National Fuel Gas Company (�National Fuel� or the �Company�)
(NYSE:NFG) today announced results for the first quarter of its
2009 fiscal year (the quarter ended December 31, 2008).
HIGHLIGHTS
- National Fuel is reporting a
loss for the quarter of $42.7 million or $0.53 per share. The loss
is due to the previously announced $108.2 million (after tax),
non-cash impairment charge to write down the book value of its oil
and natural gas producing properties as a result of significantly
lower commodity prices at December 31, 2008.
- Quarterly operating results,
before items impacting comparability (�Operating Results�) for the
quarter were $64.3 million, or $0.80 per share compared to $70.6
million or $0.82 per share for the prior year�s first quarter. The
main drivers causing the decrease in Operating Results were lower
average crude oil prices realized and lower natural gas production
in the Exploration and Production segment during the quarter.
- Production of crude oil and
natural gas during the quarter ended December 31, 2008 decreased
1.1 billion cubic feet equivalent (�Bcfe�) compared to the prior
year�s first quarter, mainly due to lingering curtailments in the
Gulf of Mexico caused by Hurricane Ike. All pre-hurricane
production is expected to be back on line by the end of the second
quarter. Total forecast production for the entire 2009 fiscal year
remains in the previously announced range between 38 and 44
Bcfe.
- The Company is revising its GAAP
earnings guidance range for fiscal 2009 to a range of $1.10 to
$1.30 per share. This guidance includes the impairment charge
($1.35 per share) noted above, and assumes flat NYMEX equivalent
pricing of $5.50 per MMBtu for natural gas and $45.00 per Bbl for
crude oil for unhedged production for the remainder of the fiscal
year.
- A conference call is scheduled
for Friday, February 6, 2009, at 11:00 am Eastern Standard
Time.
MANAGEMENT COMMENTS
David F. Smith, President and Chief Executive Officer of
National Fuel Gas Company stated: �The volatility and turmoil in
the financial markets and worldwide economy during the past several
months have also affected National Fuel and the energy industry as
a whole. The continued decrease in commodity prices since July has
had a significant negative impact on our financial results,
contributing to the large ceiling test write-down as well as the
drop in recurring earnings. While there is little we can do to
influence global commodity prices, we are acutely focused on
operating our assets in the most effective way possible. In that
regard, we�ve seen great success, particularly in our regulated
segments, which performed flawlessly in the face of significant
weather variations, and which delivered stable and predictable
earnings that are in line with our last rate awards.
We�ve long believed in our integrated business model. The value
of that model has been particularly evident over the past few
quarters. When commodity prices peaked over the summer, we enjoyed
record earnings. Even though prices have now cycled lower, we still
expect that our operating companies will generate sufficient cash
to fund our operations and allow us to comfortably continue our
dividend payments. Looking to the future, we expect the overall
business environment will continue to be challenging. But, more
than ever, we believe that the quality and diversity of our
operating results, coupled with our long-standing commitment to
fiscal discipline, position us to capitalize on future
opportunities.�
SUMMARY OF RESULTS
National Fuel had a consolidated loss for the quarter ended
December 31, 2008 of $42.7 million, or $0.53 per share, compared to
the prior year�s first quarter earnings of $70.6 million or $0.82
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).
� Three Months Ended December 31, 2008 � 2007 (in thousands except
per share amounts)
Reported GAAP earnings $ (42,678 ) $
70,604
Items impacting comparability1: �
Impairment of oil and gas producing properties 108,207 Impairment
of investment in partnership 1,085 Gain on life insurance proceeds
(2,312 ) � �
Operating Results $ 64,302 � $ 70,604 �
Reported GAAP earnings per share $ (0.53 ) $ 0.82
Items
impacting comparability1: � Impairment of oil and
gas producing properties 1.35 Impairment of investment in
partnership 0.01 Gain on life insurance proceeds (0.03 ) � �
Operating Results $ 0.80 � $ 0.82 �
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 financial
results when comparing the first quarters of fiscal 2009 and fiscal
2008. Excluding these items, Operating Results for the current
first quarter of $64.3 million or $0.80 per share decreased $6.3
million, or $0.02 per share, from the prior year�s first quarter.
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. The Company
is reporting financial results for four business segments:
Exploration and Production, Pipeline and Storage, Utility, and
Energy Marketing. Previously the Company reported separate results
for the Timber segment. During the quarter ended December 31, 2008,
the Company made the decision to eliminate the Timber segment as a
reportable segment based on the fact that the Timber operations do
not meet any of the quantitative thresholds specified by Generally
Accepted Accounting Principles. Results from the former Timber
segment are now included in the All Other category.
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 mainly in
California, in the Appalachian region and in the Gulf of
Mexico.
The Exploration and Production segment�s loss in the first
quarter of fiscal 2009 of $83.6 million, or $1.04 per share, is a
decrease of $117.6 million, or $1.43 per share, when compared with
the prior year�s first quarter. The decrease was mainly due to a
non-cash charge of $108.2 million to write down the value of
Seneca�s oil and natural gas producing properties.
Seneca uses the full cost method of accounting for determining
the book value of its oil and natural gas properties. This
accounting method requires that Seneca perform a quarterly �ceiling
test� to compare the present value of future revenues from its oil
and natural gas reserves based on period end spot prices (the
�ceiling�) with the book value of those reserves at the balance
sheet date. If the book value of the reserves exceeds the ceiling,
a non-cash charge must be recorded in order to reduce the book
value of the reserves to the calculated ceiling.
