NFG National Fuel Gas Co

National Fuel Gas Company (“National Fuel” or the “Company”) (NYSE:NFG) today announced consolidated earnings for the second quarter of fiscal 2010 and for the six-months ended March 31, 2010.

HIGHLIGHTS

• Earnings for the second quarter were $80.4 million or $0.97 per share, an increase of $6.9 million or $0.05 per share from the second quarter of fiscal 2009.
• Compared to the prior year’s second quarter, production of crude oil and natural gas increased nearly 1.7 billion cubic feet equivalent (“Bcfe”), or 16.6%, to 11.8 Bcfe. Appalachian production increased 1.5 Bcfe or 68.7%, of which 1.3 Bcfe came from the Marcellus Shale. The Company’s production forecast for the entire 2010 fiscal year has been narrowed to a range between 46 and 51 Bcfe. The previous forecast range had been between 44 and 51 Bcfe.
• Seneca-operated Marcellus production into Midstream’s Covington Gathering System continued to increase during the quarter. The current daily gross production from the Seneca-operated Marcellus wells is 30 million cubic feet per day (“MMCFD”) with six wells flowing.
• Seneca’s joint-venture partner, EOG Resources, Inc., has completed a pipeline interconnection with Dominion Transmission, Inc. and has commenced sustained production from the joint-venture wells in Clearfield County.
• The Pipeline and Storage segment of the Company has entered into additional contracts with customers with respect to interstate pipeline projects to transport Marcellus production. The Company recently announced the signing of precedent agreements for substantial capacity on Supply Corporation’s Northern Access expansion project and Empire’s Tioga County Extension Project.
• The Company is narrowing its GAAP earnings guidance range for fiscal 2010 to a range of $2.45 to $2.70 per share. The previous earnings guidance had been a range between $2.40 to $2.70 per share. This guidance assumes flat NYMEX pricing of $5.00 per Million British Thermal Units (“MMBtu”) for natural gas and $75.00 per barrel (“Bbl”) for crude oil for unhedged production for the remainder of the fiscal year.
• A conference call is scheduled for Friday, May 7, 2010, at 11 a.m. Eastern Time.

MANAGEMENT COMMENTS

David F. Smith, Chairman, President and Chief Executive Officer of National Fuel Gas Company, stated: “Throughout the second quarter, the growth opportunities presented by the Marcellus Shale continued to become more evident. Not only has our Exploration and Production segment been able to increase production by 17% over the prior year, but the Pipeline and Storage segment has reached several major milestones in broadening markets for Appalachian gas production. These new markets will help both Seneca and other Marcellus producers alleviate some of the current regional infrastructure constraints.”

“As we continue to move forward and execute our Appalachian strategy, we are excited about the growth potential present in the Marcellus. With the financial strength provided by the stable and predictable earnings of our regulated businesses, we intend to capitalize on these opportunities and position National Fuel Gas Company as an industry leader in the Appalachian Basin.”

“With all of the focus on developing the gas-oriented Marcellus, it is important to note that Seneca’s oil and gas balance has provided significant protection from the recent sustained decrease in natural gas commodity prices. With oil accounting for 40 percent of the total production this quarter, Seneca’s earnings benefited from the strength of oil prices, as well as from the increase in natural gas production.”

“As I have said before, National Fuel’s ability to successfully execute the large number of opportunities available to us will provide benefits for our shareholders, customers and employees.”

SUMMARY OF RESULTS

National Fuel had consolidated earnings for the quarter ended March 31, 2010, of $80.4 million or $0.97 per share, compared to the prior year’s second quarter earnings of $73.5 million, or $0.92 per share, an increase of $6.9 million or $0.05 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 discussion of earnings and operating results before items impacting comparability (“Operating Results”) are after tax, unless otherwise noted).

Consolidated earnings for the six months ended March 31, 2010, of $144.9 million, or $1.76 per share, increased $114.1 million, or $1.38 per share, from the same period in the prior year, where earnings were $30.8 million, or $0.38 per share.

      Three Months Six Months Ended March 31, Ended March 31, 2010   2009 2010   2009 (in thousands except per share amounts) Reported GAAP earnings $ 80,428 $ 73,484 $ 144,927 $ 30,806 Items impacting comparability1: Impairment of oil and gas producing properties 108,207 Impairment of investment in partnership 1,085 Gain on life insurance policies (2,312 )         Operating Results $ 80,428 $ 73,484 $ 144,927 $ 137,786     Reported GAAP earnings per share $ 0.97 $ 0.92 $ 1.76 $ 0.38 Items impacting comparability1: Impairment of oil and gas producing properties 1.35 Impairment of investment in partnership 0.01 Gain on life insurance policies (0.03 )         Operating Results $ 0.97 $ 0.92 $ 1.76 $ 1.71    

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 six months ended March 31, 2010, to the comparable period in fiscal 2009. Excluding these items, Operating Results for the six months ended March 31, 2010 of $144.9 million, or $1.76 per share, increased $7.1 million, or $0.05 per share from the same period in the prior year, where Operating Results were $137.8 million, or $1.71 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 at pages 10 through 13 of 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 second quarter of fiscal 2010 of $27.4 million, or $0.33 per share, increased $9.3 million, or $0.10 per share, when compared with the prior year’s second quarter. The increase was mainly due to increased natural gas production and higher crude oil prices realized after hedging.

Overall production for the current quarter of 11.8 Bcfe increased nearly 1.7 Bcfe, or 16.6 percent compared to the prior year’s second quarter. Production increased 68.7 percent in Appalachia due to higher production mainly from Marcellus wells. In the Gulf of Mexico, production increased by 7.7 percent.

In addition to the higher production, higher crude oil prices realized after hedging contributed to the increase in earnings. Lower natural gas prices realized after hedging reduced earnings. For the quarter ended March 31, 2010, the weighted average oil price received by Seneca (after hedging) was $77.29 per Bbl, an increase of $20.90 per Bbl from the prior year’s quarter. The weighted average natural gas price received by Seneca (after hedging) for the quarter ended March 31, 2010, was $6.54 per thousand cubic feet (“Mcf”), a decrease of $0.99 per Mcf.

Several other items also impacted earnings; including higher lease operating expenses (“LOE”) (mainly due to higher steam fuel cost and the operating costs associated with the July 2009 acquisition of the Ivanhoe assets in California, and the costs to transport Marcellus production in Appalachia) and higher depletion expense (due mainly to the increase in production). Earnings were also impacted by lower other operating expenses. A bad debt charge related to a customer’s bankruptcy filing and the recognition of actual plugging costs in excess of amounts previously accrued in the prior year’s second quarter did not recur in the current year.

