NFG National Fuel Gas Co

National Fuel Gas Company (�National Fuel� or the �Company�) (NYSE:NFG) today announced record earnings for the second quarter of fiscal 2008 and for the six-months ended March 31, 2008. HIGHLIGHTS Reported GAAP earnings for the second quarter increased over 21% to $95.0 million or $1.11 per share, an increase of $16.6 million, or $0.19 per share. Increased earnings in the Exploration and Production segment provided the bulk of the increase. Higher average commodity prices realized and increased natural gas production were the main drivers of the higher earnings. Quarterly operating results before items impacting comparability were $94.4 million or $1.10 per share, an increase of $21.3 million, or $0.24 per share, from the prior year�s second quarter. Operating results increased in all segments from the prior year�s second quarter. The Company is increasing and narrowing its GAAP earnings guidance for fiscal 2008 earnings to a range of $2.90 to $3.00 per share. It had previously been in the range of $2.60 to $2.80 per share. A conference call is scheduled for Friday, May 2, 2008, at 11:00 a.m. Eastern Time. MANAGEMENT COMMENTS David F. Smith, Chief Executive Officer and President of National Fuel Gas Company stated: �This was another solid quarter for the Company. Our GAAP earnings of $1.11 per share and our operating results of $1.10 per share are the highest achieved in the second quarter in our history. While these record earnings were driven in large part by increased production and higher average commodity prices that were realized in our Exploration and Production segment, operating results were up in all segments.� �We recognize, however, that the higher prices for all energy sources will have a negative impact on the customers of our Utility segment. We are pleased to be in a position to offer our New York customers the benefits of our Conservation Incentive Program that was implemented during our most recent rate proceeding. With projected energy costs to remain high during the next heating season, it is important for our utility customers to take steps now to conserve during next winter.� �We are also pleased to report continued progress toward achieving an in-service date of November 2008 for the Empire Connector pipeline. It is our intent to continue to grow this important segment of our regulated business to enhance the stable and consistent base of earnings that these assets provide.� �In our other growth segment, Exploration and Production, we are increasing our capital spending, particularly in Appalachia, where we will continue to accelerate our conventional upper Devonian drilling program and, additionally, devote increased capital to extract the potential of the Marcellus Shale.� SUMMARY OF RESULTS National Fuel had consolidated earnings for the quarter ended March 31, 2008, of $95.0 million, an increase of $16.6 million, or $0.19 per share, from the prior year�s second quarter of $78.4 million or $0.92 per share (note: all references to earnings per share are to diluted earnings per share, all amounts are stated in U.S. dollars and all amounts used in the earnings and operating results discussions are after tax unless otherwise noted). Consolidated earnings for the six months ended March 31, 2008, of $165.6 million, or $1.93 per share, increased $32.6 million, or $0.36 per share, from the same period in the prior year, where earnings were $133.0 million, or $1.57 per share. � Three Months � Six Months Ended March 31, Ended March 31, 2008 � 2007 2008 � 2007 (in thousands except per share amounts) Reported GAAP earnings $ 95,004 $ 78,447 $ 165,608 $ 132,967 Items impacting comparability1: Income from discontinued operations (2,967) (6,799) Gain on sale of turbine (586) (586) Resolution of purchased gas contingency (2,344) (2,344) Discontinuation of hedge accounting (1,888) � � � � Operating results $ 94,418 $ 73,136 $ 165,022 $ 121,936 � Reported GAAP earnings per share $ 1.11 $ 0.92 $ 1.93 $ 1.57 Items impacting comparability1: Income from discontinued operations (0.03) (0.08) Gain on sale of turbine (0.01) (0.01) Resolution of purchased gas contingency (0.03) (0.03) Discontinuation of hedge accounting (0.02) � � � � Earnings excluding these items $ 1.10 $ 0.86 $ 1.92 $ 1.44 1 See discussion of these individual 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 quarter and six months ended March 31, 2008, to the comparable periods in fiscal 2007. Excluding these items, operating results for the current second quarter of $94.4 million, or $1.10 per share, increased $21.3 million, or $0.24 per share. Excluding these items, operating results for the six months ended March 31, 2008 of $165.0 million, or $1.92 per share, increased $43.1 million, or $0.48 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 earnings for each segment is summarized in a tabular form in this report. It may be helpful to refer to those tables while reviewing this discussion.) 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, and in the Gulf Coast regions of Texas, Louisiana and Alabama. Seneca previously had Canadian Exploration and Production operations, which it sold on August 31, 2007. As a result of that sale, the Company has presented the Canadian operations as discontinued operations. The Exploration and Production segment�s earnings in the second quarter of fiscal 2008 of $34.6 million, or $0.40 per share, increased $14.8 million, or $0.17 per share, when compared with the prior year�s second quarter. Excluding earnings from discontinued operations discussed below, operating results in the Exploration and Production segment increased $17.7 million, or $0.20 per share, for the second quarter of fiscal 2008. The increase was primarily due to higher crude oil and natural gas prices realized after hedging and was also impacted by higher production. For the quarter ended March 31, 2008, the weighted average oil price received by Seneca (after hedging) was $78.54 per barrel (�Bbl�), an increase of $30.59 per Bbl, or 63.8 percent, from the prior year�s quarter. The weighted average natural gas price received by Seneca (after hedging) for the quarter ended March 31, 2008, was $9.21 per thousand cubic feet (�Mcf�), an increase of $1.98 per Mcf, or 27.4 percent. Overall production for the quarter was 10.4 billion cubic feet equivalent (�Bcfe�), an increase of 0.4 Bcfe compared to the prior year�s quarter. A 13.1 percent increase in natural gas production more than offset a drop in crude oil production. The increase in natural gas production occurred mostly in the Appalachian region, where production was up 0.5 billion cubic feet, or 37 percent, over the prior year�s quarter as a result of Seneca�s continued development of its Upper Devonian acreage position. The decrease in crude oil production occurred mostly in the Gulf Division and was attributable to the natural decline curve of Seneca�s properties. Other items impacting operating results for the quarter were higher depletion