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.

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press-release-details
Press release details

National Fuel Reports Second Quarter Earnings and Provides Operational Update

05/03/2018

WILLIAMSVILLE, N.Y., May 03, 2018 (GLOBE NEWSWIRE) -- National Fuel Gas Company (“National Fuel” or the “Company”) (NYSE:NFG) today announced consolidated results for the second quarter of its 2018 fiscal year and for the six months ended March 31, 2018, and provided an update on the Company's upstream and midstream operations.

FISCAL 2018 SECOND QUARTER SUMMARY

  • GAAP earnings of $91.8 million, or $1.06 per share, compared to $89.3 million, or $1.04 per share, in the prior year
  • Excluding a $4.0 million, or $0.05 per share, adjustment to the initial remeasurement of deferred taxes from federal tax reform, Adjusted Operating Results were $95.8 million, or $1.11 per share (see non-GAAP reconciliation below)
  • Consolidated Adjusted EBITDA of $217.9 million (non-GAAP reconciliation on page 24)
  • Net natural gas and oil production of 46.1 Bcfe, up 1% from the prior year and up 15% from the first quarter
  • Average natural gas prices, after the impact of hedging, of $2.52 per Mcf, down $0.44 per Mcf from the prior year
  • Average oil prices, after the impact of hedging, of $58.31 per Bbl, up $5.39 per Bbl from the prior year
  • Utility segment earnings increased 30% on colder weather in Pennsylvania and new rates in New York
  • Due to the reduction in the fiscal 2018 federal statutory rate as a result of the 2017 Tax Reform Act, the Company realized net earnings benefit for the quarter of $10.3 million, or $0.11 per share
         
         
  Three Months Ended Six Months Ended
  March 31, March 31,
(in thousands except per share amounts) 2018 2017 2018 2017
Reported GAAP Earnings $91,847 $89,284 $290,501  $178,191
Items impacting comparability        
Remeasurement of deferred income taxes under 2017 Tax Reform 4,000  (107,000) 
Adjusted Operating Results $95,847 $89,284 $183,501  $178,191
         
Reported GAAP Earnings per share $1.06 $1.04 $3.37  $2.07
Items impacting comparability        
Remeasurement of deferred income taxes under 2017 Tax Reform $0.05  $(1.24) 
Adjusted Operating Results per share $1.11 $1.04 $2.13  $2.07
 

UPSTREAM AND MIDSTREAM BUSINESS OPERATIONS UPDATE

Earlier this week, the Company’s exploration and production subsidiary, Seneca Resources Corporation (“Seneca”) entered into a precedent agreement with Transcontinental Gas Pipeline Company, LLC (“Transco”) for 300,000 Dekatherms (Dth) per day of new firm transportation capacity.  The incremental capacity will allow Seneca to move natural gas supplies from its Clermont-Rich Valley producing area in the Western Development Area (“WDA”) and its Lycoming County acreage in the Eastern Development Area (“EDA”) to premium markets connected to Zone 6 of Transco’s interstate pipeline system.  Seneca will be an anchor shipper on the to-be-announced Transco project.  While the size, scope, and facilities associated with Transco’s expansion have yet to be finalized, Seneca’s transportation rate is expected to be competitive with other expansion project rates in its current transportation portfolio. The in-service date is anticipated in the first half of fiscal 2022.

In order to provide Seneca with a complete transportation path extending from its WDA to these Zone 6 markets, Transco is expected to lease approximately 300,000 Dth per day of new capacity from National Fuel Gas Supply Corporation (“Supply Corporation”), a pipeline and storage subsidiary of the Company.  The lease is expected to provide Transco with a path from the Company’s Clermont Gathering System in McKean County, Pa., to Supply Corporation’s existing interconnection with Transco in Leidy, Pa.  This new capacity on the Supply Corporation pipeline system is expected to be created via an expansion component that will be added to Supply Corporation’s FM100 Modernization Project. The preliminary cost estimate for the entirety of the FM100 Modernization Project, including the proposed expansion, is approximately $250 million to $300 million. Supply Corporation is currently in the pre-filing process with FERC on the FM100 Modernization Project, which is also expected to upgrade 1950’s era facilities.

National Fuel also remains committed to building its federally authorized Northern Access pipeline project. Northern Access, a planned expansion of the Supply Corporation and Empire Pipeline, Inc. (“Empire”) interstate pipeline systems, will provide Seneca with 490,000 Dth per day of incremental capacity from the WDA in Pennsylvania to diverse markets in New York state, Canada and the Midwest U.S.  Legal challenges relating to the New York State Department of Environmental Conservation’s review of a state environmental permit remain pending.

Seneca has continued to advance its Utica appraisal and optimization program in the WDA.  In the second quarter, Seneca brought on three additional Utica wells off a Marcellus development pad in Clermont-Rich Valley and one Utica appraisal well on its Boone Mountain prospect in Elk County, Pa., approximately 30 miles to the south of the Clermont-Rich Valley area.  Initial production results on the Boone Mountain well were consistent with the best WDA Utica well that Seneca has completed to date and, based on other geologic information, suggests that as much as 160,000 acres in the WDA is economically viable for future Utica shale development.  Much of this Utica position overlaps with Seneca’s core Marcellus acreage, where Seneca has identified as many as 125 well locations on existing Marcellus well pads that allow for the utilization of the Company's Clermont Gathering System. The redevelopment of these locations requires minimal additional investment in gathering infrastructure, which will provide significant uplift to the program's consolidated returns.

Seneca meanwhile continues to make progress on the marketing of its near-term natural gas production, augmenting its existing firm transportation portfolio with firm sales at in-basin receipt points that lock in a significant portion of its projected production volumes at attractive net-back pricing while reducing local spot market exposure.  As Seneca looks to grow into this future firm capacity and capitalize on the Company’s integrated strategy to enhance the consolidated upstream and midstream returns of the Appalachian drilling program, Seneca will add a third horizontal drilling rig to its Appalachian operations in the third quarter of fiscal 2018.  The additional rig will be primarily dedicated to the redevelopment of Seneca’s Clermont-Rich Valley acreage for the Utica Shale.

While the additional drilling rig will not lead to an immediate production increase this fiscal year, Seneca expects now to grow its production at a 15 to 20 percent compound annual growth rate through fiscal 2022, which will also benefit the Gathering segment's throughput.  Due to the minimal gathering capital requirements, as well as Seneca’s existing firm capacity and financial hedge portfolio, peer leading cost structure, and royalty-free economics in the WDA, the Company expects the combined Exploration and Production and Gathering segments to live within cash flows at current natural gas strip pricing over the next three years.  The addition of a third rig is also expected to be accretive to the Appalachian program’s overall consolidated earnings and yield a higher return on invested capital relative to the current two rig activity level, while  providing economies of scale, operational flexibility, and other benefits to drive further efficiencies.

Additionally, on May 1, 2018, Seneca closed on a sale of its Sespe oil and natural gas assets in California for $43 million. The divestiture of Sespe, the Company’s sole asset in Ventura County, is part of Seneca’s strategy to focus on and grow production from its core California assets in the San Joaquin basin, in particular recently acquired leases in the Midway Sunset field. The Sespe field produces approximately 900 net barrels of oil equivalent (“boe”) per day and was expected to contribute approximately $0.05 per share of earnings for the remainder of fiscal 2018. Under full cost accounting rules, the Company will not record any gain or loss with respect to the transaction.

MANAGEMENT COMMENTS

Ronald J. Tanski, President and Chief Executive Officer of National Fuel Gas Company, stated: “We’re pleased to report another quarter of solid financial results across all of our operating segments.  A return this year to a more normal heating season in our New York and Pennsylvania operating regions increased throughput across our utility pipeline system.  Notwithstanding the weather that was colder than the two previous heating seasons, our customers continue to benefit from the low cost of natural gas supplies that are being produced from the Appalachian basin and safely delivered to them through our interstate and utility pipeline systems.

