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. 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;
  5. Changes in the price of natural gas or oil;
  6. Impairments under the SEC’s full cost ceiling test for natural gas and oil reserves;
  7. Factors affecting the Company’s ability to successfully identify, drill for and produce economically viable natural gas and oil reserves, including among others geology, lease availability, title disputes, weather conditions, shortages, delays or unavailability of equipment and services required in drilling operations, insufficient gathering, processing and transportation capacity, the need to obtain governmental approvals and permits, and compliance with environmental laws and regulations;
  8. Increasing health care costs and the resulting effect on health insurance premiums and on the obligation to provide other post-retirement benefits;
  9. Changes in price differentials between similar quantities of natural gas or oil at different geographic locations, and the effect of such changes on commodity production, revenues and demand for pipeline transportation capacity to or from such locations;
  10. Other changes in price differentials between similar quantities of natural gas or oil having different quality, heating value, hydrocarbon mix or delivery date;
  11. The cost and effects of legal and administrative claims against the Company or activist shareholder campaigns to effect changes at the Company;
  12. Uncertainty of oil and gas reserve estimates;
  13. Significant differences between the Company’s projected and actual production levels for natural gas or oil;
  14. Changes in demographic patterns and weather conditions;
  15. Changes in the availability, price or accounting treatment of derivative financial instruments;
  16. Changes in laws, actuarial assumptions, the interest rate environment and the return on plan/trust assets related to the Company’s pension and other post-retirement benefits, which can affect future funding obligations and costs and plan liabilities;
  17. Changes in economic conditions, including global, national or regional recessions, and their effect on the demand for, and customers’ ability to pay for, the Company’s products and services;
  18. The creditworthiness or performance of the Company’s key suppliers, customers and counterparties;
  19. The impact of information technology, cybersecurity or data security breaches;
  20. Economic disruptions or uninsured losses resulting from major accidents, fires, severe weather, natural disasters, terrorist activities or acts of war;
  21. Significant differences between the Company’s projected and actual capital expenditures and operating expenses; or
  22. Increasing costs of insurance, changes in coverage and the ability to obtain insurance.

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

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

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

press-release-details
Press release details

National Fuel Reports First Quarter Earnings

02/02/2017

WILLIAMSVILLE, N.Y.--(BUSINESS WIRE)-- National Fuel Gas Company (“National Fuel” or the “Company”) (NYSE:NFG) today announced consolidated results for the fiscal first quarter ended December 31, 2016.

FISCAL 2017 FIRST QUARTER SUMMARY

  • Consolidated net income of $88.9 million or $1.04 per share compared to a consolidated net loss of $189.1 million or $2.23 per share in the prior year
  • Adjusted EBITDA of $228.3 million, up from $204.8 million in the prior year (non-GAAP reconciliation on page 21)
  • Net production of 44.9 Bcfe, an 18% increase from prior year and 13% increase from the fiscal 2016 fourth quarter
  • Seneca lease operating and transportation expense of $0.88 per Mcfe, down $0.15 per Mcfe or 15% from the prior year
  • Seneca G&A expense of $0.29 per Mcfe, down $0.23 per Mcfe or 44% from prior year
  • Seneca DD&A expense of $0.65 per Mcfe, down $0.51 per Mcfe or 44% from the prior year
  • Gathering revenues of $27.9 million on 50.6 Bcf of throughput, up $9.1 million from the prior year
  • Utility net income up $2.6 million or $0.03 per share on weather that was more than 17% colder than last year
  • Company is raising and tightening fiscal 2017 earnings guidance to a range of $3.10 to $3.30 per share

OPERATING RESULTS

 
Three Months Ended
December 31,
(in thousands except per share amounts) 2016   2015
Reported GAAP earnings (loss) $ 88,908 $ (189,109 )
Items impacting comparability:
Impairment of oil and gas properties (E&P) 435,451
Tax impact of impairment of oil and gas properties (182,889 )
Joint development agreement professional fees (E&P) 4,682
Tax impact of joint development agreement professional fees   (1,966 )
Operating Results $ 88,908   $ 66,169  
 
Reported GAAP earnings (loss) per share $ 1.04 $ (2.23 )
Items impacting comparability:
Impairment of oil and gas properties (E&P) 5.12
Tax impact of impairment of oil and gas properties (2.15 )
Joint development agreement professional fees (E&P) 0.06
Tax impact of joint development agreement professional fees   (0.02 )
Operating Results per diluted share $ 1.04   $ 0.78  

MANAGEMENT COMMENTS

Ronald J. Tanski, President and Chief Executive Officer of National Fuel Gas Company, stated: “Our 2017 fiscal year is off to a great start. Aside from our pipeline and storage segment, where earnings were down modestly, each of the other segments improved its financial performance over the prior year. We are particularly pleased that natural gas prices increased to levels that allowed Seneca to return wells to production. Seneca’s increased production, and the associated throughput on our gathering systems, were the main drivers that allowed us to exceed our guidance.

“We expect to keep moving forward with our plans to build our Northern Access pipeline by the middle of next fiscal year. In the meantime, our efforts will remain focused on the efficient development of our Marcellus acreage to prepare for the Northern Access capacity while continuing to evaluate our opportunities in the Utica Shale on the very same acreage. Together, these stacked formations provide plenty of running room on our acreage and will fuel our growth for an extended period."

DISCUSSION OF RESULTS BY SEGMENT

The following discussion of the earnings of each segment is summarized in a tabular form on pages 7 and 8 of this report. It may be helpful to refer to those tables while reviewing this discussion. Note that management defines Operating Results as reported GAAP earnings before items impacting comparability and Adjusted EBITDA as reported GAAP earnings before the following items: interest expense, depreciation and amortization, interest and other income, impairments, items impacting comparability, and income taxes.

