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. Impairments under the SEC’s full cost ceiling test for natural gas and oil reserves;
  2. Changes in the price of natural gas or oil;
  3. 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;
  4. The length and severity of the recent COVID-19 pandemic, including its impacts across our businesses on demand, operations, global supply chains and liquidity;
  5. 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;
  6. The creditworthiness or performance of the Company’s key suppliers, customers and counterparties;
  7. 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;
  8. Delays or changes in costs or plans with respect to Company projects or related projects of other companies, including disruptions due to COVID-19, as well as difficulties or delays in obtaining necessary governmental approvals, permits or orders or in obtaining the cooperation of interconnecting facility operators;
  9. 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;
  10. 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;
  11. The impact of information technology disruptions, cybersecurity or data security breaches;
  12. 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;
  13. Increasing health care costs and the resulting effect on health insurance premiums and on the obligation to provide other post-retirement benefits;
  14. Other changes in price differentials between similar quantities of natural gas or oil having different quality, heating value, hydrocarbon mix or delivery date;
  15. The cost and effects of legal and administrative claims against the Company or activist shareholder campaigns to effect changes at the Company;
  16. Uncertainty of oil and gas reserve estimates;
  17. Significant differences between the Company’s projected and actual production levels for natural gas or oil;
  18. Changes in demographic patterns and weather conditions;
  19. Changes in the availability, price or accounting treatment of derivative financial instruments;
  20. 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;
  21. Economic disruptions or uninsured losses resulting from major accidents, fires, severe weather, natural disasters, terrorist activities or acts of war;
  22. Significant differences between the Company’s projected and actual capital expenditures and operating expenses;
  23. Increasing costs of insurance, changes in coverage and the ability to obtain insurance; or
  24. The Company’s ability to complete planned acquisitions, as well as successfully integrate acquired assets and achieve expected cost synergies.
  25. Forward-looking statements include estimates of oil and gas quantities. Proved oil and gas reserves are those quantities of oil and gas which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible under existing economic conditions, operating methods and government regulations. Other estimates of oil and gas quantities, including estimates of probable reserves, possible reserves, and resource potential, are by their nature more speculative than estimates of proved reserves. Accordingly, estimates other than proved reserves are subject to substantially greater risk of being actually realized.

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

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press-release-details
Press release details

National Fuel Reports Second Quarter Earnings

04/30/2020

WILLIAMSVILLE, N.Y., April 30, 2020 (GLOBE NEWSWIRE) -- National Fuel Gas Company (“National Fuel” or the “Company”) (NYSE:NFG) today announced consolidated results for the second quarter of its 2020 fiscal year and for the six months ended March 31, 2020.

FISCAL 2020 SECOND QUARTER SUMMARY

  • GAAP net loss of $106.1 million, or $1.23 per share, compared to GAAP net income of $90.6 million, or $1.04 per share, in the prior year, which includes a $129.3 million after-tax impairment of oil and gas properties and a $56.8 million deferred tax valuation allowance described in further detail in this release
  • Adjusted operating results of $84.2 million, or $0.97 per share, compared to $92.9 million, or $1.07 per share, in the prior year (see non-GAAP reconciliation on page 2)
  • Adjusted EBITDA of $231.1 million, an increase of $5.3 million from $225.8 million in the prior year (non-GAAP reconciliation on page 24)
  • E&P segment net production of 59.8 Bcfe, an increase of 11 Bcfe, or 23% from the prior year, including the impact of approximately 2.7 Bcf of curtailments due to sustained low natural gas prices in Appalachia
  • Average natural gas prices, after the impact of hedging, of $2.12 per Mcf, down $0.46 per Mcf from the prior year
  • Average oil prices, after the impact of hedging, of $58.23 per Bbl, down $2.78 per Bbl from the prior year
  • Gathering revenues of $35.3 million, an increase of $5.9 million, or 20%, on higher throughput from the E&P segment
  • Pipeline & Storage revenues of $79.2 million, an increase of $6.9 million, or 10%, from the prior year, largely driven by the successful resolution of a National Fuel Gas Supply Corporation rate proceeding
  • Reducing fiscal 2020 consolidated capital expenditure guidance to a range of $680 to $740 million, a decrease of $30 million  from the midpoint of the Company's previous guidance range

MANAGEMENT COMMENTS ON COMPANY’S COVID-19 RESPONSE

David P. Bauer, President and Chief Executive Officer of National Fuel Gas Company, stated: “As we confront the challenges of the COVID-19 pandemic, I am proud to say that National Fuel has continued to safely and reliably provide natural gas service to our over 743,000 utility customers in western New York and northwestern Pennsylvania, operate our extensive network of transportation, compression and gathering infrastructure, and produce essential natural gas supplies.

The continuity of our operations is a direct result of the dedication and hard work of our over 2,000 employees.  During this unprecedented situation, National Fuel has remained committed to our workforce - the bedrock of our Company - and has not instituted any furloughs or workforce reductions.  With a large portion of our employees now working remotely, we have implemented a number of initiatives to provide the flexibility needed to address this new normal, including additional paid time off to address child care needs, and encouraging the use of alternative work schedules.

With respect to our in-field workforce and customer service representatives, all of whom provide essential services to our communities each and every day, we have adopted appropriate social distancing measures and have provided necessary personal protective equipment in line with directives from federal, state, and local agencies.  As this public health crisis evolves, the health and well-being of our employees and our communities will remain our number one priority, and National Fuel will continue to monitor developments affecting our stakeholders in order to take appropriate steps to mitigate the impacts of the COVID-19 virus.”

RECONCILIATION OF GAAP EARNINGS TO ADJUSTED OPERATING RESULTS

                 
    Three Months Ended   Six Months Ended
     March 31,    March 31,
(in thousands except per share amounts)   2020   2019   2020   2019
Reported GAAP Earnings   $ (106,068 )   $ 90,595     $ (19,477 )   $ 193,256  
Items impacting comparability:                
Impairment of oil and gas properties (E&P)   177,761         177,761      
Tax impact of impairment of oil and gas properties   (48,503 )       (48,503 )    
Deferred tax valuation allowance   56,770         56,770      
Remeasurement of deferred income taxes under 2017 Tax Reform               (5,000 )
Mark-to-market adjustments due to hedge ineffectiveness (E&P)       6,742         237  
Tax impact of mark-to-market adjustments due to hedge ineffectiveness       (1,416 )       (50 )
Unrealized (gain) loss on other investments (Corporate / All Other)   5,414     (3,831 )   6,433     2,516  
Tax impact of unrealized (gain) loss on other investments   (1,137 )   805     (1,351 )   (528 )
Adjusted Operating Results   $ 84,237     $ 92,895     $ 171,633     $ 190,431  
                 
Reported GAAP Earnings Per Share   $ (1.23 )   $ 1.04     $ (0.23 )   $ 2.23  
Items impacting comparability:                
Impairment of oil and gas properties, net of tax (E&P)   1.49         1.49      
Deferred tax valuation allowance   0.66         0.66      
Remeasurement of deferred income taxes under 2017 Tax Reform               (0.06 )
Mark-to-market adjustments due to hedge ineffectiveness, net of tax (E&P)       0.06          
Unrealized (gain) loss on other investments, net of tax (Corporate / All Other)   0.05     (0.03 )   0.06     0.02  
Rounding               0.01  
Adjusted Operating Results Per Share   $ 0.97     $ 1.07     $ 1.98     $ 2.20  

MANAGEMENT COMMENTS ON SECOND QUARTER RESULTS

Mr. Bauer added: “Low commodity prices continued to serve as a headwind during the quarter, weighing on our results and requiring the Company to write down the value of its oil and gas reserves in our Exploration and Production segment.  Operationally, however, our results were in line with our expectations, driven by the strong performance of our Pipeline and Storage and Gathering businesses, both of which saw significant earnings growth. In these uncertain times, our diversified business model continues to function as designed, providing National Fuel with stability through a consistent, predictable base of cash flows and a strong balance sheet.”

FISCAL 2020 GUIDANCE AND BUSINESS UPDATE

National Fuel is revising its fiscal 2020 earnings guidance to reflect revised commodity price assumptions for the balance of the fiscal year, and the results of the fiscal second quarter. The Company is now projecting that earnings, excluding items impacting comparability, will be within the range of $2.75 to $2.95 per share, or $2.85 per share at the midpoint of the range.

The Company is assuming that NYMEX natural gas prices will average $2.05 per MMBtu for the remainder of fiscal 2020, unchanged from the previous guidance, while also lowering its Appalachian spot price forecast to $1.65 per MMBtu.  Additionally, the Company is now assuming that WTI oil prices will average $22.50 per barrel (Bbl) for the remainder of fiscal 2020, a decrease of $32.50 per Bbl from the $55.00 assumed in the previous guidance. These price assumptions are intended to reflect the current NYMEX forward markets for natural gas and oil and consider the impact of local sales point differentials.

The Exploration and Production segment is lowering its fiscal 2020 net production guidance to a range of 230 to 240 Bcfe, which reflects the impacts of curtailments during the second quarter and estimated curtailments for the month of April.  During the second quarter, Seneca executed approximately 12.6 Bcf of new NYMEX swap contracts and fixed price physical firm sales for fiscal 2020. The Company currently has financial hedges and fixed price physical firm sales contracts in place on approximately 72% of Seneca’s remaining expected fiscal 2020 natural gas production that, on average, lock-in a price realization after the cost of transportation of $2.16 per Mcf.