“We are also excited about recent updates to our near and longer-term operating plans that will allow us to continue the growth of our upstream and midstream businesses in Appalachia.  Our ongoing transition to Utica shale development in the WDA is moving along quite well.  Early results indicate that we have a large inventory of additional Utica locations in and around our core Marcellus footprint that will generate stronger consolidated returns, particularly in areas where new Utica production can use existing gathering infrastructure that was built during our Marcellus development.  With a newly developed pipeline expansion project planned to be in place, we now expect to have the exit capacity and end-market diversity to tap and bring forward the value of our significant, stacked-pay acreage position in Pennsylvania, while also continuing to grow the earnings and returns of our Gathering and Pipeline and Storage segments and capitalize on the strategic benefits of our integrated business model.”

DISCUSSION OF RESULTS BY SEGMENT

The following discussion of the earnings of each segment is summarized in a tabular form on pages 9 through 12 of this report.  It may be helpful to refer to those tables while reviewing this discussion.  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 Six Months Ended
 March 31, March 31,
(in thousands except per share amounts)2018 2017 Variance 2018 2017 Variance
Net Income$26,537 $33,769 $(7,232)   $133,235 $68,849 $64,386 
Net Income Per Share (Diluted)$0.31 $0.39 $(0.08) $1.54 $0.80 $0.74 
Adjusted EBITDA$78,770 $93,970 $(15,200) $158,264 $196,447 $(38,183)
                    

The Exploration and Production segment’s second quarter earnings declined $7.2 million, as the positive impacts of higher production, better realized crude oil prices, and a lower effective income tax rate were more than offset by a decline in realized natural gas prices and higher operating expenses.

Seneca’s second quarter net production was 46.1 billion cubic feet equivalent (“Bcfe”), an increase of 0.5 Bcfe, or 1 percent, from the prior year due mainly to higher natural gas production in Appalachia.  Net natural gas production increased 0.5 billion cubic feet (“Bcf”) versus the prior year and 6.0 Bcf, or 17 percent, versus the fiscal 2018 first quarter.  The year over year increase was primarily due to higher net production in the WDA from new Marcellus and Utica wells completed and connected to sales during the past year.  The 17 percent sequential increase over the first quarter of the fiscal year was due mostly to production from new wells brought on-line this quarter (including the first development pad brought to sales in the EDA since fiscal 2016), and an increase in Marcellus production from other EDA locations after price-related and operational curtailments experienced during the previous quarter (Seneca did not have any significant curtailments in the second quarter of fiscal 2018).  Seneca’s oil production decreased 11 thousand barrels ("Mbbl"), or 2 percent, versus the prior year.

Seneca's average realized natural gas price, after the impact of hedging and marketing and transportation costs, was $2.52 per thousand cubic feet ("Mcf"), a decrease of $0.44 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 firm sales and hedges settled in the current quarter. Seneca's average realized oil price, after the impact of hedging, was $58.31 per barrel ("Bbl"), an increase of $5.39 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.

Seneca’s operating expenses increased $5.2 million during the second quarter.  Lease operating and transportation expense (“LOE”) increased $1.3 million due to higher natural gas production in Appalachia, which resulted in higher gathering and transportation costs, and an increase in well workover activities and steaming costs in California.  Depreciation, depletion and amortization (“DD&A”) expense increased $3.1 million due to the increase in production and a higher per unit DD&A rate, which increased by $0.06 per thousand cubic feet equivalent (“Mcfe”) to $0.69 per Mcfe due mainly to a higher depletable fixed asset balance at March 31, 2018.

The decrease in the segment’s effective tax rate was mostly due to the 2017 Tax Reform Act, which reduced the Company’s federal statutory corporate tax rate in fiscal 2018 from 35 percent to 24.5 percent and benefited Seneca’s second quarter earnings by $3.5 million, or $0.04 per share. The current period benefit was offset partially by a $0.8 million revision to the remeasurement of deferred income taxes that was recorded in the first quarter.

See page 21 for additional comparative information on the Exploration & Production segment’s production, realized pricing and per unit operating costs.

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   Six Months Ended
 March 31, March 31,
(in thousands except per share amounts)2018 2017 Variance 2018 2017 Variance
Net Income$22,724 $19,256 $3,468 $61,186 $38,624 $22,562
Net Income Per Share (Diluted)$0.26 $0.22 $0.04 $0.71 $0.45 $0.26
Adjusted EBITDA$50,142 $49,103 $1,039 $100,915 $97,116 $3,799
                  

The Pipeline and Storage segment’s second quarter earnings increased $3.5 million due primarily to higher operating revenues and a lower effective income tax rate, offset partially by a decrease in the allowance for funds used during construction reported in other income.  Operating revenues increased $1.0 million due to new demand charges for transportation service from Supply Corporation’s Line D Expansion project, which was placed in service on November 1, 2017, and surcharge revenues relating to Supply Corporation’s greenhouse gas and pipeline safety system enhancements that also went into effect in November 2017, which were partially offset by a decline in transportation revenues resulting from contract terminations.   The decrease in the effective income tax rate was due primarily to the 2017 Tax Reform Act, which reduced the Company’s federal statutory corporate tax rate and benefited the segment’s earnings by $3.4 million, or $0.04 per share.

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 Six Months Ended
 March 31, March 31,
(in thousands except per share amounts)2018 2017 Variance 2018 2017 Variance
Net Income$11,770 $10,285 $1,485  $57,169 $21,266 $35,903 
Net Income Per Share (Diluted)$0.14 $0.12 $0.02  $0.66 $0.25 $0.41 
Adjusted EBITDA$24,138 $24,172 $(34) $44,869 $49,273 $(4,404)
                    

The $1.5 million increase in Gathering segment’s second quarter earnings was due mainly to a lower effective income tax rate.  Operating revenues were largely flat when compared to the prior year as the increase in gathering throughput from Seneca’s Appalachian natural gas production was offset by the impact of gathering rate adjustments that went into effect in February.  The decrease in the effective income tax rate was due primarily to the 2017 Tax Reform Act, which reduced the Company’s federal statutory corporate tax rate and benefited the segment’s earnings by $1.9 million, or $0.02 per share. The current period tax benefit was offset partially by a $0.4 million revision to the remeasurement of deferred income taxes that was recorded in the first quarter.

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 Six Months Ended
 March 31, March 31,
(in thousands except per share amounts)2018 2017 Variance 2018 2017 Variance
Net Income$33,360  $25,581  $7,779  $54,353  $46,755  $7,598 
Net Income Per Share (Diluted)$0.39  $0.30  $0.09  $0.63  $0.54  $0.09 
Adjusted EBITDA$66,013  $61,580  $4,433  $112,997  $113,909  $(912)

The Utility segment’s second quarter earnings increased $7.8 million due to the positive impacts of colder weather, new customer rates in Distribution’s New York service territory (effective in April 2017), lower O&M expense, and tax reform.  Weather in Distribution’s Pennsylvania service territory was 17.1 percent colder on average than last year, resulting in higher residential and transportation customer throughput and revenues.  The impact of weather variations on earnings in Distribution’s New York service territory is largely mitigated by that jurisdiction’s weather normalization clause.  O&M expense decreased $2.3 million due mainly to lower personnel and information systems costs, partially offset by higher amortization of environmental remediation costs that resulted from the April 2017 rate case order in New York.

