Commentary on this conference call may contain forward-looking statements within the meaning of the federal securities laws. National Fuel Gas Company (the “Company”) is providing this cautionary statement to make applicable and take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for any forward-looking statements made by, or on behalf of, the Company.

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

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

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

  1. Delays or changes in costs or plans with respect to Company projects or related projects of other companies, including difficulties or delays in obtaining necessary governmental approvals, permits or orders or in obtaining the cooperation of interconnecting facility operators;
  2. Governmental/regulatory actions, initiatives and proceedings, including those involving rate cases (which address, among other things, target rates of return, rate design and retained natural gas), environmental/safety requirements, affiliate relationships, industry structure, and franchise renewal;
  3. Changes in laws, regulations or judicial interpretations to which the Company is subject, including those involving derivatives, taxes, safety, employment, climate change, other environmental matters, real property, and exploration and production activities such as hydraulic fracturing;
  4. 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 potential 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 Increasing costs of insurance, changes in coverage and the ability to obtain insurance.

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

02/01/2018

WILLIAMSVILLE, N.Y., Feb. 01, 2018 (GLOBE NEWSWIRE) -- National Fuel Gas Company (“National Fuel” or the “Company”) (NYSE:NFG) today announced consolidated results for the first quarter of its 2018 fiscal year.

FISCAL 2018 FIRST QUARTER SUMMARY

  • Consolidated net income of $198.7 million, or $2.30 per share, compared to $88.9 million, or $1.04 per share, in the prior year first quarter
  • Excluding the $111.0 million, or $1.29 per share, reduction in tax expense due to the remeasurement of deferred taxes,  Adjusted Operating Results for the quarter were $87.7 million, or $1.02 per share (see non-GAAP reconciliation on page 21 and discussion of federal tax reform on page 2)
  • Realized net earnings benefit for the quarter of $9.5 million, or $0.11 per share, due to the reduction in the fiscal 2018 federal statutory rate from 2017 Tax Reform Act (see discussion on page 2)
  • Consolidated Adjusted EBITDA of $197.8 million (non-GAAP reconciliation on page 21)
  • Net natural gas and oil production of 40.1 Bcfe
  • Price-related natural gas production curtailments of 1.2 Bcf in Appalachia
  • Average natural gas prices, after the impact of hedging, of $2.72 per Mcf, down $0.25 per Mcf from the prior year
  • Average oil prices, after the impact of hedging, of $59.79 per Bbl, up $5.08 per Bbl from the prior year
  • Weather in Utility segment's Pennsylvania utility service territory 15.9% colder than last year

MANAGEMENT COMMENTS

Ronald J. Tanski, President and Chief Executive Officer of National Fuel Gas Company, stated: “Our 2018 fiscal year is off to a strong start. Operationally, our Utility and Pipeline and Storage subsidiaries entered the winter heating season prepared to provide our customers and service territories with safe and reliable natural gas services.  As expected, operating income in our Exploration and Production segment dipped as older natural gas sales and hedge contracts with more favorable prices continued to expire and production in Seneca’s Eastern Development Area followed its normal production curve.  After adding a second rig in 2017 and, in January, connecting the first new Marcellus pad in our Eastern Development Area since 2016, we expect production to increase in the second quarter as we resume our targeted path of measured production growth.

“Perhaps the biggest development in the quarter was the passing of federal tax reform, which we believe will positively impact our business, our shareholders, and our customers. The reduction in the federal tax rate should increase the Company’s earnings and cash flows over the long-term, freeing up shareholder capital to be reinvested into growing our business.  We also expect the reduction in the federal tax rate will ultimately benefit our utility and pipeline and storage customers, as well as thousands of Western New York and northwestern Pennsylvania residents and businesses.  We look forward to working with our regulators to evaluate the impact of these positive changes.”

DISCUSSION OF FEDERAL INCOME TAX REFORM

On December 22, 2017, the “Tax Cuts and Jobs Act” (the 2017 Tax Reform Act) was enacted, which made significant changes to the taxation of business entities and included provisions that materially impacted the Company’s financial statements. The most significant change was the reduction in the statutory corporate tax rate from 35 percent to 21 percent.  As a fiscal year tax payer, the Company is required to use a blended statutory federal tax rate of 24.5 percent for fiscal 2018, including the first quarter ended December 31, 2017.  The Company’s income will be taxed at the new 21 percent statutory federal tax rate in fiscal 2019 and beyond.

Excluding the impact on deferred income taxes (discussed below), the reduction in the statutory federal tax rate from 35 percent to 24.5 percent resulted in a benefit of $13.9 million, or $0.16 per share, on the Company’s consolidated first quarter earnings.  Consistent with utility rate treatment implemented after previous federal tax reforms, the Company recorded a $6.0 million regulatory refund provision ($4.4 million after-tax, or $0.05 per share) that reduced the Utility segment’s operating revenues and deferred the net effect of the reduction in tax rates by increasing the segment’s regulatory liability.  The following summarizes the impact of the federal tax rate reduction, excluding the impact on deferred income taxes, on first quarter fiscal 2018 earnings by segment:

(in millions) Benefit of
Tax Rate
Reduction
 Regulatory
Refund
Provision
 Net Benefit on
Q1 FY18
Earnings
Exploration and Production $4.1  $  $4.1 
Pipeline and Storage 3.5    3.5 
Gathering 1.6    1.6 
Utility 4.4  (4.4)  
Energy Marketing 0.2    0.2 
Corporate and All Other 0.1    0.1 
Total Company $13.9  $(4.4) $9.5 
             

Additionally, the Company’s deferred income taxes were remeasured as of September 30, 2017, based on the new statutory federal tax rate.  For non-rate regulated activities, the net decrease in the Company’s deferred income tax liability was recorded as a reduction to income tax expense, benefiting first quarter earnings by $111.0 million, or $1.29 per share.  For the rate regulated activities of the Utility and Pipeline and Storage segments, the change in deferred income taxes was recorded as a $65.7 million decrease in recoverable future taxes and a $271.0 million increase in taxes refundable to customers.  The 2017 Tax Reform Act includes provisions that stipulate how excess deferred income taxes related to certain accelerated depreciation benefits, which make up substantially all of the regulatory liability, are to be passed back to customers.  Potential refunds of other deferred income taxes will be determined by the federal and state regulatory agencies.  The following summarizes the impact and regulatory accounting treatment of the remeasurement of deferred income taxes by segment:

(in millions) Decrease /
(Increase) in
Income Tax
 Decrease in
Recoverable
Future Taxes
 Increase in
Taxes
Refundable to
Customers
 Net Reduction
of Deferred
Income Taxes
Exploration and Production $77.3  $  $  $77.3 
Pipeline and Storage 14.1  4.4  141.0  159.5 
Gathering 34.9      34.9 
Utility   61.3  130.0  191.3 
Energy Marketing (0.2)     (0.2)
Corporate and All Other (15.1)     (15.1)
Total Company $111.0  $65.7  $271.0  $447.7 
                 

The 2017 Tax Reform Act also repealed the corporate alternative minimum tax (AMT) and provides that the Company’s existing AMT credit carryovers are refundable beginning in fiscal 2019.  As of December 31, 2017, the Company had $92 million of AMT credit carryovers that are expected to be utilized by or refunded to the Company between fiscal 2019 and fiscal 2022.

