NFG National Fuel Gas Co

National Fuel Gas Company (“National Fuel” or the “Company”) (NYSE:NFG) today announced consolidated earnings for the third quarter of fiscal 2010 and for the nine months ended June 30, 2010.

HIGHLIGHTS

• Consolidated earnings for the third quarter were $42.6 million or $0.51 per share, a decrease of $0.3 million, or $0.02 per share, from the third quarter of fiscal 2009 due to lower earnings in the Pipeline and Storage segment.
• Compared to the prior year’s third quarter, production of crude oil and natural gas increased approximately 1.7 billion cubic feet equivalent (“Bcfe”), or 15.1%, to 13.3 Bcfe. Appalachian production increased 115% to 4.8 Bcfe, including production from the Marcellus Shale of 2.4 Bcfe. The Company’s production forecast for the entire 2010 fiscal year is expected to be between 48 and 51 Bcfe.
• Seneca Resources Corporation (“Seneca”) has increased its estimate of net risked Marcellus resource potential to a range of 8 to 15 trillion cubic feet (“Tcf”) across an area of 738,000 acres that it considers to be prospective in the Marcellus Shale.
• The Company is narrowing its GAAP earnings guidance range for fiscal 2010 to a range of $2.60 to $2.70 per share. The previous earnings guidance had been a range between $2.45 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.
• The Company’s preliminary GAAP earnings guidance for fiscal 2011 is in the range of $2.60 to $2.90 per share. The 2011 preliminary guidance includes oil and gas production for the Exploration and Production segment in the range of 60 to 70 Bcfe and is based on an assumed average NYMEX price, exclusive of basis differential, of $5.00 per MMBtu for natural gas and $80.00 per Bbl for crude oil.
• A conference call is scheduled for Friday, August 6, 2010, at 11 a.m. Eastern Time.

MANAGEMENT COMMENTS

David F. Smith, Chairman and Chief Executive Officer of National Fuel Gas Company, stated: “Results for the third quarter of fiscal year 2010 were consistent with our expectations, supported by strong production growth from the Exploration and Production segment along with the stable and predictable results from the Utility business.”

“Seneca continues to execute on its aggressive growth plans. With the recent addition of a third Seneca-operated rig in the Marcellus Shale, we have accelerated our pace of drilling. This increased drilling, combined with continued strong well results, has allowed us to nearly double the midpoint of our Marcellus resource potential estimate to 11.5 Tcf. The increase in this estimate and the ongoing development of the entire play continue to provide development opportunities for Seneca, Midstream and the Pipeline and Storage segment.”

“In the Appalachian Basin, industry-wide growth in production has put pressure on natural gas prices. The erosion of historically favorable prices at the import point at the Canadian border has created short-term challenges in the Pipeline and Storage segment. These challenges, however, continue to create opportunities for new infrastructure construction that will help transport Marcellus Shale gas to the major markets.”

“Our current cash position and strong balance sheet will allow National Fuel to capitalize on the potential provided by the Marcellus Shale, generating long-term value for our shareholders.”

SUMMARY OF RESULTS

National Fuel had consolidated earnings for the quarter ended June 30, 2010, of $42.6 million, or $0.51 per share, compared to the prior year’s third quarter earnings of $42.9 million, or $0.53 per share, a decrease of $0.3 million or $0.02 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 nine months ended June 30, 2010, of $187.5 million, or $2.27 per share, increased $113.8 million, or $1.35 per share, from the same period in the prior year, where earnings were $73.7 million or $0.92 per share.

          Three Months Nine Months Ended June 30, Ended June 30,   2010     2009   2010     2009   (in thousands except per share amounts) Reported GAAP earnings $ 42,585 $ 42,904 $ 187,512 $ 73,710 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 $ 42,585 $ 42,904 $ 187,512 $ 180,690     Reported GAAP earnings per share $ 0.51 $ 0.53 $ 2.27 $ 0.92 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 $ 0.51 $ 0.53 $ 2.27 $ 2.25     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, 2010, to the comparable period in fiscal 2009. Excluding these items, Operating Results for the nine months ended June 30, 2010, of $187.5 million, or $2.27 per share, increased $6.8 million, or $0.02 per share, from the same period in the prior year, where Operating Results were $180.7 million or $2.25 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 third quarter of fiscal 2010 of $27.9 million, or $0.33 per share, increased $0.8 million, or less than $0.01 per share, when compared with the prior year’s third quarter.

Overall production for the current quarter of 13.3 Bcfe increased approximately 1.7 Bcfe, or 15.1 percent, compared to the prior year’s third quarter. Production increased approximately 115 percent in Appalachia mainly due to higher production from Marcellus wells of 2.4 Bcfe. In the Gulf of Mexico, production decreased 0.8 Bcfe. Production in California was consistent with the prior year.

In addition to the higher production, higher crude oil prices realized after hedging had a positive impact on earnings. Lower natural gas prices realized after hedging reduced earnings. For the quarter ended June 30, 2010, the weighted average oil price received by Seneca (after hedging) was $75.23 per Bbl, an increase of $8.04 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, 2010, was $5.74 per thousand cubic feet (“Mcf”), a decrease of $0.20 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 the depletable base and higher production).

The Exploration and Production segment’s earnings of $85.0 million, or $1.03 per share, for the nine months ended June 30, 2010, compares to a loss of $38.4 million, or $0.47 per share, for the nine months ended June 30, 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 June 30, 2010, the ceiling exceeded the book value of Seneca’s oil and gas properties by approximately $231 million.

Excluding the impact of the ceiling test charge in the prior year’s first quarter, Operating Results for the nine months ended June 30, 2010, of $85.0 million, or $1.03 per share, increased $15.2 million, or $0.15 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 nine months ended June 30, 2010, increased 17.3 percent to 36.6 Bcfe, an increase of 5.4 Bcfe compared to the prior year’s nine-month period. Production increased 78.9 percent in Appalachia mainly due to 4.1 Bcfe of Marcellus production and higher production from upper Devonian wells. In the Gulf of Mexico, production increased by 4.8 percent. California production was consistent with the prior year.