In addition, the Company is lowering its consolidated capital expenditure guidance to a range of $680 to $740 million, a $30 million decrease from the midpoint of the Company’s prior guidance range.  The Company’s other guidance assumptions remain largely unchanged from the previous guidance.

Additional details on the Company's updated forecast assumptions and business segment guidance for fiscal 2020 are outlined in the table on page 8.

DISCUSSION OF SECOND QUARTER RESULTS BY SEGMENT

The following earnings discussion of each operating segment for the quarter ended March 31, 2020 is summarized in a tabular form on pages 9 and 10 of this report (earnings drivers for the six months ended March 31, 2020 are summarized on pages 11 and 12).  It may be helpful to refer to those tables while reviewing this discussion.  As of the quarter ended September 30, 2019, the Company is no longer reporting the Energy Marketing operations as a reportable segment.  The Energy Marketing operations have been included in the All Other category in the disclosures and tables that follow below.  Prior year segment information has been restated to reflect this change in presentation.

Note that management defines Adjusted Operating Results as reported GAAP earnings adjusted for items impacting comparability, and Adjusted EBITDA as reported GAAP earnings before the following items: interest expense, income taxes, depreciation, depletion and amortization, other income and deductions, 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 Company, LLC ("Seneca").  Seneca explores for, develops and produces natural gas and oil reserves, primarily in Pennsylvania and California.

  Three Months Ended
  March 31,
(in thousands) 2020   2019   Variance
GAAP Earnings $ (175,275 )   $ 21,873     $ (197,148 )
Impairment of oil and gas properties, net of tax 129,258         129,258  
Deferred tax valuation allowance 60,463         60,463  
Mark-to-market adjustments due to hedge ineffectiveness, net of tax     5,326     (5,326 )
Adjusted Operating Results $ 14,446     $ 27,199     $ (12,753 )
           
Adjusted EBITDA $ 79,846     $ 83,580     $ (3,734 )

Seneca’s second quarter GAAP earnings decreased $197.1 million versus the prior year, which includes the impact of a non-cash, pre-tax impairment of Seneca’s oil and natural gas reserves, and the recognition of a valuation allowance that reduced the deferred tax asset related to certain state-level net operating loss and credit carryforwards that may not be realized.

During the second quarter, Seneca recorded a non-cash, pre-tax impairment charge of $177.8 million ($129.3 million after-tax) to write-down the value of Seneca’s oil and natural gas reserves under the full cost method of accounting. The full cost method of accounting requires that Seneca perform a quarterly “ceiling test” to compare the present value of future revenues from its oil and natural gas reserves based on an unweighted arithmetic average of the first day of the month oil and gas prices for each month within the 12-month period prior to the end of the reporting period (“the ceiling”) with the book value of those reserves at the balance sheet date.  If the book value of the reserves exceeds the ceiling, a non-cash impairment charge must be recorded in order to reduce the book value of the reserves to the calculated ceiling.  It is anticipated that the current low commodity price environment will lead to impairments during the remainder of fiscal 2020 and likely in the first quarter of fiscal 2021 as well.

During the quarter ended March 31, 2020, the Company recorded a full valuation allowance in the amount of $60.5 million against certain state deferred tax assets based on its conclusion, considering all available evidence (both positive and negative), that it was more likely than not that these deferred tax assets would not be realized.  A significant item of objective negative evidence considered was a projected three-year cumulative pre-tax loss primarily due to the non-cash impairments of Seneca’s oil and gas reserves noted above.  Changes in judgment regarding future realization of these deferred tax assets may result in a reversal of all or a portion of the valuation allowance.

Excluding these items noted above, as well as the net impact of non-cash mark-to-market adjustments recorded in the prior year relating to hedge ineffectiveness (see table above), Seneca’s second quarter earnings decreased $12.8 million as the positive impact of higher production was more than offset by the negative impacts of lower realized natural gas and crude oil prices, higher operating expenses, higher interest expense, and a higher effective tax rate.

Seneca produced 59.8 Bcfe during the second quarter, an increase of 11.0 Bcfe, or 23%, from the prior year. Natural gas production increased 10.7 Bcf, or 24%, due primarily to production from new Marcellus and Utica wells completed and connected to sales in Appalachia. Net production increased 5.4 Bcf to 26.6 Bcf in Seneca’s Western Development Area and 5.4 Bcf to 29.0 Bcf in the Eastern Development Area.  Seneca curtailed an estimated 2.7 Bcf of net natural gas production during the second quarter due to lower spot pricing at local sales points in Pennsylvania.  Oil production for the second quarter increased 42,000 Bbls from the prior year as new production continues to come on-line from Seneca’s development of the Pioneer and 17N assets in the Midway Sunset area of California, as well as the Coalinga assets.

Seneca's average realized natural gas price, after the impact of hedging and transportation costs, was $2.12 per Mcf, a decrease of $0.46 per Mcf from the prior year. This decline was largely due to lower NYMEX prices and lower spot pricing at local sales points in Pennsylvania. Seneca's average realized oil price, after the impact of hedging, was $58.23 per Bbl, a decrease of $2.78 per Bbl compared to the prior year.  The decline in oil price realizations was due primarily to lower market prices for crude oil during the quarter and reduced price differentials at local sales points in California.

The increase in Seneca’s operating expenses was largely due to higher production during the quarter.  Lease operating and transportation (“LOE”) expense, which increased $5.8 million, includes the fees paid to the Company’s Gathering segment for gathering and compression services used to connect Seneca’s Marcellus and Utica production to sales points along interstate pipelines. In addition to higher production, the $9.2 million increase in depreciation, depletion and amortization (“DD&A”) expense was also due to a higher DD&A rate. Seneca’s general and administrative (“G&A”) costs were relatively flat despite the increased production. On a unit of production basis, G&A expenses during the quarter decreased $0.06 per Mcfe to $0.29 per Mcfe.

The increase in Seneca’s effective tax rate, excluding the impact of the valuation allowance recorded at March 31, 2020 discussed above, was largely driven by the prior year impact of the Enhanced Oil Recovery tax credit, which was not available in the current year.

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
  March 31,
(in thousands) 2020   2019   Variance
GAAP Earnings $ 22,087     $ 17,749     $ 4,338  
           
Adjusted EBITDA $ 49,102     $ 41,281     $ 7,821  

The Pipeline and Storage segment’s second quarter GAAP earnings increased $4.3 million versus the prior year primarily driven by higher operating revenues and lower operation and maintenance (“O&M”) expenses, partially offset by higher DD&A expense.  The increase in operating revenues of $6.9 million, or 10%, was largely due to an increase in Supply Corporation's transportation and storage rates effective February 1, 2020, in accordance with Supply Corporation's rate case settlement in principle coupled with new demand charges for transportation service from Supply Corporation's Line N to Monaca expansion project, which was placed in service on November 1, 2019.  O&M expense decreased $0.9 million primarily due to lower compressor and facility maintenance costs, partially offset by an increase in pipeline integrity costs.  The increase in DD&A expense of $2.1 million was primarily attributable to an increase in Supply Corporation's depreciation rates associated with its rate case settlement in principle.

Gathering Segment

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

  Three Months Ended
  March 31,
(in thousands) 2020   2019   Variance
GAAP Earnings $ 19,898     $ 12,690     $ 7,208  
Deferred tax valuation allowance (3,769 )       (3,769 )
Adjusted Operating Results $ 16,129     $ 12,690     $ 3,439  
           
Adjusted EBITDA $ 29,541     $ 24,598     $ 4,943  

The Gathering segment’s second quarter GAAP earnings increased $7.2 million versus the prior year.  Earnings were positively impacted by $3.8 million as a result of the Gathering segment's recognition of an income tax benefit that was recorded as an offset to the valuation allowance described above in the Exploration and Production segment.  This offset is a result of the Gathering and Exploration and Production segments’ subsidiaries filing a combined state tax return.  Taxable income generated in the Gathering segment is used to offset taxable losses in the Exploration and Production segment, which provided the opportunity to reduce the valuation allowance recorded in the Exploration and Production segment.  Excluding this item, the Gathering segment’s earnings increased $3.4 million. The increase was primarily driven by higher operating revenues, which were partially offset by higher O&M expense and a modest increase in DD&A expense.  Operating revenues increased $5.9 million, or 20%, primarily due to an 11.0 Bcf increase in gathered volumes from Seneca’s Appalachian natural gas production. The $1.0 million increase in O&M expense was due to an increase in compressor station operating and preventative maintenance activity during the current quarter. The $0.6 million increase in DD&A expense was due primarily to a higher average total value of plant assets in service versus the prior year.

Downstream Businesses

Utility Segment

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

  Three Months Ended
  March 31,
(in thousands) 2020   2019   Variance
GAAP Earnings $ 31,499     $ 35,589     $ (4,090 )
           
Adjusted EBITDA $ 73,192     $ 78,688     $ (5,496 )

The Utility segment’s second quarter GAAP earnings decreased $4.1 million over the prior year primarily driven by a decline in customer margin (operating revenues less purchased gas sold) and higher O&M expense.  The $1.5 million decrease in customer margin was due primarily to warmer weather in Distribution's Pennsylvania service territory, partially offset by higher revenues earned through the Company’s system modernization tracking mechanism and the positive impact of adjustments related to regulatory rate and cost recovery mechanisms subject to annual reconciliation.  Weather in Distribution's Pennsylvania service territory was 17.5% warmer on average than last year, resulting in a decrease in 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.  The $3.3 million increase in O&M expense was primarily attributable to higher personnel costs as well as a higher accrual for bad debt expense given the economic backdrop in the Company's service territory.