expense, lease operating expenses (�LOE�), general and administrative expenses and mark-to-market adjustments to recognize hedge ineffectiveness on certain derivative financial instruments used to hedge prices on Seneca�s oil and gas production. The increase in depletion expense was caused by a $0.27 increase in the per unit depletion rate, which was mainly due to the reduction in proved reserves in California, primarily in the Midway Sunset field at the end of fiscal 2007. That reduction resulted from an audit by Netherland, Sewell & Associates which determined that reduced performance from certain wells in the field supported a reduction in proved reserves. The increase in LOE is due to the High Island 24L well that began production in October 2007, higher steaming costs in California, and an increase in the number of producing properties in Appalachia, where approximately 20 wells are being added each month. The Exploration and Production segment�s earnings of $68.6 million, or $0.80 per share, for the six months ended March 31, 2008, increased $28.1 million, or $0.32 per share, when compared with the six months ended March 31, 2007. Excluding earnings from discontinued operations, operating results for the six months ended March 31, 2008, increased $34.9 million, or $0.40 per share, from the prior year. The increase was primarily due to higher crude oil and natural gas prices realized after hedging and was also significantly impacted by higher production. For the six months ended March 31, 2008, the weighted average oil price received by Seneca (after hedging) was $75.44 per Bbl, an increase of $29.58 per Bbl, or 64.5 percent, from the prior year�s six month period. The weighted average natural gas price received by Seneca (after hedging) for the six months ended March 31, 2008, was $8.55 per Mcfe, an increase of $1.38, or 19.2 percent. Overall production for the six months ended March 31, 2008, was 21.1 Bcfe, an increase of 1.1 Bcfe, compared to the prior year�s six month period. An increase in natural gas production more than offset a decline in crude oil production. Higher interest income and lower interest expense during the current six month period also contributed to the increase in operating results. Other items impacting operating results for the six months ended March 31, 2008, were higher depletion expense, LOE, general and administrative expenses, state income taxes and mark-to-market adjustments to recognize hedge ineffectiveness on certain derivative financial instruments used to hedge prices on Seneca�s oil and gas production. The increase in depletion expense is due to higher production and a higher per unit rate as discussed above. Similar to the quarterly results described above, the increase in LOE is due to the High Island 24L well that began production in October 2007, higher steaming costs in California, and an increase in the number of producing properties in Appalachia, where approximately 20 wells are being added each month. 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 $15.6 million, or $0.18 per share, for the quarter ended March 31, 2008, increased $1.7 million, or $0.02 per share, when compared with the same period in the prior fiscal year. The increase is primarily due to higher transportation and storage revenues and higher efficiency gas revenue. The increase in transportation and storage revenue is mainly due to additional contracts and higher rates for these services. The increase in efficiency gas revenues is due to both higher natural gas prices and higher retained volumes compared to the prior year�s quarter. An increase in the allowance for funds used during construction (�AFUDC�) resulting from the construction of the Empire Connector also contributed to the increase in earnings for the quarter. Partially offsetting the increased earnings were higher depreciation and operating expenses. The Pipeline and Storage segment�s earnings of $28.4 million, or $0.33 per share, for the six months ended March 31, 2008, increased $0.8 million when compared with the six months ended March 31, 2007. The comparability of the results for the six months ended March 31, 2008, 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. Excluding that gain, operating results increased $2.7 million for the six months ended March 31, 2008, mainly due to higher transportation and storage revenues and higher efficiency gas revenues. Higher AFUDC and lower depreciation expense also contributed to the increase in operating results. Higher operating expenses and interest expense during the six month period partially offset those items. 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 $34.2 million, or $0.40 per share for the quarter ended March 31, 2008, increased $0.7 million, or $0.01 per share, however the results are not directly comparable to the prior year�s second quarter due to a rate design change in the New York Division discussed below. In the New York Division, earnings decreased $0.1 million or less than $0.01 per share. On December 21, 2007, the New York Public Service Commission issued an order allowing Distribution to increase annual revenues by $1.8 million. In addition to the revenue increase, the order approved a rate design change, which allows Distribution to recover a greater amount of its cost in the minimum bill amount. This results in shifting over $6.5 million of revenue from the second quarter and spreading it to the third and fourth quarters of the fiscal year. As a result of this change, earnings for the second quarter of fiscal 2008 decreased from the second quarter of fiscal 2007. The impact of the rate order was mostly offset by a routine regulatory adjustment and lower expenses for bad debts and postretirement benefits. In the Pennsylvania Division, earnings increased $0.8 million due to an increase in customer usage per account and lower bad debt expense partially offset by warmer weather compared to the prior year quarter. The Utility segment�s earnings of $54.4 million, or $0.64 per share, for the six months ended March 31, 2008, increased $3.8 million, or $0.04 per share, compared to the six months ended March 31, 2007. Earnings in Distribution�s New York Division for the six months ended March 31, 2008, of $35.9 million increased $0.8 million or $0.01 per share, compared to the prior year. The increase is mainly due to an increase in customer usage per account, a routine regulatory adjustment, and lower bad debt and postretirement benefits expenses. The impact of these items more than offset the impact on earnings of the rate design change included in the rate order discussed above. For the six months ended March 31, 2008, earnings in Distribution�s Pennsylvania Division of $18.5 million, or $0.22 per share, increased $3.0 million, or $0.03 per share, compared to the prior year. Earnings increased primarily due to an increase in base rates, higher usage per customer and a decrease in bad debt expense. On January 1, 2007, Distribution implemented a Settlement Agreement approved by the Pennsylvania Public Utility Commission that provided for a $14.3 million (before tax) annual base rate increase. Warmer weather during the six months ended March 31, 2008, partially offset the increase in base rates. 