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 nine months ended June 30, 2010, the weighted average oil price received by Seneca (after hedging) was $75.65 per Bbl, an increase of $12.98 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, 2010, was $6.16 per Mcf, a decrease of $1.12 per Mcf.

Other items impacting Operating Results for the nine months ended June 30, 2010, were higher depletion expense (mainly due to the increase in production and a higher depletable base) 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 $7.2 million, or $0.09 per share, for the quarter ended June 30, 2010, decreased $2.0 million, or $0.02 per share, 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 third 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 expense (mainly due to increased pension expense) and property taxes 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 $30.0 million, or $0.37 per share, for the nine months ended June 30, 2010, decreased $11.5 million, or $0.15 per share, when compared with the nine months ended June 30, 2009. The decrease in earnings for the current nine-month period was due to higher operating expenses (mainly due to increased pension and other operating expenses), higher property taxes and interest expense and a lower allowance for funds used during construction (“AFUDC”) for 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 $6.0 million, for the quarter ended June 30, 2010, compare to earnings of $5.4 million, for the quarter ended June 30, 2009.

In the New York Division, earnings increased $0.4 million. The increase is primarily due to lower interest expense on over recoveries of purchased gas costs, which more than offset higher operating expenses for the quarter. In the Pennsylvania Division, earnings increased $0.2 million. The impact on earnings of warmer weather and higher interest expense was more than offset by a lower effective tax rate.

The Utility segment’s earnings of $62.3 million for the nine months ended June 30, 2010, increased from earnings of $60.3 million for the nine months ended June 30, 2009. Earnings in the New York Division for the nine months ended June 30, 2010, of $40.6 million decreased $0.1 million compared to the prior year. Higher interest expense on long-term debt and the impact of regulatory true-up adjustments more than offset the impact of lower operating expenses during the nine-month period.

For the nine months ended June 30, 2010, earnings in the Pennsylvania Division of $21.7 million increased $2.1 million compared to the prior year. Lower operating expenses and a lower effective tax rate more than offset higher interest expense, warmer weather and lower customer usage during the nine-month period.

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, 2010, of $1.4 million increased $0.1 million compared to the third quarter of the prior year. Earnings for the nine months ended June 30, 2010, in the Energy Marketing segment of $8.5 million increased $1.0 million compared to the prior year. The increase in the quarter and year to date earnings is due to higher margins 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 (“Midstream”), 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 June 30, 2010, were $0.1 million compared to the prior year’s third quarter loss of $0.1 million. Earnings from Midstream’s pipeline gathering and natural gas processing operations, higher margins from the timber operations and higher margins in the landfill gas operations more than offset a higher effective tax rate.

Earnings in the Corporate and All Other category for the nine months ended June 30, 2010, were $1.7 million compared to earnings of $2.7 million in the prior year nine-month period. The comparability of the results for the nine months ended June 30, 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 for the nine months ended June 30, 2010, increased $0.2 million. Earnings from Midstream’s pipeline gathering and processing operations, 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 a higher effective tax rate.

EARNINGS GUIDANCE

The Company is narrowing its earnings guidance for fiscal 2010 to reflect actual results for the nine months ended June 30, 2010. The revised GAAP earnings range is $2.60 to $2.70 per share. The previous guidance range had been $2.45 to $2.70 per share. This includes oil and gas production for fiscal 2010 for the Exploration and Production segment in a range between 48 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.

The Company’s preliminary GAAP earnings guidance for fiscal 2011 is in the range of $2.60 to $2.90 per share. This includes oil and gas production for the Exploration and Production segment in the range of 60 to 70 Bcfe and is based on an assumed average NYMEX price, exclusive of basis differential, of $5.00 per MMBtu for natural gas and $80.00 per Bbl for crude oil.

EARNINGS TELECONFERENCE

The Company will host a conference call on Friday, August 6, 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 on National Fuel’s website at investor.nationalfuelgas.com. For those without Internet access, access is also provided by dialing (toll-free) 1-866-783-2142, using the passcode “60304436.” 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) 1-888-286-8010, using passcode “88538993.” Both the webcast and telephonic replay will be available until the close of business on Friday, August 13, 2010.

