National Fuel Gas Company (“National Fuel” or the “Company”) (NYSE:NFG) today announced consolidated results for the second quarter of its 2018 fiscal year and for the six months ended March 31, 2018, and provided an update on the Company's upstream and midstream operations.

FISCAL 2018 SECOND QUARTER SUMMARY

  • GAAP earnings of $91.8 million, or $1.06 per share, compared to $89.3 million, or $1.04 per share, in the prior year
  • Excluding a $4.0 million, or $0.05 per share, adjustment to the initial remeasurement of deferred taxes from federal tax reform, Adjusted Operating Results were $95.8 million, or $1.11 per share (see non-GAAP reconciliation below)
  • Consolidated Adjusted EBITDA of $217.9 million (non-GAAP reconciliation on page 24)
  • Net natural gas and oil production of 46.1 Bcfe, up 1% from the prior year and up 15% from the first quarter
  • Average natural gas prices, after the impact of hedging, of $2.52 per Mcf, down $0.44 per Mcf from the prior year
  • Average oil prices, after the impact of hedging, of $58.31 per Bbl, up $5.39 per Bbl from the prior year
  • Utility segment earnings increased 30% on colder weather in Pennsylvania and new rates in New York
  • Due to the reduction in the fiscal 2018 federal statutory rate as a result of the 2017 Tax Reform Act, the Company realized net earnings benefit for the quarter of $10.3 million, or $0.11 per share
                 
                 
    Three Months Ended   Six Months Ended
    March 31,   March 31,
(in thousands except per share amounts)   2018   2017   2018   2017
Reported GAAP Earnings   $ 91,847   $ 89,284   $ 290,501     $ 178,191
Items impacting comparability                
Remeasurement of deferred income taxes under 2017 Tax Reform   4,000   —   (107,000 )   —
Adjusted Operating Results   $ 95,847   $ 89,284   $ 183,501     $ 178,191
                 
Reported GAAP Earnings per share   $ 1.06   $ 1.04   $ 3.37     $ 2.07
Items impacting comparability                
Remeasurement of deferred income taxes under 2017 Tax Reform   $ 0.05   —   $ (1.24 )   —
Adjusted Operating Results per share   $ 1.11   $ 1.04   $ 2.13     $ 2.07
 

UPSTREAM AND MIDSTREAM BUSINESS OPERATIONS UPDATE

Earlier this week, the Company’s exploration and production subsidiary, Seneca Resources Corporation (“Seneca”) entered into a precedent agreement with Transcontinental Gas Pipeline Company, LLC (“Transco”) for 300,000 Dekatherms (Dth) per day of new firm transportation capacity.  The incremental capacity will allow Seneca to move natural gas supplies from its Clermont-Rich Valley producing area in the Western Development Area (“WDA”) and its Lycoming County acreage in the Eastern Development Area (“EDA”) to premium markets connected to Zone 6 of Transco’s interstate pipeline system.  Seneca will be an anchor shipper on the to-be-announced Transco project.  While the size, scope, and facilities associated with Transco’s expansion have yet to be finalized, Seneca’s transportation rate is expected to be competitive with other expansion project rates in its current transportation portfolio. The in-service date is anticipated in the first half of fiscal 2022.

In order to provide Seneca with a complete transportation path extending from its WDA to these Zone 6 markets, Transco is expected to lease approximately 300,000 Dth per day of new capacity from National Fuel Gas Supply Corporation (“Supply Corporation”), a pipeline and storage subsidiary of the Company.  The lease is expected to provide Transco with a path from the Company’s Clermont Gathering System in McKean County, Pa., to Supply Corporation’s existing interconnection with Transco in Leidy, Pa.  This new capacity on the Supply Corporation pipeline system is expected to be created via an expansion component that will be added to Supply Corporation’s FM100 Modernization Project. The preliminary cost estimate for the entirety of the FM100 Modernization Project, including the proposed expansion, is approximately $250 million to $300 million. Supply Corporation is currently in the pre-filing process with FERC on the FM100 Modernization Project, which is also expected to upgrade 1950’s era facilities.

National Fuel also remains committed to building its federally authorized Northern Access pipeline project. Northern Access, a planned expansion of the Supply Corporation and Empire Pipeline, Inc. (“Empire”) interstate pipeline systems, will provide Seneca with 490,000 Dth per day of incremental capacity from the WDA in Pennsylvania to diverse markets in New York state, Canada and the Midwest U.S.  Legal challenges relating to the New York State Department of Environmental Conservation’s review of a state environmental permit remain pending.

Seneca has continued to advance its Utica appraisal and optimization program in the WDA.  In the second quarter, Seneca brought on three additional Utica wells off a Marcellus development pad in Clermont-Rich Valley and one Utica appraisal well on its Boone Mountain prospect in Elk County, Pa., approximately 30 miles to the south of the Clermont-Rich Valley area.  Initial production results on the Boone Mountain well were consistent with the best WDA Utica well that Seneca has completed to date and, based on other geologic information, suggests that as much as 160,000 acres in the WDA is economically viable for future Utica shale development.  Much of this Utica position overlaps with Seneca’s core Marcellus acreage, where Seneca has identified as many as 125 well locations on existing Marcellus well pads that allow for the utilization of the Company's Clermont Gathering System. The redevelopment of these locations requires minimal additional investment in gathering infrastructure, which will provide significant uplift to the program's consolidated returns.