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, 2008, of $5.6 million, or $0.07 per share, decreased $1.1 million, or $0.01 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 second quarter of 2007. Excluding this item, operating results for the quarter increased $1.3 million primarily due to a nearly nine percent increase in sales throughput during the quarter. Additionally NFR benefited from the profitable sale of certain gas held as inventory and from the marketing flexibility that it derives from its contracts for significant storage capacity. Earnings for the six months ended March 31, 2008, in the Energy Marketing segment of $6.6 million, or $0.07 per share, decreased $0.6 million, or $0.01 per share, from the prior period. The comparability of the results is impacted by a $2.3 million reversal of an accrual for purchased gas expense noted above. Excluding this item, operating results for the six months ended March 31, 2008, increased $1.7 million, or $0.02 per share, compared to the prior year mainly due to increased sales throughput and the factors discussed above. 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, 2008 of $3.9 million, or $0.05 per share, increased $0.7 million, or $0.01 per share from the prior year�s second quarter due to higher margins. Much of the current quarter�s harvest was from low or no basis Company-owned property. This resulted in an increase in gross margins from the prior year�s quarter. Earnings for the six months ended March 31, 2008, of $4.3 million, increased $0.9 million from the prior year�s earnings. The increase is due to higher volumes of lumber and log sales. In addition, harvesting from Company-owned property resulted in higher margins during the six months ended March 31, 2008. Corporate and All Other Other direct, wholly-owned subsidiaries of the Company include: 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 which are fueled with natural gas or landfill gas. Earnings in the Corporate and All Other category for the quarter ended March 31, 2008, were $1.1 million, a slight decrease compared to the prior year�s second quarter earnings of $1.4 million. The comparability of the quarterly results is impacted by a $0.6 million gain on the sale of a gas-powered turbine the Company had previously planned to use in the development of a co-generation plant. Excluding this item, operating results for the quarter decreased $0.8 million. Higher margins from the landfill gas operations and lower interest expense were more than offset by lower interest income and higher operating expenses mainly related to the proxy contest initiated by a shareholder. Earnings in the Corporate and All Other category for the six months ended March 31, 2008, were $3.4 million, a decrease of $0.2 million when compared to the prior year�s earnings. The comparability of the results for the six months ended March 31, 2008, is impacted by the $0.6 million gain on the sale of the turbine described above. Excluding this item, operating results decreased $0.8 million. Higher margins from the landfill gas operations, higher income from unconsolidated subsidiaries, lower interest expense and a lower effective tax rate were more than offset by lower interest income and higher operating expenses mainly related to the proxy contest noted above. Discontinued Operations On August 31, 2007, Seneca completed the sale of its Canadian subsidiary. As a result of that sale, the Company has presented the Canadian operations as discontinued operations. Earnings in the second quarter of fiscal 2007 include earnings from discontinued operations of $3.0 million. There were no earnings from discontinued operations in the second quarter of fiscal 2008. Earnings for the six months ended March 31, 2007, include earnings from discontinued operations of $6.8 million. There were no earnings from discontinued operations for the six months ended March 31, 2008. EARNINGS GUIDANCE The Company is increasing and narrowing its GAAP earnings guidance for fiscal 2008 earnings to a range of $2.90 to $3.00 per share. Earnings guidance had previously been in the range of $2.60 to $2.80 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 guidance is a result of higher than forecast crude oil prices realized by Seneca during the three months ended March 31, 2008, combined with the certainty of pricing on planned commodity sales in both the Pipeline and Storage and the Exploration and Production segments, which are now hedged. In addition, the revised earnings per share guidance reflects a lower weighted average number of shares to be outstanding for the remainder of the fiscal year as a result of shares repurchased pursuant to the Company�s share repurchase program. This guidance is still based on the July 24, 2007, NYMEX 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 July 24, 2007, prices, the fiscal year earnings will be affected as detailed in the earnings sensitivity table in this release. EARNINGS TELECONFERENCE The Company will host a conference call on Friday, May 2, 2008, 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 investor relations page at National Fuel�s Web site at investor.nationalfuelgas.com. For those without Internet access, access is also provided by dialing (toll-free) 1-866-271-5140, and using the passcode �75887151.� 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 �39987735.� Both the webcast and telephonic replay will be available until the close of business on Friday, May 9, 2008. National Fuel is an integrated energy company with $4.2 billion in assets comprised of the following five operating segments: Exploration and Production, Pipeline and Storage, Utility, Energy Marketing, and Timber. Additional information about National Fuel is available on its Internet Web site: http://www.nationalfuelgas.com or through its investor information service at 1-800-334-2188. Certain statements contained herein, including those regarding estimated future earnings, and statements that are identified by the use of the words �anticipates,� �estimates,� �expects,� �forecasts,� �intends,� �plans,� �predicts,� �projects,� �believes,� �seeks,� �will,� �may� and similar expressions, 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 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 of derivative financial instruments or the valuation of the Company�s natural gas and oil reserves; uncertainty of oil and gas reserve estimates; 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; 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; changes in laws and regulations to which the Company is subject, including changes in tax, environmental, safety and employment laws and regulations; 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; the