Corporate and All Other

The Company’s operations that are included in Corporate and All Other, which now include the Company’s energy marketing business, generated a combined loss of $4.3 million in the current year second quarter, which was a $7.0 million decrease from the combined earnings of $2.7 million generated in the prior-year second quarter.  The decrease in earnings was driven primarily by higher unrealized losses on investment securities in the current quarter compared to unrealized gains on investment securities in the prior year second quarter.

EARNINGS TELECONFERENCE

The Company will host a conference call on Friday, May 1, 2020, at 8:30 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 “9349819”.  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 “9349819”.  Both the webcast and a telephonic replay will be available until the close of business on Friday, May 8, 2020.

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

Certain statements contained herein, including statements identified by the use of the words “anticipates,” “estimates,” “expects,” “forecasts,” “intends,” “plans,” “predicts,” “projects,” “believes,” “seeks,” “will,” “may” and similar expressions, and statements which are other than statements of historical facts, are “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties, which could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. The Company’s expectations, beliefs and projections contained herein are expressed in good faith and are believed to have a reasonable basis, but there can be no assurance that such expectations, beliefs or projections will result or be achieved or accomplished. In addition to other factors, the following are important factors that could cause actual results to differ materially from those discussed in the forward-looking statements: impairments under the SEC’s full cost ceiling test for natural gas and oil reserves; changes in the price of natural gas or oil; financial and economic conditions, including the availability of credit, and occurrences affecting the Company’s ability to obtain financing on acceptable terms for working capital, capital expenditures and other investments, including any downgrades in the Company’s credit ratings and changes in interest rates and other capital market conditions; the length and severity of the recent COVID-19 pandemic, including its impacts across our businesses on demand, operations, global supply chains and liquidity; 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; 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; delays or changes in costs or plans with respect to Company projects or related projects of other companies, including disruptions due to COVID-19, as well as 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 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; the impact of  information technology disruptions, cybersecurity or data security breaches; 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; 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; 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
AND SUBSIDIARIES

GUIDANCE SUMMARY

As discussed on page 2, the Company is revising its earnings guidance for fiscal 2020.  Additional details on the Company's forecast assumptions and business segment guidance are outlined in the table below.

While the Company expects to incur additional ceiling test impairment charges in the remaining quarters of fiscal 2020 and likely in the first quarter of fiscal 2021 as well, the amount of these charges is not reasonably determinable at this time. The amount of any ceiling test charge is determined at the end of the applicable quarter and will depend on many factors, including additions to or subtractions from proved reserves, fluctuations in oil and gas prices, and income tax effects related to the differences between the book and tax basis of the Company’s oil and gas properties. Some or all of these factors are likely to be significant. Because the expected ceiling test impairment charges and other potential items impacting comparability are not reasonably determinable at this time, the Company is unable to provide earnings guidance other than on a non-GAAP basis that excludes these items.

  Updated FY 2020 Guidance   Previous FY 2020 Guidance
Consolidated Earnings per Share, excluding items impacting comparability $2.75 to $2.95   $2.95 to $3.15
Consolidated Effective Tax Rate ~ 26%    ~ 25%
       
Capital Expenditures (Millions)      
  Exploration and Production $375 - $395   $375 - $410
  Pipeline and Storage $175 - $195   $180 - $215
  Gathering $50 - $60   $50 - $60
  Utility $80 - $90   $90 - $100
  Consolidated Capital Expenditures $680 - $740   $695 - $785
       
Exploration & Production Segment Guidance      
       
  Commodity Price Assumptions      
  NYMEX natural gas price $2.05 /MMBtu   $2.05 /MMBtu
  Appalachian basin spot price $1.65 /MMBtu   $1.70 /MMBtu
  NYMEX (WTI) crude oil price $22.50 /Bbl   $55.00 /Bbl
  California oil price premium (% of WTI) 90 %   104 %
       
  Production (Bcfe)      
  East Division - Appalachia 214 to 224   219 to 229
  West Division - California ~ 16   ~ 16
  Total Production 230 to 240   235 to 245
       
  E&P Operating Costs ($/Mcfe)      
  LOE $0.85 - $0.89   $0.85 - $0.89
  G&A $0.27 - $0.30   $0.27 - $0.30
  DD&A $0.70 - $0.74   $0.73 - $0.77
       
Other Business Segment Guidance (Millions)      
  Gathering Segment Revenues $135 - $140   $135 - $145
  Pipeline and Storage Segment Revenues ~ $305   $290 - $295

 

NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS
QUARTER ENDED MARCH 31, 2020
(Unaudited)
                       
  Upstream   Midstream   Downstream        
                       
  Exploration &   Pipeline &           Corporate /    
(Thousands of Dollars) Production   Storage   Gathering   Utility   All Other   Consolidated*
                       
Second quarter 2019 GAAP earnings $ 21,873     $ 17,749     $ 12,690     $ 35,589     $ 2,694     $ 90,595  
                       
Items impacting comparability:                      
Mark-to-market adjustments due to hedge ineffectiveness 6,742                     6,742  
Tax impact of mark-to-market adjustments due to hedge ineffectiveness (1,416 )                   (1,416 )
Unrealized (gain) loss on other investments                 (3,831 )   (3,831 )
Tax impact of unrealized (gain) loss on other investments                 805     805  
Second quarter 2019 adjusted operating results 27,199     17,749     12,690     35,589     (332 )   92,895  
                       
Drivers of adjusted operating results**                      
                       
Upstream Revenues                      
Higher (lower) natural gas production 21,887                     21,887  
Higher (lower) crude oil production 2,030                     2,030  
Higher (lower) realized natural gas prices, after hedging (20,168 )                   (20,168 )
Higher (lower) realized crude oil prices, after hedging (1,332 )                   (1,332 )
                       
Midstream Revenues                      
Higher (lower) operating revenues     5,456     4,660             10,116  
                       
Downstream Margins***                      
Impact of usage and weather             (3,814 )       (3,814 )
System modernization tracker revenues             1,689         1,689  
Regulatory revenue adjustments             615         615  
Higher (lower) energy marketing margins                 604     604  
                       
Operating Expenses                      
Lower (higher) lease operating and transportation expenses (4,573 )                   (4,573 )
Lower (higher) operating expenses (395 )   705     (751 )   (2,880 )   415     (2,906 )
Lower (higher) depreciation / depletion (7,306 )   (1,630 )   (479 )           (9,415 )
                       
Other Income (Expense)                      
(Higher) lower other deductions (365 )   (483 )               (848 )
(Higher) lower interest expense (486 )               (608 )   (1,094 )
                       
Income Taxes                      
Lower (higher) income tax expense / effective tax rate (1,646 )   (2 )   2     343     24     (1,279 )
                       
All other / rounding (399 )   292     7     (43 )   (27 )   (170 )
Second quarter 2020 adjusted operating results 14,446     22,087     16,129     31,499     76     84,237  
                       
Items impacting comparability:                      
Impairment of oil and gas properties (177,761 )                   (177,761 )
Tax impact of impairment of oil and gas properties 48,503                     48,503  
Deferred tax valuation allowance (60,463 )       3,769         (76 )   (56,770 )
Unrealized gain (loss) on other investments                 (5,414 )   (5,414 )
Tax impact of unrealized gain (loss) on other investments                 1,137     1,137  
Second quarter 2020 GAAP earnings $ (175,275 )   $ 22,087     $ 19,898     $ 31,499     $ (4,277 )   $ (106,068 )
                       
* Amounts do not reflect intercompany eliminations                      
** Operating results have been calculated using the 21% federal statutory rate effective for the 2019 fiscal year.
*** Downstream margin defined as operating revenues less purchased gas expense.

 

NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS PER SHARE
QUARTER ENDED MARCH 31, 2020
(Unaudited)
                       
  Upstream   Midstream   Downstream        
                       
  Exploration &   Pipeline &           Corporate /    
  Production   Storage   Gathering   Utility   All Other   Consolidated*
                       
Second quarter 2019 GAAP earnings per share $ 0.25     $ 0.20     $ 0.15     $ 0.41     $ 0.03     $ 1.04  
Items impacting comparability:                      
Mark-to-market adjustments due to hedge ineffectiveness, net of tax 0.06                     0.06  
Unrealized (gain) loss on other investments, net of tax                 (0.03 )   (0.03 )
Second quarter 2019 adjusted operating results per share 0.31     0.20     0.15     0.41         1.07  
                       
Drivers of adjusted operating results**                      
                       
Upstream Revenues                      
Higher (lower) natural gas production 0.25                     0.25  
Higher (lower) crude oil production 0.02                     0.02  
Higher (lower) realized natural gas prices, after hedging (0.23 )                   (0.23 )
Higher (lower) realized crude oil prices, after hedging (0.02 )                   (0.02 )
                       
Midstream Revenues                      
Higher (lower) operating revenues     0.06     0.05             0.11  
                       
Downstream Margins***                      
Impact of usage and weather             (0.04 )       (0.04 )
System modernization tracker revenues             0.02         0.02  
Regulatory revenue adjustments             0.01         0.01  
Higher (lower) energy marketing margins                 0.01     0.01  
                       