National Fuel is an integrated energy company with $4.9 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 at 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 derivatives, 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 derivatives, 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 JUNE 30, 2010   Exploration & Pipeline & Energy Corporate / (Thousands of Dollars) Production   Storage   Utility   Marketing   All Other   Consolidated   Third quarter 2009 GAAP earnings $ 27,083 $ 9,221 $ 5,396 $ 1,331 $ (127 ) $ 42,904   Drivers of operating results Higher (lower) crude oil prices 4,227 4,227 Higher (lower) natural gas prices (1,072 ) (1,072 ) Higher (lower) natural gas production 7,527 7,527 Higher (lower) crude oil production (1,496 ) (1,496 ) Higher (lower) processing plant revenues 717 717 Lower (higher) lease operating expenses (3,072 ) (3,072 ) Lower (higher) depreciation / depletion (3,567 ) (765 ) (4,332 )   Higher (lower) transportation revenues (460 ) (460 ) Higher (lower) efficiency gas revenues 622 622 Lower (higher) operating costs (1,018 ) (1,114 ) (590 ) (283 ) (420 ) (3,425 ) Lower (higher) property, franchise and other taxes (544 ) (544 )   Warmer weather in Pennsylvania (936 ) (936 )   Income from unconsolidated subsidiaries -   Higher (lower) margins 473 2,975 3,448   Higher (lower) interest income (313 ) (313 ) Lower (higher) interest expense 420 474 894   Lower (higher) income tax expense / effective tax rate (1,740 ) 1,842 (1,133 ) (1,031 )   All other / rounding   (126 )     (178 )     (217 )     (110 )     (442 )     (1,073 )   Third quarter 2010 GAAP earnings $ 27,883     $ 7,234     $ 5,969     $ 1,411     $ 88     $ 42,585                     NATIONAL FUEL GAS COMPANY RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS PER SHARE QUARTER ENDED JUNE 30, 2010   Exploration & Pipeline & Energy Corporate / Production   Storage   Utility   Marketing   All Other   Consolidated   Third quarter 2009 GAAP earnings $ 0.33 $ 0.11 $ 0.07 $ 0.02 $ - $ 0.53   Drivers of operating results Higher (lower) crude oil prices 0.05 0.05 Higher (lower) natural gas prices (0.01 ) (0.01 ) Higher (lower) natural gas production 0.09 0.09 Higher (lower) crude oil production (0.02 ) (0.02 ) Higher (lower) processing plant revenues 0.01 0.01 Lower (higher) lease operating expenses (0.04 ) (0.04 ) Lower (higher) depreciation / depletion (0.04 ) (0.01 ) (0.05 )   Higher (lower) transportation revenues (0.01 ) (0.01 ) Higher (lower) efficiency gas revenues 0.01 0.01 Lower (higher) operating costs (0.01 ) (0.01 ) (0.01 ) - (0.01 ) (0.04 ) Lower (higher) property, franchise and other taxes (0.01 ) (0.01 )   Warmer weather in Pennsylvania (0.01 ) (0.01 )   Income from unconsolidated subsidiaries -   Higher (lower) margins - 0.04 0.04   Higher (lower) interest income - - Lower (higher) interest expense 0.01 0.01 0.02   Lower (higher) income tax expense / effective tax rate (0.02 ) 0.02 (0.01 ) (0.01 )   All other / rounding   (0.02 )     -       (0.01 )     -     (0.01 )     (0.04 )   Third quarter 2010 GAAP earnings $ 0.33     $ 0.09     $ 0.07     $ 0.02   $ -     $ 0.51                     NATIONAL FUEL GAS COMPANY RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS NINE MONTHS ENDED JUNE 30, 2010   Exploration & Pipeline & Energy Corporate / (Thousands of Dollars) Production   Storage   Utility   Marketing   All Other   Consolidated   Nine months ended June 30, 2009 GAAP earnings $ (38,366 ) $ 41,582 $ 60,303 $ 7,509 $ 2,682 $ 73,710 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 operating results 69,841 41,582 60,303 7,509 1,455 180,690   Drivers of operating results Higher (lower) crude oil prices 20,496 20,496 Higher (lower) natural gas prices (16,061 ) (16,061 ) Higher (lower) natural gas production 27,382 27,382 Higher (lower) crude oil production (2,646 ) (2,646 ) Higher (lower) processing plant revenues 1,536 1,536 Lower (higher) lease operating expenses (4,622 ) (4,622 ) Lower (higher) depreciation / depletion (7,542 ) (1,598 ) (9,140 )   Higher (lower) transportation revenues (266 ) (266 ) Higher (lower) efficiency gas revenues 376 376 Lower (higher) operating costs (866 ) (3,262 ) 3,663 (101 ) (378 ) (944 ) Lower (higher) property, franchise and other taxes (1,578 ) (1,578 )   Warmer weather in Pennsylvania (875 ) (875 ) Higher (lower) usage (2,106 ) (2,106 ) Regulatory true-up adjustments (1,100 ) (1,100 )   Income (loss) from unconsolidated subsidiaries (578 ) (578 )   Higher (lower) margins 1,019 6,526 7,545   Higher (lower) AFUDC* (2,835 ) (2,835 ) Higher (lower) interest income (1,097 ) (537 ) 3,184 1,550 Lower (higher) interest expense 1,585 (3,201 ) (2,751 ) (3,854 ) (8,221 )   Lower (higher) income tax expense / effective tax rate (2,717 ) 5,349 (3,594 ) (962 )   All other / rounding   (243 )     (243 )     (229 )     45       541       (129 )   Nine months ended June 30, 2010 GAAP earnings $ 85,046     $ 30,036     $ 62,254     $ 8,472     $ 1,704     $ 187,512     * 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, 2010   Exploration & Pipeline & Energy Corporate / Production   Storage   Utility   Marketing   All Other   Consolidated   Nine months ended June 30, 2009 GAAP earnings $ (0.47 ) $ 0.52 $ 0.75 $ 0.09 $ 0.03 $ 0.92 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 operating results 0.88 0.52 0.75 0.09 0.01 2.25   Drivers of operating results Higher (lower) crude oil prices 0.25 0.25 Higher (lower) natural gas prices (0.19 ) (0.19 ) Higher (lower) natural gas production 0.33 0.33 Higher (lower) crude oil production (0.03 ) (0.03 ) Higher (lower) processing plant revenues 0.02 0.02 Lower (higher) lease operating expenses (0.06 ) (0.06 ) Lower (higher) depreciation / depletion (0.09 ) (0.02 ) (0.11 )   Higher (lower) transportation revenues - - Higher (lower) efficiency gas revenues - - Lower (higher) operating costs (0.01 ) (0.04 ) 0.04 - - (0.01 ) Lower (higher) property, franchise and other taxes (0.02 ) (0.02 )   Warmer weather in Pennsylvania (0.01 ) (0.01 ) Higher (lower) usage (0.03 ) (0.03 ) Regulatory true-up adjustments (0.01 ) (0.01 )   Income (loss) from unconsolidated subsidiaries (0.01 ) (0.01 )   Higher (lower) margins 0.01 0.08 0.09   Higher (lower) AFUDC* (0.03 ) (0.03 ) Higher (lower) interest income (0.01 ) (0.01 ) 0.04 0.02 Lower (higher) interest expense 0.02 (0.04 ) (0.03 ) (0.05 ) (0.10 )   Lower (higher) income tax expense / effective tax rate (0.03 ) 0.06 (0.04 ) (0.01 )   All other / rounding (including impact of higher weighted average shares)   (0.05 )     (0.01 )     (0.02 )         0.01       (0.07 )   Nine months ended June 30, 2010 GAAP earnings $ 1.03     $ 0.37     $ 0.75     $ 0.10   $ 0.02     $ 2.27     * 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