The decline in the Utility segment’s effective income tax rate due to the 2017 Tax Reform Act resulted in a $5.4 million decrease in income tax expense, which was mostly offset by a regulatory refund provision recorded against operating revenues.  Consistent with utility rate treatment implemented after previous federal tax reforms and taking into consideration guidance provided by state regulators during the quarter, the Company recorded a $5.3 million refund provision ($3.9 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.

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 Six Months Ended
 March 31, March 31,
(in thousands except per share amounts)2018 2017 Variance 2018 2017 Variance
Net Income$578  $905  $(327) $1,624  $2,687  $(1,063)
Net Income Per Share (Diluted)$0.01  $0.01  $  $0.02  $0.03  $(0.01)
Adjusted EBITDA$924  $1,382  $(458) $2,606  $4,230  $(1,624)

The Energy Marketing segment’s second quarter earnings declined $0.3 million due largely to lower margins (operating revenues less purchased gas expenses), offset partially by lower O&M expense.  NFR’s customer margins were negatively impacted by stronger natural gas prices at local purchase points, which spiked on days with extreme weather in January, relative to NYMEX-based customer sales contracts.

Corporate and All Other

For the second quarter of fiscal 2018, the Corporate and All Other category had a net loss of $3.1 million compared to a net loss of $0.5 million in the prior year.  The decrease in earnings was primarily attributable to a $2.7 million revision to the remeasurement of deferred income taxes that was recorded in the first quarter of fiscal 2018 due to the 2017 Tax Reform Act.

FISCAL 2018 GUIDANCE UPDATE

National Fuel is revising its fiscal 2018 earnings guidance to $3.20 to $3.35 per share, or $3.275 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 six months ended March 31, 2018, by $107.0 million, or $1.24 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 six 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, technical corrections, and the filing of the Company’s fiscal 2017 federal consolidated tax return.  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.

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 a range of 26 percent to 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 (pre-tax) 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 an $11.3 million ($8.3 million after-tax) regulatory refund provision in the first six months of fiscal 2018.  The Company’s earnings guidance, including the impact from the Utility segment’s projected regulatory refund provision, assumes normal weather.

In addition to the impacts of tax reform on current year income, the revised earnings guidance range reflects the impact of actual results for the six months ended March 31, 2018, the sale of Seneca's Sespe assets in California, and other updates to key forecast assumptions, including revisions to the Exploration and Production segment’s forecasted production and natural gas and oil pricing 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 the impact of the sale of Seneca’s Sespe oil properties in California and adjustments made to Seneca’s operations schedule in Appalachia due primarily to the anticipated delay of the in-service date of the Atlantic Sunrise project to later in the fourth quarter, which impacted the expected timing of new pad turn-ons and pushed a portion of new production from fiscal 2018 to fiscal 2019.  Seneca, which holds 189,405 Dth per day of firm transportation capacity on Atlantic Sunrise, had previously expected that the capacity would be available on July 1, 2018.

The Company’s capital expenditure guidance was revised to a range of $610 million to $680 million, at the midpoint an increase of $40 million from the previous guidance range. The increase is due primarily to the additional horizontal drilling rig that Seneca plans to deploy in Appalachia during the third quarter as discussed in the Upstream and Midstream Operations Update section above. The revision to the Pipeline and Storage segment’s capital budget is due primarily to the expected timing of the spending.

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 $3.35 $3.20 to $3.40
Consolidated Effective Tax Rate (1)26% to 27% ~27%
    
Capital Expenditures (Millions)   
  Exploration and Production (2)$350 - $370 $300 - $330
  Pipeline and Storage$110 - $130 $110 - $140
  Gathering$60 - $80 $60 - $80
  Utility$90 - $100 $90 - $100
  Consolidated Capital Expenditures                                         $610 - $680 $560 - $650

 

Exploration & Production Segment Guidance                                                             
    
  Commodity Price Assumptions                                         
  NYMEX natural gas price$2.75 /MMBtu $3.00 /MMBtu
  Appalachian basin spot price (summer)             $2.00 /MMBtu $2.40/$2.00 /MMBtu
  NYMEX (WTI) crude oil price$65.00 /Bbl $60.00 /Bbl
  California oil price (% of WTI)98% 98%
    
  Production (Bcfe)   
  East Division - Appalachia (3)157 to 172 160 to 175
  West Division - California~ 18 ~ 20
  Total Production175 to 190 180 to 195
    
  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 ~ $0.70
    
Other Business Segment Guidance (Millions)   
  Gathering Segment Revenues$110 - $115 $110 - $120
  Pipeline and Storage Segment Revenues~$295 ~$295
  Utility Segment Regulatory Refund Provision~$16 ~$16

(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 11 Bcf of spot sales for the remainder of FY18.

EARNINGS TELECONFERENCE

The Company will host a conference call on Friday, May 4, 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 “2679378.”  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 “2679378.”  Both the webcast and a telephonic replay will be available until the close of business on Friday, May 11, 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. Welsch         716-857-7875                           
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; changes in the price of natural gas or oil; impairments under the SEC’s full cost ceiling test for natural gas and oil reserves; 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; the impact of potential information technology, cybersecurity or data security breaches; economic disruptions or uninsured losses resulting from major accidents, fires, severe weather, natural disasters, terrorist activities or acts of war; 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 MARCH 31, 2018
(Unaudited)
              
              
 Upstream Midstream Businesses Downstream Businesses    
              
 Exploration & Pipeline &     Energy Corporate /  
(Thousands of Dollars)Production Storage Gathering Utility Marketing All Other Consolidated*
              
Second quarter 2017 GAAP earnings$33,769  $19,256  $10,285  $25,581  $905  $(512) $89,284 
              
Earnings drivers***             
Higher (lower) crude oil prices2,322            2,322 
Higher (lower) natural gas prices(11,965)           (11,965)
Higher (lower) natural gas production1,031            1,031 
Higher (lower) crude oil production(369)           (369)
Lower (higher) lease operating and transportation expenses(822)           (822)
Lower (higher) depreciation / depletion(2,038)         (263) (2,301)
              
Higher (lower) transportation and storage revenues  606          606 
Lower (higher) other operating expenses(421)     1,171      750 
              
Impact of new rates      1,767      1,767 
Colder weather      3,448      3,448 
              
Higher (lower) margins        (443) 659  216 
              
Higher (lower) AFUDC**  (599)         (599)
              
(Higher) lower interest expense  302          302 
              
Lower (higher) income tax expense / effective tax rate1,884            1,884 
              
Impact of 2017 Tax Reform Act             
Impact of tax rate change (35% to 24.5%) on current period earnings3,539  3,385  1,871  5,440  109  (122) 14,222 
Refund provision on tax rate change      (3,914)     (3,914)
Remeasurement of deferred income taxes under 2017 Tax Reform(790)   (400)   (159) (2,651) (4,000)
              
All other / rounding397  (226) 14  (133) 166  (233) (15)
Second quarter 2018 GAAP earnings$26,537  $22,724  $11,770  $33,360  $578  $(3,122) $91,847 
              
* Amounts do not reflect intercompany eliminations 
** AFUDC = Allowance for Funds Used During Construction 
*** 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 MARCH 31, 2018
(Unaudited)
               
               
  Upstream Midstream Businesses Downstream Businesses    
               
  Exploration & Pipeline &     Energy Corporate /  
  Production Storage Gathering Utility Marketing All Other Consolidated*
               
Second quarter 2017 GAAP earnings $0.39  $0.22  $0.12  $0.30  $0.01  $  $1.04 
               
Earnings drivers***              
Higher (lower) crude oil prices 0.03            0.03 
Higher (lower) natural gas prices (0.14)           (0.14)
Higher (lower) natural gas production 0.01            0.01 
Higher (lower) crude oil production              
Lower (higher) lease operating and transportation expenses (0.01)           (0.01)
Lower (higher) depreciation / depletion (0.02)           (0.02)
               