Seneca meanwhile continues to make progress on the marketing of its near-term natural gas production, augmenting its existing firm transportation portfolio with firm sales at in-basin receipt points that lock in a significant portion of its projected production volumes at attractive net-back pricing while reducing local spot market exposure.  As Seneca looks to grow into this future firm capacity and capitalize on the Company’s integrated strategy to enhance the consolidated upstream and midstream returns of the Appalachian drilling program, Seneca will add a third horizontal drilling rig to its Appalachian operations in the third quarter of fiscal 2018.  The additional rig will be primarily dedicated to the redevelopment of Seneca’s Clermont-Rich Valley acreage for the Utica Shale.

While the additional drilling rig will not lead to an immediate production increase this fiscal year, Seneca expects now to grow its production at a 15 to 20 percent compound annual growth rate through fiscal 2022, which will also benefit the Gathering segment's throughput.  Due to the minimal gathering capital requirements, as well as Seneca’s existing firm capacity and financial hedge portfolio, peer leading cost structure, and royalty-free economics in the WDA, the Company expects the combined Exploration and Production and Gathering segments to live within cash flows at current natural gas strip pricing over the next three years.  The addition of a third rig is also expected to be accretive to the Appalachian program’s overall consolidated earnings and yield a higher return on invested capital relative to the current two rig activity level, while  providing economies of scale, operational flexibility, and other benefits to drive further efficiencies.

Additionally, on May 1, 2018, Seneca closed on a sale of its Sespe oil and natural gas assets in California for $43 million. The divestiture of Sespe, the Company’s sole asset in Ventura County, is part of Seneca’s strategy to focus on and grow production from its core California assets in the San Joaquin basin, in particular recently acquired leases in the Midway Sunset field. The Sespe field produces approximately 900 net barrels of oil equivalent (“boe”) per day and was expected to contribute approximately $0.05 per share of earnings for the remainder of fiscal 2018. Under full cost accounting rules, the Company will not record any gain or loss with respect to the transaction.

MANAGEMENT COMMENTS

Ronald J. Tanski, President and Chief Executive Officer of National Fuel Gas Company, stated: “We’re pleased to report another quarter of solid financial results across all of our operating segments.  A return this year to a more normal heating season in our New York and Pennsylvania operating regions increased throughput across our utility pipeline system.  Notwithstanding the weather that was colder than the two previous heating seasons, our customers continue to benefit from the low cost of natural gas supplies that are being produced from the Appalachian basin and safely delivered to them through our interstate and utility pipeline systems.

“We are also excited about recent updates to our near and longer-term operating plans that will allow us to continue the growth of our upstream and midstream businesses in Appalachia.  Our ongoing transition to Utica shale development in the WDA is moving along quite well.  Early results indicate that we have a large inventory of additional Utica locations in and around our core Marcellus footprint that will generate stronger consolidated returns, particularly in areas where new Utica production can use existing gathering infrastructure that was built during our Marcellus development.  With a newly developed pipeline expansion project planned to be in place, we now expect to have the exit capacity and end-market diversity to tap and bring forward the value of our significant, stacked-pay acreage position in Pennsylvania, while also continuing to grow the earnings and returns of our Gathering and Pipeline and Storage segments and capitalize on the strategic benefits of our integrated business model.”

DISCUSSION OF RESULTS BY SEGMENT

The following discussion of the earnings of each segment is summarized in a tabular form on pages 9 through 12 of this report.  It may be helpful to refer to those tables while reviewing this discussion.  Note that management defines Adjusted EBITDA as reported GAAP earnings before the following items: interest expense, income taxes, depreciation, depletion and amortization, interest and other income, impairments, and other items reflected in operating income that impact comparability.

Upstream Business

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, primarily in Pennsylvania and California.

       
  Three Months Ended   Six Months Ended
  March 31,   March 31,
(in thousands except per share amounts) 2018   2017   Variance   2018   2017   Variance
Net Income $ 26,537   $ 33,769   $ (7,232 )     $ 133,235   $ 68,849   $ 64,386  
Net Income Per Share (Diluted) $ 0.31   $ 0.39   $ (0.08 )   $ 1.54   $ 0.80   $ 0.74  
Adjusted EBITDA $ 78,770   $ 93,970   $ (15,200 )   $ 158,264   $ 196,447   $ (38,183 )
                                       

The Exploration and Production segment’s second quarter earnings declined $7.2 million, as the positive impacts of higher production, better realized crude oil prices, and a lower effective income tax rate were more than offset by a decline in realized natural gas prices and higher operating expenses.

Seneca’s second quarter net production was 46.1 billion cubic feet equivalent (“Bcfe”), an increase of 0.5 Bcfe, or 1 percent, from the prior year due mainly to higher natural gas production in Appalachia.  Net natural gas production increased 0.5 billion cubic feet (“Bcf”) versus the prior year and 6.0 Bcf, or 17 percent, versus the fiscal 2018 first quarter.  The year over year increase was primarily due to higher net production in the WDA from new Marcellus and Utica wells completed and connected to sales during the past year.  The 17 percent sequential increase over the first quarter of the fiscal year was due mostly to production from new wells brought on-line this quarter (including the first development pad brought to sales in the EDA since fiscal 2016), and an increase in Marcellus production from other EDA locations after price-related and operational curtailments experienced during the previous quarter (Seneca did not have any significant curtailments in the second quarter of fiscal 2018).  Seneca’s oil production decreased 11 thousand barrels ("Mbbl"), or 2 percent, versus the prior year.

