Press Release Details

Forward Looking Statement Disclosure

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

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

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

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

  1. Changes in laws, regulations or judicial interpretations to which the Company is subject, including those involving derivatives, taxes, safety, employment, climate change, other environmental matters, real property, and exploration and production activities such as hydraulic fracturing;
  2. Governmental/regulatory actions, initiatives and proceedings, including those involving rate cases (which address, among other things, target rates of return, rate design and retained natural gas), environmental/safety requirements, affiliate relationships, industry structure, and franchise renewal;
  3. The length and severity of the ongoing COVID-19 pandemic, including its impacts across our businesses on demand, operations, global supply chains and liquidity;
  4. 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;
  5. Changes in the price of natural gas or oil;
  6. Impairments under the SEC’s full cost ceiling test for natural gas and oil reserves;
  7. The creditworthiness or performance of the Company’s key suppliers, customers and counterparties;
  8. 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;
  9. The Company’s ability to estimate accurately the time and resources necessary to meet emissions targets;
  10. Disallowance by applicable regulatory bodies of appropriate rate recovery for system modernization; moves to reduce or eliminate reliance on natural gas;
  11. Delays or changes in costs or plans with respect to Company projects or related projects of other companies, including disruptions due to the COVID-19 pandemic, as well as difficulties or delays in obtaining necessary governmental approvals, permits or orders or in obtaining the cooperation of interconnecting facility operators;
  12. The Company's ability to complete planned strategic transactions;
  13. The Company's ability to successfully integrate acquired assets and achieve expected cost synergies;
  14. Changes in price differentials between similar quantities of natural gas or oil at different geographic locations, and the effect of such changes on commodity production, revenues and demand for pipeline transportation capacity to or from such locations;
  15. The impact of information technology disruptions, cybersecurity or data security breaches;
  16. 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;
  17. Increasing health care costs and the resulting effect on health insurance premiums and on the obligation to provide other post-retirement benefits; 
  18. Other changes in price differentials between similar quantities of natural gas or oil having different quality, heating value, hydrocarbon mix or delivery date;
  19. The cost and effects of legal and administrative claims against the Company or activist shareholder campaigns to effect changes at the Company;
  20. Uncertainty of oil and gas reserve estimates;
  21. Significant differences between the Company’s projected and actual production levels for natural gas or oil;
  22. Changes in demographic patterns and weather conditions;
  23. Changes in the availability, price or accounting treatment of derivative financial instruments;
  24. 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;
  25. Economic disruptions or uninsured losses resulting from major accidents, fires, severe weather, natural disasters, terrorist activities or acts of war;
  26. Significant differences between the Company’s projected and actual capital expenditures and operating expenses; or
  27. Increasing costs of insurance, changes in coverage and the ability to obtain insurance.

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

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


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National Fuel Reports First Quarter Earnings

02/04/2021

WILLIAMSVILLE, N.Y., Feb. 04, 2021 (GLOBE NEWSWIRE) -- National Fuel Gas Company (“National Fuel” or the “Company”) (NYSE:NFG) today announced consolidated results for the first quarter of its 2021 fiscal year.

FISCAL 2021 FIRST QUARTER SUMMARY

  • GAAP net income of $77.8 million, or $0.85 per share, which includes a $55.2 million non-cash, after-tax impairment of oil and gas properties, and a $37.0 million after-tax gain on the sale of the Company's timber properties, compared to GAAP net income of $86.6 million, or $1.00 per share, in the prior year.
  • Adjusted operating results of $97.0 million, or $1.06 per share, compared to $87.4 million, or $1.01 per share, in the prior year (see non-GAAP reconciliation on page 2).
  • Adjusted EBITDA of $251.7 million, compared to $222.9 million in the prior year (see non-GAAP reconciliation on page 21).
  • Pipeline & Storage segment Adjusted EBITDA of $58.1 million, an increase of 35% from the prior year.
  • Gathering segment Adjusted EBITDA of $39.8 million, an increase of 35% from the prior year.
  • E&P segment Adjusted EBITDA of $100.7 million, an increase of 9% from the prior year.
  • E&P segment net production of 79.5 Bcfe, an increase of 21.1 Bcfe, or 36%, from the prior year, which includes the impact of the Company's Appalachian asset acquisition and approximately 4 Bcf of price-related natural gas curtailments.
  • Average realized natural gas prices of $2.14 per Mcf, down $0.18 per Mcf from the prior year.
  • Average realized oil prices of $49.91 per Bbl, down $13.01 per Bbl from the prior year.
  • Utility segment completed its system modernization program for calendar year 2020, replacing over 150 miles of older vintage pipelines. While maintaining the Company's long-standing focus on the safety and reliability of its distribution network, this program has contributed to the more than 60% reduction in Utility greenhouse gas emissions since 1990.
  • Company completed the sale of substantially all of its timber assets in Pennsylvania, with net proceeds of $104.6 million.
  • Company is increasing its fiscal 2021 earnings guidance to a range of $3.65 to $3.95, an increase of $0.10 at the midpoint.

MANAGEMENT COMMENTS

David P. Bauer, President and Chief Executive Officer of National Fuel Gas Company, stated: “National Fuel had an excellent start to our fiscal 2021 on the strength of our recently completed Empire North expansion project and our Appalachian E&P and gathering acquisition. We continue to see the benefits of these newly acquired assets, with record production at Seneca driving meaningful earnings growth in our gathering segment and long-term, sustainable reductions in the cost structure of our upstream business.

As we continue to confront the COVID-19 pandemic, the safety of our employees, customers, and communities remains paramount to our daily operations across each of our businesses. National Fuel and its dedicated workforce have retained their focus on business continuity during this health crisis, and to date, the Company has not experienced any significant financial or operational impacts.

Looking forward, we are well-positioned to execute on our near-term integrated growth opportunities, with preliminary construction activities on our FM100 expansion and modernization project – the largest in the Company’s history – expected to start in the next few weeks. This project, which will add more than $50 million in annual Pipeline and Storage revenues, further supports the integrated development of our prolific and highly-economic Marcellus and Utica assets and puts us on a path to generating meaningful consolidated free cash flow in fiscal 2022.

Additionally, we continue to make progress with our ESG disclosures and initiatives. Across our system, we're making investments that will reduce our operational and fugitive emissions. We're also aggressively promoting our Utility's conservation and energy efficiency programs to help lower the end-use emissions of our customers. Lastly, both on our own and through participation in programs like the Low Carbon Resources Initiatives, we're evaluating new low- and zero-carbon fuel sources and technologies. All of these initiatives make National Fuel well-positioned to play a meaningful and continued role in the decarbonization of the economy.”