  2010     2009     2010     2009   Operating Revenues $ 354,127   $ 367,111   $ 1,482,518   $ 1,778,919     Operating Expenses: Purchased Gas 98,400 126,969 605,617 941,171 Operation and Maintenance 97,388 91,679 308,903 311,496 Property, Franchise and Other Taxes 18,605 17,576 57,719 56,709 Depreciation, Depletion and Amortization 50,588 43,659 142,433 127,715 Impairment of Oil and Gas Producing Properties   -     -     -     182,811   264,981 279,883 1,114,672 1,619,902   Operating Income 89,146 87,228 367,846 159,017   Other Income (Expense): Income from Unconsolidated Subsidiaries 624 627 1,696 2,719 Impairment of Investment in Partnership - - - (1,804 ) Other Income 851 1,522 2,473 7,350 Interest Income 569 1,460 2,049 4,358 Interest Expense on Long-Term Debt (21,115 ) (21,756 ) (65,238 ) (57,357 ) Other Interest Expense   (1,874 )   (2,539 )   (5,264 )   (5,013 )   Income Before Income Taxes 68,201 66,542 303,562 109,270   Income Tax Expense   25,616     23,638     116,050     35,560     Net Income Available for Common Stock $ 42,585   $ 42,904   $ 187,512   $ 73,710     Earnings Per Common Share: Basic $ 0.52   $ 0.54   $ 2.31   $ 0.93   Diluted $ 0.51   $ 0.53   $ 2.27   $ 0.92     Weighted Average Common Shares: Used in Basic Calculation   81,801,377     79,551,195     81,178,000     79,450,838   Used in Diluted Calculation   82,970,921     80,391,402     82,556,730     80,248,787             NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited)   June 30, September 30, (Thousands of Dollars)     2010       2009     ASSETS Property, Plant and Equipment $ 5,518,060 $ 5,184,844 Less - Accumulated Depreciation, Depletion and Amortization   2,164,383       2,051,482   Net Property, Plant and Equipment   3,353,677       3,133,362     Current Assets: Cash and Temporary Cash Investments 458,847 408,053 Cash Held in Escrow 2,000 2,000 Hedging Collateral Deposits 8,222 848 Receivables - Net 143,684 144,466 Unbilled Utility Revenue 12,957 18,884 Gas Stored Underground 27,245 55,862 Materials and Supplies - at average cost 32,753 24,520 Other Current Assets 42,639 68,474 Deferred Income Taxes   32,893       53,863   Total Current Assets   761,240       776,970     Other Assets: Recoverable Future Taxes 138,435 138,435 Unamortized Debt Expense 13,116 14,815 Other Regulatory Assets 518,225 530,913 Deferred Charges 6,447 2,737 Other Investments 76,354 78,503 Investments in Unconsolidated Subsidiaries 14,037 14,940 Goodwill 5,476 5,476 Intangible Assets 20,188 21,536 Fair Value of Derivative Financial Instruments 41,897 44,817 Other   269       6,625   Total Other Assets   834,444       858,797   Total Assets $ 4,949,361     $ 4,769,129     CAPITALIZATION AND LIABILITIES Capitalization: Comprehensive Shareholders' Equity Common Stock, $1 Par Value Authorized - 200,000,000 Shares; Issued and Outstanding - 81,965,317 Shares and 80,499,915 Shares, Respectively $ 81,965 $ 80,500 Paid in Capital 644,751 602,839 Earnings Reinvested in the Business   1,053,176       948,293   Total Common Shareholders' Equity Before Items of Other Comprehensive Loss 1,779,892 1,631,632 Accumulated Other Comprehensive Loss   (38,153 )     (42,396 ) Total Comprehensive Shareholders' Equity 1,741,739 1,589,236 Long-Term Debt, Net of Current Portion   1,049,000       1,249,000   Total Capitalization   2,790,739       2,838,236     Current and Accrued Liabilities: Notes Payable to Banks and Commercial Paper - - Current Portion of Long-Term Debt 200,000 - Accounts Payable 106,087 90,723 Amounts Payable to Customers 51,014 105,778 Dividends Payable 28,278 26,967 Interest Payable on Long-Term Debt 17,203 32,031 Customer Advances 1,029 24,555 Customer Security Deposits 18,618 17,430 Other Accruals and Current Liabilities 65,244 18,875 Fair Value of Derivative Financial Instruments     2,776       2,148   Total Current and Accrued Liabilities     490,249       318,507     Deferred Credits: Deferred Income Taxes 735,558 663,876 Taxes Refundable to Customers 67,057 67,046 Unamortized Investment Tax Credit 3,463 3,989 Cost of Removal Regulatory Liability 123,357 105,546 Other Regulatory Liabilities 86,106 120,229 Pension and Other Post-Retirement Liabilities 420,361 415,888 Asset Retirement Obligations 92,601 91,373 Other Deferred Credits   139,870       144,439   Total Deferred Credits   1,668,373       1,612,386   Commitments and Contingencies   -       -   Total Capitalization and Liabilities $ 4,949,361     $ 4,769,129             NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)   Nine Months Ended June 30, (Thousands of Dollars)         2010       2009     Operating Activities: Net Income Available for Common Stock $ 187,512 $ 73,710 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 142,433 127,715 Deferred Income Taxes 63,813 (85,494 ) Income from Unconsolidated Subsidiaries, Net of Cash Distributions 904 180 Impairment of Investment in Partnership - 1,804 Excess Tax Benefits Associated with Stock-Based Compensation Awards (13,207 ) (5,927 ) Other 7,884 11,751 Change in: Hedging Collateral Deposits (7,374 ) (6,358 ) Receivables and Unbilled Utility Revenue 6,676 (5,520 ) Gas Stored Underground and Materials and Supplies 20,384 71,491 Unrecovered Purchased Gas Costs - 35,808 Prepayments and Other Current Assets 39,043 37,904 Accounts Payable 127 (82,146 ) Amounts Payable to Customers (54,764 ) 43,019 Customer Advances (23,526 ) (29,788 ) Customer Security Deposits 1,188 3,314 Other Accruals and Current Liabilities 30,961 162,903 Other Assets 29,197 (8,517 ) Other Liabilities         (11,358 )     (14,453 ) Net Cash Provided by Operating Activities       $ 419,893     $ 514,207     Investing Activities: Capital Expenditures ($327,513 ) ($240,312 ) Cash Held in Escrow - (2,000 ) Net Proceeds from Sale of Oil and Gas Producing Properties - 3,701 Other         (273 )     (1,674 ) Net Cash Used in Investing Activities         ($327,786 )     ($240,285 )   Financing Activities: Excess Tax Benefits Associated with Stock-Based Compensation Awards $ 13,207 $ 5,927 Net Proceeds from Issuance of Long-Term Debt - 247,780 Reduction of Long-Term Debt - (100,000 ) Dividends Paid on Common Stock (81,318 ) (77,398 ) Proceeds From Issuance of Common Stock         26,798       14,760   Net Cash Provided by (Used In) Financing Activities         ($41,313 )   $ 91,069   Net Increase in Cash and Temporary Cash Investments 50,794 364,991 Cash and Temporary Cash Investments at Beginning of Period         408,053       68,239   Cash and Temporary Cash Investments at June 30       $ 458,847     $ 433,230                     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

