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 2011 and for the nine months ended June 30, 2011.

HIGHLIGHTS

• Earnings for the third quarter were $46.9 million, or $0.56 per share, an increase of $4.3 million, or $0.05 per share, compared to the prior year’s third quarter earnings of $42.6 million or $0.51 per share. The increase is mainly due to higher earnings in the Exploration and Production, Utility, and Energy Marketing segments, and the All Other category.
• Compared to the prior year’s third quarter, production of crude oil and natural gas increased approximately 3.6 billion cubic feet equivalent (“Bcfe”), or 27.5%, to 16.9 Bcfe. Appalachian production increased 152.5% to 12.2 Bcfe, including production from the Marcellus Shale of 10.3 Bcfe. The Company’s production for the entire 2011 fiscal year is expected to be between 68 and 71 Bcfe.
• The Company is increasing and narrowing its GAAP earnings guidance range for fiscal 2011 to a range of $3.00 to $3.10 per share. The previous earnings guidance had been a range between $2.83 to $2.98 per share, (inclusive of the $0.37 per share gain on the sale of the Company’s landfill gas electric generation assets) and had assumed flat NYMEX pricing of $4.00 per (“MMBtu”) for natural gas and $80.00 per barrel (“Bbl”) for crude oil. The revised guidance assumes flat NYMEX pricing of $4.00 per MMBtu for natural gas and $90.00 per Bbl for crude oil for unhedged production for the remainder of the fiscal year.
• The Company’s preliminary GAAP earnings guidance for fiscal 2012 is in the range of $2.85 to $3.15 per share. The 2012 preliminary guidance includes oil and gas production for the Exploration and Production segment in the range of 87 to 101 Bcfe and is based on an assumed flat NYMEX price of $4.50 per MMBtu for natural gas and $95.00 per Bbl for crude oil.
• A conference call is scheduled for Friday, August 5, 2011, at 11 a.m. Eastern Time.

MANAGEMENT COMMENTS

David F. Smith, Chairman and Chief Executive Officer of National Fuel Gas Company, stated: “The third quarter was another great quarter for National Fuel. Even with the sale of our offshore Gulf of Mexico properties, consolidated production grew by more than 27 percent from the prior year largely due to the continuing growth of Seneca’s Marcellus operations. In July, we added a fifth Seneca-operated rig, which should increase the pace of our drilling even further.

“In the Pipeline and Storage segment, our expansion initiatives are moving along as planned. Construction is under way on the Supply Corporation Line N Expansion and the Empire Pipeline Tioga County Extension projects, both of which will go in service this fall. These projects, along with several other upcoming expansions, will make National Fuel one of the preeminent infrastructure companies serving shippers and producers throughout the region.

“Combining our rapid growth in Marcellus production with significant pipeline expansion opportunities and the earnings stability provided by our Utility segment, we are well positioned to deliver long-term value for all of our stakeholders.”

SUMMARY OF RESULTS

National Fuel had consolidated earnings for the quarter ended June 30, 2011, of $46.9 million, or $0.56 per share, compared to the prior year’s third quarter earnings of $42.6 million, or $0.51 per share, an increase of $4.3 million or $0.05 per share.

Consolidated earnings for the nine months ended June 30, 2011, of $221.0 million, or $2.64 per share, increased $33.5 million, or $0.37 per share, from the same period in the prior year, where earnings were $187.5 million or $2.27 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.)

      Three Months Nine Months Ended June 30, Ended June 30, 2011   2010 2011   2010 (in thousands except per share amounts) Reported GAAP earnings $ 46,891 $ 42,585 $ 221,045 $ 187,512 Items impacting comparability1: Gain on sale of landfill gas electric generation investments (31,418 ) (Income) Loss from discontinued operations 57 (771 )         Operating Results $ 46,891 $ 42,642 $ 189,627   $ 186,741     Reported GAAP earnings per share $ 0.56 $ 0.51 $ 2.64 $ 2.27 Items impacting comparability1: Gain on sale of landfill gas electric generation investments (0.37 ) (Income) Loss from discontinued operations 0.00 (0.01 )         Operating Results $ 0.56 $ 0.51 $ 2.27   $ 2.26    

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 quarter and nine months ended June 30, 2011, to the comparable periods in 2010. Excluding these items, Operating Results for the current quarter of $46.9 million, or $0.56 per share, increased $4.2 million, or $0.05 per share, from the prior year’s third quarter where Operating Results were $42.6 million or $0.51 per share. Excluding these items, Operating Results for the nine months ended June 30, 2011, of $189.6 million, or $2.27 per share, compared to Operating Results of $186.7 million or $2.26 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 produces natural gas and oil reserves in California and Appalachia. Seneca completed the sale of its Gulf of Mexico assets in April 2011.

The Exploration and Production segment’s earnings in the third quarter of fiscal 2011 of $32.8 million, or $0.39 per share, increased $4.9 million, or $0.06 per share, when compared with the prior year’s third quarter. The increase was mainly due to natural gas production that was 4.5 Bcf higher than the third quarter of fiscal 2010.

Overall production of natural gas and crude oil for the current quarter of 16.9 Bcfe increased approximately 3.6 Bcfe, or 27.5 percent, compared to the prior year’s third quarter. Production from Seneca’s Appalachia properties increased approximately 153 percent to 12.2 Bcfe, mainly due to a 7.8 Bcfe increase in production from Marcellus wells. Gulf of Mexico production decreased 3.6 Bcfe due to the April 2011 sale of Seneca’s offshore assets. Production in California was relatively flat.

Changes in commodity prices realized after hedging also impacted earnings. The weighted average natural gas price received by Seneca (after hedging) for the quarter ended June 30, 2011, was $5.48 per thousand cubic feet (“Mcf”), a decrease of $0.26 per Mcf compared to the prior year’s third quarter. Higher crude oil prices realized after hedging contributed to the increase in earnings. The weighted average crude oil price received by Seneca (after hedging) for the quarter ended June 30, 2011, was $84.37 per Bbl, an increase of $9.14 per Bbl.

Depletion, lease operating expenses (“LOE”), and general and administrative (“G&A”) expenses for the current year’s third quarter increased over last year’s third quarter due to the higher production activity discussed above. However on a per unit basis, LOE decreased $0.17 per thousand cubic feet equivalent (“Mcfe”) largely due to the increase in Marcellus production which has a lower LOE rate than our Upper Devonian or California production. Depletion was unchanged. G&A increased $0.04 per Mcfe due to higher labor expenses, including additional staffing and relocation costs related to the opening of the Pittsburgh office in the East division during the quarter.

The Exploration and Production segment’s earnings of $93.5 million, or $1.12 per share, for the nine months ended June 30, 2011, increased $8.4 million, or $0.09 per share, when compared with the nine months ended June 30, 2010. The increase was primarily due to natural gas production that was 15.7 Bcf higher than the prior year’s nine-month period.

Overall production for the nine months ended June 30, 2011, increased 38.8 percent to 50.8 Bcfe, an increase of 14.2 Bcfe compared to the prior year’s nine-month period. Production from Seneca’s Appalachia properties increased approximately 177 percent to 31.2 Bcfe, mainly due to a 20.9 Bcfe increase in production from Marcellus wells. In the Gulf of Mexico, production decreased by 5.2 Bcfe due to the April sale of Seneca’s offshore assets. Production in California was relatively flat.