The Exploration and Production segment’s earnings of $57.2 million, or $0.69 per share, for the six months ended March 31, 2010, compares to a loss of $65.5 million, or $0.82 per share, for the six months ended March 31, 2009. The increase was mainly due to the non-cash impairment charge of $108.2 million taken 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 impairment charge must be recorded in order to reduce the book value of the reserves to the calculated ceiling. The impairment at December 31, 2008 was mainly driven by a significant decrease in commodity prices. At March 31, 2010, the ceiling exceeded the book value of Seneca’s oil and gas properties by approximately $290 million.

Excluding the impact of the ceiling test charge in the prior year’s first quarter, Operating Results for the six months ended March 31, 2010, of $57.2 million or $0.69 per share increased $14.4 million, or $0.16 per share, from the prior year. The increase was primarily due to higher natural gas production and higher crude oil prices realized after hedging.

Overall production for the six months ended March 31, 2010 increased 18.5 percent to 23.3 Bcfe, an increase of 3.6 Bcfe compared to the prior year’s six month period. Production increased 58.7 percent in Appalachia mainly due to Marcellus production that came on-line during the first and second quarters of the current fiscal year, and higher production from upper Devonian wells. In the Gulf of Mexico, production increased by 23.1 percent due to production from a new discovery that came on-line late in the second quarter of fiscal 2009.

In addition to overall higher production, higher crude oil prices realized after hedging contributed to the increase in Operating Results. Lower natural gas prices realized after hedging reduced Operating Results. For the six months ended March 31, 2010, the weighted average oil price received by Seneca (after hedging) was $75.86 per Bbl, an increase of $15.50 per Bbl from the prior year’s six month period. The weighted average natural gas price received by Seneca (after hedging) for the six months ended March 31, 2010, was $6.42 per Mcf, a decrease of $1.76 per Mcf.

Other items impacting Operating Results for the six months ended March 31, 2010, were higher depletion expense (mainly due to the increase in production) and higher LOE (mainly due to higher steam fuel cost and the operating costs associated with the July 2009 acquisition of the Ivanhoe assets in California, and the costs to transport Marcellus production in Appalachia).

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”). The Pipeline and Storage segment provides natural gas transportation and storage services to affiliated and non-affiliated companies through an integrated system of pipelines and underground natural gas storage fields in western New York and western Pennsylvania.

The Pipeline and Storage segment’s earnings of $12.4 million, for the quarter ended March 31, 2010, decreased $2.7 million when compared with the same period in the prior fiscal year. Transportation revenues for both Supply Corporation and Empire decreased in the current quarter compared to the second quarter of 2009. Persistent strong Niagara/Chippawa basis prices have caused shippers to evaluate lower cost supply sources, and certain shippers have reduced their imports of natural gas from Canada. This has resulted in some contract terminations on Supply Corporation from Niagara and available firm capacity on Empire from Chippawa remaining unsold. In order to offset these lower shipping volumes, Supply Corporation’s Northern Access expansion project and Empire’s Tioga County Extension Project have been designed to utilize that available capacity to provide producers of Marcellus gas a transportation path from the Marcellus supply basins to Canadian and other northeastern markets.

Higher operating and interest expense also decreased earnings for the current quarter. An increase in efficiency gas revenue due to higher prices and retained volumes during the current quarter partially offset the decrease in earnings for the quarter.

The Pipeline and Storage segment’s earnings of $22.8 million, for the six months ended March 31, 2010, decreased $9.6 million when compared with the six months ended March 31, 2009. The decrease in earnings for the current six month period was due to higher operating expenses (mainly due to increased pension and operating expenses, and preliminary survey costs associated with the Tioga County Extension Project planned to move Marcellus production to Chippawa), higher property taxes and interest expense and a lower allowance for funds used during construction (“AFUDC”) for the current six 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 $33.3 million, for the quarter ended March 31, 2010, compares to earnings of $32.8 million, for the quarter ended March 31, 2009.

In the New York Division, earnings decreased $1.0 million. The decrease is primarily due to higher interest expense and the impact of certain regulatory adjustments, partially offset by lower operating expenses. In the Pennsylvania Division, earnings increased $1.5 million due to lower operating expenses and a lower effective tax rate, partially offset by higher interest expense. In addition, in Pennsylvania, the impact on earnings of lower customer usage due to customer conservation efforts more than offset the positive impact of colder weather during the current quarter.

The Utility segment’s earnings of $56.3 million for the six months ended March 31, 2010, increased from earnings of $54.9 million for the six months ended March 31, 2009. Earnings in Distribution’s New York Division for the six months ended March 31, 2010, of $36.0 million decreased $0.5 million compared to the prior year. Higher interest expense more than offset the impact of lower operating expenses during the six-month period.

For the six months ended March 31, 2010, earnings in Distribution’s Pennsylvania Division of $20.3 million increased $1.9 million compared to the prior year. Lower operating expenses and a lower effective tax rate more than offset higher interest expense and lower customer usage.

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 March 31, 2010, of $6.0 million increased $0.4 million compared to the second quarter of the prior year. Earnings for the six months ended March 31, 2010, in the Energy Marketing segment of $7.1 million increased $0.9 million compared to the prior year. The increase in the quarter and year to date earnings is due to higher margin and lower operating expenses compared to the same periods in fiscal 2009.

Corporate and All Other

The Corporate and All Other category includes the following active, wholly owned subsidiaries of the Company: 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; Horizon Power, Inc., a corporation that develops and owns independent electric generation facilities that are fueled by natural gas or landfill gas, and National Fuel Gas Midstream Corporation, formed to build, own and operate natural gas processing and pipeline gathering facilities in the Appalachian region.

Earnings in the Corporate and All Other category for the quarter ended March 31, 2010, were $1.4 million, a decrease of $0.4 million compared to the prior year’s second quarter earnings of $1.8 million. The decrease in earnings was mainly due to higher interest expense and higher income taxes. Higher margins from the timber operations (mainly due to lower prices paid for purchased logs and stumpage), higher margins in the landfill gas operations and higher interest income partially offset the decrease in earnings.

Earnings in the Corporate and All Other category for the six months ended March 31, 2010, were $1.6 million, a decrease of $1.2 million when compared to the prior year’s earnings. The comparability of the results for the six months ended March 31, 2010, was 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 in the prior year’s first quarter. Excluding these items, Operating Results were flat. Higher margins from the timber operations (mainly due to lower prices paid for purchased logs and stumpage), higher margins in the landfill gas operations and higher interest income were offset by higher interest expense and higher income taxes.

EARNINGS GUIDANCE

The Company is narrowing its earnings guidance for fiscal 2010 to reflect actual results for the six months ended March 31, 2010, as well as the change in the lower end of the production guidance range for the fiscal year. The revised GAAP earnings range is $2.45 to $2.70 per share. The previous guidance range had been $2.40 to $2.70 per share. This includes oil and gas production for fiscal 2010 for the Exploration and Production segment in a range between 46 and 51 Bcfe, hedges currently in place, and NYMEX equivalent flat commodity pricing on non-hedged volumes exclusive of basis differential of $5.00 per MMBtu for natural gas and $75.00 per Bbl for crude oil.

