National Fuel Gas Company (“National Fuel” or the “Company”)
(NYSE:NFG) today announced consolidated earnings for the third
quarter of fiscal 2009 and for the nine months ended June 30,
2009.
HIGHLIGHTS
- Earnings for the third quarter
were $42.9 million or $0.53 per share, a decrease of $17.0 million,
or $0.19 per share from the third quarter of 2008. A 33% decrease
in average commodity prices realized in the quarter this year in
the Exploration and Production segment was the main driver of the
decrease in earnings.
- Production in the Exploration
and Production segment for the current quarter increased over 12%
with increases in all three divisions. Appalachian and Gulf of
Mexico production each increased 16%. California production
increased 7% during the quarter. Total production for the entire
2009 fiscal year is expected to be in the upper half of the
previously announced range of 38 to 44 billion cubic feet
equivalent (“Bcfe”).
- Seneca Resources Corporation
(“Seneca”) and joint-venture partner EOG Resources, Inc. (“EOG”)
have now completed and flow tested four horizontal Marcellus Shale
wells at an average initial production (“IP”) rate of 2.3 million
cubic feet per day (“MMCFD”). Seneca estimates 4 to 8 trillion
cubic feet (“TCF”) of net risked Marcellus resource potential
across an area of 720,000 acres that it considers to be prospective
in the Marcellus Shale.
- The Company is revising its GAAP
earnings guidance range for fiscal 2009 to a range of $1.20 to
$1.30 per share. The previous guidance range had been $0.95 to
$1.10 per share.
- The Company’s preliminary GAAP
earnings guidance for fiscal 2010 is in the range of $2.30 to $2.60
per share. The 2010 preliminary guidance includes oil and gas
production for the Exploration and Production segment in the range
of 42 to 48 billion cubic feet equivalent (“Bcfe”) and is based on
an assumed average NYMEX price, exclusive of basis differential, of
$5.00 per Million British Thermal Units (“MMBtu”) for natural gas
and $75.00 per barrel (“Bbl”) for crude oil.
- A conference call is scheduled
for Friday, August 7, 2009, at 11:00 a.m. Eastern Time.
MANAGEMENT COMMENTS
David F. Smith, Chief Executive Officer and President of
National Fuel Gas Company stated: “It’s no surprise that the
dramatic drop in commodity prices compared to a year ago had a
considerable impact on the earnings of our Exploration and
Production segment and Pipeline and Storage segment. But putting
aside the effect of commodity price changes, the third quarter was
another strong quarter for the Company. Production was up 12% over
the prior year, and our regulated operations delivered another
quarter of consistent results.
“We continue to execute on our Appalachian growth strategy. Last
month, we spudded our first Seneca operated Marcellus Shale
horizontal well and we commenced construction of National Fuel Gas
Midstream Corporation’s first Appalachian-region gathering system.
While the Marcellus Shale remains our top priority, we believe the
current economic climate will create opportunities to invest in
additional energy properties, such as our recently announced
acquisition of production properties in California. The balance
among our various operating segments continues to provide a solid
base of earnings and financial strength to allow us to capitalize
on these opportunities and others going forward.
“As we prepare for our next heating season, we are injecting
natural gas into storage at rates that are substantially below last
year’s prices. These lower prices should help our customers
moderate their utility bills over the upcoming heating season.”
SUMMARY OF RESULTS
National Fuel had consolidated earnings for the quarter ended
June 30, 2009, of $42.9 million or $0.53 per share, a decrease of
$17.0 million, or $0.19 per share, from the prior year’s third
quarter earnings of $59.9 million or $0.72 per share. The per share
amounts reflect a lower number of shares outstanding in the current
quarter resulting mainly from the impact of the Company’s
repurchase of approximately 5.2 million shares of National Fuel
common stock in the prior fiscal year. (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 discussions
of earnings and operating results before items impacting
comparability (“Operating Results”) are stated on an after tax
basis, unless otherwise noted.)
Consolidated earnings for the nine months ended June 30, 2009,
of $73.7 million, or $0.92 per share, decreased $151.8 million, or
$1.73 per share, from the same period in the prior year, where
earnings were $225.5 million, or $2.65 per share.
Three Months Nine Months Ended June 30, Ended
June 30, 2009 2008 2009 2008
(in thousands except per share amounts)
Reported GAAP
earnings $ 42,904 $ 59,855 $ 73,710 $ 225,463
Items
impacting comparability1: Gain on sale of turbine
(586 ) 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 $ 42,904 $ 59,855 $ 180,690 $
224,877
Reported GAAP earnings per share $
0.53 $ 0.72 $ 0.92 $ 2.65
Items impacting
comparability1: Gain on sale of turbine (0.01 )
Impairment of oil and gas producing properties 1.35 Impairment of
investment in partnership 0.01 Gain on life insurance proceeds
(0.03 ) Earnings excluding these items
$ 0.53 $ 0.72 $ 2.25 $ 2.64
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 financial
results when comparing the nine months ended June 30, 2009, to the
comparable period in fiscal 2008. Excluding these items, Operating
Results for the nine months ended June 30, 2009, of $180.7 million,
or $2.25 per share, decreased $44.2 million, or $0.39 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 within 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 of
Mexico.
The Exploration and Production segment’s earnings in the third
quarter of fiscal 2009 of $27.1 million, or $0.33 per share,
decreased $12.7 million, or $0.15 per share, when compared with the
prior year’s third quarter. The decrease was primarily due to lower
crude oil and natural gas prices realized after hedging. Higher
production across all three divisions, lower lease operating
expenses (“LOE”) and a lower effective tax rate partially offset
the impact of lower commodity prices. The decrease in LOE is due to
lower steam fuel costs in California.
For the quarter ended June 30, 2009, the weighted average oil
price received by Seneca (after hedging) was $67.19 per Bbl, a
decrease of $22.36 per Bbl from the prior year’s quarter. The
weighted average natural gas price received by Seneca (after
hedging) for the quarter ended June 30, 2009, was $5.94 per
thousand cubic feet (“Mcf”), a decrease of $3.79 per Mcf.
Overall crude oil and natural gas production for the current
quarter of 11.5 Bcfe increased over 12 percent compared to the
prior year’s third quarter. Production increased 16 percent in both
the Gulf of Mexico and Appalachian region and seven percent in
California.
The Exploration and Production segment’s loss of $38.4 million,
or $0.47 per share, for the nine months ended June 30, 2009,
compares to earnings of $108.4 million, or $1.28 per share, for the
nine months ended June 30, 2008. The decrease was due to a non-cash
charge of $108.2 million in the first quarter of fiscal 2009 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
calculation, a non-cash charge, or impairment, must be recorded in
order to reduce the book value of the reserves to the calculated
ceiling. The impairment was mainly driven by a significant decrease
in commodity prices.
Excluding the impact of the ceiling test charge in the first
quarter of fiscal 2009, Operating Results for the nine months ended
June 30, 2009, of $69.8 million or $0.88 per share decreased $38.5
million, or $0.40 per share, from the prior year. The decrease was
primarily due to lower crude oil and natural gas prices realized
after hedging. For the nine months ended June 30, 2009, the
weighted average oil price received by Seneca (after hedging) was
$62.67 per Bbl, a decrease of $17.30 per Bbl from the prior year’s
nine-month period. The weighted average natural gas price received
by Seneca (after hedging) for the nine months ended June 30, 2009,
was $7.28 per Mcf, a decrease of $1.67 per Mcf.
