National Fuel Gas Company (“National Fuel” or the “Company”)
(NYSE:NFG) today announced consolidated results for the second
quarter of its 2017 fiscal year and for the six months ended March
31, 2017.
FISCAL 2017 SECOND QUARTER SUMMARY
- Consolidated net income of $89.3
million or $1.04 per share compared to a consolidated net loss of
$147.7 million or $1.74 per share in the prior year
- Adjusted EBITDA of $227.0 million, up
from $224.4 million in the prior year (non-GAAP reconciliation on
page 22)
- Net production of 45.6 Bcfe, a 16%
increase from prior year
- Seneca combined LOE, G&A and
DD&A expenses of $1.92 per Mcfe, a $0.48 per Mcfe decrease from
the prior year
- Gathering revenues of $28.0 million on
50.6 Bcf of system throughput, a 29% increase from the prior
year
- Weather in Utility's Pennsylvania
service territory 4.1% warmer than prior year and 15.5% warmer than
normal
- Raising and tightening fiscal 2017
earnings guidance to a range of $3.20 to $3.35 per share
- Raising and tightening fiscal 2017
production guidance to a range of 165 to 180 Bcfe
OPERATING RESULTS
Three Months Ended Six Months Ended March 31,
March 31, (in thousands except per share amounts) 2017 2016
2017 2016
Reported GAAP earnings (loss) $ 89,284 $
(147,687 ) $ 178,191 $ (336,796 )
Items impacting
comparability: Impairment of oil and gas properties (E&P)
397,443 832,894 Tax impact of impairment of oil and gas properties
(166,926 ) (349,814 ) Joint development agreement professional fees
(E&P) 4,682 Tax impact of joint development agreement
professional fees (1,966 )
Operating
Results $ 89,284 $ 82,830 $ 178,191 $
149,000
Reported GAAP earnings (loss) per
share $ 1.04 $ (1.74 ) $ 2.07 $ (3.97 )
Items impacting
comparability: Impairment of oil and gas properties (E&P)
4.69 9.83 Tax impact of impairment of oil and gas properties (1.97
) (4.13 ) Joint development agreement professional fees (E&P)
0.06 Tax impact of joint development agreement professional fees
(0.02 ) Earnings per share impact of diluted shares (0.01 )
(0.02 )
Operating Results per diluted share $ 1.04
$ 0.97 $ 2.07 $ 1.75
MANAGEMENT COMMENTS
Ronald J. Tanski, President and Chief Executive Officer of
National Fuel Gas Company, stated: “Strong performance in our
Exploration & Production and Gathering segments over each of
our last two quarters bodes well for our whole fiscal year. These
segments continue to benefit from improving natural gas prices in
the Appalachian basin. Given the relative near-term strength we are
seeing in local pricing, we are positioning our near-term
development and marketing plans to target a 10-plus percent annual
growth rate in our Appalachian production over the next three years
and lock-in attractive returns on our low-cost drilling program and
gathering investments. Seneca is in the process of adding a second
rig to prepare for the start of its Atlantic Sunrise capacity and
eventually begin Utica Shale development in Tioga County, Pa., in
fiscal 2018, providing opportunities for further growth.
“The higher earnings in our unregulated segments more than
offset the decline in earnings in our regulated Pipeline &
Storage and Utility segments, where a number of minor factors drove
earnings modestly lower than the previous year. Since most of the
daily operational activities of the regulated companies remain
fairly routine from year to year, these minor variances are not
uncommon. However, the increasingly difficult regulatory policies
in New York are impacting our ability to make reasoned decisions
with respect to additional investments in these segments in the
state. Nonetheless, our dedicated employees continue to execute our
operational plan to ensure safe and reliable natural gas service
for our customers in New York and Pennsylvania.
“While we sort through the delay of our Northern Access pipeline
project, we will concentrate on our investment opportunities
outside the state of New York. As we focus on our Exploration &
Production and Gathering segments, along with ongoing investment in
the expansion and modernization of our pipeline systems where
possible, I am confident that we can continue to grow our
integrated businesses.”
DISCUSSION OF RESULTS BY SEGMENT
The following discussion of the earnings of each segment is
summarized in a tabular form on pages 7 through 10 of this report.
It may be helpful to refer to those tables while reviewing this
discussion. Note that management defines Operating Results as
reported GAAP earnings before items impacting comparability and
Adjusted EBITDA as reported GAAP earnings before the following
items: interest expense, depreciation and amortization, interest
and other income, impairments, items impacting comparability, and
income taxes.
Upstream Business
Exploration and Production
Segment
The Exploration and Production segment operations are carried
out by Seneca Resources Corporation ("Seneca"). Seneca explores
for, develops and produces natural gas and oil reserves, primarily
in Pennsylvania and California.
Three Months Ended Six Months Ended
March 31, March 31, (in thousands except per share
amounts)
2017 2016 Variance
2017 2016 Variance Net Income /
(Loss) $ 33,769 $ (213,335 ) $ 247,104 $ 68,849
$ (450,421 ) $
519,270
Net Income / (Loss) Per Share (Diluted) $ 0.39 $ (2.52 ) $ 2.91 $
0.80 $ (5.32 ) $ 6.12 Adjusted EBITDA $ 93,970 $ 79,608 $ 14,362 $
196,447 $ 170,749 $ 25,698
Net income in the Exploration and Production segment in the
second quarter was $33.8 million or $0.39 per share, compared to a
net loss of $213.3 million or $2.52 per share in the prior year
second quarter, an increase of $247.1 million or $2.91 per share.
Excluding the impact of last year's impairment charge, the increase
in the Exploration and Production segment's second quarter earnings
is mainly due to higher natural gas production, lower operating
expenses and a lower effective income tax rate, offset partially by
a decrease in oil production and lower realized natural gas prices
after the impact of hedging. In the prior year second quarter,
Seneca recorded a $397.4 million ($230.5 million after-tax) ceiling
test impairment charge to reduce the value of Seneca’s oil and gas
properties. There was no ceiling test impairment charge in the
current year’s second quarter.
The full cost method of accounting requires that Seneca perform
a quarterly “ceiling test” to compare the present value of future
revenues from its oil and natural gas reserves based on an
unweighted arithmetic average of the first day of the month oil and
gas prices for each month within the 12-month period prior to the
end of the reporting period (“the ceiling”) with the book value of
those reserves at the balance sheet date. If the book value of the
reserves exceeds the ceiling, a non-cash impairment charge must be
recorded in order to reduce the book value of the reserves to the
calculated ceiling. At March 31, 2017, the ceiling exceeded the
book value of the oil and gas properties by approximately $201.0
million. Seneca does not expect to incur any impairment charges in
fiscal 2017 due to the improvement in oil and gas prices and lower
expected operating and well development costs.
Seneca's net production was 45.6 billion cubic feet equivalent
("Bcfe"), an increase of 6.4 Bcfe or 16 percent versus the prior
year second quarter, and 0.7 Bcfe or 2 percent versus the first
quarter of fiscal 2017. Net natural gas production increased 6.7
Bcf or 19 percent versus the prior year due to higher natural gas
production in Appalachia. An improvement in local natural gas
pricing in Pennsylvania allowed Seneca to produce all of its
available production volumes during the second quarter. Seneca
voluntarily curtailed approximately 9.1 Bcf (net) of natural gas
production in the prior year second quarter. Seneca’s crude oil
production decreased 49 thousand barrels ("Mbbl") or 7 percent due
mainly to changes in steam operations and a reduction in well
workover activity at its North Midway Sunset field.
Seneca's average realized natural gas price, after the impact of
hedging, for the second quarter was $2.96 per thousand cubic feet
("Mcf"), a decrease of $0.03 per Mcf versus the prior year.
Seneca's average realized oil price, after the impact of hedging,
was $52.92 per barrel ("Bbl"), a decrease of $0.09 per Bbl.
Seneca's average realized natural gas and oil prices benefited from
an uplift of $0.21 per Mcf and $4.96 per Bbl, respectively, from
financial hedges settled during the quarter.
Lease operating and transportation expense ("LOE") increased
$5.0 million due mainly to higher production. However, LOE expense
on a per unit of production basis decreased from $0.96 per Mcfe to
$0.93 per Mcfe. The $0.03 per Mcfe improvement is largely the
result of higher Appalachian natural gas production, which carries
a lower per unit LOE cost relative to Seneca’s California oil
operations, as well as a general reduction in well repair and
maintenance costs across Seneca's California and Appalachia
divisions.
Seneca’s General & Administrative (“G&A”) expense
decreased $2.6 million due to lower personnel costs. Seneca’s per
unit of production G&A expense for the quarter was $0.36 per
Mcfe, a decrease of $0.13 per Mcfe or 27 percent from the prior
year.