EARNINGS TELECONFERENCE

The Company will host a conference call on Friday, May 7, 2010, 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 website at investor.nationalfuelgas.com. For those without Internet access, access is also provided by dialing (toll-free) 1-866-356-3377, and using the passcode “87921204.” 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 website link and by phone at (toll free) 888-286-8010 using passcode “94473740.” Both the webcast and telephonic replay will be available until the close of business on Friday, May 14, 2010.

National Fuel is an integrated energy company with $5.0 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 website: http://www.nationalfuelgas.com or through its investor information service at 1-800-334-2188.

Certain statements contained herein, including those regarding estimated future earnings, and statements that are identified by the use of the words “anticipates,” “estimates,” “expects,” “forecasts,” “intends,” “plans,” “predicts,” “projects,” “believes,” “seeks,” “will,” “may” and similar expressions, are “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties, which could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. The Company’s expectations, beliefs and projections contained herein are expressed in good faith and are believed to have a reasonable basis, but there can be no assurance that such expectations, beliefs or projections will result or be achieved or accomplished. In addition to other factors, the following are important factors that could cause actual results to differ materially from those discussed in the forward-looking statements: 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 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, insufficient gathering, processing and transportation capacity, 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; changes in laws and regulations to which the Company is subject, including those involving taxes, safety, employment, climate change, other environmental matters, and exploration and production activities such as hydraulic fracturing; the nature and projected profitability of pending and potential projects and other investments, and the ability to obtain necessary governmental approvals and permits; 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; inability to obtain new customers or retain existing ones; significant changes in competitive factors affecting the Company; governmental/regulatory actions, initiatives and proceedings, including those involving acquisitions, financings, rate cases (which address, among other things, allowed rates of return, rate design and retained natural gas), affiliate relationships, industry structure, franchise renewal, and environmental/safety requirements; unanticipated impacts of restructuring initiatives in the natural gas and electric industries; ability to successfully identify and finance acquisitions or other investments and ability to operate and integrate existing and any subsequently acquired business or properties; 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; 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 MARCH 31, 2010   Exploration & Pipeline & Energy Corporate / (Thousands of Dollars) Production   Storage   Utility   Marketing   All Other   Consolidated

 

Second quarter 2009 GAAP earnings $ 18,107 $ 15,186 $ 32,819 $ 5,579 $ 1,793 $ 73,484

 

Drivers of operating results Higher (lower) crude oil prices 10,588 10,588 Higher (lower) natural gas prices (4,606 ) (4,606 ) Higher (lower) natural gas production 9,617 9,617 Higher (lower) crude oil production (1,724 ) (1,724 ) Lower (higher) lease operating expenses (2,183 ) (2,183 )   Higher (lower) transportation revenues (1,448 ) (1,448 ) Higher (lower) efficiency gas revenues 2,029 2,029 Lower (higher) operating expenses 762 (1,576 ) 2,031 95 1,312 Lower (higher) depreciation / depletion (3,477 ) 605 (2,872 ) Lower (higher) property, franchise and other taxes (466 ) (466 )   Usage (1,239 ) (1,239 ) Colder weather in Pennsylvania 313 313 Regulatory true-up adjustments (378 ) (378 )   Higher (lower) margins 172 1,056 1,228   Higher (lower) interest income (209 ) (236 ) 2,249 1,804 (Higher) lower interest expense 551 (1,295 ) (1,498 ) (2,421 ) (4,663 )   (Higher) lower income tax expense 2,137 (1,311 ) 826   All other / rounding   (43 )     (351 )     (912 )     123     (11 )     (1,194 )   Second quarter 2010 GAAP earnings $ 27,383     $ 12,448     $ 33,273     $ 5,969   $ 1,355     $ 80,428               NATIONAL FUEL GAS COMPANY RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS PER SHARE QUARTER ENDED MARCH 31, 2010   Exploration & Pipeline & Energy Corporate / Production   Storage   Utility   Marketing   All Other   Consolidated   Second quarter 2009 GAAP earnings $ 0.23 $ 0.19 $ 0.41 $ 0.07 $ 0.02 $ 0.92   Drivers of operating results Higher (lower) crude oil prices 0.13 0.13 Higher (lower) natural gas prices (0.06 ) (0.06 ) Higher (lower) natural gas production 0.12 0.12 Higher (lower) crude oil production (0.02 ) (0.02 ) Lower (higher) lease operating expenses (0.03 ) (0.03 )   Higher (lower) transportation revenues (0.02 ) (0.02 ) Higher (lower) efficiency gas revenues 0.02 0.02 Lower (higher) operating expenses 0.01 (0.02 ) 0.02 - 0.01 Lower (higher) depreciation / depletion (0.04 ) 0.01 (0.03 ) Lower (higher) property, franchise and other taxes (0.01 ) (0.01 )   Usage (0.02 ) (0.02 ) Colder weather in Pennsylvania - - Regulatory true-up adjustments - -   Higher (lower) margins - 0.01 0.01   Higher (lower) interest income - - 0.03 0.03 (Higher) lower interest expense - (0.02 ) (0.02 ) (0.03 ) (0.07 )   (Higher) lower income tax expense 0.03 (0.01 ) 0.02   All other / rounding   (0.01 )     -       (0.02 )     -         (0.03 )   Second quarter 2010 GAAP earnings $ 0.33     $ 0.15     $ 0.40     $ 0.07   $ 0.02     $ 0.97               NATIONAL FUEL GAS COMPANY RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS SIX MONTHS ENDED MARCH 31, 2010   Exploration & Pipeline & Energy Corporate / (Thousands of Dollars) Production   Storage   Utility   Marketing   All Other   Consolidated   Six months ended March 31, 2009 GAAP earnings $ (65,450 ) $ 32,362 $ 54,907 $ 6,178 $ 2,809 $ 30,806 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   Six months ended March 31, 2009 operating results 42,757 32,362 54,907 6,178 1,582 137,786   Drivers of operating results Higher (lower) crude oil prices 16,324 16,324 Higher (lower) natural gas prices (15,506 ) (15,506 ) Higher (lower) natural gas production 20,371 20,371 Higher (lower) crude oil production (1,205 ) (1,205 ) Lower (higher) lease operating expenses (1,550 ) (1,550 )   Lower (higher) operating expenses (2,150 ) 4,253 182 2,285 Lower (higher) depreciation / depletion (3,976 ) (3,976 ) Lower (higher) property, franchise and other taxes (1,032 ) (1,032 )   Usage (2,180 ) (2,180 ) Colder weather in Pennsylvania - Regulatory true-up adjustments -   Higher (lower) margins 547 2,940 3,487   Lower AFUDC * (2,780 ) (2,780 ) Higher (lower) interest income (1,013 ) (225 ) 3,210 1,972 Lower (higher) interest expense 1,166 (3,199 ) (3,226 ) (3,836 ) (9,095 )   (Higher) lower income tax expense 3,506 (2,462 ) 1,044   All other / rounding   (205 )     (174 )     (974 )     154     181       (1,018 )   Six months ended March 31, 2010 GAAP earnings $ 57,163     $ 22,802     $ 56,286     $ 7,061   $ 1,615     $ 144,927     * AFUDC = Allowance for Funds Used During Construction             NATIONAL FUEL GAS COMPANY RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS PER SHARE SIX MONTHS ENDED MARCH 31, 2010   Exploration & Pipeline & Energy Corporate / Production   Storage   Utility   Marketing   All Other   Consolidated   Six months ended March 31, 2009 GAAP earnings $ (0.82 ) $ 0.40 $ 0.68 $ 0.08 $ 0.04 $ 0.38 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   Six months ended March 31, 2009 operating results 0.53 0.40 0.68 0.08 0.02 1.71   Drivers of operating results Higher (lower) crude oil prices 0.20 0.20 Higher (lower) natural gas prices (0.19 ) (0.19 ) Higher (lower) natural gas production 0.25 0.25 Higher (lower) crude oil production (0.01 ) (0.01 ) Lower (higher) lease operating expenses (0.02 ) (0.02 )   Lower (higher) operating expenses (0.03 ) 0.05 - 0.02 Lower (higher) depreciation / depletion (0.05 ) (0.05 ) Lower (higher) property, franchise and other taxes (0.01 ) (0.01 )   Usage (0.03 ) (0.03 ) Colder weather in Pennsylvania - Regulatory true-up adjustments -   Higher (lower) margins 0.01 0.04 0.05   Lower AFUDC * (0.03 ) (0.03 ) Higher (lower) interest income (0.01 ) - 0.04 0.03 Lower (higher) interest expense 0.01 (0.04 ) (0.04 ) (0.05 ) (0.12 )   (Higher) lower income tax expense 0.04 (0.03 ) 0.01   All other / rounding   (0.02 )     (0.01 )     (0.02 )     -     -       (0.05 ) Six months ended March 31, 2010 GAAP earnings $ 0.69     $ 0.28     $ 0.68     $ 0.09   $ 0.02     $ 1.76     * AFUDC = Allowance for Funds Used During Construction   NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES         (Thousands of Dollars, except per share amounts) Three Months Ended Six Months Ended March 31, March 31, (Unaudited) (Unaudited)

