NFG National Fuel Gas Co

National Fuel Gas Company (�National Fuel� or the �Company�) (NYSE:NFG) today announced results for the quarter and six months ended March 31, 2007. HIGHLIGHTS 1 Reported GAAP earnings per share for the quarter of $0.92 increased $0.01 per share from the prior year's second quarter. Earnings were higher in the Utility segment, the Energy Marketing segment and the Timber segment. Lower earnings in the Exploration and Production segment and the Pipeline and Storage segment offset those increases. 2 Quarterly operating results before items impacting comparability were $0.89 per share, an increase of $0.04 from the prior year's second quarter. 3 The Company is increasing and narrowing its GAAP guidance range for fiscal 2007 earnings. The revised earnings guidance range is now $2.25 to $2.40 per share.* It had previously been $2.15 to $2.35 per share.* 4 A conference call is scheduled for Tuesday, May 8, 2007, at 11:00 am Eastern Time. MANAGEMENT COMMENTS Philip C. Ackerman, Chairman and Chief Executive Officer of National Fuel Gas Company stated: �We have just had another very solid quarter. In particular, extremes of weather with weekly temperatures ranging from 46% warmer than normal to 30% colder than normal emphasized the importance of storage capacity and the talents of our employees in meeting customer needs. An increase in gas production and an increase in realized oil prices were offset by a higher effective tax rate, but our Exploration and Production segment continues to make progress with increasing emphasis on Appalachia, the hiring of a new exploration and production manager and the possible sale of our Canadian operations.� SUMMARY OF RESULTS National Fuel had consolidated earnings for the quarter ended March 31, 2007, of $78.4 million, a decrease of $0.2 million from the prior year�s second quarter of $78.6 million. Consolidated earnings per share of $0.92 increased $0.01 due to a lower number of weighted average shares outstanding compared to the prior year. The decrease in weighted average shares outstanding is a result of the Company�s share repurchase program (note: all references to earnings per share are to diluted earnings per share and all amounts are stated in U.S. dollars). Consolidated earnings for the six months ended March 31, 2007, of $133.0 million or $1.57 per share decreased $3.0 million or $0.01 per share from the prior year�s earnings. The Company�s consolidated earnings per share would have been $0.02 per share lower if not for the fact that the weighted average shares outstanding have decreased compared to the prior year, mostly due to the share repurchase program. Three Months Six Months Ended March 31, Ended March 31, (in thousands except per share amounts) 2007� 2006� 2007� 2006� Reported GAAP earnings $ 78,447� $ 78,594� $ 132,967� $ 136,013� Items impacting comparability: Resolution of purchased gas contingency1 (2,344) (2,344) Discontinuance of hedge accounting1 (1,888) Income tax adjustment1 (5,080) (5,080) Out-of-period symmetrical sharing adjustment1 � � � � (2,551) Operating results $ 76,103� $ 73,514� $ 128,735� $ 128,382� � � � � Reported GAAP earnings per share $ 0.92� $ 0.91� $ 1.57� $ 1.58� Items impacting comparability: Resolution of purchased gas contingency1 (0.03) (0.03) Discontinuance of hedge accounting1 (0.02) Income tax adjustment1 (0.06) (0.06) Out-of-period symmetrical sharing adjustment1 � � � � (0.03) Operating results $ 0.89� $ 0.85� $ 1.52� $ 1.49� 1 See discussion of these items below. As outlined in the table above, certain items included in GAAP earnings impacted the comparability of the Company�s operating results when comparing the second quarter and six months ended March 31, 2007, to the comparable periods in fiscal 2006. Excluding these items, operating results for the current second quarter of $76.1 million or $0.89 per share increased $2.6 million or $0.04 per share. Excluding these items, operating results for the six months ended March 31, 2007, of $128.7 million or $1.52 per share increased $0.4 million or $0.03 per share. Items impacting comparability will be discussed in more detail within the discussion of segment earnings below. DISCUSSION OF RESULTS BY SEGMENT (The following discussion of the earnings of each segment is summarized in a tabular form in this report. It may be helpful to refer to those tables while reviewing this discussion.) 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. The Utility segment�s earnings of approximately $33.4 million or $0.39 per share, for the quarter ended March 31, 2007, increased $4.8 million or $0.06 per share compared to the prior year�s second quarter. In the New York division, earnings decreased $1.3 million mainly due to higher operating expenses. In the Pennsylvania division, operating results increased $6.1 million due to the impact of weather that was 16.5 percent colder than the prior year and the increase in base rates taking effect early in this quarter. On January 1, 2007, Distribution implemented the Settlement Agreement approved by the Pennsylvania Public Utility Commission, which among other things provided for a $14.3 million (before tax) annual base rate increase. A lower effective tax rate also contributed to the increase in this segment�s quarterly earnings. The Utility segment�s earnings of $50.6 million or $0.60 per share for the six months ended March 31, 2007, increased $0.2 million compared to the six months ended March 31, 2006. Earnings in Distribution�s New York Division for the six months ended March 31, 2007, of $35.1 million decreased $5.6 million compared to the prior year. The comparability of the six month results is impacted by a $2.6 million positive out-of-period adjustment recorded in the first quarter of fiscal 2006 to correct Distribution�s calculation of the symmetrical sharing component of New York�s gas adjustment rate. Excluding this item, operating results decreased $3.1 million or $0.04 per share. This decrease is mainly due to higher bad debt and other operating expenses and higher property taxes. For the six months ended March 31, 2007, earnings in Distribution�s Pennsylvania Division of $15.5 million or $0.18 per share, increased $5.8 million, or $0.07 per share, compared to the prior year. Earnings increased primarily due to the impact of weather that was 5.8 percent colder than the prior year, the annual $14.3 million (before taxes) increase in base rates taking effect on January 1, 2007, and a lower effective tax rate. Partially offsetting the increase was higher intercompany interest expense. Pipeline and Storage Segment The Pipeline and Storage segment operations are carried out by National Fuel Gas Supply Corporation (�Supply Corporation�) and Empire State Pipeline (�Empire�). These companies provide 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 western Pennsylvania. The Pipeline