Seneca's average realized natural gas price, after the impact of hedging and marketing and transportation costs, was $2.52 per thousand cubic feet ("Mcf"), a decrease of $0.44 per Mcf from the prior year.  The decline in Seneca’s realized natural gas price is primarily attributable to the expiration of physical firm sales and financial hedge contracts over the past 12 months that had favorable pricing relative to firm sales and hedges settled in the current quarter. Seneca's average realized oil price, after the impact of hedging, was $58.31 per barrel ("Bbl"), an increase of $5.39 per Bbl.  The improvement in oil price realizations was due primarily to higher market prices for West Texas Intermediate (WTI) crude oil during the quarter and stronger price differentials relative to WTI at local sales points in California.

Seneca’s operating expenses increased $5.2 million during the second quarter.  Lease operating and transportation expense (“LOE”) increased $1.3 million due to higher natural gas production in Appalachia, which resulted in higher gathering and transportation costs, and an increase in well workover activities and steaming costs in California.  Depreciation, depletion and amortization (“DD&A”) expense increased $3.1 million due to the increase in production and a higher per unit DD&A rate, which increased by $0.06 per thousand cubic feet equivalent (“Mcfe”) to $0.69 per Mcfe due mainly to a higher depletable fixed asset balance at March 31, 2018.

The decrease in the segment’s effective tax rate was mostly due to the 2017 Tax Reform Act, which reduced the Company’s federal statutory corporate tax rate in fiscal 2018 from 35 percent to 24.5 percent and benefited Seneca’s second quarter earnings by $3.5 million, or $0.04 per share. The current period benefit was offset partially by a $0.8 million revision to the remeasurement of deferred income taxes that was recorded in the first quarter.

See page 21 for additional comparative information on the Exploration & Production segment’s production, realized pricing and per unit operating costs.

Midstream Businesses

Pipeline and Storage Segment

The Pipeline and Storage segment’s 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 Pennsylvania.

       
  Three Months Ended     Six Months Ended
  March 31,   March 31,
(in thousands except per share amounts) 2018   2017   Variance   2018   2017   Variance
Net Income $ 22,724   $ 19,256   $ 3,468   $ 61,186   $ 38,624   $ 22,562
Net Income Per Share (Diluted) $ 0.26   $ 0.22   $ 0.04   $ 0.71   $ 0.45   $ 0.26
Adjusted EBITDA $ 50,142   $ 49,103   $ 1,039   $ 100,915   $ 97,116   $ 3,799
                                   

The Pipeline and Storage segment’s second quarter earnings increased $3.5 million due primarily to higher operating revenues and a lower effective income tax rate, offset partially by a decrease in the allowance for funds used during construction reported in other income.  Operating revenues increased $1.0 million due to new demand charges for transportation service from Supply Corporation’s Line D Expansion project, which was placed in service on November 1, 2017, and surcharge revenues relating to Supply Corporation’s greenhouse gas and pipeline safety system enhancements that also went into effect in November 2017, which were partially offset by a decline in transportation revenues resulting from contract terminations.   The decrease in the effective income tax rate was due primarily to the 2017 Tax Reform Act, which reduced the Company’s federal statutory corporate tax rate and benefited the segment’s earnings by $3.4 million, or $0.04 per share.

Gathering Segment

The Gathering segment’s operations are carried out by National Fuel Gas Midstream Corporation’s subsidiary limited liability companies. The Gathering segment constructs, owns and operates natural gas gathering pipelines and compression facilities in the Appalachian region which currently delivers Seneca’s gross Appalachian production to the interstate pipeline system.

       
  Three Months Ended   Six Months Ended
  March 31,   March 31,
(in thousands except per share amounts) 2018   2017   Variance   2018   2017   Variance
Net Income $ 11,770   $ 10,285   $ 1,485     $ 57,169   $ 21,266   $ 35,903  
Net Income Per Share (Diluted) $ 0.14   $ 0.12   $ 0.02     $ 0.66   $ 0.25   $ 0.41  
Adjusted EBITDA $ 24,138   $ 24,172   $ (34 )   $ 44,869   $ 49,273   $ (4,404 )
                                       

The $1.5 million increase in Gathering segment’s second quarter earnings was due mainly to a lower effective income tax rate.  Operating revenues were largely flat when compared to the prior year as the increase in gathering throughput from Seneca’s Appalachian natural gas production was offset by the impact of gathering rate adjustments that went into effect in February.  The decrease in the effective income tax rate was due primarily to the 2017 Tax Reform Act, which reduced the Company’s federal statutory corporate tax rate and benefited the segment’s earnings by $1.9 million, or $0.02 per share. The current period tax benefit was offset partially by a $0.4 million revision to the remeasurement of deferred income taxes that was recorded in the first quarter.

Downstream Businesses

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.

  Three Months Ended   Six Months Ended
  March 31,   March 31,
(in thousands except per share amounts) 2018   2017   Variance   2018   2017   Variance
Net Income $ 33,360     $ 25,581     $ 7,779     $ 54,353     $ 46,755     $ 7,598  
Net Income Per Share (Diluted) $ 0.39     $ 0.30     $ 0.09     $ 0.63     $ 0.54     $ 0.09  
Adjusted EBITDA $ 66,013     $ 61,580     $ 4,433     $ 112,997     $ 113,909     $ (912 )

The Utility segment’s second quarter earnings increased $7.8 million due to the positive impacts of colder weather, new customer rates in Distribution’s New York service territory (effective in April 2017), lower O&M expense, and tax reform.  Weather in Distribution’s Pennsylvania service territory was 17.1 percent colder on average than last year, resulting in higher residential and transportation customer throughput and revenues.  The impact of weather variations on earnings in Distribution’s New York service territory is largely mitigated by that jurisdiction’s weather normalization clause.  O&M expense decreased $2.3 million due mainly to lower personnel and information systems costs, partially offset by higher amortization of environmental remediation costs that resulted from the April 2017 rate case order in New York.