SUMMARY OF OPERATIONS

2010 2009 2010 2009 Operating Revenues $ 671,380   $ 804,645   $ 1,128,392   $ 1,411,808     Operating Expenses: Purchased Gas 334,430 485,468 507,217 814,201 Operation and Maintenance 117,019 118,928 211,516 219,816 Property, Franchise and Other Taxes 20,454 20,372 39,113 39,134 Depreciation, Depletion and Amortization 46,891 41,714 91,846 84,056 Impairment of Oil and Gas Producing Properties   -     -     -     182,811   518,794 666,482 849,692 1,340,018   Operating Income 152,586 138,163 278,700 71,790   Other Income (Expense): Income from Unconsolidated Subsidiaries 672 974 1,073 2,092 Impairment of Investment in Partnership - - - (1,804 ) Other Income 1,266 947 1,622 5,827 Interest Income 326 1,005 1,480 2,898 Interest Expense on Long-Term Debt (22,061 ) (17,545 ) (44,124 ) (35,601 ) Other Interest Expense   (2,006 )   (2,849 )   (3,390 )   (2,474 )   Income Before Income Taxes 130,783 120,695 235,361 42,728   Income Tax Expense   50,355     47,211     90,434     11,922     Net Income Available for Common Stock $ 80,428   $ 73,484   $ 144,927   $ 30,806     Earnings Per Common Share: Basic $ 0.99   $ 0.92   $ 1.79   $ 0.39   Diluted $ 0.97   $ 0.92   $ 1.76   $ 0.38     Weighted Average Common Shares: Used in Basic Calculation   81,175,261     79,514,793     80,866,311     79,400,660   Used in Diluted Calculation   82,569,323     80,129,743     82,347,254     80,156,407         NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited)   March 31, September 30, (Thousands of Dollars) 2010   2009   ASSETS Property, Plant and Equipment $ 5,413,119 $ 5,184,844 Less - Accumulated Depreciation, Depletion and Amortization   2,118,594       2,051,482   Net Property, Plant and Equipment   3,294,525       3,133,362     Current Assets: Cash and Temporary Cash Investments 426,804 408,053 Cash Held in Escrow 2,000 2,000 Hedging Collateral Deposits 13,657 848 Receivables - Net 226,566 144,466 Unbilled Utility Revenue 38,634 18,884 Gas Stored Underground 14,696 55,862 Materials and Supplies - at average cost 27,754 24,520 Other Current Assets 50,593 68,474 Deferred Income Taxes   40,600       53,863   Total Current Assets   841,304       776,970     Other Assets: Recoverable Future Taxes 138,435 138,435 Unamortized Debt Expense 13,683 14,815 Other Regulatory Assets 521,917 530,913 Deferred Charges 4,876 2,737 Other Investments 79,219 78,503 Investments in Unconsolidated Subsidiaries 13,713 14,940 Goodwill 5,476 5,476 Intangible Assets 20,637 21,536 Fair Value of Derivative Financial Instruments 48,850 44,817 Other   3,153       6,625   Total Other Assets   849,959       858,797   Total Assets $ 4,985,788     $ 4,769,129     CAPITALIZATION AND LIABILITIES Capitalization: Comprehensive Shareholders' Equity Common Stock, $1 Par Value Authorized - 200,000,000 Shares; Issued and Outstanding - 81,258,186 Shares and 80,499,915 Shares, Respectively $ 81,258 $ 80,500 Paid in Capital 627,871 602,839 Earnings Reinvested in the Business   1,038,869       948,293   Total Common Shareholders' Equity Before Items of Other Comprehensive Loss 1,747,998 1,631,632 Accumulated Other Comprehensive Loss   (38,902 )     (42,396 ) Total Comprehensive Shareholders' Equity 1,709,096 1,589,236 Long-Term Debt, Net of Current Portion   1,049,000       1,249,000   Total Capitalization   2,758,096       2,838,236     Current and Accrued Liabilities: Notes Payable to Banks and Commercial Paper - - Current Portion of Long-Term Debt 200,000 - Accounts Payable 109,145 90,723 Amounts Payable to Customers 64,336 105,778 Dividends Payable 27,222 26,967 Interest Payable on Long-Term Debt 30,512 32,031 Customer Advances 2,715 24,555 Customer Security Deposits 19,426 17,430 Other Accruals and Current Liabilities 110,174 18,875 Fair Value of Derivative Financial Instruments   16,632       2,148   Total Current and Accrued Liabilities   580,162       318,507     Deferred Credits: Deferred Income Taxes 720,584 663,876 Taxes Refundable to Customers 67,053 67,046 Unamortized Investment Tax Credit 3,638 3,989 Cost of Removal Regulatory Liability 121,954 105,546 Other Regulatory Liabilities 87,215 120,229 Pension and Other Post-Retirement Liabilities 414,479 415,888 Asset Retirement Obligations 92,461 91,373 Other Deferred Credits   140,146       144,439   Total Deferred Credits   1,647,530       1,612,386   Commitments and Contingencies   -       -   Total Capitalization and Liabilities $ 4,985,788     $ 4,769,129       NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Six Months Ended March 31, (Thousands of Dollars)   2010   2009   Operating Activities: Net Income Available for Common Stock $ 144,927 $ 30,806 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 91,846 84,056 Deferred Income Taxes 41,796 (80,857 ) Income from Unconsolidated Subsidiaries, Net of Cash Distributions 1,228 808 Impairment of Investment in Partnership - 1,804 Excess Tax Benefits Associated with Stock-Based Compensation Awards (13,437 ) (5,927 ) Other 6,270 8,997 Change in: Hedging Collateral Deposits (12,809 ) (22,194 ) Receivables and Unbilled Utility Revenue (101,881 ) (149,895 ) Gas Stored Underground and Materials and Supplies 37,932 79,128 Unrecovered Purchased Gas Costs - 34,782 Prepayments and Other Current Assets 31,318 16,954 Accounts Payable 12,179 (45,186 ) Amounts Payable to Customers (41,442 ) 18,897 Customer Advances (21,840 ) (31,189 ) Customer Security Deposits 1,996 968 Other Accruals and Current Liabilities 90,498 215,281 Other Assets 11,285 2,399 Other Liabilities     (535 )     (4,301 ) Net Cash Provided by Operating Activities   $ 279,331     $ 338,142     Investing Activities: Capital Expenditures ($230,530 ) ($181,158 ) Net Proceeds from Sale of Oil and Gas Producing Properties - 60 Other     (115 )     (595 ) Net Cash Used in Investing Activities     ($230,645 )     ($181,693 )   Financing Activities: Excess Tax Benefits Associated with Stock-Based Compensation Awards $ 13,437 $ 5,927 Reduction of Long-Term Debt - (100,000 ) Dividends Paid on Common Stock (54,096 ) (51,556 ) Proceeds From Issuance of Common Stock     10,724       6,989   Net Cash Used In Financing Activities     ($29,935 )     ($138,640 ) Net Increase in Cash and Temporary Cash Investments 18,751 17,809 Cash and Temporary Cash Investments at Beginning of Period     408,053       68,239   Cash and Temporary Cash Investments at March 31   $ 426,804     $ 86,048                   NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES   SEGMENT OPERATING RESULTS AND STATISTICS (UNAUDITED)   Three Months Ended Six Months Ended (Thousands of Dollars, except per share amounts) March 31, March 31,