RECONCILIATION OF GAAP EARNINGS TO ADJUSTED OPERATING RESULTS

         
    Three Months Ended
    December 31,
(in thousands except per share amounts)   2020   2019
Reported GAAP Earnings   $ 77,774     $ 86,591  
Items impacting comparability:        
Impairment of oil and gas properties (E&P)   76,152      
Tax impact of impairment of oil and gas properties   (20,980 )    
Gain on sale of timber properties (Corporate / All Other)   (51,066 )    
Tax impact of gain on sale of timber properties   14,069      
Unrealized (gain) loss on other investments (Corporate / All Other)   1,298     1,019  
Tax impact of unrealized (gain) loss on other investments   (272 )   (214 )
Adjusted Operating Results   $ 96,975     $ 87,396  
         
Reported GAAP Earnings Per Share   $ 0.85     $ 1.00  
Items impacting comparability:        
Impairment of oil and gas properties, net of tax (E&P)   0.60      
Gain on sale of timber properties, net of tax (Corporate / All Other)   (0.40 )    
Unrealized (gain) loss on other investments, net of tax (Corporate / All Other)   0.01     0.01  
Adjusted Operating Results Per Share   $ 1.06     $ 1.01  
                 

FISCAL 2021 GUIDANCE UPDATE

National Fuel is revising its fiscal 2021 earnings guidance to reflect the results of the first fiscal quarter, along with updated commodity price and operating unit cost assumptions for the balance of the year. The Company is now projecting that earnings, excluding items impacting comparability, will be within the range of $3.65 to $3.95 per share, an increase of $0.10 per share from the midpoint of the Company’s prior guidance range. The increase from the Company’s prior earnings guidance reflects higher expected price realizations on Seneca’s oil production and lower expected exploration and production operating unit costs, partially offset by lower expected price realizations on Seneca’s natural gas production.

The Company is now assuming that NYMEX natural gas prices will average $2.75 per MMBtu for the remainder of fiscal 2021, a decrease of $0.25 per MMBtu from the $3.00 per MMBtu assumed in the previous guidance. Additionally, the Company is now assuming that WTI oil prices will average $52.50 per Bbl for the remainder of the year, a $15.00 increase from the $37.50 per Bbl assumed in the previous guidance. For guidance purposes, the Company’s updated projections approximate the current NYMEX forward markets for natural gas and oil and consider the impact of local sales point differentials and new physical firm sales, transportation, and financial hedge contracts.

Seneca currently has firm sales contracts in place for 216 Bcf, or approximately 93% of its projected remaining fiscal 2021 Appalachian production, limiting its exposure to in-basin markets. Approximately 186 Bcf of those sales, or 80% of Seneca’s expected remaining Appalachian production, are either matched by a financial hedge, including a combination of swaps and no-cost collars, or were entered into at a fixed price. Additionally, Seneca has financial hedges in place for 1,079 Mbbl, or approximately 67%, of its expected remaining oil production for the fiscal year.

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 2021 are outlined in the table on page 7.

DISCUSSION OF FIRST QUARTER RESULTS BY SEGMENT

The following earnings discussion of each operating segment for the quarter ended December 31, 2020 is summarized in a tabular form on pages 8 and 9 of this report. It may be helpful to refer to those tables while reviewing this discussion.

Note that management defines Adjusted 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
  December 31,
(in thousands) 2020   2019   Variance
GAAP Earnings $ (29,623 )   $ 23,977     $ (53,600 )
Impairment of oil and gas properties, net of tax 55,172         55,172  
Adjusted Operating Results $ 25,549     $ 23,977     $ 1,572  
           
Adjusted EBITDA $ 100,744     $ 92,100     $ 8,644  
                       

Seneca’s first quarter GAAP earnings decreased $53.6 million versus the prior year. This was primarily driven by a non-cash, pre-tax impairment charge of $76.2 million ($55.2 million after-tax) to write-down the value of Seneca’s oil and natural gas reserves under the full cost method of accounting. This method requires Seneca to perform a quarterly “ceiling test” comparing the present value of future net 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. Seneca does not expect to incur impairment charges in the remaining quarters of fiscal 2021. Excluding this item, Seneca’s first quarter earnings increased $1.6 million.

Seneca produced 79.5 Bcfe during the first quarter, an increase of 21.1 Bcfe, or 36%, from the prior year, despite the impact of approximately 4 Bcf of price-related curtailments. The increase was primarily driven by higher natural gas production from the Company's fourth quarter fiscal 2020 acquisition of Appalachian upstream assets, as well as production from new Marcellus and Utica wells. Net production increased 16.4 Bcf to 45.7 Bcf in the Eastern Development Area ("EDA"), primarily due to higher production from the acquisition. Net production increased 5.0 Bcf to 29.9 Bcf in Seneca’s Western Development Area ("WDA"), primarily due to the ongoing development program in the region. Oil production for the first quarter decreased 38,000 Bbls, or 6%, from the prior year due to production declines in Seneca's Midway Sunset and Lost Hills areas as a result of reduced steam activity and delayed workover expenses in response to lower commodity prices in the second half of fiscal 2020. These declines were partially offset by new production brought on-line in Seneca’s Pioneer and Coalinga development areas.

Seneca's average realized natural gas price, after the impact of hedging and transportation costs, was $2.14 per Mcf, a decrease of $0.18 per Mcf from the prior year. Seneca's average realized oil price, after the impact of $6.43 per Bbl of hedging gains, was $49.91 per Bbl, a decrease of $13.01 per Bbl compared to the prior year. The decline in oil price realizations was due primarily to lower market prices for unhedged crude oil at local sales points in California.

Lease operating and transportation (“LOE”) expense increased $14.8 million primarily due to higher transportation costs in Appalachia from increased production and an increase in well repairs, as well as higher steam facility repairs and maintenance and steam fuel costs in California. LOE expense includes $46.7 million in intercompany expense for gathering and compression services used to connect Seneca’s Marcellus and Utica production to sales points along interstate pipelines. DD&A expense increased $1.2 million due largely to higher natural gas production, partially offset by the impact of ceiling test impairments recorded during fiscal 2020. Seneca's general and administrative ("G&A") expense increased $1.6 million due primarily to higher personnel costs.

On a unit of production basis, Seneca's combined G&A, LOE, other operation and maintenance ("O&M") expense, and Property, Franchise, and Other Taxes decreased $0.12 per Mcfe, or 10%, during the quarter.

Interest expense increased by $1.4 million from the prior year, primarily driven by additional long-term borrowings from the Company's long-term debt issuance in June 2020 that was used to fund a portion of the Company's Appalachian acquisition. The increase in Seneca's effective income tax rate was largely driven by an increase to a valuation allowance for deferred tax assets that was initially established in the second quarter of fiscal 2020.

Midstream Businesses

Pipeline and Storage Segment

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

   
  Three Months Ended
  December 31,
(in thousands) 2020   2019   Variance
GAAP Earnings $ 24,183     $ 18,105     $ 6,078  
           
Adjusted EBITDA $ 58,134     $ 42,942     $ 15,192  
                       

The Pipeline and Storage segment’s first quarter GAAP earnings increased $6.1 million versus the prior year, with higher operating revenues partially offset by higher DD&A expense and higher interest expense. The increase in operating revenues of $15.5 million, or 22%, 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, coupled with new demand charges for transportation service from the Company's Empire North expansion project, which was placed in service near the end of the fourth quarter of fiscal 2020. The increase in DD&A expense of $3.9 million was primarily attributable to an increase in Supply Corporation's depreciation rates associated with its rate case settlement combined with incremental depreciation from the Empire North expansion project. The increase in interest expense of $3.6 million was primarily driven by additional long-term borrowings from the Company's long-term debt issuance in June 2020.