DISCUSSION OF RESULTS BY SEGMENT

The following discussion of the earnings of each segment is summarized in a tabular form on pages 8 and 9 of this report.  It may be helpful to refer to those tables while reviewing this discussion.  Note that management defines Adjusted EBITDA as reported GAAP earnings before the following items: interest expense, income taxes, depreciation, depletion and amortization, interest and other income, impairments, and other items reflected in operating income that impact comparability.

Upstream Business

Exploration and Production Segment

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

 Three Months Ended
 December 31,
(in thousands except per share amounts)2017 2016 Variance
Net Income$106,698  $35,080  $71,618 
Net Income Per Share (Diluted)$1.24  $0.41  $0.83 
Adjusted EBITDA$79,495  $102,476  $(22,981)

Excluding the impact of federal tax reform as discussed on page 2, earnings for the Exploration and Production segment declined $9.8 million, as the positive impact of higher realized crude oil prices was more than offset by lower natural gas and crude oil production and a decline in realized natural gas prices.

Seneca’s first quarter net production was 40.1 billion cubic feet equivalent (“Bcfe”), a decrease of 4.8 Bcfe, or 11 percent, from the prior year, and a decrease of 0.2 Bcfe, or 1 percent, versus the fiscal 2017 fourth quarter.  Net natural gas production decreased 4.5 billion cubic feet (“Bcf”) versus the prior year due mainly to natural declines from Marcellus wells in the Eastern Development Area (“EDA”) where the Company last brought on a new development pad in fiscal 2016, offset partially by higher net production in the Western Development Area (“WDA”) from new Marcellus and Utica wells completed and connected to sales during the past year.  As a result of depressed local daily spot prices in Pennsylvania, Seneca voluntarily curtailed an estimated 1.2 Bcf of net natural gas production during the first quarter.

Seneca’s oil production decreased 48 thousand barrels ("Mbbl"), or 7 percent, versus the prior year and was relatively flat when compared to the fiscal 2017 fourth quarter.  The year over year decrease in production was largely due to the lagging impact of a significant reduction in well workover activity in California over the last few years in response to low crude oil prices, as well as modifications made to steam operations at the Midway Sunset fields.  Over the past two quarters, Seneca has seen a steady improvement in production levels at North and South Midway Sunset as the Company has recently increased workover activity and the fields continue to respond favorably to steaming operations.  Seneca also temporarily shut-in production at its Sespe field in Ventura County, California for a short period due to the wildfires that affected the region during the quarter.

Seneca's average realized natural gas price, after the impact of hedging and all marketing and transportation costs, was $2.72 per thousand cubic feet ("Mcf"), a decrease of $0.25 per Mcf from the prior year.  The decline in Seneca’s realized natural gas price is primarily attributable to the expiration of physical firm sales and financial hedge contracts over the past 12 months that had favorable pricing relative to current market prices and hedge book. Seneca's average realized oil price, after the impact of hedging, was $59.79 per barrel ("Bbl"), an increase of $5.08 per Bbl.  The improvement in oil price realizations was due primarily to higher market prices for West Texas Intermediate (WTI) crude oil during the quarter and stronger price differentials relative to WTI at local sales points in California.

Lease operating and transportation expense (“LOE”) was relatively flat when compared to the prior year as the impact of lower natural gas production in Appalachia, which resulted in lower gathering and other variable operating costs, was offset by  an increase in well workover activities as well as higher steam volumes at South Midway Sunset in California.  Depreciation, depletion and amortization (“DD&A”) expense decreased $1.6 million as the impact of lower production was slightly offset by a higher per unit DD&A rate, which increased by $0.03 per thousand cubic feet equivalent (“Mcfe”) to $0.68 per Mcfe due mainly to a higher depletable fixed asset balance at December 31, 2017.

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)2017 2016 Variance
Net Income$38,462  $19,368  $19,094 
Net Income Per Share (Diluted)$0.45  $0.23  $0.22 
Adjusted EBITDA$50,773  $48,014  $2,759 

Excluding the impacts of federal tax reform as discussed on page 2, the Pipeline and Storage segment’s earnings increased $1.5 million due to lower Operation and Maintenance (“O&M”) expense, which was partially offset by an increase in DD&A expense.  O&M expense decreased $2.9 million compared to the prior year first quarter due mostly to lower pension and post-retirement benefit expenses and a decrease in the reserve for preliminary engineering costs on projects in development.

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)2017 2016 Variance
Net Income$45,400  $10,981  $34,419 
Net Income Per Share (Diluted)$0.53  $0.13  $0.40 
Adjusted EBITDA$20,731  $25,101  $(4,370)

Excluding the impacts of federal tax reform as discussed on page 2, the Gathering segment’s earnings decreased $2.0 million versus the prior year first quarter due mainly to lower operating revenues. Operating revenues declined $4.0 million due primarily to lower throughput from Seneca, which decreased by 7.4 Bcf versus the prior year.  Most of the decrease in throughput occurred on Midstream Corporation’s Covington (Tioga Co., Pa.) and Trout Run (Lycoming Co., Pa.) gathering systems, which serve producing areas where Seneca did not add any new wells over the last year and have been subject to price-related production curtailments.   In 2017, Seneca resumed development activities on its Lycoming Co., Pa. acreage. Production from new wells is expected to help increase Trout Run system throughput starting in the second quarter of fiscal 2018.