Overall production for the nine months ended June 30, 2009, was
31.2 Bcfe compared to 31.3 Bcfe for the prior year nine-month
period. Lower production in the Gulf of Mexico as a result of
curtailments due to Hurricane Ike, was offset by increases in both
California and Appalachia.
Other items impacting Operating Results for the nine months
ended June 30, 2009, were lower depletion and LOE and higher
general and administrative (“G&A”) expenses. The impact of
lower state income taxes had a positive impact on earnings for the
current nine month period. The decrease in depletion expense was
mainly due to a lower depletable base resulting from the ceiling
test impairment recorded in the first quarter of fiscal 2009
described above. The decrease in LOE is due to lower steam fuel
costs in California, lower workover expenses and the shut-in of
certain properties related to Hurricane Ike in the Gulf of Mexico.
The increase in G&A expenses is due to additional staffing and
other costs in the East division, and a bad debt charge related to
a refiner bankruptcy in California.
Seneca continues to evaluate and develop the Company’s
significant Marcellus Shale acreage position. Seneca and
joint-venture partner EOG have now completed and flow tested four
horizontal Marcellus Shale wells. The IP rates of those wells
ranged from 1.4 to 3.3 million cubic feet per day (“MMCFD”) and
averaged 2.3 MMCFD. Seneca has also drilled seven vertical wells
outside of the joint venture with EOG and is currently drilling its
second Seneca-operated horizontal well in Tioga County,
Pennsylvania. Seneca estimates 4 to 8 TCF of net risked Marcellus
resource potential across an area of 720,000 acres that it
considers to be prospective in the Marcellus Shale. This estimate
is based upon certain risk assumptions that vary across the
acreage.
On July 17, 2009, Seneca completed the purchase of Ivanhoe
Energy’s U.S. oil and gas subsidiary for $39.2 million. Assets
acquired include proved oil and gas reserves of 1.8 million barrels
of oil equivalent (“MMBOE”) and approximately $5 million of other
assets, such that the cost of the reserves was approximately $34
million, or $19 per proved Bbl.
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 $9.2 million, for
the quarter ended June 30, 2009, decreased $3.3 million when
compared with the same period in the prior fiscal year. The
decrease was primarily due to lower efficiency gas revenues, mainly
the result of lower commodity prices and lower transported volumes
during the quarter. Higher transportation revenues from the Empire
Connector, which was placed in service in mid December 2008,
partially offset these decreases. Higher interest expense and a
lower allowance for funds used during construction (“AFUDC”) in the
third quarter of the current fiscal year also contributed to the
decrease in earnings compared to the prior year’s third
quarter.
The Pipeline and Storage segment’s earnings of $41.6 million for
the nine months ended June 30, 2009, increased $0.7 million when
compared with the nine months ended June 30, 2008. The increase is
due to higher transportation revenues, mainly the result of
incremental revenue from the Empire Connector, which was placed in
service in mid December 2008 and the addition of several new
contracts for firm transportation services. Higher AFUDC related to
the construction of the Empire Connector also contributed to the
increase in earnings for the current nine-month period. Partially
offsetting the increased earnings were lower efficiency gas
revenues mainly due to lower natural gas prices, higher
depreciation expense and higher interest expense during the current
nine month period.
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 $5.4
million, or $0.07 per share, for the quarter ended June 30, 2009,
compares to earnings of $7.8 million, or $0.09 per share, for the
quarter ended June 30, 2008.
In the New York Division, earnings decreased $1.1 million. The
decrease is primarily due to higher interest expense partially
offset by lower operating expenses. In the Pennsylvania Division,
earnings decreased $1.3 million. The decrease is mainly due to
lower customer usage due to customer conservation efforts and
higher interest expense.
The Utility segment’s earnings of $60.3 million for the nine
months ended June 30, 2009, decreased $1.9 million compared to the
nine months ended June 30, 2008. Earnings in Distribution’s New
York Division for the nine months ended June 30, 2009, of $40.7
million decreased $0.5 million compared to the prior year. Lower
margins in the first quarter of fiscal 2009 primarily as a result
of the rate design change approved by the New York State Public
Service Commission’s December 28, 2007 rate order and higher
interest expense more than offset the impact of lower operating
expenses.
For the nine months ended June 30, 2009, earnings in
Distribution’s Pennsylvania Division of $19.6 million decreased
$1.4 million compared to the prior year. The positive impact of
colder weather and lower interest expense was offset by lower
customer usage per account, higher bad debt expense and a higher
effective tax rate.
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
June 30, 2009, of $1.3 million increased $0.9 million compared to
the third quarter of last year. Earnings increased as a result of
lower bad debt expense and higher margins, primarily driven by
lower pipeline transportation fuel costs due to lower natural gas
commodity prices.
The Energy Marketing segment’s earnings for the nine months
ended June 30, 2009, of $7.5 million increased $0.4 million
compared to the prior year. An increase in margin and lower
operating expenses due to lower bad debt expense were somewhat
offset by higher state income taxes.
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.
The Corporate and All Other category had a loss of $0.1 million
for the quarter ended June 30, 2009 compared to a loss of $0.8
million in the prior year’s third quarter. Expenses related to a
proxy contest in fiscal 2008 did not recur in the current year and
lower income taxes were the primary reasons for the decreased loss.
The positive impact of these items was partially offset by lower
income from unconsolidated subsidiaries and higher interest
expense.
Earnings in the Corporate and All Other category for the nine
months ended June 30, 2009, were $2.7 million, a decrease of $4.1
million when compared to the prior year’s earnings. The
comparability of the results for the nine months ended June 30,
2009, is impacted by a $0.6 million gain in the second quarter of
fiscal 2008 related to the sale of a gas-powered turbine that the
Company had previously planned to use in the development of a
co-generation plant, and in the first quarter of fiscal 2009, by a
$2.3 million gain recognized on 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 $4.8 million. Lower margins from
the timber operations as a result of decreased sales volumes and
prices, lower margins in the landfill gas operations and a decrease
in income from unconsolidated subsidiaries contributed to the
decrease in Operating Results. The non-recurrence of expenses
related to the proxy contest, noted above, and lower income taxes
partially offset the decrease in Operating Results.
EARNINGS GUIDANCE
The Company is revising its earnings guidance for fiscal 2009 to
reflect actual results for the nine months ended June 30, 2009. The
revised GAAP earnings range is $1.20 to $1.30 per share. The
previous guidance range had been $0.95 to $1.10 per share. The
revised guidance includes actual results for the first nine months
of fiscal 2009, the impairment charge recorded in the first
quarter, forecasted oil and gas production for fiscal 2009 for the
Exploration and Production segment in the upper half of the
previously announced range of 38 to 44 Bcfe, hedges currently in
place, and NYMEX equivalent flat commodity pricing on non-hedged
volumes exclusive of basis differential, of $3.53 per MMBtu for
natural gas and $60.50 per Bbl for crude oil.