Higher (lower) transportation and storage revenues   0.01          0.01 
Lower (higher) other operating expenses       0.01      0.01 
               
Impact of new rates       0.02      0.02 
Colder weather       0.04      0.04 
               
Higher (lower) margins           0.01  0.01 
               
Higher (lower) AFUDC**   (0.01)         (0.01)
               
(Higher) lower interest expense              
               
Lower (higher) income tax expense / effective tax rate 0.02            0.02 
               
Impact of 2017 Tax Reform Act              
Impact of tax rate change (35% to 24.5%) on current period earnings 0.04  0.04  0.02  0.06      0.16 
Refund provision on tax rate change       (0.05)     (0.05)
Remeasurement of deferred income taxes under 2017 Tax Reform (0.01)   (0.01)     (0.03) (0.05)
               
All other / rounding     0.01  0.01    (0.03) (0.01)
Second quarter 2018 GAAP earnings $0.31  $0.26  $0.14  $0.39  $0.01  $(0.05) $1.06 
               
* Amounts do not reflect intercompany eliminations 
** AFUDC = Allowance for Funds Used During Construction 
*** 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
SIX MONTHS ENDED MARCH 31, 2018
(Unaudited)
              
 Upstream Midstream Businesses Downstream Businesses    
              
 Exploration & Pipeline &     Energy Corporate /  
(Thousands of Dollars)Production Storage Gathering Utility Marketing All Other Consolidated*
              
Six months ended March 31, 2017 GAAP earnings$68,849  $38,624  $21,266  $46,755  $2,687  $10  $178,191 
              
Earnings drivers***             
Higher (lower) crude oil prices4,519            4,519 
Higher (lower) natural gas prices(17,940)           (17,940)
Higher (lower) natural gas production(7,587)           (7,587)
Higher (lower) crude oil production(2,074)           (2,074)
Lower (higher) lease operating and transportation expenses(783)           (783)
Lower (higher) depreciation / depletion(979) (842) (285)     (197) (2,303)
              
Higher (lower) storage revenues  784          784 
Higher (lower) gathering and processing revenues    (2,769)       (2,769)
Lower (higher) other operating expenses(1,009) 2,059    476      1,526 
Lower (higher) property, franchise and other taxes  (354)         (354)
              
Impact of new rates      2,789      2,789 
Colder weather      4,688      4,688 
              
Higher (lower) margins        (1,204) 1,011  (193)
              
Higher (lower) AFUDC**  (542)         (542)
              
Lower (higher) interest expense  608    452      1,060 
              
Lower (higher) income tax expense / effective tax rate5,754    1,172  (1,850)     5,076 
              
Impact of 2017 Tax Reform Act             
Impact of tax rate change (35% to 24.5%) on current period earnings7,634  6,913  3,415  10,241  291  (11) 28,483 
Refund provision on tax rate change      (8,320)     (8,320)
Remeasurement of deferred income taxes under 2017 Tax Reform76,510  14,100  34,500    (359) (17,751) 107,000 
              
All other / rounding341  (164) (130) (878) 209  (128) (750)
Six months ended March 31, 2018 GAAP earnings$133,235  $61,186  $57,169  $54,353  $1,624  $(17,066) $290,501 
              
* Amounts do not reflect intercompany eliminations 
** AFUDC = Allowance for Funds Used During Construction 
*** 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
SIX MONTHS ENDED MARCH 31, 2018
(Unaudited)
               
  Upstream Midstream Businesses Downstream Businesses    
               
  Exploration & Pipeline &     Energy Corporate /  
  Production Storage Gathering Utility Marketing All Other Consolidated*
               
Six months ended March 31, 2017 GAAP earnings $0.80  $0.45  $0.25  $0.54  $0.03  $  $2.07 
               
Earnings drivers***              
Higher (lower) crude oil prices 0.05            0.05 
Higher (lower) natural gas prices (0.21)           (0.21)
Higher (lower) natural gas production (0.09)           (0.09)
Higher (lower) crude oil production (0.02)           (0.02)
Lower (higher) lease operating and transportation expenses (0.01)           (0.01)
Lower (higher) depreciation / depletion (0.01) (0.01)         (0.02)
               
Higher (lower) storage revenues   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      0.02 
Lower (higher) property, franchise and other taxes              
               
Impact of new rates       0.03      0.03 
Colder weather       0.05      0.05 
               
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 0.07    0.01  (0.02)     0.06 
               
Impact of 2017 Tax Reform Act              
Impact of tax rate change (35% to 24.5%) on current period earnings 0.09  0.08  0.04  0.12      0.33 
Refund provision on tax rate change       (0.10)     (0.10)
Remeasurement of deferred income taxes under 2017 Tax Reform 0.89  0.16  0.40      (0.21) 1.24 
               
All other / rounding (0.01)   (0.01) (0.01)   0.01  (0.02)
Six months ended March 31, 2018 GAAP earnings $1.54  $0.71  $0.66  $0.63  $0.02  $(0.19) $3.37 
               
* Amounts do not reflect intercompany eliminations 
** AFUDC = Allowance for Funds Used During Construction 
*** 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 Six Months Ended 
 March 31, March 31, 
 (Unaudited) (Unaudited) 
SUMMARY OF OPERATIONS2018 2017 2018 2017 
Operating Revenues:        
Utility and Energy Marketing Revenues$339,422  $308,889  $565,147  $516,669  
Exploration and Production and Other Revenues147,868  159,997  288,318  321,691  
Pipeline and Storage and Gathering Revenues53,615  53,189  107,096  106,216  
 540,905  522,075  960,561  944,576  
Operating Expenses:        
Purchased Gas176,608  147,971  270,642  218,214  
Operation and Maintenance:        
  Utility and Energy Marketing61,410  63,907  112,780  114,329  
  Exploration and Production and Other39,586  37,593  75,127  68,055  
  Pipeline and Storage and Gathering22,642  23,106  42,679  45,766  
Property, Franchise and Other Taxes22,802  22,542  43,650  42,921  
Depreciation, Depletion and Amortization61,155  56,999  116,985  113,194  
 384,203  352,118  661,863  602,479  
         
Operating Income156,702  169,957  298,698  342,097  
         
Other Income (Expense):        
Interest Income1,025  391  3,275  1,991  
Other Income770  1,744  2,492  3,356  
Interest Expense on Long-Term Debt(27,148) (28,913) (55,235) (58,016) 
Other Interest Expense(1,233) (924) (1,736) (1,834) 
         
Income Before Income Taxes130,116  142,255  247,494  287,594  
         
Income Tax Expense (Benefit)38,269  52,971  (43,007) 109,403  
         
Net Income Available for Common Stock$91,847  $89,284  $290,501  $178,191  
         
Earnings Per Common Share        
Basic$1.07  $1.05  $3.39  $2.09  
Diluted$1.06  $1.04  $3.37  $2.07  
         
Weighted Average Common Shares:        
Used in Basic Calculation85,809,233 85,334,887 85,718,779 85,261,575 
Used in Diluted Calculation86,323,636 86,006,614 86,318,892 85,897,282 

 

 
 
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
  
 March 31, September 30,
(Thousands of Dollars) 2018  2017
    
ASSETS   
Property, Plant and Equipment$10,126,931  $9,945,560 
Less - Accumulated Depreciation, Depletion and Amortization 5,344,134   5,271,486 
Net Property, Plant and Equipment 4,782,797   4,674,074 
    
