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 Third Quarter Earnings

08/04/2016

WILLIAMSVILLE, N.Y.--(BUSINESS WIRE)-- National Fuel Gas Company (“National Fuel” or the “Company”) (NYSE:NFG) today announced consolidated results for the third quarter of its 2016 fiscal year and for the nine months ended June 30, 2016.

FISCAL 2016 THIRD QUARTER EARNINGS SUMMARY

  • Consolidated net income of $8.3 million or $0.10 per share
  • Operating results, excluding items impacting comparability, of $58.1 million or $0.68 per share
  • Impairment of oil and gas properties of $82.7 million ($47.9 million after tax)
  • Consolidated adjusted EBITDA of $189.8 million, an increase of $10.4 million versus prior year (see non-GAAP reconciliation on page 25)
  • Production of 44.0 Bcfe, a 22% increase from prior year and 12% increase from the second quarter
  • Net Appalachian natural gas spot sales of approximately 6.4 Bcf
  • Average natural gas and crude oil prices after hedging of $2.86 per Mcf and $58.79 per Bbl, respectively
  • Midstream businesses EBITDA of $70.9 million, an increase of $12.0 million or 20% versus prior year
  • Raising and tightening fiscal 2016 earnings guidance
  • Initiating fiscal 2017 earnings guidance with a range of $2.85 to $3.15 per share

     
 

OPERATING RESULTS













 




Three Months Ended
Nine Months Ended




June 30,
June 30,
(in thousands except per share amounts)


2016   2015
2016   2015
Reported GAAP earnings (loss)


$ 8,286

$ (293,134 )
$ (328,510 )
$ (191,724 )
Items impacting comparability:









Impairment of oil and gas properties (E&P)


82,658

588,712

915,552

709,060
Tax impact of impairment of oil and gas properties


(34,716 )
(248,863 )
(384,531 )
(299,738 )
Joint development agreement professional fees (E&P)


3,173



7,855


Tax impact of joint development agreement professional fees


(1,333 )
 
(3,299 )
 
Operating Results


$ 58,068  
$ 46,715  
$ 207,067  
$ 217,598  










 
Reported GAAP earnings (loss) per share


$ 0.10

$ (3.44 )
$ (3.87 )
$ (2.25 )
Items impacting comparability:









Impairment of oil and gas properties (E&P)


0.97

6.91

10.80

8.32
Tax impact of impairment of oil and gas properties


(0.41 )
(2.92 )
(4.54 )
(3.52 )
Joint development agreement professional fees (E&P)


0.04



0.09


Tax impact of joint development agreement professional fees


(0.02 )


(0.04 )

Earnings per share impact of dilutive shares (All segments)


 
 
(0.01 )
 
Operating Results per diluted share


$ 0.68  
$ 0.55  
$ 2.43  
$ 2.55  


















 

MANAGEMENT COMMENTS

Ronald J. Tanski, President and Chief Executive Officer of National Fuel Gas Company, stated: "Each of our business segments contributed to a very good quarter of operations for the Company. In our upstream segment, Seneca's Marcellus production grew by an impressive 25 percent due to increased takeaway capacity on National Fuel pipelines and improved pricing in Appalachia. This higher production also contributed to the increased throughput we achieved in our Gathering and Pipeline and Storage segments. While commodity pricing in the Appalachian basin has improved, the methodology imposed under the full-cost accounting rules required us to once again incur a non-cash impairment charge. We expect that the pricing curve will level out and soon bring an end to these impairment charges.

"The steps we have taken in fiscal 2016 have positioned National Fuel well financially and operationally. In fiscal 2017, we plan to execute our integrated strategy to grow our upstream and midstream businesses in Appalachia. We are pleased that IOG elected to continue participating with us in drilling additional Marcellus wells over the next year, allowing us to dedicate capital to our midstream pipeline businesses while maintaining activity levels upstream. We recently received a positive Environmental Assessment from the Federal Energy Regulatory Commission for our Northern Access Project and remain on schedule to obtain the additional regulatory approvals to build the project to meet the anticipated November 2017 in-service date. While we continue to be encouraged by firming natural gas prices, we will maintain the current pace of our drilling program over the next year in order to grow production into the Northern Access capacity as efficiently as possible. This strategy should result in steady, but significant, growth across our upstream and midstream businesses.”

DISCUSSION OF THIRD QUARTER RESULTS BY SEGMENT

The following discussion of the earnings of each segment is summarized in a tabular form on pages 9 through 12 of this report. It may be helpful to refer to those tables while reviewing this discussion.

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

June 30, 2016


Quarter Ended

June 30, 2015


Variance
Net Income / (Loss)


$ (19,165 )
$ (323,113 )
$ 303,948
Net Income / (Loss) Per Share (Diluted)


$ (0.22 )
$ (3.79 )
$ 3.57
Adjusted EBITDA


$ 97,924

$ 93,662

$ 4,262













 

The quarter over quarter variance in the Exploration and Production segment's net loss is mainly due to lower impairment charges that were recorded to write down the value of Seneca’s oil and natural gas reserves under the full cost method of accounting. The non-cash, pre-tax impairment charge recorded in the current year's third quarter was $82.7 million ($47.9 million after-tax) versus $588.7 million ($339.8 million after-tax) in the prior year. The full cost method of accounting 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, Seneca expects to incur an additional impairment charge in the fourth quarter of the fiscal year ending September 30, 2016.

Seneca also incurred $3.2 million ($1.8 million after tax) of professional and legal expenses during the third quarter relating to the extension of the joint development agreement that Seneca entered into in June 2016. 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 third quarter were $30.6 million, or $0.36 per share, compared to $16.7 million, or $0.20 per share, in the prior year’s third quarter, an increase of $13.9 million or $0.16 per share. The increase in Operating Results is mainly due to higher natural gas production and lower operating expenses, offset partially by lower realized natural gas and crude oil prices after hedging, lower oil production and higher interest expense.