The decline in the Utility segment’s effective income tax rate due to the 2017 Tax Reform Act resulted in a $5.4 million decrease in income tax expense, which was mostly offset by a regulatory refund provision recorded against operating revenues.  Consistent with utility rate treatment implemented after previous federal tax reforms and taking into consideration guidance provided by state regulators during the quarter, the Company recorded a $5.3 million refund provision ($3.9 million after-tax, or $0.05 per share) that reduced the Utility segment’s operating revenues and deferred the net effect of the reduction in tax rates by increasing the segment’s regulatory liability.

Energy Marketing Segment

The Energy Marketing segment's operations are carried out by National Fuel Resources, Inc. (“NFR”).  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.

  Three Months Ended   Six Months Ended
  March 31,   March 31,
(in thousands except per share amounts) 2018   2017   Variance   2018   2017   Variance
Net Income $ 578     $ 905     $ (327 )   $ 1,624     $ 2,687     $ (1,063 )
Net Income Per Share (Diluted) $ 0.01     $ 0.01     $ —     $ 0.02     $ 0.03     $ (0.01 )
Adjusted EBITDA $ 924     $ 1,382     $ (458 )   $ 2,606     $ 4,230     $ (1,624 )

The Energy Marketing segment’s second quarter earnings declined $0.3 million due largely to lower margins (operating revenues less purchased gas expenses), offset partially by lower O&M expense.  NFR’s customer margins were negatively impacted by stronger natural gas prices at local purchase points, which spiked on days with extreme weather in January, relative to NYMEX-based customer sales contracts.

Corporate and All Other

For the second quarter of fiscal 2018, the Corporate and All Other category had a net loss of $3.1 million compared to a net loss of $0.5 million in the prior year.  The decrease in earnings was primarily attributable to a $2.7 million revision to the remeasurement of deferred income taxes that was recorded in the first quarter of fiscal 2018 due to the 2017 Tax Reform Act.

FISCAL 2018 GUIDANCE UPDATE

National Fuel is revising its fiscal 2018 earnings guidance to $3.20 to $3.35 per share, or $3.275 per share at the midpoint of the range.  The revised earnings guidance does not include the impact of the remeasurement of deferred income taxes resulting from the 2017 Tax Reform Act, which reduced the Company’s consolidated income tax expense and benefited earnings for the six months ended March 31, 2018, by $107.0 million, or $1.24 per share.  While the Company expects to record additional adjustments to its deferred income taxes as a result of the 2017 Tax Reform Act during the remaining six months of fiscal 2018, the amounts of these and other potential adjustments are not reasonably determinable at this time.  The final determination of the impact of the income tax effects of certain items will require additional analysis and further interpretation of the 2017 Tax Reform Act from yet to be issued U.S. Treasury regulations, state income tax guidance, federal and state regulatory guidance, technical corrections, and the filing of the Company’s fiscal 2017 federal consolidated tax return.  Some or all of these factors may be significant.  Because the amounts of final adjustments are not reasonably determinable at this time, the Company is unable to provide earnings guidance other than on a non-GAAP basis that excludes the impact of the remeasurement of deferred income taxes and other potential adjustments.

Excluding the impact of the remeasurement of deferred income taxes, the Company expects that the reduction in the statutory federal tax rate from 35 percent to 24.5 percent will lower the Company’s effective income tax rate for fiscal 2018 to a range of 26 percent to 27 percent. Furthermore, consistent with utility rate treatment implemented after previous tax reforms, the Company expects to record a regulatory refund provision of approximately $16.0 million (pre-tax) in fiscal 2018 to reduce the Utility segment’s operating revenues and defer the net effect of the reduction in tax rates by increasing the segment’s regulatory liability. The Company recorded an $11.3 million ($8.3 million after-tax) regulatory refund provision in the first six months of fiscal 2018.  The Company’s earnings guidance, including the impact from the Utility segment’s projected regulatory refund provision, assumes normal weather.

In addition to the impacts of tax reform on current year income, the revised earnings guidance range reflects the impact of actual results for the six months ended March 31, 2018, the sale of Seneca's Sespe assets in California, and other updates to key forecast assumptions, including revisions to the Exploration and Production segment’s forecasted production and natural gas and oil pricing as outlined in the table below.

The Exploration and Production segment’s fiscal 2018 forecasted production was reduced by 5 Bcfe at the midpoint of the range to reflect the impact of the sale of Seneca’s Sespe oil properties in California and adjustments made to Seneca’s operations schedule in Appalachia due primarily to the anticipated delay of the in-service date of the Atlantic Sunrise project to later in the fourth quarter, which impacted the expected timing of new pad turn-ons and pushed a portion of new production from fiscal 2018 to fiscal 2019.  Seneca, which holds 189,405 Dth per day of firm transportation capacity on Atlantic Sunrise, had previously expected that the capacity would be available on July 1, 2018.

The Company’s capital expenditure guidance was revised to a range of $610 million to $680 million, at the midpoint an increase of $40 million from the previous guidance range. The increase is due primarily to the additional horizontal drilling rig that Seneca plans to deploy in Appalachia during the third quarter as discussed in the Upstream and Midstream Operations Update section above. The revision to the Pipeline and Storage segment’s capital budget is due primarily to the expected timing of the spending.