and Storage segment�s earnings of $13.9 million, or $0.16 per share, for the quarter ended March 31, 2007, decreased $3.0 million, or $0.04 per share, when compared with the same period in the prior fiscal year. The decrease is primarily due to lower efficiency gas revenue resulting from lower retained volumes and lower natural gas prices compared to the prior year�s quarter. The lower volumes of efficiency gas are part of a FERC approved settlement of a complaint filed by various parties against Supply Corporation under Sections 5(a) and 13 of the Natural Gas Act (the FERC settlement) effective December 1, 2006. The FERC settlement also lowered Supply Corporation�s depreciation rates, which resulted in lower depreciation expense for the quarter. While the settlement increased Supply Corporation�s expense for postretirement benefits, this increase was substantially offset by decreases in the depreciation expense and other operating expenses. Earnings of $27.6 million, or $0.33 per share, for the six months ended March 31, 2007, decreased $5.1 million, or $0.05 per share, when compared with the six months ended March 31, 2006. The comparability of the results for the six months ended March 31, 2007, is impacted by a $1.9 million gain associated with the prepayment in the first quarter of 2007 of the project financing debt for the Empire State Pipeline. Upon the payment of that debt, the corresponding interest rate collar no longer qualified for hedge accounting, and gains and losses could no longer be deferred. Excluding that gain, operating results decreased $7.0 million for the six months ended March 31, 2007, mainly due to lower efficiency gas revenue resulting from both lower natural gas prices and lower retained volumes due to the FERC settlement discussed above. Higher throughput realized in the first quarter of the prior year caused by the hurricanes in the fall of 2005 did not recur this year. An increase in postretirement benefits expense, also due to the FERC settlement, and higher intercompany interest expense contributed to the decline in earnings. The decrease was partially offset by lower depreciation expense, resulting from the FERC settlement, and lower other operating expenses. Exploration and Production Segment The Exploration and Production segment operations are carried out by Seneca Resources Corporation (�Seneca�). Seneca explores for, develops and purchases natural gas and oil reserves in California, in the Appalachian region, in the Gulf Coast region of Texas, Louisiana and Alabama, and in the western provinces of Canada. The Exploration and Production segment�s earnings in the second quarter of fiscal 2007 decreased $6.0 million or $0.07 per share to $19.8 million or $0.23 per share, when compared with the same period in the prior fiscal year. The comparability of the quarterly results is impacted by a positive tax adjustment of $5.1 million recorded in the second quarter of fiscal 2006. This benefit to earnings resulted from an adjustment to a deferred income tax balance. Under generally accepted accounting principles, a company may recognize the benefit of certain expected future income tax deductions as a deferred tax asset only if it anticipates sufficient future taxable income to utilize those deductions. As a result of changing circumstances, Seneca increased its forecast of future taxable income in the Canadian division and, consequently, recorded a deferred tax asset for certain costs related to capital expenditures that it now expects to deduct on future income tax returns. Excluding this item, operating results in the Exploration and Production segment decreased $1.0 million or $0.01 per share. The decrease was mainly due to a higher effective tax rate as a result of higher state income taxes. Partially offsetting this decrease was a 19.3 percent increase in oil prices realized after hedging that more than offset a drop in gas prices realized after hedging of 7.0 percent. For the quarter ended March 31, 2007, the weighted average oil price received by Seneca (after hedging) was $48.09/barrel (�Bbl�), an increase of $7.79/Bbl from the prior year�s quarter. This increase in the weighted average oil price was mainly due to the expiration of older hedges. The weighted average natural gas price received by Seneca (after hedging) for the quarter ended March 31, 2007, was $6.87/thousand cubic feet (�Mcf�), a decrease of $0.52/Mcf from the prior year�s quarter. Overall production for the quarter was 12.2 Bcfe, an increase of 0.1 Bcfe over the prior year�s quarter. An increase in natural gas production more than offset a drop in crude oil production. The Exploration and Production segment�s earnings of $40.5 million, or $0.48 per share, for the six months ended March 31, 2007, decreased $2.8 million, or $0.02 per share, when compared with the six months ended March 31, 2006. The comparability of the six month results is impacted by a positive tax adjustment recorded in the second quarter of fiscal 2006 as described above. Excluding this item, operating results for the six months ended March 31, 2007, in the Exploration and Production segment increased $2.3 million, or $0.04 per share, from the prior year. This increase is mainly due to a nearly 1.0 Bcfe increase in production. A minor drop in oil production was more than offset by an increase in gas production while the drop in gas prices realized after hedging was more than offset by the increase in oil prices realized after hedging. For the six months ended March 31, 2007, the weighted average oil price received by Seneca (after hedging) was $45.90/Bbl, an increase of $9.20/Bbl from the prior year. This increase in the weighted average oil price was mainly due to the expiration of older hedges. The weighted average natural gas price received by Seneca (after hedging) was $6.90/Mcf, a decrease of $0.98/Mcf from the prior year. In addition a higher effective tax rate contributed to this decline. Energy Marketing National Fuel Resources, Inc. (�NFR�) comprises the Company�s Energy Marketing segment. NFR markets natural gas to industrial, commercial, public authority and residential customers in western and central New York and northwestern Pennsylvania, offering competitively priced energy and energy management services to its customers. The Energy Marketing segment�s earnings for the quarter ended March 31, 2007, of $6.7 million or $0.08 per share increased $2.8 million or $0.04 per share compared to the second quarter of last year. The comparability of the quarterly results is impacted by a $2.3 million reversal of an accrual for purchased gas expense for which a contingency was resolved during the quarter. Excluding this item earnings for the quarter increased $0.5 million primarily due to a 15 percent increase in sales throughput during the quarter. Earnings for the six months ended March 31, 2007, in the