Depreciation, depletion and amortization ("DD&A") expense
decreased $8.4 million due to lower per unit DD&A, offset
partially by the impact of higher production. Seneca’s per unit
DD&A decreased by $0.32 per Mcf equivalent ("Mcfe") to $0.63
per Mcfe due to a lower depletable fixed asset balance resulting
mainly from the ceiling test impairment charges recorded during the
past year.
Seneca’s effective income tax rate decreased in the second
quarter due primarily to an enhanced oil recovery tax credit
related to Seneca’s California properties. This credit was
applicable this year as a result of relatively low domestic crude
oil prices.
Midstream Businesses
Pipeline and Storage Segment
The Pipeline and Storage segment’s operations are carried out by
National Fuel Gas Supply Corporation (“Supply Corporation”) and
Empire Pipeline, Inc. (“Empire”). The Pipeline and Storage segment
provides natural gas transportation and storage services to
affiliated and non-affiliated companies through an integrated
system of pipelines and underground natural gas storage fields in
western New York and Pennsylvania.
Three Months Ended Six Months Ended
March 31, March 31, (in thousands except per share
amounts)
2017 2016 Variance
2017 2016 Variance Net Income /
(Loss) $ 19,256 $ 21,194 $ (1,938 ) $ 38,624 $
42,470 $ (3,846 ) Net Income / (Loss) Per Share (Diluted) $
0.22 $ 0.25 $ (0.03 ) $ 0.45 $ 0.50 $ (0.05 ) Adjusted EBITDA $
49,103 $ 53,672 $ (4,569 ) $ 97,116 $ 104,415 $ (7,299 )
The Pipeline and Storage segment's second quarter earnings
decreased from the prior year due primarily to a $3.8 million
decline in operating revenues. The decrease in revenues was the
result of the reduction in Supply Corporation and Empire’s rates
related to their rate case settlements that went into effect in
2016, as well as a decline in short-term transportation contracts
in the current quarter.
Gathering Segment
The Gathering segment’s operations are carried out by National
Fuel Gas Midstream Corporation’s subsidiary limited liability
companies. The Gathering segment constructs, owns and operates
natural gas gathering pipelines and compression facilities in the
Appalachian region which currently delivers Seneca’s gross
Appalachian production to the interstate pipeline system.
Three Months Ended Six Months Ended
March 31, March 31, (in thousands except per share
amounts)
2017 2016 Variance
2017 2016 Variance Net Income /
(Loss) $ 10,285 $ 7,568 $ 2,717 $ 21,266 $
12,490 $
8,776
Net Income / (Loss) Per Share (Diluted) $ 0.12 $ 0.09 $ 0.03 $ 0.25
$ 0.15 $ 0.10 Adjusted EBITDA $ 24,172 $ 18,831 $ 5,341 $ 49,273 $
35,290 $ 13,983
The Gathering segment’s second quarter earnings increased $2.7
million or 36 percent versus the prior year on higher revenues
offset slightly by higher operating expenses. Operating revenues
increased $6.3 million as the increase in Seneca’s gross
Appalachian natural gas production, which includes production from
joint development wells, helped drive higher volumes across the
Company’s gathering systems. The Gathering segment transported 50.6
Bcf on its systems in the second quarter, up 11.4 Bcf or 29 percent
from the prior year. Operation and Maintenance (“O&M”) expenses
were up $1.0 million versus the prior year due to higher costs
associated with operating new compression and dehydration
facilities at the segment’s Clermont gathering system.
Downstream Businesses
Utility Segment
The Utility segment operations are carried out by National Fuel
Gas Distribution Corporation (“Distribution”), which sells or
transports natural gas to customers located in western New York and
northwestern Pennsylvania.
Three Months Ended Six Months Ended
March 31, March 31, (in thousands except per share
amounts)
2017 2016 Variance
2017 2016 Variance Net Income /
(Loss) $ 25,581 $ 31,960 $ (6,379 ) $ 46,755 $
50,566 $ (3,811 ) Net Income / (Loss) Per Share (Diluted) $
0.30 $ 0.38 $ (0.08 ) $ 0.54 $ 0.60 $ (0.06 ) Adjusted EBITDA $
61,580 $ 69,467 $ (7,887 ) $ 113,909 $ 115,382 $ (1,473 )
The Utility segment’s second quarter earnings decreased $6.4
million or 20 percent due primarily to higher O&M and DD&A
expenses and warmer weather. O&M expense increased $6.5 million
versus the prior year due mainly to higher pension and benefits
costs and uncollectible accounts. DD&A expense increased $1.7
million due to higher plant balances at March 31, 2017, which was
primarily driven by the replacement of Distribution’s legacy
customer information system that was placed in service in May
2016.
The weather was 4.1 percent warmer than last year and 15.5
percent warmer than normal in Distribution’s Pennsylvania service
territory, resulting in lower retail residential and transportation
customer throughput and revenues when compared to both the prior
year and Company projections for earnings guidance purposes, which
assumes normal weather. In New York, the impact of weather
variations on earnings is largely mitigated by that jurisdiction’s
weather normalization clause.
Energy Marketing Segment
The Energy Marketing segment's operations are carried out by
National Fuel Resources, Inc. (“NFR”). NFR markets natural gas to
industrial, wholesale, commercial, public authority and residential
customers primarily in western and central New York and
northwestern Pennsylvania, offering competitively priced natural
gas to its customers.
Three Months Ended Six Months Ended
March 31, March 31, (in thousands except per share
amounts)
2017 2016 Variance
2017 2016 Variance Net Income /
(Loss) $ 905 $ 3,484 $ (2,579 ) $ 2,687 $
4,707 $ (2,020 ) Net Income / (Loss) Per Share (Diluted) $
0.01 $ 0.04 $ (0.03 ) $ 0.03 $ 0.06 $ (0.03 ) Adjusted EBITDA $
1,382 $ 5,653 $ (4,271 ) $ 4,230 $ 7,500 $ (3,270 )
The Energy Marketing segment's second quarter earnings decreased
$2.6 million due to lower margin. NFR’s customer margins were
negatively impacted by stronger natural gas prices at local pricing
points relative to NYMEX-based sales contracts and lower volumes as
a result of warmer weather during the period.
Corporate and All Other
The Corporate and All Other category had a loss of $0.5 million
or $0.00 per share for the second quarter compared to earnings of
$1.4 million or $0.02 per share in the prior year. The $1.9 million
decrease is primarily attributable to the non-recurrence of a death
benefit gain on life insurance proceeds and related tax benefits
that were recognized in the prior year.
GUIDANCE
The Company is raising and tightening its earnings guidance for
fiscal 2017 to a range of $3.20 to $3.35 per share to reflect the
impact of actual results for the six months ended March 31, 2017,
and updates to key forecast assumptions, including positive
revisions to the Exploration & Production segment’s forecasted
production and operating expense assumptions, as outlined in the
table below.
The Company is also updating fiscal 2017 capital expenditure
guidance to a range of $450 to $530 million, a decrease of $100
million at the midpoint. Expected capital expenditures for the
Pipeline & Storage segment were reduced by $115 million at the
midpoint to reflect the delay in the Northern Access pipeline
project. Changes to Exploration & Production, up $30 million at
the midpoint of the range, and Gathering, down $15 million at the
midpoint, were the result of changes in the timing of Seneca’s
Appalachian development activities between fiscal 2017 and fiscal
2018. There were no changes to the Utility segment’s capital
expenditure budget.
Updated FY 2017 Guidance Previous FY 2017
Guidance Consolidated Earnings per Share $3.20 to
$3.35 $3.10 to $3.30 Capital Expenditures
(Millions) Exploration & Production (1) $210 - $250 $180 - $220
Pipeline & Storage $100 - $120 $200 - $250 Gathering $50 - $60
$65 - $75 Utility $90 - $100 $90 - $100
Consolidated Capital
Expenditures $450 - $530 $535 - $645
Exploration & Production Segment Guidance NYMEX Natural
Gas Price Assumption $3.25 $3.25 NYMEX Crude Oil Price Assumption
$55.00 $55.00
Production (Bcfe) East Division -
Appalachia 145 to 160 135 to 153 West Division - California ~ 20 20
to 22
Total Production 165 to 180 155 to 175
E&P Operating Costs ($/Mcfe) LOE $0.95 - $1.00
$0.95 - $1.05 G&A $0.35 - $0.40 $0.35 - $0.40 DD&A $0.60 -
$0.65 $0.65 - $0.70
(1) Net of initial conveyance proceeds received from joint
development partner for working interest in joint development
wells
EARNINGS TELECONFERENCE
The Company will host a conference call on Friday, May 5, 2017,
at 11 a.m. Eastern Time to discuss this announcement. There are two
ways to access this call. For those with Internet access, visit the
NFG Investor Relations News & Events page at National Fuel’s
website at investor.nationalfuelgas.com. For those without Internet
access, audio access is also provided by dialing (toll-free)
877-201-0168, using conference ID number “4568855.” 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 “4568855.” Both the webcast and a
telephonic replay will be available until the close of business on
Friday, May 12, 2017.