Operating Expenses                      
Lower (higher) lease operating and transportation expenses (0.05 )                   (0.05 )
Lower (higher) operating expenses     0.01     (0.01 )   (0.03 )       (0.03 )
Lower (higher) depreciation / depletion (0.08 )   (0.02 )   (0.01 )           (0.11 )
                       
Other Income (Expense)                      
(Higher) lower other deductions     (0.01 )               (0.01 )
(Higher) lower interest expense (0.01 )               (0.01 )   (0.02 )
                       
Income Taxes                      
Lower (higher) income tax expense / effective tax rate (0.02 )                   (0.02 )
                       
All other / rounding     0.01     0.01     (0.01 )       0.01  
Second quarter 2020 adjusted operating results per share 0.17     0.25     0.19     0.36         0.97  
                       
Items impacting comparability:                      
Impairment of oil and gas properties, net of tax (1.49 )                   (1.49 )
Deferred tax valuation allowance (0.70 )       0.04             (0.66 )
Unrealized gain (loss) on other investments, net of tax                 (0.05 )   (0.05 )
Earnings per share impact of diluted shares (0.01 )   0.01                  
Second quarter 2020 GAAP earnings per share $ (2.03 )   $ 0.26     $ 0.23     $ 0.36     $ (0.05 )   $ (1.23 )
                       
* Amounts do not reflect intercompany eliminations                      
** Operating results have been calculated using the 21% federal statutory rate effective for the 2019 fiscal year.
*** Downstream margin defined as operating revenues less purchased gas expense.

 

NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS
SIX MONTHS ENDED MARCH 31, 2020
(Unaudited)
                       
  Upstream   Midstream   Downstream        
                       
  Exploration &   Pipeline &           Corporate /    
(Thousands of Dollars) Production   Storage   Gathering   Utility   All Other   Consolidated*
                       
Six months ended March 31, 2019 GAAP earnings $ 60,087     $ 42,851     $ 26,872     $ 61,237     $ 2,209     $ 193,256  
                       
Items impacting comparability:                      
Remeasurement of deferred taxes under 2017 Tax Reform (990 )       (500 )       (3,510 )   (5,000 )
Mark-to-market adjustments due to hedge ineffectiveness 237                     237  
Tax impact of mark-to-market adjustments due to hedge ineffectiveness (50 )                   (50 )
Unrealized (gain) loss on other investments                 2,516     2,516  
Tax impact of unrealized (gain) loss on other investments                 (528 )   (528 )
Six months ended March 31, 2019 adjusted operating results 59,284     42,851     26,372     61,237     687     190,431  
                       
Drivers of adjusted operating results**                      
                       
Upstream Revenues                      
Higher (lower) natural gas production 40,427                     40,427  
Higher (lower) crude oil production 3,487                     3,487  
Higher (lower) realized natural gas prices, after hedging (32,792 )                   (32,792 )
Higher (lower) realized crude oil prices, after hedging (754 )                   (754 )
                       
Midstream Revenues                      
Higher (lower) operating revenues     1,625     8,688             10,313  
                       
Downstream Margins***                      
Impact of usage and weather             (3,678 )       (3,678 )
System modernization tracker revenues             2,033         2,033  
Regulatory revenue adjustments             1,550         1,550  
Higher (lower) energy marketing margins                 891     891  
                       
Operating Expenses                      
Lower (higher) lease operating and transportation expenses (11,082 )                   (11,082 )
Lower (higher) operating expenses (1,016 )   1,260     (2,038 )   (2,707 )   674     (3,827 )
Lower (higher) property, franchise and other taxes 1,187     (1,215 )               (28 )
Lower (higher) depreciation / depletion (14,770 )   (2,017 )   (843 )           (17,630 )
                       
Other Income (Expense)                      
(Higher) lower other deductions (713 )   (916 )           1,004     (625 )
(Higher) lower interest expense (1,192 )   412     272         (717 )   (1,225 )
                       
Income Taxes                      
Lower (higher) income tax expense / effective tax rate (2,980 )   (2,458 )   (213 )   (443 )   (266 )   (6,360 )
                       
All other / rounding (664 )   650     (165 )   90     591     502  
Six months ended March 31, 2020 adjusted operating results 38,422     40,192     32,073     58,082     2,864     171,633  
                       
Items impacting comparability:                      
Impairment of oil and gas properties (177,761 )                   (177,761 )
Tax impact of impairment of oil and gas properties 48,503                     48,503  
Deferred tax valuation allowance (60,463 )       3,769         (76 )   (56,770 )
Unrealized gain (loss) on other investments                 (6,433 )   (6,433 )
Tax impact of unrealized gain (loss) on other investments                 1,351     1,351  
Six months ended March 31, 2020 GAAP earnings $ (151,299 )   $ 40,192     $ 35,842     $ 58,082     $ (2,294 )   $ (19,477 )
                       
* Amounts do not reflect intercompany eliminations                      
** Operating results have been calculated using the 21% federal statutory rate effective for the 2019 fiscal year.
*** Downstream margin defined as operating revenues less purchased gas expense.

 

NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS PER SHARE
SIX MONTHS ENDED MARCH 31, 2020
(Unaudited)
                       
  Upstream   Midstream   Downstream        
                       
  Exploration &   Pipeline &           Corporate /    
  Production   Storage   Gathering   Utility   All Other   Consolidated*
Six months ended March 31, 2019 GAAP earnings per share $ 0.69     $ 0.49     $ 0.31     $ 0.71     $ 0.03     $ 2.23  
Items impacting comparability:                      
Remeasurement of deferred taxes under 2017 Tax Reform (0.01 )       (0.01 )       (0.04 )   (0.06 )
Mark-to-market adjustments due to hedge ineffectiveness, net of tax                      
Unrealized (gain) loss on other investments, net of tax                 0.02     0.02  
Rounding                 0.01     0.01  
Six months ended March 31, 2019 adjusted operating results per share 0.68     0.49     0.30     0.71     0.02     2.20  
                       
Drivers of adjusted operating results**                      
                       
Upstream Revenues                      
Higher (lower) natural gas production 0.47                     0.47  
Higher (lower) crude oil production 0.04                     0.04  
Higher (lower) realized natural gas prices, after hedging (0.38 )                   (0.38 )
Higher (lower) realized crude oil prices, after hedging (0.01 )                   (0.01 )
                       
Midstream Revenues                      
Higher (lower) operating revenues     0.02     0.10             0.12  
                       
Downstream Margins***                      
Impact of usage and weather             (0.04 )       (0.04 )
System modernization tracker revenues             0.02         0.02  
Regulatory revenue adjustments             0.02         0.02  
Higher (lower) energy marketing margins                 0.01     0.01  
                       
Operating Expenses                      
Lower (higher) lease operating and transportation expenses (0.13 )                   (0.13 )
Lower (higher) operating expenses (0.01 )   0.01     (0.02 )   (0.03 )   0.01     (0.04 )
Lower (higher) property, franchise and other taxes 0.01     (0.01 )                
Lower (higher) depreciation / depletion (0.17 )   (0.02 )   (0.01 )           (0.20 )
                       
Other Income (Expense)                      
(Higher) lower other deductions (0.01 )   (0.01 )           0.01     (0.01 )
(Higher) lower interest expense (0.01 )               (0.01 )   (0.02 )
                       
Income Taxes                      
Lower (higher) income tax expense / effective tax rate (0.03 )   (0.03 )       (0.01 )       (0.07 )
                       
All other / rounding (0.01 )   0.01                  
Six months ended March 31, 2020 adjusted operating results per share 0.44     0.46     0.37     0.67     0.04     1.98  
                       
Items impacting comparability:                      
Impairment of oil and gas properties, net of tax (1.49 )                   (1.49 )
Deferred tax valuation allowance (0.70 )       0.04             (0.66 )
Unrealized gain (loss) on other investments, net of tax                 (0.06 )   (0.06 )
Earnings per share impact of diluted shares         0.01         (0.01 )    
Six months ended March 31, 2020 GAAP earnings per share $ (1.75 )   $ 0.46     $ 0.42     $ 0.67     $ (0.03 )   $ (0.23 )
                       
* Amounts do not reflect intercompany eliminations                      
** Operating results have been calculated using the 21% federal statutory rate effective for the 2019 fiscal year.
*** Downstream margin defined as operating revenues less purchased gas expense.