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)2017 2016 Variance
Net Income$20,993  $21,175  $(182)
Net Income Per Share (Diluted)$0.24  $0.25  $(0.01)
Adjusted EBITDA$46,985  $52,331  $(5,346)

Excluding the impact of federal tax reform as discussed on page 2, the Utility segment’s earnings were relatively flat versus the prior year as the impact of colder weather and new customer rates in Distribution’s New York service territory (effective in April 2017) was offset by an increase in O&M expense.  Weather in Distribution’s Pennsylvania service territory was 15.9 percent colder on average than last year, resulting in higher 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 nearly $1.0 million due mainly to higher amortization of environmental remediation costs that resulted from the April 2017 rate case order in New York.

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)2017 2016 Variance
Net Income$1,046  $1,782  $(736)
Net Income Per Share (Diluted)$0.01  $0.02  $(0.01)
Adjusted EBITDA$1,680  $2,846  $(1,166)

The $0.7 million decrease in the Energy Marketing segment’s first quarter earnings was primarily attributable to lower customer margins. NFR’s customer margins were negatively impacted by stronger natural gas prices at local purchase points relative to NYMEX-based customer sales contracts.

Corporate and All Other

For the first quarter of fiscal 2018, the Corporate and All Other category had a net loss of $13.9 million compared to net income of $0.5 million in the prior year first quarter.  The decrease in earnings was primarily attributable to the non-cash $15.1 million loss recorded to remeasure certain deferred tax assets resulting from federal tax reform.

GUIDANCE

National Fuel is revising its fiscal 2018 earnings guidance to $3.20 to $3.40 per share, or $3.30 per share at the midpoint of the range.  The revised earnings guidance does not include the impact of the remeasurement of deferred income taxes resulting from the 2017 Tax Reform Act, which reduced the Company’s consolidated income tax expense and benefited earnings for the three months ended December 31, 2017 by $111.0 million, or $1.29 per share.  While the Company expects to record additional adjustments to its deferred income taxes as a result of the 2017 Tax Reform Act during the remaining nine months of fiscal 2018, the amounts of these and other potential adjustments are not reasonably determinable at this time.  The final determination of the impact of the income tax effects of certain items will require additional analysis and further interpretation of the 2017 Tax Reform Act from yet to be issued U.S. Treasury regulations, state income tax guidance, federal and state regulatory guidance, and technical corrections.  Some or all of these factors may be significant.  Because the amounts of final adjustments are not reasonably determinable at this time, the Company is unable to provide earnings guidance other than on a non-GAAP basis that excludes the impact of the remeasurement of deferred income taxes and other potential adjustments.

The revised earnings guidance range reflects the impact of actual results for the three months ended December 31, 2017, the impact of lower federal income tax rates on fiscal 2018 income, and other updates to key forecast assumptions, including revisions to the Exploration and Production segment’s forecasted production, natural gas and oil pricing, and operating expense assumptions, as outlined in the table below.

The Exploration and Production segment’s fiscal 2018 forecasted production was reduced by 5 Bcfe at the midpoint of the range to reflect first quarter actual production, which was negatively impacted by 1.2 Bcf of voluntary price-related natural gas curtailments and approximately 2 Bcf of unforecasted operational natural gas curtailments, and adjustments made to Seneca’s operations schedule in Appalachia that pushed a portion of fiscal 2018 production to fiscal 2019.

Excluding the impact of the remeasurement of deferred income taxes, the Company expects that the reduction in the statutory federal tax rate from 35 percent to 24.5 percent will lower the Company’s effective income tax rate for fiscal 2018 to approximately 27 percent. Furthermore, consistent with utility rate treatment implemented after previous tax reforms, the Company expects to record a regulatory refund provision of approximately $16.0 million in fiscal 2018 to reduce the Utility segment’s operating revenues and defer the net effect of the reduction in tax rates by increasing the segment’s regulatory liability. The Company recorded a $6.0 million ($4.4 million after-tax) regulatory refund provision in the first quarter.  The Company’s earnings guidance, including the impact from the Utility segment’s projected regulatory refund provision, assumes normal weather.

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

        
  Updated FY 2018 Guidance    Previous FY 2018 Guidance
Consolidated Earnings per Share (1) $3.20 to $3.40    $2.75 to $3.05
        
Consolidated Effective Tax Rate (1) ~27%    ~38%
        
Capital Expenditures (Millions)       
Exploration and Production (2) $300 - $330    $275 - $325
Pipeline and Storage $110 - $140    $110 - $140
Gathering $60 - $80    $60 - $80
Utility $90 - $100    $90 - $100
Consolidated Capital Expenditures $560 - $650    $535 - $645
        
Exploration & Production Segment Guidance       
        
Commodity Price Assumptions       
NYMEX natural gas price $3.00 /MMBtu    $3.00 /MMBtu
Appalachian basin spot price (winter/summer) $2.40/$2.00 /MMBtu    $2.40 /MMBtu
NYMEX (WTI) crude oil price $60.00 /Bbl    $50.00 /Bbl
California oil price (% of WTI) 98%    95%
        
Production (Bcfe)       
East Division - Appalachia (3) 160 to 175    165 to 180
West Division - California ~ 20    ~ 20
Total Production 180 to 195    185 to 200
        
E&P Operating Costs ($/Mcfe)       
LOE $0.90 - $1.00    $0.90 - $1.00
G&A $0.30 - $0.35    $0.30 - $0.35
DD&A ~ $0.70    $0.65 - $0.70
        
Other Business Segment Guidance (Millions)       
Gathering Segment Revenues $110 - $120    $115 - $125
Pipeline and Storage Segment Revenues ~$295    ~$295
Utility Segment Regulatory Refund Provision ~$16    $0

 

(1)   Excludes earnings impact of the remeasurement of deferred income taxes resulting from the 2017 Tax Reform Act.
(2)   Net of conveyance proceeds received from joint development partner for working interest in joint development wells.
(3)   Seneca East Division - Appalachia production guidance assumes approximately 17.5 Bcf of spot sales in FY18.

EARNINGS TELECONFERENCE

The Company will host a conference call on Friday, February 2, 2018, at 11 a.m. Eastern Time to discuss this announcement.  There are two ways to access this call.  For those with Internet access, visit the NFG Investor Relations News & Events page at National Fuel’s website at investor.nationalfuelgas.com.  For those without Internet access, audio access is also provided by dialing (toll-free) 833-287-0795, using conference ID number “8999277.”  For those unable to listen to the live conference call, an audio replay will be available approximately two hours following the teleconference at the same website link and by phone at (toll-free) 800-585-8367 using conference ID number “8999277.”  Both the webcast and a telephonic replay will be available until the close of business on Friday, February 9, 2018.

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.