Seneca's net third quarter fiscal 2016 production was 44.0 billion cubic feet equivalent ("Bcfe"), an increase of 7.8 Bcfe, or 22 percent, from the prior fiscal year's third quarter, and an increase of 4.8 Bcfe, or 12 percent, versus the second quarter of fiscal 2016. Net natural gas production for the quarter was 39.6 Bcf, an increase of 8.0 Bcf, or 25 percent, versus prior year due mainly to new incremental firm transportation capacity that became available to Seneca during the first quarter of fiscal 2016. In addition, improved local spot pricing in Pennsylvania allowed Seneca to sell approximately 6.4 Bcf of net production in local spot markets during the quarter, the first meaningful spot production volumes Seneca has sold since the first quarter of fiscal 2015. Seneca's voluntary production curtailments decreased 7.1 Bcf from the estimated 11.8 Bcf of net production curtailed in the third quarter of fiscal 2015 and 4.4 Bcf from the estimated 9.1 Bcf curtailed during the second quarter of fiscal 2016.

Seneca produced 728 thousand barrels ("Mbbl") of crude oil during the third quarter, a decrease of 31 Mbbl, or 4.1 percent, when compared to the prior year due primarily to a temporary disruption in steam flood operations in North Midway Sunset and lower overall well workover activity in response to the decline in oil market prices.

Seneca's average realized natural gas price, after the impact of hedging, for the third quarter was $2.86 per thousand cubic feet ("Mcf"), a decrease of $0.46 per Mcf versus the prior year third quarter. Seneca's average realized oil price, after the impact of hedging, for the third quarter was $58.79 per barrel ("Bbl"), a decrease of $10.86 per Bbl when compared to the prior year third quarter. Seneca's average realized natural gas and oil prices benefited from a $1.11 per Mcf and $19.75 per Bbl uplift, respectively, from financial hedges settled during the quarter.

Lease operating and transportation ("LOE") expense decreased by $0.5 million versus the prior year third quarter due to lower per unit LOE offset partially by the impact of higher production. On a per unit of production basis, LOE for the third quarter decreased by $0.21 per Mcf equivalent ("Mcfe") to $0.88 per Mcfe. The decrease is largely due to a reduction in well maintenance and steam costs in Seneca's California division and lower salt water disposal and maintenance costs in Seneca's Appalachian division.

G&A expense, excluding the $3.2 million of professional fees related to the joint development agreement discussed above, was $13.4 million for the third quarter, a decrease of $3.7 million versus the prior year due primarily to lower personnel costs at Seneca.

Depreciation, depletion and amortization ("DD&A") expense decreased $24.8 million versus the prior year third quarter due to lower per unit DD&A, offset partially by the impact of higher production. On a per unit of production basis, DD&A decreased $0.84 per Mcfe to $0.71 per Mcfe due primarily to a lower depletable fixed asset balance resulting from the ceiling test impairment charges recorded during the prior four quarters and higher natural gas reserve balances at September 30, 2015.

Property, franchise and other taxes decreased $2.3 million versus the prior year third quarter due primarily to reimbursements received from Seneca's joint development partner for its share of Pennsylvania impact fees and the general decline in oil and natural gas market prices, which have lowered the assessed values of Seneca's California oil properties and impact fee payments in Pennsylvania.

The $2.6 million increase in interest expense is due to the full quarter impact of the long-term debt issuance that occurred at the end of 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

June 30, 2016


Quarter Ended

June 30, 2015


Variance
Net Income / (Loss)


$ 17,323

$ 17,714

$ (391 )
Net Income / (Loss) Per Share (Diluted)


$ 0.20

$ 0.21

$ (0.01 )
Adjusted EBITDA


$ 48,515

$ 44,437

$ 4,078














 

The Pipeline and Storage segment's third quarter earnings were relatively flat versus the prior year as the increase in operating revenues were offset by increases in Operation and Maintenance ("O&M"), DD&A and interest expenses. Operating revenues increased $6.9 million, or 10 percent, as a result of the three expansion projects - Northern Access 2015, Westside Expansion & Modernization, and Tuscarora Lateral - that were placed in service during the first quarter of fiscal 2016.

O&M expense increased $2.2 million versus prior year's third quarter due primarily to higher post-retirement benefit costs and expenses associated with the operation of new and expanded compression assets. DD&A expense for the quarter increased $1.4 million due to higher gross plant in service, which was largely attributable to the expansion projects that were placed in service within the last year. The $1.9 million increase in interest expense is due to the full quarter impact of the long-term debt issuance that occurred at the end of the quarter ended June 30, 2015, coupled with lower capitalized interest resulting from the decline in pipeline expansion construction work in progress during the current quarter.

Gathering Segment

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


     
 
 
(in thousands except per share amounts)


Quarter Ended

June 30, 2016


Quarter Ended

June 30, 2015


Variance
Net Income / (Loss)


$ 9,473

$ 6,226

$ 3,247
Net Income / (Loss) Per Share (Diluted)


$ 0.11

$ 0.07

$ 0.04
Adjusted EBITDA


$ 22,433

$ 14,527

$ 7,906













 

The increase in the Gathering segment's third quarter earnings is due primarily to higher gathering revenues, offset partially by higher O&M, DD&A and interest expenses. Operating revenues increased $8.6 million, or 51 percent, versus prior year's third quarter mainly due to a 15.0 Bcf increase in gathered volume on the Clermont Gathering System ("Clermont"), a result of Seneca's increased gross production volumes. O&M expense increased $0.7 million due to higher costs associated with operating various Clermont compression projects placed in service during the current fiscal year. DD&A expense increased $1.4 million due to higher gross plant in service during the quarter.

The $2.0 million increase in interest expense is due to the full quarter impact of the long-term debt issuance that occurred at the end of the quarter ended June 30, 2015, coupled with lower capitalized interest resulting from the Clermont projects being placed in service.

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

June 30, 2016


Quarter Ended

June 30, 2015


Variance
Net Income / (Loss)


$ 2,179

$ 5,727

$ (3,548 )
Net Income / (Loss) Per Share (Diluted)


$ 0.03

$ 0.07

$ (0.04 )
Adjusted EBITDA


$ 22,900

$ 27,059

$ (4,159 )














 

The decrease in the Utility segment's third quarter earnings was largely attributable to the impact of higher O&M expenses, which increased $2.5 million versus the prior year due to higher personnel costs and expenses relating to the implementation of the new customer information system that went in service during the quarter. The Utility segment's earnings were further reduced by higher DD&A expense and lower margins.