Energy Marketing segment of $7.2 million, or $0.08 per share, increased $2.3 million, or $0.02 per share. The comparability of the quarterly results is impacted by a $2.3 million reversal of an accrual for purchased gas expense noted above. Excluding this item earnings for the six months ended March 31, 2007, were flat compared to the prior year. Timber Segment The Timber segment operations are carried out by Highland Forest Resources, Inc. (�Highland�) and Seneca�s Northeast Division. This segment markets high quality hardwoods from its New York and Pennsylvania land holdings and owns two sawmill/dry kiln operations in northwestern Pennsylvania. The Timber segment�s earnings for the quarter ended March 31, 2007, of $3.2 million or $0.04 per share increased $1.0 million or $0.01 per share from the prior year�s second quarter. Favorable weather conditions facilitated the harvesting of both veneer and saw logs during the quarter. Although the overall volume of log and lumber sales was down, most of the current quarter�s harvest was from low or no basis Company-owned property thus resulting in an increase in gross margins from the prior year�s quarter. Earnings for the six months ended March 31, 2007, of $3.4 million decreased $0.3 million from the prior year�s earnings. The decrease is due to unfavorable weather conditions in the first quarter that hindered the harvesting of both veneer and saw logs. This resulted in lower sales of both logs and lumber for the six months ended March 31, 2007. Harvesting from Company-owned property resulted in improved margins in the second quarter and offset some of the decline in earnings experienced in the first quarter. Corporate and All Other Other direct, wholly-owned subsidiaries of the Company include Horizon Energy Development, Inc., a corporation formerly engaged in the development of international power projects, Horizon LFG, Inc., a corporation engaged, through subsidiaries, in the purchase, processing, transportation and sale of landfill gas, and Horizon Power, Inc., a corporation that develops and owns independent electric generation facilities that are fueled by natural gas or landfill gas. Earnings in the Corporate and All Other category for the quarter ended March 31, 2007, were $1.4 million, an increase of $0.3 million when compared to the prior year�s second quarter earnings of $1.1 million. The increase is due to higher earnings in Horizon LFG, Inc. and higher intercompany interest income partially offset by higher operating costs and higher interest expense. Earnings in the Corporate and All Other category for the six months ended March 31, 2007, were $3.6 million, an increase of $2.6 million when compared to the prior year�s earnings. The increase is mainly due to higher earnings in Horizon LFG, Inc. and higher intercompany interest income partially offset by higher operating costs and higher interest expense. EARNINGS GUIDANCE The Company is increasing, and narrowing, its guidance range for fiscal 2007 earnings. The revised earnings guidance range is now $2.25 to $2.40 per share.* It had previously been $2.15 to $2.35 per share.* The narrowing of the range is possible because the most sensitivity to earnings variance in the Utility segment typically occurs during the first two fiscal quarters, which are now completed. The increase in the upper end of the guidance range is made possible primarily due to the certainty of pricing on planned gas sales in the Pipeline and Storage segment, which are now hedged. This guidance is still based on the September 21, 2006, commodity pricing incorporated in the Company�s original guidance. To the extent that actual pricing during the remainder of the fiscal year varies from those September 21, 2006, prices, the fiscal year earnings will be affected as detailed in the earnings sensitivity table on page 24 of this release.* EARNINGS TELECONFERENCE The Company will host a conference call on Tuesday, May 8, 2007, at 11 a.m. (Eastern Standard Time) to discuss this announcement. There are two ways to access this call. For those with Internet access, visit National Fuel�s Web site at nationalfuelgas.com and click on the �For Investors� link at the top of the homepage. For those without Internet access, access is also provided by dialing (toll-free) 1-800-798-2796, and using the passcode �74463473.� For those unable to listen to the live conference call, a replay will be available approximately one hour after the conclusion of the call at the same Web site link and by phone at (toll free) 888-286-8010 using passcode �99121557.� Both the webcast and telephonic replay will be available until the close of business on Tuesday, May 15, 2007. National Fuel is an integrated energy company with $4.0 billion in assets comprised of the following five operating segments: Utility, Pipeline and Storage, Exploration and Production, Energy Marketing, and Timber. Additional information about National Fuel is available on its Internet Web site: nationalfuelgas.com or through its investor information service at 1-800-334-2188. * - Certain statements contained herein, including those which are designated with an asterisk ("*") and those which use words such as "anticipates," "estimates," "expects," "intends," "plans," "predicts," "projects," and similar expressions, 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: changes in laws and regulations to which the Company is subject, including changes in tax, environmental, safety and employment laws and regulations; changes in economic conditions, including economic disruptions caused by terrorist activities, acts of war or major accidents; changes in demographic patterns and weather conditions, including the occurrence of severe weather, such as hurricanes; changes in the availability and/or price of natural gas or oil and the effect of such changes on the accounting treatment or valuation of derivative financial instruments or the Company's natural gas and oil reserves; impairments under the Securities and Exchange Commission's full cost ceiling test for natural gas and oil reserves; changes in the availability and/or price of derivative financial instruments; changes in the price differentials between various types of oil; inability to obtain new customers or retain existing ones; significant changes in competitive factors affecting the Company; governmental/regulatory actions, initiatives and proceedings, including those involving acquisitions, financings, rate cases (which address, among other things, allowed rates of return, rate design and retained gas), affiliate relationships, industry structure, franchise renewal, and environmental/safety requirements; unanticipated impacts of restructuring initiatives in the natural gas and electric industries; significant changes from expectations in actual capital expenditures and operating expenses and unanticipated project