nature and projected profitability of pending and potential projects and other investments, and the ability to obtain necessary governmental approvals and permits; occurrences affecting the Company�s ability to obtain funds from operations, from borrowings under our credit lines or other credit facilities or from issuances of other short-term notes or debt or equity securities to finance needed capital expenditures and other investments, including any downgrades in the Company�s credit ratings; ability to successfully identify and finance acquisitions or other investments and ability to operate and integrate existing and any subsequently acquired business or properties; impairments under the SEC�s full cost ceiling test for natural gas and oil reserves; 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. NATIONAL FUEL GAS COMPANY RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS QUARTER ENDED MARCH 31, 2008 � � Exploration & � Pipeline & � � Energy � � Corporate / � (Thousands of Dollars) Production* � Storage � Utility � Marketing � Timber � All Other � Consolidated � Second quarter 2007 GAAP earnings $ 19,801 $ 13,936 $ 33,444 $ 6,706 $ 3,200 $ 1,360 $ 78,447 Items impacting comparability: Income from discontinued operations (2,967) (2,967) Resolution of a purchased gas contingency � � � � � � � (2,344) � � � � � � (2,344) Second quarter 2007 operating results 16,834 13,936 33,444 4,362 3,200 1,360 73,136 � Drivers of operating results Higher crude oil prices 15,016 15,016 Higher natural gas prices 7,485 7,485 Higher natural gas production 3,169 3,169 Lower crude oil production (1,521) (1,521) Derivative mark to market adjustment (1,093) (1,093) Higher lease operating costs (3,356) (3,356) � Higher transportation and storage revenues 979 979 Higher efficiency gas revenues 1,040 1,040 Lower (higher) operating costs (1,922) (438) 3,023 (1,374) (711) Lower (higher) depreciation / depletion (2,311) (398) 348 (250) (2,611) � Usage 1,483 1,483 Warmer weather in Pennsylvania (537) (537) Base rate decrease in New York (4,279) (4,279) Regulatory true-up adjustment 528 528 � Higher margins 1,224 984 307 2,515 � Higher AFUDC** 442 442 Higher (lower) interest income 487 (1,253) (766) Lower interest expense 1,219 1,233 2,452 � All other / rounding � 565 � � 57 � � 154 � � 61 � � (51) � � 261 � � 1,047 � Second quarter 2008 operating results 34,572 15,618 34,164 5,647 3,883 534 94,418 Items impacting comparability: Gain on Sale of Turbine � � � � � � � � � � � 586 � � 586 Second quarter 2008 GAAP earnings $ 34,572 � $ 15,618 � $ 34,164 � $ 5,647 � $ 3,883 � $ 1,120 � $ 95,004 � � * Includes discontinued operations ** 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, 2008 � � Exploration & � Pipeline & � � Energy � � Corporate / � Production* � Storage � Utility � Marketing � Timber � All Other � Consolidated � Second quarter 2007 GAAP earnings $ 0.23 $ 0.16 $ 0.39 $ 0.08 $ 0.04 $ 0.02 $ 0.92 Items impacting comparability: Income from discontinued operations (0.03) (0.03) Resolution of a purchased gas contingency � � � � � � � (0.03) � � � � � � (0.03) Second quarter 2007 operating results 0.20 0.16 0.39 0.05 0.04 0.02 0.86 � Drivers of operating results Higher crude oil prices 0.18 0.18 Higher natural gas prices 0.09 0.09 Higher natural gas production 0.04 0.04 Lower crude oil production (0.02) (0.02) Derivative mark to market adjustment (0.01) (0.01) Higher lease operating costs (0.04) (0.04) � Higher transportation and storage revenues 0.01 0.01 Higher efficiency gas revenues 0.01 0.01 Lower (higher) operating costs (0.02) (0.01) 0.04 (0.02) (0.01) Lower (higher) depreciation / depletion (0.03) - - - (0.03) � Usage 0.02 0.02 Warmer weather in Pennsylvania (0.01) (0.01) Base rate decrease in New York (0.05) (0.05) Regulatory true-up adjustment 0.01 0.01 � Higher margins 0.01 0.01 - 0.02 � Higher AFUDC** 0.01 0.01 Higher (lower) interest income 0.01 (0.01) - Lower interest expense 0.01 0.01 0.02 � All other / rounding � (0.01) � � - � � - � � 0.01 � � - � � - � � - � Second quarter 2008 operating results 0.40 0.18 0.40 0.07 0.05 - 1.10 Items impacting comparability: Gain on Sale of Turbine � � � � � � � � � � � 0.01 � � 0.01 Second quarter 2008 GAAP earnings $ 0.40 � $ 0.18 � $ 0.40 � $ 0.07 � $ 0.05 � $ 0.01 � $ 1.11 � � * Includes discontinued operations ** AFUDC = Allowance for Funds Used During Construction NATIONAL FUEL GAS COMPANY RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS SIX MONTHS ENDED MARCH 31, 2008 � � Exploration & � Pipeline & � � Energy � � Corporate / � (Thousands of Dollars) Production* � Storage � Utility � Marketing � Timber � All Other � Consolidated � Six months ended March 31, 2007 GAAP earnings $ 40,523 $ 27,624 $ 50,618 $ 7,198 $ 3,417 $ 3,587 $ 132,967 Items impacting comparability: Income from discontinued operations (6,799) (6,799) Resolution of a purchased gas contingency (2,344) (2,344) Discontinuance of hedge accounting � � � (1,888) � � � � � � � � � � (1,888) Six months ended March 31, 2007 operating results 33,724 25,736 50,618 4,854 3,417 3,587 121,936 � Drivers of operating results Higher crude oil prices 30,314 30,314 Higher natural gas prices 10,406 10,406 Higher natural gas production 6,454 6,454 Lower crude oil production (1,423) (1,423) Derivative mark to market adjustment (1,267) (1,267) Higher lease operating costs (4,872) (4,872) � Higher transportation and storage revenues 2,403 2,403 Higher efficiency gas revenues 833 833 Lower (higher) operating costs (2,264) (1,147) 2,884 (3,745) (4,272) Lower (higher) depreciation / depletion (5,857) 371 (365) (5,851) � Usage 3,366 3,366 Warmer weather in Pennsylvania (1,208) (1,208) Base rate decrease in New York (4,279) (4,279) Base rate increase in Pennsylvania 2,006 2,006 Regulatory true-up adjustment 712 712 � Higher margins 1,721 1,564 282 3,567 � Income from unconsolidated subsidiaries 736 736 � Higher AFUDC** 800 800 Higher (lower) interest income 1,542 (742) 800 Lower (higher) interest expense 2,391 (345) 2,017 4,063 � (Higher) lower income tax expense (930) 393 (537) � All other / rounding � 376 � � (254) � � 281 � � 27 � � (336) � � 241 � � 335 � Six months ended March 31, 2008 operating results 68,594 28,397 54,380 6,602 4,280 2,769 165,022 Items impacting comparability: Gain on Sale of Turbine � � � � � � � � � � � 586 � � 586 Six months ended March 31, 2008 GAAP earnings $ 68,594 � $ 28,397 � $ 54,380 � $ 6,602 � $ 4,280 � $ 3,355 � $ 165,608 � � * Includes discontinued operations ** 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, 2008 � � Exploration & � Pipeline & � � Energy � � Corporate / � Production* � Storage � Utility � Marketing � Timber � All Other � Consolidated � Six months ended March 31, 2007 GAAP earnings $ 0.48 $ 0.33 $ 0.60 $ 0.08 $ 0.04 $ 0.04 $ 1.57 Items impacting comparability: Income from discontinued operations (0.08) (0.08) Resolution of a purchased gas contingency (0.03) (0.03) Discontinuance of hedge accounting � � � (0.02) � � � � � � � � � � (0.02) Six months ended March 31, 2007 operating results 0.40 0.31 0.60 0.05 0.04 0.04 1.44 � Drivers of operating results Higher crude oil prices 0.35 0.35 Higher natural gas prices 0.12 0.12 Higher natural gas production 0.08 0.08 Lower crude oil production (0.02) (0.02) Derivative mark to market adjustment (0.01) (0.01) Higher lease operating costs (0.06) (0.06) � Higher transportation and storage revenues 0.03 0.03 Higher efficiency gas revenues 0.01 0.01 Lower (higher) operating costs (0.03) (0.01) 0.03 (0.04) (0.05) Lower (higher) depreciation / depletion (0.07) - - (0.07) � Usage 0.04 0.04 Warmer weather in Pennsylvania (0.01) (0.01) Base rate decrease in New York (0.05) (0.05) Base rate increase in Pennsylvania 0.02 0.02 Regulatory true-up adjustment 0.01 0.01 � Higher margins 0.02 0.02 - 0.04 � Income from unconsolidated subsidiaries 0.01 0.01 � Higher AFUDC** 0.01 0.01 Higher (lower) interest income 0.02 (0.01) 0.01 Lower (higher) interest expense 0.03 - 0.02 0.05 � (Higher) lower income tax expense (0.01) - (0.01) � All other / rounding � - � � (0.02) � � - � � - � � (0.01) � � 0.01 � � (0.02) Six months ended March 31, 2008 operating results 0.80 0.33 0.64 0.07 0.05 0.03 1.92 Items impacting comparability: Gain on Sale of Turbine � � � � � � � � � � � 0.01 � � 0.01 Six months ended March 31, 2008 GAAP earnings $ 0.80 � $ 0.33 � $ 0.64 � $ 0.07 � $ 0.05 � $ 0.04 � $ 1.93 � * Includes discontinued operations ** 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 2008 2007 2008 2007 Operating Revenues $ 885,853 $ 798,100 $ 1,454,121 $ 1,288,758 � Operating Expenses: Purchased Gas 531,438 476,904 809,448 719,843 Operation and Maintenance 120,584 120,408 223,040 215,112 Property, Franchise and Other Taxes 21,398 19,989 39,070 36,940 Depreciation, Depletion and Amortization � 42,412 � 38,395 � 86,533 � 77,802 715,832 655,696 1,158,091 1,049,697 � Operating Income 170,021 142,404 296,030 239,061 � Other Income (Expense): Income from Unconsolidated Subsidiaries 1,030 942 3,305 2,173 Interest Income 2,177 636 5,270 1,721 Other Income 2,080 2,526 3,334 3,241 Interest Expense on Long-Term Debt (16,289) (17,888) (32,577) (33,931) Other Interest Expense � (2,285) � (1,516) � (3,010) � (3,366) � Income from Continuing Operations Before Income Taxes 156,734 127,104 272,352 208,899 � Income Tax Expense � 61,730 � 51,624 � 106,744 � 82,731 � Income from Continuing Operations 95,004 75,480 165,608 126,168 � Income from Discontinued Operations, Net of Tax � - � 2,967 � - � 6,799 � Net Income Available for Common Stock $ 95,004 $ 78,447 $ 165,608 $ 132,967 � Earnings Per Common Share: Basic: Income from Continuing Operations $ 1.14 $ 0.91 $ 1.98 $ 1.53 Income from Discontinued Operations � - � 0.04 � - � 0.08 Net Income Available for Common Stock $ 1.14 $ 0.95 $ 1.98 $ 1.61 � Diluted: Income from Continuing Operations $ 1.11 $ 0.89 $ 1.93 $ 1.49 Income from Discontinued Operations � - � 0.03 � - � 0.08 Net Income Available for Common Stock $ 1.11 $ 0.92 $ 1.93 $ 1.57 � Weighted Average Common Shares: Used in Basic Calculation � 83,406,242 � 82,895,087 � 83,509,268 � 82,786,027 Used in Diluted Calculation � 85,385,944 � 85,033,127 � 85,603,033 � 84,891,742 NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) � � March 31, September 30, (Thousands of Dollars) � 2008 � 2007 � ASSETS Property, Plant and Equipment $ 4,593,980 $ 4,461,586 Less - Accumulated Depreciation, Depletion and Amortization � 1,650,715 � � 1,583,181 Net Property, Plant and Equipment � 2,943,265 � � 2,878,405 � Current Assets: Cash and Temporary Cash Investments 216,412 124,806 Cash Held in Escrow - 61,964 Hedging Collateral Deposits 2,354 4,066 Receivables - Net 363,872 172,380 Unbilled Utility Revenue 75,084 20,682 Gas Stored Underground 19,512 66,195 Materials and Supplies - at average cost 37,618 35,669 Unrecovered Purchased Gas Costs 1,421 14,769 Other Current Assets 30,854 45,057 Deferred Income Taxes � 41,253 � � 8,550 Total Current Assets � 788,380 � � 554,138 � Other Assets: Recoverable Future Taxes 83,620 83,954 Unamortized Debt Expense 11,101 12,070 Other Regulatory Assets 133,881 137,577 Deferred Charges 5,314 5,545 Other Investments 83,754 85,902 Investments in Unconsolidated Subsidiaries 16,605 18,256 Goodwill 5,476 5,476 Intangible Assets 27,505 28,836 Prepaid Pension and Post-Retirement Benefit Costs 59,331 61,006 Fair Value of Derivative Financial Instruments - 9,188 Other � 4,843 � � 8,059 Total Other Assets � 431,430 � � 455,869 Total Assets $ 4,163,075 � $ 3,888,412 � CAPITALIZATION AND LIABILITIES Capitalization: Comprehensive Shareholders' Equity Common Stock, $1 Par Value Authorized - 200,000,000 Shares; Issued and Outstanding - 81,636,429 Shares and 83,461,308 Shares, Respectively $ 81,636 $ 83,461 Paid in Capital 580,811 569,085 Earnings Reinvested in the Business � 1,008,084 � � 983,776 Total Common Shareholder Equity Before Items of Other Comprehensive Loss 1,670,531 1,636,322 Accumulated Other Comprehensive Loss � (41,867) � � (6,203) Total Comprehensive Shareholders' Equity 1,628,664 1,630,119 Long-Term Debt, Net of Current Portion � 899,000 � � 799,000 Total Capitalization � 2,527,664 � � 2,429,119 � Current and Accrued Liabilities: Notes Payable to Banks and Commercial Paper - - Current Portion of Long-Term Debt 100,000 200,024 Accounts Payable 149,595 109,757 Amounts Payable to Customers 4,985 10,409 Dividends Payable 25,307 25,873 Interest Payable on Long-Term Debt 18,158 18,158 Customer Advances - 22,863 Other Accruals and Current Liabilities 213,087 36,062 Fair Value of Derivative Financial Instruments � 64,595 � � 16,200 Total Current and Accrued Liabilities � 575,727 � � 439,346 � Deferred Credits: Deferred Income Taxes 593,375 575,356 Taxes Refundable to Customers 14,033 14,026 Unamortized Investment Tax Credit 5,042 5,392 Cost of Removal Regulatory Liability 99,924 91,226 Other Regulatory Liabilities 92,343 76,659 Post-Retirement Liabilities 62,372 70,555 Asset Retirement Obligations 76,357 75,939 Other Deferred Credits � 116,238 � � 110,794 Total Deferred Credits � 1,059,684 � � 1,019,947 Commitments and Contingencies � - � � - Total Capitalization and Liabilities $ 4,163,075 � $ 3,888,412 NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) � � Six Months Ended March 31, (Thousands of Dollars) � 2008 � 2007 � Operating Activities: Net Income Available for Common Stock $ 165,608 $ 132,967 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation, Depletion and Amortization 86,533 84,886 Deferred Income Taxes 12,817 21,803 Income from Unconsolidated Subsidiaries, Net of Cash Distributions 1,651 (960) Excess Tax Benefits Associated with Stock-Based Compensation Awards (16,275) (13,689) Other (194) 3,818 Change in: Hedging Collateral Deposits 1,712 17,642 Receivables and Unbilled Utility Revenue (245,912) (196,094) Gas Stored Underground and Materials and Supplies 44,734 47,243 Unrecovered Purchased Gas Costs 13,347 (992) Prepayments and Other Current Assets 15,878 28,659 Accounts