National Fuel is an integrated energy company reporting
financial results for five operating segments: Exploration and
Production, Pipeline and Storage, Gathering, Utility, and Energy
Marketing. Additional information about National Fuel is available
at www.nationalfuelgas.com.
Certain statements contained herein, including statements
identified by the use of the words “anticipates,” “estimates,”
“expects,” “forecasts,” “intends,” “plans,” “predicts,” “projects,”
“believes,” “seeks,” “will,” “may” and similar expressions, and
statements which are other than statements of historical facts, are
“forward-looking statements” as defined by the Private Securities
Litigation Reform Act of 1995. Forward-looking statements involve
risks and uncertainties, which could cause actual results or
outcomes to differ materially from those expressed in the
forward-looking statements. The Company’s expectations, beliefs and
projections contained herein are expressed in good faith and are
believed to have a reasonable basis, but there can be no assurance
that such expectations, beliefs or projections will result or be
achieved or accomplished. In addition to other factors, the
following are important factors that could cause actual results to
differ materially from those discussed in the forward-looking
statements: delays or changes in costs or plans with respect to
Company projects or related projects of other companies, including
difficulties or delays in obtaining necessary governmental
approvals, permits or orders or in obtaining the cooperation of
interconnecting facility operators; governmental/regulatory
actions, initiatives and proceedings, including those involving
rate cases (which address, among other things, target rates of
return, rate design and retained natural gas), environmental/safety
requirements, affiliate relationships, industry structure, and
franchise renewal; changes in laws, regulations or judicial
interpretations to which the Company is subject, including those
involving derivatives, taxes, safety, employment, climate change,
other environmental matters, real property, and exploration and
production activities such as hydraulic fracturing; impairments
under the SEC’s full cost ceiling test for natural gas and oil
reserves; changes in the price of natural gas or oil; financial and
economic conditions, including the availability of credit, and
occurrences affecting the Company’s ability to obtain financing on
acceptable terms for working capital, capital expenditures and
other investments, including any downgrades in the Company’s credit
ratings and changes in interest rates and other capital market
conditions; factors affecting the Company’s ability to successfully
identify, drill for and produce economically viable natural gas and
oil reserves, including among others geology, lease availability,
title disputes, weather conditions, shortages, delays or
unavailability of equipment and services required in drilling
operations, insufficient gathering, processing and transportation
capacity, the need to obtain governmental approvals and permits,
and compliance with environmental laws and regulations; increasing
health care costs and the resulting effect on health insurance
premiums and on the obligation to provide other post-retirement
benefits; changes in price differentials between similar quantities
of natural gas or oil sold at different geographic locations, and
the effect of such changes on commodity production, revenues and
demand for pipeline transportation capacity to or from such
locations; other changes in price differentials between similar
quantities of natural gas or oil having different quality, heating
value, hydrocarbon mix or delivery date; the cost and effects of
legal and administrative claims against the Company or activist
shareholder campaigns to effect changes at the Company; uncertainty
of oil and gas reserve estimates; significant differences between
the Company’s projected and actual production levels for natural
gas or oil; changes in demographic patterns and weather conditions;
changes in the availability, price or accounting treatment of
derivative financial instruments; changes in economic conditions,
including global, national or regional recessions, and their effect
on the demand for, and customers’ ability to pay for, the Company’s
products and services; the creditworthiness or performance of the
Company’s key suppliers, customers and counterparties; economic
disruptions or uninsured losses resulting from major accidents,
fires, severe weather, natural disasters, terrorist activities,
acts of war, cyber attacks or pest infestation; significant
differences between the Company’s projected and actual capital
expenditures and operating expenses; changes in laws, actuarial
assumptions, the interest rate environment and the return on
plan/trust assets related to the Company’s pension and other
post-retirement benefits, which can affect future funding
obligations and costs and plan liabilities; or increasing costs of
insurance, changes in coverage and the ability to obtain insurance.
The Company disclaims any obligation to update any forward-looking
statements to reflect events or circumstances after the date
thereof.
NATIONAL FUEL GAS COMPANY RECONCILIATION OF CURRENT AND
PRIOR YEAR GAAP EARNINGS QUARTER ENDED MARCH 31, 2017
(Unaudited)
Midstream
Downstream
Upstream
Businesses
Businesses
Exploration & Pipeline & Energy Corporate /
(Thousands of Dollars) Production Storage Gathering
Utility Marketing All Other
Consolidated*
Second quarter 2016 GAAP earnings $
(213,335 ) $ 21,194 $ 7,568 $ 31,960 $ 3,484 $ 1,442 $ (147,687 )
Items impacting comparability: Impairment of oil and gas
producing properties 397,443 397,443 Tax impact of impairment of
oil and gas producing properties (166,926 )
(166,926 )
Second quarter 2016 operating results 17,182 21,194 7,568
31,960 3,484 1,442 82,830
Drivers of operating
results Higher (lower) crude oil prices (39 ) (39 ) Higher
(lower) natural gas prices (962 ) (962 ) Higher (lower) natural gas
production 12,963 12,963 Higher (lower) crude oil production (1,680
) (1,680 ) Lower (higher) lease operating and transportation
expenses (3,234 ) (3,234 ) Lower (higher) depreciation / depletion
5,475 252 (265 ) (1,076 ) 4,386 Higher (lower)
transportation and storage revenues (2,288 ) (2,288 ) Higher
(lower) gathering and processing revenues 4,098 4,098 Lower
(higher) other operating expenses 2,651 (395 ) (647 ) (3,775 )
(2,166 ) Regulatory true-up adjustments (341 ) (341 ) Warmer
weather (733 ) (733 ) Higher (lower) margins (2,686 ) (223 )
(2,909 ) Higher (lower) AFUDC** 395 (582 ) (187 )
Lower (higher) interest expense (206 ) (206 ) Lower (higher)
income tax expense / effective tax rate 1,539 (1,037 ) 502
All other / rounding (126 ) 98 (263 )
128 107 (694 ) (750 )
Second
quarter 2017 GAAP earnings and operating results $ 33,769
$ 19,256 $ 10,285 $
25,581 $ 905 $ (512 ) $ 89,284
* Amounts do not reflect intercompany eliminations **
AFUDC = Allowance for Funds Used During Construction
NATIONAL FUEL GAS COMPANY RECONCILIATION OF CURRENT AND
PRIOR YEAR GAAP EARNINGS PER SHARE QUARTER ENDED MARCH 31,
2017 (Unaudited)
Midstream
Downstream
Upstream
Businesses
Businesses
Exploration & Pipeline & Energy Corporate /
Production Storage Gathering Utility