  2010       2009     Variance   2010       2009     Variance Operating Revenues $ 112,802     $ 97,619     $ 15,183   $ 328,312     $ 281,410     $ 46,902     Operating Expenses: Operation and Maintenance: General and Administrative Expense 8,353 6,849 1,504 25,700 22,465 3,235 Lease Operating Expense 15,964 11,775 4,189 43,895 36,944 6,951 All Other Operation and Maintenance Expense 2,400 2,325 75 6,734 8,599 (1,865 ) Property, Franchise and Other Taxes (Lease Operating Expense) 2,878 2,341 537 7,881 7,722 159 Depreciation, Depletion and Amortization 28,959 23,472 5,487 78,762 67,159 11,603 Impairment of Oil and Gas Producing Properties   -       -       -     -       182,811       (182,811 )   58,554       46,762       11,792     162,972       325,700       (162,728 )   Operating Income (Loss) 54,248 50,857 3,391 165,340 (44,290 ) 209,630   Other Income (Expense): Interest Income 190 319 (129 ) 500 2,186 (1,686 ) Other Interest Expense   (7,259 )     (7,905 )     646     (23,013 )     (25,452 )     2,439     Income (Loss) Before Income Taxes 47,179 43,271 3,908 142,827 (67,556 ) 210,383 Income Tax Expense (Benefit)   19,296       16,188       3,108     57,781       (29,190 )     86,971   Net Income (Loss) $ 27,883     $ 27,083     $ 800   $ 85,046     $ (38,366 )   $ 123,412     Net Income (Loss) Per Share (Diluted) $ 0.33     $ 0.33     $ -   $ 1.03     $ (0.47 )   $ 1.50       Three Months Ended Nine Months Ended June 30, June 30,

PIPELINE AND STORAGE SEGMENT

  2010       2009     Variance   2010       2009     Variance Revenues from External Customers $ 32,086 $ 30,791 $ 1,295 $ 107,560 $ 105,904 $ 1,656 Intersegment Revenues   19,466       20,033       (567 )   60,289       62,026       (1,737 ) Total Operating Revenues   51,552       50,824       728     167,849       167,930       (81 )   Operating Expenses: Purchased Gas 67 8 59 139 137 2 Operation and Maintenance 18,404 16,690 1,714 55,566 50,546 5,020 Property, Franchise and Other Taxes 5,119 4,281 838 15,216 12,789 2,427 Depreciation, Depletion and Amortization   8,895       8,750       145     26,617       26,416       201     32,485       29,729       2,756     97,538       89,888       7,650     Operating Income 19,067 21,095 (2,028 ) 70,311 78,042 (7,731 )   Other Income (Expense): Interest Income 65 546 (481 ) 117 943 (826 ) Other Income 119 175 (56 ) 365 3,192 (2,827 ) Other Interest Expense   (6,507 )     (6,505 )     (2 )   (19,684 )     (14,760 )     (4,924 )   Income Before Income Taxes 12,744 15,311 (2,567 ) 51,109 67,417 (16,308 ) Income Tax Expense   5,510       6,090       (580 )   21,073       25,835       (4,762 ) Net Income $ 7,234     $ 9,221     $ (1,987 ) $ 30,036     $ 41,582     $ (11,546 )   Net Income Per Share (Diluted) $ 0.09     $ 0.11     $ (0.02 ) $ 0.37     $ 0.52     $ (0.15 )                   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

  2010       2009     Variance   2010       2009     Variance Revenues from External Customers $ 126,326 $ 158,310 $ (31,984 ) $ 707,323 $ 1,009,962 $ (302,639 ) Intersegment Revenues   2,653       2,940       (287 )   13,315       13,339       (24 ) Total Operating Revenues   128,979       161,250       (32,271 )   720,638       1,023,301       (302,663 )   Operating Expenses: Purchased Gas 50,404 80,505 (30,101 ) 389,992 681,989 (291,997 ) Operation and Maintenance 42,899 42,404 495 146,327 155,088 (8,761 ) Property, Franchise and Other Taxes 10,140 10,491 (351 ) 33,142 34,822 (1,680 ) Depreciation, Depletion and Amortization   10,129       10,010       119     30,125       29,670       455     113,572       143,410       (29,838 )   599,586       901,569       (301,983 )   Operating Income 15,407 17,840 (2,433 ) 121,052 121,732 (680 )   Other Income (Expense): Interest Income 164 430 (266 ) 1,018 1,349 (331 ) Other Income 267 251 16 780 763 17 Other Interest Expense   (8,998 )     (9,728 )     730     (27,053 )     (22,820 )     (4,233 )   Income Before Income Taxes 6,840 8,793 (1,953 ) 95,797 101,024 (5,227 ) Income Tax Expense   871       3,397       (2,526 )   33,543       40,721       (7,178 ) Net Income $ 5,969     $ 5,396     $ 573   $ 62,254     $ 60,303     $ 1,951     Net Income Per Share (Diluted) $ 0.07     $ 0.07     $ -   $ 0.75     $ 0.75     $ -       Three Months Ended Nine Months Ended June 30, June 30,