Payable 39,838 34,417 Amounts Payable to Customers (5,424) (13,339) Customer Advances (22,863) (29,417) Other Accruals and Current Liabilities 192,787 163,928 Other Assets 18,127 (3,765) Other Liabilities � � 4,504 � � (2,434) Net Cash Provided by Operating Activities � $ 306,868 � $ 274,673 � Investing Activities: Capital Expenditures ($144,707) ($132,313) Investment in Partnership - (3,300) Cash Held in Escrow 58,397 - Net Proceeds from Sale of Oil and Gas Producing Properties 2,313 2,330 Other � � 1,557 � � (339) Net Cash Used in Investing Activities � � ($82,440) � � ($133,622) � Financing Activities: Excess Tax Benefits Associated with Stock-Based Compensation Awards $ 16,275 $ 13,689 Shares Repurchased under Repurchase Plan (108,941) (43,344) Reduction of Long-Term Debt (24) (23,207) Dividends Paid on Common Stock (51,896) (49,808) Proceeds From Issuance of Common Stock � � 11,764 � � 14,604 Net Cash Used In Financing Activities � � ($132,822) � � ($88,066) Effect of Exchange Rates on Cash � � - � � (787) Net Increase in Cash and Temporary Cash Investments 91,606 52,198 Cash and Temporary Cash Investments at Beginning of Period � � 124,806 � � 69,611 Cash and Temporary Cash Investments at March 31 � $ 216,412 � $ 121,809 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, EXPLORATION AND PRODUCTION SEGMENT � 2008 � � 2007 � Variance � 2008 � � 2007 � Variance Operating Revenues $ 114,720 � $ 78,554 � $ 36,166 $ 222,675 � $ 153,680 � $ 68,995 � � � � Operating Expenses: Purchased Gas - - - - - - Operation and Maintenance: General and Administrative Expense 7,171 4,491 2,680 12,752 8,706 4,046 Lease Operating Expense 14,421 11,336 3,085 26,148 21,543 4,605 All Other Operation and Maintenance Expense 2,284 2,006 278 4,018 4,582 (564) Property, Franchise and Other Taxes (Lease Operating Expense) 3,074 997 2,077 4,876 1,986 2,890 Depreciation, Depletion and Amortization � 22,804 � � 19,248 � � 3,556 � 46,849 � � 37,838 � � 9,011 � 49,754 � � 38,078 � � 11,676 � 94,643 � � 74,655 � � 19,988 � Operating Income 64,966 40,476 24,490 128,032 79,025 49,007 � Other Income (Expense): Interest Income 3,144 2,395 749 7,032 4,661 2,371 Other Income (65) - (65) 18 - 18 Other Interest Expense � (11,073) � � (12,949) � � 1,876 � (22,218) � � (25,897) � � 3,679 � Income from Continuing Operations Before Income Taxes 56,972 29,922 27,050 112,864 57,789 55,075 Income Tax Expense � 22,400 � � 13,088 � � 9,312 � 44,270 � � 24,065 � � 20,205 Income from Continuing Operations 34,572 16,834 17,738 68,594 33,724 34,870 � Income from Discontinued Operations, Net of Tax � - � � 2,967 � � (2,967) � - � � 6,799 � � (6,799) � Net Income $ 34,572 � $ 19,801 � $ 14,771 $ 68,594 � $ 40,523 � $ 28,071 � Income from Continuing Operations Per Share (Diluted) $ 0.40 $ 0.20 $ 0.20 $ 0.80 $ 0.40 $ 0.40 Income from Discontinued Operations, Net of Tax, Per - - Share (Diluted) � - � � 0.03 � � (0.03) � - � � 0.08 � � (0.08) Net Income Per Share (Diluted) $ 0.40 � $ 0.23 � $ 0.17 $ 0.80 � $ 0.48 � $ 0.32 � � Three Months Ended Six Months Ended March 31, March 31, PIPELINE AND STORAGE SEGMENT � 2008 � � 2007 � Variance � 2008 � � 2007 � Variance Revenues from External Customers $ 37,934 $ 34,952 $ 2,982 $ 69,817 $ 64,761 $ 5,056 Intersegment Revenues � 20,861 � � 20,884 � � (23) � 41,209 � � 41,252 � � (43) Total Operating Revenues � 58,795 � � 55,836 � � 2,959 � 111,026 � � 106,013 � � 5,013 � Operating Expenses: Purchased Gas (14) 2 (16) (8) (11) 3 Operation and Maintenance 18,417 17,744 673 34,415 32,647 1,768 Property, Franchise and Other Taxes 4,259 4,335 (76) 8,532 8,613 (81) Depreciation, Depletion and Amortization � 8,176 � � 7,563 � � 613 � 16,285 � � 16,855 � � (570) � 30,838 � � 29,644 � � 1,194 � 59,224 � � 58,104 � � 1,120 � Operating Income 27,957 26,192 1,765 51,802 47,909 3,893 � Other Income (Expense): Interest Income 70 39 31 165 123 42 Other Income 731 80 651 1,421 264 1,157 Interest Expense on Long-Term Debt (16) (10) (6) (31) 1,829 (1,860) Other Interest Expense � (2,552) � � (2,741) � � 189 � (5,588) � � (5,028) � � (560) � Income Before Income Taxes 26,190 23,560 2,630 47,769 45,097 2,672 Income Tax Expense � 10,572 � � 9,624 � � 948 � 19,372 � � 17,473 � � 1,899 Net Income $ 15,618 � $ 13,936 � $ 1,682 $ 28,397 � $ 27,624 � $ 773 � Net Income Per Share (Diluted) $ 0.18 � $ 0.16 � $ 0.02 � $ 0.33 � $ 0.33 � $ - 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, UTILITY SEGMENT 2008 � 2007 � Variance 2008 � 2007 � Variance Revenues from External Customers $ 522,730 � $ 501,473 � $ 21,257 $ 849,855 � $ 790,256 � $ 59,599 Intersegment Revenues � 6,114 � � 5,941 � � 173 � 10,413 � � 9,970 � � 443 Total Operating Revenues � 528,844 � � 507,414 � � 21,430 � 860,268 � � 800,226 � � 60,042 � Operating Expenses: Purchased Gas 378,187 352,864 25,323 597,310 539,225 58,085 Operation and Maintenance 62,796 67,448 (4,652) 113,778 118,215 (4,437) Property, Franchise and Other Taxes 13,531 14,107 (576) 24,629 25,298 (669) Depreciation, Depletion and Amortization � 9,786 � � 10,321 � � (535) � 19,827 � � 20,100 � � (273) � 464,300 � � 444,740 � � 19,560 � 755,544 � � 702,838 � � 52,706 � Operating Income 64,544 62,674 1,870 104,724 97,388 7,336 � Other Income (Expense): Interest Income 164 177 (13) 362 462 (100) Other Income 259 368 (109) 604 653 (49) Other Interest Expense � (7,654) � � (7,269) � � (385) � (14,905) � � (14,646) � � (259) � Income Before Income Taxes 57,313 55,950 1,363 90,785 83,857 6,928 Income Tax Expense � 23,149 � � 22,506 � � 643 � 36,405 � � 33,239 � � 3,166 Net Income $ 34,164 � $ 33,444 � $ 720 $ 54,380 � $ 50,618 � $ 3,762 � Net Income Per Share (Diluted) $ 0.40 � $ 0.39 � $ 0.01 $ 0.64 � $ 0.60 � $ 0.04 � � Three Months Ended Six Months Ended March 31, March 31, ENERGY MARKETING SEGMENT 2008 � 2007 � Variance 2008 � 2007 � Variance Operating Revenues $ 191,263 � $ 163,338 � $ 27,925 $ 277,982 � $ 246,656 � $ 31,326 � Operating Expenses: Purchased Gas 180,723 151,027 29,696 264,652 232,282 32,370 Operation and Maintenance 1,439 1,218 221 2,785 2,512 273 Property, Franchise and Other Taxes 14 24 (10) 23 35 (12) Depreciation, Depletion and Amortization � 11 � � 7 � � 4 � 22 � � 14 � � 8 � 182,187 � � 152,276 � � 29,911 � 267,482 � � 234,843 � � 32,639 � Operating Income 9,076 11,062 (1,986) 10,500 11,813 (1,313) � Other Income (Expense): Interest Income 63 78 (15) 87 140 (53) Other Income 74 181 (107) 133 317 (184) Other Interest Expense � (44) � � (125) � � 81 � (127) � � (252) � � 125 � Income Before Income Taxes 9,169 11,196 (2,027) 10,593 12,018 (1,425) Income Tax Expense � 3,522 � � 4,490 � � (968) � 3,991 � � 4,820 � � (829) Net Income $ 5,647 � $ 6,706 � $ (1,059) $ 6,602 � $ 7,198 � $ (596) � Net Income Per Share (Diluted) $ 0.07 � $ 0.08 � $ (0.01) $ 0.07 � $ 0.08 � $ (0.01) NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES � SEGMENT OPERATING RESULTS AND STATISTICS (UNAUDITED) � � Three Months Ended � Six Months Ended (Thousands of Dollars, except per share amounts) March 31, March 