Marketing All Other Consolidated*
Second
quarter 2016 GAAP earnings $ (2.52 ) $ 0.25 $ 0.09 $ 0.38 $
0.04 $ 0.02 $ (1.74 )
Items impacting comparability:
Impairment of oil and gas producing properties 4.69 4.69 Tax impact
of impairment of oil and gas producing properties (1.97 ) (1.97 )
Earnings per share impact of diluted shares
(0.01 )
(0.01 )
Second quarter 2016 operating results 0.20 0.25 0.09
0.38 0.04 0.01 0.97
Drivers of operating results
Higher (lower) crude oil prices — — Higher (lower) natural gas
prices (0.01 ) (0.01 ) Higher (lower) natural gas production 0.15
0.15 Higher (lower) crude oil production (0.02 ) (0.02 ) Lower
(higher) lease operating and transportation expenses (0.04 ) (0.04
) Lower (higher) depreciation / depletion 0.06 — — (0.01 ) 0.05
Higher (lower) transportation and storage revenues (0.03 )
(0.03 ) Higher (lower) gathering and processing revenues 0.05 0.05
Lower (higher) other operating expenses 0.03 — (0.01 ) (0.04 )
(0.02 ) Regulatory true-up adjustments — — Warmer weather
(0.01 ) (0.01 ) Higher (lower) margins (0.03 ) — (0.03 )
Higher (lower) AFUDC** — (0.01 ) (0.01 ) Lower
(higher) interest expense — — Lower (higher) income tax
expense / effective tax rate 0.02 (0.01 ) 0.01 All other /
rounding — — (0.01 ) (0.01 )
— — (0.02 )
Second quarter
2017 GAAP earnings and operating results $ 0.39 $
0.22 $ 0.12 $ 0.30 $ 0.01
$ — $ 1.04 * Amounts do
not reflect intercompany eliminations ** AFUDC = Allowance for
Funds Used During Construction
NATIONAL FUEL GAS
COMPANY RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP
EARNINGS SIX MONTHS ENDED MARCH 31, 2017
(Unaudited)
Midstream
Downstream
Upstream
Businesses
Businesses
Exploration & Pipeline & Energy Corporate /
(Thousands of Dollars) Production Storage Gathering
Utility Marketing All Other
Consolidated*
Six months ended March 31, 2016 GAAP
earnings $ (450,421 ) $ 42,470 $ 12,490 $ 50,566 $ 4,707 $
3,392 $ (336,796 )
Items impacting comparability: Impairment
of oil and gas producing properties 832,894 832,894 Tax impact of
impairment of oil and gas producing properties (349,814 ) (349,814
) Joint development agreement professional fees 4,682 4,682 Tax
impact of joint development agreement professional fees (1,966 )
(1,966 )
Six months ended March 31, 2016 operating
results 35,375 42,470 12,490 50,566 4,707 3,392 149,000
Drivers of operating results Higher (lower) crude oil prices
(2,356 ) (2,356 ) Higher (lower) natural gas prices (5,992 ) (5,992
) Higher (lower) natural gas production 27,346 27,346 Higher
(lower) crude oil production (2,791 ) (2,791 ) Lower (higher) lease
operating and transportation expenses (3,680 ) (3,680 ) Lower
(higher) depreciation / depletion 15,212 639 (2,040 ) 13,811
Higher (lower) transportation and storage revenues (2,373 ) (2,373
) Higher (lower) gathering and processing revenues 10,014 10,014
Lower (higher) other operating expenses 4,531 (2,116 ) (959 )
(5,647 ) (667 ) (4,858 ) Regulatory true-up adjustments 961
961 Colder weather 2,249 2,249 Higher (lower) usage 1,395 1,395
Higher (lower) margins (2,090 ) (321 ) (2,411 )
Higher (lower) AFUDC** (500 ) (1,060 ) (1,560 ) Lower
(higher) interest expense 846 428 1,274 Lower (higher)
income tax expense / effective tax rate 1,012 517 (854 ) (2,072 )
(1,397 ) All other / rounding (654 ) (13 ) 147
331 70 (322 ) (441
)
Six months ended March 31, 2017 GAAP earnings and operating
results $ 68,849 $ 38,624 $ 21,266
$ 46,755 $ 2,687 $ 10
$ 178,191 * Amounts do not reflect
intercompany eliminations ** AFUDC = Allowance for Funds Used
During Construction
NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS PER
SHARE SIX MONTHS ENDED MARCH 31, 2017 (Unaudited)
Midstream
Downstream
Upstream
Businesses
Businesses
Exploration & Pipeline & Energy Corporate /
Production Storage Gathering Utility
Marketing All Other Consolidated*
Six
months ended March 31, 2016 GAAP earnings $ (5.32 ) $ 0.50 $
0.15 $ 0.60 $ 0.06 $ 0.04 $ (3.97 )
Items impacting
comparability: Impairment of oil and gas producing properties
9.83 9.83 Tax impact of impairment of oil and gas producing
properties (4.13 ) (4.13 ) Joint development agreement professional
fees 0.06 0.06 Tax impact of joint development agreement
professional fees (0.02 ) (0.02 ) Earnings per share impact of
diluted shares (0.01 )
(0.01 ) (0.02 )
Six months ended
March 31, 2016 operating results 0.42 0.50 0.15 0.59 0.05 0.04
1.75
Drivers of operating results Higher (lower)
crude oil prices (0.03 ) (0.03 ) Higher (lower) natural gas prices
(0.07 ) (0.07 ) Higher (lower) natural gas production 0.32 0.32
Higher (lower) crude oil production (0.03 ) (0.03 ) Lower (higher)
lease operating and transportation expenses (0.04 ) (0.04 ) Lower
(higher) depreciation / depletion 0.18 0.01 (0.02 ) 0.17
Higher (lower) transportation and storage revenues (0.03 ) (0.03 )
Higher (lower) gathering and processing revenues 0.12 0.12 Lower
(higher) other operating expenses 0.05 (0.02 ) (0.01 ) (0.07 )
(0.01 ) (0.06 ) Regulatory true-up adjustments 0.01 0.01
Colder weather 0.03 0.03 Higher (lower) usage 0.02 0.02
Higher (lower) margins (0.02 ) — (0.02 ) Higher (lower)
AFUDC** (0.01 ) (0.01 ) (0.02 ) Lower (higher) interest
expense 0.01 — 0.01 Lower (higher) income tax expense /
effective tax rate 0.01 0.01 (0.01 ) (0.02 ) (0.01 ) All
other / rounding (0.02 ) (0.01 ) —
(0.01 ) — (0.01 ) (0.05 )
Six months
ended March 31, 2017 GAAP earnings and operating results $ 0.80
$ 0.45 $ 0.25 $ 0.54
$ 0.03 $ — $ 2.07
* Amounts do not reflect intercompany eliminations ** AFUDC
= Allowance for Funds Used During Construction
NATIONAL
FUEL GAS COMPANY AND SUBSIDIARIES (Thousands of
Dollars, except per share amounts) Three Months Ended
Six Months Ended March 31, March 31, (Unaudited) (Unaudited)
SUMMARY OF
OPERATIONS
2017 2016 2017 2016 Operating Revenues:
Utility and Energy Marketing Revenues $ 308,889 $ 248,173 $ 516,669
$ 417,005 Exploration and Production and Other Revenues 159,997
144,570 321,691 297,454 Pipeline and Storage and Gathering Revenues
53,189 56,389 106,216 109,868 522,075
449,132 944,576 824,327 Operating Expenses: Purchased Gas 147,971
81,623 218,214 123,691 Operation and Maintenance: Utility and
Energy Marketing 63,907 57,309 114,329 104,858 Exploration and
Production and Other 37,593 42,964 68,055 88,539 Pipeline and
Storage and Gathering 23,106 21,541 45,766 41,109 Property,
Franchise and Other Taxes 22,542 21,305 42,921 41,662 Depreciation,
Depletion and Amortization 56,999 63,947 113,194 134,498 Impairment
of Oil and Gas Producing Properties — 397,443 —
832,894 352,118 686,132 602,479 1,367,251
Operating Income (Loss) 169,957 (237,000 ) 342,097 (542,924 )
Other Income (Expense): Interest Income 391 278 1,991 2,077
Other Income 1,744 3,236 3,356 5,654 Interest Expense on Long-Term
Debt (28,913 ) (28,994 ) (58,016 ) (59,366 ) Other Interest Expense
(924 ) (1,237 ) (1,834 ) (2,617 ) Income (Loss) Before
Income Taxes 142,255 (263,717 ) 287,594 (597,176 ) Income
Tax Expense (Benefit) 52,971 (116,030 ) 109,403
(260,380 )
Net Income (Loss) Available for Common
Stock $ 89,284 $ (147,687 ) $ 178,191 $ (336,796
)
Earnings (Loss) Per Common Share: Basic $ 1.05
$ (1.74 ) $ 2.09 $ (3.97 ) Diluted $ 1.04 $
(1.74 ) $ 2.07 $ (3.97 )
Weighted Average Common
Shares: Used in Basic Calculation 85,334,887 84,806,982
85,261,575 84,728,680 Used in Diluted Calculation 86,006,614