ENERGY MARKETING SEGMENT

  2010       2009     Variance   2010       2009     Variance Operating Revenues $ 72,830     $ 71,894     $ 936   $ 303,103     $ 350,445     $ (47,342 )   Operating Expenses: Purchased Gas 68,704 68,496 208 284,473 333,386 (48,913 ) Operation and Maintenance 1,847 1,412 435 4,723 4,568 155 Property, Franchise and Other Taxes 7 6 1 24 22 2 Depreciation, Depletion and Amortization   11       11       -     32       31       1     70,569       69,925       644     289,252       338,007       (48,755 )   Operating Income 2,261 1,969 292 13,851 12,438 1,413   Other Income (Expense): Interest Income 15 39 (24 ) 28 67 (39 ) Other Income 12 91 (79 ) 58 201 (143 ) Other Interest Expense   (6 )     (14 )     8     (21 )     (209 )     188     Income Before Income Taxes 2,282 2,085 197 13,916 12,497 1,419 Income Tax Expense   871       754       117     5,444       4,988       456   Net Income $ 1,411     $ 1,331     $ 80   $ 8,472     $ 7,509     $ 963     Net Income Per Share (Diluted) $ 0.02     $ 0.02     $ -   $ 0.10     $ 0.09     $ 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

  2010       2009     Variance   2010       2009     Variance Revenues from External Customers $ 9,859 $ 8,269 $ 1,590 $ 35,568 $ 30,523 $ 5,045 Intersegment Revenues   1,418       374       1,044     1,418       3,890       (2,472 ) Total Operating Revenues   11,277       8,643       2,634     36,986       34,413       2,573     Operating Expenses: Purchased Gas 1,205 1,181 24 4,209 4,538 (329 ) Operation and Maintenance 7,111 8,748 (1,637 ) 20,692 28,151 (7,459 ) Property, Franchise and Other Taxes 392 385 7 1,246 1,140 106 Depreciation, Depletion and Amortization   2,416       1,243       1,173     6,370       3,918       2,452     11,124       11,557       (433 )   32,517       37,747       (5,230 )   Operating Income (Loss) 153 (2,914 ) 3,067 4,469 (3,334 ) 7,803   Other Income (Expense): Income from Unconsolidated Subsidiaries 624 627 (3 ) 1,696 2,719 (1,023 ) Impairment of Investment in Partnership - - - - (1,804 ) 1,804 Interest Income 40 52 (12 ) 96 543 (447 ) Other Income (7 ) 26 (33 ) 32 38 (6 ) Other Interest Expense   (549 )     (560 )     11     (1,629 )     (1,921 )     292     Income (Loss) Before Income Taxes 261 (2,769 ) 3,030 4,664 (3,759 ) 8,423 Income Tax Expense (Benefit)   75       (1,683 )     1,758     1,739       (3,713 )     5,452   Net Income (Loss) $ 186     $ (1,086 )   $ 1,272   $ 2,925     $ (46 )   $ 2,971     Net Income Per Share (Diluted) $ -     $ (0.01 )   $ 0.01   $ 0.04     $ -     $ 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,

CORPORATE

  2010       2009     Variance   2010       2009     Variance Revenues from External Customers $ 224 $ 228 $ (4 ) $ 652 $ 675 $ (23 ) Intersegment Revenues   1,003       1,003       -     2,545       3,062       (517 ) Total Operating Revenues   1,227       1,231       (4 )   3,197       3,737       (540 )   Operating Expenses: Operation and Maintenance 2,970 2,605 365 9,637 8,573 1,064 Property, Franchise and Other Taxes 69 72 (3 ) 210 214 (4 ) Depreciation, Depletion and Amortization   178       173       5     527       521       6     3,217       2,850       367     10,374       9,308       1,066     Operating Loss (1,990 ) (1,619 ) (371 ) (7,177 ) (5,571 ) (1,606 )   Other Income (Expense): Interest Income 22,525 22,553 (28 ) 67,587 62,243 5,344 Other Income 460 979 (519 ) 1,238 3,156 (1,918 ) Interest Expense on Long-Term Debt (21,115 ) (21,756 ) 641 (65,238 ) (57,357 ) (7,881 ) Other Interest Expense   (985 )     (306 )     (679 )   (1,161 )     (2,824 )     1,663     Loss Before Income Taxes (1,105 ) (149 ) (956 ) (4,751 ) (353 ) (4,398 ) Income Tax Benefit   (1,007 )     (1,108 )     101     (3,530 )     (3,081 )     (449 ) Net Income (Loss) $ (98 )   $ 959     $ (1,057 ) $ (1,221 )   $ 2,728     $ (3,949 )   Net Income (Loss) Per Share (Diluted) $ -     $ 0.01     $ (0.01 ) $ (0.02 )   $ 0.03     $ (0.05 )     Three Months Ended Nine Months Ended June 30, June 30,

INTERSEGMENT ELIMINATIONS

  2010       2009     Variance   2010       2009     Variance Intersegment Revenues $ (24,540 )   $ (24,350 )   $ (190 ) $ (77,567 )   $ (82,317 )   $ 4,750     Operating Expenses: Purchased Gas (21,980 ) (23,221 ) 1,241 (73,196 ) (78,879 ) 5,683 Operation and Maintenance   (2,560 )     (1,129 )     (1,431 )   (4,371 )     (3,438 )     (933 )   (24,540 )     (24,350 )     (190 )   (77,567 )     (82,317 )     4,750     Operating Income - - - - - -   Other Income (Expense): Interest Income (22,430 ) (22,479 ) 49 (67,297 ) (62,973 ) (4,324 ) Other Interest Expense   22,430       22,479       (49 )   67,297       62,973       4,324     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   2010   2009 (Decrease)   2010   2009   (Decrease)   Capital Expenditures: Exploration and Production $ 82,863