Upstream Business

Exploration and Production Segment

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

  Three Months Ended
December 31,
(in thousands except per share amounts) 2016   2015   Variance
Net Income / (Loss) $ 35,080   $ (237,086 )   $ 272,166
Net Income / (Loss) Per Share (Diluted) $ 0.41 $ (2.80 ) $ 3.21
Adjusted EBITDA $ 102,476 $ 91,140 $ 11,336

Net income in the Exploration and Production segment in the first quarter was $35.1 million or $0.41 per share, compared to a net loss of $237.1 million or $2.80 per share in the prior year first quarter, an increase of $272.2 million, or $3.21 per share. Excluding the impact of last year's impairment charge, the increase in the Exploration and Production segment's first quarter earnings is mainly due to higher natural gas production and lower operating expenses, offset partially by a decrease in oil production and lower realized oil and natural gas prices after the impact of hedging. In the prior year first quarter, Seneca recorded a $435.5 million ($252.6 million after-tax) ceiling test impairment charge to reduce the value of Seneca’s oil and gas properties. There were no ceiling test impairment charges in this year’s first quarter.

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. At December 31, 2016, the ceiling exceeded the book value of the oil and gas properties by approximately $71.5 million. While possible, Seneca does not expect to incur any impairment charges in fiscal 2017 due to the improvement in oil and gas prices and lower lease operating expenses and development costs.

Seneca's first quarter net production was 44.9 billion cubic feet equivalent ("Bcfe"), an increase of 6.9 Bcfe or 18 percent versus the prior year first quarter, and 5.1 Bcfe or 13 percent versus the fourth quarter of fiscal 2016. Net natural gas production increased 7.0 Bcf or 21 percent versus the prior year due mainly to higher natural gas production in Appalachia. An improvement in local natural gas pricing in Pennsylvania allowed Seneca to produce most of its available production volumes since November 1, 2016, selling 8.6 Bcf (net) in the daily spot markets and under new seasonal firm sales agreements during the quarter. Seneca voluntarily curtailed a modest 3.5 Bcf (net) of natural gas production during the quarter, which was a decrease from the 14.6 Bcf (net) in the prior year first quarter. For the remainder of fiscal 2017, Seneca has entered into an additional 6.0 Bcf (net) of seasonal firm sales agreements that will further reduce its daily local spot market exposure.

Seneca’s crude oil production decreased 27 thousand barrels ("Mbbl") or 4 percent due mainly to the lingering impact of a disruption in steam flood operations in the North Midway Sunset field in early fiscal 2016. Field production at North Midway Sunset is expected to return to pre-disruption levels in the second quarter of fiscal 2017.

Seneca's average realized natural gas price, after the impact of hedging, for the first quarter was $2.97 per thousand cubic feet ("Mcf"), a decrease of $0.19 per Mcf versus the prior year. Seneca's average realized oil price, after the impact of hedging, was $54.71 per barrel ("Bbl"), a decrease of $5.05 per Bbl. Seneca's average realized natural gas and oil prices benefited from an uplift of $0.58 per Mcf and $10.89 per Bbl, respectively, from financial hedges settled during the quarter. At the midpoint of Seneca’s fiscal 2017 production guidance range, Seneca is 82 percent and 55 percent hedged on projected natural gas and oil production, respectively, for the remainder of fiscal 2017 (see page 5 for earnings guidance update).

Depreciation, depletion and amortization ("DD&A") expense decreased $15.0 million due to lower per unit DD&A, offset partially by the impact of higher production. Seneca’s per unit DD&A decreased by $0.51 per Mcf equivalent ("Mcfe") to $0.65 per Mcfe due to a lower depletable fixed asset balance resulting mainly from the ceiling test impairment charges recorded during the prior four quarters.

Seneca’s General & Administrative (“G&A”) expense decreased $7.0 million due to lower personnel costs and nonrecurring professional fees recorded in the prior year. In the prior year first quarter, Seneca incurred $4.7 million of professional and legal expenses relating to the joint development agreement that Seneca entered into in December 2015. Seneca’s per unit of production G&A expense for the quarter was $0.29 per Mcfe, a decrease of $0.23 per Mcfe or 44 percent from the prior year.

Lease operating and transportation expense ("LOE") increased $0.7 million due mainly to higher production, which was partially offset by lower per unit LOE expense. Per unit LOE expense decreased from $1.03 per Mcfe to $0.88 per Mcfe. The $0.15 per Mcfe improvement is largely the result of higher Appalachian natural gas production, which carries lower LOE costs relative to Seneca’s California oil production, as well as a general reduction in well repair and maintenance costs across Seneca's California and Appalachia divisions.

Midstream Businesses

Pipeline and Storage Segment

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

    Three Months Ended
December 31,
(in thousands except per share amounts) 2016   2015   Variance
Net Income / (Loss) $ 19,368   $ 21,276   $ (1,908 )
Net Income / (Loss) Per Share (Diluted) $ 0.23 $ 0.25 $ (0.02 )
Adjusted EBITDA $ 48,014 $ 50,741 $ (2,727 )

The Pipeline and Storage segment's first quarter earnings decreased from the prior year due primarily to higher Operation and Maintenance ("O&M") expense and lower Other Income. O&M expense increased $2.6 million due to higher personnel costs and an increase in expenses associated with the operation of the segment’s expanded compressor facilities. Other Income decreased $0.9 million as the Company recorded lower allowance for funds used during construction (“AFUDC”) following the completion of the expansion projects that were placed in-service during the prior year first quarter.

Operating revenues for the Pipeline & Storage segment were relatively flat when compared to the prior year first quarter. The increase in revenues resulting from a full quarter of revenue from Supply Corporation’s Northern Access 2015 project and Empire’s Tuscarora Lateral Project, which were placed in-service during the prior year first quarter, were more than offset by a reduction in Supply Corporation and Empire’s rates that went into effect following recent rate case settlements.

Gathering Segment

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

    Three Months Ended
December 31,
(in thousands except per share amounts) 2016   2015   Variance
Net Income / (Loss) $ 10,981   $ 4,921   $ 6,060
Net Income / (Loss) Per Share (Diluted) $ 0.13 $ 0.06 $ 0.07
Adjusted EBITDA $ 25,101 $ 16,458 $ 8,643

The Gathering segment’s first quarter earnings increased $6.1 million or 123 percent versus the prior year on higher revenues. Operating revenues increased $9.1 million as the increase in Seneca’s gross Appalachian natural gas production, which includes production from joint development wells, helped drive higher volumes across the Company’s gathering systems. The Gathering segment transported 50.6 Bcf on its systems in the first quarter, up 16.8 Bcf or 50 percent from the prior year. While operating revenues were up 48 percent for the quarter, operating expenses increased only 2 percent versus the prior year.