84,806,982 85,897,282 84,728,680 NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited)
March 31, September 30, (Thousands of Dollars)
2017 2016
ASSETS Property, Plant and Equipment
$ 9,704,134 $ 9,539,581 Less - Accumulated Depreciation, Depletion
and Amortization 5,185,077
5,085,099 Net Property, Plant and Equipment
4,519,057 4,454,482 Current
Assets: Cash and Temporary Cash Investments 231,173 129,972 Hedging
Collateral Deposits 1,771 1,484 Receivables - Net 171,162 133,201
Unbilled Revenue 52,852 18,382 Gas Stored Underground 9,027 34,332
Materials and Supplies - at average cost 34,695 33,866 Unrecovered
Purchased Gas Costs 4,681 2,440 Other Current Assets
51,585 59,354 Total Current Assets
556,946 413,031
Other Assets: Recoverable Future Taxes 179,928 177,261 Unamortized
Debt Expense 1,424 1,688 Other Regulatory Assets 314,903 320,750
Deferred Charges 26,128 20,978 Other Investments 117,284 110,664
Goodwill 5,476 5,476 Prepaid Post-Retirement Benefit Costs 18,315
17,649 Fair Value of Derivative Financial Instruments 64,729
113,804 Other 485 604
Total Other Assets 728,672
768,874 Total Assets $ 5,804,675 $
5,636,387
CAPITALIZATION AND LIABILITIES
Capitalization: Comprehensive Shareholders' Equity Common Stock, $1
Par Value Authorized - 200,000,000 Shares; Issued and Outstanding -
85,375,068 Shares and 85,118,886 Shares, Respectively $ 85,375 $
85,119 Paid in Capital 782,688 771,164 Earnings Reinvested in the
Business 817,348 676,361 Accumulated Other Comprehensive Loss
(34,091 ) (5,640 ) Total Comprehensive
Shareholders' Equity 1,651,320 1,527,004 Long-Term Debt, Net of
Unamortized Discount and Debt Issuance Costs
2,087,385 2,086,252 Total
Capitalization 3,738,705
3,613,256 Current and Accrued Liabilities: Notes
Payable to Banks and Commercial Paper — — Current Portion of
Long-Term Debt — — Accounts Payable 111,382 108,056 Amounts Payable
to Customers 19,466 19,537 Dividends Payable 34,577 34,473 Interest
Payable on Long-Term Debt 34,900 34,900 Customer Advances 300
14,762 Customer Security Deposits 17,512 16,019 Other Accruals and
Current Liabilities 106,287 74,430 Fair Value of Derivative
Financial Instruments 1,471
1,560 Total Current and Accrued Liabilities
325,895 303,737 Deferred
Credits: Deferred Income Taxes 837,098 823,795 Taxes Refundable to
Customers 93,506 93,318 Cost of Removal Regulatory Liability
196,901 193,424 Other Regulatory Liabilities 91,661 99,789 Pension
and Other Post-Retirement Liabilities 291,259 277,113 Asset
Retirement Obligations 114,014 112,330 Other Deferred Credits
115,636 119,625 Total
Deferred Credits 1,740,075
1,719,394 Commitments and Contingencies —
— Total Capitalization and Liabilities
$ 5,804,675 $ 5,636,387
NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended March 31, (Thousands of Dollars)
2017 2016 Operating Activities: Net Income (Loss)
Available for Common Stock $ 178,191 $ (336,796 ) Adjustments to
Reconcile Net Income (Loss) to Net Cash Provided by Operating
Activities: Impairment of Oil and Gas Producing Properties —
832,894 Depreciation, Depletion and Amortization 113,194 134,498
Deferred Income Taxes 63,781 (283,912 ) Excess Tax Benefits
Associated with Stock-Based Compensation Awards — (226 )
Stock-Based Compensation 5,632 2,518 Other 7,713 6,106 Change in:
Hedging Collateral Deposits (287 ) 1,161 Receivables and Unbilled
Revenue (92,155 ) (28,211 ) Gas Stored Underground and Materials
and Supplies 24,476 22,637 Unrecovered Purchased Gas Costs (2,241 )
(1,245 ) Other Current Assets 7,769 4,177 Accounts Payable 13,997
(31,786 ) Amounts Payable to Customers (71 ) (14,561 ) Customer
Advances (14,462 ) (16,203 ) Customer Security Deposits 1,493 (389
) Other Accruals and Current Liabilities 44,690 22,420 Other Assets
(32 ) 3,754 Other Liabilities 202 (4,073 ) Net
Cash Provided by Operating Activities $ 351,890
$ 312,763 Investing Activities: Capital
Expenditures $ (208,231 ) $ (358,981 ) Net Proceeds from Sale of
Oil and Gas Producing Properties 26,554 104,938 Other (3,225
) (18,249 ) Net Cash Used in Investing Activities $
(184,902 ) $ (272,292 ) Financing Activities: Excess
Tax Benefits Associated with Stock-Based Compensation Awards $ — $
226 Dividends Paid on Common Stock (69,017 ) (66,887 ) Net Proceeds
From Issuance of Common Stock 3,230 6,294
Net Cash Used in Financing Activities $ (65,787 )
$ (60,367 ) Net Increase (Decrease) in Cash and
Temporary Cash Investments 101,201 (19,896 ) Cash and Temporary
Cash Investments at Beginning of Period 129,972
113,596 Cash and Temporary Cash Investments at March
31 $ 231,173 $ 93,700
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
2017 2016 Variance 2017 2016 Variance
Total Operating Revenues $ 159,553 $ 143,783
$ 15,770 $ 320,485 $ 295,749
$ 24,736 Operating
Expenses: Operation and Maintenance: General and Administrative
Expense 16,530 19,143 (2,613 ) 29,504 39,099 (9,595 ) Lease
Operating and Transportation Expense 42,543 37,568 4,975 82,251
76,590 5,661 All Other Operation and Maintenance Expense 2,781
4,247 (1,466 ) 5,332 7,391 (2,059 ) Property, Franchise and Other
Taxes 3,729 3,217 512 6,951 6,602 349 Depreciation, Depletion and
Amortization 28,851 37,274 (8,423 ) 57,905 81,307 (23,402 )
Impairment of Oil and Gas Producing Properties —
397,443 (397,443 ) — 832,894
(832,894 ) 94,434 498,892
(404,458 ) 181,943 1,043,883 (861,940 )
Operating Income (Loss) 65,119 (355,109) 420,228 138,542
(748,134) 886,676 Other Income (Expense): Interest Income
147 27 120 233 693 (460 ) Interest Expense (13,303 ) (13,546
) 243 (26,826 ) (28,128 ) 1,302
Income (Loss) Before Income Taxes 51,963 (368,628 ) 420,591
111,949 (775,569 ) 887,518 Income Tax Expense (Benefit) 18,194
(155,293 ) 173,487 43,100
(325,148 ) 368,248 Net Income (Loss) $ 33,769
$ (213,335 ) $ 247,104 $ 68,849
$ (450,421 ) $ 519,270 Net Income (Loss) Per
Share (Diluted) $ 0.39 $ (2.52 ) $ 2.91
$ 0.80 $ (5.32 ) $ 6.12
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
2017 2016 Variance 2017 2016 Variance
Revenues from External Customers $ 53,163 $ 56,276 $
(3,113 ) $ 106,164 $ 109,630 $ (3,466 ) Intersegment
Revenues 22,592 23,292 (700 ) 44,746
45,477 (731 ) Total Operating Revenues
75,755 79,568 (3,813 ) 150,910
155,107 (4,197 ) Operating Expenses: Purchased
Gas (28 ) 245 (273 ) 194 703 (509 ) Operation and Maintenance
19,668 19,060 608 39,911 36,653 3,258 Property, Franchise and Other
Taxes 7,012 6,591 421 13,689 13,336 353 Depreciation, Depletion and
Amortization 10,476 10,865 (389 )
20,138 21,121 (983 ) 37,128
36,761 367 73,932 71,813
2,119 Operating Income 38,627 42,807
(4,180 ) 76,978 83,294 (6,316 ) Other Income (Expense):
Interest Income 319 179 140 591 290 301 Other Income 807 413 394
1,494 1,994 (500 ) Interest Expense (8,342 ) (8,453 )
111 (16,688 ) (16,491 ) (197 ) Income
Before Income Taxes 31,411 34,946 (3,535 ) 62,375 69,087 (6,712 )
Income Tax Expense 12,155 13,752 (1,597
) 23,751 26,617 (2,866 ) Net Income $
19,256 $ 21,194 $ (1,938 ) $ 38,624
$ 42,470 $ (3,846 ) Net Income
Per Share (Diluted) $ 0.22 $ 0.25 $
(0.03 ) $ 0.45 $ 0.50 $ (0.05 )
Three Months Ended Six Months Ended March 31, March 31,
GATHERING
SEGMENT
2017 2016 Variance 2017 2016 Variance
Revenues from External Customers $ 26 $ 113 $ (87 ) $ 52 $ 238 $
(186 ) Intersegment Revenues 27,936 21,545
6,391 55,776 40,184