Current Assets:   
Cash and Temporary Cash Investments 227,994   555,530 
Hedging Collateral Deposits 3,657   1,741 
Receivables - Net 198,922   112,383 
Unbilled Revenue 60,059   22,883 
Gas Stored Underground 6,842   35,689 
Materials and Supplies - at average cost 34,769   33,926 
Unrecovered Purchased Gas Costs 426   4,623 
Other Current Assets 60,324   51,505 
Total Current Assets 592,993   818,280 
    
Other Assets:   
Recoverable Future Taxes 115,514   181,363 
Unamortized Debt Expense 7,861   1,159 
Other Regulatory Assets 171,902   174,433 
Deferred Charges 36,835   30,047 
Other Investments 123,039   125,265 
Goodwill 5,476   5,476 
Prepaid Post-Retirement Benefit Costs 59,586   56,370 
Fair Value of Derivative Financial Instruments 18,144   36,111 
Other 426   742 
Total Other Assets 538,783   610,966 
Total Assets$5,914,573  $6,103,320 
    
CAPITALIZATION AND LIABILITIES   
Capitalization:   
Comprehensive Shareholders' Equity   
Common Stock, $1 Par Value Authorized - 200,000,000 Shares; Issued and   
Outstanding - 85,881,897 Shares and 85,543,125 Shares, Respectively$85,882  $85,543 
Paid in Capital 810,126   796,646 
Earnings Reinvested in the Business 1,070,939   851,669 
Accumulated Other Comprehensive Loss (47,760)  (30,123)
Total Comprehensive Shareholders' Equity 1,919,187   1,703,735 
Long-Term Debt, Net of Current Portion and Unamortized Discount and Debt Issuance Costs 2,085,012   2,083,681 
Total Capitalization 4,004,199   3,787,416 
    
Current and Accrued Liabilities:   
Notes Payable to Banks and Commercial Paper     
Current Portion of Long-Term Debt    300,000 
Accounts Payable 127,585   126,443 
Amounts Payable to Customers 12,083    
Dividends Payable 35,641   35,500 
Interest Payable on Long-Term Debt 26,435   35,031 
Customer Advances 154   15,701 
Customer Security Deposits 18,973   20,372 
Other Accruals and Current Liabilities 147,549   111,889 
Fair Value of Derivative Financial Instruments 11,475   1,103 
Total Current and Accrued Liabilities 379,895   646,039 
    
Deferred Credits:   
Deferred Income Taxes 482,682   891,287 
Taxes Refundable to Customers 365,091   95,739 
Cost of Removal Regulatory Liability 207,711   204,630 
Other Regulatory Liabilities 124,868   113,716 
Pension and Other Post-Retirement Liabilities 133,852   149,079 
Asset Retirement Obligations 106,481   106,395 
Other Deferred Credits 109,794   109,019 
Total Deferred Credits 1,530,479   1,669,865 
Commitments and Contingencies     
Total Capitalization and Liabilities$5,914,573  $6,103,320 

 

     
     
     
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
  Six Months Ended
  March 31,
(Thousands of Dollars) 2018 2017
     
Operating Activities:    
Net Income Available for Common Stock $290,501  $178,191 
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
    
Depreciation, Depletion and Amortization 116,985  113,194 
Deferred Income Taxes (62,459) 63,781 
Stock-Based Compensation 7,862  5,632 
Other 8,052  7,713 
Change in:    
Hedging Collateral Deposits (1,916) (287)
Receivables and Unbilled Revenue (123,954) (92,155)
Gas Stored Underground and Materials and Supplies 28,004  24,476 
Unrecovered Purchased Gas Costs 4,197  (2,241)
Other Current Assets (8,819) 7,769 
Accounts Payable 10,838  13,997 
Amounts Payable to Customers 12,083  (71)
Customer Advances (15,547) (14,462)
Customer Security Deposits (1,399) 1,493 
Other Accruals and Current Liabilities 37,646  44,690 
Other Assets (9,541) (32)
Other Liabilities (5,767) 202 
Net Cash Provided by Operating Activities $286,766  $351,890 
     
Investing Activities:    
Capital Expenditures $(261,720) $(208,231)
Net Proceeds from Sale of Oil and Gas Producing Properties 17,310  26,554 
Other 5,355  (3,225)
Net Cash Used in Investing Activities $(239,055) $(184,902)
     
Financing Activities:    
Reduction of Long-Term Debt $(307,047) $ 
Dividends Paid on Common Stock (71,091) (69,017)
Net Proceeds From Issuance of Common Stock 2,891  3,230 
Net Cash Used in Financing Activities $(375,247) $(65,787)
     
Net Increase (Decrease) in Cash and Temporary Cash Investments (327,536) 101,201 
Cash and Temporary Cash Investments at Beginning of Period 555,530  129,972 
Cash and Temporary Cash Investments at March 31 $227,994  $231,173 

 

          
          
          
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
          
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
          
UPSTREAM BUSINESS
          
          
 Three Months Ended Six Months Ended
(Thousands of Dollars, except per share amounts)March 31, March 31,
EXPLORATION AND PRODUCTION SEGMENT2018 2017 Variance 20182017Variance
Total Operating Revenues$146,411  $159,553  $(13,142) $285,552 $320,485 $(34,933)
          
Operating Expenses:         
Operation and Maintenance:         
General and Administrative Expense17,041  16,530  511  30,936 29,504 1,432 
Lease Operating and Transportation Expense43,808  42,543  1,265  83,455 82,251 1,204 
All Other Operation and Maintenance Expense2,919  2,781  138  5,454 5,332 122 
Property, Franchise and Other Taxes3,873  3,729  144  7,443 6,951 492 
Depreciation, Depletion and Amortization31,986  28,851  3,135  59,411 57,905 1,506 
 99,627  94,434  5,193  186,699 181,943 4,756 
          
Operating Income46,784  65,119 (18,335) 98,853 138,542(39,689)
          
Other Income (Expense):         
Interest Income305  147  158  601 233 368 
Interest Expense(13,380) (13,303) (77) (26,753)(26,826)73 
          
Income Before Income Taxes33,709  51,963  (18,254) 72,701 111,949 (39,248)
Income Tax Expense (Benefit)7,172  18,194  (11,022) (60,534)43,100 (103,634)
Net Income$26,537  $33,769  $(7,232) $133,235 $68,849 $64,386 
          
Net Income Per Share (Diluted)$0.31  $0.39  $(0.08) $1.54 $0.80 $0.74 
          

 

          
          
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
          
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
          
MIDSTREAM BUSINESSES
          
          
 Three Months Ended Six Months Ended
(Thousands of Dollars, except per share amounts)March 31, March 31,
PIPELINE AND STORAGE SEGMENT2018 2017 Variance 20182017Variance
Revenues from External Customers$53,714  $53,163  $551  $107,025 $106,164 $861 
Intersegment Revenues23,044  22,592  452  45,028 44,746 282 
Total Operating Revenues76,758  75,755  1,003  152,053 150,910 1,143 
          
Operating Expenses:         
Purchased Gas55  (28) 83  161 194 (33)
Operation and Maintenance19,426  19,668  (242) 36,742 39,911 (3,169)
Property, Franchise and Other Taxes7,135  7,012  123  14,235 13,689 546 
Depreciation, Depletion and Amortization10,838  10,476  362  21,434 20,138 1,296 
 37,454  37,128  326  72,572 73,932 (1,360)
          
Operating Income39,304  38,627  677  79,481 76,978 2,503 
          
Other Income (Expense):         
Interest Income608  319  289  1,153 591 562 
Other Income209  807  (598) 954 1,494 (540)
Interest Expense(7,875) (8,342) 467  (15,752)(16,688)936 
          
Income Before Income Taxes32,246  31,411  835  65,836 62,375 3,461 
Income Tax Expense9,522  12,155  (2,633) 4,650 23,751 (19,101)
Net Income$22,724  $19,256  $3,468  $61,186 $38,624 $22,562 
          