Changes in commodity prices realized after hedging also impacted earnings. The weighted average natural gas price received by Seneca (after hedging) for the nine-month period ended June 30, 2011, was $5.36 per Mcf, a decrease of $0.80 per Mcf from last year’s third quarter. Higher crude oil prices realized after hedging contributed to the increase in earnings. The weighted average crude oil price received by Seneca (after hedging) for the nine-month period ended June 30, 2011, was $80.78 per Bbl, an increase of $5.13 per Bbl.

Depletion, LOE and G&A expenses for the nine months ended June 30, 2011, increased compared to the prior year’s nine-month period due to the higher production activity discussed above. However, on a per unit basis, LOE decreased $0.14 per Mcfe for the reason described above and G&A expense was unchanged. Depletion increased $0.03 per Mcfe.

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 $4.5 million, or $0.05 per share, for the quarter ended June 30, 2011, decreased $2.7 million, or $0.04 per share, when compared with the same period in the prior fiscal year. The decrease was mostly due to increased operating expenses mainly due to increased pension expense, compressor station maintenance, and preliminary survey costs associated with expansion projects and lower firm transportation revenues due to the continued impact of capacity turnbacks at Niagara. Although more volumes of natural gas were transported for shippers under their firm transportation contracts, largely due to colder weather, the impact to revenues was minimal given Supply and Empire’s straight-fixed variable rate design. A higher allowance for funds used during construction (“AFUDC”) associated with the Line N and Tioga expansion projects partially offset the decrease in earnings.

The Pipeline and Storage segment’s earnings of $24.0 million, or $0.29 per share, for the nine months ended June 30, 2011, decreased $6.0 million, or $0.08 per share, when compared with the nine months ended June 30, 2010. The decrease in earnings for the current nine-month period was due to higher operating expenses and lower firm transportation revenues for the reasons described above. Higher depreciation expense and higher property taxes also reduced earnings in the current nine-month period. Higher AFUDC associated with expansion projects had a positive impact on earnings.

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 $6.3 million, or $0.08 per share, for the quarter ended June 30, 2011, increased $0.4 million, or $0.01 per share, compared to the quarter ended June 30, 2010. Colder weather and higher customer usage in Pennsylvania and lower operating expenses in both the New York and Pennsylvania divisions had a positive impact on earnings. The impact of weather variations on earnings in New York is mitigated by that jurisdiction’s weather normalization clause. Higher property taxes, the impact of a change in the calculation of certain regulatory expenses and higher income taxes partially offset the positive impact of the above items.

The Utility segment’s earnings of $62.4 million, or $0.74 per share, for the nine months ended June 30, 2011, were consistent with earnings of $62.3 million, or $0.75 per share, for the nine months ended June 30, 2010. Colder weather and higher customer usage in Pennsylvania was offset by the impact of a New York regulatory adjustment regarding the timing of collection of certain regulatory expenses. Depreciation expense, property taxes, and income taxes in both jurisdictions were higher than the previous year.

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, 2011, of $1.9 million increased $0.5 million compared to the third quarter of the prior year primarily due to lower operating expenses. Earnings for the nine months ended June 30, 2011, in the Energy Marketing segment of $9.1 million increased $0.7 million compared to the prior year’s nine-month period. The increase is due to higher volumes sold to retail customers, improved average margins per Mcf, and lower operating expenses compared to the same period in fiscal 2010.

Corporate and All Other

The Corporate and All Other category includes the following active, wholly owned subsidiaries of the Company: National Fuel Gas Midstream Corporation (“Midstream”), formed to build, own and operate natural gas processing and pipeline gathering facilities in the Appalachian region; and the Northeast division of Seneca Resources Corporation that markets high quality hardwoods from Appalachian land holdings.

Earnings in the Corporate and All Other category for the quarter ended June 30, 2011, were $1.4 million compared to the prior year’s third quarter earnings of $0.1 million. The comparability of the results for the quarters ended June 30, 2011, and June 30, 2010, was impacted by the following item. On September 1, 2010, the Company completed the sale of its landfill gas operations. As a result of this transaction, the Company is presenting the landfill gas operations as discontinued operations. Earnings in the third quarter of fiscal 2010 include a loss from discontinued operations of $0.1 million.

Excluding discontinued operations, Operating Results in the Corporate and All Other category of $1.4 million in the current year third quarter increased $1.2 million from the prior year’s third quarter. Higher earnings from Midstream’s pipeline gathering and natural gas processing operations and sales of standing timber resulted in increased Operating Results. Corporate operating expenses and state franchise taxes were higher than the previous year.

Earnings in the Corporate and All Other category for the nine months ended June 30, 2011, were $32.0 million, an increase of $30.3 million compared to earnings of $1.7 million in the prior year nine-month period. The comparability of the results for the nine months ended June 30, 2011, and the prior year’s nine-month period was impacted by $0.8 million of income from discontinued operations as a result of the sale of the Company’s landfill gas operations described above and a $31.4 million gain realized on the of February 2011 Horizon Power, Inc. sale of its interest in certain entities that owned landfill gas electric generation assets.

Excluding these items, Operating Results for the nine months ended June 30, 2011, of $0.6 million decreased $0.3 million from the prior year’s nine-month period. Lower earnings from timber sales (due to the sale of the sawmill operations), lower income from unconsolidated subsidiaries (due to the sale of landfill gas electric generation assets described above), higher corporate operating expenses and higher state franchise taxes more than offset higher earnings from Midstream’s pipeline gathering and natural gas processing operations.

EARNINGS GUIDANCE

The Company is increasing and narrowing its GAAP earnings guidance range for fiscal 2011 to a range of $3.00 to $3.10 per share. The previous guidance range had been $2.83 to $2.98 per share, (inclusive of the $0.37 per share gain on the sale of the Company’s landfill gas electric generation assets) and had assumed flat NYMEX pricing of $4.00 per MMBtu for natural gas and $80.00 per Bbl for crude oil. The revised guidance includes oil and gas production for fiscal 2011 for the Exploration and Production segment in a range between 68 and 71 Bcfe, hedges currently in place, and flat NYMEX commodity pricing on unhedged volumes of $4.00 per MMBtu for natural gas and $90.00 per Bbl for crude oil.

The Company’s preliminary GAAP earnings guidance for fiscal 2012 is in the range of $2.85 to $3.15 per share. This includes oil and gas production for the Exploration and Production segment in the range of 87 to 101 Bcfe and is based on an assumed flat NYMEX price of $4.50 per MMBtu for natural gas and $95.00 per Bbl for crude oil.

EARNINGS TELECONFERENCE

The Company will host a conference call on Friday, August 5, 2011, 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) 1-800-901-5259, using the passcode “63064116.” 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 “46229014.” Both the webcast and telephonic replay will be available until the close of business on Friday, August 12, 2011.