 

               
               
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
               
(Thousands of Dollars, except per share amounts)              
  Three Months Ended   Six Months Ended
  March 31,   March 31,
  (Unaudited)   (Unaudited)
SUMMARY OF OPERATIONS 2020   2019   2020   2019
Operating Revenues:              
Utility and Energy Marketing Revenues $ 282,634     $ 357,654     $ 510,660     $ 629,747  
Exploration and Production and Other Revenues 156,542     146,467     323,735     310,403  
Pipeline and Storage and Gathering Revenues 51,919     48,423     100,888     102,641  
  491,095     552,544     935,283     1,042,791  
Operating Expenses:              
Purchased Gas 118,270     195,037     210,542     333,697  
Operation and Maintenance:              
  Utility and Energy Marketing 51,725     48,559     94,981     92,475  
  Exploration and Production and Other 39,959     40,141     76,652     72,936  
  Pipeline and Storage and Gathering 27,305     27,249     53,190     52,182  
Property, Franchise and Other Taxes 22,743     22,535     45,887     46,540  
Depreciation, Depletion and Amortization 77,912     65,664     152,830     129,918  
Impairment of Oil and Gas Producing Properties 177,761         177,761      
  515,675     399,185     811,843     727,748  
               
Operating Income (Loss) (24,580 )   153,359     123,440     315,043  
               
Other Income (Expense):              
Other Income (Deductions) (17,480 )   (5,919 )   (20,520 )   (15,521 )
Interest Expense on Long-Term Debt (25,270 )   (25,273 )   (50,713 )   (50,713 )
Other Interest Expense (1,892 )   (1,787 )   (3,443 )   (2,860 )
               
Income (Loss) Before Income Taxes (69,222 )   120,380     48,764     245,949  
               
Income Tax Expense 36,846     29,785     68,241     52,693  
               
Net Income (Loss) Available for Common Stock $ (106,068 )   $ 90,595     $ (19,477 )   $ 193,256  
               
Earnings (Loss) Per Common Share              
Basic $ (1.23 )   $ 1.05     $ (0.23 )   $ 2.24  
Diluted $ (1.23 )   $ 1.04     $ (0.23 )   $ 2.23  
               
Weighted Average Common Shares:              
Used in Basic Calculation 86,561,066   86,290,047   86,469,258   86,159,932
Used in Diluted Calculation 86,561,066   86,767,673   86,469,258   86,738,809

 

NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
   
  March 31,   September 30,
(Thousands of Dollars)   2020     2019
       
ASSETS      
Property, Plant and Equipment $ 11,559,528     $ 11,204,838  
Less - Accumulated Depreciation, Depletion and Amortization   6,003,658       5,695,328  
Net Property, Plant and Equipment   5,555,870       5,509,510  
       
Current Assets:      
Cash and Temporary Cash Investments   111,655       20,428  
Hedging Collateral Deposits   10,728       6,832  
Receivables - Net   172,011       139,956  
Unbilled Revenue   44,715       18,758  
Gas Stored Underground   8,860       36,632  
Materials and Supplies - at average cost   48,113       40,717  
Unrecovered Purchased Gas Costs         2,246  
Other Current Assets   100,188       97,054  
Total Current Assets   496,270       362,623  
       
Other Assets:      
Recoverable Future Taxes   115,934       115,197  
Unamortized Debt Expense   13,151       14,005  
Other Regulatory Assets   161,800       167,320  
Deferred Charges   56,855       33,843  
Other Investments   137,044       144,917  
Goodwill   5,476       5,476  
Prepaid Post-Retirement Benefit Costs   71,381       60,517  
Fair Value of Derivative Financial Instruments   94,797       48,669  
Other   81       80  
Total Other Assets   656,519       590,024  
Total Assets $ 6,708,659     $ 6,462,157  
       
CAPITALIZATION AND LIABILITIES      
Capitalization:      
Comprehensive Shareholders' Equity      
Common Stock, $1 Par Value Authorized - 200,000,000 Shares; Issued and      
Outstanding - 86,561,532 Shares and 86,315,287 Shares, Respectively $ 86,562     $ 86,315  
Paid in Capital   835,444       832,264  
Earnings Reinvested in the Business   1,176,870       1,272,601  
Accumulated Other Comprehensive Loss   (18,917 )     (52,155 )
Total Comprehensive Shareholders' Equity   2,079,959       2,139,025  
Long-Term Debt, Net of Current Portion and Unamortized Discount and Debt Issuance Costs   2,134,964       2,133,718  
Total Capitalization   4,214,923       4,272,743  
       
Current and Accrued Liabilities:      
Notes Payable to Banks and Commercial Paper   230,000       55,200  
Current Portion of Long-Term Debt          
Accounts Payable   106,938       132,208  
Amounts Payable to Customers   17,213       4,017  
Dividends Payable   37,654       37,547  
Interest Payable on Long-Term Debt   18,508       18,508  
Customer Advances   615       13,044  
Customer Security Deposits   14,999       16,210  
Other Accruals and Current Liabilities   150,239       139,600  
Fair Value of Derivative Financial Instruments   7,652       5,574  
Total Current and Accrued Liabilities   583,818       421,908  
       
Deferred Credits:      
Deferred Income Taxes   777,299       653,382  
Taxes Refundable to Customers   360,331       366,503  
Cost of Removal Regulatory Liability   224,546       221,699  
Other Regulatory Liabilities   157,371       142,367  
Pension and Other Post-Retirement Liabilities   126,959       133,729  
Asset Retirement Obligations   128,779       127,458  
Other Deferred Credits   134,633       122,368  
Total Deferred Credits   1,909,918       1,767,506  
Commitments and Contingencies          
Total Capitalization and Liabilities $ 6,708,659     $ 6,462,157  

 

         
         
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
    Six Months Ended
    March 31,
(Thousands of Dollars)   2020   2019
         
Operating Activities:        
Net Income (Loss) Available for Common Stock   $ (19,477 )   $ 193,256  
Adjustments to Reconcile Net Income (Loss) to Net Cash
Provided by Operating Activities:
       
Impairment of Oil and Gas Producing Properties   177,761      
Depreciation, Depletion and Amortization   152,830     129,918  
Deferred Income Taxes   104,883     90,468  
Stock-Based Compensation   7,580     10,731  
Other   9,800     7,997  
Change in:        
Receivables and Unbilled Revenue   (58,248 )   (130,377 )
Gas Stored Underground and Materials and Supplies   20,086     29,093  
Unrecovered Purchased Gas Costs   2,246     (1,556 )
Other Current Assets   (3,134 )   10,438  
Accounts Payable   (5,465 )   10,226  
Amounts Payable to Customers   13,196     12,069  
Customer Advances   (12,429 )   (13,176 )
Customer Security Deposits   (1,211 )   (7,184 )
Other Accruals and Current Liabilities   9,076     48,028  
Other Assets   (10,359 )   (38,686 )
Other Liabilities   3,857     (10,410 )
Net Cash Provided by Operating Activities   $ 390,992     $ 340,835  
         
Investing Activities:        
Capital Expenditures   $ (395,486 )   $ (386,579 )
Other   4,167     (2,616 )
Net Cash Used in Investing Activities   $ (391,319 )   $ (389,195 )
         
Financing Activities:        
Changes in Notes Payable to Banks and Commercial Paper   $ 174,800     $  
Dividends Paid on Common Stock   (75,197 )   (73,197 )
Net Repurchases of Common Stock   (4,153 )   (8,864 )
Net Cash Provided by (Used in) Financing Activities   $ 95,450     $ (82,061 )
         
Net Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash   95,123     (130,421 )
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period   27,260     233,047  
Cash, Cash Equivalents, and Restricted Cash at March 31   $ 122,383     $ 102,626  

 

                   
                   
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
                   
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
                   
UPSTREAM BUSINESS
                   
                   
  Three Months Ended   Six Months Ended
(Thousands of Dollars, except per share amounts) March 31,   March 31,
EXPLORATION AND PRODUCTION SEGMENT 2020   2019   Variance   2020 2019 Variance
Total Operating Revenues $ 155,560     $ 146,102     $ 9,458     $ 321,499   $ 308,978   $ 12,521  
                   
Operating Expenses:                  
Operation and Maintenance:                  
General and Administrative Expense 17,429     17,113     316     32,809   32,312   497  
Lease Operating and Transportation Expense 51,730     45,941     5,789     102,531   88,503   14,028  
All Other Operation and Maintenance Expense 3,084     2,900     184     6,041   5,252   789  
Property, Franchise and Other Taxes 3,471     3,310     161     8,171   9,673   (1,502 )
Depreciation, Depletion and Amortization 45,136     35,888     9,248     89,284   70,588   18,696  
Impairment of Oil and Gas Producing Properties 177,761         177,761     177,761     177,761  
  298,611     105,152     193,459     416,597   206,328   210,269  
                   
Operating Income (Loss) (143,051 )   40,950   (184,001 )   (95,098 ) 102,650 (197,748 )
                   
Other Income (Expense):                  
Non-Service Pension and Post-Retirement Benefit Costs (395 )   (4 )   (391 )   (790 ) (8 ) (782 )
Interest and Other Income 208     279     (71 )   441   562   (121 )
Interest Expense (14,163 )   (13,548 )   (615 )   (28,220 ) (26,711 ) (1,509 )
                   
Income (Loss) Before Income Taxes (157,401 )   27,677     (185,078 )   (123,667 ) 76,493   (200,160 )
Income Tax Expense 17,874     5,804     12,070     27,632   16,406   11,226  
Net Income (Loss) $ (175,275 )   $ 21,873     $ (197,148 )   $ (151,299 ) $ 60,087   $ (211,386 )
                   
Net Income (Loss) Per Share (Diluted) $ (2.03 )   $ 0.25     $ (2.28 )   $ (1.75 ) $ 0.69   $ (2.44 )
                   

 

                   
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
                   
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
                   
MIDSTREAM BUSINESSES
                   
                   
  Three Months Ended   Six Months Ended
(Thousands of Dollars, except per share amounts) March 31,   March 31,
PIPELINE AND STORAGE SEGMENT 2020   2019   Variance   2020 2019 Variance
Revenues from External Customers $ 51,919     $ 48,421     $ 3,498     $ 100,888   $ 102,639   $ (1,751 )
Intersegment Revenues 27,326     23,918     3,408     50,577   46,769   3,808  
Total Operating Revenues 79,245     72,339     6,906     151,465   149,408   2,057  
                   