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 primarily delivers Seneca’s gross Appalachian production to the interstate pipeline system.

   
  Three Months Ended
  December 31,
(in thousands) 2020   2019   Variance
GAAP Earnings $ 20,550     $ 15,944     $ 4,606  
           
Adjusted EBITDA $ 39,793     $ 29,431     $ 10,362  
                       

The Gathering segment’s first quarter GAAP earnings increased $4.6 million versus the prior year. The increase was primarily driven by higher operating revenues, which was partially offset by higher DD&A expense, higher O&M expenses and higher interest expense. Operating revenues increased $12.2 million, or 35%, primarily due to increased gathering throughput resulting from the Company's Appalachian acquisition in the fourth quarter of fiscal 2020 and from new Appalachian wells that were brought on-line. The increase in DD&A expense of $2.8 million was primarily attributable to incremental depreciation expense related to the recent Appalachian acquisition, as well as higher average depreciable plant in service compared to the prior year. Compression leasing expenses associated with the Appalachian acquisition were primarily responsible for the $1.9 million increase in O&M expense, partly offset by a decline in compressor station O&M expenses on Company owned facilities. The increase in interest expense of $1.9 million was primarily driven by additional long-term borrowings from the Company's long-term debt issuance in June 2020 that was used to fund a portion of the Appalachian acquisition.

Downstream Businesses

Utility Segment

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

   
  Three Months Ended
  December 31,
(in thousands) 2020   2019   Variance
GAAP Earnings $ 23,037     $ 26,583     $ (3,546 )
           
Adjusted EBITDA $ 56,968     $ 59,463     $ (2,495 )
                       

The Utility segment’s first quarter GAAP earnings decreased $3.5 million versus the prior year primarily due to higher O&M expense and a higher effective income tax rate. The $2.4 million increase in O&M expense was primarily attributable to incremental expense recorded to increase the allowance for uncollectible accounts due to the potential for customer non-payment resulting from the current economic backdrop brought on by COVID-19, as well as higher personnel costs. Warmer than normal weather in Distribution's Pennsylvania service territory resulted in a decline in customer usage and margin, which was largely offset by higher revenues earned through the Company's system modernization tracking mechanism in its New York service territory. Weather in Distribution's Pennsylvania service territory was 11% warmer on average than last year, and 17% warmer than normal. 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 increase in the Utility segment's effective income tax rate was primarily due to the non-recurring impact of permanent book versus tax differences.

Corporate and All Other

The Company’s operations that are included in Corporate and All Other generated combined earnings of $39.6 million in the current year first quarter, which was a $37.6 million increase over combined earnings of $2.0 million generated in the prior-year first quarter. The increase was primarily driven by a gain recognized on the sale of the Company's timber properties of $51.1 million ($37.0 million after-tax). The Company completed the sale of substantially all of its timber assets in Pennsylvania on December 10, 2020 for net proceeds of $104.6 million. The proceeds from this sale were used to complete a reverse like-kind exchange in conjunction with the Company's fourth quarter fiscal 2020 Appalachian acquisition of certain upstream assets and midstream gathering assets.

EARNINGS TELECONFERENCE

The Company will host a conference call on Friday, February 5, 2021, at 11 a.m. Eastern Time to discuss this announcement. Pre-registration is required to access the teleconference by phone in a listen-only mode by following this link: http://www.directeventreg.com/registration/event/9363257. To access the webcast, visit the Events Calendar under the News & Events page on the NFG Investor Relations website at investor.nationalfuelgas.com. A replay of the conference call will be available approximately two hours following the teleconference at the same website link and by phone (toll-free) at 800-585-8367 using conference ID number “9363257”. Both the webcast and conference call replay will be available until the close of business on Friday, February 12, 2021.

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.

     
Analyst Contact: Kenneth E. Webster 716-857-7067
Media Contact: Karen L. Merkel 716-857-7654
     

Certain statements contained herein, including statements identified by the use of the words “anticipates,” “estimates,” “expects,” “forecasts,” “intends,” “plans,” “predicts,” “projects,” “believes,” “seeks,” “will,” “may” and similar expressions, and statements which are other than statements of historical facts, are “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties, which could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. The Company’s expectations, beliefs and projections contained herein are expressed in good faith and are believed to have a reasonable basis, but there can be no assurance that such expectations, beliefs or projections will result or be achieved or accomplished. In addition to other factors, the following are important factors that could cause actual results to differ materially from those discussed in the forward-looking statements: 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; changes in the price of natural gas or oil; impairments under the SEC’s full cost ceiling test for natural gas and oil reserves; the creditworthiness or performance of the Company’s key suppliers, customers and counterparties; 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; 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 the COVID-19 pandemic, as well as difficulties or delays in obtaining necessary governmental approvals, permits or orders or in obtaining the cooperation of interconnecting facility operators; the Company's ability to complete planned strategic transactions; the Company's ability to successfully integrate acquired assets and achieve expected cost synergies; 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 2021. Additional details on the Company's forecast assumptions and business segment guidance are outlined in the table below.

The revised earnings guidance range does not include the impact of certain items that impacted the comparability of earnings during the first quarter, including: (1) the after-tax impairment of oil and gas properties, which reduced earnings by $0.60 per share; (2) the after-tax gain on sale of timber properties, which increased earnings by $0.40 per share; and (3) the after-tax unrealized loss on other investments, which reduced earnings by $0.01 per share. While the Company expects to record additional adjustments to unrealized gain or loss on other investments during the nine months ending September 30, 2021, the amounts of these and other potential adjustments are not reasonably determinable at this time. As such, the Company is unable to provide earnings guidance other than on a non-GAAP basis.

       
  Updated FY 2021 Guidance   Previous FY 2021 Guidance
Consolidated Earnings per Share, excluding items impacting comparability $3.65 to $3.95   $3.55 to $3.85
Consolidated Effective Tax Rate ~ 26%   ~ 26%
       
Capital Expenditures (Millions)      
Exploration and Production $350 - $390   $350 - $390
Pipeline and Storage $250 - $300   $250 - $300
Gathering $30 - $40   $30 - $40
Utility $90 - $100   $90 - $100
Consolidated Capital Expenditures $720 - $830   $720 - $830
       
Exploration & Production Segment Guidance *      
       
Commodity Price Assumptions      
NYMEX natural gas price $2.75 /MMBtu   $3.00 /MMBtu
Appalachian basin spot price (winter I summer) $2.25 /MMBtu | $2.05 /MMBtu   $2.50 /MMBtu | $2.10 /MMBtu
NYMEX (WTI) crude oil price $52.50 /Bbl   $37.50 /Bbl
California oil price premium (% of WTI) 96%   94%
       
Production (Bcfe)      
East Division - Appalachia 295 to 320   290 to 320
West Division - California ~ 15   ~ 15
Total Production 310 to 335   305 to 335
       
E&P Operating Costs ($/Mcfe)      
LOE $0.83 - $0.85   $0.83 - $0.86
G&A $0.20 - $0.22   $0.21 - $0.23
DD&A $0.58 - $0.62   $0.60 - $0.65
       
Other Business Segment Guidance (Millions)      
Gathering Segment Revenues $185 - $200   $185 - $200
Pipeline and Storage Segment Revenues $330 - $340   $330 - $340

* Commodity price assumptions are for the remaining 9 months of the fiscal year.