National Fuel is an integrated energy company with $5.1 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 occurrences affecting the Company’s ability to obtain financing on acceptable terms for working capital, capital expenditures and other investments, 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, severe weather, pest infestation or natural disasters; 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, the need to obtain governmental approvals and permits, and compliance with environmental laws and regulations; 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; uncertainty of oil and gas reserve estimates; significant differences between the Company’s projected and actual production levels for natural gas or oil; significant changes in market dynamics or competitive factors affecting the Company’s ability to retain existing customers or obtain new customers; 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; impairments under the SEC’s full cost ceiling test for natural gas and oil reserves; changes in the availability and/or cost of derivative financial instruments; changes in the price differential between similar quantities of natural gas at different geographic locations, and the effect of such changes on the demand for pipeline transportation capacity to or from such locations; other changes in price differentials between similar quantities of oil or natural gas having different quality, heating value or geographic location; changes in the projected profitability of pending or potential projects, investments or transactions; significant differences between the Company’s projected and actual capital expenditures and operating expenses; delays or changes in costs or plans with respect to Company projects or related projects of other companies, including difficulties or delays in obtaining necessary governmental approvals, permits or orders or in obtaining the cooperation of interconnecting facility operators; 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 thereof.

  NATIONAL FUEL GAS COMPANY RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS QUARTER ENDED JUNE 30, 2011     Exploration &   Pipeline &     Energy   Corporate /   (Thousands of Dollars) Production   Storage   Utility   Marketing   All Other **   Consolidated***   Third quarter 2010 GAAP earnings $ 27,883 $ 7,234 $ 5,969 $ 1,411 $ 88 $ 42,585 Items impacting comparability: Loss from discontinued operations                   57     $ 57   Third quarter 2010 operating results 27,883 7,234 5,969 1,411 145 42,642   Drivers of operating results Higher (lower) crude oil prices 3,950 3,950 Higher (lower) natural gas prices (2,234 ) (2,234 ) Higher (lower) natural gas production 16,838 16,838 Higher (lower) crude oil production (7,091 ) (7,091 ) Lower (higher) lease operating expenses (947 ) (947 ) Lower (higher) depreciation / depletion (5,203 ) (436 ) 1,324 (4,315 ) Higher (lower) processing plant revenues 272 272   Higher (lower) transportation revenues (852 ) (852 ) Higher (lower) gathering and processing revenues - 1,182 1,182 Lower (higher) operating expenses (1,212 ) (2,105 ) 506 282 (292 ) (2,821 ) Lower (higher) property, franchise and other taxes 497 - (358 ) (912 ) (773 )   Usage 600 600 Colder weather in Pennsylvania 1,355 1,355 Regulatory true-up adjustments (580 ) (580 )   Higher (lower) income from unconsolidated subsidiaries (455 ) (455 )   Higher (lower) margins (684 ) (684 )   Higher AFUDC * 502 502 Higher (lower) interest income - (2,353 ) (2,353 ) Lower (higher) interest expense 2,156 - 2,439 4,595   Lower (higher) income tax expense/effective tax rate (2,169 ) 264 (905 ) 131 647 (2,032 )   All other / rounding   44       (104 )     (259 )     67     344       92     Third quarter 2011 GAAP earnings $ 32,784     $ 4,503     $ 6,328     $ 1,891   $ 1,385     $ 46,891     * AFUDC = Allowance for Funds Used During Construction ** Includes discontinued operations *** Amounts do not reflect intercompany eliminations     NATIONAL FUEL GAS COMPANY RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS PER SHARE QUARTER ENDED JUNE 30, 2011             Exploration & Pipeline & Energy Corporate / Production   Storage   Utility   Marketing   All Other **   Consolidated***   Third quarter 2010 GAAP earnings $ 0.33 $ 0.09 $ 0.07 $ 0.02 $ - $ 0.51 Items impacting comparability: Loss from discontinued operations                   -       -   Third quarter 2010 operating results 0.33 0.09 0.07 0.02 - 0.51   Drivers of operating results Higher (lower) crude oil prices 0.05 0.05 Higher (lower) natural gas prices (0.03 ) (0.03 ) Higher (lower) natural gas production 0.20 0.20 Higher (lower) crude oil production (0.08 ) (0.08 ) Lower (higher) lease operating expenses (0.01 ) (0.01 ) Lower (higher) depreciation / depletion (0.06 ) (0.01 ) 0.02 (0.05 ) Higher (lower) processing plant revenues - -   Higher (lower) transportation revenues (0.01 ) (0.01 ) Higher (lower) gathering and processing revenues - 0.01 0.01 Lower (higher) operating expenses (0.01 ) (0.03 ) 0.01 - - (0.03 ) Lower (higher) property, franchise and other taxes 0.01 - - (0.01 ) -   Usage 0.01 0.01 Colder weather in Pennsylvania 0.02 0.02 Regulatory true-up adjustments (0.01 ) (0.01 )   Higher (lower) income from unconsolidated subsidiaries (0.01 ) (0.01 )   Higher (lower) margins (0.01 ) (0.01 )   Higher AFUDC * 0.01 0.01 Higher (lower) interest income - (0.03 ) (0.03 ) Lower (higher) interest expense 0.03 - 0.03 0.06   Lower (higher) income tax expense/effective tax rate (0.03 ) - (0.01 ) - 0.01 (0.03 )   All other / rounding   (0.01 )     -       (0.01 )     -     0.01       (0.01 )   Third quarter 2011 GAAP earnings $ 0.39     $ 0.05     $ 0.08     $ 0.02   $ 0.02     $ 0.56     * AFUDC = Allowance for Funds Used During Construction ** Includes discontinued operations *** Amounts do not reflect intercompany eliminations     NATIONAL FUEL GAS COMPANY RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS NINE MONTHS ENDED JUNE 30, 2011             Exploration & Pipeline & Energy Corporate / (Thousands of Dollars) Production   Storage   Utility   Marketing   All Other **   Consolidated***   Nine months ended June 30, 2010 GAAP earnings $ 85,046 $ 30,036 $ 62,254 $ 8,472 $ 1,704 $ 187,512 Items impacting comparability: Income from discontinued operations                   (771 )     (771 ) Nine months ended June 30, 2010 operating results 85,046 30,036 62,254 8,472 933 186,741   Drivers of operating results Higher (lower) crude oil prices 7,278 7,278 Higher (lower) natural gas prices (19,755 ) (19,755 ) Higher (lower) natural gas production 62,885 62,885 Higher (lower) crude oil production (12,292 ) (12,292 ) Lower (higher) lease operating expenses (6,397 ) (6,397 ) Lower (higher) depreciation / depletion (20,705 ) (766 ) (559 ) 3,384 (18,646 ) Higher (lower) processing plant revenues 1,127 1,127   Higher (lower) transportation revenues (2,536 ) (2,536 ) Higher (lower) gathering and processing revenues - 3,805 3,805 Lower (higher) operating costs (5,272 ) (3,939 ) - 110 (988 ) (10,089 ) Lower (higher) property, franchise and other taxes (1,139 ) (367 ) (892 ) (1,243 ) (3,641 )   Usage 2,100 2,100 Colder weather in Pennsylvania 2,365 2,365 Regulatory true-up adjustments (2,019 ) (2,019 )   Higher (lower) income from unconsolidated subsidiaries (1,556 ) (1,556 )   Higher (lower) margins 345 (5,682 ) (5,337 )   Higher AFUDC * 973 973 Higher (lower) interest income - - (5,699 ) (5,699 ) Lower (higher) interest expense 5,750 - 524 5,952 12,226   Lower (higher) income tax expense/effective tax rate (2,899 ) 670 (1,568 ) 166 552 (3,079 )   All other / rounding   (172 )     (35 )     194       29     1,157       1,173     Nine months ended June 30, 2011 operating results 93,455 24,036 62,399 9,122 615 189,627 Items impacting comparability: Gain on sale of unconsolidated subsidiaries                   31,418       31,418   Nine months ended June 30, 2011 GAAP earnings $ 93,455     $ 24,036     $ 62,399     $ 9,122   $ 32,033     $ 221,045     * AFUDC = Allowance for Funds Used During Construction ** Includes discontinued operations *** Amounts do not reflect intercompany eliminations     NATIONAL FUEL GAS COMPANY RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS PER SHARE NINE MONTHS ENDED JUNE 30, 2011     Exploration &   Pipeline &     Energy   Corporate /   Production   Storage   Utility   Marketing   All Other **   Consolidated***   Nine months ended June 30, 2010 GAAP earnings $ 1.03 $ 0.37 $ 0.75 $ 0.10 $ 0.02 $ 2.27 Items impacting comparability: Income from discontinued operations                   (0.01 )     (0.01 ) Nine months ended June 30, 2010 operating results 1.03 0.37 0.75 0.10 0.01 2.26   Drivers of operating results Higher (lower) crude oil prices 0.09 0.09 Higher (lower) natural gas prices (0.24 ) (0.24 ) Higher (lower) natural gas production 0.75 0.75 Higher (lower) crude oil production (0.15 ) (0.15 ) Lower (higher) lease operating expenses (0.08 ) (0.08 ) Lower (higher) depreciation / depletion (0.25 ) (0.01 ) (0.01 ) 0.04 (0.23 ) Higher (lower) processing plant revenues 0.01 0.01   Higher (lower) transportation revenues (0.03 ) (0.03 ) Higher (lower) gathering and processing revenues - 0.05 0.05 Lower (higher) operating costs (0.06 ) (0.05 ) - - (0.01 ) (0.12 ) Lower (higher) property, franchise and other taxes (0.01 ) - (0.01 ) (0.01 ) (0.03 )   Usage 0.03 0.03 Colder weather in Pennsylvania 0.03 0.03 Regulatory true-up adjustments (0.02 ) (0.02 )   Higher (lower) income from unconsolidated subsidiaries (0.02 ) (0.02 )   Higher (lower) margins - (0.07 ) (0.07 )   Higher AFUDC * 0.01 0.01 Higher (lower) interest income - - (0.07 ) (0.07 ) Lower (higher) interest expense 0.07 - 0.01 0.07 0.15   Lower (higher) income tax expense/effective tax rate (0.03 ) 0.01 (0.02 ) - 0.01 (0.03 )   All other / rounding   (0.01 )     (0.01 )     (0.02 )     0.01     0.01       (0.02 )   Nine months ended June 30, 2011 operating results 1.12 0.29 0.74 0.11 0.01 2.27 Items impacting comparability: Gain on sale of unconsolidated subsidiaries                   0.37       0.37   Nine months ended June 30, 2011 GAAP earnings $ 1.12     $ 0.29     $ 0.74     $ 0.11   $ 0.38     $ 2.64     * AFUDC = Allowance for Funds Used During Construction ** Includes discontinued operations *** Amounts do not reflect intercompany eliminations           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