Additional details on the Company's forecast assumptions and business segment guidance for fiscal 2018 are outlined in the table below.

 
  Updated FY 2018 Guidance   Previous FY 2018 Guidance
Consolidated Earnings per Share (1) $3.20 to $3.35   $3.20 to $3.40
Consolidated Effective Tax Rate (1) 26% to 27%   ~27%
       
Capital Expenditures (Millions)      
  Exploration and Production (2) $350 - $370   $300 - $330
  Pipeline and Storage $110 - $130   $110 - $140
  Gathering $60 - $80   $60 - $80
  Utility $90 - $100   $90 - $100
  Consolidated Capital Expenditures                                          $610 - $680   $560 - $650
Exploration & Production Segment Guidance                                                             
       
  Commodity Price Assumptions                                            
  NYMEX natural gas price $2.75 /MMBtu   $3.00 /MMBtu
  Appalachian basin spot price (summer)              $2.00 /MMBtu   $2.40/$2.00 /MMBtu
  NYMEX (WTI) crude oil price $65.00 /Bbl   $60.00 /Bbl
  California oil price (% of WTI) 98 %   98 %
       
  Production (Bcfe)      
  East Division - Appalachia (3) 157 to 172   160 to 175
  West Division - California ~ 18   ~ 20
  Total Production 175 to 190   180 to 195
       
  E&P Operating Costs ($/Mcfe)      
  LOE $0.90 - $1.00   $0.90 - $1.00
  G&A $0.30 - $0.35   $0.30 - $0.35
  DD&A ~ $0.70   ~ $0.70
       
Other Business Segment Guidance (Millions)     
  Gathering Segment Revenues $110 - $115   $110 - $120
  Pipeline and Storage Segment Revenues ~$295   ~$295
  Utility Segment Regulatory Refund Provision ~$16   ~$16

(1)   Excludes earnings impact of the remeasurement of deferred income taxes resulting from the 2017 Tax Reform Act.(2)   Net of conveyance proceeds received from joint development partner for working interest in joint development wells.(3)   Seneca East Division - Appalachia production guidance assumes approximately 11 Bcf of spot sales for the remainder of FY18.

EARNINGS TELECONFERENCE

The Company will host a conference call on Friday, May 4, 2018, 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 NFG Investor Relations News & Events page at National Fuel’s website at investor.nationalfuelgas.com.  For those without Internet access, audio access is also provided by dialing (toll-free) 833-287-0795, using conference ID number “2679378.”  For those unable to listen to the live conference call, an audio replay will be available approximately two hours following the teleconference at the same website link and by phone at (toll-free) 800-585-8367 using conference ID number “2679378.”  Both the webcast and a telephonic replay will be available until the close of business on Friday, May 11, 2018.

National Fuel is an integrated energy company reporting financial results for five operating segments: Exploration and Production, Pipeline and Storage, Gathering, Utility, and Energy Marketing.  Additional information about National Fuel is available at www.nationalfuelgas.com.

     
     
Analyst Contact: Brian M. Welsch          716-857-7875                           
Media Contact: Karen L. Merkel 716-857-7654

 

Certain statements contained herein, including statements identified by the use of the words “anticipates,” “estimates,” “expects,” “forecasts,” “intends,” “plans,” “predicts,” “projects,” “believes,” “seeks,” “will,” “may” and similar expressions, and statements which are other than statements of historical facts, 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: 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 rate cases (which address, among other things, target rates of return, rate design and retained natural gas), environmental/safety requirements, affiliate relationships, industry structure, and franchise renewal; changes in laws, regulations or judicial interpretations to which the Company is subject, including those involving derivatives, taxes, safety, employment, climate change, other environmental matters, real property, and exploration and production activities such as hydraulic fracturing; changes in the price of natural gas or oil; impairments under the SEC’s full cost ceiling test for natural gas and oil reserves; 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; 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, title disputes, 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; increasing health care costs and the resulting effect on health insurance premiums and on the obligation to provide other post-retirement benefits; changes in price differentials between similar quantities of natural gas or oil sold at different geographic locations, and the effect of such changes on commodity production, revenues and demand for pipeline transportation capacity to or from such locations; other changes in price differentials between similar quantities of natural gas or oil having different quality, heating value, hydrocarbon mix or delivery date; the cost and effects of legal and administrative claims against the Company or activist shareholder campaigns to effect changes at the Company; uncertainty of oil and gas reserve estimates; significant differences between the Company’s projected and actual production levels for natural gas or oil; changes in demographic patterns and weather conditions; changes in the availability, price or accounting treatment of derivative financial instruments; changes in laws, actuarial assumptions, the interest rate environment and the return on plan/trust assets related to the Company’s pension and other post-retirement benefits, which can affect future funding obligations and costs and plan liabilities; changes in 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; the impact of potential information technology, cybersecurity or data security breaches; economic disruptions or uninsured losses resulting from major accidents, fires, severe weather, natural disasters, terrorist activities or acts of war; significant differences between the Company’s projected and actual capital expenditures and operating expenses; 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 MARCH 31, 2018
(Unaudited)
                           
                           
  Upstream   Midstream Businesses   Downstream Businesses        
                           
  Exploration &   Pipeline &           Energy   Corporate /    
(Thousands of Dollars) Production   Storage   Gathering   Utility   Marketing   All Other   Consolidated*
                           