Analyst Contact:Brian M. Welsch716-857-7875
Media Contact:Karen L. Merkel716-857-7654

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

              
NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS
QUARTER ENDED DECEMBER 31, 2017
(Unaudited)
              
              
 Upstream Midstream
Businesses
 Downstream
Businesses
    
              
 Exploration & Pipeline &     Energy Corporate /  
(Thousands of Dollars)Production Storage Gathering Utility Marketing All Other Consolidated*
              
First quarter 2017 GAAP earnings$35,080  $19,368  $10,981  $21,175  $1,782  $522  $88,908 
              
Earnings drivers**             
Higher (lower) crude oil prices2,218            2,218 
Higher (lower) natural gas prices(5,951)           (5,951)
Higher (lower) natural gas production(8,641)           (8,641)
Higher (lower) crude oil production(1,726)           (1,726)
Lower (higher) depreciation / depletion1,059  (607) (135)       317 
              
Higher (lower) gathering and processing revenues    (2,619)       (2,619)
Lower (higher) other operating expenses(588) 1,903  (203) (696)     416 
              
Colder weather      1,241      1,241 
Impact of new rates      1,021      1,021 
Regulatory true-up adjustments      (1,213)     (1,213)
              
Higher (lower) margins        (761) 352  (409)
              
(Higher) lower interest expense  306          306 
              
Lower (higher) income tax expense / effective tax rate3,870    949        4,819 
              
Impact of 2017 Tax Reform Act             
Impact of tax rate change (35% to 24.5%) on current period earnings4,094  3,527  1,544  4,406  183  111  13,865 
Refund provision on tax rate change      (4,406)     (4,406)
Remeasurement of deferred income taxes under
2017 Tax Reform
77,300  14,100  34,900    (200) (15,100) 111,000 
              
All other / rounding(17) (135) (17) (535) 42  170  (492)
First quarter 2018 GAAP earnings$106,698  $38,462  $45,400  $20,993  $1,046  $(13,945) $198,654 
              
* Amounts do not reflect intercompany eliminations
** Earnings drivers have been calculated using a 35% federal statutory rate. The impact of the change to a blended year 24.5% federal statutory rate is broken out separately under the caption "Impact of 2017 Tax Reform Act."

 

NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS PER SHARE
QUARTER ENDED DECEMBER 31, 2017
(Unaudited)
               
  Upstream Midstream
Businesses
 Downstream
Businesses
    
               
  Exploration & Pipeline &     Energy Corporate /  
  Production Storage Gathering Utility Marketing All Other Consolidated*
               
First quarter 2017 GAAP earnings $0.41  $0.23  $0.13  $0.25  $0.02  $  $1.04 
               
Earnings drivers**              
Higher (lower) crude oil prices 0.03            0.03 
Higher (lower) natural gas prices (0.07)           (0.07)
Higher (lower) natural gas production (0.10)           (0.10)
Higher (lower) crude oil production (0.02)           (0.02)
Lower (higher) depreciation / depletion 0.01  (0.01)          
               
Higher (lower) gathering and processing revenues     (0.03)       (0.03)
Lower (higher) other operating expenses (0.01) 0.02    (0.01)      
               
Colder weather       0.01      0.01 
Impact of new rates       0.01      0.01 
Regulatory true-up adjustments       (0.01)     (0.01)
               
Higher (lower) margins         (0.01)   (0.01)
               
(Higher) lower interest expense              
               
Lower (higher) income tax expense / effective tax rate 0.04    0.01        0.05 
               
Impact of 2017 Tax Reform Act              
Impact of tax rate change (35% to 24.5%) on current period earnings 0.05  0.04  0.02  0.05      0.16 
Refund provision on tax rate change       (0.05)     (0.05)
Remeasurement of deferred income taxes under
2017 Tax Reform
 0.90  0.16  0.40      (0.17) 1.29 
               
All other / rounding   0.01    (0.01)      
First quarter 2018 GAAP earnings $1.24  $0.45  $0.53  $0.24  $0.01  $(0.17) $2.30 
               
* Amounts do not reflect intercompany eliminations
** Earnings drivers have been calculated using a 35% federal statutory rate. The impact of the change to a blended year 24.5% federal statutory rate is broken out separately under the caption "Impact of 2017 Tax Reform Act."

 

     
     
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
     
(Thousands of Dollars, except per share amounts)    
 Three Months Ended 
 December 31, 
 (Unaudited) 
SUMMARY OF OPERATIONS2017 2016 
Operating Revenues:    
Utility and Energy Marketing Revenues$225,725  $207,780  
Exploration and Production and Other Revenues140,450  161,694  
Pipeline and Storage and Gathering Revenues53,480  53,026  
 419,655  422,500  
Operating Expenses:    
Purchased Gas94,034  70,243  
Operation and Maintenance:    
Utility and Energy Marketing51,369  50,422  
Exploration and Production and Other35,542  30,461  
Pipeline and Storage and Gathering20,037  22,660  
Property, Franchise and Other Taxes20,848  20,379  
Depreciation, Depletion and Amortization55,830  56,196  
 277,660  250,361  
     
Operating Income141,995  172,139  
     
Other Income (Expense):    
Interest Income2,249  1,600  
Other Income1,722  1,614  
Interest Expense on Long-Term Debt(28,087) (29,103) 
Other Interest Expense(502) (910) 
     
Income Before Income Taxes117,377  145,340  
     
Income Tax Expense (Benefit)(81,277) 56,432  
     
Net Income Available for Common Stock$198,654  $88,908  
     
Earnings Per Common Share    
Basic$2.32  $1.04  
Diluted$2.30  $1.04  
     
Weighted Average Common Shares:    
Used in Basic Calculation85,630,296
  85,189,851
  
Used in Diluted Calculation86,325,537
  85,797,989
  
     

 

NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
  
 December 31, September 30,
(Thousands of Dollars)2017
 2017
    
ASSETS   
Property, Plant and Equipment$10,023,252  $9,945,560 
Less - Accumulated Depreciation, Depletion and Amortization 5,294,211   5,271,486 
Net Property, Plant and Equipment 4,729,041   4,674,074 
    
Current Assets:   
Cash and Temporary Cash Investments 166,289   555,530 
Hedging Collateral Deposits 4,465   1,741 
Receivables - Net 161,029   112,383 
Unbilled Revenue 74,790   22,883 
Gas Stored Underground 24,139   35,689 
Materials and Supplies - at average cost 35,139   33,926 
Unrecovered Purchased Gas Costs 7,787   4,623 
Other Current Assets 47,914   51,505 
Total Current Assets 521,552   818,280 
    