 
NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS
QUARTER ENDED DECEMBER 31, 2020
(Unaudited)
                       
  Upstream   Midstream   Downstream        
                       
  Exploration &   Pipeline &           Corporate /    
(Thousands of Dollars) Production   Storage   Gathering   Utility   All Other   Consolidated*
                       
First quarter 2020 GAAP earnings $ 23,977     $ 18,105     $ 15,944     $ 26,583     $ 1,982     $ 86,591  
                       
Items impacting comparability:                      
Unrealized (gain) loss on other investments                 1,019     1,019  
Tax impact of unrealized (gain) loss on other investments                 (214 )   (214 )
First quarter 2020 adjusted operating results 23,977     18,105     15,944     26,583     2,787     87,396  
                       
Drivers of adjusted operating results**                      
                       
Upstream Revenues                      
Higher (lower) natural gas production 39,164                     39,164  
Higher (lower) crude oil production (1,885 )                   (1,885 )
Higher (lower) realized natural gas prices, after hedging (11,301 )                   (11,301 )
Higher (lower) realized crude oil prices, after hedging (5,791 )                   (5,791 )
                       
Midstream Revenues                      
Higher (lower) operating revenues     12,280     9,655             21,935  
                       
Downstream Margins***                      
Impact of usage and weather             (1,164 )       (1,164 )
System modernization tracker revenues             920         920  
Higher (lower) energy marketing margins                 (2,340 )   (2,340 )
                       
Operating Expenses                      
Lower (higher) lease operating and transportation expenses (11,677 )                   (11,677 )
Lower (higher) operating expenses (1,806 )       (1,470 )   (1,956 )   777     (4,455 )
Lower (higher) depreciation / depletion (935 )   (3,052 )   (2,185 )           (6,172 )
                       
Other Income (Expense)                      
(Higher) lower other deductions     (510 )           1,213     703  
(Higher) lower interest expense (1,132 )   (2,859 )   (1,510 )       (346 )   (5,847 )
                       
Income Taxes                      
Lower (higher) income tax expense / effective tax rate (3,163 )   301     (18 )   (1,358 )   2,306     (1,932 )
                       
All other / rounding 98     (82 )   134     12     (741 )   (579 )
First quarter 2021 adjusted operating results 25,549     24,183     20,550     23,037     3,656     96,975  
                       
Items impacting comparability:                      
Impairment of oil and gas properties (76,152 )                   (76,152 )
Tax impact of impairment of oil and gas properties 20,980                     20,980  
Gain on sale of timber properties                 51,066     51,066  
Tax impact of gain on sale of timber properties                 (14,069 )   (14,069 )
Unrealized gain (loss) on other investments                 (1,298 )   (1,298 )
Tax impact of unrealized gain (loss) on other investments                 272     272  
First quarter 2021 GAAP earnings $ (29,623 )   $ 24,183     $ 20,550     $ 23,037     $ 39,627     $ 77,774  
                       
* Amounts do not reflect intercompany eliminations
** Drivers of operating results have been calculated using the 21% federal statutory rate.
*** 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 DECEMBER 31, 2020
(Unaudited)
                       
  Upstream   Midstream   Downstream        
                       
  Exploration &   Pipeline &           Corporate /    
  Production   Storage   Gathering   Utility   All Other   Consolidated*
                       
First quarter 2020 GAAP earnings per share $ 0.28     $ 0.21     $ 0.18     $ 0.31     $ 0.02     $ 1.00  
Items impacting comparability:                      
Unrealized (gain) loss on other investments, net of tax                 0.01     0.01  
First quarter 2020 adjusted operating results per share 0.28     0.21     0.18     0.31     0.03     1.01  
                       
Drivers of adjusted operating results**                      
                       
Upstream Revenues                      
Higher (lower) natural gas production 0.43                     0.43  
Higher (lower) crude oil production (0.02 )                   (0.02 )
Higher (lower) realized natural gas prices, after hedging (0.12 )                   (0.12 )
Higher (lower) realized crude oil prices, after hedging (0.06 )                   (0.06 )
                       
Midstream Revenues                      
Higher (lower) operating revenues     0.13     0.11             0.24  
                       
Downstream Margins***                      
Impact of usage and weather             (0.01 )       (0.01 )
System modernization tracker revenues             0.01         0.01  
Higher (lower) energy marketing margins                 (0.03 )   (0.03 )
                       
Operating Expenses                      
Lower (higher) lease operating and transportation expenses (0.13 )                   (0.13 )
Lower (higher) operating expenses (0.02 )       (0.02 )   (0.02 )   0.01     (0.05 )
Lower (higher) depreciation / depletion (0.01 )   (0.03 )   (0.02 )           (0.06 )
                       
Other Income (Expense)                      
(Higher) lower other deductions     (0.01 )           0.01      
(Higher) lower interest expense (0.01 )   (0.03 )   (0.02 )           (0.06 )
                       
Income Taxes                      
Lower (higher) income tax expense / effective tax rate (0.03 )           (0.01 )   0.03     (0.01 )
                       
Impact of additional shares (0.01 )   (0.01 )   (0.01 )   (0.02 )       (0.05 )
All other / rounding (0.02 )           (0.01 )       (0.03 )
First quarter 2021 adjusted operating results per share 0.28     0.26     0.22     0.25     0.05     1.06  
                       
Items impacting comparability:                      
Impairment of oil and gas properties, net of tax (0.60 )                   (0.60 )
Gain on sale of timber properties, net of tax                 0.40     0.40  
Unrealized gain (loss) on other investments, net of tax                 (0.01 )   (0.01 )
First quarter 2021 GAAP earnings per share $ (0.32 )   $ 0.26     $ 0.22     $ 0.25     $ 0.44     $ 0.85  
                       