2011 2010 2011 2010 Operating Revenues $ 380,979   $ 351,992   $ 1,492,808   $ 1,474,107     Operating Expenses: Purchased Gas 112,725 97,195 582,358 601,408 Operation and Maintenance 95,977 96,593 310,148 306,624 Property, Franchise and Other Taxes 20,179 18,594 63,714 57,684 Depreciation, Depletion and Amortization   57,293     50,422     170,617     141,935   286,174 262,804 1,126,837 1,107,651   Operating Income 94,805 89,188 365,971 366,456   Other Income (Expense): Income (Loss) from Unconsolidated Subsidiaries (77 ) 624 (698 ) 1,696 Gain on Sale of Unconsolidated Subsidiaries - - 50,879 - Other Income 1,890 851 4,828 2,473 Interest Income 325 568 1,277 2,048 Interest Expense on Long-Term Debt (17,876 ) (21,115 ) (55,994 ) (65,238 ) Other Interest Expense   (1,159 )   (1,866 )   (4,014 )   (5,245 )   Income from Continuing Operations Before Income Taxes 77,908 68,250 362,249 302,190   Income Tax Expense   31,017     25,608     141,204     115,449     Income from Continuing Operations 46,891 42,642 221,045 186,741   Income (Loss) from Discontinued Operations, Net of Tax   -     (57 )   -     771     Net Income Available for Common Stock $ 46,891   $ 42,585   $ 221,045   $ 187,512     Earnings Per Common Share: Basic: Income from Continuing Operations $ 0.57 $ 0.52 $ 2.68 $ 2.30 Income (Loss) from Discontinued Operations   -     -     -     0.01   Net Income Available for Common Stock $ 0.57   $ 0.52   $ 2.68   $ 2.31     Diluted: Income from Continuing Operations $ 0.56 $ 0.51 $ 2.64 $ 2.26 Income (Loss) from Discontinued Operations   -     -     -     0.01   Net Income Available for Common Stock $ 0.56   $ 0.51   $ 2.64   $ 2.27     Weighted Average Common Shares: Used in Basic Calculation   82,687,467     81,801,377     82,436,603     81,178,000   Used in Diluted Calculation   83,782,493     82,970,921     83,649,498     82,556,730       NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited)     June 30, September 30, (Thousands of Dollars)   2011   2010   ASSETS Property, Plant and Equipment $ 5,392,065 $ 5,637,498 Less - Accumulated Depreciation, Depletion and Amortization   1,607,088       2,187,269   Net Property, Plant and Equipment   3,784,977       3,450,229     Current Assets: Cash and Temporary Cash Investments 184,710 397,171 Hedging Collateral Deposits 37,984 11,134 Receivables - Net 165,576 132,136 Unbilled Utility Revenue 13,399 20,920 Gas Stored Underground 22,525 48,584 Materials and Supplies - at average cost 28,923 24,987 Other Current Assets 44,786 115,969 Deferred Income Taxes   22,885       24,476   Total Current Assets   520,788       775,377     Other Assets: Recoverable Future Taxes 151,142 149,712 Unamortized Debt Expense 11,058 12,550 Other Regulatory Assets 524,355 542,801 Deferred Charges 4,989 9,646 Other Investments 84,118 77,839 Investments in Unconsolidated Subsidiaries 1,367 14,828 Goodwill 5,476 5,476 Fair Value of Derivative Financial Instruments 43,347 65,184 Other   1,648       1,983   Total Other Assets   827,500       880,019   Total Assets $ 5,133,265     $ 5,105,625     CAPITALIZATION AND LIABILITIES Capitalization: Comprehensive Shareholders' Equity Common Stock, $1 Par Value Authorized - 200,000,000 Shares; Issued and Outstanding - 82,700,177 Shares and 82,075,470 Shares, Respectively $ 82,700 $ 82,075 Paid in Capital 644,945 645,619 Earnings Reinvested in the Business   1,198,064       1,063,262   Total Common Shareholders' Equity Before Items of Other Comprehensive Loss 1,925,709 1,790,956 Accumulated Other Comprehensive Loss   (75,098 )     (44,985 ) Total Comprehensive Shareholders' Equity 1,850,611 1,745,971 Long-Term Debt, Net of Current Portion   899,000       1,049,000   Total Capitalization   2,749,611       2,794,971     Current and Accrued Liabilities: Notes Payable to Banks and Commercial Paper - - Current Portion of Long-Term Debt 150,000 200,000 Accounts Payable 95,182 89,677 Amounts Payable to Customers 25,661 38,109 Dividends Payable 29,358 28,316 Interest Payable on Long-Term Debt 15,953 30,512 Customer Advances 1,021 27,638 Customer Security Deposits 17,672 18,320 Other Accruals and Current Liabilities 133,856 71,592 Fair Value of Derivative Financial Instruments   44,607       20,160   Total Current and Accrued Liabilities   513,310       524,324     Deferred Credits: Deferred Income Taxes 919,145 800,758 Taxes Refundable to Customers 70,343 69,585 Unamortized Investment Tax Credit 2,761 3,288 Cost of Removal Regulatory Liability 133,759 124,032 Other Regulatory Liabilities 92,811 89,334 Pension and Other Post-Retirement Liabilities 435,517 446,082 Asset Retirement Obligations 65,583 101,618 Other Deferred Credits   150,425       151,633   Total Deferred Credits   1,870,344       1,786,330   Commitments and Contingencies   -       -   Total Capitalization and Liabilities   5,133,265     $ 5,105,625       NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)     Nine Months Ended June 30, (Thousands of Dollars)   2011   2010   Operating Activities: Net Income Available for Common Stock $ 221,045 $ 187,512 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Gain on Sale of Unconsolidated Subsidiaries (50,879 ) - Depreciation, Depletion and Amortization 170,617 142,433 Deferred Income Taxes 140,326 63,813 (Income) Loss from Unconsolidated Subsidiaries, Net of Cash Distributions 4,976 904 Excess Tax Costs (Benefits) Associated with Stock-Based Compensation Awards 1,224 (13,207 ) Other 2,375 7,884 Change in: Hedging Collateral Deposits (26,850 ) (7,374 ) Receivables and Unbilled Utility Revenue (25,919 ) 6,676 Gas Stored Underground and Materials and Supplies 22,387 20,384 Prepayments and Other Current Assets 69,960 39,043 Accounts Payable 5,506 127 Amounts Payable to Customers (12,448 ) (54,764 ) Customer Advances (26,617 ) (23,526 ) Customer Security Deposits (648 ) 1,188 Other Accruals and Current Liabilities 36,743 30,961 Other Assets 20,255 29,197 Other Liabilities     (15,771 )     (11,358 ) Net Cash Provided by Operating Activities   $ 536,282     $ 419,893     Investing Activities: Capital Expenditures ($583,739 ) ($327,513 ) Net Proceeds from Sale of Unconsolidated Subsidiaries 59,365 - Net Proceeds from Sale of Oil and Gas Producing Properties 69,435 - Other     (2,908 )     (273 ) Net Cash Used in Investing Activities     ($457,847 )     ($327,786 )   Financing Activities: Excess Tax (Costs) Benefits Associated with Stock-Based Compensation Awards ($1,224 ) $ 13,207 Reduction of Long-Term Debt (200,000 ) - Dividends Paid on Common Stock (85,201 ) (81,318 ) Net Proceeds From Issuance (Repurchase) of Common Stock     (4,471 )     26,798   Net Cash Used in Financing Activities     ($290,896 )     ($41,313 ) Net Increase (Decrease) in Cash and Temporary Cash Investments (212,461 ) 50,794 Cash and Temporary Cash Investments at October 1     397,171       408,053   Cash and Temporary Cash Investments at June 30   $ 184,710     $ 458,847       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