Downstream Businesses

Utility Segment

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

    Three Months Ended
December 31,
(in thousands except per share amounts) 2016   2015   Variance
Net Income / (Loss) $ 21,175   $ 18,606   $ 2,569
Net Income / (Loss) Per Share (Diluted) $ 0.25 $ 0.22 $ 0.03
Adjusted EBITDA $ 52,331 $ 45,918 $ 6,413

The Utility segment’s earnings increased $2.6 million or 14 percent due mainly to colder weather, higher customer usage and the positive impact of routine regulatory adjustments, offset partially by higher O&M and DD&A expenses. Weather in Distribution’s Pennsylvania service territory was 17.9 percent colder on average than last year, resulting in higher retail residential and transportation customer throughput and revenues. In New York, the impact of weather variations on earnings is largely mitigated by that jurisdiction’s weather normalization clause. O&M expense increased $2.9 million versus the prior year due mainly to higher personnel costs.

Energy Marketing Segment

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

    Three Months Ended
December 31,
(in thousands except per share amounts) 2016   2015   Variance
Net Income / (Loss) $ 1,782   $ 1,223   $ 559
Net Income / (Loss) Per Share (Diluted) $ 0.02 $ 0.01 $ 0.01
Adjusted EBITDA $ 2,846 $ 1,846 $ 1,000

The Energy Marketing segment's first quarter earnings increased $0.6 million or 46 percent due to higher margins. NFR’s margins were positively impacted by colder weather, which increased retail customer usage.

Corporate and All Other

The Corporate and All Other category earnings of $0.5 million or $0.00 per share for the quarter ended December 31, 2016, compares to earnings of $2.0 million or $0.03 per share in the prior year first quarter. The decrease is due to higher corporate operating expenses and higher income taxes.

EARNINGS GUIDANCE

The Company is revising its earnings guidance for fiscal 2017 to a range of $3.10 to $3.30 per share. The Company is also updating fiscal 2017 capital expenditure and production guidance and revising some of its Exploration & Production forecast assumptions.

  Updated FY 2017 Guidance   Previous FY 2017 Guidance
Consolidated Earnings per Share $3.10 to $3.30 $2.85 to $3.15
 
Capital Expenditures (Millions)
Exploration & Production (1) $180 - $220 $180 - $220
Pipeline & Storage $200 - $250 $390 - $440
Gathering $65 - $75 $65 - $75
Utility $90 - $100 $90 - $100
Consolidated Capital Expenditures $535 - $645 $725 - $835
 
Exploration & Production Segment Guidance
NYMEX Natural Gas Price Assumption $3.25 $3.25
NYMEX Crude Oil Price Assumption $55.00 $53.00
 
Production (Bcfe)
East Division - Appalachia 135 to 153 125 to 148
West Division - California 20 to 22 20 to 22
Total Production 155 to 175 145 to 170
 
E&P Operating Costs ($/Mcfe)
LOE $0.95 - $1.05 $0.95 - $1.05
G&A $0.35 - $0.40 $0.35 - $0.40
DD&A $0.65 - $0.70 $0.65 - $0.75
(1)   Net of initial conveyance proceeds received from joint development partner for working interest in joint development wells

EARNINGS TELECONFERENCE

The Company will host a conference call on Friday, February 3, 2017, at 11 a.m. Eastern Time to discuss this announcement. There are two ways to access this call. For those with Internet access, visit the NFG Investor Relations News & Events page at National Fuel’s website at investor.nationalfuelgas.com. For those without Internet access, audio access is also provided by dialing (toll-free) 877-201-0168, using conference ID number “47888632.” For those unable to listen to the live conference call, an audio replay will be available approximately two hours following the teleconference at the same website link and by phone at (toll-free) 855-859-2056 or 404-537-3406, using conference ID number “47888632.” Both the webcast and telephonic replay will be available until the close of business on Friday, February 10, 2017.

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

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

               
 
NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS
QUARTER ENDED DECEMBER 31, 2016
(Unaudited)
 
 
Upstream

Midstream
Businesses

Downstream
Businesses

 
Exploration & Pipeline & Energy Corporate /
(Thousands of Dollars) Production   Storage   Gathering   Utility   Marketing   All Other   Consolidated*
 
First quarter 2016 GAAP earnings $ (237,086 ) $ 21,276 $ 4,921 $ 18,606 $ 1,223 $ 1,951 $ (189,109 )
Items impacting comparability:
Impairment of oil and gas producing properties 435,451 435,451
Tax impact of impairment of oil and gas producing properties (182,889 ) (182,889 )
Joint development agreement professional fees 4,682 4,682
Tax impact of joint development agreement professional fees (1,966 )                       (1,966 )
First quarter 2016 operating results 18,192 21,276 4,921 18,606 1,223 1,951 66,169
 
Drivers of operating results
Higher (lower) crude oil prices (2,367 ) (2,367 )
Higher (lower) natural gas prices (5,063 ) (5,063 )
Higher (lower) natural gas production 14,417 14,417
Higher (lower) crude oil production (1,061 ) (1,061 )
Lower (higher) lease operating and transportation expenses (446 ) (446 )
Lower (higher) depreciation / depletion 9,737 386 (965 ) 9,158
 
Higher (lower) gathering and processing revenues 5,916 5,916
Lower (higher) other operating expenses 1,880 (1,722 ) (313 ) (1,872 ) (611 ) (2,638 )
 
Colder weather 3,327 3,327
Higher usage 1,480 1,480
Regulatory true-up adjustments 1,314 1,314
 
Higher (lower) margins 596 596
 
Higher (lower) AFUDC** (895 ) (895 )
 
Lower (higher) interest expense 688 635 1,323
 
Lower (higher) income tax expense / effective tax rate (529 ) (1,148 ) (1,677 )
 
All other / rounding (368 )   323     (178 )   (715 )   (37 )   330     (645 )
First quarter 2017 GAAP earnings $ 35,080     $ 19,368     $ 10,981     $ 21,175     $ 1,782     $ 522     $ 88,908  
 
* Amounts do not reflect intercompany eliminations
** AFUDC = Allowance for Funds Used During Construction
             
 
NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS PER SHARE
QUARTER ENDED DECEMBER 31, 2016
(Unaudited)
 
 
Upstream

Midstream
Businesses

Downstream
Businesses

 
Exploration & Pipeline & Energy Corporate /
Production   Storage   Gathering   Utility   Marketing   All Other   Consolidated*
 