Excluding the impact of the ceiling test charge this quarter,
Operating Results in the Exploration and Production segment were
$24.7 million or $0.31 per share, compared to $34.0 million or
$0.39 per share in the first quarter of the prior year. The
decrease was primarily due to lower crude oil prices realized after
hedging and lower natural gas production. For the quarter ended
December 31, 2008, the weighted average oil price received by
Seneca (after hedging) was $64.34 per barrel (�Bbl�), a decrease of
$8.25 per Bbl, from the prior year�s first quarter. The weighted
average natural gas price received by Seneca (after hedging) for
the quarter ended December 31, 2008, was $8.90 per thousand cubic
feet (�Mcf�), an increase of $1.00 per Mcf compared to the prior
year�s first quarter.
Overall production for the quarter ended December 31, 2008 was
9.6 Bcfe, a decrease of 1.1 Bcfe compared to the prior year�s first
quarter. Hurricane related shut-ins were responsible for most of
the 1.2 Bcfe decrease in production of Seneca�s Gulf division. Two
significant producing properties were shut-in for the entire first
quarter due to repair work on third party pipelines and onshore
processing facilities. Production was also slightly lower in the
East division primarily due to compressor downtime and pipeline
constraints. Higher production in the West partially offset the
decreases in the other divisions.
Other items impacting Operating Results for the quarter were
higher lease operating expenses (�LOE�) and general and
administrative (�G&A�) expenses. The increase in LOE is mainly
due to higher production taxes related to increased production from
the High Island 24L and 23L fields located in the Gulf division,
higher property taxes and increased well repair costs associated
with higher than normal activity in the West, and an increase in
the number of producing properties in Appalachia. G&A expenses
increased primarily due to a bad debt charge related to a
customer�s bankruptcy filing. Additional staffing and associated
costs in the East division also contributed to the higher G&A
expenses.
Pipeline and Storage
Segment
The Pipeline and Storage segment operations are carried out by
National Fuel Gas Supply Corporation (�Supply Corporation�) and
Empire Pipeline Inc. (�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 $17.2 million, or
$0.21 per share, for the quarter ended December 31, 2008, increased
$4.4 million, or $0.06 per share, when compared with the same
period in the prior fiscal year. The increase is mainly the result
of higher transportation and storage revenues and higher efficiency
gas revenues. The increase in transportation and storage revenues
was largely due to the addition of several new contracts for firm
transportation service. The higher efficiency gas revenues were due
to higher transported volumes. Also contributing to the higher
earnings was an increase in the allowance for funds used during
construction related to the construction of the Empire Connector
that was placed in service in mid-December 2008. Because of the
mid-December start-up date, the Empire Connector did not make a
significant contribution to volumes or revenues for the quarter
ended December 31, 2008.
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 $22.1
million, or $0.28 per share, for the quarter ended December 31,
2008, increased $1.9 million, or $0.04 per share compared to the
prior year�s first quarter.
In the New York division, earnings increased $1.3 million. The
increase was due to lower operating expenses mainly related to the
rate of accrual for postretirement benefit expenses and lower
interest expense this quarter. A decrease in margins partially
offset the increase in earnings for the current quarter compared to
the prior year�s first quarter. The decrease in margins was
primarily due to the rate design change approved by the New York
State Public Service Commission�s December 28, 2007 rate order.
Earnings increased $0.6 million in the Pennsylvania division,
primarily due to weather that was colder than the prior year. This
increase was partially offset by higher bad debt expense.
Energy Marketing
National Fuel Resources, Inc. (�NFR�) comprises the Company�s
Energy Marketing segment. NFR markets natural gas to industrial,
wholesale, commercial, public authority and residential customers
primarily in western and central New York and northwestern
Pennsylvania, offering competitively priced natural gas to its
customers.
The Energy Marketing segment�s earnings for the quarter ended
December 31, 2008 of $0.6 million decreased $0.4 million from the
first quarter last year. This decrease is mainly due to lower
margins.
Corporate and All
Other
Other active, wholly owned subsidiaries of the Company include
Highland Forest Resources, Inc., a corporation that markets high
quality hardwoods from New York and Pennsylvania land holdings;
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 first
quarter of fiscal 2009 decreased $1.6 million when compared to the
prior year�s first quarter. The comparability of the quarterly
results is impacted by a $2.3 million gain recognized on
corporate-owned executive life insurance policies and a $1.1
million impairment in the value of Horizon Power�s 50 percent
investment in Energy Systems North East, LLC, a partnership that
owns an 80-megawatt combined cycle, natural gas-fired power plant
in the town of North East, Pennsylvania. Excluding these items,
Operating Results decreased $2.8 million due to lower margins from
the timber operations as a result of decreased sales volumes and
prices, lower margins experienced in the landfill gas operations,
and a decrease in income from unconsolidated subsidiaries. Also
contributing to the decrease in Operating Results were higher
interest expense and lower interest income. Lower corporate
operating expenses partially offset the decrease in Operating
Results. Expenses related to a proxy contest in the prior year did
not recur in fiscal 2009.