Other Assets:   
Recoverable Future Taxes 116,792   181,363 
Unamortized Debt Expense 8,148   1,159 
Other Regulatory Assets 174,577   174,433 
Deferred Charges 34,063   30,047 
Other Investments 123,368   125,265 
Goodwill 5,476   5,476 
Prepaid Post-Retirement Benefit Costs 57,054   56,370 
Fair Value of Derivative Financial Instruments 21,107   36,111 
Other 754   742 
Total Other Assets 541,339   610,966 
Total Assets$5,791,932  $6,103,320 
    
CAPITALIZATION AND LIABILITIES   
Capitalization:   
Comprehensive Shareholders' Equity   
Common Stock, $1 Par Value Authorized - 200,000,000 Shares; Issued and   
Outstanding - 85,760,846 Shares and 85,543,125 Shares, Respectively$85,761  $85,543 
Paid in Capital 800,348   796,646 
Earnings Reinvested in the Business 1,014,733   851,669 
Accumulated Other Comprehensive Loss (40,919)  (30,123)
Total Comprehensive Shareholders' Equity 1,859,923   1,703,735 
Long-Term Debt, Net of Current Portion and Unamortized Discount and Debt Issuance Costs 2,084,465   2,083,681 
Total Capitalization 3,944,388   3,787,416 
    
Current and Accrued Liabilities:   
Notes Payable to Banks and Commercial Paper     
Current Portion of Long-Term Debt    300,000 
Accounts Payable 132,409   126,443 
Amounts Payable to Customers 251    
Dividends Payable 35,590   35,500 
Interest Payable on Long-Term Debt 27,962   35,031 
Customer Advances 18,398   15,701 
Customer Security Deposits 22,503   20,372 
Other Accruals and Current Liabilities 121,596   111,889 
Fair Value of Derivative Financial Instruments 6,579   1,103 
Total Current and Accrued Liabilities 365,288   646,039 
    
Deferred Credits:   
Deferred Income Taxes 453,285   891,287 
Taxes Refundable to Customers 366,768   95,739 
Cost of Removal Regulatory Liability 205,554   204,630 
Other Regulatory Liabilities 118,551   113,716 
Pension and Other Post-Retirement Liabilities 125,055   149,079 
Asset Retirement Obligations 106,516   106,395 
Other Deferred Credits 106,527   109,019 
Total Deferred Credits 1,482,256   1,669,865 
Commitments and Contingencies     
Total Capitalization and Liabilities$5,791,932  $6,103,320 

 

NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
  Three Months Ended
  December 31,
(Thousands of Dollars) 2017 2016
     
Operating Activities:    
Net Income Available for Common Stock $198,654  $88,908 
Adjustments to Reconcile Net Income to Net Cash
   Provided by Operating Activities:
    
Depreciation, Depletion and Amortization 55,830  56,196 
Deferred Income Taxes (94,676) 44,852 
Stock-Based Compensation 3,905  2,482 
Other 3,678  3,607 
Change in:    
Hedging Collateral Deposits (2,724) 1,484 
Receivables and Unbilled Revenue (83,357) (67,395)
Gas Stored Underground and Materials and Supplies 10,337  10,597 
Unrecovered Purchased Gas Costs (3,164) (1,257)
Other Current Assets 3,591  9,576 
Accounts Payable 13,173  18,805 
Amounts Payable to Customers 251  (16,306)
Customer Advances 2,697  (983)
Customer Security Deposits 2,131  673 
Other Accruals and Current Liabilities 11,532  5,919 
Other Assets (5,275) (8,389)
Other Liabilities (21,775) (4,122)
Net Cash Provided by Operating Activities $94,808  $144,647 
     
Investing Activities:    
Capital Expenditures $(142,613) $(106,053)
Net Proceeds from Sale of Oil and Gas Producing Properties   5,759 
Other 2,612  (4,297)
Net Cash Used in Investing Activities $(140,001) $(104,591)
     
Financing Activities:    
Reduction of Long-Term Debt $(307,047) $ 
Dividends Paid on Common Stock (35,500) (34,473)
Net Proceeds From Issuance (Repurchase) of Common Stock (1,501) 938 
Net Cash Used in Financing Activities $(344,048) $(33,535)
     
Net Increase (Decrease) in Cash and Temporary Cash Investments (389,241) 6,521 
Cash and Temporary Cash Investments at Beginning of Period 555,530  129,972 
Cash and Temporary Cash Investments at December 31 $166,289  $136,493 

 

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 SEGMENT2017 2016 Variance
Total Operating Revenues$139,141  $160,932  $(21,791)
      
Operating Expenses:     
Operation and Maintenance:     
General and Administrative Expense13,895  12,974  921 
Lease Operating and Transportation Expense39,647  39,708  (61)
All Other Operation and Maintenance Expense2,535  2,552  (17)
Property, Franchise and Other Taxes3,569  3,222  347 
Depreciation, Depletion and Amortization27,425  29,053  (1,628)
 87,071  87,509  (438)
      
Operating Income52,070  73,423
  (21,353)
      
Other Income (Expense):     
Interest Income296  86  210 
Interest Expense(13,374) (13,523) 149 
      
Income Before Income Taxes38,992  59,986  (20,994)
Income Tax Expense (Benefit)(67,706) 24,906  (92,612)
Net Income$106,698  $35,080  $71,618 
      
Net Income Per Share (Diluted)$1.24  $0.41  $0.83 
      

 

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 SEGMENT2017 2016 Variance
Revenues from External Customers$53,310  $53,000  $310 
Intersegment Revenues21,985  22,155  (170)
Total Operating Revenues75,295  75,155  140 
      
Operating Expenses:     
Purchased Gas106  222  (116)
Operation and Maintenance17,316  20,242  (2,926)
Property, Franchise and Other Taxes7,100  6,677  423 
Depreciation, Depletion and Amortization10,596  9,662  934 
 35,118  36,803  (1,685)
      
Operating Income40,177  38,352  1,825 
      
Other Income (Expense):     
Interest Income544  273  271 
Other Income745  686  59 
Interest Expense(7,876) (8,347) 471 
      
Income Before Income Taxes33,590  30,964  2,626 
Income Tax Expense (Benefit)(4,872) 11,596  (16,468)
Net Income$38,462  $19,368  $19,094 
      