* Amounts do not reflect intercompany eliminations
** Drivers of operating results have been calculated using the 21% federal statutory rate.
*** 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
  December 31,
  (Unaudited)
SUMMARY OF OPERATIONS 2020   2019
Operating Revenues:      
Utility and Energy Marketing Revenues $ 189,466     $ 228,026  
Exploration and Production and Other Revenues 192,035     167,193  
Pipeline and Storage and Gathering Revenues 59,659     48,969  
  441,160     444,188  
Operating Expenses:      
Purchased Gas 51,620     92,272  
Operation and Maintenance:      
Utility and Energy Marketing 44,886     43,256  
Exploration and Production and Other 42,027     36,693  
Pipeline and Storage and Gathering 28,098     25,885  
Property, Franchise and Other Taxes 22,781     23,144  
Depreciation, Depletion and Amortization 83,120     74,918  
Impairment of Oil and Gas Producing Properties 76,152      
  348,684     296,168  
Gain on Sale of Timber Properties 51,066      
Operating Income 143,542     148,020  
       
Other Income (Expense):      
Other Income (Deductions) (2,176 )   (3,040 )
Interest Expense on Long-Term Debt (32,256 )   (25,443 )
Other Interest Expense (1,919 )   (1,551 )
       
Income Before Income Taxes 107,191     117,986  
       
Income Tax Expense 29,417     31,395  
       
Net Income Available for Common Stock $ 77,774     $ 86,591  
       
Earnings Per Common Share      
Basic $ 0.85     $ 1.00  
Diluted $ 0.85     $ 1.00  
       
Weighted Average Common Shares:      
Used in Basic Calculation 91,007,657     86,378,450  
Used in Diluted Calculation 91,508,259     86,883,152  

 

 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
   
  December 31,   September 30,
(Thousands of Dollars) 2020   2020
       
ASSETS      
Property, Plant and Equipment $ 12,495,227     $ 12,351,852  
Less - Accumulated Depreciation, Depletion and Amortization   6,503,561       6,353,785  
Net Property, Plant and Equipment   5,991,666       5,998,067  
Assets Held for Sale, Net         53,424  
       
Current Assets:      
Cash and Temporary Cash Investments   109,413       20,541  
Receivables - Net   178,584       143,583  
Unbilled Revenue   45,829       17,302  
Gas Stored Underground   19,648       33,338  
Materials, Supplies and Emission Allowances   51,694       51,877  
Unrecovered Purchased Gas Costs   367        
Other Current Assets   47,904       47,557  
Total Current Assets   453,439       314,198  
       
Other Assets:      
Recoverable Future Taxes   117,431       118,310  
Unamortized Debt Expense   11,870       12,297  
Other Regulatory Assets   153,172       156,106  
Deferred Charges   61,986       67,131  
Other Investments   145,921       154,502  
Goodwill   5,476       5,476  
Prepaid Post-Retirement Benefit Costs   80,032       76,035  
Fair Value of Derivative Financial Instruments   18,094       9,308  
Other   81       81  
Total Other Assets   594,063       599,246  
Total Assets $ 7,039,168     $ 6,964,935  
       
CAPITALIZATION AND LIABILITIES      
Capitalization:      
Comprehensive Shareholders' Equity      
Common Stock, $1 Par Value Authorized - 200,000,000 Shares; Issued and      
Outstanding - 91,152,710 Shares and 90,954,696 Shares, Respectively $ 91,153     $ 90,955  
Paid in Capital   1,004,369       1,004,158  
Earnings Reinvested in the Business   1,028,844       991,630  
Accumulated Other Comprehensive Loss   (79,741 )     (114,757 )
Total Comprehensive Shareholders' Equity   2,044,625       1,971,986  
Long-Term Debt, Net of Current Portion and Unamortized Discount and Debt Issuance Costs   2,130,473       2,629,576  
Total Capitalization   4,175,098       4,601,562  
       
Current and Accrued Liabilities:      
Notes Payable to Banks and Commercial Paper   25,000       30,000  
Current Portion of Long-Term Debt   500,000        
Accounts Payable   96,905       134,126  
Amounts Payable to Customers   5,823       10,788  
Dividends Payable   40,560       40,475  
Interest Payable on Long-Term Debt   45,350       27,521  
Customer Advances   16,032       15,319  
Customer Security Deposits   17,623       17,199  
Other Accruals and Current Liabilities   154,377       140,176  
Fair Value of Derivative Financial Instruments   4,513       43,969  
Total Current and Accrued Liabilities   906,183       459,573  
       
Deferred Credits:      
Deferred Income Taxes   735,236       696,054  
Taxes Refundable to Customers   357,354       357,508  
Cost of Removal Regulatory Liability   234,641       230,079  
Other Regulatory Liabilities   168,188       161,573  
Pension and Other Post-Retirement Liabilities   124,097       127,181  
Asset Retirement Obligations   192,682       192,228  
Other Deferred Credits   145,689       139,177  
Total Deferred Credits   1,957,887       1,903,800  
Commitments and Contingencies          
Total Capitalization and Liabilities $ 7,039,168     $ 6,964,935  

 

         
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
    Three Months Ended
    December 31,
(Thousands of Dollars)   2020   2019
         
Operating Activities:        
Net Income Available for Common Stock   $ 77,774     $ 86,591  
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:        
Gain on Sale of Timber Properties   (51,066 )    
Impairment of Oil and Gas Producing Properties   76,152      
Depreciation, Depletion and Amortization   83,120     74,918  
Deferred Income Taxes   26,591     51,366  
Stock-Based Compensation   3,933     3,266  
Other   2,887     1,911  
Change in:        
Receivables and Unbilled Revenue   (63,606 )   (58,655 )
Gas Stored Underground and Materials, Supplies and Emission Allowances   13,873     6,985  
Unrecovered Purchased Gas Costs   (367 )   627  
Other Current Assets   (251 )   14  
Accounts Payable   (541 )   8,280  
Amounts Payable to Customers   (4,965 )   (573 )
Customer Advances   713     683  
Customer Security Deposits   424     (700 )
Other Accruals and Current Liabilities   27,615     15,438  
Other Assets   10,066     (28,259 )
Other Liabilities   2,391     5,857  
Net Cash Provided by Operating Activities   $ 204,743     $ 167,749  
         
Investing Activities:        
Capital Expenditures   $ (183,301 )   $ (198,495 )
Net Proceeds from Sale of Timber Properties   104,582      
Other   11,849     5,212  
Net Cash Used in Investing Activities   $ (66,870 )   $ (193,283 )
         
Financing Activities:        
Changes in Notes Payable to Banks and Commercial Paper   $ (5,000 )   $ 84,600  
Dividends Paid on Common Stock   (40,475 )   (37,547 )
Net Repurchases of Common Stock   (3,526 )   (4,147 )
Net Cash Provided by (Used in) Financing Activities   $ (49,001 )   $ 42,906  
         
Net Increase in Cash, Cash Equivalents, and Restricted Cash   88,872     17,372  
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period   20,541     27,260  
Cash, Cash Equivalents, and Restricted Cash at December 31   $ 109,413     $ 44,632  

 

           
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
           
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
           
UPSTREAM BUSINESS
           
           
  Three Months Ended
(Thousands of Dollars, except per share amounts) December 31,
EXPLORATION AND PRODUCTION SEGMENT 2020   2019   Variance
Total Operating Revenues $ 191,395     $ 165,939     $ 25,456  
           