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

June 30, 2016


Quarter Ended

June 30, 2015


Variance
Net Income / (Loss)


$ (590 )
$ 1,533

$ (2,123 )
Net Income / (Loss) Per Share (Diluted)


$ (0.01 )
$ 0.02

$ (0.03 )
Adjusted EBITDA


$ (930 )
$ 2,327

$ (3,257 )














 

The decrease in the Energy Marketing segment's third quarter earnings is due primarily to lower margins, which were negatively impacted by changes in natural gas prices at local purchase points relative to NYMEX-based customer sales contracts.

Corporate and All Other

The Corporate and All Other category net loss of $0.9 million for the quarter ended June 30, 2016, compares to a net loss of $1.2 million in the prior year’s third quarter. The $0.3 million decrease in the net loss impacted consolidated earnings by less than $0.01 per share.

EARNINGS GUIDANCE

The Company is updating and narrowing earnings guidance for fiscal 2016 to a range of $2.90 to $3.00 per share exclusive of any ceiling test impairment charges. These charges were $531 million after-tax, or $6.26 per share, for the nine months ended June 30, 2016. While the Company expects to incur an additional ceiling test impairment charge in the fourth quarter of fiscal 2016, the amount of this charge 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.

The Company's updated fiscal 2016 guidance reflects actual third quarter results and the following revised forecast assumptions:


     
 




Updated FY 2016 Guidance
Previous FY 2016 Guidance
Consolidated Earnings per Share (1)


$2.90 to $3.00
$2.80 to $2.95






 
Capital Expenditures (Millions)





Exploration & Production (2)


$120 - $135
$120 - $160
Pipeline & Storage


$125 - $140
$130 - $160
Gathering


$55 - $65
$75 - $85
Utility


$90 - $100
$90 - $100
Consolidated Capital Expenditures


$390 - $440
$415 - $505






 
Exploration & Production Segment Guidance





NYMEX Natural Gas Price Assumption


$2.75
$2.15
NYMEX Crude Oil Price Assumption


$45.00
$40.00






 
Total Production (Bcfe)


160 to 165
158 to 175
E&P Operating Costs ($/Mcfe)





LOE


$0.95 - $1.00
$0.95 - $1.05
G&A (3)


$0.35 - $0.40
$0.35 - $0.40
DD&A


$0.85 - $0.90
$0.85 - $0.95






 
    (1)   Exclusive of ceiling test impairment charges


(2)
Net of up-front and recurring proceeds received from joint development partner


(3)
G&A per unit guidance excludes $7.9 million of joint development professional fees




 

The Company is also initiating preliminary earnings, capital expenditures, and Exploration and Production segment operations guidance for fiscal 2017.


     




Preliminary FY 2017 Guidance
Consolidated Earnings per Share (1)


$2.85 to $3.15




 
Capital Expenditures (Millions)



Exploration & Production (2)


$160 - $200
Pipeline & Storage


$400 - $450
Gathering


$75 - $85
Utility


$90 - $100
Consolidated Capital Expenditures


$725 - $835




 
Exploration & Production Segment Guidance



NYMEX Natural Gas Price Assumption


$3.00
NYMEX Crude Oil Price Assumption


$50.00




 
Production (Bcfe)



East Division - Appalachia


130 to 153
West Division - California


20 to 22
Total Production


150 to 175




 
Capital Expenditures (Millions)



East Division - Appalachia


$125 - $155
West Division - California


$35 - $45
Total E&P Capital Expenditures


$160 - $200




 
E&P Operating Costs ($/Mcfe)



LOE


$0.95 - $1.05
G&A


$0.35 - $0.40
DD&A


$0.65 - $0.75




 
Midstream Businesses Guidance



Pipeline & Storage Segment Revenues (Millions)


$295 - $305
Gathering Segment Revenues (Millions)


$95 - $105




 
    (1)   Assumes no ceiling test impairment charges


(2)
Net of up-front and recurring proceeds received from joint development partner




 

EARNINGS TELECONFERENCE

The Company will host a conference call on Friday, August 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 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 “46345887.” 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 “46345887.” Both the webcast and telephonic replay will be available until the close of business on Friday, August 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; 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; 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; 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 hereof.


     
 
 
 
 
 
 
NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS
QUARTER ENDED JUNE 30, 2016
(Unaudited)
















 
















 




Upstream

Midstream
Businesses


Downstream
Businesses





















 




Exploration &
Pipeline &




Energy
Corporate /

(Thousands of Dollars)


Production   Storage   Gathering   Utility   Marketing   All Other   Consolidated*
















 
Third quarter 2015 GAAP earnings


$ (323,113 )
$ 17,714

$ 6,226

$ 5,727

$ 1,533

$ (1,221 )
$ (293,134 )
Items impacting comparability:















Impairment of oil and gas producing properties


588,712











588,712
Tax impact of impairment of oil and gas producing properties


(248,863 )                       (248,863 )
Third quarter 2015 operating results


16,736

17,714

6,226

5,727

1,533

(1,221 )
46,715
















 
Drivers of operating results















Higher (lower) crude oil prices


(5,138 )










(5,138 )
Higher (lower) natural gas prices


(12,005 )










(12,005 )
Higher (lower) natural gas production


17,216











17,216
Higher (lower) crude oil production


(1,420 )










(1,420 )
Lower (higher) depreciation / depletion


16,093

(900 )
(937 )
(479 )




13,777
















 
Higher (lower) transportation revenues




4,263









4,263
Higher (lower) gathering and processing revenues






5,595







5,595
Lower (higher) operating expenses


2,614

(1,461 )
(461 )
(1,731 )


447

(592 )
Lower (higher) property, franchise and other taxes


1,482











1,482
















 
Higher (lower) margins








(1,013 )
(2,209 )
568

(2,654 )
















 
Higher (lower) AFUDC**




(598 )








(598 )
















 
Higher (lower) interest income


(410 )










(410 )
















 
Lower (higher) interest expense


(1,667 )
(1,265 )
(1,307 )






(4,239 )
















 
Lower (higher) income tax expense / effective tax rate


(2,906 )
(715 )
318





(894 )
(4,197 )
















 
All other / rounding


22     285     39     (325 )   86     166     273  
Third quarter 2016 operating results


30,617

17,323

9,473

2,179

(590 )
(934 )
58,068
Items impacting comparability:















Impairment of oil and gas producing properties


(82,658 )










(82,658 )
Tax impact of impairment of oil and gas producing properties


34,716











34,716
Joint development agreement professional fees


(3,173 )