First quarter 2016 GAAP earnings $ (2.80 ) $ 0.25 $ 0.06 $ 0.22 $ 0.01 $ 0.03 $ (2.23 )
Items impacting comparability:
Impairment of oil and gas producing properties 5.12 5.12
Tax impact of impairment of oil and gas producing properties (2.15 ) (2.15 )
Joint development agreement professional fees 0.06 0.06
Tax impact of joint development agreement professional fees (0.02 )                       (0.02 )
First quarter 2016 operating results 0.21 0.25 0.06 0.22 0.01 0.03 0.78
 
Drivers of operating results
Higher (lower) crude oil prices (0.03 ) (0.03 )
Higher (lower) natural gas prices (0.06 ) (0.06 )
Higher (lower) natural gas production 0.17 0.17
Higher (lower) crude oil production (0.01 ) (0.01 )
Lower (higher) lease operating and transportation expenses (0.01 ) (0.01 )
Lower (higher) depreciation / depletion 0.11 (0.01 ) 0.10
 
Higher (lower) gathering and processing revenues 0.07 0.07
Lower (higher) other operating expenses 0.02 (0.02 ) (0.02 ) (0.01 ) (0.03 )
 
Colder weather 0.04 0.04
Higher usage 0.02 0.02
Regulatory true-up adjustments 0.02 0.02
 
Higher (lower) margins 0.01 0.01
 
Higher (lower) AFUDC** (0.01 ) (0.01 )
 
Lower (higher) interest expense 0.01 0.01 0.02
 
Lower (higher) income tax expense / effective tax rate (0.01 ) (0.01 ) (0.02 )
 
All other / rounding 0.01     0.01     (0.01 )   (0.02 )       (0.01 )   (0.02 )
First quarter 2017 GAAP earnings $ 0.41     $ 0.23     $ 0.13     $ 0.25     $ 0.02     $     $ 1.04  
 
* Amounts do not reflect intercompany eliminations
** AFUDC = Allowance for Funds Used During Construction
   
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 
(Thousands of Dollars, except per share amounts)
Three Months Ended
December 31,
(Unaudited)

SUMMARY OF OPERATIONS

2016   2015
Operating Revenues:
Utility and Energy Marketing Revenues $ 207,780 $ 168,832
Exploration and Production and Other Revenues 161,694 152,884
Pipeline and Storage and Gathering Revenues 53,026   53,479  
422,500 375,195
Operating Expenses:
Purchased Gas 70,243 42,068
Operation and Maintenance:
Utility and Energy Marketing 50,422 47,549
Exploration and Production and Other 30,461 45,575
Pipeline and Storage and Gathering 22,660 19,568
Property, Franchise and Other Taxes 20,379 20,357
Depreciation, Depletion and Amortization 56,196 70,551
Impairment of Oil and Gas Producing Properties   435,451  
250,361 681,119
 
Operating Income (Loss) 172,139 (305,924 )
 
Other Income (Expense):
Interest Income 1,600 1,799
Other Income 1,614 2,418
Interest Expense on Long-Term Debt (29,103 ) (30,372 )
Other Interest Expense (910 ) (1,380 )
 
Income (Loss) Before Income Taxes 145,340 (333,459 )
 
Income Tax Expense (Benefit) 56,432   (144,350 )
 
Net Income (Loss) Available for Common Stock $ 88,908   $ (189,109 )
 
Earnings (Loss) Per Common Share:
Basic $ 1.04   $ (2.23 )
Diluted $ 1.04   $ (2.23 )
 
Weighted Average Common Shares:
Used in Basic Calculation 85,189,851 84,651,233
Used in Diluted Calculation 85,797,989 84,651,233
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
December 31,   September 30,
(Thousands of Dollars)   2016   2016
 
ASSETS
Property, Plant and Equipment $9,620,006 $9,539,581
Less - Accumulated Depreciation, Depletion and Amortization   5,133,877     5,085,099  
Net Property, Plant and Equipment   4,486,129     4,454,482  
 
Current Assets:
Cash and Temporary Cash Investments 136,493 129,972
Hedging Collateral Deposits 1,484
Receivables - Net 161,025 133,201
Unbilled Revenue 59,121 18,382
Gas Stored Underground 23,431 34,332
Materials and Supplies - at average cost 34,170 33,866
Unrecovered Purchased Gas Costs 3,697 2,440
Other Current Assets   49,778     59,354  
Total Current Assets   467,715     413,031  
 
Other Assets:
Recoverable Future Taxes 179,941 177,261
Unamortized Debt Expense 1,556 1,688
Other Regulatory Assets 323,448 320,750
Deferred Charges 22,215 20,978
Other Investments 114,721 110,664
Goodwill 5,476 5,476
Prepaid Post-Retirement Benefit Costs 17,960 17,649
Fair Value of Derivative Financial Instruments 42,065 113,804
Other   491     604  
Total Other Assets   707,873     768,874  
Total Assets   $5,661,717     $5,636,387  
 
CAPITALIZATION AND LIABILITIES
Capitalization:
Comprehensive Shareholders' Equity
Common Stock, $1 Par Value Authorized - 200,000,000
Shares; Issued and Outstanding - 85,292,570 Shares
and 85,118,886 Shares, Respectively $85,293 $85,119
Paid in Capital 775,868 771,164
Earnings Reinvested in the Business 762,641 676,361
Accumulated Other Comprehensive Loss   (54,859 )   (5,640 )
Total Comprehensive Shareholders' Equity 1,568,943 1,527,004
Long-Term Debt, Net of Unamortized Discount and Debt Issuance Costs   2,086,817     2,086,252  
Total Capitalization   3,655,760     3,613,256  
 
Current and Accrued Liabilities:
Notes Payable to Banks and Commercial Paper
Current Portion of Long-Term Debt
Accounts Payable 113,136 108,056
Amounts Payable to Customers 3,231 19,537
Dividends Payable 34,544 34,473
Interest Payable on Long-Term Debt 28,985 34,900
Customer Advances 13,779 14,762
Customer Security Deposits 16,692 16,019
Other Accruals and Current Liabilities 88,519 74,430
Fair Value of Derivative Financial Instruments   7,312     1,560  
Total Current and Accrued Liabilities   306,198     303,737  
 