The Company’s preliminary GAAP earnings guidance for fiscal 2010
is in the range of $2.30 to $2.60 per share. This includes oil and
gas production for the Exploration and Production segment in the
range of 42 to 48 Bcfe and is based on an assumed average NYMEX
price, exclusive of basis differential, of $5.00 per MMBtu for
natural gas and $75.00 per Bbl for crude oil. Further details
regarding the production guidance are included within this
document.
EARNINGS TELECONFERENCE
The Company will host a conference call on Friday, August 7,
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) 1-866-700-7441, and using the passcode
“18477482.” 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) 888-286-8010
using passcode “79992917.” Both the webcast and telephonic replay
will be available until the close of business on Tuesday, September
8, 2009.
National Fuel is an integrated energy company with $4.4 billion
in assets comprised of the following four operating segments:
Exploration and Production, Pipeline and Storage, Utility, and
Energy Marketing. 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.
The Securities and Exchange Commission (the “SEC”) permits oil
and gas companies, in their filings with the SEC, to disclose only
proved reserves that a company has demonstrated by actual
production or conclusive formation tests to be economically and
legally producible under existing economic and operating
conditions. The Company uses the terms “probable,” “possible,”
“resource potential” and other descriptions of volumes of reserves
or resources potentially recoverable through additional drilling or
recovery techniques that the SEC’s guidelines would prohibit us
from including in filings with the SEC. These estimates are by
their nature more speculative than estimates of proved reserves
and, accordingly, are subject to substantially greater risk of
being actually realized. Investors are urged to consider closely
the disclosure in our Form 10-K and Forms 10-Q, available at
www.nationalfuelgas.com. You can also obtain these forms on the
SEC’s website at www.sec.gov.
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 other
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 gas reserve estimates;
factors affecting the Company’s ability to successfully identify,
drill for and produce economically viable natural gas and oil
reserves, including among others geology, lease availability,
weather conditions, shortages, delays or unavailability of
equipment and services required in drilling operations, and the
need to obtain governmental approvals and permits and comply with
environmental laws and regulations; significant differences between
the Company’s projected and 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
oil having different quality and/or different geographic locations,
or changes in the price differentials between natural gas having
different heating values and/or different geographic locations;
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 differences between the Company’s projected
and 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 other 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 JUNE 30, 2009
Exploration &
Pipeline & Energy Corporate / (Thousands of Dollars) Production
Storage Utility Marketing All Other
Consolidated
Third quarter 2008 GAAP earnings
$ 39,791 $ 12,534 $ 7,848 $ 478 $ (796 ) $ 59,855
Drivers
of operating results Higher (lower) crude oil prices (12,261 )
(12,261 ) Higher (lower) natural gas prices (15,946 ) (15,946 )
Higher (lower) natural gas production 4,155 4,155 Higher (lower)
crude oil production 5,758 5,758 Lower (higher) lease operating
expenses 2,838 2,838 Higher (lower) transportation revenues
2,183 2,183 Higher (lower) efficiency gas revenues (2,534 ) (2,534
) Lower (higher) operating costs 480 632 1,063 2,175 Higher
(lower) usage (430 ) (430 ) Income from unconsolidated
subsidiaries (607 ) (607 ) Higher (lower) margins 395 (234 )
161 Higher (lower) AFUDC* (937 ) (937 ) Higher (lower)
interest income (1,254 ) 272 (982 ) Lower (higher) interest expense
1,659 (1,401 ) (1,861 ) (774 ) (2,377 ) Lower (higher)
income tax expense / effective tax rate 2,443 803 3,246 All
other / rounding (100 ) (624 )
(641 ) (174 ) 146
(1,393 )
Third quarter 2009 GAAP earnings $ 27,083
$ 9,221 $ 5,396 $ 1,331
$ (127 ) $ 42,904 * AFUDC
= Allowance for Funds Used During Construction
NATIONAL
FUEL GAS COMPANY RECONCILIATION OF CURRENT AND PRIOR YEAR
GAAP EARNINGS PER SHARE QUARTER ENDED JUNE 30, 2009
Exploration &
Pipeline & Energy Corporate / Production Storage
Utility Marketing All Other Consolidated
Third quarter 2008 GAAP earnings $ 0.48 $ 0.15 $ 0.09
$ - $ - $ 0.72
Drivers of operating results Higher
(lower) crude oil prices (0.15 ) (0.15 ) Higher (lower) natural gas
prices (0.20 ) (0.20 ) Higher (lower) natural gas production 0.05
0.05 Higher (lower) crude oil production 0.07 0.07 Lower (higher)
lease operating expenses 0.04 0.04 Higher (lower)
transportation and storage revenues 0.03 0.03 Higher (lower)
efficiency gas revenues (0.03 ) (0.03 ) Lower (higher) operating
costs 0.01 0.01 0.01 0.03 Higher (lower) usage (0.01 ) (0.01
) Income from unconsolidated subsidiaries (0.01 ) (0.01 )
Higher (lower) margins 0.01 - 0.01 Higher (lower)
AFUDC* (0.01 ) (0.01 ) Higher (lower) interest income (0.02 ) -
(0.02 ) Lower (higher) interest expense 0.02 (0.02 ) (0.02 ) (0.01
) (0.03 ) Lower (higher) income tax expense / effective tax
rate 0.03 0.01 0.04 All other / rounding (including impact
of lower weighted average shares) 0.01
(0.01 ) - - -
-
Third quarter 2009 GAAP
earnings $ 0.33 $ 0.11 $ 0.07
$ 0.02 $ - $ 0.53