Operating Expenses:                  
Purchased Gas (3 )   510     (513 )   (10 ) 813   (823 )
Operation and Maintenance 22,014     22,907     (893 )   42,945   44,540   (1,595 )
Property, Franchise and Other Taxes 8,132     7,641     491     16,487   14,949   1,538  
Depreciation, Depletion and Amortization 13,356     11,293     2,063     24,960   22,407   2,553  
  43,499     42,351     1,148     84,382   82,709   1,673  
                   
Operating Income 35,746     29,988     5,758     67,083   66,699   384  
                   
Other Income (Expense):                  
Non-Service Pension and Post-Retirement Benefit (Costs) Credit (174 )   930     (1,104 )   (349 ) 1,397   (1,746 )
Interest and Other Income 1,535     1,043     492     3,088   2,502   586  
Interest Expense (7,152 )   (7,500 )   348     (14,264 ) (14,786 ) 522  
                   
Income Before Income Taxes 29,955     24,461     5,494     55,558   55,812   (254 )
Income Tax Expense 7,868     6,712     1,156     15,366   12,961   2,405  
Net Income $ 22,087     $ 17,749     $ 4,338     $ 40,192   $ 42,851   $ (2,659 )
                   
Net Income Per Share (Diluted) $ 0.26     $ 0.20     $ 0.06     $ 0.46   $ 0.49   $ (0.03 )
                   
                   
  Three Months Ended   Six Months Ended
  March 31,   March 31,
GATHERING SEGMENT 2020   2019   Variance   2020 2019 Variance
Revenues from External Customers $     $ 2     $ (2 )   $   $ 2   $ (2 )
Intersegment Revenues 35,267     29,366     5,901     70,055   59,056   10,999  
Total Operating Revenues 35,267     29,368     5,899     70,055   59,058   10,997  
                   
Operating Expenses:                  
Operation and Maintenance 5,702     4,752     950     11,044   8,464   2,580  
Property, Franchise and Other Taxes 24     18     6     38   48   (10 )
Depreciation, Depletion and Amortization 5,279     4,673     606     10,418   9,351   1,067  
  11,005     9,443     1,562     21,500   17,863   3,637  
                   
Operating Income 24,262     19,925     4,337     48,555   41,195   7,360  
                   
Other Income (Expense):                  
Non-Service Pension and Post-Retirement Benefit Costs (71 )   (1 )   (70 )   (143 ) (83 ) (60 )
Interest and Other Income 89     190     (101 )   157   315   (158 )
Interest Expense (2,160 )   (2,345 )   185     (4,379 ) (4,723 ) 344  
                   
Income Before Income Taxes 22,120     17,769     4,351     44,190   36,704   7,486  
Income Tax Expense 2,222     5,079     (2,857 )   8,348   9,832   (1,484 )
Net Income $ 19,898     $ 12,690     $ 7,208     $ 35,842   $ 26,872   $ 8,970  
                   
Net Income Per Share (Diluted) $ 0.23     $ 0.15     $ 0.08     $ 0.42   $ 0.31   $ 0.11  
                   

 

                   
                   
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
                   
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
                   
DOWNSTREAM BUSINESS
                   
                   
  Three Months Ended   Six Months Ended
(Thousands of Dollars, except per share amounts) March 31,   March 31,
UTILITY SEGMENT 2020   2019   Variance   2020 2019 Variance
Revenues from External Customers $ 250,556     $ 298,636     $ (48,080 )   $ 445,465   $ 518,647   $ (73,182 )
Intersegment Revenues 3,937     4,394     (457 )   5,853   7,040   (1,187 )
Total Operating Revenues 254,493     303,030     (48,537 )   451,318   525,687   (74,369 )
                   
Operating Expenses:                  
Purchased Gas 119,411     165,235     (45,824 )   204,116   277,115   (72,999 )
Operation and Maintenance 51,070     47,795     3,275     93,913   90,950   2,963  
Property, Franchise and Other Taxes 10,820     11,312     (492 )   20,634   21,365   (731 )
Depreciation, Depletion and Amortization 13,751     13,365     386     27,382   26,656   726  
  195,052     237,707     (42,655 )   346,045   416,086   (70,041 )
                   
Operating Income 59,441     65,323     (5,882 )   105,273   109,601   (4,328 )
                   
Other Income (Expense):                  
Non-Service Pension and Post-Retirement Benefit Costs (12,388 )   (12,686 )   298     (19,151 ) (19,614 ) 463  
Interest and Other Income 294     1,068     (774 )   1,245   1,780   (535 )
Interest Expense (5,516 )   (6,263 )   747     (11,190 ) (12,157 ) 967  
                   
Income Before Income Taxes 41,831     47,442     (5,611 )   76,177   79,610   (3,433 )
Income Tax Expense 10,332     11,853     (1,521 )   18,095   18,373   (278 )
Net Income $ 31,499     $ 35,589     $ (4,090 )   $ 58,082   $ 61,237   $ (3,155 )
                   
Net Income Per Share (Diluted) $ 0.36     $ 0.41     $ (0.05 )   $ 0.67   $ 0.71   $ (0.04 )
                   

 

NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
                   
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
                   
  Three Months Ended   Six Months Ended
(Thousands of Dollars, except per share amounts) March 31,   March 31
ALL OTHER 2020   2019   Variance   2020 2019 Variance
Revenues from External Customers $ 32,925     $ 59,328     $ (26,403 )   $ 67,161   $ 112,416   $ (45,255 )
Intersegment Revenues 79     43     36     256   375   (119 )
Total Operating Revenues 33,004     59,371     (26,367 )   67,417   112,791   (45,374 )
Operating Expenses:                  
Purchased Gas 29,151     56,820     (27,669 )   61,184   108,337   (47,153 )
Operation and Maintenance 1,875     1,944     (69 )   3,578   3,822   (244 )
Property, Franchise and Other Taxes 176     134     42     320   270   50  
Depreciation, Depletion and Amortization 206     254     (48 )   408   536   (128 )
  31,408     59,152     (27,744 )   65,490   112,965   (47,475 )
                   
Operating Income (Loss) 1,596     219     1,377     1,927   (174 ) 2,101  
                   
Other Income (Expense):                  
Non-Service Pension and Post-Retirement Benefit Costs (69 )   (11 )   (58 )   (138 ) (133 ) (5 )
Interest and Other Income 193     360     (167 )   471   666   (195 )
Interest Expense (24 )   (8 )   (16 )   (42 ) (13 ) (29 )
                   
Income Before Income Taxes 1,696     560     1,136     2,218   346   1,872  
Income Tax Expense (Benefit) 527     144     383     678   (153 ) 831  
Net Income $ 1,169     $ 416     $ 753     $ 1,540   $ 499   $ 1,041  
Net Income Per Share (Diluted) $ 0.01     $ 0.01     $     $ 0.02   $ 0.01   $ 0.01  
           
  Three Months Ended   Six Months Ended
  March 31,   March 31,
CORPORATE 2020   2019   Variance   2020 2019 Variance
Revenues from External Customers $ 135     $ 55     $ 80     $ 270   $ 109   $ 161  
Intersegment Revenues 1,094     1,165     (71 )   2,187   2,329   (142 )
Total Operating Revenues 1,229     1,220     9     2,457   2,438   19  
Operating Expenses:                  
Operation and Maintenance 3,499     3,955     (456 )   6,142   6,751   (609 )
Property, Franchise and Other Taxes 120     120         237   235   2  
Depreciation, Depletion and Amortization 184     191     (7 )   378   380   (2 )
  3,803     4,266     (463 )   6,757   7,366   (609 )
                   
Operating Loss (2,574 )   (3,046 )   472     (4,300 ) (4,928 ) 628  
                   
Other Income (Expense):                  
Non-Service Pension and Post-Retirement Benefit Costs (775 )   (647 )   (128 )   (1,550 ) (1,385 ) (165 )
Interest and Other Income 22,801     32,761     (9,960 )   53,874   56,377   (2,503 )
Interest Expense on Long-Term Debt (25,270 )   (25,273 )   3     (50,713 ) (50,713 )  
Other Interest Expense (1,605 )   (1,324 )   (281 )   (3,023 ) (2,367 ) (656 )
                   
Income (Loss) before Income Taxes (7,423 )   2,471     (9,894 )   (5,712 ) (3,016 ) (2,696 )
Income Tax Expense (Benefit) (1,977 )   193     (2,170 )   (1,878 ) (4,726 ) 2,848  
Net Income (Loss) $ (5,446 )   $ 2,278     $ (7,724 )   $ (3,834 ) $ 1,710   $ (5,544 )
Net Income (Loss) Per Share (Diluted) $ (0.06 )   $ 0.02     $ (0.08 )   $ (0.05 ) $ 0.02   $ (0.07 )
                   
                   
  Three Months Ended   Six Months Ended
  March 31,   March 31,
INTERSEGMENT ELIMINATIONS 2020   2019   Variance   2020 2019 Variance
Intersegment Revenues $ (67,703 )   $ (58,886 )   $ (8,817 )   $ (128,928 ) $ (115,569 ) $ (13,359 )
Operating Expenses:                  
Purchased Gas (30,289 )   (27,528 )   (2,761 )   (54,748 ) (52,568 ) (2,180 )
Operation and Maintenance (37,414 )   (31,358 )   (6,056 )   (74,180 ) (63,001 ) (11,179 )
  (67,703 )   (58,886 )   (8,817 )   (128,928 ) (115,569 ) (13,359 )
                   