EXPLORATION AND PRODUCTION SEGMENT

2010   2009   Variance 2010   2009   Variance Operating Revenues $ 109,158     $ 87,077     $ 22,081   $ 215,511     $ 183,790     $ 31,721     Operating Expenses: Operation and Maintenance: General and Administrative Expense 8,858 8,525 333 17,347 15,617 1,730 Lease Operating Expense 15,688 12,555 3,133 27,932 25,169 2,763 All Other Operation and Maintenance Expense 2,149 3,644 (1,495 ) 4,333 6,274 (1,941 ) Property, Franchise and Other Taxes (Lease Operating Expense) 2,652 2,426 226 5,004 5,381 (377 ) Depreciation, Depletion and Amortization 25,891 20,543 5,348 49,803 43,687 6,116 Impairment of Oil and Gas Producing Properties   -       -       -     -       182,811       (182,811 )   55,238       47,693       7,545     104,419       278,939       (174,520 )   Operating Income (Loss) 53,920 39,384 14,536 111,092 (95,149 ) 206,241   Other Income (Expense): Interest Income 156 479 (323 ) 309 1,868 (1,559 ) Other Interest Expense   (7,885 )     (8,733 )     848     (15,753 )     (17,547 )     1,794     Income (Loss) Before Income Taxes 46,191 31,130 15,061 95,648 (110,828 ) 206,476 Income Tax Expense (Benefit)   18,808       13,023       5,785     38,485       (45,378 )     83,863   Net Income (Loss) $ 27,383     $ 18,107     $ 9,276   $ 57,163     $ (65,450 )   $ 122,613     Net Income (Loss) Per Share (Diluted) $ 0.33     $ 0.23     $ 0.10   $ 0.69     $ (0.82 )   $ 1.51         Three Months Ended Six Months Ended March 31, March 31,

PIPELINE AND STORAGE SEGMENT

2010   2009   Variance 2010   2009   Variance Revenues from External Customers $ 40,971 $ 39,846 $ 1,125 $ 75,475 $ 75,113 $ 362 Intersegment Revenues   20,565       21,156       (591 )   40,822       41,993       (1,171 ) Total Operating Revenues   61,536       61,002       534     116,297       117,106       (809 )   Operating Expenses: Purchased Gas 135 115 20 72 129 (57 ) Operation and Maintenance 20,130 17,708 2,422 37,162 33,855 3,307 Property, Franchise and Other Taxes 4,988 4,269 719 10,096 8,509 1,587 Depreciation, Depletion and Amortization   8,883       9,813       (930 )   17,722       17,666       56     34,136       31,905       2,231     65,052       60,159       4,893     Operating Income 27,400 29,097 (1,697 ) 51,245 56,947 (5,702 )   Other Income (Expense): Interest Income 21 384 (363 ) 52 398 (346 ) Other Income 147 230 (83 ) 245 3,017 (2,772 ) Other Interest Expense   (6,581 )     (4,588 )     (1,993 )   (13,177 )     (8,255 )     (4,922 )   Income Before Income Taxes 20,987 25,123 (4,136 ) 38,365 52,107 (13,742 ) Income Tax Expense   8,539       9,937       (1,398 )   15,563       19,745       (4,182 ) Net Income $ 12,448     $ 15,186     $ (2,738 ) $ 22,802     $ 32,362     $ (9,560 )   Net Income Per Share (Diluted) $ 0.15     $ 0.19     $ (0.04 ) $ 0.28     $ 0.40     $ (0.12 )                 NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES   SEGMENT OPERATING RESULTS AND STATISTICS (UNAUDITED)   Three Months Ended Six Months Ended (Thousands of Dollars, except per share amounts) March 31, March 31,