EARNINGS GUIDANCE
The Company is revising its earnings guidance for fiscal 2009 to
reflect actual first quarter results as well as a change in pricing
assumptions for crude oil and natural gas. The revised GAAP
earnings range is $1.10 to $1.30 per share. This includes the
impairment charge ($1.35 per share) noted previously, forecast oil
and gas production for fiscal 2009 for the Exploration and
Production segment in the range between 38 and 44 Bcfe, hedges
currently in place, and NYMEX equivalent flat commodity pricing on
non-hedged volumes exclusive of basis differential of $5.50 per
MMBtu for natural gas and $45.00 per Bbl for crude oil.
EARNINGS TELECONFERENCE
The Company will host a conference call on Friday, February 6,
2009, 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) 1-866-783-2146, and using the passcode
�16850387.� For those unable to listen to the live conference call,
a replay will be available at approximately 2 p.m. (Eastern Time)
at the same Web site link and by phone at (toll free)
1-888-286-8010 using passcode �64283323.� Both the webcast and
telephonic replay will be available until the close of business on
Friday, February 13, 2009.
Additional information about National Fuel is available on its
Internet Web site: 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: financial and economic conditions, including the
availability of credit, and their effect on the Company�s ability
to obtain financing on acceptable terms for working capital,
capital expenditures and other investments; occurrences affecting
the Company�s ability to obtain financing under credit lines or
other credit facilities or through the issuance of commercial
paper, other short-term notes or debt or equity securities,
including any downgrades in the Company�s credit ratings and
changes in interest rates and other capital market conditions;
changes in economic conditions, including global, national or
regional recessions, and their effect on the demand for, and
customers� ability to pay for, the Company�s products and services;
the creditworthiness or performance of the Company�s key suppliers,
customers and counterparties; economic disruptions or uninsured
losses resulting from terrorist activities, acts of war, major
accidents, fires, hurricanes, other severe weather, pest
infestation or other natural disasters; changes in actuarial
assumptions, the interest rate environment and the return on
plan/trust assets related to the Company�s pension and
post-retirement benefits, which can affect future funding
obligations and costs and plan liabilities; changes in demographic
patterns and weather conditions; 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;
impairments under the SEC�s full cost ceiling test for natural gas
and oil reserves; uncertainty of oil and natural gas reserve
estimates; ability to successfully identify, drill for and produce
economically viable natural gas and oil reserves, including
shortages, delays or unavailability of equipment and services
required in drilling operations; 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 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 natural 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; ability to successfully identify and finance
acquisitions or other investments and ability to operate and
integrate existing and any subsequently acquired business or
properties; 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 or activist
shareholder campaigns to effect changes at the Company; 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 DECEMBER
31, 2008 � Exploration & Pipeline & Energy Corporate /
(Thousands of Dollars) Production � Storage � Utility � Marketing �
All Other � Consolidated �
First quarter 2008 GAAP earnings
$ 34,022 $ 12,778 $ 20,217 $ 954 $ 2,633 $ 70,604 �
Drivers of
operating results Higher (lower) crude oil prices (4,428 )
(4,428 ) Higher (lower) natural gas prices 3,005 3,005 Higher
(lower) natural gas production (5,907 ) (5,907 ) Higher (lower)
crude oil production 156 156 Lower (higher) lease operating
expenses (1,325 ) (1,325 ) Lower (higher) depreciation / depletion
586 586 � Higher (lower) transportation and storage revenues 1,218
1,218 Higher (lower) efficiency gas revenues 1,306 1,306 Lower
(higher) operating expenses (1,652 ) 1,249 1,080 677 � Colder
weather in Pennsylvania 824 824 � Higher (lower) income from
unconsolidated subsidiaries (840 ) (840 ) � Higher (lower) margins
(1,419 ) (152 ) (1,664 ) (3,235 ) � Higher AFUDC * 2,055 2,055
Higher (lower) interest income (1,624 ) (1,220 ) (2,844 ) (Higher)