(1)

$ 34,517

(3)

$ 48,346 $ 273,849

(1)(2)

$ 151,678

 

(3)

$ 122,171 Pipeline and Storage 6,765 7,020 (255 ) 22,243 37,240

(4)

(14,997 ) Utility 13,988 14,557 (569 ) 39,513 40,380 (867 ) Energy Marketing   140   14   126     239   25     214   Total Reportable Segments 103,756 56,108 47,648 335,844 229,323 106,521 All Other 2,151 3,731 (1,580 ) 5,988

(2)

3,805 2,183 Corporate 68 104 (36 ) 202 149 53 Eliminations   -   -   -     -   (344 )   344   Total Capital Expenditures $ 105,975 $ 59,943 $ 46,032   $ 342,034 $ 232,933   $ 109,101    

(1) Amount for the quarter and nine months ended June 30, 2010 includes $24.3 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 June 30, 2010 since it represents a non-cash investing activity at that date.

 

(2) Capital expenditures for the Exploration and Production segment for the nine months ended June 30, 2010 exclude $9.1 million of capital expenditures, the majority of which was in the Appalachian region. Capital expenditures for All Other for the nine months ended June 30, 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 nine months ended June 30, 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 June 30, 2010.

 

(3) Amount for the quarter and 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.

 

(4) 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 2010 2009 Normal (1) Last Year (1)   Buffalo, NY 927 665 854 (28.3) (22.1) Erie, PA 885 631 821 (28.7) (23.1)  

Nine Months Ended June 30

  Buffalo, NY 6,514 6,152 6,558 (5.6) (6.2) Erie, PA 6,108 5,842 6,064 (4.4) (3.7)   (1) Percents compare actual 2010 degree days to normal degree days and actual 2010 degree days to actual 2009 degree days.               NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES  

EXPLORATION AND PRODUCTION INFORMATION

    Three Months Ended Nine Months Ended June 30, June 30, Increase Increase   2010   2009 (Decrease)     2010   2009 (Decrease)  

Gas Production/Prices:

Production (MMcf) Gulf Coast 2,745 3,307 (562 ) 8,079 7,118 961 West Coast 940 1,014 (74 ) 2,866 3,063 (197 ) Appalachia   4,741   2,155   2,586     11,084   6,065   5,019   Total Production   8,426   6,476   1,950     22,029   16,246   5,783     Average Prices (Per Mcf) Gulf Coast $ 4.95 $ 3.95 $ 1.00 $ 5.26 $ 4.90 $ 0.36 West Coast 4.38 3.04 1.34 4.92 4.10 0.82 Appalachia 4.45 4.11 0.34 5.10 6.06 (0.96 ) Weighted Average 4.61 3.86 0.75 5.13 5.18 (0.05 ) Weighted Average after Hedging 5.74 5.94 (0.20 ) 6.16 7.28 (1.12 )  

Oil Production/Prices:

Production (Thousands of Barrels) Gulf Coast 135 176 (41 ) 389 470 (81 ) West Coast 661 654 7 2,007 1,984 23 Appalachia   13   14   (1 )   34   41   (7 ) Total Production   809   844   (35 )   2,430   2,495   (65 )   Average Prices (Per Barrel) Gulf Coast $ 76.42 $ 56.29 $ 20.13 $ 78.64 $ 50.64 $ 28.00 West Coast 71.92 55.77 16.15 71.79 46.84 24.95 Appalachia 74.90 48.93 25.97 77.77 54.90 22.87 Weighted Average 72.72 55.77 16.95 72.97 47.69 25.28 Weighted Average after Hedging 75.23 67.19 8.04 75.65 62.67 12.98   Total Production (Mmcfe)   13,280   11,540   1,740     36,609   31,216   5,393    

Selected Operating Performance Statistics:

General & Administrative Expense per Mcfe (1) $ 0.63 $ 0.59 $ 0.04 $ 0.70 $ 0.72 $ (0.02 ) Lease Operating Expense per Mcfe (1) $ 1.42 $ 1.22 $ 0.20 $ 1.41 $ 1.43 $ (0.02 ) Depreciation, Depletion & Amortization per Mcfe (1) $ 2.18 $ 2.03 $ 0.15 $ 2.15 $ 2.15 $ -  

(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 Three Months of Fiscal 2010  

SWAPS

Volume

Average Hedge Price

Oil 0.5 MMBBL $74.43 / BBL Gas 3.9 BCF $ 6.95/ MCF   Hedging Summary for Fiscal 2011  

SWAPS

Volume

Average Hedge Price

Oil 1.4 MMBBL $69.76 / BBL Gas 19.9 BCF $ 6.76 / MCF   Hedging Summary for Fiscal 2012  

SWAPS

Volume

Average Hedge Price

Oil 0.8 MMBBL $68.32 / BBL Gas 13.8 BCF $ 7.11 / MCF   Hedging Summary for Fiscal 2013  

SWAPS

Volume

Average Hedge Price

Oil 0.2 MMBBL $72.98 / BBL Gas 3.8 BCF $ 6.65 / MCF    

Gross Wells in Process of Drilling

Nine Months Ended June 30, 2010

East

Marcellus Upper Total

Gulf

West

Shale

Devonian

Company

  Wells in Process - Beginning Period Exploratory 0.00 0.00 16.00

(1) (2)

20.00

(2)

36.00 Developmental 0.00 0.00 14.00

(1)

68.00 82.00 Wells Commenced Exploratory 1.00 0.00 8.00 11.00 20.00 Developmental 0.00 43.00 36.00 67.00 146.00 Wells Completed Exploratory 1.00 0.00 11.00 7.00 19.00 Developmental 0.00 42.00 14.00 105.00 161.00 Wells Plugged & Abandoned Exploratory 0.00 0.00 1.00 1.00 2.00 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 0.00 0.00 12.00 22.00 34.00 Developmental 0.00 1.00 36.00 28.00 65.00  

(1) Gross exploratory wells were decreased by 11 and developmental wells were increased by 11.