UTILITY SEGMENT

2010   2009   Variance 2010   2009   Variance Revenues from External Customers $ 348,593 $ 502,016 $ (153,423 ) $ 580,997 $ 851,653 $ (270,656 ) Intersegment Revenues   6,149       5,846       303     10,662       10,399       263   Total Operating Revenues   354,742       507,862       (153,120 )   591,659       862,052       (270,393 )   Operating Expenses: Purchased Gas 212,197 359,588 (147,391 ) 339,587 601,484 (261,897 ) Operation and Maintenance 58,441 63,070 (4,629 ) 103,427 112,683 (9,256 ) Property, Franchise and Other Taxes 12,267 13,206 (939 ) 23,002 24,332 (1,330 ) Depreciation, Depletion and Amortization   10,077       9,937       140     19,997       19,661       336     292,982       445,801       (152,819 )   486,013       758,160       (272,147 )   Operating Income 61,760 62,061 (301 ) 105,646 103,892 1,754   Other Income (Expense): Interest Income 136 123 13 854 919 (65 ) Other Income 243 237 6 512 512 - Other Interest Expense   (9,331 )     (7,026 )     (2,305 )   (18,054 )     (13,092 )     (4,962 )   Income Before Income Taxes 52,808 55,395 (2,587 ) 88,958 92,231 (3,273 ) Income Tax Expense   19,535       22,576       (3,041 )   32,672       37,324       (4,652 ) Net Income $ 33,273     $ 32,819     $ 454   $ 56,286     $ 54,907     $ 1,379     Net Income Per Share (Diluted) $ 0.40     $ 0.41     $ (0.01 ) $ 0.68     $ 0.68     $ -         Three Months Ended Six Months Ended March 31, March 31,

ENERGY MARKETING SEGMENT

2010   2009   Variance 2010   2009   Variance Operating Revenues $ 158,537     $ 163,545     $ (5,008 ) $ 230,273     $ 278,551     $ (48,278 )   Operating Expenses: Purchased Gas 147,166 152,438 (5,272 ) 215,769 264,888 (49,119 ) Operation and Maintenance 1,542 1,688 (146 ) 2,876 3,156 (280 ) Property, Franchise and Other Taxes 7 9 (2 ) 17 15 2 Depreciation, Depletion and Amortization   11       9       2     21       20       1     148,726       154,144       (5,418 )   218,683       268,079       (49,396 )   Operating Income 9,811 9,401 410 11,590 10,472 1,118   Other Income (Expense): Interest Income 8 24 (16 ) 14 27 (13 ) Other Income 30 67 (37 ) 46 110 (64 ) Other Interest Expense   (9 )     (60 )     51     (15 )     (195 )     180     Income Before Income Taxes 9,840 9,432 408 11,635 10,414 1,221 Income Tax Expense   3,871       3,853       18     4,574       4,236       338   Net Income $ 5,969     $ 5,579     $ 390   $ 7,061     $ 6,178     $ 883     Net Income Per Share (Diluted) $ 0.07     $ 0.07     $ -   $ 0.09     $ 0.08     $ 0.01                 NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES   SEGMENT OPERATING RESULTS AND STATISTICS (UNAUDITED)   Three Months Ended Six Months Ended (Thousands of Dollars, except per share amounts) March 31, March 31,

ALL OTHER

2010   2009   Variance 2010   2009   Variance Revenues from External Customers $ 13,903 $ 11,929 $ 1,974 $ 25,707 $ 22,254 $ 3,453 Intersegment Revenues   -       1,194       (1,194 )   -       3,516       (3,516 ) Total Operating Revenues   13,903       13,123       780     25,707       25,770       (63 )   Operating Expenses: Purchased Gas 1,506 1,397 109 3,004 3,357 (353 ) Operation and Maintenance 7,847 9,871 (2,024 ) 13,583 19,404 (5,821 ) Property, Franchise and Other Taxes 469 392 77 853 756 97 Depreciation, Depletion and Amortization   1,854       1,237       617     3,954       2,675       1,279     11,676       12,897       (1,221 )   21,394       26,192       (4,798 )   Operating Income (Loss) 2,227 226 2,001 4,313 (422 ) 4,735   Other Income (Expense): Income from Unconsolidated Subsidiaries 672 974 (302 ) 1,073 2,092 (1,019 ) Impairment of Investment in Partnership - - - - (1,804 ) 1,804 Interest Income 28 241 (213 ) 57 490 (433 ) Other Income 12 10 2 40 12 28 Other Interest Expense   (540 )     (587 )     47     (1,082 )     (1,360 )     278     Income (Loss) Before Income Taxes 2,399 864 1,535 4,401 (992 ) 5,393 Income Tax Expense (Benefit)   825       (1,043 )     1,868     1,663       (2,032 )     3,695   Net Income (Loss) $ 1,574     $ 1,907     $ (333 ) $ 2,738     $ 1,040     $ 1,698     Net Income (Loss) Per Share (Diluted) $ 0.02     $ 0.02     $ (0.00 ) $ 0.03     $ 0.02     $ 0.01                   NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES   SEGMENT OPERATING RESULTS AND STATISTICS (UNAUDITED)   Three Months Ended Six Months Ended (Thousands of Dollars, except per share amounts) March 31, March 31,

CORPORATE

2010   2009   Variance 2010   2009   Variance Revenues from External Customers $ 218 $ 232 $ (14 ) $ 429 $ 447 $ (18 ) Intersegment Revenues   1,003       1,055       (52 )   1,542       2,058       (516 ) Total Operating Revenues   1,221       1,287       (66 )   1,971       2,505       (534 )   Operating Expenses: Operation and Maintenance 3,507 3,048 459 6,667 5,967 700 Property, Franchise and Other Taxes 71 70 1 141 141 - Depreciation, Depletion and Amortization   175       175       -     349       347       2     3,753       3,293       460     7,157       6,455       702     Operating Loss (2,532 ) (2,006 ) (526 ) (5,186 ) (3,950 ) (1,236 )   Other Income (Expense): Interest Income 22,379 18,706 3,673 45,061 39,689 5,372 Other Income 834 403 431 779 2,176 (1,397 ) Interest Expense on Long-Term Debt (22,061 ) (17,545 ) (4,516 ) (44,124 ) (35,601 ) (8,523 ) Other Interest Expense   (62 )     (807 )     745     (176 )     (2,518 )     2,342     Income (Loss) Before Income Taxes (1,442 ) (1,249 ) (193 ) (3,646 ) (204 ) (3,442 ) Income Tax Benefit   (1,223 )     (1,135 )     (88 )   (2,523 )     (1,973 )     (550 ) Net Income (Loss) $ (219 )   $ (114 )   $ (105 ) $ (1,123 )   $ 1,769     $ (2,892 )   Net Income (Loss) Per Share (Diluted) $ -     $ -     $ -   $ (0.01 )   $ 0.02     $ (0.03 )       Three Months Ended Six Months Ended March 31, March 31,