(3,173 )
Tax impact of joint development agreement professional fees


1,333                         1,333  
Third quarter 2016 GAAP earnings


$ (19,165 )   $ 17,323     $ 9,473     $ 2,179     $ (590 )   $ (934 )   $ 8,286  
















 
* 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 JUNE 30, 2016
(Unaudited)
















 
















 




Upstream

Midstream
Businesses


Downstream
Businesses





















 




Exploration &
Pipeline &




Energy
Corporate /





Production   Storage   Gathering   Utility   Marketing   All Other   Consolidated*
















 
Third quarter 2015 GAAP earnings


$ (3.79 )
$ 0.21

$ 0.07

$ 0.07

$ 0.02

$ (0.02 )
$ (3.44 )
Items impacting comparability:















Impairment of oil and gas producing properties


6.91











6.91
Tax impact of impairment of oil and gas producing properties


(2.92 )                       (2.92 )
Third quarter 2015 operating results


0.20

0.21

0.07

0.07

0.02

(0.02 )
0.55
















 
Drivers of operating results















Higher (lower) crude oil prices


(0.06 )










(0.06 )
Higher (lower) natural gas prices


(0.14 )










(0.14 )
Higher (lower) natural gas production


0.20











0.20
Higher (lower) crude oil production


(0.02 )










(0.02 )
Lower (higher) depreciation / depletion


0.19

(0.01 )
(0.01 )
(0.01 )




0.16
















 
Higher (lower) transportation revenues




0.05









0.05
Higher (lower) gathering and processing revenues






0.07







0.07
Lower (higher) operating expenses


0.03

(0.02 )
(0.01 )
(0.02 )


0.01

(0.01 )
Lower (higher) property, franchise and other taxes


0.02











0.02
















 
Higher (lower) margins








(0.01 )
(0.03 )
0.01

(0.03 )
















 
Higher (lower) AFUDC**




(0.01 )








(0.01 )
















 
High (lower) interest income































 
Lower (higher) interest expense


(0.02 )
(0.01 )
(0.02 )






(0.05 )
















 
Lower (higher) income tax expense / effective tax rate


(0.03 )
(0.01 )






(0.01 )
(0.05 )
















 
All other / rounding


(0.01 )       0.01                  
Third quarter 2016 operating results


0.36

0.20

0.11

0.03

(0.01 )
(0.01 )
0.68
Items impacting comparability:















Impairment of oil and gas producing properties


(0.97 )










(0.97 )
Tax impact of impairment of oil and gas producing properties


0.41











0.41
Joint development agreement professional fees


(0.04 )










(0.04 )
Tax impact of joint development agreement professional fees


0.02                         0.02  
Third quarter 2016 GAAP earnings


$ (0.22 )   $ 0.20     $ 0.11     $ 0.03     $ (0.01 )   $ (0.01 )   $ 0.10  
















 
* 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
NINE MONTHS ENDED JUNE 30, 2016
(Unaudited)
















 
















 




Upstream

Midstream
Businesses


Downstream
Businesses





















 




Exploration &
Pipeline &




Energy
Corporate /

(Thousands of Dollars)


Production   Storage   Gathering   Utility   Marketing   All Other   Consolidated*
















 
Nine months ended June 30, 2015 GAAP earnings


$ (349,955 )
$ 61,868

$ 24,254

$ 66,558

$ 7,732

$ (2,181 )
$ (191,724 )
Items impacting comparability:















Impairment of oil and gas producing properties


709,060











709,060
Tax impact of impairment of oil and gas producing properties


(299,738 )                       (299,738 )
Nine months ended June 30, 2015 operating results


59,367

61,868

24,254

66,558

7,732

(2,181 )
217,598
















 
Drivers of operating results















Higher (lower) crude oil prices


(20,727 )










(20,727 )
Higher (lower) natural gas prices


(27,670 )










(27,670 )
Higher (lower) natural gas production


3,219











3,219
Higher (lower) crude oil production


(2,656 )










(2,656 )
Derivative mark to market adjustments


(1,841 )










(1,841 )
Lower (higher) lease operating and transportation expenses


7,905











7,905
Lower (higher) depreciation / depletion


52,621

(2,400 )
(2,198 )
(995 )




47,028
















 
Higher (lower) transportation revenues




6,655









6,655
Higher (lower) gathering and processing revenues






4,552







4,552
Lower (higher) operating expenses


2,399

(2,194 )
(1,137 )
1,869



1,160

2,097
Lower (higher) property, franchise and other taxes


3,329

(592 )








2,737
















 
Regulatory true-up adjustments








(3,067 )




(3,067 )
Warmer weather








(12,861 )




(12,861 )
















 
Higher (lower) margins










(3,755 )
565

(3,190 )
















 
Higher (lower) AFUDC**




509









509
















 
Higher (lower) interest income


(723 )










(723 )
















 
Lower (higher) interest expense


(6,065 )
(3,318 )
(4,269 )






(13,652 )
















 
Lower (higher) income tax expense / effective tax rate


(2,786 )
(338 )
690

1,841



1,247

654
















 
All other / rounding


(381 )   (396 )   70     (600 )   140     1,667     500  
Nine months ended June 30, 2016 operating results


65,991

59,794

21,962

52,745

4,117

2,458

207,067
Items impacting comparability:















Impairment of oil and gas producing properties


(915,552 )










(915,552 )
Tax impact of impairment of oil and gas producing properties


384,531











384,531
Joint development agreement professional fees


(7,855 )










(7,855 )
Tax impact of joint development agreement professional fees


3,299                         3,299  
Nine months ended June 30, 2016 GAAP earnings


$ (469,586 )   $ 59,794     $ 21,962     $ 52,745     $ 4,117     $ 2,458     $ (328,510 )
















 
* 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
NINE MONTHS ENDED JUNE 30, 2016
(Unaudited)
















 
















 




Upstream

Midstream
Businesses


Downstream
Businesses





















 




Exploration &
Pipeline &




Energy
Corporate /





Production   Storage   Gathering   Utility   Marketing   All Other   Consolidated*
















 
Nine months ended June 30, 2015 GAAP earnings


$ (4.11 )
$ 0.73

$ 0.28

$ 0.78

$ 0.09

$ (0.02 )
$ (2.25 )
Items impacting comparability:















Impairment of oil and gas producing properties


8.32











8.32
Tax impact of impairment of oil and gas producing properties


(3.52 )                       (3.52 )
Nine months ended June 30, 2015 operating results


0.69

0.73

0.28

0.78

0.09

(0.02 )
2.55
















 
Drivers of operating results















Higher (lower) crude oil prices


(0.24 )










(0.24 )
Higher (lower) natural gas prices


(0.32 )










(0.32 )
Higher (lower) natural gas production


0.04











0.04
Higher (lower) crude oil production


(0.03 )










(0.03 )
Derivative mark to market adjustments


(0.02 )










(0.02 )
Lower (higher) lease operating and transportation expenses


0.09











0.09
Lower (higher) depreciation / depletion


0.62

(0.03 )
(0.03 )
(0.01 )




0.55
















 
Higher (lower) transportation revenues




0.08









0.08
Higher (lower) gathering and processing revenues






0.05







0.05
Lower (higher) operating expenses


0.03

(0.03 )
(0.01 )
0.02



0.01

0.02
Lower (higher) property, franchise and other taxes


0.04

(0.01 )








0.03
















 
Regulatory true-up adjustments








(0.04 )




(0.04 )
Warmer weather








(0.15 )




(0.15 )
















 
Higher (lower) margins










(0.04 )
0.01

(0.03 )
















 
Higher (lower) AFUDC**




0.01









0.01
















 
Higher (lower) interest income


(0.01 )










(0.01 )
















 
Lower (higher) interest expense


(0.07 )
(0.04 )
(0.05 )






(0.16 )
















 
Lower (higher) income tax expense / effective tax rate


(0.03 )


0.01

0.02



0.01

0.01
















 
All other / rounding


(0.02 )   (0.01 )   0.01             0.02      
Nine months ended June 30, 2016 operating results


0.77

0.70

0.26

0.62

0.05

0.03

2.43
Items impacting comparability:















Impairment of oil and gas producing properties


(10.80 )










(10.80 )
Tax impact of impairment of oil and gas producing properties


4.54











4.54
Joint development agreement professional fees


(0.09 )










(0.09 )
Tax impact of joint development agreement professional fees


0.04











0.04
Earnings per share impact of diluted shares


    0.01                     0.01  
Nine months ended June 30, 2016 GAAP earnings


$ (5.54 )   $ 0.71     $ 0.26     $ 0.62     $ 0.05     $ 0.03     $ (3.87 )
















 
* 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
Nine Months Ended




June 30,
June 30,




(Unaudited)
(Unaudited)

SUMMARY OF OPERATIONS




2016   2015
2016   2015
Operating Revenues:









Utility and Energy Marketing Revenues


$ 123,976

$ 132,422

$ 540,981

$ 772,802
Exploration and Production and Other Revenues


158,578

160,256

456,032

532,173
Pipeline and Storage and Gathering Revenues


53,063  
47,137  
162,930  
154,876  




335,617

339,815

1,159,943

1,459,851
Operating Expenses:









Purchased Gas


23,477

27,038

147,168

344,728
Operation and Maintenance:









Utility and Energy Marketing


46,616

44,263

151,474

156,724
Exploration and Production and Other


35,427

46,162

123,965

140,564
Pipeline and Storage and Gathering


23,215

20,272

64,324

59,237
Property, Franchise and Other Taxes


20,261

22,717

61,923

68,561
Depreciation, Depletion and Amortization


58,802

79,865

193,300

265,298
Impairment of Oil and Gas Producing Properties


82,658  
588,712  
915,552  
709,060  




290,456

829,029

1,657,706

1,744,172










 
Operating Income (Loss)


45,161

(489,214 )
(497,763 )
(284,321 )










 
Other Income (Expense):









Interest Income


564

327

2,640

1,631
Other Income


1,519

2,066

7,173

4,638
Interest Expense on Long-Term Debt


(28,897 )
(22,213 )
(88,263 )
(66,900 )
Other Interest Expense


(1,321 )
(1,007 )
(3,938 )
(3,382 )










 
Income (Loss) Before Income Taxes


17,026

(510,041 )
(580,151 )
(348,334 )










 
Income Tax Expense (Benefit)


8,740  
(216,907 )
(251,641 )
(156,610 )










 
Net Income (Loss) Available for Common Stock


$ 8,286  
$ (293,134 )
$ (328,510 )
$ (191,724 )










 
Earnings (Loss) Per Common Share:









Basic


$ 0.10  
$ (3.47 )
$ (3.87 )
$ (2.27 )
Diluted


$ 0.10  
$ (3.44 )
$ (3.87 )
$ (2.25 )










 
Weighted Average Common Shares:









Used in Basic Calculation


84,917,664
84,453,602
84,791,447
84,326,182
Used in Diluted Calculation


85,470,216
85,248,281
84,791,447
85,237,514










 
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)

     




June 30,   September 30,
(Thousands of Dollars)       2016   2015






 
ASSETS





Property, Plant and Equipment


$ 9,460,444

$ 9,261,323
Less - Accumulated Depreciation, Depletion and Amortization         5,012,690       3,929,428
Net Property, Plant and Equipment         4,447,754       5,331,895






 
Current Assets:





Cash and Temporary Cash Investments



105,567


113,596
Hedging Collateral Deposits



3,008


11,124
Receivables - Net



140,911


105,004
Unbilled Revenue



14,604


20,746
Gas Stored Underground



15,944


34,252
Materials and Supplies - at average cost



33,039


30,414
Unrecovered Purchased Gas Costs



933


Other Current Assets         47,118       60,665
Total Current Assets         361,124       375,801






 
Other Assets:





Recoverable Future Taxes



172,456


168,214
Unamortized Debt Expense



1,821


2,218
Other Regulatory Assets



269,343


278,227
Deferred Charges



17,968


15,129
Other Investments



111,385


92,990
Goodwill



5,476


5,476
Prepaid Post-Retirement Benefit Costs



27,158


24,459
Fair Value of Derivative Financial Instruments



126,596


270,363
Other         116       167
Total Other Assets         732,319       857,243
Total Assets       $ 5,541,197     $ 6,564,939






 
CAPITALIZATION AND LIABILITIES





Capitalization:





Comprehensive Shareholders' Equity





Common Stock, $1 Par Value Authorized - 200,000,000





Shares; Issued and Outstanding - 84,948,691 Shares





and 84,594,383 Shares, Respectively


$ 84,949

$ 84,594
Paid in Capital



761,673


744,274
Earnings Reinvested in the Business



673,281


1,103,200
Accumulated Other Comprehensive Income         7,739       93,372
Total Comprehensive Shareholders' Equity



1,527,642


2,025,440
Long-Term Debt, Net of Unamortized Discount and Debt Issuance Costs         2,085,686       2,084,009
Total Capitalization         3,613,328       4,109,449






 
Current and Accrued Liabilities:





Notes Payable to Banks and Commercial Paper






Current Portion of Long-Term Debt






Accounts Payable



86,487


180,388
Amounts Payable to Customers



35,441


56,778
Dividends Payable



34,404


33,415
Interest Payable on Long-Term Debt



28,985


36,200
Customer Advances



38


16,236
Customer Security Deposits



16,094


16,490
Other Accruals and Current Liabilities



72,759


96,557
Fair Value of Derivative Financial Instruments         2,133       10,076
Total Current and Accrued Liabilities         276,341       446,140






 
Deferred Credits:





Deferred Income Taxes



807,955


1,137,962
Taxes Refundable to Customers



91,452


89,448
Unamortized Investment Tax Credit



470


731
Cost of Removal Regulatory Liability



191,217


184,907
Other Regulatory Liabilities



102,018


108,617
Pension and Other Post-Retirement Liabilities



222,756


202,807
Asset Retirement Obligations



114,804


156,805
Other Deferred Credits         120,856       128,073
Total Deferred Credits         1,651,528       2,009,350
Commitments and Contingencies              
Total Capitalization and Liabilities       $ 5,541,197     $ 6,564,939









 

     
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)




Nine Months Ended




June 30,
(Thousands of Dollars)       2016   2015






 
Operating Activities:





Net Loss Available for Common Stock


$ (328,510 )
$ (191,724 )
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by Operating Activities:





Impairment of Oil and Gas Producing Properties


915,552

709,060
Depreciation, Depletion and Amortization


193,300

265,298
Deferred Income Taxes


(269,248 )
(198,116 )
Excess Tax Benefits Associated with Stock-Based Compensation Awards


(1,786 )
(9,064 )
Stock-Based Compensation


3,138

8,383
Other


9,685

7,329
Change in:





Hedging Collateral Deposits


8,116

(8,367 )
Receivables and Unbilled Revenue


(7,756 )
22,175
Gas Stored Underground and Materials and Supplies


15,683

20,259
Unrecovered Purchased Gas Costs


(933 )

Other Current Assets


15,334

14,367
Accounts Payable


(53,687 )
11,153
Amounts Payable to Customers


(21,337 )
11,097
Customer Advances


(16,198 )
(18,961 )
Customer Security Deposits


(396 )
2,568
Other Accruals and Current Liabilities


3,375

13,794
Other Assets


3,775

1,124
Other Liabilities       (8,152 )   52,261  
Net Cash Provided by Operating Activities       $ 459,955     $ 712,636  






 
Investing Activities:





Capital Expenditures


$ (481,781 )
$ (718,965 )
Net Proceeds from Sale of Oil and Gas Producing Properties


115,235


Other       (11,163 )   (1,065 )
Net Cash Used in Investing Activities       $ (377,709 )   $ (720,030 )






 
Financing Activities:





Changes in Notes Payable to Banks and Commercial Paper


$

$ (85,600 )
Excess Tax Benefits Associated with Stock-Based Compensation Awards


1,786

9,064
Dividends Paid on Common Stock


(100,419 )
(97,330 )
Net Proceeds From Issuance of Long-Term Debt




445,662
Net Proceeds From Issuance of Common Stock       8,358     8,743  
Net Cash (Used in) Provided by Financing Activities       $ (90,275 )   $ 280,539  






 
Net Increase (Decrease) in Cash and Temporary Cash Investments


(8,029 )
273,145
Cash and Temporary Cash Investments at Beginning of Period       113,596     36,886  
Cash and Temporary Cash Investments at June 30       $ 105,567     $ 310,031  










 

     
 
 
 
 
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES














 
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)














 
UPSTREAM BUSINESS














 














 




Three Months Ended
Nine Months Ended
(Thousands of Dollars, except per share amounts)


June 30,
June 30,

EXPLORATION AND PRODUCTION SEGMENT




2016   2015   Variance
2016   2015   Variance
Total Operating Revenues


$ 156,835     $ 159,404     $ (2,569 )
$ 452,583     $ 529,590     $ (77,007 )














 
Operating Expenses:













Operation and Maintenance:













General and Administrative Expense


16,573

17,066

(493 )
55,671

50,793

4,878
Lease Operating and Transportation Expense


38,861

39,390

(529 )
115,451

127,614

(12,163 )
All Other Operation and Maintenance Expense


3,011

3,367

(356 )
10,402

11,115

(713 )
Property, Franchise and Other Taxes


3,639

5,919

(2,280 )
10,241

15,361

(5,120 )
Depreciation, Depletion and Amortization


31,279

56,038

(24,759 )
112,586

193,540

(80,954 )
Impairment of Oil and Gas Producing Properties


82,658     588,712     (506,054 )
915,552     709,060     206,492  




176,021     710,492     (534,471 )
1,219,903     1,107,483     112,420  














 
Operating Loss


(19,186 )
(551,088)
531,902

(767,320 )
(577,893)
(189,427 )














 
Other Income (Expense):













Interest Income


88

720

(632 )
781

1,893

(1,112 )
Interest Expense


(13,753 )   (11,190 )   (2,563 )
(41,882 )   (32,551 )   (9,331 )














 
Loss Before Income Taxes


(32,851 )
(561,558 )
528,707

(808,421 )
(608,551 )
(199,870 )
Income Tax Benefit


(13,686 )   (238,445 )   224,759  
(338,835 )   (258,596 )   (80,239 )
Net Loss


$ (19,165 )   $ (323,113 )   $ 303,948  
$ (469,586 )   $ (349,955 )   $ (119,631 )














 
Net Loss Per Share (Diluted)


$ (0.22 )   $ (3.79 )   $ 3.57  
$ (5.54 )   $ (4.11 )   $ (1.43 )


























 

     
 
 
 
 
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES














 
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)