2011   2010   Variance 2011   2010   Variance Operating Revenues $ 130,974     $ 112,802     $ 18,172   $ 388,571     $ 328,312     $ 60,259           Operating Expenses: Operation and Maintenance: General and Administrative Expense 11,342 8,353 2,989 35,330 25,700 9,630 Lease Operating Expense 17,421 15,964 1,457 53,736 43,895 9,841 All Other Operation and Maintenance Expense 1,252 2,400 (1,148 ) 5,196 6,734 (1,538 ) Property, Franchise and Other Taxes 2,114 2,878 (764 ) 9,634 7,881 1,753 Depreciation, Depletion and Amortization   36,964       28,959       8,005     110,615       78,762       31,853     69,093       58,554       10,539     214,511       162,972       51,539     Operating Income 61,881 54,248 7,633 174,060 165,340 8,720   Other Income (Expense): Interest Income (10 ) 190 (200 ) (11 ) 500 (511 ) Other Income 1 - 1 1 - 1 Other Interest Expense   (3,817 )     (7,259 )     3,442     (13,825 )     (23,013 )     9,188     Income Before Income Taxes 58,055 47,179 10,876 160,225 142,827 17,398 Income Tax Expense   25,271       19,296       5,975     66,770       57,781       8,989   Net Income $ 32,784     $ 27,883     $ 4,901   $ 93,455     $ 85,046     $ 8,409     Net Income Per Share (Diluted) $ 0.39     $ 0.33     $ 0.06   $ 1.12     $ 1.03     $ 0.09       Three Months Ended Nine Months Ended June 30, June 30,

PIPELINE AND STORAGE SEGMENT

2011   2010   Variance 2011  

2010

  Variance Revenues from External Customers $ 29,933 $ 32,086 $ (2,153 ) $ 103,115 $ 107,560 $ (4,445 ) Intersegment Revenues   20,324       19,466       858     60,838       60,289       549   Total Operating Revenues   50,257       51,552       (1,295 )   163,953       167,849       (3,896 )   Operating Expenses: Purchased Gas 11 67 (56 ) (14 ) 139 (153 ) Operation and Maintenance 21,643 18,404 3,239 61,627 55,566 6,061 Property, Franchise and Other Taxes 5,173 5,119 54 15,781 15,216 565 Depreciation, Depletion and Amortization   9,567       8,895       672     27,796       26,617       1,179     36,394       32,485       3,909     105,190       97,538       7,652     Operating Income 13,863 19,067 (5,204 ) 58,763 70,311 (11,548 )   Other Income (Expense): Interest Income 73 65 8 252 117 135 Other Income 621 119 502 1,336 365 971 Other Interest Expense   (6,423 )     (6,507 )     84     (19,505 )     (19,684 )     179     Income Before Income Taxes 8,134 12,744 (4,610 ) 40,846 51,109 (10,263 ) Income Tax Expense   3,631       5,510       (1,879 )   16,810       21,073       (4,263 ) Net Income $ 4,503     $ 7,234     $ (2,731 ) $ 24,036     $ 30,036     $ (6,000 )   Net Income Per Share (Diluted) $ 0.05     $ 0.09     $ (0.04 ) $ 0.29     $ 0.37     $ (0.08 )     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