delays or changes in project costs or plans, including changes in the plans of the sponsors of the proposed Millennium Pipeline with respect to that project, and the ability to obtain necessary environmental permits; the nature and projected profitability of pending and potential projects and other investments; occurrences affecting the Company's ability to obtain funds from operations or from issuances of debt or equity securities to finance needed capital expenditures and other investments, including any downgrades in the Company's credit ratings; uncertainty of oil and gas reserve estimates; ability to successfully identify and finance acquisitions or other investments and ability to operate and integrate existing and any subsequently acquired business or properties; ability to successfully identify, drill for and produce economically viable natural gas and oil reserves; significant changes from expectations in the Company's actual production levels for natural gas or oil; regarding foreign operations, changes in trade and monetary policies, inflation and exchange rates, taxes, operating conditions, laws and regulations related to foreign operations, and political and governmental changes; significant changes in tax rates or policies or in rates of inflation or interest; significant changes in the Company's relationship with its employees or contractors and the potential adverse effects if labor disputes, grievances or shortages were to occur; changes in accounting principles or the application of such principles to the Company; the cost and effects of legal and administrative claims against the Company; changes in actuarial assumptions and the return on assets with respect to the Company�s retirement plan and post retirement benefit plans; increasing health care costs and the resulting effect on health insurance premiums and on the obligation to provide post retirement benefits; 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 hereof or to reflect the occurrence of unanticipated events. NATIONAL FUEL GAS COMPANY RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS QUARTER ENDED MARCH 31, 2007 � Pipeline & Energy Corporate / (Thousands of Dollars) Utility � Storage � E&P � Marketing � Timber � All Other � Consolidated � Second quarter 2006 GAAP earnings $ 28,654� $ 16,892� $ 25,845� $ 3,877� $ 2,242� $ 1,084� $ 78,594� Items impacting comparability: Income tax adjustment � � � � � � (5,080) � � � � � � � � (5,080) Second quarter 2006 operating results 28,654� 16,892� 20,765� 3,877� 2,242� 1,084� 73,514� � Drivers of operating results Colder weather in Pennsylvania 1,843� 1,843� Base rate increase in Pennsylvania 3,034� 3,034� � Lower efficiency gas revenues (3,170) (3,170) Higher operating costs (1,719) (516) (542) (2,777) Lower depreciation / depletion 1,048� 484� 1,532� � Higher crude oil prices 4,380� 4,380� Lower natural gas prices (2,369) (2,369) Higher natural gas production 1,518� 1,518� Lower crude oil production (914) (914) Lower (higher) effective tax rate 1,301� (3,829) (2,528) � Higher margins 752� 629� 274� 1,655� � Higher interest income (expense) (900) 1,038� 138� � All other / rounding � 331� � � 582� � � 250� � � (267) � � (155) � � (494) � � 247� � Second quarter 2007 operating results 33,444� 13,936� 19,801� 4,362� 3,200� 1,360� 76,103� Items impacting comparability: Resolution of a purchased gas contingency � � � � � � � 2,344� � � � � � � 2,344� Second quarter 2007 GAAP earnings $ 33,444� � $ 13,936� � $ 19,801� � $ 6,706� � $ 3,200� � $ 1,360� � $ 78,447� NATIONAL FUEL GAS COMPANY RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS PER SHARE QUARTER ENDED MARCH 31, 2007 � Pipeline & Energy Corporate / Utility � Storage � E&P � Marketing � Timber � All Other � Consolidated � Second quarter 2006 GAAP earnings $ 0.33� $ 0.20� $ 0.30� $ 0.04� $ 0.03� $ 0.01� $ 0.91� Items impacting comparability: Income tax adjustment � � � � � (0.06) � � � � � � � � (0.06) Second quarter 2006 operating results 0.33� 0.20� 0.24� 0.04� 0.03� 0.01� 0.85� � Drivers of operating results Colder weather in Pennsylvania 0.02� 0.02� Base rate increase in Pennsylvania 0.04� 0.04� � Lower efficiency gas revenues (0.04) (0.04) Higher operating costs (0.02) (0.01) (0.01) (0.04) Lower depreciation / depletion 0.01� -� 0.01� � Higher crude oil prices 0.05� 0.05� Lower natural gas prices (0.03) (0.03) Higher natural gas production 0.02� 0.02� Lower crude oil production (0.01) (0.01) Lower (higher) effective tax rate 0.02� (0.04) (0.02) � Higher margins 0.01� 0.01� -� 0.02� � Higher interest income (expense) (0.01) 0.01� -� � All other / rounding � -� � � 0.01� � � -� � � -� � � -� � � 0.01� � � 0.02� � Second quarter 2007 operating results 0.39� 0.16� 0.23� 0.05� 0.04� 0.02� 0.89� Items impacting comparability: Resolution of a purchased gas contingency � � � � � � � 0.03� � � � � � � 0.03� Second quarter 2007 GAAP earnings $ 0.39� � $ 0.16� � $ 0.23� � $ 0.08� � $ 0.04� � $ 0.02� � $ 0.92� NATIONAL FUEL GAS COMPANY RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS SIX MONTHS ENDED MARCH 31, 2007 � Pipeline & Energy Corporate / (Thousands of Dollars) Utility � Storage � E&P � Marketing � Timber � All Other � Consolidated � Six months ended March 31, 2006 GAAP earnings $ 50,407� $ 32,742� $ 43,280� $ 4,864� $ 3,706� $ 1,014� $ 136,013� Items impacting comparability: Out-of-period adjustment to symmetrical sharing (2,551) (2,551) Income tax adjustment � � � � � (5,080) � � � � � � � � (5,080) Six months ended March 31, 2006 operating results 47,856� 32,742� 38,200� 4,864� 3,706� 1,014� 128,382� � Drivers of operating results Colder weather in Pennsylvania 2,111� 2,111� Base rate increase in Pennsylvania 3,034� 3,034� Higher operating costs (2,400) (421) (2,821) Higher property taxes (554) (554) � Lower transportation and storage revenues (1,025) (1,025) Lower efficiency gas revenues (5,823) (5,823) Lower depreciation / depletion 977� 902� 1,879� � Higher crude oil prices 10,412� 10,412� Lower natural gas prices (8,784) (8,784) Higher natural gas production 6,397� 6,397� Lower crude oil production (1,137) (1,137) Lower (higher) effective tax rate 1,447� (4,090) (2,643) � Higher (lower) margins 303� (1,035) 727� (5) � Higher interest income (expense) (677) (2,030) 2,017� (690) � All other / rounding � (199) � � 895� � � (475) � � (313) � � (156) � � 250� � � 2� � Six months ended March 31, 2007 operating results 50,618� 25,736� 40,523� 4,854� 3,417� 3,587� 128,735� Items impacting comparability: Resolution of a purchased gas contingency 2,344� 2,344� Discontinuance of hedge accounting � � � 1,888� � � � � � � � � � � 1,888� Six months ended March 31, 2007 GAAP earnings $ 50,618� � $ 27,624� � $ 40,523� � $ 7,198� � $ 3,417� � $ 3,587� � $ 132,967� NATIONAL FUEL GAS COMPANY RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS PER SHARE SIX MONTHS ENDED MARCH 31, 2007 � Pipeline & Energy Corporate / Utility Storage E&P Marketing Timber All Other Consolidated � Six months ended March 31, 2006 GAAP earnings $ 0.58� $ 0.38� $ 0.50� $ 0.06� $ 0.04� $ 0.02� $ 1.58� Items impacting comparability: Out-of-period adjustment to symmetrical sharing (0.03) (0.03) Income tax adjustment � � � (0.06) � � � � (0.06) Six months ended March 31, 2006 operating results 0.55� 0.38� 0.44� 0.06� 0.04� 0.02� 1.49� � Drivers of operating results Colder weather in Pennsylvania 0.02� 0.02� Base rate increase in Pennsylvania 0.04� 0.04� Higher operating costs (0.03) -� (0.03) Higher property taxes (0.01) (0.01) � Lower transportation and storage revenues (0.01) (0.01) Lower efficiency gas revenues (0.07) (0.07) Lower depreciation / depletion 0.01� 0.01� 0.02� � Higher crude oil prices 0.12� 0.12� Lower natural gas prices (0.10) (0.10) Higher natural gas production 0.07� 0.07� Lower crude oil production (0.01) (0.01) Lower (higher) effective tax rate 0.02� (0.05) (0.03) � Higher (lower) margins -� (0.01) 0.01� -� � Higher interest income (expense) (0.01) (0.02) 0.02� (0.01) � All other / rounding / impact of lower shares outstanding � 0.02� � 0.02� � 0.01� � (0.01) � -� � (0.01) � 0.03� � Six months ended March 31, 2007 operating results 0.60� 0.31� 0.48� 0.05� 0.04� 0.04� 1.52� Items impacting comparability: Resolution of a purchased gas contingency 0.03� 0.03� Discontinuance of hedge accounting � � 0.02� � � � � � 0.02� Six months ended March 31, 2007 GAAP earnings $ 0.60� $ 0.33� $ 0.48� $ 0.08� $ 0.04� $ 0.04� $ 1.57� 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 2007 2006 2007 2006 Operating Revenues $ 812,156� $ 890,981� $ 1,316,396� $ 1,601,737� � Operating Expenses: Purchased Gas 476,904� 566,540� 719,843� 1,003,317� Operation and Maintenance 125,539� 121,076� 224,913� 224,704� Property, Franchise and Other Taxes 20,233� 20,120� 37,345� 37,302� Depreciation, Depletion and Amortization � 42,061� � 44,278� � 84,886� � 87,324� 664,737� 752,014� 1,066,987� 1,352,647� � Operating Income 147,419� 138,967� 249,409� 249,090� � Other Income (Expense): Income from Unconsolidated Subsidiaries 942� 720� 2,173� 1,985� Interest Income 885� 965� 2,248� 2,098� Other Income 2,526� 248� 3,241� 989� Interest Expense on Long-Term Debt (17,888) (18,149) (33,931) (36,367) Other Interest Expense � (1,516) � (1,465) � (3,366) � (3,240) � Income Before Income Taxes 132,368� 121,286� 219,774� 214,555� � Income Tax Expense � 53,921� � 42,692� � 86,807� � 78,542� � Net Income Available for Common Stock $ 78,447� $ 78,594� $ 132,967� $ 136,013� � Earnings Per Common Share: Basic $ 0.95� $ 0.93� $ 1.61� $ 1.61� Diluted $ 0.92� $ 0.91� $ 1.57� $ 1.58� � Weighted Average Common Shares: Used in Basic Calculation � 82,895,087� � 84,346,733� � 82,786,027� � 84,385,140� Used in Diluted Calculation � 85,033,127� � 86,253,597� � 84,891,742� � 86,256,515� NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) � March 31, September 30, (Thousands of Dollars) � 2007� � 2006� � ASSETS Property, Plant and Equipment $4,820,700� $4,703,040� Less - Accumulated Depreciation, Depletion and Amortization 1,893,449� � 1,825,314� Net Property, Plant and Equipment 2,927,251� � 2,877,726� � Current Assets: Cash and Temporary Cash Investments 121,809� 69,611� Hedging Collateral Deposits 2,034� 19,676� Receivables - Net 335,666� 144,254� Unbilled Utility Revenue 58,850� 25,538� Gas Stored Underground 17,021� 59,461� Materials and Supplies - at average cost 31,853� 36,693� Unrecovered Purchased Gas Costs 13,962� 12,970� Prepaid Pension and Post-Retirement Benefit Costs 68,483� 64,125� Other Current Assets 30,700� 63,723� Deferred Income Taxes 23,951� � 23,402� Total Current Assets 704,329� � 519,453� � Other Assets: Recoverable Future Taxes 79,177� 79,511� Unamortized Debt Expense 14,482� 15,492� Other Regulatory Assets 85,427� 76,917� Deferred Charges 5,234� 3,558� Other Investments 80,866� 88,414� Investments in Unconsolidated Subsidiaries 15,850� 11,590� Goodwill 5,476� 5,476� Intangible Assets 30,423� 31,498� Fair Value of Derivative Financial Instruments 1,866� 11,305� Deferred Income Taxes 4,627� 9,003� Other 6,010� � 4,388� Total Other Assets 329,438� � 337,152� Total Assets $3,961,018� � $3,734,331� � CAPITALIZATION AND LIABILITIES Capitalization: Comprehensive Shareholders' Equity Common Stock, $1 Par Value Authorized - 200,000,000 Shares; Issued and Outstanding - 83,132,149 Shares and 83,402,670 Shares, Respectively $83,132� $83,403� Paid in Capital 565,809� 543,730� Earnings Reinvested in the Business 834,902� � 786,013� Total Common Shareholder Equity Before Items of Other Comprehensive Income 1,483,843� 1,413,146� Accumulated Other Comprehensive Income 21,733� � 30,416� Total Comprehensive Shareholders' Equity 1,505,576� 1,443,562� Long-Term Debt, Net of Current Portion 999,000� � 1,095,675� Total Capitalization 2,504,576� � 2,539,237� � Current and Accrued Liabilities: Notes Payable to Banks and Commercial Paper -� -� Current Portion of Long-Term Debt 96,393� 22,925� Accounts Payable 166,990� 133,034� Amounts Payable to Customers 10,596� 23,935� Dividends Payable 24,927� 25,008� Interest Payable on Long-Term Debt 18,419� 18,420� Other Accruals and Current Liabilities 176,307� 27,040� Fair Value of Derivative Financial Instruments 32,122� � 39,983� Total Current and Accrued Liabilities 525,754� � 290,345� � Deferred Credits: Deferred Income Taxes 556,115� 544,502� Taxes Refundable to Customers 10,433� 10,426� Unamortized Investment Tax Credit 5,743� 6,094� Cost of Removal Regulatory Liability 87,986� 85,076� Other Regulatory Liabilities 70,842� 75,456� Post-Retirement Liabilities 26,953� 32,918� Asset Retirement Obligations 79,609� 77,392� Other Deferred Credits 93,007� � 72,885� Total Deferred Credits 930,688� � 904,749� Commitments and Contingencies -� � -� Total Capitalization and Liabilities $3,961,018� � $3,734,331� � NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) � Six Months Ended March 31, (Thousands of Dollars) � 2007� � 2006� � Operating Activities: Net Income Available for Common Stock $132,967� $136,013� Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation, Depletion and Amortization 84,886� 87,324� Deferred Income Taxes 21,803� (1,435) Income from Unconsolidated Subsidiaries, Net of Cash Distributions (960) 1,166� Excess Tax Benefits Associated with Stock-Based Compensation Awards (13,689) (6,515) Other 3,818� (5,297) Change in: Hedging Collateral Deposits 17,642� 60,894� Receivables and Unbilled Utility Revenue (225,511) (249,466) Gas Stored Underground and Materials and Supplies 47,243� 33,486� Unrecovered Purchased Gas Costs (992) 14,817� Prepayments and Other Current Assets 28,659� 24,372� Accounts Payable 34,417� (9,951) Amounts Payable to Customers (13,339) 11,492� Other Accruals and Current Liabilities 163,928� 139,020� Other Assets (3,765) (11,837) Other Liabilities � (2,434) � 