Deferred Credits:
Deferred Income Taxes 803,166 823,795
Taxes Refundable to Customers 93,940 93,318
Unamortized Investment Tax Credit 340 383
Cost of Removal Regulatory Liability 195,544 193,424
Other Regulatory Liabilities 104,054 99,789
Pension and Other Post-Retirement Liabilities 272,672 277,113
Asset Retirement Obligations 113,194 112,330
Other Deferred Credits   116,849     119,242  
Total Deferred Credits   1,699,759     1,719,394  
Commitments and Contingencies        
Total Capitalization and Liabilities   $5,661,717     $5,636,387  
   
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
December 31,
(Thousands of Dollars)   2016   2015
 
Operating Activities:
Net Income (Loss) Available for Common Stock $ 88,908 $ (189,109 )
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by Operating Activities:
Impairment of Oil and Gas Producing Properties 435,451
Depreciation, Depletion and Amortization 56,196 70,551
Deferred Income Taxes 44,852 (140,013 )
Excess Tax Benefits Associated with Stock-Based Compensation Awards (226 )
Stock-Based Compensation 2,482 960
Other 3,607 3,418
Change in:
Hedging Collateral Deposits 1,484 1,573
Receivables and Unbilled Revenue (67,395 ) (31,150 )
Gas Stored Underground and Materials and Supplies 10,597 3,466
Unrecovered Purchased Gas Costs (1,257 )
Other Current Assets 9,576 (5,254 )
Accounts Payable 18,805 (20,784 )
Amounts Payable to Customers (16,306 ) (11,702 )
Customer Advances (983 ) 7,189
Customer Security Deposits 673 267
Other Accruals and Current Liabilities 5,919 (14,353 )
Other Assets (8,389 ) 885
Other Liabilities   (4,122 )   2,904  
Net Cash Provided by Operating Activities   $ 144,647     $ 114,073  
 
Investing Activities:
Capital Expenditures $ (106,053 ) $ (186,437 )
Net Proceeds from Sale of Oil and Gas Producing Properties 5,759 10,574
Other   (4,297 )   (15,756 )
Net Cash Used in Investing Activities   $ (104,591 )   $ (191,619 )
 
Financing Activities:
Changes in Notes Payable to Banks and Commercial Paper $ $ 31,400
Excess Tax Benefits Associated with Stock-Based Compensation Awards 226
Dividends Paid on Common Stock (34,473 ) (33,415 )
Net Proceeds From Issuance of Common Stock   938     2,068  
Net Cash (Used in) Provided by Financing Activities   $ (33,535 )   $ 279  
 
Net Increase (Decrease) in Cash and Temporary Cash Investments 6,521 (77,267 )
Cash and Temporary Cash Investments at Beginning of Period   129,972     113,596  
Cash and Temporary Cash Investments at December 31   $ 136,493     $ 36,329  
     
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
 
UPSTREAM BUSINESS
 
 
Three Months Ended
(Thousands of Dollars, except per share amounts) December 31,

EXPLORATION AND PRODUCTION SEGMENT

2016   2015   Variance
Total Operating Revenues $ 160,932     $ 151,965     $ 8,967  
 
Operating Expenses:
Operation and Maintenance:
General and Administrative Expense 12,974 19,955 (6,981 )
Lease Operating and Transportation Expense 39,708 39,022 686
All Other Operation and Maintenance Expense 2,552 3,145 (593 )
Property, Franchise and Other Taxes 3,222 3,385 (163 )
Depreciation, Depletion and Amortization 29,053 44,033 (14,980 )
Impairment of Oil and Gas Producing Properties     435,451     (435,451 )
87,509     544,991     (457,482 )
 
Operating Income (Loss) 73,423 (393,026) 466,449
 
Other Income (Expense):
Interest Income 86 667 (581 )
Interest Expense (13,523 )   (14,582 )   1,059  
 
Income (Loss) Before Income Taxes 59,986 (406,941 ) 466,927
Income Tax Expense (Benefit) 24,906     (169,855 )   194,761  
Net Income (Loss) $ 35,080     $ (237,086 )   $ 272,166  
 
Net Income (Loss) Per Share (Diluted) $ 0.41     $ (2.80 )   $ 3.21  
     
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
 
MIDSTREAM BUSINESSES
 
 
Three Months Ended
(Thousands of Dollars, except per share amounts) December 31,

PIPELINE AND STORAGE SEGMENT

  2016   2015   Variance
Revenues from External Customers $ 53,000 $ 53,354 $ (354 )
Intersegment Revenues 22,155     22,183     (28 )
Total Operating Revenues 75,155     75,537     (382 )
 
Operating Expenses:
Purchased Gas 222 458 (236 )
Operation and Maintenance 20,242 17,593 2,649
Property, Franchise and Other Taxes 6,677 6,745 (68 )
Depreciation, Depletion and Amortization 9,662     10,256     (594 )
36,803     35,052     1,751  
 
Operating Income 38,352 40,485 (2,133 )
 
Other Income (Expense):
Interest Income 273 111 162
Other Income 686 1,582 (896 )
Interest Expense (8,347 )   (8,038 )   (309 )
 
Income Before Income Taxes 30,964 34,140 (3,176 )
Income Tax Expense 11,596     12,864     (1,268 )
Net Income $ 19,368     $ 21,276     $ (1,908 )
 
Net Income Per Share (Diluted) $ 0.23     $ 0.25     $ (0.02 )
 
 
Three Months Ended
December 31,

GATHERING SEGMENT

2016   2015   Variance
Revenues from External Customers $ 26 $ 125 $ (99 )
Intersegment Revenues 27,840     18,640     9,200  
Total Operating Revenues 27,866     18,765     9,101  
 
Operating Expenses:
Operation and Maintenance 2,754 2,273 481
Property, Franchise and Other Taxes 11 34 (23 )
Depreciation, Depletion and Amortization 3,880     4,210     (330 )
6,645     6,517     128  
 
Operating Income 21,221 12,248 8,973
 
Other Income (Expense):
Interest Income 146 34 112
Other Income 1 1
Interest Expense (2,093 )   (3,070 )   977  
 
Income Before Income Taxes 19,275 9,213 10,062
Income Tax Expense 8,294     4,292     4,002  
Net Income $ 10,981     $ 4,921     $ 6,060  
 