31, TIMBER SEGMENT 2008 � 2007 � Variance 2008 � 2007 � Variance Operating Revenues $ 17,424 � $ 18,184 � $ (760) $ 30,324 � $ 29,947 � $ 377 � � � � Operating Expenses: Operation and Maintenance 8,684 10,969 (2,285) 18,643 20,111 (1,468) Property, Franchise and Other Taxes 430 426 4 827 819 8 Depreciation, Depletion and Amortization 1,267 � 883 � 384 2,813 � 2,251 � 562 10,381 � 12,278 � (1,897) 22,283 � 23,181 � (898) � Operating Income 7,043 5,906 1,137 8,041 6,766 1,275 � Other Income (Expense): Interest Income 189 296 (107) 579 612 (33) Other Income - - - - 21 (21) Other Interest Expense (790) � (791) � 1 (1,650) � (1,594) � (56) � Income Before Income Taxes 6,442 5,411 1,031 6,970 5,805 1,165 Income Tax Expense 2,559 � 2,211 � 348 2,690 � 2,388 � 302 Net Income $ 3,883 � $ 3,200 � $ 683 $ 4,280 � $ 3,417 � $ 863 � Net Income Per Share (Diluted) $ 0.05 � $ 0.04 � $ 0.01 $ 0.05 � $ 0.04 � $ 0.01 � � Three Months Ended Six Months Ended March 31, March 31, ALL OTHER 2008 � 2007 � Variance 2008 � 2007 � Variance Revenues from External Customers $ 1,619 $ 1,403 $ 216 $ 3,169 $ 3,079 $ 90 Intersegment Revenues 3,099 � 2,090 � 1,009 5,812 � 4,287 � 1,525 Total Operating Revenues 4,718 � 3,493 � 1,225 8,981 � 7,366 � 1,615 � Operating Expenses: Purchased Gas 2,510 1,822 688 4,712 3,650 1,062 Operation and Maintenance 1,056 950 106 2,114 1,755 359 Property, Franchise and Other Taxes 17 28 (11) 40 48 (8) Depreciation, Depletion and Amortization 196 � 197 � (1) 393 � 393 � - 3,779 � 2,997 � 782 7,259 � 5,846 � 1,413 � Operating Income 939 496 443 1,722 1,520 202 � Other Income (Expense): Income from Unconsolidated Subsidiaries 1,030 942 88 3,305 2,173 1,132 Interest Income 28 4 24 43 7 36 Other Income 912 12 900 921 25 896 Other Interest Expense (142) � (667) � 525 (429) � (1,337) � 908 � Income Before Income Taxes 2,767 787 1,980 5,562 2,388 3,174 Income Tax Expense 1,075 � 320 � 755 1,532 � 935 � 597 Net Income $ 1,692 � $ 467 � $ 1,225 $ 4,030 � $ 1,453 � $ 2,577 � Net Income Per Share (Diluted) $ 0.02 � $ 0.01 � $ 0.01 $ 0.05 � $ 0.02 � $ 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, CORPORATE 2008 � 2007 � Variance 2008 � 2007 � Variance Revenues from External Customers $ 163 � $ 196 � $ (33) $ 299 � $ 379 � $ (80) Intersegment Revenues � 961 � � 912 � � 49 � 1,922 � � 1,764 � � 158 Total Operating Revenues � 1,124 � � 1,108 � � 16 � 2,221 � � 2,143 � � 78 � Operating Expenses: Operation and Maintenance 5,383 5,262 121 10,525 7,011 3,514 Property, Franchise and Other Taxes 73 72 1 143 141 2 Depreciation, Depletion and Amortization � 172 � � 176 � � (4) � 344 � � 351 � � (7) � 5,628 � � 5,510 � � 118 � 11,012 � � 7,503 � � 3,509 � Operating Loss (4,504) (4,402) (102) (8,791) (5,360) (3,431) � Other Income (Expense): Interest Income 20,186 22,138 (1,952) 42,890 44,067 (1,177) Other Income 169 1,885 (1,716) 237 1,961 (1,724) Interest Expense on Long-Term Debt (16,273) (17,878) 1,605 (32,546) (35,760) 3,214 Other Interest Expense � (1,697) � � (1,465) � � (232) � (3,981) � � (2,963) � � (1,018) � Income (Loss) Before Income Taxes (2,119) 278 (2,397) (2,191) 1,945 (4,136) Income Tax Benefit � (1,547) � � (615) � � (932) � (1,516) � � (189) � � (1,327) Net Income (Loss) $ (572) � $ 893 � $ (1,465) $ (675) � $ 2,134 � $ (2,809) � Net Income (Loss) Per Share (Diluted) $ (0.01) � $ 0.01 � $ (0.02) $ (0.01) � $ 0.02 � $ (0.03) � � Three Months Ended Six Months Ended March 31, March 31, INTERSEGMENT ELIMINATIONS 2008 � 2007 � Variance 2008 � 2007 � Variance Intersegment Revenues $ (31,035) � $ (29,827) � $ (1,208) $ (59,356) � $ (57,273) � $ (2,083) � Operating Expenses: Purchased Gas (29,968) (28,811) (1,157) (57,218) (55,303) (1,915) Operation and Maintenance � (1,067) � � (1,016) � � (51) � (2,138) � � (1,970) � � (168) � (31,035) � � (29,827) � � (1,208) � (59,356) � � (57,273) � � (2,083) � Operating Income - - - - - - � Other Income (Expense): Interest Income (21,667) (24,491) 2,824 (45,888) (48,351) 2,463 Other Interest Expense � 21,667 � � 24,491 � � (2,824) � 45,888 � � 48,351 � � (2,463) � 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 2008 2007 (Decrease) 2008 2007 (Decrease) � Capital Expenditures: Exploration and Production $ 34,195 $ 38,677 $ (4,482) $ 64,861 $ 75,919 $ (11,058) Pipeline and Storage 31,739 5,201 26,538 57,110 10,153 46,957 Utility 11,188 12,679 (1,491) 23,896 25,558 (1,662) Energy Marketing 7 8 (1) 15 17 (2) Timber � 161 � 401 � (240) � 1,144 � 1,207 � (63) Total Reportable Segments 77,290 56,966 20,324 147,026 112,854 34,172 All Other 53 55 (2) 53 84 (31) Corporate 27 (610) 637 35 (572) 607 Eliminations � (2,407) � - � (2,407) � (2,407) � - � (2,407) Total Expenditures from Continuing Operations 74,963 56,411 18,552 144,707 112,366 32,341 Discontinued Operations � - � 10,600 � (10,600) � - � 19,947 � (19,947) Total Capital Expenditures $ 74,963 $ 67,011 $ 7,952 $ 144,707 $ 132,313 $ 12,394 � � DEGREE DAYS � Percent Colder (Warmer) Than: Three Months Ended March 31 Normal 2008 2007 Normal Last Year � Buffalo, NY 3,364 3,264 3,327 (3.0) (1.9) Erie, PA 3,176 3,104 3,152 (2.3) (1.5) � Six Months Ended March 31 � Buffalo, NY 5,624 5,358 5,274 (4.7) 1.6 Erie, PA 5,257 4,975 5,030 (5.4) (1.1) NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES � � � � � � EXPLORATION AND PRODUCTION INFORMATION � Three Months Ended Six Months Ended March 31, March 31, Increase Increase 2008 2007 (Decrease) 2008 2007 (Decrease) � Gas Production/ Prices: � Production (MMcf) Gulf Coast 3,022 2,893 129 5,849 5,616 233 West Coast 977 920 57 2,004 1,865 139 Appalachia � 1,828 � 1,339 � 489 � 3,744 � 2,732 � 1,012 Total Production from Continuing Operations 5,827 5,152 675 11,597 10,213 1,384 Canada - Discontinued Operations � - � 1,856 � (1,856) � - � 3,577 � (3,577) Total Production � 5,827 � 7,008 � (1,181) � 11,597 � 13,790 � (2,193) � Average Prices (Per Mcf) Gulf Coast $ 9.50 $ 6.42 $ 3.08 $ 8.36 $ 6.48 $ 1.88 West Coast 7.93 6.95 0.98 7.34 6.51 0.83 Appalachia 8.90 7.39 1.51 8.15 7.30 0.85 Weighted Average for Continuing Operations 9.05 6.77 2.28 8.12 6.71 1.41 Weighted Average after Hedging for Continuing Operations 9.21 7.23 1.98 8.55 7.17 1.38 Canada - Discontinued Operations N/M 5.87 N/M N/M 6.12 N/M � Oil Production/ Prices: Production (Thousands of Barrels) Gulf Coast 128 174 (46) 285 376 (91) West Coast 599 599 - 1,227 1,190 37 Appalachia � 28 � 31 � (3) � 65 � 58 � 7 Total Production from Continuing Operations 755 804 (49) 1,577 1,624 (47) Canada - Discontinued Operations � - � 61 � (61) � - � 117 � (117) Total Production � 755 � 865 � (110) � 1,577 � 1,741 � (164) � Average Prices (Per Barrel) Gulf Coast $ 99.75 $ 57.21 $ 42.54 $ 94.31 $ 56.84 $ 37.47 West Coast 88.45 49.99 38.46 85.04 50.55 34.49 Appalachia 90.15 57.88 32.27 86.73 58.76 27.97 Weighted Average for Continuing Operations 90.43 51.86 38.57 86.78 52.30 34.48 Weighted Average after Hedging for Continuing Operations 78.54 47.95 30.59 75.44 45.86 29.58 Canada - Discontinued Operations N/M 49.98 N/M N/M 46.45 N/M � Total