19,107� Net Cash Provided by Operating Activities � $274,673� � $243,190� � Investing Activities: Capital Expenditures ($132,313) ($134,961) Investment in Partnership (3,300) -� Net Proceeds from Sale of Oil and Gas Producing Properties 2,330� 4� Other � (339) � (1,396) Net Cash Used in Investing Activities � ($133,622) � ($136,353) � Financing Activities: Excess Tax Benefits Associated with Stock-Based Compensation Awards $13,689� $6,515� Shares Repurchased under Repurchase Plan (43,344) (26,577) Reduction of Long-Term Debt (23,207) (4,529) Dividends Paid on Common Stock (49,808) (48,933) Proceeds From Issuance of Common Stock � 14,604� � 7,164� Net Cash Used In Financing Activities � ($88,066) � ($66,360) Effect of Exchange Rates on Cash � (787) � 15� Net Increase in Cash and Temporary Cash Investments $52,198� $40,492� Cash and Temporary Cash Investments at Beginning of Period � 69,611� � 57,607� Cash and Temporary Cash Investments at March 31 � $121,809� � $98,099� NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES SEGMENT OPERATING RESULTS AND STATISTICS (UNAUDITED) � Three Months EndedMarch 31, Six Months EndedMarch 31, (Thousands of Dollars, except per share amounts) UTILITY SEGMENT 2007 2006 Variance 2007 2006 Variance Revenues from External Customers $ 501,473� $ 536,235� $ (34,762) $ 790,256� $ 967,714� $ (177,458) Intersegment Revenues � 5,941� � 5,681� � 260� � 9,970� � 9,803� � 167� Total Operating Revenues � 507,414� � 541,916� � (34,502) � 800,226� � 977,517� � (177,291) � Operating Expenses: Purchased Gas 352,864� 394,803� (41,939) 539,225� 715,360� (176,135) Operation and Maintenance 67,448� 65,496� 1,952� 118,215� 117,209� 1,006� Property, Franchise and Other Taxes 14,107� 14,259� (152) 25,298� 25,773� (475) Depreciation, Depletion and Amortization � 10,321� � 10,027� � 294� � 20,100� � 20,004� � 96� � 444,740� � 484,585� � (39,845) � 702,838� � 878,346� � (175,508) � Operating Income 62,674� 57,331� 5,343� 97,388� 99,171� (1,783) � Other Income (Expense): Interest Income 177� 179� (2) 462� 380� 82� Other Income 368� 192� 176� 653� 404� 249� Other Interest Expense � (7,269) � (6,880) � (389) � (14,646) � (13,603) � (1,043) � Income Before Income Taxes 55,950� 50,822� 5,128� 83,857� 86,352� (2,495) Income Tax Expense � 22,506� � 22,168� � 338� � 33,239� � 35,945� � (2,706) Net Income $ 33,444� $ 28,654� $ 4,790� $ 50,618� $ 50,407� $ 211� � Net Income Per Share (Diluted) $ 0.39� $ 0.33� $ 0.06� $ 0.60� $ 0.58� $ 0.02� � � Three Months Ended Six Months Ended March 31, March 31, PIPELINE AND STORAGE SEGMENT � 2007 � 2006 Variance � 2007 � 2006 Variance Revenues from External Customers $ 34,952� $ 39,346� $ (4,394) $ 64,761� $ 74,085� $ (9,324) Intersegment Revenues � 20,884� � 19,711� � 1,173� � 41,252� � 41,006� � 246� Total Operating Revenues � 55,836� � 59,057� � (3,221) � 106,013� � 115,091� � (9,078) � Operating Expenses: Purchased Gas 2� 78� (76) (11) 62� (73) Operation and Maintenance 17,744� 16,949� 795� 32,647� 32,265� 382� Property, Franchise and Other Taxes 4,335� 4,010� 325� 8,613� 7,966� 647� Depreciation, Depletion and Amortization � 7,563� � 9,176� � (1,613) � 16,855� � 18,359� � (1,504) � 29,644� � 30,213� � (569) � 58,104� � 58,652� � (548) � Operating Income 26,192� 28,844� (2,652) 47,909� 56,439� (8,530) � Other Income (Expense): Interest Income 39� 144� (105) 123� 196� (73) Other Income 80� 60� 20� 264� 268� (4) Interest Expense on Long-Term Debt (10) (274) 264� 1,829� (592) 2,421� Other Interest Expense � (2,741) � (1,093) � (1,648) � (5,028) � (2,389) � (2,639) � Income Before Income Taxes 23,560� 27,681� (4,121) 45,097� 53,922� (8,825) Income Tax Expense � 9,624� � 10,789� � (1,165) � 17,473� � 21,180� � (3,707) Net Income $ 13,936� $ 16,892� $ (2,956) $ 27,624� $ 32,742� $ (5,118) � Net Income Per Share (Diluted) $ 0.16� $ 0.20� $ (0.04) $ 0.33� $ 0.38� $ (0.05) NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES � SEGMENT OPERATING RESULTS AND STATISTICS (UNAUDITED) � Three Months EndedMarch 31, Six Months EndedMarch 31, (Thousands of Dollars, except per share amounts) EXPLORATION AND PRODUCTION SEGMENT 2007 2006 Variance 2007 2006 Variance Operating Revenues $ 92,610� $ 88,719� $ 3,891� $ 181,318� $ 170,806� $ 10,512� � Operating Expenses: Purchased Gas -� 4� (4) -� 98� (98) Operation and Maintenance: General and Administrative Expense 5,949� 6,381� (432) 11,520� 12,682� (1,162) Lease Operating Expense 14,945� 13,155� 1,790� 28,401� 26,694� 1,707� All Other Operation and Maintenance Expense 2,070� 2,021� 49� 4,711� 3,992� 719� Property, Franchise and Other Taxes (Lease Operating Expense) 1,241� 1,528� (287) 2,391� 2,736� (345) Depreciation, Depletion and Amortization � 22,914� � 23,118� � (204) � 44,922� � 44,658� � 264� � 47,119� � 46,207� � 912� � 91,945� � 90,860� � 1,085� � Operating Income 45,491� 42,512� 2,979� 89,373� 79,946� 9,427� � Other Income (Expense): Interest Income 2,644� 1,940� 704� 5,188� 3,781� 1,407� Other Interest Expense � (12,949) � (12,521) � (428) � (25,897) � (24,950) � (947) � Income Before Income Taxes 35,186� 31,931� 3,255� 68,664� 58,777� 9,887� Income Tax Expense � 15,385� � 6,086� � 9,299� � 28,141� � 15,497� � 12,644� Net Income $ 19,801� $ 25,845� $ (6,044) $ 40,523� $ 43,280� $ (2,757) � Net Income Per Share (Diluted) $ 0.23� $ 0.30� $ (0.07) $ 0.48� $ 0.50� $ (0.02) � � � � Three Months Ended Six Months Ended March 31, March 31, ENERGY MARKETING SEGMENT � 2007� � 2006� Variance � 2007� � 2006� Variance Operating Revenues $ 163,338� $ 206,061� $ (42,723) $ 246,656� $ 351,620� $ (104,964) � Operating Expenses: Purchased Gas 151,027� 198,562� (47,535) 232,282� 341,391� (109,109) Operation and Maintenance 1,218� 1,259� (41) 2,512� 2,489� 23� Property, Franchise and Other Taxes 24� (249) 273� 35� (240) 275� Depreciation, Depletion and Amortization � 7� � 16� � (9) � 14� � 37� � (23) � 152,276� � 199,588� � (47,312) � 234,843� � 343,677� � (108,834) � Operating Income 11,062� 6,473� 4,589� 11,813� 7,943� 3,870� � Other Income (Expense): Interest Income 78� 43� 35� 140� 169� (29) Other Income 181� 121� 60� 317� 219� 98� Other Interest Expense � (125) � (129) � 4� � (252) � (191) � (61) � Income Before Income Taxes 11,196� 6,508� 4,688� 12,018� 8,140� 3,878� Income Tax Expense � 4,490� � 2,631� � 1,859� � 4,820� � 3,276� � 1,544� Net Income $ 6,706� $ 3,877� $ 2,829� $ 7,198� $ 4,864� $ 2,334� � Net Income Per Share (Diluted) $ 0.08� $ 0.04� $ 0.04� $ 0.08� $ 0.06� $ 0.02� NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES � SEGMENT OPERATING RESULTS AND STATISTICS (UNAUDITED) � Three Months EndedMarch 31, Six Months EndedMarch 31, (Thousands of Dollars, except per share amounts) TIMBER SEGMENT 2007 2006 Variance 2007 2006 Variance Revenues from External Customers $ 18,184� $ 19,157� $ (973) $ 29,947� $ 36,066� $ (6,119) Intersegment Revenues � -� � (23) � 23� � -� � -� � -� Total Operating Revenues � 