 
MIDSTREAM BUSINESSES














 














 




Three Months Ended
Nine Months Ended
(Thousands of Dollars, except per share amounts)


June 30,
June 30,

PIPELINE AND STORAGE SEGMENT




2016   2015   Variance
2016   2015   Variance
Revenues from External Customers


$ 52,998

$ 47,012

$ 5,986

$ 162,627

$ 154,515

$ 8,112
Intersegment Revenues


22,795     21,833     962  
68,272     66,347     1,925  
Total Operating Revenues


75,793     68,845     6,948  
230,899     220,862     10,037  














 
Operating Expenses:













Purchased Gas


356

(61 )
417

1,059

492

567
Operation and Maintenance


20,492

18,243

2,249

57,145

53,770

3,375
Property, Franchise and Other Taxes


6,430

6,226

204

19,766

18,855

911
Depreciation, Depletion and Amortization


11,023     9,639     1,384  
32,144     28,452     3,692  




38,301     34,047     4,254  
110,114     101,569     8,545  














 
Operating Income


37,492

34,798

2,694

120,785

119,293

1,492














 
Other Income (Expense):













Interest Income


237

142

95

527

350

177
Other Income


657

1,000

(343 )
2,651

1,888

763
Interest Expense


(8,528 )   (6,581 )   (1,947 )
(25,017 )   (19,913 )   (5,104 )














 
Income Before Income Taxes


29,858

29,359

499

98,946

101,618

(2,672 )
Income Tax Expense


12,535     11,645     890  
39,152     39,750     (598 )
Net Income


$ 17,323     $ 17,714     $ (391 )
$ 59,794     $ 61,868     $ (2,074 )














 
Net Income Per Share (Diluted)


$ 0.20     $ 0.21     $ (0.01 )
$ 0.71     $ 0.73     $ (0.02 )














 














 




Three Months Ended
Nine Months Ended




June 30,
June 30,

GATHERING SEGMENT




2016   2015   Variance
2016   2015   Variance
Revenues from External Customers


$ 65

$ 126

$ (61 )
$ 303

$ 361

$ (58 )
Intersegment Revenues


25,417     16,748     8,669  
65,601     58,541     7,060  
Total Operating Revenues


25,482     16,874     8,608  
65,904     58,902     7,002  














 
Operating Expenses:













Operation and Maintenance


3,018

2,309

709

8,066

6,317

1,749
Property, Franchise and Other Taxes


31

38

(7 )
116

130

(14 )
Depreciation, Depletion and Amortization


3,608     2,166     1,442  
11,407     8,025     3,382  




6,657     4,513     2,144  
19,589     14,472     5,117  














 
Operating Income


18,825

12,361

6,464

46,315

44,430

1,885














 
Other Income (Expense):













Interest Income


88

35

53

188

94

94
Other Income


1

1



3

3


Interest Expense


(1,794 )   216     (2,010 )
(6,781 )   (214 )   (6,567 )














 
Income Before Income Taxes


17,120

12,613

4,507

39,725

44,313

(4,588 )
Income Tax Expense


7,647     6,387     1,260  
17,763     20,059     (2,296 )
Net Income


$ 9,473     $ 6,226     $ 3,247  
$ 21,962     $ 24,254     $ (2,292 )














 
Net Income Per Share (Diluted)


$ 0.11     $ 0.07     $ 0.04  
$ 0.26     $ 0.28     $ (0.02 )


























 

     
 
 
 
 
 














 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES














 
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)














 
DOWNSTREAM BUSINESSES














 














 




Three Months Ended
Nine Months Ended
(Thousands of Dollars, except per share amounts)


June 30,
June 30,

UTILITY SEGMENT




2016   2015   Variance
2016   2015   Variance
Revenues from External Customers


$ 106,568

$ 110,002

$ (3,434 )
$ 463,154

$ 630,049

$ (166,895 )
Intersegment Revenues


1,729     2,614     (885 )
10,757     13,670     (2,913 )
Total Operating Revenues


108,297     112,616     (4,319 )
473,911     643,719     (169,808 )














 
Operating Expenses:













Purchased Gas


29,514

31,812

(2,298 )
155,764

295,490

(139,726 )
Operation and Maintenance


45,990

43,487

2,503

148,883

154,126

(5,243 )
Property, Franchise and Other Taxes


9,893

10,258

(365 )
30,980

33,380

(2,400 )
Depreciation, Depletion and Amortization


12,234     11,498     736  
35,511     33,981     1,530  




97,631     97,055     576  
371,138     516,977     (145,839 )














 
Operating Income


10,666

15,561

(4,895 )
102,773

126,742

(23,969 )














 
Other Income (Expense):













Interest Income


115

17

98

321

42

279
Other Income


345

609

(264 )
1,749

1,604

145
Interest Expense


(7,192 )   (6,997 )   (195 )
(21,684 )   (21,145 )   (539 )














 
Income Before Income Taxes


3,934

9,190

(5,256 )
83,159

107,243

(24,084 )
Income Tax Expense


1,755     3,463     (1,708 )
30,414     40,685     (10,271 )
Net Income


$ 2,179     $ 5,727     $ (3,548 )
$ 52,745     $ 66,558     $ (13,813 )














 
Net Income Per Share (Diluted)


$ 0.03     $ 0.07     $ (0.04 )
$ 0.62     $ 0.78     $ (0.16 )














 














 




Three Months Ended
Nine Months Ended




June 30,
June 30,

ENERGY MARKETING SEGMENT




2016   2015   Variance
2016   2015   Variance
Revenues from External Customers


$ 17,408

$ 22,420

$ (5,012 )
$ 77,827

$ 142,753

$ (64,926 )
Intersegment Revenues


231     379     (148 )
855     796     59  
Total Operating Revenues


17,639     22,799     (5,160 )
78,682     143,549     (64,867 )














 
Operating Expenses:













Purchased Gas


17,191

18,954

(1,763 )
67,235

126,325

(59,090 )
Operation and Maintenance


1,376

1,516

(140 )
4,872

4,804

68
Property, Franchise and Other Taxes


2

2



6

7

(1 )
Depreciation, Depletion and Amortization


70     50     20  
208     151     57  




18,639     20,522     (1,883 )
72,321     131,287     (58,966 )














 
Operating Income (Loss)


(1,000 )
2,277

(3,277 )
6,361

12,262

(5,901 )