Net Income Per Share (Diluted)$0.45  $0.23  $0.22 
      
      
 Three Months Ended
 December 31,
GATHERING SEGMENT2017 2016 Variance
Revenues from External Customers$170  $26  $144 
Intersegment Revenues23,665  27,840  (4,175)
Total Operating Revenues23,835  27,866  (4,031)
      
Operating Expenses:     
Operation and Maintenance3,066  2,754  312 
Property, Franchise and Other Taxes38  11  27 
Depreciation, Depletion and Amortization4,088  3,880  208 
 7,192  6,645  547 
      
Operating Income16,643  21,221  (4,578)
      
Other Income (Expense):     
Interest Income398  146  252 
Other Income  1  (1)
Interest Expense(2,340) (2,093) (247)
      
Income Before Income Taxes14,701  19,275  (4,574)
Income Tax Expense (Benefit)(30,699) 8,294  (38,993)
Net Income$45,400  $10,981  $34,419 
      
Net Income Per Share (Diluted)$0.53  $0.13  $0.40 
      

 

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 SEGMENT2017 2016 Variance
Revenues from External Customers$187,089  $170,971  $16,118 
Intersegment Revenues2,182  1,826  356 
Total Operating Revenues189,271  172,797  16,474 
      
Operating Expenses:     
Purchased Gas81,924  60,732  21,192 
Operation and Maintenance50,482  49,529  953 
Property, Franchise and Other Taxes9,880  10,205  (325)
Depreciation, Depletion and Amortization13,325  13,102  223 
 155,611  133,568  22,043 
      
Operating Income33,660  39,229  (5,569)
      
Other Income (Expense):     
Interest Income305  134  171 
Other Income169  92  77 
Interest Expense(6,837) (7,198) 361 
      
Income Before Income Taxes27,297  32,257  (4,960)
Income Tax Expense6,304  11,082  (4,778)
Net Income$20,993  $21,175  $(182)
      
Net Income Per Share (Diluted)$0.24  $0.25  $(0.01)
      
      
 Three Months Ended
 December 31,
ENERGY MARKETING SEGMENT2017 2016 Variance
Revenues from External Customers$38,636  $36,809  $1,827 
Intersegment Revenues126  19  107 
Total Operating Revenues38,762  36,828  1,934 
      
Operating Expenses:     
Purchased Gas35,445  32,339  3,106 
Operation and Maintenance1,637  1,643  (6)
Depreciation, Depletion and Amortization69  70  (1)
 37,151  34,052  3,099 
      
Operating Income1,611  2,776  (1,165)
      
Other Income (Expense):     
Interest Income134  134   
Other Income3  3   
Interest Expense(11) (13) 2 
      
Income Before Income Taxes1,737  2,900  (1,163)
Income Tax Expense691  1,118  (427)
Net Income$1,046  $1,782  $(736)
      
Net Income Per Share (Diluted)$0.01  $0.02  $(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 OTHER2017 2016 Variance
Total Operating Revenues$1,096  $554  $542 
Operating Expenses:     
Operation and Maintenance324  516  (192)
Property, Franchise and Other Taxes144  143  1 
Depreciation, Depletion and Amortization139  241  (102)
 607  900  (293)
      
Operating Income (Loss)489  (346) 835 
Other Income (Expense):     
Interest Income72  39  33 
      
Income (Loss) Before Income Taxes561  (307) 868 
Income Tax Expense (Benefit)1,280  (128) 1,408 
Net Loss$(719) $(179) $(540)
      
Net Income (Loss) Per Share (Diluted)$(0.01) $  $(0.01)
      
      
 Three Months Ended
 December 31,
CORPORATE2017 2016 Variance
Revenues from External Customers$213  $208  $5 
Intersegment Revenues1,000  976  24 
Total Operating Revenues1,213  1,184  29 
Operating Expenses:     
Operation and Maintenance3,563  3,391  172 
Property, Franchise and Other Taxes117  121  (4)
Depreciation, Depletion and Amortization188  188   
 3,868  3,700  168 
      
Operating Loss(2,655) (2,516) (139)
      
Other Income (Expense):     
Interest Income31,819  31,805  14 
Other Income805  832  (27)
Interest Expense on Long-Term Debt(28,087) (29,103) 1,016 
Other Interest Expense(1,383) (753) (630)
      
Income Before Income Taxes499  265  234 
Income Tax Expense (Benefit)13,725  (436) 14,161 
Net Income (Loss)$(13,226) $701  $(13,927)
      
Net Income (Loss) Per Share (Diluted)$(0.16) $  $(0.16)
      
      
 Three Months Ended
 December 31,
INTERSEGMENT ELIMINATIONS2017 2016 Variance
Intersegment Revenues$(48,958) $(52,816) $3,858 
Operating Expenses:     
Purchased Gas(23,441) (23,050) (391)
Operation and Maintenance(25,517) (29,766) 4,249 
 (48,958) (52,816) 3,858 
      
Operating Income     
      
Other Income (Expense):     
Interest Income(31,319) (31,017) (302)
Interest Expense31,319  31,017  302 
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
 2017 2016 (Decrease)
      
Capital Expenditures:     
Exploration and Production$74,725 (1)(2)$40,689 (3)(4)$34,036 
Pipeline and Storage22,274 (1)(2)25,392 (3)(4)(3,118)
Gathering12,931 (1)(2)11,344 (3)(4)1,587 
Utility16,535 (1)(2)17,052 (3)(4)(517)
Energy Marketing18  7  11 
Total Reportable Segments126,483  94,484  31,999 
All Other1  39  (38)
Corporate29  60  (31)
Total Capital Expenditures$126,513  $94,583  $31,930 
            

(1) Capital expenditures for the three months ended December 31, 2017, include accounts payable and accrued liabilities related to capital expenditures of $37.1 million, $10.7 million, $4.7 million, and $3.6 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, 2017, since they represent non-cash investing activities at that date.

(2) Capital expenditures for the three months ended December 31, 2017, exclude capital expenditures of $36.5 million, $25.1 million, $3.9 million and $6.7 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, 2017 and paid during the three months ended December 31, 2017.  These amounts were excluded from the Consolidated Statement of Cash Flows at September 30, 2017, 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, 2017.

(3) 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.

(4) 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.

          
DEGREE DAYS         
          
       Percent Colder
       (Warmer) Than:
Three Months Ended December 31Normal 2017 2016   Normal (1) Last Year (1)
          
Buffalo, NY2,253 2,227 1,966 (1.2) 13.3
Erie, PA2,044 2,029 1,750 (0.7) 15.9
          

(1) Percents compare actual 2017 degree days to normal degree days and actual 2017 degree days to actual 2016 degree days.