18,184� � 19,134� � (950) � 29,947� � 36,066� � (6,119) � Operating Expenses: Operation and Maintenance 10,969� 12,746� (1,777) 20,111� 24,430� (4,319) Property, Franchise and Other Taxes 426� 478� (52) 819� 859� (40) Depreciation, Depletion and Amortization � 883� � 1,627� � (744) � 2,251� � 3,638� � (1,387) � 12,278� � 14,851� � (2,573) � 23,181� � 28,927� � (5,746) � Operating Income 5,906� 4,283� 1,623� 6,766� 7,139� (373) � Other Income (Expense): Interest Income 296� 164� 132� 612� 301� 311� Other Income -� 35� (35) 21� 52� (31) Other Interest Expense � (791) � (758) � (33) � (1,594) � (1,521) � (73) � Income Before Income Taxes 5,411� 3,724� 1,687� 5,805� 5,971� (166) Income Tax Expense � 2,211� � 1,482� � 729� � 2,388� � 2,265� � 123� Net Income $ 3,200� $ 2,242� $ 958� $ 3,417� $ 3,706� $ (289) � Net Income Per Share (Diluted) $ 0.04� $ 0.03� $ 0.01� $ 0.04� $ 0.04� $ -� � � � Three Months Ended Six Months Ended March 31, March 31, ALL OTHER 2007 2006 Variance 2007 2006 Variance Revenues from External Customers $ 1,403� $ 1,075� $ 328� $ 3,079� $ 1,058� $ 2,021� Intersegment Revenues � 2,090� � 2,057� � 33� � 4,287� � 6,584� � (2,297) Total Operating Revenues � 3,493� � 3,132� � 361� � 7,366� � 7,642� � (276) � Operating Expenses: Purchased Gas 1,822� 1,866� (44) 3,650� 4,972� (1,322) Operation and Maintenance 950� 922� 28� 1,755� 1,795� (40) Property, Franchise and Other Taxes 28� 23� 5� 48� 42� 6� Depreciation, Depletion and Amortization � 197� � 197� � -� � 393� � 397� � (4) � 2,997� � 3,008� � (11) � 5,846� � 7,206� � (1,360) � Operating Income 496� 124� 372� 1,520� 436� 1,084� � Other Income (Expense): Income from Unconsolidated Subsidiaries 942� 720� 222� 2,173� 1,985� 188� Interest Income 4� 7� (3) 7� 13� (6) Other Income 12� 14� (2) 25� 16� 9� Other Interest Expense � (667) � (616) � (51) � (1,337) � (1,206) � (131) � Income Before Income Taxes 787� 249� 538� 2,388� 1,244� 1,144� Income Tax Expense � 320� � 203� � 117� � 935� � 628� � 307� Net Income $ 467� $ 46� $ 421� $ 1,453� $ 616� $ 837� � Net Income Per Share (Diluted) $ 0.01� $ -� $ 0.01� $ 0.02� $ 0.01� $ 0.01� NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES � SEGMENT OPERATING RESULTS AND STATISTICS (UNAUDITED) � Three Months EndedMarch 31, Six Months EndedMarch 31, (Thousands of Dollars, except per share amounts) CORPORATE 2007 2006 Variance 2007 2006 Variance Revenues from External Customers $ 196� $ 388� $ (192) $ 379� $ 388� $ (9) Intersegment Revenues � 912� � 782� � 130� � 1,764� � 1,475� � 289� Total Operating Revenues � 1,108� � 1,170� � (62) � 2,143� � 1,863� � 280� � Operating Expenses: Operation and Maintenance 5,262� 1,582� 3,680� 7,011� 3,450� 3,561� Property, Franchise and Other Taxes 72� 71� 1� 141� 166� (25) Depreciation, Depletion and Amortization � 176� � 117� � 59� � 351� � 231� � 120� � 5,510� � 1,770� � 3,740� � 7,503� � 3,847� � 3,656� � Operating Loss (4,402) (600) (3,802) (5,360) (1,984) (3,376) � Other Income (Expense): Interest Income 22,138� 19,979� 2,159� 44,067� 39,703� 4,364� Other Income 1,885� (174) 2,059� 1,961� 30� 1,931� Interest Expense on Long-Term Debt (17,878) (17,875) (3) (35,760) (35,775) 15� Other Interest Expense � (1,465) � (959) � (506) � (2,963) � (1,825) � (1,138) � Income Before Income Taxes 278� 371� (93) 1,945� 149� 1,796� Income Tax Benefit � (615) � (667) � 52� � (189) � (249) � 60� Net Income $ 893� $ 1,038� $ (145) $ 2,134� $ 398� $ 1,736� � Net Income Per Share (Diluted) $ 0.01� $ 0.01� $ -� $ 0.02� $ 0.01� $ 0.01� � � � Three Months Ended Six Months Ended � March 31, March 31, INTERSEGMENT ELIMINATIONS 2007 2006 Variance 2007 2006 Variance Intersegment Revenues $ (29,827) $ (28,208) $ (1,619) $ (57,273) $ (58,868) $ 1,595� � Operating Expenses: Purchased Gas (28,811) (28,773) (38) (55,303) (58,566) 3,263� Operation and Maintenance � (1,016) � 565� � (1,581) � (1,970) � (302) � (1,668) � (29,827) � (28,208) � (1,619) � (57,273) � (58,868) � 1,595� � Operating Income -� -� -� -� -� -� � Other Income (Expense): Interest Income (24,491) (21,491) (3,000) (48,351) (42,445) (5,906) Other Interest Expense � 24,491� � 21,491� � 3,000� � 48,351� � 42,445� � 5,906� � 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 2007� 2006� (Decrease) 2007� 2006� (Decrease) � Capital Expenditures: Utility $ 12,679� $ 13,006� $ (327) $ 25,558� $ 25,360� $ 198� Pipeline and Storage 5,201� 4,165� 1,036� 10,153� 10,328� (175) Exploration and Production 49,277� 45,401� 3,876� 95,866� 96,324� (458) Energy Marketing 8� 1� 7� 17� 6� 11� Timber � 401� � 257� � 144� � 1,207� � 752� � 455� Total Reportable Segments 67,566� 62,830� 4,736� 132,801� 132,770� 31� All Other 55� 56� (1) 84� 56� 28� Corporate � (610) � 1,707� � (2,317) � (572) � 2,135� � (2,707) Total Consolidated $ 67,011� $ 64,593� $ 2,418� $ 132,313� $ 134,961� $ (2,648) DEGREE DAYS � Percent Colder � (Warmer) Than: Three Months Ended March 31 Normal 2007� 2006� Normal Last Year � Buffalo, NY 3,327� 3,327� 2,875� -� 15.7� Erie, PA 3,142� 3,152� 2,705� 0.3� 16.5� � Six Months Ended March 31 � Buffalo, NY 5,587� 5,274� 5,085� (5.6) 3.7� Erie, PA 5,223� 5,030� 4,753� (3.7) 5.8� NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES � EXPLORATION AND PRODUCTION INFORMATION � � Three Months Ended Six Months Ended March 31, March 31, Increase Increase 2007� 2006� (Decrease) 2007� 2006� (Decrease) � Gas Production /Prices: Production (MMcf) Gulf Coast 2,893� 2,752� 141� 5,616� 4,419� 1,197� West Coast 920� 933� (13) 1,865� 1,951� (86) Appalachia 1,339� 1,246� 93� 2,732� 2,499� 233� Canada � 1,856� � 1,761� � 95� � 3,577� � 3,672� � (95) � 7,008� � 6,692� � 316� 13,790� 12,541� � 1,249� Average Prices (Per Mcf) Gulf Coast $ 6.42� $ 8.47� $ (2.05) $ 6.48� $ 9.33� $ (2.85) West Coast 6.95� 8.02� (1.07) 6.51� 9.62� (3.11) Appalachia 7.39� 10.03� (2.64) 7.30� 11.83� (4.53) Canada 5.87� 7.21� (1.34) 6.12� 9.06� (2.94) Weighted Average 6.53� 8.37� (1.84) 6.56� 9.79� (3.23) Weighted Average after Hedging 6.87� 7.39� (0.52) 6.90� 7.88� (0.98) � Oil Production /Prices: Production (Thousands of Barrels) Gulf Coast 174� 181� (7) 376� 288� 88� West Coast 599� 639� (40) 1,190� 1,324� (134) Appalachia 31� 12� 19� 58� 22� 36� Canada � 61� � 68� � (7) � 117� � 155� � (38) � 865� � 900� � (35) � 1,741� � 1,789� � (48) � Average Prices (Per Barrel) Gulf Coast $ 57.21� $ 58.69� $ (1.48) $ 56.84� $ 58.39� $ (1.55) West Coast 49.99� 53.65� (3.66) 50.55� 52.46� (1.91) Appalachia 57.88� 60.28� (2.40) 58.76� 60.84� (2.08) Canada 49.98� 48.63� 1.35� 46.45� 45.57� 0.88� Weighted Average 51.73� 54.37� (2.64) 51.91� 52.92� (1.01) Weighted Average after Hedging 48.09� 40.30� 7.79� 45.90� 36.70� 9.20� � Total Production (Mmcfe) 12,198� 12,092� � 106� 24,236� 23,275� � 961� � Selected Operating Performance Statistics: General & Administrative Expense per Mcfe (1) $ 0.49� $ 0.53� $ (0.04) $ 0.48� $ 0.54� $ (0.06) Lease Operating Expense per Mcfe (1) $ 