Second quarter 2017 GAAP earnings $ 33,769     $ 19,256     $ 10,285     $ 25,581     $ 905     $ (512 )   $ 89,284  
                           
Earnings drivers***                          
Higher (lower) crude oil prices 2,322                         2,322  
Higher (lower) natural gas prices (11,965 )                       (11,965 )
Higher (lower) natural gas production 1,031                         1,031  
Higher (lower) crude oil production (369 )                       (369 )
Lower (higher) lease operating and transportation expenses (822 )                       (822 )
Lower (higher) depreciation / depletion (2,038 )                   (263 )   (2,301 )
                           
Higher (lower) transportation and storage revenues     606                     606  
Lower (higher) other operating expenses (421 )           1,171             750  
                           
Impact of new rates             1,767             1,767  
Colder weather             3,448             3,448  
                           
Higher (lower) margins                 (443 )   659     216  
                           
Higher (lower) AFUDC**     (599 )                   (599 )
                           
(Higher) lower interest expense     302                     302  
                           
Lower (higher) income tax expense / effective tax rate 1,884                         1,884  
                           
Impact of 2017 Tax Reform Act                          
Impact of tax rate change (35% to 24.5%) on current period earnings 3,539     3,385     1,871     5,440     109     (122 )   14,222  
Refund provision on tax rate change             (3,914 )           (3,914 )
Remeasurement of deferred income taxes under 2017 Tax Reform (790 )       (400 )       (159 )   (2,651 )   (4,000 )
                           
All other / rounding 397     (226 )   14     (133 )   166     (233 )   (15 )
Second quarter 2018 GAAP earnings $ 26,537     $ 22,724     $ 11,770     $ 33,360     $ 578     $ (3,122 )   $ 91,847  
                           
* Amounts do not reflect intercompany eliminations 
** AFUDC = Allowance for Funds Used During Construction 
*** Earnings drivers have been calculated using a 35% federal statutory rate. The impact of the change to a blended year 24.5% federal statutory rate is broken out separately under the caption "Impact of 2017 Tax Reform Act." 
                             
                             
                             
NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS PER SHARE
QUARTER ENDED MARCH 31, 2018
(Unaudited)
                             
                             
    Upstream   Midstream Businesses   Downstream Businesses        
                             
    Exploration &   Pipeline &           Energy   Corporate /    
    Production   Storage   Gathering   Utility   Marketing   All Other   Consolidated*
                             
Second quarter 2017 GAAP earnings   $ 0.39     $ 0.22     $ 0.12     $ 0.30     $ 0.01     $ —     $ 1.04  
                             
Earnings drivers***                            
Higher (lower) crude oil prices   0.03                         0.03  
Higher (lower) natural gas prices   (0.14 )                       (0.14 )
Higher (lower) natural gas production   0.01                         0.01  
Higher (lower) crude oil production   —                         —  
Lower (higher) lease operating and transportation expenses   (0.01 )                       (0.01 )
Lower (higher) depreciation / depletion   (0.02 )                   —     (0.02 )
                             
Higher (lower) transportation and storage revenues       0.01                     0.01  
Lower (higher) other operating expenses   —             0.01             0.01  
                             
Impact of new rates               0.02             0.02  
Colder weather               0.04             0.04  
                             
Higher (lower) margins                   —     0.01     0.01  
                             
Higher (lower) AFUDC**       (0.01 )                   (0.01 )
                             
(Higher) lower interest expense       —                     —  
                             
Lower (higher) income tax expense / effective tax rate   0.02                         0.02  
                             
Impact of 2017 Tax Reform Act                            
Impact of tax rate change (35% to 24.5%) on current period earnings   0.04     0.04     0.02     0.06     —     —     0.16  
Refund provision on tax rate change               (0.05 )           (0.05 )
Remeasurement of deferred income taxes under 2017 Tax Reform   (0.01 )       (0.01 )       —     (0.03 )   (0.05 )
                             
All other / rounding   —     —     0.01     0.01     —     (0.03 )   (0.01 )
Second quarter 2018 GAAP earnings   $ 0.31     $ 0.26     $ 0.14     $ 0.39     $ 0.01     $ (0.05 )   $ 1.06  
                             
* Amounts do not reflect intercompany eliminations 
** AFUDC = Allowance for Funds Used During Construction 
*** Earnings drivers have been calculated using a 35% federal statutory rate. The impact of the change to a blended year 24.5% federal statutory rate is broken out separately under the caption "Impact of 2017 Tax Reform Act." 
                           
                           
                           
NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS
SIX MONTHS ENDED MARCH 31, 2018
(Unaudited)
                           
  Upstream   Midstream Businesses   Downstream Businesses        
                           
  Exploration &   Pipeline &           Energy   Corporate /    
(Thousands of Dollars) Production   Storage   Gathering   Utility   Marketing   All Other   Consolidated*
                           
Six months ended March 31, 2017 GAAP earnings $ 68,849     $ 38,624     $ 21,266     $ 46,755     $ 2,687     $ 10     $ 178,191  
                           
Earnings drivers***                          
Higher (lower) crude oil prices 4,519                         4,519  
Higher (lower) natural gas prices (17,940 )                       (17,940 )
Higher (lower) natural gas production (7,587 )                       (7,587 )
Higher (lower) crude oil production (2,074 )                       (2,074 )
Lower (higher) lease operating and transportation expenses (783 )                       (783 )
Lower (higher) depreciation / depletion (979 )   (842 )   (285 )           (197 )   (2,303 )
                           