Operating Expenses:          
Operation and Maintenance:          
General and Administrative Expense 16,953     15,380     1,573  
Lease Operating and Transportation Expense 65,581     50,800     14,781  
All Other Operation and Maintenance Expense 3,671     2,958     713  
Property, Franchise and Other Taxes 4,446     4,701     (255 )
Depreciation, Depletion and Amortization 45,332     44,148     1,184  
Impairment of Oil and Gas Producing Properties 76,152         76,152  
  212,135     117,987     94,148  
           
Operating Income (Loss) (20,740 )   47,952   (68,692 )
           
Other Income (Expense):          
Non-Service Pension and Post-Retirement Benefit Costs (285 )   (395 )   110  
Interest and Other Income 91     234     (143 )
Interest Expense (15,490 )   (14,057 )   (1,433 )
           
Income (Loss) Before Income Taxes (36,424 )   33,734     (70,158 )
Income Tax Expense (Benefit) (6,801 )   9,757     (16,558 )
Net Income (Loss) $ (29,623 )   $ 23,977     $ (53,600 )
           
Net Income (Loss) Per Share (Diluted) $ (0.32 )   $ 0.28     $ (0.60 )

 

           
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
           
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
           
MIDSTREAM BUSINESSES
           
           
  Three Months Ended
(Thousands of Dollars, except per share amounts) December 31,
PIPELINE AND STORAGE SEGMENT 2020   2019   Variance
Revenues from External Customers $ 59,308     $ 48,969     $ 10,339  
Intersegment Revenues 28,456     23,251     5,205  
Total Operating Revenues 87,764     72,220     15,544  
           
Operating Expenses:          
Purchased Gas 13     (7 )   20  
Operation and Maintenance 21,173     20,930     243  
Property, Franchise and Other Taxes 8,444     8,355     89  
Depreciation, Depletion and Amortization 15,468     11,605     3,863  
  45,098     40,883     4,215  
           
Operating Income 42,666     31,337     11,329  
           
Other Income (Expense):          
Non-Service Pension and Post-Retirement Benefit (Costs) Credit 125     (174 )   299  
Interest and Other Income 856     1,552     (696 )
Interest Expense (10,731 )   (7,112 )   (3,619 )
           
Income Before Income Taxes 32,916     25,603     7,313  
Income Tax Expense 8,733     7,498     1,235  
Net Income $ 24,183     $ 18,105     $ 6,078  
           
Net Income Per Share (Diluted) $ 0.26     $ 0.21     $ 0.05  
           
           
  Three Months Ended
  December 31,
GATHERING SEGMENT 2020   2019   Variance
Revenues from External Customers $ 351     $     $ 351  
Intersegment Revenues 46,658     34,788     11,870  
Total Operating Revenues 47,009     34,788     12,221  
           
Operating Expenses:          
Operation and Maintenance 7,203     5,342     1,861  
Property, Franchise and Other Taxes 13     15     (2 )
Depreciation, Depletion and Amortization 7,904     5,138     2,766  
  15,120     10,495     4,625  
           
Operating Income 31,889     24,293     7,596  
           
Other Income (Expense):          
Non-Service Pension and Post-Retirement Benefit Costs (68 )   (71 )   3  
Interest and Other Income 234     68     166  
Interest Expense (4,131 )   (2,219 )   (1,912 )
           
Income Before Income Taxes 27,924     22,071     5,853  
Income Tax Expense 7,374     6,127     1,247  
Net Income $ 20,550     $ 15,944     $ 4,606  
           
Net Income Per Share (Diluted) $ 0.22     $ 0.18     $ 0.04  

 

           
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
           
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
           
DOWNSTREAM BUSINESS
           
           
  Three Months Ended
(Thousands of Dollars, except per share amounts) December 31,
UTILITY SEGMENT 2020   2019   Variance
Revenues from External Customers $ 188,901     $ 194,910     $ (6,009 )
Intersegment Revenues 100     1,915     (1,815 )
Total Operating Revenues 189,001     196,825     (7,824 )
           
Operating Expenses:          
Purchased Gas 77,032     84,705     (7,673 )
Operation and Maintenance 45,252     42,843     2,409  
Property, Franchise and Other Taxes 9,749     9,814     (65 )
Depreciation, Depletion and Amortization 13,994     13,630     364  
  146,027     150,992     (4,965 )
           
Operating Income 42,974     45,833     (2,859 )
           
Other Income (Expense):          
Non-Service Pension and Post-Retirement Benefit Costs (6,684 )   (6,764 )   80  
Interest and Other Income 738     950     (212 )
Interest Expense (5,452 )   (5,673 )   221  
           
Income Before Income Taxes 31,576     34,346     (2,770 )
Income Tax Expense 8,539     7,763     776  
Net Income $ 23,037     $ 26,583     $ (3,546 )
           
Net Income Per Share (Diluted) $ 0.25     $ 0.31     $ (0.06 )

 

 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
           
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
           
  Three Months Ended
(Thousands of Dollars, except per share amounts) December 31,
ALL OTHER 2020   2019   Variance
Revenues from External Customers $ 1,110     $ 34,235     $ (33,125 )
Intersegment Revenues 20     177     (157 )
Total Operating Revenues 1,130     34,412     (33,282 )
Operating Expenses:          
Purchased Gas 2,287     32,033     (29,746 )
Operation and Maintenance 764     1,703     (939 )
Property, Franchise and Other Taxes 8     142     (134 )
Depreciation, Depletion and Amortization 386     203     183  
  3,445     34,081     (30,636 )
Gain on Sale of Timber Properties 51,066         51,066  
Operating Income 48,751     331     48,420  
           
Other Income (Expense):          
Non-Service Pension and Post-Retirement Benefit Costs (4 )   (69 )   65  
Interest and Other Income 185     278     (93 )
Interest Expense     (18 )   18  
           
Income before Income Taxes 48,932     522     48,410  
Income Tax Expense 11,372     151     11,221  
Net Income $ 37,560     $ 371     $ 37,189  
Net Income Per Share (Diluted) $ 0.41     $     $ 0.41  
   
  Three Months Ended
  December 31,
CORPORATE 2020   2019   Variance
Revenues from External Customers $ 95     $ 135     $ (40 )
Intersegment Revenues 663     1,094     (431 )
Total Operating Revenues 758     1,229     (471 )
Operating Expenses:          
Operation and Maintenance 2,599     2,644     (45 )
Property, Franchise and Other Taxes 121     117     4  
Depreciation, Depletion and Amortization 36     194     (158 )
  2,756     2,955     (199 )
           
Operating Loss (1,998 )   (1,726 )   (272 )
           
Other Income (Expense):          
Non-Service Pension and Post-Retirement Benefit Costs (923 )   (775 )   (148 )
Interest and Other Income 38,979     31,073     7,906  
Interest Expense on Long-Term Debt (32,256 )   (25,443 )   (6,813 )
Other Interest Expense (1,535 )   (1,419 )   (116 )
           