1.33� $ 1.21� $ 0.12� $ 1.27� $ 1.26� $ 0.01� Depreciation, Depletion & Amortization per Mcfe (1) $ 1.88� $ 1.91� $ (0.03) $ 1.85� $ 1.92� $ (0.07) � (1) Refer to page 17 for the General and Administrative Expense, Lease Operating Expense and Depreciation, Depletion, and Amortization Expense for the Exploration and Production segment. NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES � EXPLORATION AND PRODUCTION INFORMATION � � Hedging Summary for Fiscal 2007 � SWAPS Volume Average Hedge Price Oil 0.4 MMBBL $37.86 / BBL Gas 6.3 BCF $7.38 / MCF � No-cost Collars Volume Floor Price Ceiling Price Oil 0.1 MMBBL $70.00 / BBL $77.00 / BBL Gas 2.5 BCF $7.42 / MCF $16.42 / MCF � Hedging Summary for Fiscal 2008 � SWAPS Volume Average Hedge Price Oil 0.6 MMBBL $52.45 / BBL Gas 7.9 BCF $8.38 / MCF � No-cost Collars Volume Floor Price Ceiling Price Gas 1.4 BCF $8.83 / MCF $16.45 / MCF � Hedging Summary for Fiscal 2009 � SWAPS Volume Average Hedge Price Oil 0.2 MMBBL $54.70 / BBL Gross Wells in Process of Drilling Six Months Ended March 31, 2007 Total Total Gulf West East U.S. Canada Company � Wells in Process - Beginning Period Exploratory 4.00� 1.00� 10.00� 15.00� 5.00� 20.00� Developmental 1.00� 5.00� 44.00� 50.00� 0.00� 50.00� Wells Commenced Exploratory 4.00� 0.00� 9.00� 13.00� 6.00� 19.00� Developmental 0.00� 36.00� 46.00� 82.00� 3.00� 85.00� Wells Completed Exploratory 1.00� 1.00� 2.00� 4.00� 4.00� 8.00� Developmental 0.00� 36.00� 67.00� 103.00� 2.00� 105.00� Wells Plugged & Abandoned Exploratory 3.00� 0.00� 0.00� 3.00� 0.00� 3.00� Developmental 0.00� 0.00� 1.00� 1.00� 0.00� 1.00� Wells in Process - End of Period Exploratory 4.00� 0.00� 17.00� 21.00� 7.00� 28.00� Developmental 1.00� 5.00� 22.00� 28.00� 1.00� 29.00� � � Net Wells in Process of Drilling Six Months Ended March 31, 2007 Total Total Gulf West East U.S. Canada Company � Wells in Process - Beginning Period Exploratory 2.02� 0.50� 10.00� 12.52� 2.13� 14.65� Developmental 0.67� 5.00� 44.00� 49.67� 0.00� 49.67� Wells Commenced Exploratory 1.90� 0.00� 8.10� 10.00� 3.95� 13.95� Developmental 0.00� 36.00� 44.00� 80.00� 1.80� 81.80� Wells Completed Exploratory 0.35� 0.50� 1.60� 2.45� 2.75� 5.20� Developmental 0.00� 36.00� 65.00� 101.00� 0.80� 101.80� Wells Plugged & Abandoned Exploratory 1.42� 0.00� 0.00� 1.42� 0.00� 1.42� Developmental 0.00� 0.00� 1.00� 1.00� 0.00� 1.00� Wells in Process - End of Period Exploratory 2.15� 0.00� 16.50� 18.65� 3.33� 21.98� Developmental 0.67� 5.00� 22.00� 27.67� 1.00� 28.67� NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES � � Utility Throughput - (millions of cubic feet - MMcf) Three Months Ended Six Months Ended March 31, March 31, Increase Increase 2007� 2006� (Decrease) 2007� 2006� (Decrease) Retail Sales: Residential Sales 29,372� 26,807� 2,565� 46,050� 46,331� (281) Commercial Sales 5,428� 5,038� 390� 8,296� 8,481� (185) Industrial Sales 323� 459� (136) 514� 786� (272) 35,123� 32,304� 2,819� 54,860� 55,598� (738) Transportation 24,723� 22,119� 2,604� 40,576� 36,461� 4,115� 59,846� 54,423� 5,423� 95,436� 92,059� 3,377� � Pipeline & Storage Throughput - (MMcf) Three Months Ended Six Months Ended March 31, March 31, Increase Increase 2007� 2006� (Decrease) 2007� 2006� (Decrease) Firm Transportation - Affiliated 51,016� 43,637� 7,379� 80,746� 76,862� 3,884� Firm Transportation - Non-Affiliated 69,615� 71,191� (1,576) 114,312� 140,788� (26,476) Interruptible Transportation 932� 1,831� (899) 1,927� 5,554� (3,627) 121,563� 116,659� 4,904� 196,985� 223,204� (26,219) � Energy Marketing Volumes Three Months Ended Six Months Ended March 31, March 31, Increase Increase 2007� 2006� (Decrease) 2007� 2006� (Decrease) Natural Gas (MMcf) 19,935� 17,332� 2,603� 31,049� 27,306� 3,743� � � Timber Board Feet (Thousands) Three Months Ended Six Months Ended March 31, March 31, Increase Increase 2007� 2006� (Decrease) 2007� 2006� (Decrease) Log Sales 3,025� 3,282� (257) 4,734� 5,774� (1,040) Green Lumber Sales 2,380� 2,982� (602) 3,910� 4,956� (1,046) Kiln Dry Lumber Sales 3,794� 4,512� (718) 6,952� 8,998� (2,046) 9,199� 10,776� (1,577) 15,596� 19,728� (4,132) NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES FISCAL 2007 EARNINGS GUIDANCE AND SENSITIVITIES � Fiscal 2007 (Diluted earnings per share guidance*) � � Range � Consolidated Earnings $2.25� -� $2.40� Earnings per share sensitivity to changes from NYMEX prices used in guidance* ^ � � � � $1 change per MMBtu gas $5 change per Bbl oil Increase Decrease Increase Decrease � + $0.06� - $0.05� + $0.05� - $0.05� NYMEX Settlement Prices at September 21, 2006 � � Natural Gas Oil ($ per MMBtu) ($ per Bbl) � Apr-07 $7.166� $65.18� May-07 $7.126� $65.61� Jun-07 $7.221� $65.96� Jul-07 $7.311� $66.25� Aug-07 $7.391� $66.49� Sep-07 $7.476� $66.67� � Average $7.282� $66.03� * Please refer to forward looking statement footnote at page 8 of this document. � ^ This sensitivity table is current as of May 1, 2007 and only considers revenue from the Exploration and Production segment's crude oil and natural gas sales. The sensitivities will become obsolete with the passage of time, changes in Seneca's production forecast, changes in basis differential, as additional hedging contracts are entered into, and with the settling of NYMEX hedge contracts at their maturity. NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES � � � � Quarter Ended March 31 (unaudited) � 2007� 2006� � Operating Revenues $ 812,156,000� $ 890,981,000� � Net Income Available for Common Stock $ 78,447,000� $ 78,594,000� � Earnings Per Common Share: Basic $ 0.95� $ 0.93� Diluted $ 0.92� $ 0.91� � Weighted Average Common Shares: Used in Basic Calculation � 82,895,087� � 84,346,733� Used in Diluted Calculation � 85,033,127� � 86,253,597� � � Six Months Ended March 31 (unaudited) � Operating Revenues $ 1,316,396,000� $ 1,601,737,000� � Net Income Available for Common Stock $ 132,967,000� $ 136,013,000� � Earnings Per Common Share: Basic $ 1.61� $ 1.61� Diluted $ 1.57� $ 1.58� � Weighted Average Common Shares: Used in Basic Calculation � 82,786,027� � 84,385,140� Used in Diluted Calculation � 84,891,742� � 86,256,515� � � Twelve Months Ended March 31 (unaudited) � Operating Revenues $ 2,026,317,000� $ 2,289,160,000� � Income from Continuing Operations $ 135,045,000� $ 180,717,000� Income from Discontinued Operations, Net of Tax � -� � 23,663,000� Net Income Available for Common Stock $ 135,045,000� $ 204,380,000� � Earnings Per Common Share: Basic: Income from Continuing Operations $ 1.62� $ 2.15� Income from Discontinued Operations � -� � 0.28� Net Income Available for Common Stock $ 1.62� $ 2.43� � Diluted: Income from Continuing Operations $ 1.58� $ 2.11� Income from Discontinued Operations � -� � 0.27� Net Income Available for Common Stock $ 1.58� $ 2.38� � Weighted Average Common Shares: Used in Basic Calculation � 83,232,743� � 84,116,896� Used in Diluted Calculation � 85,352,796� � 85,810,270