lower interest expense 1,515 771 (544 ) 1,742 � All other /
rounding � 302 � � � (181 ) � � 446 � � � (203 ) � � 344 � � � 708
� �
First quarter 2009 operating results 24,650 17,176
22,088 599 (211 ) 64,302
Items impacting comparability: Gain
on life insurance policies 2,312 2,312 Impairment of investment in
partnership (1,085 ) (1,085 ) Impairment of oil and gas properties
� (108,207 ) � � � � � � � � � � (108,207 )
First quarter 2009
GAAP earnings $ (83,557 ) � $ 17,176 � � $ 22,088 � � $ 599 � �
$ 1,016 � � $ (42,678 ) � � * AFUDC = Allowance for Funds Used
During Construction � � � � � �
NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS PER
SHARE QUARTER ENDED DECEMBER 31, 2008 � Exploration
& Pipeline & Energy
Corporate /
Production � Storage � Utility � Marketing � All Other �
Consolidated �
First quarter 2008 GAAP earnings $ 0.39 $
0.15 $ 0.24 $ 0.01 $ 0.03 $ 0.82 �
Drivers of operating
results Higher (lower) crude oil prices (0.06) (0.06) Higher
(lower) natural gas prices 0.04 0.04 Higher (lower) natural gas
production (0.07) (0.07) Higher (lower) crude oil production - -
Lower (higher) lease operating expenses (0.02) (0.02) Lower
(higher) depreciation / depletion 0.01 0.01 � Higher (lower)
transportation and storage revenues 0.02 0.02 Higher (lower)
efficiency gas revenues 0.02 0.02 Lower (higher) operating expenses
(0.02) 0.02 0.01 0.01 � Colder weather in Pennsylvania 0.01 0.01 �
Higher (lower) income from unconsolidated subsidiaries (0.01)
(0.01) � Higher (lower) margins (0.02) - (0.02) (0.04) � Higher
AFUDC * 0.03 0.03 Higher (lower) interest income (0.02) (0.02)
(0.04) (Higher) lower interest expense 0.02 0.01 (0.01) 0.02 � All
other / rounding 0.04 � (0.01) � 0.02 � - � 0.01 � 0.06 �
First
quarter 2009 operating results 0.31 0.21 0.28 0.01 (0.01) 0.80
Items impacting comparability: Gain on life insurance
policies 0.03 0.03 Impairment of investment in partnership (0.01)
(0.01) Impairment of oil and gas properties (1.35) � � � � � � � �
� (1.35)
First quarter 2009 GAAP earnings $ (1.04) � $ 0.21
� $ 0.28 � $ 0.01 � $ 0.01 � $ (0.53) � � * AFUDC = Allowance for
Funds Used During Construction �
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES � � (Thousands of Dollars, except per share
amounts) Three Months Ended December 31, (Unaudited)
SUMMARY OF OPERATIONS
2008 2007 Operating Revenues $ 607,163 � $ 568,268 � � Operating
Expenses: Purchased Gas 328,733 278,010 Operation and Maintenance
101,334 102,455 Property, Franchise and Other Taxes 18,762 17,672
Depreciation, Depletion and Amortization 42,342 44,121 Impairment
of Oil and Gas Producing Properties � 182,811 � � - � 673,982
442,258 � Operating Income (Loss) (66,819 ) 126,010 � Other Income
(Expense): Income (Loss) from Unconsolidated Subsidiaries (686 )
2,275 Other Income 5,327 1,253 Interest Income 1,892 3,093 Interest
Expense on Long-Term Debt (18,056 ) (16,289 ) Other Interest
Expense � 375 � � (724 ) � Income (Loss) Before Income Taxes
(77,967 ) 115,618 � Income Tax Expense (Benefit) � (35,289 ) �
45,014 � �
Net Income (Loss) Available for Common Stock $
(42,678 ) $ 70,604 � �
Earnings (Loss) Per Common Share:
Basic $ (0.54 ) $ 0.84 � Diluted $ (0.53 ) $ 0.82 � �
Weighted
Average Common Shares: Used in Basic Calculation � 79,289,005 �
� 83,611,177 � Used in Diluted Calculation � 80,167,893 � �
85,819,534 � � �
NATIONAL FUEL GAS COMPANY AND
SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
(Unaudited) � December 31, September 30, (Thousands of
Dollars) � 2008 � 2008 �
ASSETS Property, Plant and
Equipment $4,982,596 $4,873,969 Less - Accumulated Depreciation,
Depletion and Amortization 1,938,841 � 1,719,869 Net Property,
Plant and Equipment 3,043,755 � 3,154,100 � Current Assets: Cash
and Temporary Cash Investments 136,685 68,239 Hedging Collateral
Deposits 3,743 1 Receivables - Net 229,220 185,397 Unbilled Utility
Revenue 79,404 24,364 Gas Stored Underground 64,279 87,294
Materials and Supplies - at average cost 25,694 31,317 Unrecovered
Purchased Gas Costs 26,716 37,708 Other Current Assets 56,385
65,158 Deferred Income Taxes 6,340 � - Total Current Assets 628,466
� 499,478 � Other Assets: Recoverable Future Taxes 83,541 82,506
Unamortized Debt Expense 13,531 13,978 Other Regulatory Assets
190,890 189,587 Deferred Charges 4,233 4,417 Other Investments
69,801 80,640 Investments in Unconsolidated Subsidiaries 13,443
16,279 Goodwill 5,476 5,476 Intangible Assets 25,620 26,174 Prepaid
Post-Retirement Benefit Costs 20,775 21,034 Fair Value of
Derivative Financial Instruments 111,303 28,786 Other 13,353 �
7,732 Total Other Assets 551,966 � 476,609 Total Assets $4,224,187
� $4,130,187 �
CAPITALIZATION AND LIABILITIES
Capitalization: Comprehensive Shareholders' Equity Common Stock, $1
Par Value Authorized - 200,000,000 Shares; Issued and Outstanding -
79,512,716 Shares and 79,120,544 Shares, Respectively $79,513
$79,121 Paid in Capital 580,377 567,716 Earnings Reinvested in the
Business 884,476 � 953,799 Total Common Shareholders' Equity Before
Items of Other Comprehensive Income 1,544,366 1,600,636 Accumulated
Other Comprehensive Income 50,101 � 2,963 Total Comprehensive
Shareholders' Equity 1,594,467 1,603,599 Long-Term Debt, Net of
Current Portion 999,000 � 999,000 Total Capitalization 2,593,467 �
2,602,599 � Current and Accrued Liabilities: Notes Payable to Banks
and Commercial Paper 66,000 - Current Portion of Long-Term Debt
100,000 100,000 Accounts Payable 197,968 142,520 Amounts Payable to
Customers 4,715 2,753 Dividends Payable 25,841 25,714 Interest
Payable on Long-Term Debt 15,557 22,114 Customer Advances 30,093
33,017 Other Accruals and Current Liabilities 65,415 45,220
Deferred Income Taxes - 1,871 Fair Value of Derivative Financial
Instruments 2,941 � 1,362 Total Current and Accrued Liabilities
508,530 � 374,571 � Deferred Credits: Deferred Income Taxes 604,044
634,372 Taxes Refundable to Customers 18,452 18,449 Unamortized
Investment Tax Credit 4,516 4,691 Cost of Removal Regulatory
Liability 103,877 103,100 Other Regulatory Liabilities 96,378
91,933 Pension and Other Post-Retirement Liabilities 73,076 78,909
Asset Retirement Obligations 92,597 93,247 Other Deferred Credits
129,250 � 128,316 Total Deferred Credits 1,122,190 � 1,153,017
Commitments and Contingencies - � - Total Capitalization and
Liabilities $4,224,187 � $4,130,187 � �
NATIONAL FUEL GAS
COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF
CASH FLOWS (Unaudited) � Three Months Ended December 31,
(Thousands of Dollars) � 2008 � 2007 � Operating Activities: Net
Income (Loss) Available for Common Stock ($42,678 ) $ 70,604
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by
Operating Activities: Impairment of Oil and Gas Producing
Properties 182,811 - Depreciation, Depletion and Amortization
42,342 44,121 Deferred Income Taxes (69,626 ) 5,296 (Income) Loss
from Unconsolidated Subsidiaries, Net of Cash Distributions 1,032
431 Impairment of Investment in Partnership 1,804 - Excess Tax
Benefits Associated with Stock-Based Compensation Awards (5,927 )
(16,275 ) Other 6,628 4,916 Change in: Hedging Collateral Deposits
(3,742 ) 2,070 Receivables and Unbilled Utility Revenue (98,914 )
(127,894 ) Gas Stored Underground and Materials and Supplies 20,971
(186 ) Unrecovered Purchased Gas Costs 10,992 2,583 Prepayments and
Other Current Assets 14,958 10,422 Accounts Payable 3,705 42,398
Amounts Payable to Customers 1,962 (1,228 ) Customer Advances
(2,924 ) 635 Other Accruals and Current Liabilities 30,407 25,400
Other Assets 12,560 10,163 Other Liabilities � � (6,217 ) � � 1,889
� Net Cash Provided by Operating Activities � $ 100,144 � � $
75,345 � � Investing Activities: Capital Expenditures ($84,268 )
($69,744 ) Cash Held in Escrow - 58,397 Net Proceeds from Sale of
Oil and Gas Producing Properties - 1,500 Other � � (632 ) � � (761
) Net Cash Used in Investing Activities � � ($84,900 ) � � ($10,608
) � Financing Activities: Change in Notes Payable to Banks and
Commercial Paper $ 66,000 $ - Excess Tax Benefits Associated with
Stock-Based Compensation Awards 5,927 16,275 Reduction of Long-Term
Debt - (24 ) Dividends Paid on Common Stock (25,714 ) (25,873 )
Proceeds From Issuance of Common Stock � � 6,989 � � � 9,846 � Net
Cash Provided by Financing Activities � $ 53,202 � � $ 224 � Net
Increase in Cash and Temporary Cash Investments 68,446 64,961 Cash
and Temporary Cash Investments at Beginning of Period � � 68,239 �
� � 124,806 � Cash and Temporary Cash Investments at December 31 �
$ 136,685 � � $ 189,767 � �
NATIONAL FUEL GAS COMPANY AND
SUBSIDIARIES � � �
SEGMENT OPERATING RESULTS AND
STATISTICS (UNAUDITED) � Three Months Ended (Thousands
of Dollars, except per share amounts) December 31,
EXPLORATION AND PRODUCTION
SEGMENT
2008 2007 Variance Total Operating Revenues $ 96,712 � $ 107,955 �
$ (11,243 ) � Operating Expenses: Operation and Maintenance:
General and Administrative Expense 7,092 5,580 1,512 Lease
Operating Expense 12,614 11,727 887 All Other Operation and
Maintenance Expense 2,630 1,736 894 Property, Franchise and Other
Taxes (Lease Operating Expense) 2,955 1,801 1,154 Depreciation,
Depletion and Amortization 23,144 24,045 (901 ) Impairment of Oil