* AFUDC = Allowance for Funds Used During Construction
NATIONAL FUEL GAS COMPANY RECONCILIATION OF CURRENT AND
PRIOR YEAR GAAP EARNINGS NINE MONTHS ENDED JUNE 30, 2009
Exploration &
Pipeline & Energy Corporate / (Thousands of Dollars) Production
Storage Utility Marketing All Other
Consolidated
Nine months ended June 30, 2008 GAAP
earnings $ 108,385 $ 40,931 $ 62,228 $ 7,079 $ 6,840 $ 225,463
Items impacting comparability: Gain on sale of turbine
(586
) (586 )
Nine months ended June 30, 2008 operating
results 108,385 40,931 62,228 7,079 6,254 224,877
Drivers of operating results Higher (lower) crude oil prices
(28,048 ) (28,048 ) Higher (lower) natural gas prices (17,543 )
(17,543 ) Higher (lower) natural gas production (6,799 ) (6,799 )
Higher (lower) crude oil production 8,996 8,996 Lower (higher)
lease operating expenses 3,145 3,145
Higher (lower) transportation
revenues
7,884 7,884 Higher (lower) efficiency gas revenues (4,384 ) (4,384
) Lower (higher) operating costs (3,030 ) 1,695 391 3,665 2,721
Lower (higher) depreciation / depletion 1,911 (1,162 ) 749
Colder weather in Pennsylvania 1,961 1,961 Higher (lower) usage
(1,886 ) (1,886 ) Regulatory true-up adjustments (356 ) (356 )
Income from unconsolidated subsidiaries (1,483 ) (1,483 )
Higher (lower) margins (1,419 ) 612 (6,887 ) (7,694 )
Higher (lower) AFUDC* 661 661 Higher (lower) interest income (4,611
) 141 (1,895 ) (6,365 ) Lower (higher) interest expense 4,695
(3,114 ) (683 ) (1,341 ) (443 ) Lower (higher) income tax
expense / effective tax rate 3,180 (1,212 ) (380 ) 3,474 5,062
All other / rounding (440 ) 625
(25 ) (193 ) (332 )
(365 )
Nine months ended June 30, 2009
operating results 69,841 41,582 60,303 7,509 1,455 180,690
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 )
Nine months ended June 30, 2009 GAAP
earnings $ (38,366 ) $ 41,582 $ 60,303
$ 7,509 $ 2,682 $ 73,710
* AFUDC = Allowance for Funds Used During
Construction
NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS PER
SHARE NINE MONTHS ENDED JUNE 30, 2009
Exploration & Pipeline & Energy
Corporate / Production Storage Utility
Marketing All Other Consolidated
Nine
months ended June 30, 2008 GAAP earnings $ 1.28 $ 0.48 $ 0.73 $
0.08 $ 0.08 $ 2.65
Items impacting comparability: Gain on
sale of turbine
(0.01 ) (0.01 )
Nine months ended
June 30, 2008 operating results 1.28 0.48 0.73 0.08 0.07 2.64
Drivers of operating results Higher (lower) crude oil
prices (0.35 ) (0.35 ) Higher (lower) natural gas prices (0.22 )
(0.22 ) Higher (lower) natural gas production (0.08 ) (0.08 )
Higher (lower) crude oil production 0.11 0.11 Lower (higher) lease
operating expenses 0.04 0.04
Higher (lower) transportation and
storage revenues
0.10 0.10 Higher (lower) efficiency gas revenues (0.05 ) (0.05 )
Lower (higher) operating costs (0.04 ) 0.02 - 0.05 0.03 Lower
(higher) depreciation / depletion 0.02 (0.01 ) 0.01 Colder
weather in Pennsylvania 0.02 0.02 Higher (lower) usage (0.02 )
(0.02 ) Regulatory true-up adjustments - - Income from
unconsolidated subsidiaries (0.02 ) (0.02 ) Higher (lower)
margins (0.02 ) 0.01 (0.09 ) (0.10 ) Higher (lower) AFUDC*
0.01 0.01 Higher (lower) interest income (0.06 ) - (0.02 ) (0.08 )
Lower (higher) interest expense 0.06 (0.04 ) (0.01 ) (0.02 ) (0.01
) Lower (higher) income tax expense / effective tax rate
0.04 (0.02 ) - 0.04 0.06 All other / rounding (including
impact of lower weighted average shares) 0.08
0.03 0.05 -
- 0.16
Nine months
ended June 30, 2009 operating results 0.88 0.52 0.75 0.09 0.01
2.25
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 )
Nine months ended June 30, 2009 GAAP earnings $
(0.47 ) $ 0.52 $ 0.75 $ 0.09
$ 0.03 $ 0.92 * AFUDC =
Allowance for Funds Used During Construction
NATIONAL
FUEL GAS COMPANY AND SUBSIDIARIES
(Thousands of Dollars, except per share amounts) Three
Months Ended Nine Months Ended June 30, June 30, (Unaudited)
(Unaudited)
SUMMARY OF OPERATIONS
2009 2008 2009
2008 Operating Revenues $ 367,111 $ 548,382 $
1,778,919 $ 2,002,503 Operating Expenses:
Purchased Gas 126,969 272,893 941,171 1,082,340 Operation and
Maintenance 90,821 102,602 310,605 325,642 Property, Franchise and
Other Taxes 17,576 19,135 56,709 58,206 Depreciation, Depletion and
Amortization 43,659 42,804 127,715 129,337 Impairment of Oil and
Gas Producing Properties - -
182,811 - 279,025 437,434 1,619,011 1,595,525
Operating Income
88,086 110,948 159,908 406,978 Other Income (Expense):
Income from Unconsolidated Subsidiaries 627 1,561 915 4,866
Interest Income 1,460 3,086 4,358 8,356 Other Income 664 1,649
6,459 4,982 Interest Expense on Long-Term Debt (21,756 ) (19,468 )
(57,357 ) (52,045 ) Other Interest Expense (2,539 )
(1,199 ) (5,013 ) (4,209 ) Income Before
Income Taxes 66,542 96,577 109,270 368,928 Income Tax
Expense 23,638 36,722 35,560
143,465
Net Income Available for
Common Stock $ 42,904 $ 59,855 $ 73,710 $
225,463
Earnings Per Common Share: Basic $
0.54 $ 0.74 $ 0.93 $ 2.72 Diluted $
0.53 $ 0.72 $ 0.92 $ 2.65
Weighted Average Common Shares: Used in Basic Calculation
79,551,195 81,342,788 79,450,838
82,789,748 Used in Diluted Calculation
80,391,402 83,712,193 80,248,787
85,000,381
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
(Unaudited) June 30, September 30, (Thousands
of Dollars) 2009 2008
ASSETS Property,
Plant and Equipment $ 5,078,088 $ 4,873,969 Less - Accumulated
Depreciation, Depletion and Amortization 2,010,584
1,719,869 Net Property, Plant and Equipment 3,067,504
3,154,100 Current Assets: Cash and Temporary
Cash Investments 433,230 68,239 Cash Held in Escrow 2,000 - Hedging
Collateral Deposits 6,359 1 Receivables - Net 200,594 185,397
Unbilled Utility Revenue
14,568 24,364 Gas Stored Underground 27,721 87,294 Materials and