Production from Continuing Operations (Mmcfe) 10,357 9,976 381 21,059 19,957 1,102 Total Canadian Production (Mmcfe) � - � 2,222 � (2,222) � - � 4,279 � (4,279) Total Production (Mmcfe) � 10,357 � 12,198 � (1,841) � 21,059 � 24,236 � (3,177) � Selected Operating Performance Statistics: General & Administrative Expense per Mcfe (1) $ 0.69 $ 0.45 $ 0.24 $ 0.61 $ 0.44 $ 0.17 Lease Operating Expense per Mcfe (1) $ 1.69 $ 1.24 $ 0.45 $ 1.47 $ 1.18 $ 0.29 Depreciation, Depletion & Amortization per Mcfe (1) $ 2.20 $ 1.93 $ 0.27 $ 2.22 $ 1.90 $ 0.32 � � (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. Amounts exclude discontinued operations of Canada. � N/M = Not meaningful NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES � � � � EXPLORATION AND PRODUCTION INFORMATION � Hedging Summary for Fiscal 2008 � SWAPS Volume Average Hedge Price Oil 0.8 MMBBL $65.72 / BBL Gas 7.7 BCF $8.54 / MCF � Hedging Summary for Fiscal 2009 � SWAPS Volume Average Hedge Price Oil 1.0 MMBBL $73.87 / BBL Gas 9.5 BCF $9.31 / MCF � Hedging Summary for Fiscal 2010 � SWAPS Volume Average Hedge Price Oil 0.2 MMBBL $84.00 / BBL Gas 0.4 BCF $10.54 / MCF � � Gross Wells in Process of Drilling Six Months Ended March 31, 2008 Total Gulf West East Company � Wells in Process - Beginning Period Exploratory 2.00 0.00 21.00 23.00 Developmental 0.00 4.00 69.00 73.00 Wells Commenced Exploratory 2.00 1.00 6.00 9.00 Developmental 0.00 29.00 75.00 104.00 Wells Completed Exploratory 1.00 0.00 5.00 6.00 Developmental 0.00 30.00 103.00 133.00 Wells Plugged & Abandoned Exploratory 0.00 0.00 1.00 1.00 Developmental 0.00 1.00 0.00 1.00 Wells Sold Exploratory 2.00 0.00 0.00 2.00 Developmental 0.00 0.00 0.00 0.00 Wells in Process - End of Period Exploratory 1.00 1.00 21.00 23.00 Developmental 0.00 2.00 41.00 43.00 Net Wells in Process of Drilling � � � � Six Months Ended March 31, 2008 Total Gulf West East Company � Wells in Process - Beginning Period Exploratory 1.30 0.00 20.00 21.30 Developmental 0.00 4.00 68.00 72.00 Wells Commenced Exploratory 0.84 1.00 6.00 7.84 Developmental 0.00 29.00 74.00 103.00 Wells Completed Exploratory 0.29 0.00 5.00 5.29 Developmental 0.00 30.00 102.00 132.00 Wells Plugged & Abandoned Exploratory 0.00 0.00 1.00 1.00 Developmental 0.00 1.00 0.00 1.00 Wells Sold Exploratory 1.30 0.00 0.00 1.30 Developmental 0.00 0.00 0.00 0.00 Wells in Process - End of Period Exploratory 0.55 1.00 20.00 21.55 Developmental 0.00 2.00 40.00 42.00 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 2008 2007 (Decrease) 2008 2007 (Decrease) Firm Transportation - Affiliated 48,817 51,016 (2,199) 80,152 80,746 (594) Firm Transportation - Non-Affiliated 73,142 69,615 3,527 134,689 114,312 20,377 Interruptible Transportation 1,221 932 289 2,304 1,927 377 123,180 121,563 1,617 217,145 196,985 20,160 � Utility Throughput - (MMcf) Three Months Ended Six Months Ended March 31, March 31, Increase Increase 2008 2007 (Decrease) 2008 2007 (Decrease) Retail Sales: Residential Sales 28,136 29,372 (1,236) 45,263 46,050 (787) Commercial Sales 4,986 5,428 (442) 7,863 8,296 (433) Industrial Sales 323 323 - 446 514 (68) 33,445 35,123 (1,678) 53,572 54,860 (1,288) Off-System Sales 2,048 - 2,048 3,080 - 3,080 Transportation 26,054 24,723 1,331 43,881 40,576 3,305 61,547 59,846 1,701 100,533 95,436 5,097 � Energy Marketing Volumes Three Months Ended Six Months Ended March 31, March 31, Increase Increase 2008 2007 (Decrease) 2008 2007 (Decrease) Natural Gas (MMcf) 21,707 19,935 1,772 32,548 31,049 1,499 � � Timber Board Feet (Thousands) Three Months Ended Six Months Ended March 31, March 31, Increase Increase 2008 2007 (Decrease) 2008 2007 (Decrease) Log Sales 3,589 3,025 564 5,613 4,734 879 Green Lumber Sales 2,792 2,380 412 5,223 3,910 1,313 Kiln-Dried Lumber Sales 3,353 3,794 (441) 7,100 6,952 148 9,734 9,199 535 17,936 15,596 2,340 NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES FISCAL 2008 EARNINGS GUIDANCE AND SENSITIVITIES � � � � � � Earnings per share sensitivity to changes Fiscal 2008 (Diluted earnings per share guidance*) from NYMEX prices used in guidance* (1) � $1 change per MMBtu gas $5 change per Bbl oil Range Increase � Decrease Increase � Decrease � Consolidated Earnings $2.90 - $3.00 + $0.02 - $0.02 + $0.03 - $0.03 NYMEX Settlement Prices at July 24, 2007 � � Natural Gas Oil ($ per MMBtu) ($ per Bbl) � Apr-08 $ 7.713 $ 72.59 May-08 $ 7.678 $ 72.48 Jun-08 $ 7.768 $ 72.39 Jul-08 $ 7.866 $ 72.29 Aug-08 $ 7.939 $ 72.19 Sep-08 $ 7.994 $ 72.09 � Average $ 7.826 $ 72.34 * Please refer to forward looking statement footnote at page 8 of this document. � (1) This sensitivity table is current as of May 1, 2008 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) � 2008 � 2007 � Operating Revenues $ 885,853,000 $ 798,100,000 � Income from Continuing Operations $ 95,004,000 $ 75,480,000 Income from Discontinued Operations, Net of Tax � - � 2,967,000 Net Income Available for Common Stock $ 95,004,000 $ 78,447,000 � Earnings Per Common Share: Basic: Income from Continuing Operations $ 1.14 $ 0.91 Income from Discontinued Operations � - � 0.04 Net Income Available for Common Stock $ 1.14 $ 0.95 � Diluted: Income from Continuing Operations $ 1.11 $ 0.89 Income from Discontinued Operations � - � 0.03 Net Income Available for Common Stock $ 1.11 $ 0.92 � Weighted Average Common Shares: Used in Basic Calculation � 83,406,242 � 82,895,087 Used in Diluted Calculation � 85,385,944 � 85,033,127 � � Six Months Ended March 31 (unaudited) � Operating Revenues $ 1,454,121,000 $ 1,288,758,000 � Income from Continuing Operations $ 165,608,000 $ 126,168,000 Income from Discontinued Operations, Net of Tax � - � 6,799,000 Net Income Available for Common Stock $ 165,608,000 $ 132,967,000 � Earnings Per Common Share: Basic: Income from Continuing Operations $ 1.98 $ 1.53 Income from Discontinued Operations � - � 0.08 Net Income Available for Common Stock $ 1.98 $ 1.61 � Diluted: Income from Continuing Operations $ 1.93 $ 1.49 Income from Discontinued Operations � - � 0.08 Net Income Available for Common Stock $ 1.93 $ 1.57 � Weighted Average Common Shares: Used in Basic Calculation � 83,509,268 � 82,786,027 Used in Diluted Calculation � 85,603,033 � 84,891,742 � � Twelve Months Ended March 31 (unaudited) � Operating Revenues $ 2,204,929,000 $ 1,966,473,000 � Income from Continuing Operations $ 241,115,000 $ 192,372,000 Income (Loss) from Discontinued Operations, Net of Tax � 128,981,000 � (57,327,000) Net Income Available for Common Stock $ 370,096,000 $ 135,045,000 � Earnings Per Common Share: Basic: Income from Continuing Operations $ 2.89 $ 2.31 Income (Loss) from Discontinued Operations � 1.54 � (0.69) Net Income Available for Common Stock $ 4.43 $ 1.62 � Diluted: Income from Continuing Operations $ 2.82 $ 2.25 Income (Loss) from Discontinued Operations � 1.50 � (0.67) Net Income Available for Common Stock $ 4.32 $ 1.58 � Weighted Average Common Shares: Used in Basic Calculation � 83,502,281 � 83,232,743 Used in Diluted Calculation � 85,610,528 � 85,352,796