,715 ) 305,889 451,128 (145,239 )
All Other 37 37 37 37
Corporate 106   43   63   155   68   87  
Total Capital Expenditures $ 144,619   $ 241,234   $ (96,615 ) $ 306,081   $ 451,196   $ (145,115 )
 
 
(1)

Capital expenditures for the quarter and six months ended March 31, 2016, include accounts payable and accrued liabilities related to capital expenditures of $34.0 million, $10.2 million, $12.6 million, and $9.3 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 March 31, 2016, since they represent non-cash investing activities at that date.

 
(2)

Capital expenditures for the six months ended March 31, 2016, 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 six months ended March 31, 2016. 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 March 31, 2016.

 
(3)

Capital expenditures for the quarter and six months ended March 31, 2015, include accounts payable and accrued liabilities related to capital expenditures of $63.5 million, $8.2 million, $14.1 million, and $8.7 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 March 31, 2015, since they represent non-cash investing activities at that date.

 
(4)

Capital expenditures for the six months ended March 31, 2015, 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 six months ended March 31, 2015. 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 March 31, 2015.

 
 

DEGREE DAYS

         
 
Percent Colder
(Warmer) Than:

Three Months Ended March 31

Normal 2016 2015 Normal (1) Last Year (1)
 
Buffalo, NY 3,326 2,963 3,984 (10.9) (25.6)
Erie, PA 3,142 2,739 3,815 (12.8) (28.2)
 

Six Months Ended March 31

 
Buffalo, NY 5,579 4,640 6,120 (16.8) (24.2)
Erie, PA 5,186 4,223 5,806 (18.6) (27.3)
 
(1)  

Percents compare actual 2016 degree days to normal degree days and actual 2016 degree days to actual 2015 degree days.

 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 

EXPLORATION AND PRODUCTION INFORMATION

 
  Three Months Ended   Six Months Ended
March 31, March 31,
    Increase     Increase
2016 2015 (Decrease) 2016 2015 (Decrease)
 

Gas Production/Prices:

Production (MMcf)
Appalachia 34,113 30,592 3,521 66,900 73,391 (6,491 )
West Coast 764   795   (31 ) 1,547   1,567   (20 )
Total Production 34,877   31,387   3,490   68,447   74,958   (6,511 )
 
Average Prices (Per Mcf)
Appalachia $ 1.85 $ 2.46 $ (0.61 ) $ 1.91 $ 2.75 $ (0.84 )
West Coast 2.87 3.81 (0.94 ) 3.27 4.70 (1.43 )
Weighted Average 1.87 2.50 (0.63 ) 1.94 2.79 (0.85 )
Weighted Average after Hedging 2.99 3.65 (0.66 ) 3.08 3.42 (0.34 )
 

Oil Production/Prices:

Production (Thousands of Barrels)
Appalachia 5 5 11 15 (4)
West Coast 718 721 (3) 1,460 1,482 (22)
Total Production 723 726 (3) 1,471 1,497 (26)
 
Average Prices (Per Barrel)
Appalachia $ 32.81 $ 46.18 $ (13.37 ) $ 36.74 $ 65.09 $ (28.35 )
West Coast 27.02 43.93 (16.91 ) 31.61 55.71 (24.10 )
Weighted Average 27.06 43.95 (16.89 ) 31.65 55.80 (24.15 )
Weighted Average after Hedging 53.01 67.14 (14.13 ) 56.45 72.78 (16.33 )
 
Total Production (Mmcfe) 39,215 35,743 3,472 77,273 83,940 (6,667)
 

Selected Operating Performance Statistics:

General & Administrative Expense per Mcfe (1) $ 0.49 $ 0.50 $ (0.01 ) $ 0.51 $ 0.40 $ 0.11
Lease Operating and Transportation Expense per Mcfe (1)(2) $ 0.96 $ 1.16 $ (0.20 ) $ 0.99 $ 1.05 $ (0.06 )
Depreciation, Depletion & Amortization per Mcfe (1) $ 0.95 $ 1.61 $ (0.66 ) $ 1.05 $ 1.64 $ (0.59 )
 
 
(1)

Refer to page 15 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 $0.52 per Mcfe for the three months ended March 31, 2016 and March 31, 2015, respectively. Amounts include transportation expense of $0.51 and $0.52 per Mcfe for the six months ended March 31, 2016 and March 31, 2015, respectively.