and Gas Producing Properties � 182,811 � � - � � 182,811 � �
231,246 � � 44,889 � � 186,357 � � Operating Income (Loss) (134,534
) 63,066 (197,600 ) � Other Income (Expense): Interest Income 1,389
3,888 (2,499 ) Other Income - 82 (82 ) Other Interest Expense �
(8,814 ) � (11,144 ) � 2,330 � � Income (Loss) Before Income Taxes
(141,959 ) 55,892 (197,851 ) Income Tax Expense (Benefit) � (58,402
) � 21,870 � � (80,272 ) Net Income (Loss) $ (83,557 ) $ 34,022 � $
(117,579 ) � Net Income (Loss) Per Share (Diluted) $ (1.04 ) $ 0.39
� $ (1.43 ) � � � � Three Months Ended December 31,
PIPELINE AND STORAGE SEGMENT
2008 2007 Variance Revenues from External Customers $ 35,267 $
31,884 $ 3,383 Intersegment Revenues � 20,837 � � 20,347 � � 490 �
Total Operating Revenues � 56,104 � � 52,231 � � 3,873 � �
Operating Expenses: Purchased Gas 14 5 9 Operation and Maintenance
16,147 15,999 148 Property, Franchise and Other Taxes 4,239 4,273
(34 ) Depreciation, Depletion and Amortization � 7,853 � � 8,109 �
� (256 ) � 28,253 � � 28,386 � � (133 ) � Operating Income 27,851
23,845 4,006 � Other Income (Expense): Interest Income 13 94 (81 )
Other Income 2,787 690 2,097 Interest Expense on Long-Term Debt -
(16 ) 16 Other Interest Expense � (3,667 ) � (3,035 ) � (632 ) �
Income Before Income Taxes 26,984 21,578 5,406 Income Tax Expense �
9,808 � � 8,800 � � 1,008 � Net Income $ 17,176 � $ 12,778 � $
4,398 � � Net Income Per Share (Diluted) $ 0.21 � $ 0.15 � $ 0.06 �
� �
NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES � � �
SEGMENT OPERATING RESULTS AND STATISTICS (UNAUDITED)
� Three Months Ended (Thousands of Dollars, except per share
amounts) December 31,
UTILITY SEGMENT
2008 2007 Variance Revenues from External Customers $ 349,637 $
327,125 $ 22,512 Intersegment Revenues � 4,553 � � 4,299 � � 254 �
Total Operating Revenues � 354,190 � � 331,424 � � 22,766 � �
Operating Expenses: Purchased Gas 241,896 219,123 22,773 Operation
and Maintenance 49,614 50,981 (1,367 ) Property, Franchise and
Other Taxes 11,126 11,098 28 Depreciation, Depletion and
Amortization � 9,723 � � 10,042 � � (319 ) � 312,359 � � 291,244 �
� 21,115 � � Operating Income 41,831 40,180 1,651 � Other Income
(Expense): Interest Income 796 198 598 Other Income 275 345 (70 )
Other Interest Expense � (6,066 ) � (7,251 ) � 1,185 � � Income
Before Income Taxes 36,836 33,472 3,364 Income Tax Expense � 14,748
� � 13,255 � � 1,493 � Net Income $ 22,088 � $ 20,217 � $ 1,871 � �
Net Income Per Share (Diluted) $ 0.28 � $ 0.24 � $ 0.04 � � � � �
Three Months Ended December 31,
ENERGY MARKETING SEGMENT
2008 2007 Variance Operating Revenues $ 115,007 � $ 86,719 � $
28,288 � � Operating Expenses: Purchased Gas 112,450 83,929 28,521
Operation and Maintenance 1,468 1,346 122 Property, Franchise and
Other Taxes 7 10 (3 ) Depreciation, Depletion and Amortization � 11
� � 11 � � - � � 113,936 � � 85,296 � � 28,640 � � Operating Income
1,071 1,423 (352 ) � Other Income (Expense): Interest Income 3 25
(22 ) Other Income 43 58 (15 ) Other Interest Expense � (135 ) �
(84 ) � (51 ) � Income Before Income Taxes 982 1,422 (440 ) Income
Tax Expense � 383 � � 468 � � (85 ) Net Income $ 599 � $ 954 � $
(355 ) � Net Income Per Share (Diluted) $ 0.01 � $ 0.01 � $ - � �
NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES � � �
SEGMENT OPERATING RESULTS AND STATISTICS (UNAUDITED)
� Three Months Ended (Thousands of Dollars, except per share
amounts) December 31,
ALL OTHER
2008 2007 Variance Revenues from External Customers $ 10,325 $
14,450 $ (4,125 ) Intersegment Revenues � 2,322 � � 2,714 � � (392
) Total Operating Revenues � 12,647 � � 17,164 � � (4,517 ) �
Operating Expenses: Purchased Gas 1,960 2,202 (242 ) Operation and
Maintenance 9,532 11,017 (1,485 ) Property, Franchise and Other
Taxes 365 420 (55 ) Depreciation, Depletion and Amortization �
1,438 � � 1,742 � � (304 ) � 13,295 � � 15,381 � � (2,086 ) �
Operating Income (Loss) (648 ) 1,783 (2,431 ) � Other Income
(Expense): Income (Loss) from Unconsolidated Subsidiaries (686 )
2,275 (2,961 ) Interest Income 249 405 (156 ) Other Income 1 9 (8 )
Other Interest Expense � (773 ) � (1,147 ) � 374 � � Income (Loss)
Before Income Taxes (1,857 ) 3,325 (5,182 ) Income Tax Expense
(Benefit) � (989 ) � 589 � � (1,578 ) Net Income (Loss) $ (868 ) $
2,736 � $ (3,604 ) � Net Income (Loss) Per Share (Diluted) $ (0.01
) $ 0.03 � $ (0.04 ) �
NATIONAL FUEL GAS COMPANY AND
SUBSIDIARIES � � �
SEGMENT OPERATING RESULTS AND
STATISTICS (UNAUDITED) � Three Months Ended (Thousands
of Dollars, except per share amounts) December 31,