INTERSEGMENT ELIMINATIONS

2010   2009   Variance 2010   2009   Variance Intersegment Revenues $ (27,717 )   $ (29,251 )   $ 1,534   $ (53,026 )   $ (57,966 )   $ 4,940     Operating Expenses: Purchased Gas (26,574 ) (28,070 ) 1,496 (51,215 ) (55,657 ) 4,442 Operation and Maintenance   (1,143 )     (1,181 )     38     (1,811 )     (2,309 )     498     (27,717 )     (29,251 )     1,534     (53,026 )     (57,966 )     4,940     Operating Income - - - - - -   Other Income (Expense): Interest Income (22,402 ) (18,952 ) (3,450 ) (44,867 ) (40,493 ) (4,374 ) Other Interest Expense   22,402       18,952       3,450     44,867       40,493       4,374     Net Income $ -     $ -     $ -   $ -     $ -     $ -     Net Income Per Share (Diluted) $ -     $ -     $ -   $ -     $ -     $ -                       NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES     SEGMENT INFORMATION (Continued) (Thousands of Dollars)     Three Months Ended Six Months Ended March 31, March 31, (Unaudited) (Unaudited)   Increase Increase 2010 2009 (Decrease) 2010 2009 (Decrease)   Capital Expenditures: Exploration and Production $ 143,249

(1)

$ 30,751

(3)

$ 112,498 $ 190,986

(1)(2)

$ 117,161

(3)

$ 73,825 Pipeline and Storage 8,491 10,719

(4)

(2,228 ) 15,478 30,220

(4)(5)

(14,742 ) Utility 13,573 12,234 1,339 25,525 25,823 (298 ) Energy Marketing   95   9   86     99   11     88   Total Reportable Segments 165,408 53,713 111,695 232,088 173,215 58,873 All Other 2,851 22 2,829 3,837

(2)

74 3,763 Corporate 107 14 93 134 45 89 Eliminations   -   -   -     -   (344 )   344   Total Capital Expenditures $ 168,366 $ 53,749 $ 114,617   $ 236,059 $ 172,990   $ 63,069  

(1) Amount for the quarter and six months ended March 31, 2010 includes $15.3 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 March 31, 2010 since it represents a non-cash investing activity at that date.

 

(2) Capital expenditures for the Exploration and Production segment for the six months ended March 31, 2010 exclude $9.1 million of capital expenditures, the majority of which was in the Appalachian region. Capital expenditures for All Other for the six months ended March 31, 2010 exclude $0.7 million of capital expenditures related to the construction of the Midstream Covington Gathering System. Both of these amounts were accrued at September 30, 2009 and paid during the six months ended March 31, 2010. These amounts were excluded from the Consolidated Statement of Cash Flows at September 30, 2009 since they represented non-cash investing activities at that date. These amounts have been included in the Consolidated Statement of Cash Flows at March 31, 2010.

 

(3) Amount for the quarter and six months ended March 31, 2009 includes $7.7 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 March 31, 2009 since it represents a non-cash investing activity at that date.

 

(4) Amount for the quarter and six months ended March 31, 2009 includes $0.9 million of accrued capital expenditures related to the Empire Connector project. This amount has been excluded from the Consolidated Statement of Cash Flows at March 31, 2009 since it represents a non-cash investing activity at that date.

 

(5) Amount for the six months ended March 31, 2009 excludes $16.8 million of capital expenditures related to the Empire Connector project accrued at September 30, 2008 and paid during the six months ended March 31, 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 March 31, 2009.

 

                                 

DEGREE DAYS

  Percent Colder (Warmer) Than:

Three Months Ended March 31

  Normal     2010     2009     Normal     Last Year     Buffalo, NY 3,327 3,241 3,391 (2.6 ) (4.4 ) Erie, PA 3,142 3,163 3,176 0.7 (0.4 )  

Six Months Ended March 31

  Buffalo, NY 5,587 5,487 5,704 (1.8 ) (3.8 ) Erie, PA 5,223 5,211 5,243 (0.2 ) (0.6 )         NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES        

EXPLORATION AND PRODUCTION INFORMATION

    Three Months Ended Six Months Ended March 31, March 31, Increase Increase 2010 2009 (Decrease) 2010 2009 (Decrease)  

Gas Production/Prices:

Production (MMcf) Gulf Coast 2,643 2,065 578 5,333 3,811 1,522 West Coast 930 1,027 (97 ) 1,926 2,049 (123 ) Appalachia   3,542   2,059   1,483     6,344   3,910   2,434   Total Production   7,115   5,151   1,964     13,603   9,770   3,833     Average Prices (Per Mcf) Gulf Coast $ 6.02 $ 4.61 $ 1.41 $ 5.42 $ 5.72 $ (0.30 ) West Coast 5.79 4.22 1.57 5.19 4.62 0.57 Appalachia 5.97 5.87 0.10 5.57 7.13 (1.56 ) Weighted Average 5.96 5.03 0.93 5.46 6.05 (0.59 ) Weighted Average after Hedging 6.54 7.53 (0.99 ) 6.42 8.18 (1.76 )  

Oil Production/Prices:

Production (Thousands of Barrels) Gulf Coast 109 166 (57 ) 255 294 (39 ) West Coast 661 648 13 1,345 1,330 15 Appalachia   9   12   (3 )   20   27   (7 ) Total Production   779   826   (47 )   1,620   1,651   (31 )   Average Prices (Per Barrel) Gulf Coast $ 89.22 $ 40.43 $ 48.79 $ 79.81 $ 47.26 $ 32.55 West Coast 73.16 36.60 36.56 71.72 42.45 29.27 Appalachia 73.80 43.55 30.25 79.67 58.10 21.57 Weighted Average 75.41 37.47 37.94 73.09 43.56 29.53 Weighted Average after Hedging 77.29 56.39 20.90 75.86 60.36 15.50   Total Production (Mmcfe)   11,789   10,107   1,682     23,323   19,676   3,647    

Selected Operating Performance Statistics:

General & Administrative Expense per Mcfe (1) $ 0.75 $ 0.84 $ (0.09 ) $ 0.74 $ 0.79 $ (0.05 ) Lease Operating Expense per Mcfe (1) $ 1.56 $ 1.48 $ 0.08 $ 1.41 $ 1.55 $ (0.14 ) Depreciation, Depletion & Amortization per Mcfe (1) $ 2.20 $ 2.03 $ 0.17 $ 2.14 $ 2.22 $ (0.08 )  

(1) Refer to page 17 for the General and Administrative Expense, Lease Operating Expense and Depreciation, Depletion, and Amortization Expense for the Exploration and Production segment.

            NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES  

EXPLORATION AND PRODUCTION INFORMATION

  Hedging Summary for the Remaining Six Months of Fiscal 2010  

SWAPS

Volume Average Hedge Price Oil 0.9 MMBBL $74.58 / BBL Gas 7.8 BCF $6.90 / MCF   Hedging Summary for Fiscal 2011  

SWAPS

Volume Average Hedge Price Oil 1.2 MMBBL $69.58 / BBL Gas 15.0 BCF $6.99 / MCF   Hedging Summary for Fiscal 2012  

SWAPS

Volume Average Hedge Price Oil 0.7 MMBBL $67.63 / BBL Gas 11.2 BCF $7.23 / MCF  

Gross Wells in Process of Drilling

Six Months Ended March 31, 2010

East Marcellus Upper Total Gulf West Shale Devonian Company   Wells in Process - Beginning Period Exploratory 0.00 0.00 14.00 (1) 22.00 36.00 Developmental 0.00 0.00 14.00 (1) 68.00 82.00 Wells Commenced Exploratory 1.00 0.00 7.00 11.00 19.00 Developmental 0.00 29.00 23.00 54.00 106.00 Wells Completed Exploratory 0.00 0.00 6.00 4.00 10.00 Developmental 0.00 27.00 9.00 75.00 111.00 Wells Plugged & Abandoned Exploratory 0.00 0.00 1.00 0.00 1.00 Developmental 0.00 0.00 0.00 2.00 2.00 Wells Sold Exploratory 0.00 0.00 0.00 1.00 1.00 Developmental 0.00 0.00 0.00 0.00 0.00 Wells in Process - End of Period Exploratory 1.00 0.00 14.00 28.00 43.00 Developmental 0.00 2.00 28.00 45.00 75.00   (1) Gross exploratory wells were decreased by 11 and developmental wells were increased by 11.  

Net Wells in Process of Drilling

Six Months Ended March 31, 2010

East Marcellus Upper Total Gulf West Shale Devonian Company   Wells in Process - Beginning Period Exploratory 0.00 0.00 13.00 (2) 20.00 33.00 Developmental 0.00 0.00 8.50 (2) 67.00 75.50 Wells Commenced Exploratory 0.29 0.00 7.00 11.00 18.29 Developmental 0.00 26.72 14.72 54.00 95.44 Wells Completed Exploratory 0.00 0.00 5.00 3.00 8.00 Developmental 0.00 25.36 6.50 75.00 106.86 Wells Plugged & Abandoned Exploratory 0.00 0.00 1.00 0.00 1.00 Developmental 0.00 0.00 0.00 2.00 2.00 Wells Sold Exploratory 0.00 0.00 0.00 1.00 1.00 Developmental 0.00 0.00 0.00 0.00 0.00 Wells in Process - End of Period Exploratory 0.29 0.00 14.00 27.00 41.29 Developmental 0.00 1.36 16.72 44.00 62.08   (2) Net exploratory wells were decreased by 6.50 and developmental wells were increased by 6.50.             NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES       Pipeline & Storage Throughput - (millions of cubic feet - MMcf)   Three Months Ended Six Months Ended March 31, March 31, Increase Increase 2010 2009 (Decrease)   2010 2009 (Decrease) Firm Transportation - Affiliated 43,587 47,255 (3,668 ) 73,763 80,989 (7,226 ) Firm Transportation - Non-Affiliated 68,559 86,217 (17,658 ) 119,022 154,736 (35,714 ) Interruptible Transportation 1,804 1,256 548   2,559 2,875 (316 ) 113,950 134,728 (20,778 ) 195,344 238,600 (43,256 )   Utility Throughput - (MMcf) Three Months Ended Six Months Ended March 31, March 31, Increase Increase 2010 2009 (Decrease)   2010 2009 (Decrease) Retail Sales: Residential Sales 26,413 28,366 (1,953 ) 43,237 46,533 (3,296 ) Commercial Sales 4,256 4,852 (596 ) 6,746 7,762 (1,016 ) Industrial Sales 288 302 (14 ) 446 445 1   30,957 33,520 (2,563 ) 50,429 54,740 (4,311 ) Off-System Sales 2,554 1 2,553 2,910 513 2,397 Transportation 24,366 24,256 110   41,427 41,729 (302 ) 57,877 57,777 100   94,766 96,982 (2,216 )   Energy Marketing Volumes Three Months Ended Six Months Ended March 31, March 31, Increase Increase 2010 2009 (Decrease)   2010 2009 (Decrease) Natural Gas (MMcf) 23,996 22,689 1,307   38,097 35,825 2,272                 NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES FISCAL 2010 EARNINGS GUIDANCE AND SENSITIVITIES           Earnings per share sensitivity to changes Fiscal 2010 (Diluted earnings per share guidance*)

 

from NYMEX prices used in guidance* ^   $1 change per MMBtu gas   $5 change per Bbl oil Range IncreaseDecrease IncreaseDecrease   Consolidated Earnings

$2.45 - $2.70

+ $0.05 - $0.05 + $0.03 - $0.03         * Please refer to forward looking statement footnote beginning at page 8 of this document.  

^ This sensitivity table is current as of May 6, 2010 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 two quarters of 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 March 31 (unaudited)

2010 2009   Operating Revenues $ 671,380,000 $ 804,645,000   Net Income Available for Common Stock $ 80,428,000 $ 73,484,000   Earnings Per Common Share: Basic $ 0.99 $ 0.92 Diluted $ 0.97 $ 0.92   Weighted Average Common Shares: Used in Basic Calculation   81,175,261   79,514,793 Used in Diluted Calculation   82,569,323   80,129,743    

Six Months Ended March 31 (unaudited)

  Operating Revenues $ 1,128,392,000 $ 1,411,808,000   Net Income Available for Common Stock $ 144,927,000 $ 30,806,000   Earnings Per Common Share: Basic $ 1.79 $ 0.39 Diluted $ 1.76 $ 0.38   Weighted Average Common Shares: Used in Basic Calculation   80,866,311   79,400,660 Used in Diluted Calculation   82,347,254   80,156,407    

Twelve Months Ended March 31 (unaudited)

  Operating Revenues $ 1,774,436,000 $ 2,358,048,000   Net Income Available for Common Stock $ 214,829,000 $ 133,926,000   Earnings Per Common Share: Basic $ 2.67 $ 1.67 Diluted $ 2.63 $ 1.64   Weighted Average Common Shares: Used in Basic Calculation   80,380,789   80,252,366 Used in Diluted Calculation   81,749,193   81,882,711