15,592 Total Operating Revenues 27,962 21,658
6,304 55,828 40,422
15,406 Operating Expenses: Operation and Maintenance
3,769 2,775 994 6,523 5,047 1,476 Property, Franchise and Other
Taxes 21 52 (31 ) 32 85 (53 ) Depreciation, Depletion and
Amortization 3,997 3,589 408
7,877 7,799 78 7,787
6,416 1,371 14,432 12,931
1,501 Operating Income 20,175 15,242
4,933 41,396 27,491 13,905 Other Income (Expense): Interest
Income 207 68 139 353 101 252 Other Income — 1 (1 ) 1 2 (1 )
Interest Expense (2,235 ) (1,918 ) (317 ) (4,328 )
(4,987 ) 659 Income Before Income Taxes
18,147 13,393 4,754 37,422 22,607 14,815 Income Tax Expense 7,862
5,825 2,037 16,156
10,117 6,039 Net Income $ 10,285
$ 7,568 $ 2,717 $ 21,266 $
12,490 $ 8,776 Net Income Per Share
(Diluted) $ 0.12 $ 0.09 $ 0.03 $
0.25 $ 0.15 $ 0.10
NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES
SEGMENT OPERATING RESULTS AND STATISTICS (UNAUDITED)
DOWNSTREAM BUSINESSES Three Months
Ended Six Months Ended (Thousands of Dollars, except per
share amounts) March 31, March 31,
UTILITY
SEGMENT
2017 2016 Variance 2017 2016 Variance
Revenues from External Customers $ 257,949 $ 212,737
$ 45,212 $ 428,919 $ 356,585 $ 72,334 Intersegment
Revenues 6,096 5,364 732 7,922
9,028 (1,106 ) Total Operating Revenues
264,045 218,101 45,944 436,841
365,613 71,228 Operating
Expenses: Purchased Gas 128,212 81,181 47,031 188,945 126,250
62,695 Operation and Maintenance 62,748 56,293 6,455 112,277
102,893 9,384 Property, Franchise and Other Taxes 11,505 11,160 345
21,710 21,088 622 Depreciation, Depletion and Amortization 13,314
11,659 1,655 26,415
23,277 3,138 215,779
160,293 55,486 349,347 273,508
75,839 Operating Income 48,266 57,808
(9,542 ) 87,494 92,105 (4,611 ) Other Income (Expense):
Interest Income 144 122 22 278 207 71 Other Income 45 706 (661 )
137 1,404 (1,267 ) Interest Expense (7,194 ) (7,158 )
(36 ) (14,392 ) (14,491 ) 99 Income
Before Income Taxes 41,261 51,478 (10,217 ) 73,517 79,225 (5,708 )
Income Tax Expense 15,680 19,518 (3,838
) 26,762 28,659 (1,897 ) Net Income $
25,581 $ 31,960 $ (6,379 ) $ 46,755
$ 50,566 $ (3,811 ) Net Income
Per Share (Diluted) $ 0.30 $ 0.38 $
(0.08 ) $ 0.54 $ 0.60 $ (0.06 )
Three Months Ended Six Months Ended March 31, March 31,
ENERGY MARKETING
SEGMENT
2017 2016 Variance 2017 2016 Variance
Revenues from External Customers $ 50,940 $ 35,436 $ 15,504 $
87,750 $ 60,420 $ 27,330 Intersegment Revenues 16 312
(296 ) 35 624 (589 )
Total Operating Revenues 50,956 35,748
15,208 87,785 61,044 26,741
Operating Expenses: Purchased Gas 47,661 28,321
19,340 79,999 50,044 29,955 Operation and Maintenance 1,913 1,773
140 3,556 3,496 60 Property, Franchise and Other Taxes — 1 (1 ) — 4
(4 ) Depreciation, Depletion and Amortization 70 69
1 140 139 1
49,644 30,164 19,480 83,695
53,683 30,012 Operating
Income 1,312 5,584 (4,272 ) 4,090 7,361 (3,271 ) Other
Income (Expense): Interest Income 138 91 47 271 141 130 Other
Income 33 15 18 35 24 11 Interest Expense (11 ) (7 )
(4 ) (24 ) (25 ) 1 Income Before Income
Taxes 1,472 5,683 (4,211 ) 4,372 7,501 (3,129 ) Income Tax Expense
567 2,199 (1,632 ) 1,685
2,794 (1,109 ) Net Income $ 905 $ 3,484
$ (2,579 ) $ 2,687 $ 4,707
$ (2,020 ) Net Income Per Share (Diluted) $ 0.01
$ 0.04 $ (0.03 ) $ 0.03 $
0.06 $ (0.03 )
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
2017 2016 Variance 2017 2016 Variance
Total Operating Revenues $ 218 $ 561 $
(343 ) $ 772 $ 1,266 $ (494 ) Operating
Expenses: Operation and Maintenance 394
164 230 909 239 670 Property, Franchise and Other Taxes 150 161 (11
) 294 304 (10 ) Depreciation, Depletion and Amortization 102
306 (204 ) 343 488
(145 ) 646 631 15 1,546
1,031 515 Operating Income
(Loss) (428 ) (70 ) (358 ) (774 ) 235 (1,009 ) Other Income
(Expense): Interest Income 49 31 18
89 50 39 Income
(Loss) Before Income Taxes (379 ) (39 ) (340 ) (685 ) 285 (970 )
Income Tax Expense (Benefit) (158 ) (16 ) (142 ) (285
) 119 (404 ) Net Income (Loss) $ (221 )
$ (23 ) $ (198 ) $ (400 ) $ 166 $ (566
) Net Income (Loss) Per Share (Diluted) $ — $
— $ — $ — $ — $ —
Three Months Ended Six Months Ended March 31,
March 31,
CORPORATE
2017 2016 Variance 2017 2016 Variance
Revenues from External Customers $ 226 $ 226 $ — $ 434 $ 439 $ (5 )
Intersegment Revenues 977 967 10
1,953 1,933 20 Total Operating
Revenues 1,203 1,193 10 2,387
2,372 15 Operating Expenses:
Operation and Maintenance 4,003 4,147 (144 ) 7,395 7,038 357
Property, Franchise and Other Taxes 125 123 2 245 243 2
Depreciation, Depletion and Amortization 189 185
4 376 367 9
4,317 4,455 (138 ) 8,016
7,648 368 Operating Loss (3,114 )
(3,262 ) 148 (5,629 ) (5,276 ) (353 ) Other Income
(Expense): Interest Income 30,693 30,339 354 62,498 62,083 415
Other Income 859 2,101 (1,242 ) 1,689 2,230 (541 ) Interest Expense
on Long-Term Debt (28,913 ) (28,994 ) 81 (58,016 ) (59,366 ) 1,350
Other Interest Expense (1,145 ) (734 ) (411 ) (1,898
) 17 (1,915 ) Loss Before Income Taxes
(1,620 ) (550 ) (1,070 ) (1,356 ) (312 ) (1,044 ) Income Tax
Benefit (1,329 ) (2,015 ) 686 (1,766 )
(3,538 ) 1,772 Net Income (Loss) $ (291 ) $
1,465 $ (1,756 ) $ 410 $ 3,226
$ (2,816 ) Net Income (Loss) Per Share (Diluted) $ —
$ 0.02 $ (0.02 ) $ — $
0.04 $ (0.04 ) Three Months Ended Six
Months Ended March 31, March 31,
INTERSEGMENT
ELIMINATIONS
2017 2016 Variance 2017 2016 Variance
Intersegment Revenues $ (57,617 ) $ (51,480 ) $
(6,137 ) $ (110,432 ) $ (97,246 ) $ (13,186 )
Operating Expenses: Purchased Gas (27,874 ) (28,124 ) 250 (50,924 )
(53,306 ) 2,382 Operation and Maintenance (29,743 ) (23,356
) (6,387 ) (59,508 ) (43,940 ) (15,568 )
(57,617 ) (51,480 ) (6,137 ) (110,432 )
(97,246 ) (13,186 ) Operating Income — — — — — —
Other Income (Expense): Interest Income (31,306 ) (30,579 )
(727 ) (62,322 ) (61,488 ) (834 ) Interest Expense 31,306
30,579 727 62,322 61,488
834 Net Income $ — $ —
$ — $ — $ — $ —
Net Income Per Share (Diluted) $ — $ —
$ — $ — $ — $ —
NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES
SEGMENT INFORMATION (Continued) (Thousands of
Dollars) Three Months Ended Six Months Ended
March 31, March 31, (Unaudited) (Unaudited) Increase
Increase 2017 2016 (Decrease) 2017 2016 (Decrease)
Capital
Expenditures:
Exploration and Production $ 57,137 (1)(2) $ 79,530 (3) $ (22,393 )
$ 97,826 (1)(2) $ 167,654 (3)(4) $ (69,828 ) Pipeline and Storage
11,386 (1)(2) 26,075 (3) (14,689 ) 36,778 (1)(2) 57,695 (3)(4)
(20,917 ) Gathering 3,147 (1)(2) 12,778 (3) (9,631 ) 14,491 (1)(2)
34,523 (3)(4) (20,032 ) Utility 19,244 (1)(2) 26,091 (3) (6,847 )
36,296 (1)(2) 46,008 (3)(4) (9,712 ) Energy Marketing 5 2
3 11 9 2 Total Reportable
Segments 90,919 144,476 (53,557 ) 185,402 305,889 (120,487 ) All
Other — 37 (37 ) 39 37 2 Corporate 3 106 (103 ) 64 155 (91 )
Eliminations (777 ) — (777 ) (777 ) — (777 ) Total
Capital Expenditures $ 90,145 $ 144,619 $ (54,474 ) $
184,728 $ 306,081 $ (121,353 )
(1)
Capital expenditures for the quarter and
six months ended March 31, 2017, include accounts payable and
accrued liabilities related to capital expenditures of $23.2
million, $5.8 million, $2.2 million, and $5.7 million in the
Exploration and Production segment, Pipeline and Storage segment,
Gathering segment and Utility segment, respectively. These amounts
have been excluded from the Consolidated Statement of Cash Flows at
March 31, 2017, since they represent non-cash investing activities
at that date.