Higher (lower) storage revenues     784                     784  
Higher (lower) gathering and processing revenues         (2,769 )               (2,769 )
Lower (higher) other operating expenses (1,009 )   2,059         476             1,526  
Lower (higher) property, franchise and other taxes     (354 )                   (354 )
                           
Impact of new rates             2,789             2,789  
Colder weather             4,688             4,688  
                           
Higher (lower) margins                 (1,204 )   1,011     (193 )
                           
Higher (lower) AFUDC**     (542 )                   (542 )
                           
Lower (higher) interest expense     608         452             1,060  
                           
Lower (higher) income tax expense / effective tax rate 5,754         1,172     (1,850 )           5,076  
                           
Impact of 2017 Tax Reform Act                          
Impact of tax rate change (35% to 24.5%) on current period earnings 7,634     6,913     3,415     10,241     291     (11 )   28,483  
Refund provision on tax rate change             (8,320 )           (8,320 )
Remeasurement of deferred income taxes under 2017 Tax Reform 76,510     14,100     34,500         (359 )   (17,751 )   107,000  
                           
All other / rounding 341     (164 )   (130 )   (878 )   209     (128 )   (750 )
Six months ended March 31, 2018 GAAP earnings $ 133,235     $ 61,186     $ 57,169     $ 54,353     $ 1,624     $ (17,066 )   $ 290,501  
                           
* Amounts do not reflect intercompany eliminations 
** AFUDC = Allowance for Funds Used During Construction 
*** Earnings drivers have been calculated using a 35% federal statutory rate. The impact of the change to a blended year 24.5% federal statutory rate is broken out separately under the caption "Impact of 2017 Tax Reform Act."   
                             
                             
                             
NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS PER SHARE
SIX MONTHS ENDED MARCH 31, 2018
(Unaudited)
                             
    Upstream   Midstream Businesses   Downstream Businesses        
                             
    Exploration &   Pipeline &           Energy   Corporate /    
    Production   Storage   Gathering   Utility   Marketing   All Other   Consolidated*
                             
Six months ended March 31, 2017 GAAP earnings   $ 0.80     $ 0.45     $ 0.25     $ 0.54     $ 0.03     $ —     $ 2.07  
                             
Earnings drivers***                            
Higher (lower) crude oil prices   0.05                         0.05  
Higher (lower) natural gas prices   (0.21 )                       (0.21 )
Higher (lower) natural gas production   (0.09 )                       (0.09 )
Higher (lower) crude oil production   (0.02 )                       (0.02 )
Lower (higher) lease operating and transportation expenses   (0.01 )                       (0.01 )
Lower (higher) depreciation / depletion   (0.01 )   (0.01 )   —             —     (0.02 )
                             
Higher (lower) storage revenues       0.01                     0.01  
Higher (lower) gathering and processing revenues           (0.03 )               (0.03 )
Lower (higher) other operating expenses   (0.01 )   0.02         0.01             0.02  
Lower (higher) property, franchise and other taxes       —                     —  
                             
Impact of new rates               0.03             0.03  
Colder weather               0.05             0.05  
                             
Higher (lower) margins                   (0.01 )   0.01     —  
                             
Higher (lower) AFUDC**       (0.01 )                   (0.01 )
                             
Lower (higher) interest expense       0.01         0.01             0.02  
                             
Lower (higher) income tax expense / effective tax rate   0.07         0.01     (0.02 )           0.06  
                             
Impact of 2017 Tax Reform Act                            
Impact of tax rate change (35% to 24.5%) on current period earnings   0.09     0.08     0.04     0.12     —     —     0.33  
Refund provision on tax rate change               (0.10 )           (0.10 )
Remeasurement of deferred income taxes under 2017 Tax Reform   0.89     0.16     0.40         —     (0.21 )   1.24  
                             
All other / rounding   (0.01 )   —     (0.01 )   (0.01 )   —     0.01     (0.02 )
Six months ended March 31, 2018 GAAP earnings   $ 1.54     $ 0.71     $ 0.66     $ 0.63     $ 0.02     $ (0.19 )   $ 3.37  
                             
* Amounts do not reflect intercompany eliminations 
** AFUDC = Allowance for Funds Used During Construction 
*** Earnings drivers have been calculated using a 35% federal statutory rate. The impact of the change to a blended year 24.5% federal statutory rate is broken out separately under the caption "Impact of 2017 Tax Reform Act." 
                 
                 
                 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
                 
(Thousands of Dollars, except per share amounts)                
  Three Months Ended   Six Months Ended  
  March 31,   March 31,  
  (Unaudited)   (Unaudited)  
SUMMARY OF OPERATIONS 2018   2017   2018   2017  
Operating Revenues:                
Utility and Energy Marketing Revenues $ 339,422     $ 308,889     $ 565,147     $ 516,669    
Exploration and Production and Other Revenues 147,868     159,997     288,318     321,691    
Pipeline and Storage and Gathering Revenues 53,615     53,189     107,096     106,216    
  540,905     522,075     960,561     944,576    
Operating Expenses:                
Purchased Gas 176,608     147,971     270,642     218,214    
Operation and Maintenance:                
  Utility and Energy Marketing 61,410     63,907     112,780     114,329    
  Exploration and Production and Other 39,586     37,593     75,127     68,055    
  Pipeline and Storage and Gathering 22,642     23,106     42,679     45,766    
Property, Franchise and Other Taxes 22,802     22,542     43,650     42,921    
Depreciation, Depletion and Amortization 61,155     56,999     116,985     113,194    
  384,203     352,118     661,863     602,479    
                 