2011   2010   Variance 2011   2010   Variance Revenues from External Customers $ 146,215   $ 126,326   $ 19,889 $ 750,802   $ 707,323   $ 43,479 Intersegment Revenues   3,475       2,653       822     14,680       13,315       1,365   Total Operating Revenues   149,690       128,979       20,711     765,482       720,638       44,844     Operating Expenses: Purchased Gas 68,667 50,404 18,263 429,716 389,992 39,724 Operation and Maintenance 42,524 42,899 (375 ) 146,549 146,327 222 Property, Franchise and Other Taxes 11,031 10,140 891 34,933 33,142 1,791 Depreciation, Depletion and Amortization   10,363       10,129       234     30,986       30,125       861     132,585       113,572       19,013     642,184       599,586       42,598     Operating Income 17,105 15,407 1,698 123,298 121,052 2,246   Other Income (Expense): Interest Income 38 164 (126 ) 485 1,018 (533 ) Other Income 300 267 33 897 780 117 Other Interest Expense   (8,659 )     (8,998 )     339     (26,247 )     (27,053 )     806     Income Before Income Taxes 8,784 6,840 1,944 98,433 95,797 2,636 Income Tax Expense   2,456       871       1,585     36,034       33,543       2,491   Net Income $ 6,328     $ 5,969     $ 359   $ 62,399     $ 62,254     $ 145     Net Income Per Share (Diluted) $ 0.08     $ 0.07     $ 0.01   $ 0.74     $ 0.75     $ (0.01 )     Three Months Ended Nine Months Ended June 30, June 30,

ENERGY MARKETING SEGMENT

2011   2010   Variance 2011   2010   Variance Revenues from External Customers $ 71,746 $ 72,830 $ (1,084 ) $ 246,719 $ 303,103 $ (56,384 ) Intersegment Revenues   156       -       156     156       -       156   Total Operating Revenues   71,902       72,830       (928 )   246,875       303,103       (56,228 )   Operating Expenses: Purchased Gas 67,711 68,704 (993 ) 227,716 284,473 (56,757 ) Operation and Maintenance 1,415 1,847 (432 ) 4,553 4,723 (170 ) Property, Franchise and Other Taxes 8 7 1 34 24 10 Depreciation, Depletion and Amortization   9       11       (2 )   28       32       (4 )   69,143       70,569       (1,426 )   232,331       289,252       (56,921 )   Operating Income 2,759 2,261 498 14,544 13,851 693   Other Income (Expense): Interest Income 36 15 21 72 28 44 Other Income 27 12 15 61 58 3 Other Interest Expense   (4 )     (6 )     2     (15 )     (21 )     6     Income Before Income Taxes 2,818 2,282 536 14,662 13,916 746 Income Tax Expense   927       871       56     5,540       5,444       96   Net Income $ 1,891     $ 1,411     $ 480   $ 9,122     $ 8,472     $ 650     Net Income Per Share (Diluted) $ 0.02     $ 0.02     $ -   $ 0.11     $ 0.10     $ 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

2011   2010   Variance 2011   2010   Variance Revenues from External Customers $ 1,873   $ 7,724   $ (5,851 ) $ 2,895   $ 27,157   $ (24,262 ) Intersegment Revenues   2,810       1,418       1,392     7,026       1,418       5,608   Total Operating Revenues   4,683       9,142       (4,459 )   9,921       28,575       (18,654 )   Operating Expenses: Purchased Gas - - - 48 - 48 Operation and Maintenance 944 6,316 (5,372 ) 3,130 18,413 (15,283 ) Property, Franchise and Other Taxes 90 381 (291 ) 490 1,211 (721 ) Depreciation, Depletion and Amortization   203       2,250       (2,047 )   630       5,872       (5,242 )   1,237       8,947       (7,710 )   4,298       25,496       (21,198 )   Operating Income (Loss) 3,446 195 3,251 5,623 3,079 2,544   Other Income (Expense): Income (Loss) from Unconsolidated Subsidiaries (77 ) 624 (701 ) (698 ) 1,696 (2,394 ) Gain on Sale of Unconsolidated Subsidiaries - - - 50,879 - 50,879 Interest Income 48 39 9 197 95 102 Other Income 254 (7 ) 261 289 32 257 Other Interest Expense   (541 )     (541 )     -     (1,637 )     (1,610 )     (27 )   Income from Continuing Operations Before Income Taxes 3,130 310 2,820 54,653 3,292 51,361 Income Tax Expense   417       67       350     20,333       1,138       19,195   Income from Continuing Operations 2,713 243 2,470 34,320 2,154 32,166   Income (Loss) from Discontinued Operations, Net of Tax   -       (57 )     57     -       771       (771 )   Net Income $ 2,713     $ 186     $ 2,527   $ 34,320     $ 2,925     $ 31,395     Income from Continuing Operations Per Share (Diluted) $ 0.03 $ - $ 0.03 $ 0.41 $ 0.03 $ 0.38 Income (Loss) from Discontinued Operations, Net of Tax, Per Share (Diluted)   -       -       -     -       0.01       (0.01 ) Net Income Per Share (Diluted) $ 0.03     $ -     $ 0.03   $ 0.41     $ 0.04     $ 0.37       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

2011   2010   Variance 2011   2010   Variance Revenues from External Customers $ 238   $ 224   $ 14 $ 706   $ 652   $ 54 Intersegment Revenues   1,028       1,003       25     2,955       2,545       410   Total Operating Revenues   1,266       1,227       39     3,661       3,197       464     Operating Expenses: Operation and Maintenance 3,565 2,970 595 10,574 9,637 937 Property, Franchise and Other Taxes 1,763 69 1,694 2,842 210 2,632 Depreciation, Depletion and Amortization   187       178       9     562       527       35     5,515       3,217       2,298     13,978       10,374       3,604     Operating Loss (4,249 ) (1,990 ) (2,259 ) (10,317 ) (7,177 ) (3,140 )   Other Income (Expense): Interest Income 18,897 22,525 (3,628 ) 58,717 67,587 (8,870 ) Other Income 687 460 227 2,244 1,238 1,006 Interest Expense on Long-Term Debt (17,876 ) (21,115 ) 3,239 (55,994 ) (65,238 ) 9,244 Other Interest Expense   (472 )     (985 )     513     (1,220 )     (1,161 )     (59 )   Loss Before Income Taxes (3,013 ) (1,105 ) (1,908 ) (6,570 ) (4,751 ) (1,819 ) Income Tax Benefit   (1,685 )     (1,007 )     (678 )   (4,283 )     (3,530 )     (753 ) Net Loss $ (1,328 )   $ (98 )   $ (1,230 ) $ (2,287 )   $ (1,221 )   $ (1,066 )   Net Loss Per Share (Diluted) $ (0.01 )   $ -     $ (0.01 ) $ (0.03 )   $ (0.02 )   $ (0.01 )     Three Months Ended Nine Months Ended June 30, June 30,

INTERSEGMENT ELIMINATIONS

2011   2010   Variance

2011

 