(2)
Capital expenditures for the six months
ended March 31, 2017, exclude capital expenditures of $25.2
million, $18.7 million, $5.3 million and $11.2 million in the
Exploration and Production segment, Pipeline and Storage segment,
Gathering segment and Utility segment, respectively. These amounts
were in accounts payable and accrued liabilities at September 30,
2016 and paid during the six months ended March 31, 2017. These
amounts were excluded from the Consolidated Statement of Cash Flows
at September 30, 2016, since they represented non-cash investing
activities at that date. These amounts have been included in the
Consolidated Statement of Cash Flows at March 31, 2017.
(3)
Capital expenditures for the quarter and
six months ended March 31, 2016, include accounts payable and
accrued liabilities related to capital expenditures of $34.0
million, $10.2 million, $12.6 million, and $9.3 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, 2016, since they represent non-cash investing activities
at that date.
(4)
Capital expenditures for the six months
ended March 31, 2016, exclude capital expenditures of $46.2
million, $33.9 million, $22.4 million and $16.5 million in the
Exploration and Production segment, Pipeline and Storage segment,
Gathering segment and Utility segment, respectively. These amounts
were in accounts payable and accrued liabilities at September 30,
2015 and paid during the six months ended March 31, 2016. These
amounts were excluded from the Consolidated Statement of Cash Flows
at September 30, 2015, since they represented non-cash investing
activities at that date. These amounts have been included in the
Consolidated Statement of Cash Flows at March 31, 2016.
DEGREE
DAYS
Percent Colder (Warmer) Than:
Three Months Ended
March 31
Normal 2017 2016 Normal (1) Last Year (1)
Buffalo, NY 3,290 2,866
2,963 (12.9 ) (3.3 ) Erie, PA 3,108 2,627 2,739 (15.5 ) (4.1
)
Six Months Ended
March 31
Buffalo, NY 5,543 4,832 4,640 (12.8 ) 4.1 Erie, PA 5,152 4,377
4,223 (15.0 ) 3.6 (1)
Percents compare actual 2017 degree days
to normal degree days and actual 2017 degree days to actual 2016
degree days.
NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES
EXPLORATION AND
PRODUCTION INFORMATION
Three Months Ended Six Months Ended March 31,
March 31, Increase Increase 2017 2016
(Decrease) 2017 2016 (Decrease)
Gas
Production/Prices:
Production (MMcf) Appalachia 40,805 34,113 6,692 80,612 66,900
13,712 West Coast 737 764 (27 ) 1,513 1,547
(34 ) Total Production 41,542 34,877 6,665
82,125 68,447 13,678 Average
Prices (Per Mcf) Appalachia $ 2.71 $
1.85 $ 0.86 $ 2.54 $ 1.91 $ 0.63 West
Coast 4.57 2.87 1.70 4.40 3.27 1.13 Weighted Average 2.75 1.87 0.88
2.57 1.94 0.63 Weighted Average after Hedging 2.96 2.99 (0.03 )
2.96 3.08 (0.12 )
Oil
Production/Prices:
Production (Thousands of Barrels) Appalachia 2 5 (3 ) 2 11 (9 )
West Coast 672 718 (46 ) 1,393 1,460
(67 ) Total Production 674 723 (49 ) 1,395
1,471 (76 ) Average Prices (Per Barrel) Appalachia $
49.87 $ 32.81 $ 17.06 $ 49.04 $ 36.74 $ 12.30 West Coast 47.96
27.02 20.94 45.75 31.61 14.14 Weighted Average 47.96 27.06 20.90
45.82 31.65 14.17 Weighted Average after Hedging 52.92 53.01 (0.09
) 53.85 56.45 (2.60 ) Total Production (Mmcfe) 45,586
39,215 6,371 90,495 77,273 13,222
Selected
Operating Performance Statistics:
General & Administrative Expense per Mcfe (1) $ 0.36 $ 0.49 $
(0.13 ) $ 0.33 $ 0.51 $ (0.18 ) Lease Operating and Transportation
Expense per Mcfe (1)(2) $ 0.93 $ 0.96 $ (0.03 ) $ 0.91 $ 0.99 $
(0.08 ) Depreciation, Depletion & Amortization per Mcfe (1) $
0.63 $ 0.95 $ (0.32 ) $ 0.64 $ 1.05 $ (0.41 ) (1)
Refer to page 14 for the General and
Administrative Expense, Lease Operating Expense and Depreciation,
Depletion, and Amortization Expense for the Exploration and
Production segment.
(2)
Amounts include transportation expense of
$0.54 and $0.51 per Mcfe for the three months ended March 31, 2017
and March 31, 2016, respectively. Amounts include transportation
expense of $0.54 and $0.51 per Mcfe for the six months ended March
31, 2017 and March 31, 2016, respectively.
NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES
EXPLORATION AND
PRODUCTION INFORMATION
Hedging Summary for the Remaining Six Months of Fiscal
2017
Volume
Average Hedge
Price
Oil Swaps Brent 48,000 BBL $ 91.00 / BBL NYMEX 792,000 BBL $
58.34 / BBL
Total 840,000 BBL $
60.21 / BBL Gas Swaps NYMEX 19,980,000 MMBTU $ 4.35 /
MMBTU Dominion Transmission Appalachian (DOM) 900,000 MMBTU $ 3.82
/ MMBTU Dawn Ontario (DAWN) 6,660,000 MMBTU $ 3.71 / MMBTU Fixed
Price Physical Sales 31,359,518 MMBTU $ 2.54 / MMBTU
Total
58,899,518 MMBTU $ 3.30 / MMBTU
Hedging Summary for Fiscal 2018
Volume
Average Hedge
Price
Oil Swaps Brent 24,000 BBL $ 91.00 / BBL NYMEX 1,275,000 BBL $
54.79 / BBL
Total 1,299,000 BBL $
55.46 / BBL Gas Swaps NYMEX 42,570,000 MMBTU $ 3.34 /
MMBTU DOM 180,000 MMBTU $ 3.82 / MMBTU DAWN 8,400,000 MMBTU $ 3.08
/ MMBTU Fixed Price Physical Sales 35,260,266 MMBTU $ 2.39 / MMBTU
Total 86,410,266 MMBTU $ 2.93 /
MMBTU Hedging Summary for Fiscal 2019
Volume
Average Hedge
Price
Oil Swaps NYMEX 912,000 BBL $ 53.84 / BBL
Total
912,000 BBL $ 53.84 / BBL Gas
Swaps NYMEX 27,060,000 MMBTU $ 3.17 / MMBTU DAWN 7,200,000 MMBTU $
3.00 / MMBTU Fixed Price Physical Sales 15,806,706 MMBTU $ 2.83 /
MMBTU
Total 50,066,706 MMBTU $ 3.04
/ MMBTU Hedging Summary for Fiscal 2020
Volume
Average Hedge
Price
Gas Swaps NYMEX 16,880,000 MMBTU $ 3.07 / MMBTU DAWN 7,200,000
MMBTU $ 3.00 / MMBTU Fixed Price Physical Sales 11,277,025 MMBTU $
2.42 / MMBTU
Total 35,357,025 MMBTU $
2.85 / MMBTU Hedging Summary for Fiscal 2021
Volume
Average Hedge
Price
Gas Swaps NYMEX 4,840,000 MMBTU $ 3.01 / MMBTU DAWN 600,000 MMBTU $
3.00 / MMBTU Fixed Price Physical Sales 7,665,000 MMBTU $ 2.03 /
MMBTU
Total 13,105,000 MMBTU $ 2.44
/ MMBTU Hedging Summary for Fiscal 2022
Volume
Average Hedge
Price
Fixed Price Physical Sales 3,822,000 MMBTU $ 2.03 / MMBTU
Total 3,822,000 MMBTU $ 2.03 /
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
2017
2016
(Decrease) 2017 2016 (Decrease) Firm Transportation -
Affiliated
43,243
42,624
619
74,850
67,333
7,517
Firm Transportation - Non-Affiliated 170,124 166,326 3,798 329,298
317,448 11,850 Interruptible Transportation 971
6,483 (5,512 ) 4,017
12,115 (8,098 ) 214,338 215,433
(1,095 ) 408,165 396,896
11,269
Gathering Volume - (MMcf) Three
Months Ended Six Months Ended March 31, March 31, Increase Increase
2017 2016 (Decrease) 2017 2016 (Decrease) Gathered Volume -
Affiliated 50,598 39,195 11,403
101,167
72,995 28,172
Utility
Throughput - (MMcf) Three Months Ended Six Months Ended March
31, March 31, Increase Increase 2017 2016 (Decrease) 2017 2016
(Decrease) Retail Sales: Residential Sales 24,949 24,486 463 40,713
37,619 3,094 Commercial Sales 3,903 3,688 215 6,202 5,515 687
Industrial Sales 157 167 (10 )
234 233 1 29,009 28,341
668 47,149 43,367 3,782 Off-System Sales 1,122 1,243 (121 ) 1,295
1,243 52 Transportation 27,089 27,297
(208 ) 46,654 44,913
1,741 57,220 56,881 339
95,098 89,523 5,575
Energy Marketing Volume Three Months Ended Six
Months Ended March 31, March 31, Increase Increase 2017 2016
(Decrease) 2017 2016 (Decrease) Natural Gas (MMcf) 14,120
15,165 (1,045 ) 25,248
25,263 (15 )
NATIONAL FUEL GAS COMPANYAND
SUBSIDIARIES
NON-GAAP FINANCIAL MEASURES
In addition to financial measures calculated in accordance with
generally accepted accounting principles (GAAP), this press release
contains information regarding Operating Results and Adjusted
EBITDA, which are non-GAAP financial measures. The Company believes
that these non-GAAP financial measures are useful to investors
because they provide an alternative method for assessing the
Company's ongoing operating results and for comparing the Company’s
financial performance to other companies. The Company's management
uses these non-GAAP financial measures for the same purpose, and
for planning and forecasting purposes. The presentation of non-GAAP
financial measures is not meant to be a substitute for financial
measures in accordance with GAAP.