Supplies - at average cost 24,768 31,317 Unrecovered Purchased Gas
Costs 1,900 37,708 Other Current Assets 32,477 65,158 Deferred
Income Taxes 33,009 - Total Current Assets
776,626 499,478 Other Assets:
Recoverable Future Taxes 83,543 82,506 Unamortized Debt Expense
15,345 13,978 Other Regulatory Assets 196,278 189,587 Deferred
Charges 1,790 4,417 Other Investments 73,174 80,640 Investments in
Unconsolidated Subsidiaries 15,094 16,279 Goodwill 5,476 5,476
Intangible Assets 24,627 26,174 Prepaid Post-Retirement Benefit
Costs 21,738 21,034 Fair Value of Derivative Financial Instruments
66,193 28,786 Other 7,914 7,732 Total Other
Assets 511,172 476,609 Total Assets $
4,355,302 $ 4,130,187
CAPITALIZATION AND
LIABILITIES Capitalization: Comprehensive Shareholders' Equity
Common Stock, $1 Par Value Authorized - 200,000,000 Shares; Issued
and Outstanding - 79,881,482 Shares and 79,120,544 Shares,
Respectively $ 79,881 $ 79,121 Paid in Capital 589,295 567,716
Earnings Reinvested in the Business 948,262
953,799 Total Common Shareholder Equity Before Items of Other
Comprehensive Income 1,617,438 1,600,636 Accumulated Other
Comprehensive Income 17,234 2,963 Total
Comprehensive Shareholders' Equity 1,634,672 1,603,599 Long-Term
Debt, Net of Current Portion 1,249,000 999,000
Total Capitalization 2,883,672 2,602,599
Current and Accrued Liabilities: Notes Payable to Banks and
Commercial Paper - - Current Portion of Long-Term Debt - 100,000
Accounts Payable 69,762 142,520 Amounts Payable to Customers 45,772
2,753 Dividends Payable 26,761 25,714 Interest Payable on Long-Term
Debt 18,722 22,114 Customer Advances 3,229 33,017 Other Accruals
and Current Liabilities 198,057 45,220 Deferred Income Taxes -
1,871 Fair Value of Derivative Financial Instruments 1,815
1,362 Total Current and Accrued Liabilities
364,118 374,571 Deferred Credits: Deferred
Income Taxes 589,380 634,372 Taxes Refundable to Customers 18,459
18,449 Unamortized Investment Tax Credit 4,165 4,691 Cost of
Removal Regulatory Liability 107,245 103,100 Other Regulatory
Liabilities 115,617 91,933 Pension and Other Post-Retirement
Liabilities 61,404 78,909 Asset Retirement Obligations 86,559
93,247 Other Deferred Credits 124,683 128,316
Total Deferred Credits 1,107,512 1,153,017
Commitments and Contingencies - - Total
Capitalization and Liabilities $ 4,355,302 $ 4,130,187
NATIONAL FUEL GAS COMPANY AND
SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) Nine Months Ended June 30, (Thousands of
Dollars) 2009 2008
Operating Activities: Net Income Available for Common Stock $
73,710 $ 225,463 Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities: Impairment of Oil and Gas
Producing Properties 182,811 - Depreciation, Depletion and
Amortization 127,715 129,337 Deferred Income Taxes (85,494 ) 27,603
Income from Unconsolidated Subsidiaries, Net of Cash Distributions
180 1,340 Impairment of Investment in Partnership 1,804 - Excess
Tax Benefits Associated with Stock-Based Compensation Awards (5,927
) (16,275 )
Other
9,365 (1,120 ) Change in: Hedging Collateral Deposits (6,358 )
(26,712 ) Receivables and Unbilled Utility Revenue (5,520 )
(129,102 ) Gas Stored Underground and Materials and Supplies 71,491
14,819 Unrecovered Purchased Gas Costs 35,808 9,089 Prepayments and
Other Current Assets 37,904 17,370 Accounts Payable (82,146 )
53,081 Amounts Payable to Customers 43,019 2,455 Customer Advances
(29,788 ) (22,863 ) Other Accruals and Current Liabilities 166,217
94,031 Other Assets (8,517 ) 19,178 Other Liabilities
(14,453 ) 17,373 Net Cash Provided by
Operating Activities $ 511,821 $ 415,067
Investing Activities: Capital Expenditures ($237,126
) ($264,728 ) Investment in Partnership (800 ) - Cash Held in
Escrow (2,000 ) 58,397 Net Proceeds from Sale of Oil and Gas
Producing Properties 3,701 5,675 Other (1,674 )
(3,414 ) Net Cash Used in Investing Activities
($237,899 ) ($204,070 ) Financing
Activities: Excess Tax Benefits Associated with Stock-Based
Compensation Awards $ 5,927 $ 16,275 Shares Repurchased under
Repurchase Plan - (129,592 ) Net Proceeds from Issuance of
Long-Term Debt 247,780 296,655 Reduction of Long-Term Debt (100,000
) (200,024 ) Dividends Paid on Common Stock (77,398 ) (77,204 )
Proceeds From Issuance of Common Stock 14,760
17,285 Net Cash Provided by (Used In)
Financing Activities $ 91,069 ($76,605
) Net Increase in Cash and Temporary Cash Investments 364,991
134,392 Cash and Temporary Cash Investments at Beginning of Period
68,239 124,806 Cash and
Temporary Cash Investments at June 30 $ 433,230
$ 259,198
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
SEGMENT OPERATING RESULTS AND STATISTICS (UNAUDITED)
Three Months Ended Nine Months Ended (Thousands of Dollars,
except per share amounts) June 30, June 30,
EXPLORATION AND PRODUCTION
SEGMENT
2009 2008 Variance
2009 2008 Variance Operating
Revenues $ 97,619 $ 126,154 $ (28,535 )
$ 281,410 $ 348,829 $ (67,419 )
Operating Expenses: Operation and Maintenance: General and
Administrative Expense 6,849 5,924 925 22,465 18,676 3,789 Lease
Operating Expense 11,775 14,964 (3,189 ) 36,944 41,112 (4,168 ) All
Other Operation and Maintenance Expense 2,325 3,708 (1,383 ) 8,599
7,727 872 Property, Franchise and Other Taxes (Lease Operating
Expense) 2,341 3,518 (1,177 ) 7,722 8,394 (672 ) Depreciation,
Depletion and Amortization 23,472 23,249 223 67,159 70,098 (2,939 )
Impairment of Oil and Gas Producing Properties -
- - 182,811
- 182,811
46,762 51,363
(4,601 ) 325,700 146,007
179,693 Operating Income (Loss) 50,857 74,791
(23,934 ) (44,290 ) 202,822 (247,112 ) Other Income
(Expense): Interest Income 319 2,247 (1,928 ) 2,186 9,280 (7,094 )