Operating Income                  
                   
Other Income (Expense):                  
Interest and Other Deductions (28,728 )   (29,201 )   473     (57,675 ) (57,897 ) 222  
Interest Expense 28,728     29,201     (473 )   57,675   57,897   (222 )
Net Income (Loss) $     $     $     $   $   $  
Net Income (Loss) 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
  2020   2019   (Decrease)   2020   2019   (Decrease)
                       
Capital Expenditures:                      
Exploration and Production $ 102,424   (1) $ 142,571   (3) $ (40,147 )   $ 229,343   (1)(2) $ 262,786   (3)(4) $ (33,443 )
Pipeline and Storage 25,554   (1) 22,674   (3) 2,880     82,638   (1)(2) 52,638   (3)(4) 30,000  
Gathering 15,072   (1) 12,680   (3) 2,392     24,910   (1)(2) 21,470   (3)(4) 3,440  
Utility 19,457   (1) 19,735   (3) (278 )   36,622   (1)(2) 35,657   (3)(4) 965  
Total Reportable Segments 162,507     197,660     (35,153 )   373,513     372,551     962  
All Other 1     22     (21 )   22     41     (19 )
Corporate 134     85     49     320     103     217  
Total Capital Expenditures $ 162,642     $ 197,767     $ (35,125 )   $ 373,855     $ 372,695     $ 1,160  

(1)       Capital expenditures for the quarter and six months ended March 31, 2020, include accounts payable and accrued liabilities related to capital expenditures of $41.2 million, $9.7 million, $4.4 million, and $4.2 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, 2020, since they represent non-cash investing activities at that date.

(2)       Capital expenditures for the six months ended March 31, 2020, exclude capital expenditures of $38.0 million, $23.8 million, $6.6 million and $12.7 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, 2019 and paid during the six months ended March 31, 2020.  These amounts were excluded from the Consolidated Statement of Cash Flows at September 30, 2019, 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, 2020.

(3)       Capital expenditures for the quarter and six months ended March 31, 2019, include accounts payable and accrued liabilities related to capital expenditures of $53.4 million, $10.7 million, $7.4 million, and $3.4 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, 2019, since they represent non-cash investing activities at that date.

(4)       Capital expenditures for the six months ended March 31, 2019, exclude capital expenditures of $51.3 million, $21.9 million, $6.1 million and $9.5 million in the Exploration and Production segment, Pipeline and Storage segment, Gathering segment and Utility segment, respectively.  These amounts were in accounts payable and accrued liabilities at September 30, 2018 and paid during the six months ended March 31, 2019.  These amounts were excluded from the Consolidated Statement of Cash Flows at September 30, 2018, 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, 2019.

                   
DEGREE DAYS                  
                   
              Percent Colder
              (Warmer) Than:
Three Months Ended March 31 Normal   2020   2019     Normal (1)   Last Year (1)
                   
Buffalo, NY 3,326   2,738   3,372   (17.7 )   (18.8 )
Erie, PA 3,142   2,555   3,096   (18.7 )   (17.5 )
                   
Six Months Ended March 31                  
                   
Buffalo, NY 5,579   4,970   5,697   (10.9 )   (12.8 )
Erie, PA 5,186   4,461   5,126   (14.0 )   (13.0 )
                   

(1)       Percents compare actual 2020 degree days to normal degree days and actual 2020 degree days to actual 2019 degree days.

                         
                         
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
                         
EXPLORATION AND PRODUCTION INFORMATION
                         
                         
    Three Months Ended   Six Months Ended
    March 31,   March 31,
            Increase           Increase
    2020   2019   (Decrease)   2020   2019   (Decrease)
                         
Gas Production/Prices:                        
Production (MMcf)                        
Appalachia   55,638     44,883     10,755     109,922     90,188     19,734  
West Coast   479     487     (8 )   966     989     (23 )
Total Production   56,117     45,370     10,747     110,888     91,177     19,711  
                         
Average Prices (Per Mcf)                        
Appalachia   $ 1.77     $ 2.65     $ (0.88 )   $ 1.97     $ 2.79     $ (0.82 )
West Coast   4.34     6.06     (1.72 )   4.67     6.40     (1.73 )
Weighted Average   1.80     2.69     (0.89 )   1.99     2.83     (0.84 )
Weighted Average after Hedging   2.12     2.58     (0.46 )   2.22     2.60     (0.38 )
                         
Oil Production/Prices:                        
Production (Thousands of Barrels)                        
Appalachia   1     1         2     2      
West Coast   605     563     42     1,206     1,134     72  
Total Production   606     564     42     1,208     1,136     72  
                         
Average Prices (Per Barrel)                        
Appalachia   $ 55.90     $ 47.54     $ 8.36     $ 55.48     $ 55.93     $ (0.45 )
West Coast   49.91     61.85     (11.94 )   56.25     63.79     (7.54 )
Weighted Average   49.92     61.82     (11.90 )   56.25     63.78     (7.53 )
Weighted Average after Hedging   58.23     61.01     (2.78 )   60.57     61.36     (0.79 )
                         
Total Production (MMcfe)   59,753     48,754     10,999     118,136     97,993     20,143  
                         
Selected Operating Performance Statistics:                        
General & Administrative Expense per Mcfe (1)   $ 0.29     $ 0.35     $ (0.06 )   $ 0.28     $ 0.33     $ (0.05 )
Lease Operating and Transportation Expense per Mcfe (1)(2)   $ 0.87     $ 0.94     $ (0.07 )   $ 0.87     $ 0.90     $ (0.03 )
Depreciation, Depletion & Amortization per Mcfe (1)   $ 0.76     $ 0.74     $ 0.02     $ 0.76     $ 0.72     $ 0.04  
                         

(1)       Refer to page 16 for the General and Administrative Expense, Lease Operating and Transportation Expense and Depreciation, Depletion, and Amortization Expense for the Exploration and Production segment.

(2)       Amounts include transportation expense of $0.56 and $0.56 per Mcfe for the three months ended March 31, 2020 and March 31, 2019, respectively. Amounts include transportation expense of $0.57 and $0.55 per Mcfe for the six months ended March 31, 2020 and March 31, 2019, respectively.

NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
             
EXPLORATION AND PRODUCTION INFORMATION
 
Hedging Summary for Remaining Six Months of Fiscal 2020   Volume     Average Hedge Price
Oil Swaps            
Brent   690,000   BBL   $ 64.55 / BBL
NYMEX   162,000   BBL   $ 50.52 / BBL
Total   852,000   BBL   $ 61.88 / BBL
             
Gas Swaps            
NYMEX   45,700,000   MMBTU   $ 2.67 / MMBTU
DAWN   3,600,000   MMBTU   $ 3.00 / MMBTU
Fixed Price Physical Sales   29,608,125   MMBTU   $ 2.18 / MMBTU
Total   78,908,125   MMBTU      
             
Hedging Summary for Fiscal 2021   Volume     Average Hedge Price
Oil Swaps            
Brent   696,000   BBL   $ 64.29 / BBL
NYMEX   156,000   BBL   $ 51.00 / BBL
Total   852,000   BBL   $ 61.86 / BBL
             
Gas Swaps            
NYMEX   117,920,000   MMBTU   $ 2.61/ MMBTU
  DAWN   600,000   MMBTU   $ 3.00 / MMBTU
No Cost Collars   25,850,000   MMBTU   $ 2.28 / MMBTU (Floor) / $2.77 / MMBTU (Ceiling)
Fixed Price Physical Sales   46,810,846   MMBTU   $ 2.22 / MMBTU
Total   191,180,846   MMBTU      
             
Hedging Summary for Fiscal 2022   Volume     Average Hedge Price
Oil Swaps            
Brent   300,000   BBL   $ 60.07 / BBL
NYMEX   156,000   BBL   $ 51.00 / BBL
Total   456,000   BBL   $ 56.97 / BBL
             
Gas Swaps            
NYMEX   62,550,000   MMBTU   $ 2.52 / MMBTU
No Cost Collars   2,350,000   MMBTU   $ 2.28 / MMBTU (Floor) / $2.77 / MMBTU (Ceiling)
Fixed Price Physical Sales   40,588,964   MMBTU   $ 2.23 / MMBTU
Total   105,488,964   MMBTU      
             
             
Hedging Summary for Fiscal 2023   Volume     Average Hedge Price
Gas Swaps            
NYMEX   17,500,000   MMBTU   $ 2.47 / MMBTU
Fixed Price Physical Sales   36,961,007   MMBTU   $ 2.26 / MMBTU
Total   54,461,007   MMBTU      
             
Hedging Summary for Fiscal 2024   Volume     Average Hedge Price
Gas Swaps            
NYMEX   1,150,000   MMBTU   $ 2.45 / MMBTU
Fixed Price Physical Sales   20,801,194   MMBTU   $ 2.25 / MMBTU
Total   21,951,194   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
    2020   2019   (Decrease)   2020   2019   (Decrease)
Firm Transportation - Affiliated   42,602     50,967     (8,365 )   77,269     86,668     (9,399 )
Firm Transportation - Non-Affiliated   153,197     148,653     4,544     327,178     304,855     22,323  
Interruptible Transportation   531     750     (219 )   1,244     1,665     (421 )
    196,330     200,370     (4,040 )   405,691     393,188     12,503  
                         