Income before Income Taxes 2,267     1,710     557  
Income Tax Expense 200     99     101  
Net Income $ 2,067     $ 1,611     $ 456  
Net Income Per Share (Diluted) $ 0.03     $ 0.02     $ 0.01  
           
           
  Three Months Ended
  December 31,
INTERSEGMENT ELIMINATIONS 2020   2019   Variance
Intersegment Revenues $ (75,897 )   $ (61,225 )   $ (14,672 )
Operating Expenses:          
Purchased Gas (27,712 )   (24,459 )   (3,253 )
Operation and Maintenance (48,185 )   (36,766 )   (11,419 )
  (75,897 )   (61,225 )   (14,672 )
Operating Income          
Other Income (Expense):          
Interest and Other Deductions (35,420 )   (28,947 )   (6,473 )
Interest Expense 35,420     28,947     6,473  
Net Income $     $     $  
Net Income Per Share (Diluted) $     $     $  

 

           
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
           
SEGMENT INFORMATION (Continued)
(Thousands of Dollars)
           
           
  Three Months Ended
  December 31,
  (Unaudited)
          Increase
  2020   2019   (Decrease)
           
Capital Expenditures:          
Exploration and Production $ 81,339   (1)(2) $ 126,918   (3)(4) $ (45,579 )
Pipeline and Storage 43,723   (1)(2) 57,084   (3)(4) (13,361 )
Gathering 8,320   (1)(2) 9,838   (3)(4) (1,518 )
Utility 17,345   (1)(2) 17,165   (3)(4) 180  
Total Reportable Segments 150,727     211,005     (60,278 )
All Other     22     (22 )
Corporate 39     185     (146 )
Eliminations 154         154  
Total Capital Expenditures $ 150,920     $ 211,212     $ (60,292 )

(1) Capital expenditures for the quarter ended December 31, 2020, include accounts payable and accrued liabilities related to capital expenditures of $35.1 million, $11.2 million, $2.3 million, and $3.5 million in the Exploration and Production segment, Pipeline and Storage segment, Gathering segment and Utility segment, respectively. These amounts have been excluded from the Consolidated Statement of Cash Flows at December 31, 2020, since they represent non-cash investing activities at that date.

(2) Capital expenditures for the quarter ended December 31, 2020, exclude capital expenditures of $45.8 million, $17.3 million, $13.5 million and $10.7 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, 2020 and paid during the quarter ended December 31, 2020. These amounts were excluded from the Consolidated Statement of Cash Flows at September 30, 2020, since they represented non-cash investing activities at that date. These amounts have been included in the Consolidated Statement of Cash Flows at December 31, 2020.

(3) Capital expenditures for the quarter ended December 31, 2019, include accounts payable and accrued liabilities related to capital expenditures of $62.3 million, $22.7 million, $5.3 million, and $3.5 million in the Exploration and Production segment, Pipeline and Storage segment, Gathering segment and Utility segment, respectively. These amounts have been excluded from the Consolidated Statement of Cash Flows at December 31, 2019, since they represent non-cash investing activities at that date.

(4) Capital expenditures for the quarter ended December 31, 2019, 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 quarter ended December 31, 2019. 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 December 31, 2019.

                         
DEGREE DAYS                        
                    Percent Colder
                    (Warmer) Than:
Three Months Ended December 31, Normal   2020   2019   Normal (1)   Last Year (1)
                         
Buffalo, NY 2,253     1,921     2,232     (14.7 )   (13.9 )
Erie, PA 2,044     1,697     1,906     (17.0 )   (11.0 )

(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
    December 31,
            Increase
    2020   2019   (Decrease)
             
Gas Production/Prices:            
Production (MMcf)            
Appalachia   75,669     54,284     21,385  
West Coast   441     487     (46 )
Total Production   76,110     54,771     21,339  
             
Average Prices (Per Mcf)            
Appalachia   $ 2.17     $ 2.16     $ 0.01  
West Coast   5.03     4.98     0.05  
Weighted Average   2.19     2.19      
Weighted Average after Hedging   2.14     2.32     (0.18 )
             
Oil Production/Prices:            
Production (Thousands of Barrels)            
Appalachia            
West Coast   563     601     (38 )
Total Production   563     601     (38 )
             
Average Prices (Per Barrel)            
Appalachia   $ 38.53     $ 54.49     $ (15.96 )
West Coast   43.48     62.63     (19.15 )
Weighted Average   43.48     62.63     (19.15 )
Weighted Average after Hedging   49.91     62.92     (13.01 )
             
Total Production (MMcfe)   79,488     58,377     21,111  
             
Selected Operating Performance Statistics:            
General & Administrative Expense per Mcfe (1)   $ 0.21     $ 0.26     $ (0.05 )
Lease Operating and Transportation Expense per Mcfe (1)(2)   $ 0.83     $ 0.87     $ (0.04 )
Depreciation, Depletion & Amortization per Mcfe (1)   $ 0.57     $ 0.76     $ (0.19 )

(1) Refer to page 13 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 $0.57 and $0.57 per Mcfe for the three months ended December 31, 2020 and December 31, 2019, respectively.

 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
             
EXPLORATION AND PRODUCTION INFORMATION
 
             
Hedging Summary for Remaining Nine Months of Fiscal 2021   Volume     Average Hedge Price
Oil Swaps            
Brent   962,000   BBL   $ 57.35 / BBL
NYMEX   117,000   BBL   $ 51.00 / BBL
Total   1,079,000   BBL   $ 56.66 / BBL
             
Gas Swaps            
NYMEX   114,630,000   MMBTU   $ 2.63 / MMBTU
No Cost Collars   21,150,000   MMBTU   $ 2.28 / MMBTU (Floor) / $2.77 / MMBTU (Ceiling)
Fixed Price Physical Sales   55,788,503   MMBTU   $ 2.24 / MMBTU
Total   191,568,503   MMBTU      
             
Hedging Summary for Fiscal 2022   Volume     Average Hedge Price
Oil Swaps            
Brent   540,000   BBL   $ 55.14 / BBL
NYMEX   156,000   BBL   $ 51.00 / BBL
Total   696,000   BBL   $ 54.21 / BBL
             
Gas Swaps            
NYMEX   140,630,000   MMBTU   $ 2.65 / MMBTU
No Cost Collars   2,350,000   MMBTU   $ 2.28 / MMBTU (Floor) / $2.77 / MMBTU (Ceiling)
Fixed Price Physical Sales   45,887,027   MMBTU   $ 2.24 / MMBTU
Total   188,867,027   MMBTU      
             
Hedging Summary for Fiscal 2023   Volume     Average Hedge Price
Oil Swaps            
Brent   120,000   BBL   $ 50.00 / BBL
Total   120,000   BBL   $ 50.00 / BBL
             
Gas Swaps            
NYMEX   24,340,000   MMBTU   $ 2.55 / MMBTU
Fixed Price Physical Sales   38,313,018   MMBTU   $ 2.26 / MMBTU
Total   62,653,018   MMBTU      
             