Net Income Per Share (Diluted) $ 0.13     $ 0.06     $ 0.07  
     
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
 
DOWNSTREAM BUSINESSES
 
 
Three Months Ended
(Thousands of Dollars, except per share amounts) December 31,

UTILITY SEGMENT

2016   2015   Variance
Revenues from External Customers $ 170,971 $ 143,848 $ 27,123
Intersegment Revenues 1,826     3,664     (1,838 )
Total Operating Revenues 172,797     147,512     25,285  
 
Operating Expenses:
Purchased Gas 60,732 45,068 15,664
Operation and Maintenance 49,529 46,599 2,930
Property, Franchise and Other Taxes 10,205 9,927 278
Depreciation, Depletion and Amortization 13,102     11,618     1,484  
133,568     113,212     20,356  
 
Operating Income 39,229 34,300 4,929
 
Other Income (Expense):
Interest Income 134 85 49
Other Income 92 697 (605 )
Interest Expense (7,198 )   (7,334 )   136  
 
Income Before Income Taxes 32,257 27,748 4,509
Income Tax Expense 11,082     9,142     1,940  
Net Income $ 21,175     $ 18,606     $ 2,569  
 
Net Income Per Share (Diluted) $ 0.25     $ 0.22     $ 0.03  
 
 
Three Months Ended
December 31,

ENERGY MARKETING SEGMENT

2016   2015   Variance
Revenues from External Customers $ 36,809 $ 24,984 $ 11,825
Intersegment Revenues 19     311     (292 )
Total Operating Revenues 36,828     25,295     11,533  
 
Operating Expenses:
Purchased Gas 32,339 21,723 10,616
Operation and Maintenance 1,643 1,723 (80 )
Property, Franchise and Other Taxes 3 (3 )
Depreciation, Depletion and Amortization 70     70      
34,052     23,519     10,533  
 
Operating Income 2,776 1,776 1,000
 
Other Income (Expense):
Interest Income 134 50 84
Other Income 3 10 (7 )
Interest Expense (13 )   (19 )   6  
 
Income Before Income Taxes 2,900 1,817 1,083
Income Tax Expense 1,118     594     524  
Net Income $ 1,782     $ 1,223     $ 559  
 
Net Income Per Share (Diluted) $ 0.02     $ 0.01     $ 0.01  
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
     
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
 
Three Months Ended
(Thousands of Dollars, except per share amounts) December 31,

ALL OTHER

2016   2015   Variance
Total Operating Revenues $ 554     $ 706     $ (152 )
Operating Expenses:
Operation and Maintenance 516 75 441
Property, Franchise and Other Taxes 143 143
Depreciation, Depletion and Amortization 241     182     59  
900     400     500  
 
Operating Income (Loss) (346 ) 306 (652 )
Other Income (Expense):
Interest Income 39     19     20  
 
Income (Loss) Before Income Taxes (307 ) 325 (632 )
Income Tax Expense (Benefit) (128 )   136     (264 )
Net Income (Loss) $ (179 )   $ 189     $ (368 )
 
Net Income (Loss) Per Share (Diluted) $     $     $  
 
 
Three Months Ended
December 31,

CORPORATE

2016   2015   Variance
Revenues from External Customers $ 208 $ 213 $ (5 )
Intersegment Revenues 976     967     9  
Total Operating Revenues 1,184     1,180     4  
Operating Expenses:
Operation and Maintenance 3,391 2,891 500
Property, Franchise and Other Taxes 121 120 1
Depreciation, Depletion and Amortization 188     182     6  
3,700     3,193     507  
 
Operating Loss (2,516 ) (2,013 ) (503 )
 
Other Income (Expense):
Interest Income 31,805 31,743 62
Other Income 832 128 704
Interest Expense on Long-Term Debt (29,103 ) (30,372 ) 1,269
Other Interest Expense (753 )   753     (1,506 )
 
Income (Loss) Before Income Taxes 265 239 26
Income Tax Expense (Benefit) (436 )   (1,523 )   1,087  
Net Income $ 701     $ 1,762     $ (1,061 )
 
Net Income Per Share (Diluted) $     $ 0.03     $ (0.03 )
 
 
Three Months Ended
December 31,

INTERSEGMENT ELIMINATIONS

2016   2015   Variance
Intersegment Revenues $ (52,816 )   $ (45,765 )   $ (7,051 )
Operating Expenses:
Purchased Gas (23,050 ) (25,181 ) 2,131
Operation and Maintenance (29,766 )   (20,584 )   (9,182 )
(52,816 )   (45,765 )   (7,051 )
 
Operating Income
 
Other Income (Expense):
Interest Income (31,017 ) (30,910 ) (107 )
Interest Expense 31,017     30,910     107  
Net Income $     $     $  
 
Net Income Per Share (Diluted) $     $     $  
         
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 
SEGMENT INFORMATION (Continued)
(Thousands of Dollars)
 
 
Three Months Ended
December 31,
(Unaudited)
Increase
2016 2015 (Decrease)
 

Capital Expenditures:

Exploration and Production $ 40,689

(1)(2)

$ 88,125 (3)(4) $ (47,436 )
Pipeline and Storage 25,392 (1)(2) 31,621 (3)(4) (6,229 )
Gathering 11,344 (1)(2) 21,744 (3)(4) (10,400 )
Utility 17,052 (1)(2) 19,917 (3)(4) (2,865 )
Energy Marketing 7   7    
Total Reportable Segments 94,484 161,414 (66,930 )
All Other 39 39
Corporate 60   48   12  
Total Capital Expenditures $ 94,583   $ 161,462   $ (66,879 )
(1)  

Capital expenditures for the three months ended December 31, 2016, include accounts payable and accrued liabilities related to capital expenditures of $25.3 million, $8.7 million, $7.9 million, and $7.1 million in the Exploration and Production segment, Pipeline and Storage segment, Gathering segment and Utility segment, respectively. These amounts have been excluded from the Consolidated Statement of Cash Flows at December 31, 2016, since they represent non-cash investing activities at that date.

(2)

Capital expenditures for the three months ended December 31, 2016, exclude capital expenditures of $25.2 million, $18.7 million, $5.3 million and $11.2 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, 2016 and paid during the three months ended December 31, 2016. These amounts were excluded from the Consolidated Statement of Cash Flows at September 30, 2016, since they represented non-cash investing activities at that date. These amounts have been included in the Consolidated Statement of Cash Flows at December 31, 2016.