 
Other Income (Expense):













Interest Income


145

60

85

286

141

145
Other Income


20

28

(8 )
44

95

(51 )
Interest Expense


(11 )   (5 )   (6 )
(37 )   (20 )   (17 )














 
Income (Loss) Before Income Taxes


(846 )
2,360

(3,206 )
6,654

12,478

(5,824 )
Income Tax Expense (Benefit)


(256 )   827     (1,083 )
2,537     4,746     (2,209 )
Net Income (Loss)


$ (590 )   $ 1,533     $ (2,123 )
$ 4,117     $ 7,732     $ (3,615 )














 
Net Income (Loss) Per Share (Diluted)


$ (0.01 )   $ 0.02     $ (0.03 )
$ 0.05     $ 0.09     $ (0.04 )


























 
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES

     
 
 
 
 
 
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)














 




Three Months Ended
Nine Months Ended
(Thousands of Dollars, except per share amounts)


June 30,
June 30,

ALL OTHER




2016   2015   Variance
2016   2015   Variance
Total Operating Revenues


$ 1,508     $ 634     $ 874  
$ 2,775     $ 1,906     $ 869  
Operating Expenses:













Operation and Maintenance


256

227

29

495

709

(214 )
Property, Franchise and Other Taxes


144

155

(11 )
449

462

(13 )
Depreciation, Depletion and Amortization


399     305     94  
888     645     243  




799     687     112  
1,832     1,816     16  














 
Operating Income (Loss)


709

(53 )
762

943

90

853














 
Other Income (Expense):













Interest Income


32

19

13

83

48

35
Other Income


    1     (1 )
    4     (4 )














 
Income (Loss) Before Income Taxes


741

(33 )
774

1,026

142

884
Income Tax Expense (Benefit)


311     (5 )   316  
431     76     355  
Net Income (Loss)


$ 430     $ (28 )   $ 458  
$ 595     $ 66     $ 529  














 
Net Income (Loss) Per Share (Diluted)


$ 0.01     $     $ 0.01  
$ 0.01     $     $ 0.01  














 














 




Three Months Ended
Nine Months Ended




June 30,
June 30,

CORPORATE




2016   2015   Variance
2016   2015   Variance
Revenues from External Customers


$ 235

$ 217

$ 18

$ 674

$ 677

$ (3 )
Intersegment Revenues


967     953     14  
2,900     2,792     108  
Total Operating Revenues


1,202     1,170     32  
3,574     3,469     105  
Operating Expenses:













Operation and Maintenance


3,236

3,952

(716 )
10,273

11,844

(1,571 )
Property, Franchise and Other Taxes


122

119

3

365

366

(1 )
Depreciation, Depletion and Amortization


189     169     20  
556     504     52  




3,547     4,240     (693 )
11,194     12,714     (1,520 )














 
Operating Loss


(2,345 )
(3,070 )
725

(7,620 )
(9,245 )
1,625














 
Other Income (Expense):













Interest Income


30,684

24,990

5,694

92,767

74,479

18,288
Other Income


496

427

69

2,726

1,044

1,682
Interest Expense on Long-Term Debt


(28,897 )
(22,213 )
(6,684 )
(88,263 )
(66,900 )
(21,363 )
Other Interest Expense


(868 )   (2,106 )   1,238  
(850 )   (4,955 )   4,105  














 
Loss Before Income Taxes


(930 )
(1,972 )
1,042

(1,240 )
(5,577 )
4,337
Income Tax Expense (Benefit)


434     (779 )   1,213  
(3,103 )   (3,330 )   227  
Net Income (Loss)


$ (1,364 )   $ (1,193 )   $ (171 )
$ 1,863     $ (2,247 )   $ 4,110  














 
Net Income (Loss) Per Share (Diluted)


$ (0.02 )   $ (0.02 )   $  
$ 0.02     $ (0.02 )   $ 0.04  














 














 




Three Months Ended
Nine Months Ended




June 30,
June 30,

INTERSEGMENT ELIMINATIONS




2016   2015   Variance
2016   2015   Variance
Intersegment Revenues


$ (51,139 )   $ (42,527 )   $ (8,612 )
$ (148,385 )   $ (142,146 )   $ (6,239 )
Operating Expenses:













Purchased Gas


(23,584 )
(23,667 )
83

(76,890 )
(77,579 )
689
Operation and Maintenance


(27,555 )   (18,860 )   (8,695 )
(71,495 )   (64,567 )   (6,928 )




(51,139 )   (42,527 )   (8,612 )
(148,385 )   (142,146 )   (6,239 )














 
Operating Income



























 
Other Income (Expense):













Interest Income


(30,825 )
(25,656 )
(5,169 )
(92,313 )
(75,416 )
(16,897 )
Interest Expense


30,825     25,656     5,169  
92,313     75,416     16,897  
Net Income


$     $     $  
$     $     $  














 
Net Income Per Share (Diluted)


$     $     $  
$     $     $  


























 

     
 
 
 
 
 
 
 
 
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES






















 
SEGMENT INFORMATION (Continued)
(Thousands of Dollars)






















 






















 




Three Months Ended
Nine Months Ended




June 30,
June 30,




(Unaudited)
(Unaudited)












Increase








Increase




2016


2015


(Decrease)
2016


2015


(Decrease)






















 

Capital Expenditures:























Exploration and Production


$

47,269



(1)


$ 136,374

(3)
$ (89,105 )
$ 214,923

(1)(2)
$ 437,450

(3)(4)
$ (222,527 )
Pipeline and Storage


18,325

(1)
56,993

(3)
(38,668 )
76,020

(1)(2)
114,664

(3)(4)
(38,644 )
Gathering


9,192

(1)
36,665

(3)
(27,473 )
43,715

(1)(2)
87,214

(3)(4)
(43,499 )
Utility


26,280

(1)
23,596

(3)
2,684

72,288

(1)(2)
65,337

(3)(4)
6,951
Energy Marketing


19  


32  


(13 )
28  


124  


(96 )
Total Reportable Segments


101,085



253,660



(152,575 )
406,974



704,789



(297,815 )
All Other












37







37
Corporate


36  


67  


(31 )
191  


134  


57  
Total Capital Expenditures


$ 101,121  


$ 253,727  


$ (152,606 )
$ 407,202  


$ 704