Gathering Volume - (MMcf)                        
    Three Months Ended   Six Months Ended
    March 31,   March 31,
            Increase           Increase
    2020   2019   (Decrease)   2020   2019   (Decrease)
Gathered Volume - Affiliated   65,134     54,157     10,977     129,526     108,845     20,681  
                         
                         
Utility Throughput - (MMcf)                        
    Three Months Ended   Six Months Ended
    March 31,   March 31,
            Increase           Increase
    2020   2019   (Decrease)   2020   2019   (Decrease)
Retail Sales:                        
Residential Sales   26,155     30,906     (4,751 )   45,631     50,686     (5,055 )
Commercial Sales   4,033     4,712     (679 )   6,846     7,558     (712 )
Industrial Sales   183     284     (101 )   400     488     (88 )
    30,371     35,902     (5,531 )   52,877     58,732     (5,855 )
Transportation   25,157     28,928     (3,771 )   45,712     51,198     (5,486 )
    55,528     64,830     (9,302 )   98,589     109,930     (11,341 )
                         

 

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, 2020 and 2019:

    Three Months Ended   Six Months Ended
    March 31,   March 31,
(in thousands except per share amounts)   2020   2019   2020   2019
Reported GAAP Earnings   $ (106,068 )   $ 90,595     $ (19,477 )   $ 193,256  
Items impacting comparability                
Impairment of oil and gas properties (E&P)   177,761         177,761      
Tax impact of impairment of oil and gas properties   (48,503 )       (48,503 )    
Deferred tax valuation allowance   56,770         56,770      
Remeasurement of deferred income taxes under 2017 Tax Reform               (5,000 )
Mark-to-market adjustments due to hedge ineffectiveness (E&P)       6,742         237  
Tax impact of mark-to-market adjustments due to hedge ineffectiveness       (1,416 )       (50 )
Unrealized (gain) loss on other investments (Corporate/All Other)   5,414     (3,831 )   6,433     2,516  
Tax impact of unrealized (gain) loss on other investments   (1,137 )   805     (1,351 )   (528 )
Adjusted Operating Results   $ 84,237     $ 92,895     $ 171,633     $ 190,431  
                 
Reported GAAP Earnings per share   $ (1.23 )   $ 1.04     $ (0.23 )   $ 2.23  
Items impacting comparability                
Impairment of oil and gas properties, net of tax (E&P)   1.49         1.49      
Deferred tax valuation allowance   0.66         0.66      
Remeasurement of deferred income taxes under 2017 Tax Reform               (0.06 )
Mark-to-market adjustments due to hedge ineffectiveness, net of tax (E&P)       0.06          
Unrealized (gain) loss on other investments, net of tax (Corporate/All Other)   0.05     (0.03 )   0.06     0.02  
Rounding               0.01  
Adjusted Operating Results per share   $ 0.97     $ 1.07     $ 1.98     $ 2.20  

Management defines Adjusted EBITDA as reported GAAP earnings before the following items:  interest expense, income taxes, depreciation, depletion and amortization, other income and deductions, 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, 2020 and 2019:

    Three Months Ended   Six Months Ended
    March 31,   March 31,
(in thousands)   2020   2019   2020   2019
Reported GAAP Earnings   $ (106,068 )   $ 90,595     $ (19,477 )   $ 193,256  
Depreciation, Depletion and Amortization   77,912     65,664     152,830     129,918  
Other (Income) Deductions   17,480     5,919     20,520     15,521  
Interest Expense   27,162     27,060     54,156     53,573  
Income Taxes   36,846     29,785     68,241     52,693  
Mark-to-Market Adjustments due to Hedge Ineffectiveness       6,742         237  
Impairment of Oil and Gas Producing Properties   177,761         177,761      
Adjusted EBITDA   $ 231,093     $ 225,765     $ 454,031     $ 445,198  
                 
Adjusted EBITDA by Segment                
Pipeline and Storage Adjusted EBITDA   $ 49,102     $ 41,281     $ 92,043     $ 89,106  
Gathering Adjusted EBITDA   29,541     24,598     58,973     50,546  
Total Midstream Businesses Adjusted EBITDA   78,643     65,879     151,016     139,652  
Exploration and Production Adjusted EBITDA   79,846     83,580     171,947     173,475  
Utility Adjusted EBITDA   73,192     78,688     132,655     136,257  
Corporate and All Other Adjusted EBITDA   (588 )   (2,382 )   (1,587 )   (4,186 )
Total Adjusted EBITDA   $ 231,093     $ 225,765     $ 454,031     $ 445,198  

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)   2020   2019   2020   2019
Exploration and Production Segment                
Reported GAAP Earnings   $ (175,275 )   $ 21,873     $ (151,299 )   $ 60,087  
Depreciation, Depletion and Amortization   45,136     35,888     89,284     70,588  
Other (Income) Deductions   187     (275 )   349     (554 )
Interest Expense   14,163     13,548     28,220     26,711  
Income Taxes   17,874     5,804     27,632     16,406  
Mark-to-Market Adjustments due to Hedge Ineffectiveness       6,742         237  
Impairment of Oil and Gas Producing Properties   177,761         177,761      
Adjusted EBITDA   $ 79,846     $ 83,580     $ 171,947     $ 173,475  
                 
Pipeline and Storage Segment                
Reported GAAP Earnings   $ 22,087     $ 17,749     $ 40,192     $ 42,851  
Depreciation, Depletion and Amortization   13,356     11,293     24,960     22,407  
Other (Income) Deductions   (1,361 )   (1,973 )   (2,739 )   (3,899 )
Interest Expense   7,152     7,500     14,264     14,786  
Income Taxes   7,868     6,712     15,366     12,961  
Adjusted EBITDA   $ 49,102     $ 41,281     $ 92,043     $ 89,106  
                 
Gathering Segment                
Reported GAAP Earnings   $ 19,898     $ 12,690     $ 35,842     $ 26,872  
Depreciation, Depletion and Amortization   5,279     4,673     10,418     9,351  
Other (Income) Deductions   (18 )   (189 )   (14 )   (232 )
Interest Expense   2,160     2,345     4,379     4,723  
Income Taxes   2,222     5,079     8,348     9,832  
Adjusted EBITDA   $ 29,541     $ 24,598     $ 58,973     $ 50,546  
                 
Utility Segment                
Reported GAAP Earnings   $ 31,499     $ 35,589     $ 58,082     $ 61,237  
Depreciation, Depletion and Amortization   13,751     13,365     27,382     26,656  
Other (Income) Deductions   12,094     11,618     17,906     17,834  
Interest Expense   5,516     6,263     11,190     12,157  
Income Taxes   10,332     11,853     18,095     18,373  
Adjusted EBITDA   $ 73,192     $ 78,688     $ 132,655     $ 136,257  
                 
Corporate and All Other                
Reported GAAP Earnings   $ (4,277 )   $ 2,694     $ (2,294 )   $ 2,209  
Depreciation, Depletion and Amortization   390     445     786     916  
Other (Income) Deductions   6,578     (3,262 )   5,018     2,372  
Interest Expense   (1,829 )   (2,596 )   (3,897 )   (4,804 )
Income Taxes   (1,450 )   337     (1,200 )   (4,879 )
Adjusted EBITDA   $ (588 )   $ (2,382 )   $ (1,587 )   $ (4,186 )

 

Analyst Contact:
Kenneth E. Webster
716-857-7067

Media Contact:
Karen L. Merkel
716-857-7654

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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

Disclosures Regarding 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. Impairments under the SEC’s full cost ceiling test for natural gas and oil reserves;
  2. Changes in the price of natural gas or oil;
  3. 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;
  4. The length and severity of the recent COVID-19 pandemic, including its impacts across our businesses on demand, operations, global supply chains and liquidity;
  5. 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;
  6. The creditworthiness or performance of the Company’s key suppliers, customers and counterparties;
  7. 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;
  8. Delays or changes in costs or plans with respect to Company projects or related projects of other companies, including disruptions due to COVID-19, as well as difficulties or delays in obtaining necessary governmental approvals, permits or orders or in obtaining the cooperation of interconnecting facility operators;
  9. 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;
  10. 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;
  11. The impact of information technology disruptions, cybersecurity or data security breaches;
  12. 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;
  13. Increasing health care costs and the resulting effect on health insurance premiums and on the obligation to provide other post-retirement benefits;
  14. Other changes in price differentials between similar quantities of natural gas or oil having different quality, heating value, hydrocarbon mix or delivery date;
  15. The cost and effects of legal and administrative claims against the Company or activist shareholder campaigns to effect changes at the Company;
  16. Uncertainty of oil and gas reserve estimates;
  17. Significant differences between the Company’s projected and actual production levels for natural gas or oil;
  18. Changes in demographic patterns and weather conditions;
  19. Changes in the availability, price or accounting treatment of derivative financial instruments;
  20. 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;
  21. Economic disruptions or uninsured losses resulting from major accidents, fires, severe weather, natural disasters, terrorist activities or acts of war;
  22. Significant differences between the Company’s projected and actual capital expenditures and operating expenses;
  23. Increasing costs of insurance, changes in coverage and the ability to obtain insurance; or
  24. The Company’s ability to complete planned acquisitions, as well as successfully integrate acquired assets and achieve expected cost synergies.

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