2010   Variance Intersegment Revenues $ (27,793 )   $ (24,540 )   $ (3,253 ) $ (85,655 )   $ (77,567 )   $ (8,088 )   Operating Expenses: Purchased Gas (23,664 ) (21,980 ) (1,684 ) (75,108 ) (73,196 ) (1,912 ) Operation and Maintenance   (4,129 )     (2,560 )     (1,569 )   (10,547 )     (4,371 )     (6,176 )   (27,793 )     (24,540 )     (3,253 )   (85,655 )     (77,567 )     (8,088 )   Operating Income - - - - - -   Other Income (Expense): Interest Income (18,757 ) (22,430 ) 3,673 (58,435 ) (67,297 ) 8,862 Other Interest Expense   18,757       22,430       (3,673 )   58,435       67,297       (8,862 )   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 2011 2010 (Decrease) 2011 2010 (Decrease)  

Capital Expenditures:

Exploration and Production $ 158,321 (1) $ 82,863 (4) $ 75,458 $ 473,515 (1) (2) $ 273,849 (4) (5) $ 199,666 Pipeline and Storage 35,471 (3) 6,765 28,706 74,969 (3) 22,243 52,726 Utility 13,994 13,988 6 39,429 39,513

(84

)

Energy Marketing   68   140  

(72

)

  329   239   90   Total Reportable Segments 207,854 103,756 104,098 588,242 335,844 252,398 All Other 4,018 2,083 1,935 6,287 5,866 (5) 421 Corporate   193   68   125     208   202   6   Total Expenditures from Continuing Operations 212,065 105,907 106,158 594,737 341,912 252,825 Discontinued Operations   -   68  

(68

)

  -   122  

(122

)

Total Capital Expenditures $ 212,065 $ 105,975 $ 106,090   $ 594,737 $ 342,034 $ 252,703    

(1)

 

Amount for the quarter and nine months ended June 30, 2011 includes $60.7 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 June 30, 2011 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, 2011 exclude $55.5 million of capital expenditures, the majority of which was in the Appalachian region. This amount was accrued at September 30, 2010 and paid during the nine months ended June 30, 2011. This amount was excluded from the Consolidated Statements of Cash Flows at September 30, 2010 since it represented a non-cash investing activity at that date. This amount has been included in the Consolidated Statement of Cash Flows at June 30, 2011.

 

(3)

Amount for the quarter and nine months ended June 30, 2011 includes $5.9 million of accrued capital expenditures. This amount has been excluded from the Consolidated Statement of Cash Flows at June 30, 2011 since it represents a non-cash investing activity at that date.

 

(4)

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.

 

(5)

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.

 

 

DEGREE DAYS

              Percent Colder (Warmer) Than:

Three Months Ended June 30

Normal 2011 2010 Normal (1) Last Year (1)   Buffalo, NY 927 848 665 (8.5 ) 27.5 Erie, PA 885 812 631 (8.2 ) 28.7  

Nine Months Ended June 30

  Buffalo, NY 6,514 6,674 6,152 2.5 8.5 Erie, PA 6,108 6,284 5,842 2.9 7.6   (1) Percents compare actual 2011 degree days to normal degree days and actual 2011 degree days to actual 2010 degree days.     NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES   EXPLORATION AND PRODUCTION INFORMATION                 Three Months Ended Nine Months Ended June 30, June 30, Increase Increase 2011 2010 (Decrease) 2011 2010 (Decrease)  

Gas Production/Prices:

Production (MMcf) Gulf Coast 22 2,745 (2,723 ) 4,092 8,079 (3,987 ) West Coast 826 940 (114 ) 2,616 2,866 (250 ) Appalachia   12,090     4,741   7,349     31,020   11,084   19,936   Total Production   12,938     8,426   4,512     37,728   22,029   15,699     Average Prices (Per Mcf) Gulf Coast N/M $ 4.95 N/M $ 5.02 $ 5.26 $ (0.24 ) West Coast $ 4.87 4.38 $ 0.49 4.40 4.92 (0.52 ) Appalachia 4.55 4.45 0.10 4.36 5.10 (0.74 ) Weighted Average 4.67 4.61 0.06 4.44 5.13 (0.69 ) Weighted Average after Hedging 5.48 5.74 (0.26 ) 5.36 6.16 (0.80 )  

Oil Production/Prices:

Production (Thousands of Barrels) Gulf Coast (9 )

(1)

135 (144 ) 187 389 (202 ) West Coast 661 661 - 1,958 2,007 (49 ) Appalachia   13     13   -     35   34   1   Total Production   665     809   (144 )   2,180   2,430   (250 )   Average Prices (Per Barrel) Gulf Coast N/M $ 76.42 N/M $ 88.57 $ 78.64 $ 9.93 West Coast $ 108.30 71.92 $ 36.38 94.74 71.79 22.95 Appalachia 92.89 74.90 17.99 87.36 77.77 9.59 Weighted Average 107.97 72.72 35.25 94.10 72.97 21.13 Weighted Average after Hedging 84.37 75.23 9.14 80.78 75.65 5.13   Total Production (Mmcfe)   16,928     13,280   3,648     50,808   36,609   14,199    

Selected Operating Performance Statistics:

General & Administrative Expense per Mcfe (2) $ 0.67 $ 0.63 $ 0.04 $ 0.70 $ 0.70 $ - Lease Operating Expense per Mcfe (2) $ 1.03 $ 1.20 $ (0.17 ) $ 1.06 $ 1.20 $ (0.14 ) Depreciation, Depletion & Amortization per Mcfe (2) $ 2.18 $ 2.18 $ - $ 2.18 $ 2.15 $ 0.03  

(1)

The sale of Gulf Coast properties in April 2011 and various adjustments to prior months' production resulted in negative oil production.

 

(2)

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.

 

N/M

Not Meaningful

    NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES  

EXPLORATION AND PRODUCTION INFORMATION

    Hedging Summary for the Remaining Three Months of Fiscal 2011            

SWAPS

Volume

Average Hedge Price

Oil 0.4 MMBBL $70.93 / BBL Gas 10.6 BCF

$ 5.77 / MCF

  Hedging Summary for Fiscal 2012  

SWAPS

Volume

Average Hedge Price

Oil

1.6 MMBBL

$77.03 / BBL Gas 35.0 BCF $ 5.89 / MCF   Hedging Summary for Fiscal 2013  

SWAPS

Volume

Average Hedge Price

Oil 0.9 MMBBL $86.21 / BBL Gas 23.9 BCF $ 5.67 / MCF   Hedging Summary for Fiscal 2014  

SWAPS

Volume

Average Hedge Price

Oil 0.2 MMBBL $94.90 / BBL Gas 4.6 BCF $ 5.89 / MCF    

Gross Wells in Process of Drilling

Nine Months Ended June 30, 2011

East Marcellus Upper Total

Gulf

West

Shale

Devonian

Company

  Wells in Process - Beginning Period Exploratory 0.00 0.00 4.00 23.00 27.00 Developmental 1.00 0.00 58.00 (1) 19.00 78.00 Wells Commenced Exploratory 0.00 1.00 7.00 0.00 8.00 Developmental 1.00 43.00 64.00 3.00 111.00 Wells Completed Exploratory 0.00 1.00 8.00 3.00 12.00 Developmental 2.00 41.00 38.00 3.00 84.00 Wells Plugged & Abandoned Exploratory 0.00 0.00 0.00 5.00 5.00 Developmental 0.00 1.00 0.00 7.00 8.00 Wells in Process - End of Period Exploratory 0.00 0.00 3.00 15.00 18.00 Developmental 0.00 1.00 84.00 12.00 97.00   (1) Amount increased by 19 for wells overlooked in the prior year.    