(3)

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

(4)

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

         

DEGREE DAYS

 
Percent Colder
(Warmer) Than:

Three Months Ended December 31

Normal 2016 2015 Normal (1) Last Year (1)
 
Buffalo, NY 2,253 1,966 1,677 (12.7) 17.2
Erie, PA 2,044 1,750 1,484 (14.4) 17.9
(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
December 31,
Increase
2016 2015 (Decrease)
 

Gas Production/Prices:

Production (MMcf)
Appalachia 39,807 32,788 7,019
West Coast 776   783   (7 )
Total Production 40,583   33,571   7,012  
 
Average Prices (Per Mcf)
Appalachia $ 2.35 $ 1.98 $ 0.37
West Coast 4.24 3.65 0.59
Weighted Average 2.39 2.02 0.37
Weighted Average after Hedging 2.97 3.16 (0.19 )
 

Oil Production/Prices:

Production (Thousands of Barrels)
Appalachia 6 (6 )
West Coast 721   742   (21 )
Total Production 721   748   (27 )
 
Average Prices (Per Barrel)
Appalachia N/M $ 39.78 N/M
West Coast $ 43.69 36.05 $ 7.64
Weighted Average 43.82 36.08 7.74
Weighted Average after Hedging 54.71 59.76 (5.05 )
 
Total Production (Mmcfe) 44,909   38,059   6,850  
 

Selected Operating Performance Statistics:

General & Administrative Expense per Mcfe (1) $ 0.29 $ 0.52 $ (0.23 )
Lease Operating and Transportation Expense per Mcfe (1)(2) $ 0.88 $ 1.03 $ (0.15 )
Depreciation, Depletion & Amortization per Mcfe (1) $ 0.65 $ 1.16 $ (0.51 )
N/M - Not Meaningful

(1)

 

Refer to page 12 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 $0.53 and $0.51 per Mcfe for the three months ended December 31, 2016 and December 31, 2015, respectively.
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
         

EXPLORATION AND PRODUCTION INFORMATION

 
Hedging Summary for the Remaining Nine Months of Fiscal 2017

Volume

Average Hedge Price

Oil Swaps
Brent 72,000 BBL $ 91.00 / BBL
NYMEX 1,163,000 BBL $ 58.40 / BBL
Total 1,235,000 BBL $ 60.30 / BBL
 
Gas Swaps
NYMEX 27,780,000 MMBTU $ 4.32 / MMBTU
Dominion Transmission Appalachian (DOM) 3,630,000 MMBTU $ 3.85 / MMBTU
Dawn Ontario (DAWN) 12,990,000 MMBTU $ 3.63 / MMBTU
Fixed Price Physical Sales 45,029,281 MMBTU $ 2.60 / MMBTU
Total 89,429,281 MMBTU $ 3.33 / MMBTU
 
Hedging Summary for Fiscal 2018

Volume

Average Hedge Price

Oil Swaps
Brent 24,000 BBL $ 91.00 / BBL
NYMEX 1,119,000 BBL $ 55.38 / BBL
Total 1,143,000 BBL $ 56.13 / BBL
 
Gas Swaps
NYMEX 42,570,000 MMBTU $ 3.34 / MMBTU
DOM 180,000 MMBTU $ 3.82 / MMBTU
DAWN 8,400,000 MMBTU $ 3.08 / MMBTU
Fixed Price Physical Sales 32,927,835 MMBTU $ 2.43 / MMBTU
Total 84,077,835 MMBTU $ 2.96 / MMBTU
 
Hedging Summary for Fiscal 2019

Volume

Average Hedge Price

Oil Swaps
NYMEX 756,000 BBL $ 54.60 / BBL
Total 756,000 BBL $ 54.60 / BBL
 
Gas Swaps
NYMEX 27,060,000 MMBTU $ 3.17 / MMBTU
DAWN 7,200,000 MMBTU $ 3.00 / MMBTU
Fixed Price Physical Sales 11,947,289 MMBTU $ 3.09 / MMBTU
Total 46,207,289 MMBTU $ 3.13 / 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 3,566,558 MMBTU $ 3.24 / MMBTU
Total 27,646,558 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

Three Months Ended December 31, 2016

Total

East

West

Company

Wells in Process - Beginning of Period
Exploratory 6.000 0.000 6.000
Developmental 87.000 0.000 87.000
Wells Commenced
Exploratory 4.000 0.000 4.000
Developmental 12.000 7.000 19.000
Wells Completed
Exploratory 1.000 0.000 1.000
Developmental 12.000 6.000 18.000
Wells Plugged & Abandoned
Exploratory 0.000 0.000 0.000
Developmental 0.000 0.000 0.000
Wells in Process - End of Period
Exploratory 9.000 0.000 9.000
Developmental 87.000 1.000 88.000
 
 

Net Wells in Process of Drilling

Three Months Ended December 31, 2016

Total

East

West

Company

Wells in Process - Beginning of Period
Exploratory 6.000 0.000 6.000
Developmental 62.900 0.000 62.900
Wells Commenced
Exploratory 4.000 0.000 4.000
Developmental 12.000 7.000 19.000
Wells Completed
Exploratory 1.000 0.000 1.000
Developmental 2.400 6.000 8.400
Wells Plugged & Abandoned
Exploratory 0.000 0.000 0.000
Developmental 0.000 0.000 0.000
Well Interest Sold (1)
Exploratory 0.000 0.000 0.000
Developmental 4.000 0.000 4.000
Wells in Process - End of Period
Exploratory 9.000 0.000 9.000
Developmental 68.500 (1) 1.000 69.500
(1)   Seneca's East Division sold an 80% working interest in 5 of the existing developmental wells in process to IOG during the three months ended December 31, 2016.
     