Other Income - - - - 18 (18 ) Other Interest Expense (7,905
) (10,457 ) 2,552 (25,452
) (32,675 ) 7,223 Income
(Loss) Before Income Taxes 43,271 66,581 (23,310 ) (67,556 )
179,445 (247,001 ) Income Tax Expense (Benefit) 16,188
26,790 (10,602 )
(29,190 ) 71,060 (100,250 ) Net
Income (Loss) $ 27,083 $ 39,791 $
(12,708 ) $ (38,366 ) $ 108,385 $ (146,751 )
Net Income (Loss) Per Share (Diluted) $ 0.33 $
0.48 $ (0.15 ) $ (0.47 ) $ 1.28
$ (1.75 ) Three Months Ended Nine Months Ended June
30, June 30,
PIPELINE AND STORAGE SEGMENT
2009 2008 Variance
2009 2008 Variance Revenues from
External Customers $ 30,791 $ 32,054 $ (1,263 ) $ 105,904 $ 101,871
$ 4,033 Intersegment Revenues 20,033
20,131 (98 ) 62,026
61,340 686 Total Operating
Revenues 50,824 52,185
(1,361 ) 167,930 163,211
4,719 Operating Expenses: Purchased Gas
8 (4 ) 12 137 (13 ) 150 Operation and Maintenance 16,690 16,462 228
50,546 50,877 (331 ) Property, Franchise and Other Taxes 4,281
4,007 274 12,789 12,539 250 Depreciation, Depletion and
Amortization 8,750 8,344
406 26,416 24,629
1,787 29,729
28,809 920 89,888
88,032 1,856 Operating
Income 21,095 23,376 (2,281 ) 78,042 75,179 2,863 Other
Income (Expense): Interest Income 546 562 (16 ) 943 726 217 Other
Income 175 1,124 (949 ) 3,192 2,545 647 Interest Expense on
Long-Term Debt - - - - (31 ) 31 Other Interest Expense
(6,505 ) (4,350 ) (2,155 )
(14,760 ) (9,938 ) (4,822 )
Income Before Income Taxes 15,311 20,712 (5,401 ) 67,417 68,481
(1,064 ) Income Tax Expense 6,090 8,178
(2,088 ) 25,835
27,550 (1,715 ) Net Income $ 9,221
$ 12,534 $ (3,313 ) $ 41,582 $
40,931 $ 651 Net Income Per Share
(Diluted) $ 0.11 $ 0.15 $ (0.04 ) $
0.52 $ 0.48 $ 0.04
NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES
SEGMENT OPERATING RESULTS AND
STATISTICS (UNAUDITED) Three Months Ended Nine
Months Ended (Thousands of Dollars, except per share amounts) June
30, June 30,
UTILITY SEGMENT
2009 2008 Variance
2009 2008 Variance Revenues from
External Customers $ 158,310 $ 217,339 $ (59,029 ) $ 1,009,962 $
1,067,194 $ (57,232 ) Intersegment Revenues 2,940
3,154 (214 ) 13,339
13,567 (228 ) Total
Operating Revenues 161,250 220,493
(59,243 ) 1,023,301
1,080,761 (57,460 ) Operating
Expenses: Purchased Gas 80,505 137,949 (57,444 ) 681,989 735,259
(53,270 ) Operation and Maintenance 42,404 44,202 (1,798 ) 155,088
157,980 (2,892 ) Property, Franchise and Other Taxes 10,491 11,120
(629 ) 34,822 35,750 (928 ) Depreciation, Depletion and
Amortization 10,010 9,625
385 29,670 29,452
218 143,410
202,896 (59,486 ) 901,569
958,441 (56,872 )
Operating Income 17,840 17,597 243 121,732 122,320 (588 )
Other Income (Expense): Interest Income 430 326 104 1,349 688 661
Other Income 251 279 (28 ) 763 883 (120 ) Other Interest Expense
(9,728 ) (6,865 ) (2,863 )
(22,820 ) (21,770 ) (1,050 )
Income Before Income Taxes 8,793 11,337 (2,544 ) 101,024
102,121 (1,097 ) Income Tax Expense 3,397
3,489 (92 ) 40,721
39,893 828 Net Income $ 5,396
$ 7,848 $ (2,452 ) $ 60,303
$ 62,228 $ (1,925 ) Net Income Per
Share (Diluted) $ 0.07 $ 0.09 $ (0.02 )
$ 0.75 $ 0.73 $ 0.02
Three Months Ended Nine Months Ended June 30, June 30,
ENERGY MARKETING SEGMENT
2009 2008 Variance
2009 2008 Variance Operating
Revenues $ 71,894 $ 162,129 $ (90,235 )
$ 350,445 $ 440,111 $ (89,666 )
Operating Expenses: Purchased Gas 68,496 159,339 (90,843 ) 333,386
423,991 (90,605 ) Operation and Maintenance 1,412 2,384 (972 )
4,568 5,170 (602 ) Property, Franchise and Other Taxes 6 9 (3 ) 22
32 (10 ) Depreciation, Depletion and Amortization 11
10 1 31
32 (1 ) 69,925
161,742 (91,817 ) 338,007
429,225 (91,218 )
Operating Income 1,969 387 1,582 12,438 10,886 1,552 Other
Income (Expense): Interest Income 39 206 (167 ) 67 293 (226 ) Other
Income 91 73 18 201 206 (5 ) Other Interest Expense (14 )
(6 ) (8 ) (209 )
(133 ) (76 ) Income Before Income Taxes 2,085
660 1,425 12,497 11,252 1,245 Income Tax Expense 754
182 572 4,988
4,173 815 Net
Income $ 1,331 $ 478 $ 853 $
7,509 $ 7,079 $ 430 Net
Income Per Share (Diluted) $ 0.02 $ - $
0.02 $ 0.09 $ 0.08 $ 0.01
NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES
SEGMENT OPERATING
RESULTS AND STATISTICS (UNAUDITED) Three Months
Ended Nine Months Ended (Thousands of Dollars, except per share
amounts) June 30, June 30,
ALL OTHER
2009 2008 Variance
2009 2008 Variance Revenues from
External Customers $ 8,269 $ 10,509 $ (2,240 ) $ 30,523 $ 44,002 $
(13,479 ) Intersegment Revenues 374
4,439 (4,065 ) 3,890
10,251 (6,361 ) Total Operating
Revenues 8,643 14,948
(6,305 ) 34,413 54,253
(19,840 ) Operating Expenses: Purchased Gas
1,181 3,229 (2,048 ) 4,538 7,941 (3,403 ) Operation and Maintenance
8,748 12,632 (3,884 ) 28,151 33,388 (5,237 ) Property, Franchise
and Other Taxes 385 410 (25 ) 1,140 1,277 (137 ) Depreciation,
Depletion and Amortization 1,243 1,403
(160 ) 3,918 4,609
(691 ) 11,557
17,674 (6,117 ) 37,747
47,215 (9,468 )
Operating Income (Loss) (2,914 ) (2,726 ) (188 ) (3,334 ) 7,038
(10,372 ) Other Income (Expense): Income from Unconsolidated
Subsidiaries 627 1,561 (934 ) 915 4,866 (3,951 ) Interest Income 52
298 (246 ) 543 920 (377 ) Other Income 26 132 (106 ) 38 1,052
(1,014 ) Other Interest Expense (560 ) (848 )
288 (1,921 ) (2,927 )
1,006 Income (Loss) Before Income Taxes
(2,769 ) (1,583 ) (1,186 ) (3,759 ) 10,949 (14,708 ) Income Tax
Expense (Benefit) (1,683 ) (623 )
(1,060 ) (3,713 ) 3,598
(7,311 ) Net Income (Loss) $ (1,086 ) $ (960 )
$ (126 ) $ (46 ) $ 7,351 $ (7,397 ) Net
Income Per Share (Diluted) $ (0.01 ) $ - $
(0.01 ) $ - $ 0.09 $ (0.09 )
NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES
SEGMENT OPERATING RESULTS AND
STATISTICS (UNAUDITED) Three Months Ended Nine