Net Wells in Process of Drilling

Nine Months Ended June 30, 2011

East Marcellus Upper Total

Gulf

West

Shale

Devonian

Company

  Wells in Process - Beginning Period Exploratory 0.00 0.00 4.00 22.00 26.00 Developmental 0.20 0.00 36.50 (2) 18.00 54.70 Wells Commenced Exploratory 0.00 0.13 7.00 0.00 7.13 Developmental 0.20 42.31 49.16 2.60 94.27 Wells Completed Exploratory 0.00 0.13 8.00 3.00 11.13 Developmental 0.40 40.31 30.16 2.60 73.47 Wells Plugged & Abandoned Exploratory 0.00 0.00 0.00 5.00 5.00 Developmental 0.00 1.00 0.00 7.00 8.00 Wells in Process - End of Period Exploratory 0.00 0.00 3.00 14.00 17.00 Developmental 0.00 1.00 55.50 11.00 67.50  

(2)

 

Marcellus Shale net developmental wells were increased by 1.88 due to the acquisition of a joint venture partner's working interest in seven wells, which totaled 1.88 net wells. In addition, this amount increased by 12 for wells overlooked in the prior year.

 

  NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES  

EXPLORATION AND PRODUCTION INFORMATION

    Fiscal 2012 Financial & Operating Guidance           Total Production (Bcfe) 87 - 101   Production by Division (Bcfe) East 68 - 80 West 19 - 21   Guidance Based on Crude Oil Average 2011 NYMEX Price ($/Bbl) (without hedges) of $95.00   Forecast price differentials West -$3.00 to +$3.00   Guidance Based on Natural Gas Average 2011 NYMEX Price ($/MMBtu) (without hedges) of $4.50   Forecast price differentials East

-$0.10 to +$0.10

West -$0.10 to -$0.30   Cost and Expenses $ per Mcfe Lease Operating Expenses $0.85 - $1.00 Depreciation, Depletion and Amortization $2.20 - $2.30 Other Taxes $0.10 - $0.20   Other Operating Expenses $7MM - $9MM General and Administrative $54MM - $58MM   Capital Investment by Division Number of Gross Wells to be Drilled Horizontal Vertical

East          $740MM - $820MM

115 - 140 10 - 20

West           $45MM - $55MM

55 - 80

Total         $785MM - $875MM

      Earnings per share sensitivity to changes from prices used in guidance* ^  

$1 change per MMBtu gas

$5 change per Bbl oil

Increase Decrease Increase Decrease   + $0.31 - $0.31 + $0.04 - $0.04   *   Please refer to forward looking statement footnote beginning at page 8 of this document.   ^ This sensitivity table is current as of August 4, 2011 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 2012 earnings forecast, the Company is utilizing flat NYMEX equivalent commodity pricing, exclusive of basis differential, of $4.50 per MMBtu for natural gas and $95 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               Pipeline & Storage Throughput- (millions of cubic feet - MMcf)   Three Months Ended Nine Months Ended June 30, June 30, Increase Increase 2011 2010 (Decrease) 2011 2010 (Decrease) Firm Transportation - Affiliated 17,538 15,438 2,100 95,884 89,201 6,683 Firm Transportation - Non-Affiliated 35,788 37,010 (1,222 ) 170,661 156,032 14,629 Interruptible Transportation 489 1,016 (527 ) 1,709 3,575 (1,866 ) 53,815 53,464 351   268,254 248,808 19,446     Utility Throughput - (MMcf) Three Months Ended Nine Months Ended June 30, June 30, Increase Increase 2011 2010 (Decrease) 2011 2010 (Decrease) Retail Sales: Residential Sales 8,867 7,055 1,812 54,075 50,292 3,783 Commercial Sales 1,203 920 283 8,044 7,666 378 Industrial Sales 79 66 13   618 512 106   10,149 8,041 2,108 62,737 58,470 4,267 Off-System Sales 867 1,124 (257 ) 6,188 4,034 2,154 Transportation 12,335 10,530 1,805   57,916 51,957 5,959   23,351 19,695 3,656   126,841 114,461 12,380     Energy Marketing Volumes Three Months Ended Nine Months Ended June 30, June 30, Increase Increase 2011 2010 (Decrease) 2011 2010 (Decrease) Natural Gas (MMcf) 13,508 13,047 461   45,863 51,144 (5,281 )     NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES        

Quarter Ended June 30 (unaudited)

2011 2010   Operating Revenues $ 380,979,000 $ 351,992,000     Income from Continuing Operations $ 46,891,000 $ 42,642,000 Loss from Discontinued Operations, Net of Tax   -   (57,000 ) Net Income Available for Common Stock $ 46,891,000 $ 42,585,000     Earnings Per Common Share: Basic: Income from Continuing Operations $ 0.57 $ 0.52 Loss from Discontinued Operations   -   -   Net Income Available for Common Stock $ 0.57 $ 0.52     Diluted: Income from Continuing Operations $ 0.56 $ 0.51 Loss from Discontinued Operations   -   -   Net Income Available for Common Stock $ 0.56 $ 0.51     Weighted Average Common Shares: Used in Basic Calculation   82,687,467   81,801,377   Used in Diluted Calculation   83,782,493   82,970,921      

Nine Months Ended June 30 (unaudited)

  Operating Revenues $ 1,492,808,000 $ 1,474,107,000     Income from Continuing Operations $ 221,045,000 $ 186,741,000 Income from Discontinued Operations, Net of Tax   -   771,000   Net Income Available for Common Stock $ 221,045,000 $ 187,512,000     Earnings Per Common Share: Basic: Income from Continuing Operations $ 2.68 $ 2.30 Income from Discontinued Operations   -   0.01   Net Income Available for Common Stock $ 2.68 $ 2.31     Diluted: Income from Continuing Operations $ 2.64 $ 2.26 Income from Discontinued Operations   -   0.01   Net Income Available for Common Stock $ 2.64 $ 2.27     Weighted Average Common Shares: Used in Basic Calculation   82,436,603   81,178,000   Used in Diluted Calculation   83,649,498   82,556,730      

Twelve Months Ended June 30 (unaudited)

  Operating Revenues $ 1,779,205,000 $ 1,750,902,000     Income from Continuing Operations $ 253,438,000 $ 216,684,000 Income (Loss) from Discontinued Operations, Net of Tax   6,009,000   (2,174,000 ) Net Income Available for Common Stock   259,447,000 $ 214,510,000     Earnings Per Common Share: Basic: Income from Continuing Operations $ 3.08 $ 2.68 Income (Loss) from Discontinued Operations   0.07   (0.03 ) Net Income Available for Common Stock $ 3.15 $ 2.65     Diluted: Income from Continuing Operations $ 3.04 $ 2.63 Income (Loss) from Discontinued Operations   0.07   (0.02 ) Net Income Available for Common Stock $ 3.11 $ 2.61     Weighted Average Common Shares: Used in Basic Calculation   82,321,791   80,941,793   Used in Diluted Calculation   83,508,416   82,335,561