Management defines Operating Results as reported GAAP earnings
before items impacting comparability. The table at page 1 of this
report reconciles National Fuel's reported GAAP earnings to
Operating Results for the three and six months ended March 31, 2017
and 2016.
Management defines Adjusted EBITDA as reported GAAP earnings
before the following items: interest expense, depreciation,
depletion and amortization, interest and other income, impairments,
items impacting comparability and income taxes.
The following tables reconcile National Fuel's reported GAAP
earnings to Adjusted EBITDA for the three and six months ended
March 31, 2017 and 2016:
Three Months Ended Six Months Ended March 31, March
31, 2017 2016 2017 2016 (in thousands)
Reported
GAAP Earnings $ 89,284 $ (147,687 ) $ 178,191 $ (336,796 )
Depreciation, Depletion and Amortization 56,999 63,947 113,194
134,498 Interest and Other Income (2,135 ) (3,514 ) (5,347 ) (7,731
) Interest Expense 29,837 30,231 59,850 61,983 Income Taxes 52,971
(116,030 ) 109,403 (260,380 )
Impairment of Oil and Gas Producing
Properties
— 397,443 — 832,894
Joint Development Agreement Professional
Fees
— — — 4,682
Adjusted EBITDA $
226,956 $ 224,390 $ 455,291 $ 429,150
Adjusted EBITDA by Segment Pipeline and Storage
Adjusted EBITDA $ 49,103 $ 53,672 $ 97,116 $ 104,415 Gathering
Adjusted EBITDA 24,172 18,831 49,273 35,290
Total Midstream Businesses Adjusted EBITDA 73,275 72,503
146,389 139,705 Exploration and Production Adjusted EBITDA 93,970
79,608 196,447 170,749 Utility Adjusted EBITDA 61,580 69,467
113,909 115,382 Energy Marketing Adjusted EBITDA 1,382 5,653 4,230
7,500 Corporate and All Other Adjusted EBITDA (3,251 ) (2,841 )
(5,684 ) (4,186 )
Total Adjusted EBITDA $ 226,956 $
224,390 $ 455,291 $ 429,150
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) 2017 2016 2017 2016
Exploration and
Production Segment
Reported GAAP Earnings $ 33,769 $ (213,335 ) $ 68,849 $ (450,421 )
Depreciation, Depletion and Amortization 28,851 37,274 57,905
81,307 Interest and Other Income (147 ) (27 ) (233 ) (693 )
Interest Expense 13,303 13,546 26,826 28,128 Income Taxes 18,194
(155,293 ) 43,100 (325,148 ) Impairment of Oil and Gas Producing
Properties — 397,443 — 832,894 Joint Development Agreement
Professional Fees — — — 4,682 Adjusted
EBITDA $ 93,970 $ 79,608 $ 196,447 $ 170,749
Pipeline and
Storage Segment
Reported GAAP Earnings $ 19,256 $ 21,194 $ 38,624 $ 42,470
Depreciation, Depletion and Amortization 10,476 10,865 20,138
21,121 Interest and Other Income (1,126 ) (592 ) (2,085 ) (2,284 )
Interest Expense 8,342 8,453 16,688 16,491 Income Taxes 12,155
13,752 23,751 26,617 Adjusted EBITDA $
49,103 $ 53,672 $ 97,116 $ 104,415
Gathering
Segment
Reported GAAP Earnings $ 10,285 $ 7,568 $ 21,266 $ 12,490
Depreciation, Depletion and Amortization 3,997 3,589 7,877 7,799
Interest and Other Income (207 ) (69 ) (354 ) (103 ) Interest
Expense 2,235 1,918 4,328 4,987 Income Taxes 7,862 5,825
16,156 10,117 Adjusted EBITDA $ 24,172
$ 18,831 $ 49,273 $ 35,290
Utility
Segment
Reported GAAP Earnings $ 25,581 $ 31,960 $ 46,755 $ 50,566
Depreciation, Depletion and Amortization 13,314 11,659 26,415
23,277 Interest and Other Income (189 ) (828 ) (415 ) (1,611 )
Interest Expense 7,194 7,158 14,392 14,491 Income Taxes 15,680
19,518 26,762 28,659 Adjusted EBITDA $
61,580 $ 69,467 $ 113,909 $ 115,382
Energy Marketing
Segment
Reported GAAP Earnings $ 905 $ 3,484 $ 2,687 $ 4,707 Depreciation,
Depletion and Amortization 70 69 140 139 Interest and Other Income
(171 ) (106 ) (306 ) (165 ) Interest Expense 11 7 24 25 Income
Taxes 567 2,199 1,685 2,794 Adjusted
EBITDA $ 1,382 $ 5,653 $ 4,230 $ 7,500
Corporate and All
Other
Reported GAAP Earnings $ (512 ) $ 1,442 $ 10 $ 3,392 Depreciation,
Depletion and Amortization 291 491 719 855 Interest and Other
Income (295 ) (1,892 ) (1,954 ) (2,875 ) Interest Expense (1,248 )
(851 ) (2,408 ) (2,139 ) Income Taxes (1,487 ) (2,031 ) (2,051 )
(3,419 ) Adjusted EBITDA $ (3,251 ) $ (2,841 ) $ (5,684 ) $ (4,186
)
NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES
Quarter Ended
March 31 (unaudited)
2017 2016 Operating Revenues $ 522,075,000
$ 449,132,000 Net Income (Loss) Available for
Common Stock $ 89,284,000 $ (147,687,000 ) Earnings
(Loss) Per Common Share: Basic $ 1.05 $ (1.74 ) Diluted $
1.04 $ (1.74 ) Weighted Average Common Shares: Used
in Basic Calculation 85,334,887 84,806,982 Used in
Diluted Calculation 86,006,614 84,806,982
Six Months Ended
March 31 (unaudited)
Operating Revenues $ 944,576,000 $ 824,327,000
Net Income (Loss) Available for Common Stock $ 178,191,000
$ (336,796,000 ) Earnings (Loss) Per Common Share:
Basic $ 2.09 $ (3.97 ) Diluted $ 2.07 $ (3.97 )
Weighted Average Common Shares: Used in Basic Calculation
85,261,575 84,728,680 Used in Diluted Calculation
85,897,282 84,728,680
Twelve Months
Ended March 31 (unaudited)
Operating Revenues $ 1,572,665,000 $ 1,465,204,000
Net Income (Loss) Available for Common Stock $
224,030,000 $ (817,633,000 ) Earnings (Loss) Per
Common Share: Basic $ 2.63 $ (9.66 ) Diluted $ 2.61 $
(9.66 ) Weighted Average Common Shares: Used in Basic
Calculation 85,114,029 84,620,502 Used in Diluted
Calculation 85,738,474 84,620,502
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170504006753/en/
National Fuel Gas CompanyBrian M. Welsch, 716-857-7875Investor
RelationsorDavid P. Bauer, 716-857-7318TreasurerorMedia:Karen L.
Merkel, 716-857-7654
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