Months Ended (Thousands of Dollars, except per share amounts) June
30, June 30,
CORPORATE
2009 2008 Variance
2009 2008 Variance Revenues from
External Customers $ 228 $ 197 $ 31 $ 675 $ 496 $ 179 Intersegment
Revenues 1,003 961 42
3,062 2,883 179
Total Operating Revenues 1,231
1,158 73 3,737
3,379 358 Operating
Expenses: Operation and Maintenance 1,747 3,391 (1,644 ) 7,682
13,915 (6,233 ) Property, Franchise and Other Taxes 72 71 1 214 214
- Depreciation, Depletion and Amortization 173
173 - 521
517 4 1,992
3,635 (1,643 ) 8,417
14,646 (6,229 )
Operating Loss
(761 ) (2,477 ) 1,716 (4,680 ) (11,267 ) 6,587 Other Income
(Expense): Interest Income 22,553 21,890 663 62,243 64,780 (2,537 )
Other Income 121 41 80 2,265 278 1,987 Interest Expense on
Long-Term Debt (21,756 ) (19,468 ) (2,288 ) (57,357 ) (52,014 )
(5,343 ) Other Interest Expense (306 ) (1,116
) 810 (2,824 ) (5,097 )
2,273 Income (Loss) Before Income Taxes
(149 ) (1,130 ) 981 (353 ) (3,320 ) 2,967 Income Tax Benefit
(1,108 ) (1,294 ) 186
(3,081 ) (2,809 ) (272 ) Net Income
(Loss) $ 959 $ 164 $ 795 $ 2,728
$ (511 ) $ 3,239 Net Income
(Loss) Per Share (Diluted) $ 0.01 $ - $
0.01 $ 0.03 $ (0.01 ) $ 0.04
Three Months Ended Nine Months Ended June 30, June
30,
INTERSEGMENT ELIMINATIONS
2009 2008 Variance
2009 2008 Variance Intersegment
Revenues $ (24,350 ) $ (28,685 ) $ 4,335 $
(82,317 ) $ (88,041 ) $ 5,724 Operating
Expenses: Purchased Gas (23,221 ) (27,620 ) 4,399 (78,879 ) (84,838
) 5,959 Operation and Maintenance (1,129 )
(1,065 ) (64 ) (3,438 ) (3,203 )
(235 ) (24,350 ) (28,685 )
4,335 (82,317 ) (88,041 )
5,724 Operating Income - - - - - -
Other Income (Expense): Interest Income (22,479 ) (22,443 )
(36 ) (62,973 ) (68,331 ) 5,358 Other Interest Expense
22,479 22,443 36
62,973 68,331
(5,358 ) Net Income $ - $ - $ -
$ - $ - $ - Net
Income Per Share (Diluted) $ - $ - $ -
$ - $ - $ -
NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES
SEGMENT INFORMATION
(Continued) (Thousands of Dollars) Three Months Ended
Nine Months Ended June 30, June 30, (Unaudited) (Unaudited)
Increase Increase 2009 2008 (Decrease) 2009
2008 (Decrease)
Capital Expenditures:
Exploration and Production (1) $ 34,517 $ 75,681 $ (41,164 ) $
151,678 $ 140,543 $ 11,135 Pipeline and Storage (2) 7,020 49,094
(42,074 ) 34,854 106,204 (71,350 ) Utility 14,557 14,939 (382 )
40,380 38,836 1,544 Energy Marketing 14
6 8 25 21 4
Total Reportable Segments
56,108 139,720 (83,612 ) 226,937 285,604 (58,667 ) All Other 2,931
108 2,823 3,005 1,303 1,702 Corporate 104 48 56 149 83 66
Eliminations - - - (344 )
(2,407 ) 2,063 Total Capital Expenditures $ 59,143 $
139,876 $ (80,733 ) $ 229,747 $ 284,583 $ (54,836 )
(1) Amount for the nine months ended June 30, 2009 includes $9.4
million of accrued capital expenditures, the majority of which was
in the Appalachian region. This amount has been excluded from the
Consolidated Statement of Cash Flows at June 30, 2009 since it
represents a non-cash investing activity at that date.
(2) Amount for the nine months ended June 30, 2009 excludes
$16.8 million of capital expenditures related to the Empire
Connector project accrued at September 30, 2008 and paid during the
nine months ended June 30, 2009. 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
June 30, 2009.
DEGREE DAYS
Percent Colder (Warmer)
Than:
Three Months Ended June 30
Normal 2009 2008 Normal Last Year Buffalo, NY 927 854 817
(7.9) 4.5 Erie, PA 885 821 762 (7.2) 7.7
Nine Months Ended June 30
Buffalo, NY 6,514 6,558 6,175 0.7 6.2 Erie, PA 6,108 6,064
5,737 (0.7) 5.7
NATIONAL FUEL GAS COMPANY AND
SUBSIDIARIES
EXPLORATION AND PRODUCTION
INFORMATION
Three Months Ended Nine Months Ended June 30, June 30,
Increase Increase 2009 2008 (Decrease) 2009 2008
(Decrease)
Gas Production/Prices:
Production (MMcf) Gulf Coast 3,307 3,019 288 7,118 8,868 (1,750 )
West Coast 1,014 1,007 7 3,063 3,010 53 Appalachia 2,155
1,793 362 6,065 5,538 527
Total Production 6,476 5,819 657
16,246 17,416 (1,170 )
Average Prices
(Per Mcf)
Gulf Coast $ 3.95 $ 12.17 $ (8.22 ) $ 4.90 $ 9.66 $ (4.76 ) West
Coast 3.04 10.61 (7.57 ) 4.10 8.43 (4.33 ) Appalachia 4.11 11.53
(7.42 ) 6.06 9.25 (3.19 ) Weighted Average 3.86 11.71 (7.85 ) 5.18
9.32 (4.14 ) Weighted Average after Hedging 5.94 9.73 (3.79 ) 7.28
8.95 (1.67 )
Oil Production/Prices:
Production (Thousands of Barrels) Gulf Coast 176 124 52 470 409 61
West Coast 654 598 56 1,984 1,825 159 Appalachia 14
23 (9 ) 41 88 (47 ) Total Production
844 745 99 2,495 2,322
173 Average Prices (Per Barrel) Gulf Coast $
56.29 $ 124.43 $ (68.14 ) $ 50.64 $ 103.46 $ (52.82 ) West Coast
55.77 114.35 (58.58 ) 46.84 94.64 (47.80 ) Appalachia 48.93 114.99
(66.06 ) 54.90 94.18 (39.28 ) Weighted Average 55.77 116.05 (60.28
) 47.69 96.17 (48.48 ) Weighted Average after Hedging 67.19 89.55
(22.36 ) 62.67 79.97 (17.30 ) Total Production (Mmcfe)
11,540 10,289 1,251 31,216
31,348 (132 )
Selected Operating Performance
Statistics:
General & Administrative Expense per Mcfe (1) $ 0.59 $ 0.58 $
0.01 $ 0.72 $ 0.60 $ 0.12 Lease Operating Expense per Mcfe (1) $
1.22 $ 1.80 $ (0.58 ) $ 1.43 $ 1.58 $ (0.15 ) Depreciation,
Depletion & Amortization per Mcfe (1) $ 2.03 $ 2.26 $ (0.23 ) $
2.15 $ 2.24 $ (0.09 )
(1) Refer to the corresponding table above 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 Three Months of Fiscal
2009
SWAPS
Volume
Average Hedge Price
Oil 0.3 MMBBL $83.12 / BBL Gas 2.3 BCF $9.44 / MCF
Hedging Summary for Fiscal 2010
SWAPS
Volume
Average Hedge Price
Oil 1.4 MMBBL $77.83 / BBL Gas 13.0 BCF $7.22 / MCF
Hedging Summary for Fiscal
2011
SWAPS
Volume
Average Hedge Price
Oil 0.6 MMBBL $66.54 / BBL Gas 9.1 BCF $7.31 / MCF
Hedging Summary for Fiscal 2012
SWAPS
Volume
Average Hedge Price