CORPORATE
2008 2007 Variance Revenues from External Customers $ 215 $ 135 $
80 Intersegment Revenues � 1,003 � � 961 � � 42 � Total Operating
Revenues $ 1,218 � $ 1,096 � $ 122 � � Operating Expenses:
Operation and Maintenance 3,365 5,141 (1,776 ) Property, Franchise
and Other Taxes 70 70 - Depreciation, Depletion and Amortization �
173 � � 172 � � 1 � � 3,608 � � 5,383 � � (1,775 ) � Operating Loss
(2,390 ) (4,287 ) 1,897 � Other Income (Expense): Interest Income
20,984 22,704 (1,720 ) Other Income 2,221 69 2,152 Interest Expense
on Long-Term Debt (18,056 ) (16,273 ) (1,783 ) Other Interest
Expense � (1,712 ) � (2,284 ) � 572 � � Income (Loss) Before Income
Taxes 1,047 (71 ) 1,118 Income Tax Expense (Benefit) � (837 ) � 32
� � (869 ) Net Income (Loss) $ 1,884 � $ (103 ) $ 1,987 � � Net
Income (Loss) Per Share (Diluted) $ 0.02 � $ - � $ 0.02 � � � �
Three Months Ended December 31,
INTERSEGMENT ELIMINATIONS
2008 2007 Variance Intersegment Revenues $ (28,715 ) $ (28,321 ) $
(394 ) � Operating Expenses: Purchased Gas (27,587 ) (27,249 ) (338
) Operation and Maintenance � (1,128 ) � (1,072 ) � (56 ) � (28,715
) � (28,321 ) � (394 ) � Operating Income - - - � Other Income
(Expense): Interest Income (21,542 ) (24,221 ) 2,679 Other Interest
Expense � 21,542 � � 24,221 � � (2,679 ) � Net Income $ - � $ - � $
- � � Net Income Per Share (Diluted) $ - � $ - � $ - � �
NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES � � � � �
�
SEGMENT INFORMATION (Continued) (Thousands of Dollars) � �
Three Months Ended December 31, (Unaudited) � Increase 2008 2007
(Decrease) �
Capital Expenditures:
Exploration and Production (1) $ 86,410 $ 30,666 $ 55,744 Pipeline
and Storage (2) 19,501 25,371 (5,870 ) Utility 13,589 12,709 880
Energy Marketing � 2 � � 9 � (7 ) Total Reportable Segments 119,502
68,755 50,747 All Other 52 982 (930 ) Corporate 31 7 24
Eliminations � (344 ) � - � (344 ) Total Capital Expenditures $
119,241 � $ 69,744 $ 49,497 � � �
(1) Amount for the three months
ended December 31, 2008 includes $51.7 million of accrued capital
expenditures, the majority of which was for lease acquisitions in
the Appalachian region. This amount has been excluded from the
Consolidated Statement of Cash Flows at December 31, 2008 since it
represents a non-cash investing activity at that date.
�
(2) Amount for the three months
ended December 31, 2008 excludes $16.8 million of capital
expenditures related to the Empire Connector project accrued at
September 30, 2008 and paid during the three months ended December
31, 2008. This amount was excluded from the Consolidated Statement
of Cash Flows at September 30, 2008 since it represented a non-cash
investing activity at that date. The amount has been included in
the Consolidated Statement of Cash Flows at December 31, 2008.
� �
DEGREE DAYS
� Percent Colder (Warmer) Than:
Three Months Ended December 31
Normal 2008 2007 Normal Last Year � Buffalo, NY 2,260 2,313 2,094
2.3 10.5 Erie, PA 2,081 2,067 1,871 (0.7 ) 10.5 � � �
NATIONAL
FUEL GAS COMPANY AND SUBSIDIARIES �
EXPLORATION AND PRODUCTION
INFORMATION
� � Three Months Ended December 31, Increase 2008 2007 (Decrease) �
Gas Production/Prices:
Production (MMcf) Gulf Coast 1,746 2,826 (1,080 ) West Coast 1,022
1,027 (5 ) Appalachia � 1,851 � 1,917 � (66 ) Total Production �
4,619 � 5,770 � (1,151 ) � Average Prices (Per Mcf) Gulf Coast $
7.04 $ 7.14 $ (0.10 ) West Coast 5.02 6.77 (1.75 ) Appalachia 8.53
7.45 1.08 Weighted Average 7.19 7.18 0.01 Weighted Average after
Hedging 8.90 7.90 1.00 �
Oil Production/Prices:
Production (Thousands of Barrels) Gulf Coast 128 156 (28 ) West
Coast 682 629 53 Appalachia � 15 � 37 � (22 ) Total Production �
825 � 822 � 3 � � Average Prices (Per Barrel) Gulf Coast $ 56.19 $
89.84 $ (33.65 ) West Coast 48.01 81.80 (33.79 ) Appalachia 69.06
84.12 (15.06 ) Weighted Average 49.66 83.43 (33.77 ) Weighted
Average after Hedging 64.34 72.59 (8.25 ) � Total Production
(MMcfe) � 9,569 � 10,702 � (1,133 ) �
Selected Operating Performance
Statistics:
General & Administrative Expense per Mcfe (1) $ 0.74 $ 0.52 $
0.22 Lease Operating Expense per Mcfe (1) $ 1.63 $ 1.26 $ 0.37
Depreciation, Depletion & Amortization per Mcfe (1) $ 2.42 $
2.25 $ 0.17 � �
(1) Refer to page 13 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 the Remaining Nine Months of Fiscal
2009 �
SWAPS
Volume
Average Hedge Price
Oil 0.9 MMBBL $83.12 / BBL Gas 7.5 BCF $9.41 / MCF �
Hedging
Summary for Fiscal 2010 �
SWAPS
Volume
Average Hedge Price
Oil 0.6 MMBBL $102.52 / BBL Gas 3.6 BCF $10.64 / MCF �
Hedging
Summary for Fiscal 2011 �
SWAPS
Volume