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 
 
 
Pipeline & Storage Throughput - (millions of cubic feet - MMcf)
 
Three Months Ended
December 31,
Increase
2016 2015 (Decrease)
Firm Transportation - Affiliated 31,607 24,709 6,898
Firm Transportation - Non-Affiliated 159,174 151,123 8,051
Interruptible Transportation 3,046   5,631   (2,585 )
193,827   181,463   12,364  
 
Gathering Volume - (MMcf)
Three Months Ended
December 31,
Increase
2016 2015 (Decrease)
Gathered Volume - Affiliated 50,569   33,800   16,769  
 
 
Utility Throughput - (MMcf)
Three Months Ended
December 31,
Increase
2016 2015 (Decrease)
Retail Sales:
Residential Sales 15,764 13,133 2,631
Commercial Sales 2,299 1,827 472
Industrial Sales 77   66   11  
18,140 15,026 3,114
Off-System Sales 173 173
Transportation 19,565   17,615   1,950  
37,878   32,641   5,237  
 
Energy Marketing Volume
Three Months Ended
December 31,
Increase
2016 2015 (Decrease)
Natural Gas (MMcf) 11,127   10,098   1,029  

NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES

NON-GAAP FINANCIAL MEASURES

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

Management defines Operating Results as reported GAAP earnings before items impacting comparability. The table at page 1 of this report reconciles National Fuel's reported GAAP earnings to Operating Results for the three months ended December 31, 2016 and 2015.

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

The following tables reconcile National Fuel's reported GAAP earnings to Adjusted EBITDA for the three months ended December 31, 2016 and 2015:

   
Three Months Ended
December 31,
2016 2015
(in thousands)
Reported GAAP Earnings $ 88,908 $ (189,109 )
Depreciation, Depletion and Amortization 56,196 70,551
Interest and Other Income (3,214 ) (4,217 )
Interest Expense 30,013 31,752
Income Taxes 56,432 (144,350 )
Impairment of Oil and Gas Producing

Properties

435,451
Joint Development Agreement Professional

Fees

  4,682  
Adjusted EBITDA $ 228,335   $ 204,760  
 
Adjusted EBITDA by Segment
Pipeline and Storage Adjusted EBITDA $ 48,014 $ 50,741
Gathering Adjusted EBITDA 25,101   16,458  
Total Midstream Businesses Adjusted EBITDA 73,115 67,199
Exploration and Production Adjusted EBITDA 102,476 91,140
Utility Adjusted EBITDA 52,331 45,918
Energy Marketing Adjusted EBITDA 2,846 1,846
Corporate and All Other Adjusted EBITDA (2,433 ) (1,343 )
Total Adjusted EBITDA $ 228,335   $ 204,760  

NATIONAL FUEL GAS COMPANY

AND SUBSIDIARIES

NON-GAAP FINANCIAL MEASURES

SEGMENT ADJUSTED EBITDA

 
Three Months Ended
December 31,
(in thousands) 2016   2015

Exploration and Production Segment

Reported GAAP Earnings $ 35,080 $ (237,086 )
Depreciation, Depletion and Amortization 29,053 44,033
Interest and Other Income (86 ) (667 )
Interest Expense 13,523 14,582
Income Taxes 24,906 (169,855 )
Impairment of Oil and Gas Producing Properties 435,451
Joint Development Agreement Professional Fees   4,682  
Adjusted EBITDA $ 102,476   $ 91,140  
 

Pipeline and Storage Segment

Reported GAAP Earnings $ 19,368 $ 21,276
Depreciation, Depletion and Amortization 9,662 10,256
Interest and Other Income (959 ) (1,693 )
Interest Expense 8,347 8,038
Income Taxes 11,596   12,864  
Adjusted EBITDA $ 48,014   $ 50,741  
 

Gathering Segment

Reported GAAP Earnings $ 10,981 $ 4,921
Depreciation, Depletion and Amortization 3,880 4,210
Interest and Other Income (147 ) (35 )
Interest Expense 2,093 3,070
Income Taxes 8,294   4,292  
Adjusted EBITDA $ 25,101   $ 16,458  
 

Utility Segment

Reported GAAP Earnings $ 21,175 $ 18,606
Depreciation, Depletion and Amortization 13,102 11,618
Interest and Other Income (226 ) (782 )
Interest Expense 7,198 7,334
Income Taxes 11,082   9,142  
Adjusted EBITDA $ 52,331   $ 45,918  
 

Energy Marketing Segment

Reported GAAP Earnings $ 1,782 $ 1,223
Depreciation, Depletion and Amortization 70 70
Interest and Other Income (137 ) (60 )
Interest Expense 13 19
Income Taxes 1,118   594  
Adjusted EBITDA $ 2,846   $ 1,846  
 

Corporate and All Other

Reported GAAP Earnings $ 522 $ 1,951
Depreciation, Depletion and Amortization 429 364
Interest and Other Income (1,659 ) (980 )
Interest Expense (1,161 ) (1,291 )
Income Taxes (564 ) (1,387 )
Adjusted EBITDA $ (2,433 ) $ (1,343 )
   
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 
 

Quarter Ended December 31 (unaudited)

2016 2015
 
Operating Revenues $ 422,500,000   $ 375,195,000  
 
Net Income (Loss) Available for Common Stock $ 88,908,000   $ (189,109,000 )
 
Earnings (Loss) Per Common Share:
Basic $ 1.04   $ (2.23 )
Diluted $ 1.04   $ (2.23 )
 
Weighted Average Common Shares:
Used in Basic Calculation 85,189,851   84,651,233  
Used in Diluted Calculation 85,797,989   84,651,233  
 

Twelve Months Ended December 31 (unaudited)

 
Operating Revenues $ 1,499,721,000   $ 1,612,199,000  
 
Net Income (Loss) Available for Common Stock $ (12,941,000 ) $ (653,276,000 )
 
Earnings (Loss) Per Common Share:
Basic $ (0.15 ) $ (7.73 )
Diluted $ (0.15 ) $ (7.73 )
 
Weighted Average Common Shares:
Used in Basic Calculation 84,983,380   84,499,299  
Used in Diluted Calculation 84,983,380   84,499,299  

Source: National Fuel Gas Company

National Fuel Gas Company

Analyst:

Brian M. Welsch, 716-857-7875

or

Media:

Karen L. Merkel, 716-857-7654

Transfer Agent and Plan Administrator

EQ Shareowner Services (1)

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


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

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

Disclosure: Caution Concerning Forward-Looking Statements

National Fuel Gas Company is including the following cautionary statement in this corporate website to make applicable and take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for any forward-looking statements made by, or on behalf of, the Company.

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

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

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

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

The Company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date thereof.