Oil 0.4 MMBBL $62.95 / BBL Gas 7.7 BCF $7.50 / MCF
Gross Wells in Process of
Drilling
Nine Months Ended June 30,
2009
Total
Gulf
West
East
Company
Wells in Process - Beginning of Period Exploratory
1.00 0.00 25.00 26.00 Developmental 1.00 1.00 123.00 125.00
Wells Commenced Exploratory 0.00 0.00 12.00 12.00
Developmental 0.00 26.00 146.00 172.00
Wells Completed
Exploratory 1.00 0.00 2.00 3.00 Developmental 0.00 26.00 183.00
209.00
Wells Plugged & Abandoned Exploratory 0.00 0.00
3.00 3.00 Developmental 1.00 0.00 0.00 1.00
Wells in Process -
End of Period Exploratory 0.00 0.00 32.00 32.00 Developmental
0.00 1.00 86.00 87.00
Net Wells in Process of
Drilling
Nine Months Ended June 30,
2009
Total
Gulf
West
East
Company
Wells in Process - Beginning of Period Exploratory
0.29 0.00 24.00 24.29 Developmental 0.30 1.00 122.00 123.30
Wells Commenced Exploratory 0.00 0.00 9.50 9.50
Developmental 0.00 26.00 145.00 171.00
Wells Completed
Exploratory 0.29 0.00 2.00 2.29 Developmental 0.00 26.00 183.00
209.00
Wells Plugged & Abandoned Exploratory 0.00 0.00
3.00 3.00 Developmental 0.30 0.00 0.00 0.30
Wells in Process -
End of Period Exploratory 0.00 0.00 28.50 28.50 Developmental
0.00 1.00 84.00 85.00
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
EXPLORATION AND PRODUCTION
INFORMATION
Fiscal 2010 Financial & Operating Guidance
Total Production (Bcfe) 42 - 48
Production by Division (Bcfe) Gulf 11 - 13 East 11 -
14 West 20 - 21
Guidance Based on Crude Oil Average 2010 NYMEX Price
($/Bbl) (without hedges) of $75.00 Forecast price
differentials Gulf -$2.00 to -$8.00 East -$5.00 to
-$7.00 West -$8.00 to -$11.00
Guidance Based on Natural
Gas Average 2010 NYMEX Price ($/MMBtu) (without hedges) of
$5.00 Forecast price differentials Gulf
$0.00 to -$0.20 East $0.00 to +$0.50 West -$0.75 to -$1.00
Cost and Expenses $ per Mcfe Lease Operating
Expenses $1.35 - $1.50 Depreciation, Depletion and Amortization
$2.25 - $2.45 Other Taxes (% of Revenue) $0.10 - $0.20 Other
Operating Expenses $8M - $9M General and Administrative $30M - $32M
Capital Investment by Division Number of
Wells to be Drilled
Gulf
$10M - $18M
0 - 2
East
$150M - $182M
160 - 220
West
$15M - $25M
25 - 45
Total
$175M - $225M
NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES
Pipeline &
Storage Throughput- (millions of cubic feet - MMcf) Three
Months Ended Nine Months Ended June 30, June 30, Increase Increase
2009 2008 (Decrease) 2009 2008 (Decrease) Firm
Transportation - Affiliated 17,214 16,697 517 99,411 96,849 2,562
Firm Transportation - Non-Affiliated 43,584 51,566 (7,982 ) 205,590
186,255 19,335 Interruptible Transportation 501 1,540 (1,039 )
3,558 3,844 (286 ) 61,299 69,803 (8,504 ) 308,559 286,948 21,611
Utility Throughput - (MMcf) Three Months Ended
Nine Months Ended June 30, June 30, Increase Increase 2009 2008
(Decrease) 2009 2008 (Decrease)
Retail Sales:
Residential Sales 8,468 8,618 (150 ) 55,001 53,881 1,120 Commercial
Sales 1,221 1,334 (113 ) 8,984 9,197 (213 ) Industrial Sales 55 77
(22 ) 499 524 (25 ) 9,744 10,029 (285 ) 64,484 63,602 882
Off-System Sales - 1,711 (1,711 ) 513 4,790 (4,277 ) Transportation
10,747 12,086 (1,339 ) 52,476 55,966 (3,490 ) 20,491 23,826 (3,335
) 117,473 124,358 (6,885 )
Energy Marketing Volumes
Three Months Ended Nine Months Ended June 30, June 30, Increase
Increase 2009 2008 (Decrease) 2009 2008 (Decrease) Natural
Gas (MMcf) 14,634 14,641 (7 ) 50,459 47,189 3,270
NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES
FISCAL 2010 EARNINGS GUIDANCE AND SENSITIVITY
Earnings per share sensitivity to changes Fiscal 2010
(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
$2.30 - $2.60 + $0.08 - $0.08 + $0.08 - $0.08
* Please refer to forward looking statement footnote in this
document.
^ This sensitivity table is current as of August 7, 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 preliminary earnings forecast.
For its fiscal 2010 earnings forecast, the Company is utilizing
flat NYMEX equivalent commodity pricing, exclusive of basis
differential, of $5 per MMBtu for natural gas and $75 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.
NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES
Quarter Ended June 30
(unaudited)
2009 2008 Operating Revenues $ 367,111,000 $ 548,382,000
Net Income Available for Common Stock $ 42,904,000 $
59,855,000 Earnings Per Common Share: Basic $ 0.54 $ 0.74
Diluted $ 0.53 $ 0.72 Weighted Average Common Shares: Used
in Basic Calculation 79,551,195 81,342,788 Used in
Diluted Calculation 80,391,402 83,712,193
Nine Months Ended June 30
(unaudited)
Operating Revenues $ 1,778,919,000 $ 2,002,503,000
Net Income Available for Common Stock $ 73,710,000 $ 225,463,000
Earnings Per Common Share: Basic $ 0.93 $ 2.72 Diluted $
0.92 $ 2.65 Weighted Average Common Shares: Used in Basic
Calculation 79,450,838 82,789,748 Used in Diluted
Calculation 80,248,787 85,000,381
Twelve Months Ended June 30
(unaudited)
Operating Revenues $ 2,176,776,000 $ 2,304,533,000
Income from Continuing Operations $ 116,976,000 $ 259,757,000
Income from Discontinued Operations, Net of Tax -
123,395,000 Net Income Available for Common Stock $ 116,976,000 $
383,152,000 Earnings Per Common Share: Basic: Income from
Continuing Operations $ 1.47 $ 3.13 Income from Discontinued
Operations - 1.49 Net Income Available for Common
Stock $ 1.47 $ 4.62 Diluted: Income from Continuing
Operations $ 1.44 $ 3.05 Income from Discontinued Operations
- 1.45 Net Income Available for Common Stock $ 1.44 $ 4.50
Weighted Average Common Shares: Used in Basic Calculation
79,805,689 82,969,977 Used in Diluted Calculation
80,994,294 85,150,920
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