Hedging Summary for Fiscal 2024   Volume     Average Hedge Price
Oil Swaps            
Brent   120,000   BBL   $ 50.30 / BBL
Total   120,000   BBL   $ 50.30 / BBL
             
Gas Swaps            
NYMEX   1,150,000   MMBTU   $ 2.45 / MMBTU
Fixed Price Physical Sales   20,799,229   MMBTU   $ 2.25 / MMBTU
Total   21,949,229   MMBTU      
             
Hedging Summary for Fiscal 2025   Volume     Average Hedge Price
Fixed Price Physical Sales   2,293,200   MMBTU   $ 2.18 / MMBTU

 

             
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
             
             
             
Pipeline & Storage Throughput - (millions of cubic feet - MMcf)
             
    Three Months Ended
    December 31,
            Increase
    2020   2019   (Decrease)
Firm Transportation - Affiliated   29,964     34,667     (4,703 )
Firm Transportation - Non-Affiliated   173,064     173,981     (917 )
Interruptible Transportation   590     714     (124 )
    203,618     209,362     (5,744 )
             
Gathering Volume - (MMcf)            
    Three Months Ended
    December 31,
            Increase
    2020   2019   (Decrease)
Gathered Volume   87,135     64,392     22,743  
             
             
Utility Throughput - (MMcf)            
    Three Months Ended
    December 31,
            Increase
    2020   2019   (Decrease)
Retail Sales:            
Residential Sales   18,412     19,476     (1,064 )
Commercial Sales   2,528     2,812     (284 )
Industrial Sales   153     217     (64 )
    21,093     22,505     (1,412 )
Transportation   17,935     20,556     (2,621 )
    39,028     43,061     (4,033 )
                   

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, Adjusted EBITDA and free cash flow, 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 or liquidity and for comparing the Company’s financial performance to other companies. The Company's management uses these non-GAAP financial measures for the same purpose, and for planning and forecasting purposes. The presentation of non-GAAP financial measures is not meant to be a substitute for financial measures in accordance with GAAP.

Management defines Adjusted Operating Results as reported GAAP earnings before items impacting comparability. The following table reconciles National Fuel's reported GAAP earnings to Adjusted Operating Results for the three months ended December 31, 2020 and 2019:

    Three Months Ended
    December 31,
(in thousands except per share amounts)   2020   2019
Reported GAAP Earnings   $ 77,774     $ 86,591  
Items impacting comparability:        
Impairment of oil and gas properties (E&P)   76,152      
Tax impact of impairment of oil and gas properties   (20,980 )    
Gain on sale of timber properties (Corporate/All Other)   (51,066 )    
Tax impact of gain on sale of timber properties   14,069      
Unrealized (gain) loss on other investments (Corporate/All Other)   1,298     1,019  
Tax impact of unrealized (gain) loss on other investments   (272 )   (214 )
Adjusted Operating Results   $ 96,975     $ 87,396  
         
Reported GAAP Earnings per share   $ 0.85     $ 1.00  
Items impacting comparability:        
Impairment of oil and gas properties, net of tax (E&P)   0.60      
Gain on sale of timber properties, net of tax (Corporate/All Other)   (0.40 )    
Unrealized (gain) loss on other investments, net of tax (Corporate/All Other)   0.01     0.01  
Adjusted Operating Results Per Share   $ 1.06     $ 1.01  

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 months ended December 31, 2020 and 2019:

    Three Months Ended
    December 31,
(in thousands)   2020   2019
Reported GAAP Earnings   $ 77,774     $ 86,591  
Depreciation, Depletion and Amortization   83,120     74,918  
Other (Income) Deductions   2,176     3,040  
Interest Expense   34,175     26,994  
Income Taxes   29,417     31,395  
Impairment of Oil and Gas Producing Properties   76,152      
Gain on Sale of Timber Properties   (51,066 )    
Adjusted EBITDA   $ 251,748     $ 222,938  
         
Adjusted EBITDA by Segment        
Pipeline and Storage Adjusted EBITDA   $ 58,134     $ 42,942  
Gathering Adjusted EBITDA   39,793     29,431  
Total Midstream Businesses Adjusted EBITDA   97,927     72,373  
Exploration and Production Adjusted EBITDA   100,744     92,100  
Utility Adjusted EBITDA   56,968     59,463  
Corporate and All Other Adjusted EBITDA   (3,891 )   (998 )
Total Adjusted EBITDA   $ 251,748     $ 222,938  

 

 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
NON-GAAP FINANCIAL MEASURES
SEGMENT ADJUSTED EBITDA
     
    Three Months Ended
    December 31,
(in thousands)   2020   2019
Exploration and Production Segment        
Reported GAAP Earnings   $ (29,623 )   $ 23,977  
Depreciation, Depletion and Amortization   45,332     44,148  
Other (Income) Deductions   194     161  
Interest Expense   15,490     14,057  
Income Taxes   (6,801 )   9,757  
Impairment of Oil and Gas Producing Properties   76,152      
Adjusted EBITDA   $ 100,744     $ 92,100  
         
Pipeline and Storage Segment        
Reported GAAP Earnings   $ 24,183     $ 18,105  
Depreciation, Depletion and Amortization   15,468     11,605  
Other (Income) Deductions   (981 )   (1,378 )
Interest Expense   10,731     7,112  
Income Taxes   8,733     7,498  
Adjusted EBITDA   $ 58,134     $ 42,942  
         
Gathering Segment        
Reported GAAP Earnings   $ 20,550     $ 15,944  
Depreciation, Depletion and Amortization   7,904     5,138  
Other (Income) Deductions   (166 )   3  
Interest Expense   4,131     2,219  
Income Taxes   7,374     6,127  
Adjusted EBITDA   $ 39,793     $ 29,431  
         
Utility Segment        
Reported GAAP Earnings   $ 23,037     $ 26,583  
Depreciation, Depletion and Amortization   13,994     13,630  
Other (Income) Deductions   5,946     5,814  
Interest Expense   5,452     5,673  
Income Taxes   8,539     7,763  
Adjusted EBITDA   $ 56,968     $ 59,463  
         
Corporate and All Other        
Reported GAAP Earnings   $ 39,627     $ 1,982  
Depreciation, Depletion and Amortization   422     397  
Gain on Sale of Timber Properties   (51,066 )    
Other (Income) Deductions   (2,817 )   (1,560 )
Interest Expense   (1,629 )   (2,067 )
Income Taxes   11,572     250  
Adjusted EBITDA   $ (3,891 )   $ (998 )
                 

Management defines free cash flow as funds from operations less capital expenditures. The Company is unable to provide a reconciliation of projected free cash flow as described in this release to its comparable financial measure calculated in accordance with GAAP without unreasonable efforts. This is due to our inability to calculate the comparable GAAP projected metrics, including operating income and total production costs, given the unknown effect, timing, and potential significance of certain income statement items.

   
Kenneth E. Webster
Investor Relations
716-857-7067
Karen M. Camiolo
Treasurer
716-857-7344
   

 

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Source: National Fuel Gas Company

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