Net Income Per Share (Diluted)$0.26  $0.22  $0.04  $0.71 $0.45 $0.26 
          
          
 Three Months Ended Six Months Ended
 March 31, March 31,
GATHERING SEGMENT2018 2017 Variance 20182017Variance
Revenues from External Customers$(99) $26  $(125) $71 $52 $19 
Intersegment Revenues27,832  27,936  (104) 51,497 55,776 (4,279)
Total Operating Revenues27,733  27,962  (229) 51,568 55,828 (4,260)
          
Operating Expenses:         
Operation and Maintenance3,572  3,769  (197) 6,638 6,523 115 
Property, Franchise and Other Taxes23  21  2  61 32 29 
Depreciation, Depletion and Amortization4,227  3,997  230  8,315 7,877 438 
 7,822  7,787  35  15,014 14,432 582 
          
Operating Income19,911  20,175  (264) 36,554 41,396 (4,842)
          
Other Income (Expense):         
Interest Income419  207  212  815 353 462 
Other Income       1 (1)
Interest Expense(2,508) (2,235) (273) (4,847)(4,328)(519)
          
Income Before Income Taxes17,822  18,147  (325) 32,522 37,422 (4,900)
Income Tax Expense (Benefit)6,052  7,862  (1,810) (24,647)16,156 (40,803)
Net Income$11,770  $10,285  $1,485  $57,169 $21,266 $35,903 
          
Net Income Per Share (Diluted)$0.14  $0.12  $0.02  $0.66 $0.25 $0.41 
          

 

          
          
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
          
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
          
DOWNSTREAM BUSINESSES
          
          
 Three Months Ended Six Months Ended
(Thousands of Dollars, except per share amounts)March 31, March 31,
UTILITY SEGMENT2018 2017 Variance 20182017Variance
Revenues from External Customers$283,778  $257,949  $25,829  $470,867 $428,919 $41,948 
Intersegment Revenues5,700  6,096  (396) 7,882 7,922 (40)
Total Operating Revenues289,478  264,045  25,433  478,749 436,841 41,908 
          
Operating Expenses:         
Purchased Gas151,493  128,212  23,281  233,418 188,945 44,473 
Operation and Maintenance60,463  62,748  (2,285) 110,946 112,277 (1,331)
Property, Franchise and Other Taxes11,509  11,505  4  21,388 21,710 (322)
Depreciation, Depletion and Amortization13,340  13,314  26  26,665 26,415 250 
 236,805  215,779  21,026  392,417 349,347 43,070 
          
Operating Income52,673  48,266  4,407  86,332 87,494 (1,162)
          
Other Income (Expense):         
Interest Income510  144  366  816 278 538 
Other Income138  45  93  307 137 170 
Interest Expense(6,857) (7,194) 337  (13,695)(14,392)697 
          
Income Before Income Taxes46,464  41,261  5,203  73,760 73,517 243 
Income Tax Expense13,104  15,680  (2,576) 19,407 26,762 (7,355)
Net Income$33,360  $25,581  $7,779  $54,353 $46,755 $7,598 
          
Net Income Per Share (Diluted)$0.39  $0.30  $0.09  $0.63 $0.54 $0.09 
          
          
 Three Months Ended Six Months Ended
 March 31, March 31,
ENERGY MARKETING SEGMENT2018 2017 Variance 20182017Variance
Revenues from External Customers$55,644  $50,940  $4,704  $94,280 $87,750 $6,530 
Intersegment Revenues(51) 16  (67) 76 35 41 
Total Operating Revenues55,593  50,956  4,637  94,356 87,785 6,571 
          
Operating Expenses:         
Purchased Gas52,980  47,661  5,319  88,423 79,999 8,424 
Operation and Maintenance1,689  1,913  (224) 3,327 3,556 (229)
Depreciation, Depletion and Amortization68  70  (2) 138 140 (2)
 54,737  49,644  5,093  91,888 83,695 8,193 
          
Operating Income856  1,312  (456) 2,468 4,090 (1,622)
          
Other Income (Expense):         
Interest Income161  138  23  295 271 24 
Other Income22  33  (11) 25 35 (10)
Interest Expense  (11) 11  (12)(24)12 
          
Income Before Income Taxes1,039  1,472  (433) 2,776 4,372 (1,596)
Income Tax Expense461  567  (106) 1,152 1,685 (533)
Net Income$578  $905  $(327) $1,624 $2,687 $(1,063)
          
Net Income Per Share (Diluted)$0.01  $0.01  $  $0.02 $0.03 $(0.01)
          

 

 
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
          
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
          
 Three Months Ended Six Months Ended
(Thousands of Dollars, except per share amounts)March 31, March 31,
ALL OTHER2018 2017 Variance 20182017Variance
Total Operating Revenues$1,232  $218  $1,014  $2,328 $772 $1,556 
Operating Expenses:         
Operation and Maintenance367  394  (27) 691 909 (218)
Property, Franchise and Other Taxes145  150  (5) 288 294 (6)
Depreciation, Depletion and Amortization506  102  404  645 343 302 
 1,018  646  372  1,624 1,546 78 
          
Operating Income (Loss)214  (428) 642  704 (774)1,478 
Other Income (Expense):         
Interest Income91  49  42  163 89 74 
          
Income (Loss) Before Income Taxes305  (379) 684  867 (685)1,552 
Income Tax Expense (Benefit)98  (158) 256  1,378 (285)1,663 
Net Income (Loss)$207  $(221) $428  $(511)$(400)$(111)
          
Net Income (Loss) Per Share (Diluted)$  $  $  $ $ $ 
          
          
 Three Months Ended Six Months Ended
 March 31, March 31,
CORPORATE2018 2017 Variance 20182017Variance
Revenues from External Customers$225  $226  $(1) $438 $434 $4 
Intersegment Revenues999  977  22  1,999 1,953 46 
Total Operating Revenues1,224  1,203  21  2,437 2,387 50 
Operating Expenses:         
Operation and Maintenance3,957  4,003  (46) 7,519 7,395 124 
Property, Franchise and Other Taxes117  125  (8) 235 245 (10)
Depreciation, Depletion and Amortization190  189  1  377 376 1 
 4,264  4,317  (53) 8,131 8,016 115 
          
Operating Loss(3,040) (3,114) 74  (5,694)(5,629)(65)
          
Other Income (Expense):         
Interest Income29,877  30,693  (816) 61,697 62,498 (801)
Other Income401  859  (458) 1,206 1,689 (483)
Interest Expense on Long-Term Debt(27,148) (28,913) 1,765  (55,235)(58,016)2,781 
Other Interest Expense(1,559) (1,145) (414) (2,942)(1,898)(1,044)
          
Loss Before Income Taxes(1,469) (1,620) 151  (968)(1,356)388 
Income Tax Expense (Benefit)1,860  (1,329) 3,189  15,587 (1,766)17,353 
Net Income (Loss)$(3,329) $(291) $(3,038) $(16,555)$410 $(16,965)
          
Net Income (Loss) Per Share (Diluted)$(0.05) $  $(0.05) $(0.19)$ $(0.19)
          
          
 Three Months Ended Six Months Ended
 March 31, March 31,
INTERSEGMENT ELIMINATIONS2018 2017 Variance 20182017Variance
Intersegment Revenues$(57,524) $(57,617) $93  $(106,482)$(110,432)$3,950 
Operating Expenses:         
Purchased Gas(27,920) (27,874) (46) (51,360)(50,924)(436)
Operation and Maintenance(29,604) (29,743) 139  (55,122)(59,508)4,386 
 (57,524) (57,617) 93  (106,482)(110,432)3,950 
          