       
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
       
EXPLORATION AND PRODUCTION INFORMATION
       
       
  Three Months Ended
  December 31,
      Increase
  2017 2016 (Decrease)
       
Gas Production/Prices:      
Production (MMcf)      
Appalachia 35,414  39,807  (4,393)
West Coast 695  776  (81)
Total Production 36,109  40,583  (4,474)
       
Average Prices (Per Mcf)      
Appalachia $2.35  $2.35  $ 
West Coast 5.00  4.24  0.76 
Weighted Average 2.40  2.39  0.01 
Weighted Average after Hedging 2.72  2.97  (0.25)
       
Oil Production/Prices:      
Production (Thousands of Barrels)      
Appalachia 1    1 
West Coast 672  721  (49)
Total Production 673  721  (48)
       
Average Prices (Per Barrel)      
Appalachia $43.85  N/M
  N/M
 
West Coast 57.88  $43.69  $14.19 
Weighted Average 57.86  43.82  14.04 
Weighted Average after Hedging 59.79  54.71  5.08 
       
Total Production (Mmcfe) 40,147  44,909  (4,762)
       
Selected Operating Performance Statistics:      
General & Administrative Expense per Mcfe (1) $0.35  $0.29  $0.06 
Lease Operating and Transportation Expense per Mcfe (1)(2) $0.99  $0.88  $0.11 
Depreciation, Depletion & Amortization per Mcfe (1) $0.68  $0.65  $0.03 
       

N/M - Not Meaningful

(1) Refer to page 13 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 $0.54 and $0.53 per Mcfe for the three months ended December 31, 2017 and December 31, 2016, respectively.

 
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
       
EXPLORATION AND PRODUCTION INFORMATION
 
Hedging Summary for the Remaining Nine Months of Fiscal 2018Volume  Average Hedge Price
Oil Swaps      
Brent 342,000 BBL $63.55 / BBL
NYMEX 1,260,000 BBL $52.67 / BBL
Total 1,602,000 BBL $54.99 / BBL
       
Gas Swaps      
NYMEX 30,780,000 MMBTU $3.17 / MMBTU
DAWN 5,400,000 MMBTU $3.00 / MMBTU
Fixed Price Physical Sales 49,897,980 MMBTU $2.42 / MMBTU
Total 86,077,980 MMBTU $2.73 / MMBTU
       
Hedging Summary for Fiscal 2019 Volume  Average Hedge Price
Oil Swaps      
Brent 612,000 BBL $61.26 / BBL
NYMEX 1,068,000 BBL $53.42 / BBL
Total 1,680,000 BBL $56.28 / BBL
       
Gas Swaps      
NYMEX 46,420,000 MMBTU $3.03 / MMBTU
DAWN 7,200,000 MMBTU $3.00 / MMBTU
Fixed Price Physical Sales 34,502,725 MMBTU $2.48 / MMBTU
Total 88,122,725 MMBTU $2.81 / MMBTU
       
Hedging Summary for Fiscal 2020 Volume  Average Hedge Price
Oil Swaps      
Brent 456,000 BBL $59.16 / BBL
NYMEX 324,000 BBL $50.52 / BBL
Total 780,000 BBL $55.57 / BBL
       
Gas Swaps      
NYMEX 18,640,000 MMBTU $3.04 / MMBTU
DAWN 7,200,000 MMBTU $3.00 / MMBTU
Fixed Price Physical Sales 38,689,152 MMBTU $2.28 / MMBTU
Total 64,529,152 MMBTU $2.58 / MMBTU
       
Hedging Summary for Fiscal 2021 Volume  Average Hedge Price
Oil Swaps      
Brent 300,000 BBL $60.00 / BBL
NYMEX 156,000 BBL $51.00 / BBL
Total 456,000 BBL $56.92 / BBL
       
Gas Swaps      
NYMEX 4,840,000 MMBTU $3.01 / MMBTU
  DAWN 600,000 MMBTU $3.00 / MMBTU
Fixed Price Physical Sales 41,572,469 MMBTU $2.22 / MMBTU
Total 47,012,469 MMBTU $2.31 / MMBTU
       
Hedging Summary for Fiscal 2022 Volume  Average Hedge Price
Oil Swaps      
NYMEX 156,000 BBL $51.00 / BBL
       
Fixed Price Physical Sales 40,567,336 MMBTU $2.23 / MMBTU
       
Hedging Summary for Fiscal 2023 Volume  Average Hedge Price
       
Fixed Price Physical Sales 35,769,734 MMBTU $2.25 / MMBTU
       
Hedging Summary for Fiscal 2024 Volume  Average Hedge Price
       
Fixed Price Physical Sales 20,111,036 MMBTU $2.24 / MMBTU
       
Hedging Summary for Fiscal 2025 Volume  Average Hedge Price
       
Fixed Price Physical Sales 2,293,200 MMBTU $2.18 / MMBTU

 

NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
       
Pipeline & Storage Throughput - (millions of cubic feet - MMcf)
       
  Three Months Ended
  December 31,
      Increase
  2017 2016 (Decrease)
Firm Transportation - Affiliated 34,841  31,607  3,234 
Firm Transportation - Non-Affiliated 171,860  159,174  12,686 
Interruptible Transportation 882  3,046  (2,164)
  207,583  193,827  13,756 
       
Gathering Volume - (MMcf)      
  Three Months Ended
  December 31,
      Increase
  2017 2016 (Decrease)
Gathered Volume - Affiliated 43,162  50,569  (7,407)
       
       
Utility Throughput - (MMcf)      
  Three Months Ended
  December 31,
      Increase
  2017 2016 (Decrease)
Retail Sales:      
Residential Sales 17,847  15,764  2,083 
Commercial Sales 2,596  2,299  297 
Industrial Sales 144  77  67 
  20,587  18,140  2,447 
Off-System Sales 22  173  (151)
Transportation 21,427  19,565  1,862 
  42,036  37,878  4,158 
       
Energy Marketing Volume      
  Three Months Ended
  December 31,
      Increase
  2017 2016 (Decrease)
Natural Gas (MMcf) 11,979  11,127  852 
       

 

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 Adjusted 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 Adjusted Operating Results as reported GAAP earnings before items impacting comparability.  The following table reconciles National Fuel's reported GAAP earnings to Adjusted Operating Results for the three months ended December 31, 2017 and 2016:

  Three Months Ended
  December 31,
(in thousands except per share amounts) 2017 2016
Reported GAAP Earnings $198,654  $88,908 
Items impacting comparability    
Remeasurement of deferred income taxes under 2017 Tax Reform (111,000)  
Adjusted Operating Results $87,654  $88,908 
     
Reported GAAP Earnings per share $2.30  $1.04 
Items impacting comparability    
Remeasurement of deferred income taxes under 2017 Tax Reform (1.29)  
Rounding 0.01   
Adjusted Operating Results per share $1.02  $1.04 
         

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

The following tables reconcile National Fuel's reported GAAP earnings to Adjusted EBITDA for the three months ended December 31, 2017 and 2016:

  Three Months Ended
  December 31,
  2017 2016
(in thousands)    
Reported GAAP Earnings $198,654  $88,908 
Depreciation, Depletion and Amortization 55,830  56,196 
Interest and Other Income (3,971) (3,214)
Interest Expense 28,589  30,013 
Income Taxes (81,277) 56,432 
Adjusted EBITDA $197,825  $228,335 
     
Adjusted EBITDA by Segment    
Pipeline and Storage Adjusted EBITDA $50,773  $48,014 
Gathering Adjusted EBITDA 20,731  25,101 
Total Midstream Businesses Adjusted EBITDA 71,504  73,115 
Exploration and Production Adjusted EBITDA 79,495  102,476 
Utility Adjusted EBITDA 46,985  52,331 
Energy Marketing Adjusted EBITDA 1,680  2,846 
Corporate and All Other Adjusted EBITDA (1,839) (2,433)
Total Adjusted EBITDA $197,825  $228,335 
         

 

NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
NON-GAAP FINANCIAL MEASURES
 SEGMENT ADJUSTED EBITDA
 
  Three Months Ended
  December 31,
(in thousands) 2017 2016
Exploration and Production Segment    
Reported GAAP Earnings $106,698  $35,080 
Depreciation, Depletion and Amortization 27,425  29,053 
Interest and Other Income (296) (86)
Interest Expense 13,374  13,523 
Income Taxes (67,706) 24,906 
Adjusted EBITDA $79,495  $102,476 
     
Pipeline and Storage Segment    
Reported GAAP Earnings $38,462  $19,368 
Depreciation, Depletion and Amortization 10,596  9,662 
Interest and Other Income (1,289) (959)
Interest Expense 7,876  8,347 
Income Taxes (4,872) 11,596 
Adjusted EBITDA $50,773  $48,014 
     
Gathering Segment    
Reported GAAP Earnings $45,400  $10,981 
Depreciation, Depletion and Amortization 4,088  3,880 
Interest and Other Income (398) (147)
Interest Expense 2,340  2,093 
Income Taxes (30,699) 8,294 
Adjusted EBITDA $20,731  $25,101 
     
Utility Segment    
Reported GAAP Earnings $20,993  $21,175 
Depreciation, Depletion and Amortization 13,325  13,102 
Interest and Other Income (474) (226)
Interest Expense 6,837  7,198 
Income Taxes 6,304  11,082 
Adjusted EBITDA $46,985  $52,331 
     
Energy Marketing Segment    
Reported GAAP Earnings $1,046  $1,782 
Depreciation, Depletion and Amortization 69  70 
Interest and Other Income (137) (137)
Interest Expense 11  13 
Income Taxes 691  1,118 
Adjusted EBITDA $1,680  $2,846 
     
Corporate and All Other    
Reported GAAP Earnings $(13,945) $522 
Depreciation, Depletion and Amortization 327  429 
Interest and Other Income (1,377) (1,659)
Interest Expense (1,849) (1,161)
Income Taxes 15,005  (564)
Adjusted EBITDA $(1,839) $(2,433)
         

 

NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
     
     
Quarter Ended December 31 (unaudited) 2017 2016
     
Operating Revenues $419,655,000  $422,500,000 
     
Net Income Available for Common Stock $198,654,000  $88,908,000 
     
Earnings Per Common Share    
Basic $2.32  $1.04 
Diluted $2.30  $1.04 
     
Weighted Average Common Shares:    
Used in Basic Calculation 85,630,296  85,189,851 
Used in Diluted Calculation 86,325,537  85,797,989 
     
Twelve Months Ended December 31 (unaudited)    
     
Operating Revenues $1,577,036,000  $1,499,721,000 
     
Net Income (Loss) Available for Common Stock $393,229,000  $(12,941,000)
     
Earnings (Loss) Per Common Share    
Basic $4.60  $(0.15)
Diluted $4.56  $(0.15)
     
Weighted Average Common Shares:    
Used in Basic Calculation 85,475,937  84,983,380 
Used in Diluted Calculation 86,160,885  84,983,380 
     

 

Brian M. Welsch
Investor Relations
716-857-7875

David P. Bauer
Treasurer
716-857-7318

Primary Logo

 

Source: National Fuel Gas Company

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. Delays or changes in costs or plans with respect to Company projects or related projects of other companies, including difficulties or delays in obtaining necessary governmental approvals, permits or orders or in obtaining the cooperation of interconnecting facility operators;
  2. Governmental/regulatory actions, initiatives and proceedings, including those involving rate cases (which address, among other things, target rates of return, rate design and retained natural gas), environmental/safety requirements, affiliate relationships, industry structure, and franchise renewal;
  3. Changes in laws, regulations or judicial interpretations to which the Company is subject, including those involving derivatives, taxes, safety, employment, climate change, other environmental matters, real property, and exploration and production activities such as hydraulic fracturing;
  4. 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; Increasing health care costs and the resulting effect on health insurance premiums and on the obligation to provide other post-retirement benefits;
  8. 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;
  9. The cost and effects of legal and administrative claims against the Company or activist shareholder campaigns to effect changes at the Company;
  10. Uncertainty of oil and gas reserve estimates;
  11. Significant differences between the Company’s projected and actual production levels for natural gas or oil;
  12. Changes in demographic patterns and weather conditions;
  13. Changes in the availability, price or accounting treatment of derivative financial instruments;
  14. 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;
  15. 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;
  16. The creditworthiness or performance of the Company’s key suppliers, customers and counterparties;
  17. The impact of potential information technology, cybersecurity or data security breaches;
  18. Economic disruptions or uninsured losses resulting from major accidents, fires, severe weather, natural disasters, terrorist activities or acts of war;
  19. Significant differences between the Company’s projected and actual capital expenditures and operating expenses; or
  20. 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.

Investor Relations

NYSE: NFG 57.46 -0.23 -0.4% Volume 316,882 Oct 17, 2018 4:02 PM.