 

(2) Marcellus Shale gross exploratory wells were increased by 2 and Upper Devonian gross exploratory wells were decreased by 2.

   

Net Wells in Process of Drilling

Nine Months Ended June 30, 2010

East

Marcellus Upper Total

Gulf

West

Shale

Devonian

Company

  Wells in Process - Beginning Period Exploratory 0.00 0.00 14.00

(3) (4)

19.00

(4)

33.00 Developmental 0.00 0.00 8.50

(3)

67.00 75.50 Wells Commenced Exploratory 0.29 0.00 8.00 11.00 19.29 Developmental 0.00 40.72 22.77 67.00 130.49 Wells Completed Exploratory 0.29 0.00 9.00 7.00 16.29 Developmental 0.00 39.72 9.50 105.00 154.22 Wells Plugged & Abandoned Exploratory 0.00 0.00 1.00 1.00 2.00 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 0.00 0.00 12.00 21.00 33.00 Developmental 0.00 1.00 21.77 27.00 49.77  

(3) Net exploratory wells were decreased by 6.50 and developmental wells were increased by 6.50.

 

(4) Marcellus Shale net exploratory wells were increased by 1 and Upper Devonian net exploratory wells were decreased by 1.

      NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES  

EXPLORATION AND PRODUCTION INFORMATION

    Fiscal 2011 Financial & Operating Guidance    

Total Production (Bcfe)

60 - 70    

Production by Division (Bcfe)

 

Gulf

9 - 11

East

32 - 39

West

19 - 20    

Guidance Based on Crude Oil Average 2011 NYMEX Price ($/Bbl) (without hedges) of $80.00

 

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 2011 NYMEX Price ($/MMBtu) (without hedges) of $5.00

 

Forecast price differentials

 

Gulf

$0.00 to -$0.10

East

$0.00 to +$0.25

West

-$0.10 to -$0.50    

Cost and Expenses $ per Mcfe

 

Lease Operating Expenses

$1.10 - $1.35

Depreciation, Depletion and Amortization

$2.12 - $2.22

Other Taxes (% of Revenue)

$0.10 - $0.20  

Other Operating Expenses

$9M - $11M

General and Administrative

$38M - $41M     Capital Investment by Division Number of Wells to be Drilled  

Gulf

$5M - $15M

0 - 2

East

$385M - $440M

120 - 150

West

$35M - $45M

50 - 75

Total

$425M - $500M

                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 2010 2009 (Decrease)   2010 2009 (Decrease) Firm Transportation - Affiliated 15,438 17,214 (1,776 ) 89,201 98,204 (9,003 ) Firm Transportation - Non-Affiliated 37,010 43,584 (6,574 ) 156,032 198,320 (42,288 ) Interruptible Transportation 1,016 501 515   3,575 3,375 200   53,464 61,299 (7,835 ) 248,808 299,899 (51,091 )   Utility Throughput - (MMcf) Three Months Ended Nine Months Ended June 30, June 30, Increase Increase 2010 2009 (Decrease)   2010 2009 (Decrease) Retail Sales: Residential Sales 7,055 8,468 (1,413 ) 50,292 55,001 (4,709 ) Commercial Sales 920 1,221 (301 ) 7,666 8,984 (1,318 ) Industrial Sales 66 55 11   512 499 13   8,041 9,744 (1,703 ) 58,470 64,484 (6,014 ) Off-System Sales 1,124 - 1,124 4,034 513 3,521 Transportation 10,530 10,747 (217 ) 51,957 52,476 (519 ) 19,695 20,491 (796 ) 114,461 117,473 (3,012 )   Energy Marketing Volumes Three Months Ended Nine Months Ended June 30, June 30, Increase Increase 2010 2009 (Decrease)   2010 2009 (Decrease) Natural Gas (MMcf) 13,047 14,634 (1,587 ) 51,144 50,459 685               NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES FISCAL 2011 EARNINGS GUIDANCE AND SENSITIVITY         Earnings per share sensitivity to changes Fiscal 2011 (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 $2.60-$2.90 + $0.19 - $0.19 + $0.06 - $0.06         * Please refer to forward looking statement footnote beginning at page 8 of this document.  

^ This sensitivity table is current as of August 5, 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 its fiscal 2011 earnings forecast, the Company is utilizing flat NYMEX equivalent commodity pricing, exclusive of basis differential, of $5 per MMBtu for natural gas and $80 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)

  2010   2009   Operating Revenues $ 354,127,000 $ 367,111,000   Net Income Available for Common Stock $ 42,585,000 $ 42,904,000   Earnings Per Common Share: Basic $ 0.52 $ 0.54 Diluted $ 0.51 $ 0.53   Weighted Average Common Shares: Used in Basic Calculation   81,801,377   79,551,195 Used in Diluted Calculation   82,970,921   80,391,402    

Nine Months Ended June 30 (unaudited)

  Operating Revenues $ 1,482,518,000 $ 1,778,919,000   Net Income Available for Common Stock $ 187,512,000 $ 73,710,000   Earnings Per Common Share: Basic $ 2.31 $ 0.93 Diluted $ 2.27 $ 0.92   Weighted Average Common Shares: Used in Basic Calculation   81,178,000   79,450,838 Used in Diluted Calculation   82,556,730   80,248,787    

Twelve Months Ended June 30 (unaudited)

  Operating Revenues $ 1,761,452,000 $ 2,176,776,000   Net Income Available for Common Stock $ 214,510,000 $ 116,976,000   Earnings Per Common Share: Basic $ 2.65 $ 1.47 Diluted $ 2.61 $ 1.44   Weighted Average Common Shares: Used in Basic Calculation   80,941,793   79,805,689 Used in Diluted Calculation   82,335,561   80,994,294