Operating Income         
          
Other Income (Expense):         
Interest Income(30,946) (31,306) 360  (62,265)(62,322)57 
Interest Expense30,946  31,306  (360) 62,265 62,322 (57)
Net Income$  $  $  $ $ $ 
          
Net Income Per Share (Diluted)$  $  $  $ $ $ 

 

            
            
            
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
            
SEGMENT INFORMATION (Continued)
(Thousands of Dollars)
            
            
 Three Months Ended Six Months Ended
 March 31, March 31,
 (Unaudited) (Unaudited)
     Increase     Increase
 2018 2017 (Decrease) 2018 2017 (Decrease)
            
Capital Expenditures:           
Exploration and Production$84,559 (1)$57,137 (3)$27,422  $159,285 (1)(2)$97,826 (3)(4)$61,459 
Pipeline and Storage15,167 (1)11,386 (3)3,781  37,440 (1)(2)36,778 (3)(4)662 
Gathering19,352 (1)3,147 (3)16,205  32,283 (1)(2)14,491 (3)(4)17,792 
Utility15,755 (1)19,244 (3)(3,489) 32,290 (1)(2)36,296 (3)(4)(4,006)
Energy Marketing4  5  (1) 22  11  11 
Total Reportable Segments134,837  90,919  43,918  261,320  185,402  75,918 
All Other      1  39  (38)
Corporate15  3  12  44  64  (20)
Eliminations(19,922) (777) (19,145) (19,922) (777) (19,145)
Total Capital Expenditures$114,930  $90,145  $24,785  $241,443  $184,728  $56,715 

(1)  Capital expenditures for the quarter and six months ended March 31, 2018, include accounts payable and accrued liabilities related to capital expenditures of $38.8 million, $9.0 million, $1.6 million, and $2.5 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 March 31, 2018, since they represent non-cash investing activities at that date.

(2)  Capital expenditures for the six months ended March 31, 2018, 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 six months ended March 31, 2018.  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 March 31, 2018.

(3)  Capital expenditures for the quarter and six months ended March 31, 2017, include accounts payable and accrued liabilities related to capital expenditures of $23.2 million, $5.8 million, $2.2 million, and $5.7 million in the Exploration and Production segment, Pipeline and Storage segment, Gathering segment and Utility segment, respectively.  These amounts have been excluded from the Consolidated Statement of Cash Flows at March 31, 2017, since they represent non-cash investing activities at that date.

(4)  Capital expenditures for the six months ended March 31, 2017, 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 six months ended March 31, 2017.  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 March 31, 2017.

          
          
          
DEGREE DAYS         
          
       Percent Colder
       (Warmer) Than:
Three Months Ended March 31Normal 2018 2017   Normal (1) Last Year (1)
          
Buffalo, NY3,290 3,208 2,866 (2.5) 11.9
Erie, PA3,108 3,075 2,627 (1.1) 17.1
          
Six Months Ended March 31         
          
Buffalo, NY5,543 5,435 4,832 (1.9) 12.5 
Erie, PA5,152 5,104 4,377 (0.9) 16.6 
          

(1)  Percents compare actual 2018 degree days to normal degree days and actual 2018 degree days to actual 2017 degree days.

             
             
             
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
             
EXPLORATION AND PRODUCTION INFORMATION
             
             
  Three Months Ended Six Months Ended
  March 31, March 31,
      Increase     Increase
  2018 2017 (Decrease) 2018 2017 (Decrease)
             
Gas Production/Prices:            
Production (MMcf)            
Appalachia 41,403  40,805  598  76,817  80,612  (3,795)
West Coast 675  737  (62) 1,370  1,513  (143)
Total Production 42,078  41,542  536  78,187  82,125  (3,938)
             
Average Prices (Per Mcf)            
Appalachia $2.46  $2.71  $(0.25) $2.41  $2.54  $(0.13)
West Coast 4.40  4.57  (0.17) 4.70  4.40  0.30 
Weighted Average 2.49  2.75  (0.26) 2.45  2.57  (0.12)
Weighted Average after Hedging 2.52  2.96  (0.44) 2.61  2.96  (0.35)
             
Oil Production/Prices:            
Production (Thousands of Barrels)            
Appalachia 1  2  (1) 2  2   
West Coast 662  672  (10) 1,334  1,393  (59)
Total Production 663  674  (11) 1,336  1,395  (59)
             
Average Prices (Per Barrel)            
Appalachia $58.54  $49.87  $8.67  $49.82  $49.04  $0.78 
West Coast 65.39  $47.96  17.43  61.61  45.75  15.86 
Weighted Average 65.39  47.96  17.43  61.60  45.82  15.78 
Weighted Average after Hedging 58.31  52.92  5.39  59.05  53.85  5.20 
             
Total Production (Mmcfe) 46,056  45,586  470  86,203  90,495  (4,292)
             
Selected Operating Performance Statistics:            
General & Administrative Expense per Mcfe (1) $0.37  $0.36  $0.01  $0.36  $0.33  $0.03 
Lease Operating and Transportation Expense per Mcfe (1)(2) $0.95  $0.93  $0.02  $0.97  $0.91  $0.06 
Depreciation, Depletion & Amortization per Mcfe (1) $0.69  $0.63  $0.06  $0.69  $0.64  $0.05 
             

(1)  Refer to page 16 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 per Mcfe for both the three months ended March 31, 2018 and March 31, 2017.  Amounts include transportation expense of $0.54 per Mcfe for both the six months ended March 31, 2018 and March 31, 2017.

 
 
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
       
EXPLORATION AND PRODUCTION INFORMATION
 
Hedging Summary for the Remaining Six Months of Fiscal 2018Volume  Average Hedge Price
Oil Swaps      
Brent 228,000 BBL $63.55 / BBL
NYMEX 840,000 BBL $52.67 / BBL
Total 1,068,000 BBL $54.99 / BBL
       
Gas Swaps      
NYMEX 20,520,000 MMBTU $3.17 / MMBTU
DAWN 3,600,000 MMBTU $3.00 / MMBTU
Fixed Price Physical Sales 38,109,910 MMBTU $2.33 / MMBTU
Total 62,229,910 MMBTU $2.65 / 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 43,507,349 MMBTU $2.44 / MMBTU
Total 97,127,349 MMBTU $2.76 / MMBTU
       
Hedging Summary for Fiscal 2020 Volume  Average Hedge Price
Oil Swaps      
Brent 600,000 BBL $59.60 / BBL
NYMEX 324,000 BBL $50.52 / BBL
Total 924,000 BBL $56.42 / BBL
       
Gas Swaps      
NYMEX 18,640,000 MMBTU $3.04 / MMBTU
DAWN 7,200,000 MMBTU $3.00 / MMBTU
Fixed Price Physical Sales 41,716,849 MMBTU $2.28 / MMBTU
Total 67,556,849 MMBTU $2.57 / 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 41,937,357 MMBTU $2.22 / MMBTU
Total 47,377,357 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 40,839,635 MMBTU $2.23 / MMBTU
       
Hedging Summary for Fiscal 2023 Volume  Average Hedge Price
       
Fixed Price Physical Sales 37,376,584 MMBTU $2.26 / 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 Six Months Ended
  March 31, March 31,
      Increase     Increase
  2018 2017 (Decrease) 2018 2017 (Decrease)
Firm Transportation - Affiliated 47,551  43,243  4,308  82,392  74,850  7,542 
Firm Transportation - Non-Affiliated 152,128  170,124  (17,996) 323,989  329,298  (5,309)
Interruptible Transportation 1,165  971  194  2,046  4,017  (1,971)
  200,844  214,338  (13,494) 408,427  408,165  262 
             