 
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 

EXPLORATION AND PRODUCTION INFORMATION

 
Hedging Summary for the Remaining Six Months of Fiscal 2016
 
 

Volume

     

Average Hedge Price

Oil Swaps  
Brent 102,000 BBL $ 94.06 / BBL
NYMEX 719,000 BBL $ 79.27 / BBL
Total 821,000 BBL $ 81.10 / BBL
 
Gas Swaps
NYMEX 18,960,000 MMBTU $ 3.92 / MMBTU
Dominion Transmission Appalachian (DOM) 9,420,000 MMBTU $ 3.78 / MMBTU
Michigan Consolidated City Gate (Mich Con) 6,000,000 MMBTU $ 4.10 / MMBTU
Dawn Ontario (DAWN) 8,160,000 MMBTU $ 3.82 / MMBTU
Fixed Price Physical Sales 24,221,925 MMBTU $ 2.55 / MMBTU
Total 66,761,925 MMBTU $ 3.41 / MMBTU
 
Hedging Summary for Fiscal 2017

Volume

Average Hedge Price

Oil Swaps
Brent 123,000 BBL $ 92.27 / BBL
NYMEX 573,000 BBL $ 71.47 / BBL
Total 696,000 BBL $ 75.14 / 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 50,660,170 MMBTU $ 2.52 / MMBTU
Total 115,010,170 MMBTU $ 3.34 / MMBTU
 
Hedging Summary for Fiscal 2018

Volume

Average Hedge Price

Oil Swaps
Brent 24,000 BBL $ 91.00 / BBL
NYMEX 51,000 BBL $ 90.62 / BBL
Total 75,000 BBL $ 90.74 / BBL
 
Gas Swaps
NYMEX 26,070,000 MMBTU $ 3.49 / MMBTU
DAWN 8,400,000 MMBTU $ 3.08 / MMBTU
Fixed Price Physical Sales 13,366,255 MMBTU $ 2.69 / MMBTU
Total 47,836,255 MMBTU $ 3.19 / MMBTU
 
Hedging Summary for Fiscal 2019

Volume

Average Hedge Price

Gas Swaps
NYMEX 25,560,000 MMBTU $ 3.18 / MMBTU
DAWN 7,200,000 MMBTU $ 3.00 / MMBTU
Fixed Price Physical Sales 6,931,100 MMBTU $ 3.19 / MMBTU
Total 39,691,100 MMBTU $ 3.15 / MMBTU
 
Hedging Summary for Fiscal 2020

Volume

Average Hedge Price

Gas Swaps
NYMEX 16,880,000 MMBTU $ 3.07 / MMBTU
DAWN 7,200,000 MMBTU $ 3.00 / MMBTU
Fixed Price Physical Sales 3,378,180 MMBTU $ 3.25 / MMBTU
Total 27,458,180 MMBTU $ 3.07 / MMBTU
 
Hedging Summary for Fiscal 2021

Volume

Average Hedge Price

Gas Swaps
NYMEX 4,840,000 MMBTU $ 3.01 / MMBTU
DAWN 600,000 MMBTU $ 3.00 / MMBTU
Total 5,440,000 MMBTU $ 3.01 / MMBTU
 
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 

EXPLORATION AND PRODUCTION INFORMATION

       

Gross Wells in Process of Drilling

Six Months Ended March 31, 2016

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 1.000 0.000 1.000
Developmental 37.000 25.000 62.000
Wells Completed
Exploratory 0.000 0.000 0.000
Developmental 26.000 25.000 51.000
Wells Plugged & Abandoned
Exploratory 0.000 0.000 0.000
Developmental 0.000 0.000 0.000
Wells in Process - End of Period
Exploratory 5.000 0.000 5.000
Developmental 107.000 0.000 107.000
 
(1)  

Gross exploratory wells were increased by 4 and developmental wells were decreased by 4.

 

Net Wells in Process of Drilling

       

Six Months Ended March 31, 2016

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 1.000 0.000 1.000
Developmental 37.000 25.000 62.000
Wells Completed
Exploratory 0.000 0.000 0.000
Developmental 19.600 25.000 44.600
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 10.400 0.000 10.400
Wells in Process - End of Period
Exploratory 5.000 0.000 5.000
Developmental 88.500 (2) 0.000 88.500
 
 
(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 13 of the existing developmental wells in process to IOG during the six months ended March 31, 2016.

 
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 
Pipeline & Storage Throughput - (millions of cubic feet - MMcf)
                   
Three Months Ended Six Months Ended
March 31, March 31,
Increase Increase
2016   2015   (Decrease) 2016   2015   (Decrease)  
Firm Transportation - Affiliated 42,624 50,777 (8,153 ) 67,333 79,863 (12,530 )
Firm Transportation - Non-Affiliated 166,326 179,534 (13,208 ) 317,448 336,770 (19,322 )
Interruptible Transportation 6,483   3,627   2,856   12,115   5,729   6,386  
215,433   233,938