Average Hedge Price
Oil 0.1 MMBBL $125.25 / BBL Gas 1.5 BCF $8.29 / MCF �
Gross Wells in Process of
Drilling
Quarter Ended December 31,
2008
Total
Gulf
West
East
Company
�
Wells in Process - Beginning of Period Exploratory 1.00
0.00 25.00 26.00 Developmental 1.00 1.00 123.00 125.00
Wells
Commenced Exploratory 0.00 0.00 4.00 4.00 Developmental 0.00
17.00 49.00 66.00
Wells Completed Exploratory 1.00 0.00 0.00
1.00 Developmental 0.00 10.00 75.00 85.00
Wells Plugged &
Abandoned Exploratory 0.00 0.00 2.00 2.00 Developmental 1.00
0.00 0.00 1.00
Wells in Process - End of Period Exploratory
0.00 0.00 27.00 27.00 Developmental 0.00 8.00 97.00 105.00 � �
Net Wells in Process of
Drilling
Quarter Ended December 31,
2008
Total
Gulf
West
East
Company
�
Wells in Process - Beginning of Period Exploratory 0.29
0.00 24.00 24.29 Developmental 0.30 1.00 122.00 123.30
Wells
Commenced Exploratory 0.00 0.00 2.50 2.50 Developmental 0.00
17.00 49.00 66.00
Wells Completed Exploratory 0.29 0.00 0.00
0.29 Developmental 0.00 10.00 75.00 85.00
Wells Plugged &
Abandoned Exploratory 0.00 0.00 2.00 2.00 Developmental 0.30
0.00 0.00 0.30
Wells in Process - End of Period Exploratory
0.00 0.00 24.50 24.50 Developmental 0.00 8.00 96.00 104.00 �
NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES � � � �
Pipeline & Storage
Throughput - (millions of cubic feet - MMcf)
� Three Months Ended December 31, Increase 2008 2007 (Decrease)
Firm Transportation - Affiliated 34,941 31,336 3,605 Firm
Transportation - Non-Affiliated 75,374 61,547 13,827 Interruptible
Transportation 1,792 1,083 709 112,107 93,966 18,141 �
Utility
Throughput - (MMcf) Three Months Ended December 31, Increase
2008 2007 (Decrease) Retail Sales: Residential Sales 18,166 17,127
1,039 Commercial Sales 2,911 2,877 34 Industrial Sales 143 123 20
21,220 20,127 1,093 Off-System Sales 512 1,031 (519) Transportation
17,473 17,827 (354) 39,205 38,985 220 �
Energy Marketing
Volumes Three Months Ended December 31, Increase 2008 2007
(Decrease) Natural Gas (MMcf) 13,136 10,841 2,295 �
NATIONAL
FUEL GAS COMPANY AND SUBSIDIARIES FISCAL 2009
EARNINGS GUIDANCE AND SENSITIVITY � � � � � � �
Earnings per
share sensitivity to changes Fiscal 2009 (Diluted earnings
per share guidance*) from prices used in guidance* ^ �
$1 change per MMBtu gas $5 change per Bbl oil Earnings Range
Increase � Decrease Increase � Decrease � Consolidated Earnings
$1.10 - $1.30 + $0.07 - $0.07 + $0.05 - $0.05 � � � � * Please
refer to forward looking statement footnote beginning at page 6 of
this document. �
^ This sensitivity table is
current as of February 4, 2009 and only considers revenue from the
Exploration and Production segment's crude oil and natural gas
sales. This revenue is based upon pricing used in the Company's
earnings forecast. For the last three quarters of its fiscal 2009
earnings forecast, the Company is utilizing flat NYMEX equivalent
commodity pricing, exclusive of basis differential, of $5.50 per
MMBtu for natural gas and $45 per Bbl for crude oil. 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 hedge contracts at their maturity. This table
does not factor in any possible additional reduction to earnings
due to future "ceiling test" impairments as described in the text
of this earnings release.
�
�
NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES � �
Quarter Ended December 31
(unaudited)
2008 2007 � Operating Revenues $ 607,163,000 � $ 568,268,000 � Net
Income (Loss) Available for Common Stock $ (42,678,000 ) $
70,604,000 � Earnings (Loss) Per Common Share: Basic $ (0.54 ) $
0.84 Diluted $ (0.53 ) $ 0.82 � Weighted Average Common Shares:
Used in Basic Calculation � 79,289,005 � � 83,611,177 Used in
Diluted Calculation � 80,167,893 � � 85,819,534 � �
Twelve Months Ended December 31
(unaudited)
� Operating Revenues $ 2,439,256,000 � $ 2,117,176,000 � Income
from Continuing Operations $ 155,446,000 $ 221,591,000 Income from
Discontinued Operations, Net of Tax � - � � 131,948,000 Net Income
Available for Common Stock $ 155,446,000 � $ 353,539,000 � Earnings
Per Common Share: Basic: Income from Continuing Operations $ 1.91 $
2.66 Income from Discontinued Operations � - � � 1.58 Net Income
Available for Common Stock $ 1.91 � $ 4.24 � Diluted: Income from
Continuing Operations $ 1.87 $ 2.59 Income from Discontinued
Operations � - � � 1.54 Net Income Available for Common Stock $
1.87 � $ 4.13 � Weighted Average Common Shares: Used in Basic
Calculation � 81,217,898 � � 83,376,508 Used in Diluted Calculation
� 83,112,216 � � 85,541,214
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