Gathering Volume - (MMcf)            
  Three Months Ended Six Months Ended
  March 31, March 31,
      Increase     Increase
  2018 2017 (Decrease) 2018 2017 (Decrease)
Gathered Volume - Affiliated 51,374  50,598  776  94,536  101,167  (6,631)
             
             
Utility Throughput - (MMcf)            
  Three Months Ended Six Months Ended
  March 31, March 31,
      Increase     Increase
  2018 2017 (Decrease) 2018 2017 (Decrease)
Retail Sales:            
Residential Sales 28,568  24,949  3,619  46,415  40,713  5,702 
Commercial Sales 4,500  3,903  597  7,096  6,202  894 
Industrial Sales 287  157  130  431  234  197 
  33,355  29,009  4,346  53,942  47,149  6,793 
Off-System Sales 119  1,122  (1,003) 141  1,295  (1,154)
Transportation 29,624  27,089  2,535  51,051  46,654  4,397 
  63,098  57,220  5,878  105,134  95,098  10,036 
             
Energy Marketing Volume            
  Three Months Ended Six Months Ended
  March 31, March 31,
      Increase     Increase
  2018 2017 (Decrease) 2018 2017 (Decrease)
Natural Gas (MMcf) 16,112  14,120  1,992  28,091  25,248  2,843 
             
             

 

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 and six months ended March 31, 2018 and 2017:

     
  Three Months Ended Six Months Ended
  March 31, March 31,
(in thousands except per share amounts) 2018 2017 2018 2017
Reported GAAP Earnings $91,847  $89,284  $290,501  $178,191 
Items impacting comparability        
Remeasurement of deferred income taxes under 2017 Tax Reform 4,000    (107,000)  
Adjusted Operating Results $95,847  $89,284  $183,501  $178,191 
         
Reported GAAP Earnings per share $1.06  $1.04  $3.37  $2.07 
Items impacting comparability        
Remeasurement of deferred income taxes under 2017 Tax Reform 0.05    (1.24)  
Adjusted Operating Results per share $1.11  $1.04  $2.13  $2.07 
 

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 and six months ended March 31, 2018 and 2017:

     
  Three Months Ended Six Months Ended
  March 31, March 31,
  2018 2017 2018 2017
(in thousands)        
Reported GAAP Earnings $91,847  $89,284  $290,501  $178,191 
Depreciation, Depletion and Amortization 61,155  56,999  116,985  113,194 
Interest and Other Income (1,795) (2,135) (5,767) (5,347)
Interest Expense 28,381  29,837  56,971  59,850 
Income Taxes 38,269  52,971  (43,007) 109,403 
Adjusted EBITDA $217,857  $226,956  $415,683  $455,291 
         
Adjusted EBITDA by Segment        
Pipeline and Storage Adjusted EBITDA $50,142  $49,103  $100,915  $97,116 
Gathering Adjusted EBITDA 24,138  24,172  44,869  49,273 
Total Midstream Businesses Adjusted EBITDA 74,280  73,275  145,784  146,389 
Exploration and Production Adjusted EBITDA 78,770  93,970  158,264  196,447 
Utility Adjusted EBITDA 66,013  61,580  112,997  113,909 
Energy Marketing Adjusted EBITDA 924  1,382  2,606  4,230 
Corporate and All Other Adjusted EBITDA (2,130) (3,251) (3,968) (5,684)
Total Adjusted EBITDA $217,857  $226,956  $415,683  $455,291 
 

 

 
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
NON-GAAP FINANCIAL MEASURES
 SEGMENT ADJUSTED EBITDA
     
  Three Months Ended Six Months Ended
  March 31, March 31,
(in thousands) 2018 2017 2018 2017
Exploration and Production Segment        
Reported GAAP Earnings $26,537  $33,769  $133,235  $68,849 
Depreciation, Depletion and Amortization 31,986  28,851  59,411  57,905 
Interest and Other Income (305) (147) (601) (233)
Interest Expense 13,380  13,303  26,753  26,826 
Income Taxes 7,172  18,194  (60,534) 43,100 
Adjusted EBITDA $78,770  $93,970  $158,264  $196,447 
         
Pipeline and Storage Segment        
Reported GAAP Earnings $22,724  $19,256  $61,186  $38,624 
Depreciation, Depletion and Amortization 10,838  10,476  21,434  20,138 
Interest and Other Income (817) (1,126) (2,107) (2,085)
Interest Expense 7,875  8,342  15,752  16,688 
Income Taxes 9,522  12,155  4,650  23,751 
Adjusted EBITDA $50,142  $49,103  $100,915  $97,116 
         
Gathering Segment        
Reported GAAP Earnings $11,770  $10,285  $57,169  $21,266 
Depreciation, Depletion and Amortization 4,227  3,997  8,315  7,877 
Interest and Other Income (419) (207) (815) (354)
Interest Expense 2,508  2,235  4,847  4,328 
Income Taxes 6,052  7,862  (24,647) 16,156 
Adjusted EBITDA $24,138  $24,172  $44,869  $49,273 
         
Utility Segment        
Reported GAAP Earnings $33,360  $25,581  $54,353  $46,755 
Depreciation, Depletion and Amortization 13,340  13,314  26,665  26,415 
Interest and Other Income (648) (189) (1,123) (415)
Interest Expense 6,857  7,194  13,695  14,392 
Income Taxes 13,104  15,680  19,407  26,762 
Adjusted EBITDA $66,013  $61,580  $112,997  $113,909 
         
Energy Marketing Segment        
Reported GAAP Earnings $578  $905  $1,624  $2,687 
Depreciation, Depletion and Amortization 68  70  138  140 
Interest and Other Income (183) (171) (320) (306)
Interest Expense   11  12  24 
Income Taxes 461  567  1,152  1,685 
Adjusted EBITDA $924  $1,382  $2,606  $4,230 
         
Corporate and All Other        
Reported GAAP Earnings $(3,122) $(512) $(17,066) $10 
Depreciation, Depletion and Amortization 696  291  1,022  719 
Interest and Other Income 577  (295) (801) (1,954)
Interest Expense (2,239) (1,248) (4,088) (2,408)
Income Taxes 1,958  (1,487) 16,965  (2,051)
Adjusted EBITDA $(2,130) $(3,251) $(3,968) $(5,684)

 

     
     
     
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
     
     
Quarter Ended March 31 (unaudited) 2018 2017
     
Operating Revenues $540,905,000  $522,075,000 
     
Net Income Available for Common Stock $91,847,000  $89,284,000 
     
Earnings Per Common Share    
Basic $1.07  $1.05 
Diluted $1.06  $1.04 
     
Weighted Average Common Shares:    
Used in Basic Calculation 85,809,233  85,334,887 
Used in Diluted Calculation 86,323,636  86,006,614 
     
Six Months Ended March 31 (unaudited)    
     
Operating Revenues $960,561,000  $944,576,000 
     
Net Income Available for Common Stock $290,501,000  $178,191,000 
     
Earnings Per Common Share:    
Basic $3.39  $2.09 
Diluted $3.37  $2.07 
     
Weighted Average Common Shares:    
Used in Basic Calculation 85,718,779  85,261,575 
Used in Diluted Calculation 86,318,892  85,897,282 
     
Twelve Months Ended March 31 (unaudited)    
     
Operating Revenues $1,595,866,000  $1,572,665,000 
     
Net Income Available for Common Stock $395,792,000  $224,030,000 
     
Earnings Per Common Share    
Basic $4.62  $2.63 
Diluted $4.59  $2.61 
     
Weighted Average Common Shares:    
Used in Basic Calculation 85,592,904  85,114,029 
Used in Diluted Calculation 86,232,666  85,738,474 
     

 

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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 56.13 -0.11 -0.2% Volume 411,623 Sep 24, 2018 4:02 PM.