Operating Income 156,702     169,957     298,698     342,097    
                 
Other Income (Expense):                
Interest Income 1,025     391     3,275     1,991    
Other Income 770     1,744     2,492     3,356    
Interest Expense on Long-Term Debt (27,148 )   (28,913 )   (55,235 )   (58,016 )  
Other Interest Expense (1,233 )   (924 )   (1,736 )   (1,834 )  
                 
Income Before Income Taxes 130,116     142,255     247,494     287,594    
                 
Income Tax Expense (Benefit) 38,269     52,971     (43,007 )   109,403    
                 
Net Income Available for Common Stock $ 91,847     $ 89,284     $ 290,501     $ 178,191    
                 
Earnings Per Common Share                
Basic $ 1.07     $ 1.05     $ 3.39     $ 2.09    
Diluted $ 1.06     $ 1.04     $ 3.37     $ 2.07    
                 
Weighted Average Common Shares:                
Used in Basic Calculation 85,809,233   85,334,887   85,718,779   85,261,575  
Used in Diluted Calculation 86,323,636   86,006,614   86,318,892   85,897,282  
 
 
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
   
  March 31,   September 30,
(Thousands of Dollars)   2018     2017
       
ASSETS      
Property, Plant and Equipment $ 10,126,931     $ 9,945,560  
Less - Accumulated Depreciation, Depletion and Amortization   5,344,134       5,271,486  
Net Property, Plant and Equipment   4,782,797       4,674,074  
       
Current Assets:      
Cash and Temporary Cash Investments   227,994       555,530  
Hedging Collateral Deposits   3,657       1,741  
Receivables - Net   198,922       112,383  
Unbilled Revenue   60,059       22,883  
Gas Stored Underground   6,842       35,689  
Materials and Supplies - at average cost   34,769       33,926  
Unrecovered Purchased Gas Costs   426       4,623  
Other Current Assets   60,324       51,505  
Total Current Assets   592,993       818,280  
       
Other Assets:      
Recoverable Future Taxes   115,514       181,363  
Unamortized Debt Expense   7,861       1,159  
Other Regulatory Assets   171,902       174,433  
Deferred Charges   36,835       30,047  
Other Investments   123,039       125,265  
Goodwill   5,476       5,476  
Prepaid Post-Retirement Benefit Costs   59,586       56,370  
Fair Value of Derivative Financial Instruments   18,144       36,111  
Other   426       742  
Total Other Assets   538,783       610,966  
Total Assets $ 5,914,573     $ 6,103,320  
       
CAPITALIZATION AND LIABILITIES      
Capitalization:      
Comprehensive Shareholders' Equity      
Common Stock, $1 Par Value Authorized - 200,000,000 Shares; Issued and      
Outstanding - 85,881,897 Shares and 85,543,125 Shares, Respectively $ 85,882     $ 85,543  
Paid in Capital   810,126       796,646  
Earnings Reinvested in the Business   1,070,939       851,669  
Accumulated Other Comprehensive Loss   (47,760 )     (30,123 )
Total Comprehensive Shareholders' Equity   1,919,187       1,703,735  
Long-Term Debt, Net of Current Portion and Unamortized Discount and Debt Issuance Costs   2,085,012       2,083,681  
Total Capitalization   4,004,199       3,787,416  
       
Current and Accrued Liabilities:      
Notes Payable to Banks and Commercial Paper   —       —  
Current Portion of Long-Term Debt   —       300,000  
Accounts Payable   127,585       126,443  
Amounts Payable to Customers   12,083       —  
Dividends Payable   35,641       35,500  
Interest Payable on Long-Term Debt   26,435       35,031  
Customer Advances   154       15,701  
Customer Security Deposits   18,973       20,372  
Other Accruals and Current Liabilities   147,549       111,889  
Fair Value of Derivative Financial Instruments   11,475       1,103  
Total Current and Accrued Liabilities   379,895       646,039  
       
Deferred Credits:      
Deferred Income Taxes   482,682       891,287  
Taxes Refundable to Customers   365,091       95,739  
Cost of Removal Regulatory Liability   207,711       204,630  
Other Regulatory Liabilities   124,868       113,716  
Pension and Other Post-Retirement Liabilities   133,852       149,079  
Asset Retirement Obligations   106,481       106,395  
Other Deferred Credits   109,794       109,019  
Total Deferred Credits   1,530,479       1,669,865  
Commitments and Contingencies   —       —  
Total Capitalization and Liabilities $ 5,914,573     $ 6,103,320  
         
         
         
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
    Six Months Ended
    March 31,
(Thousands of Dollars)   2018   2017
         
Operating Activities:        
Net Income Available for Common Stock   $ 290,501     $ 178,191  
Adjustments to Reconcile Net Income to Net CashProvided by Operating Activities:        
Depreciation, Depletion and Amortization   116,985     113,194  
Deferred Income Taxes   (62,459 )   63,781  
Stock-Based Compensation   7,862     5,632  
Other   8,052     7,713  
Change in:        
Hedging Collateral Deposits   (1,916 )   (287 )
Receivables and Unbilled Revenue   (123,954 )   (92,155 )
Gas Stored Underground and Materials and Supplies   28,004     24,476  
Unrecovered Purchased Gas Costs   4,197     (2,241 )
Other Current Assets   (8,819 )   7,769  
Accounts Payable   10,838     13,997  
Amounts Payable to Customers   12,083     (71 )
Customer Advances   (15,547 )   (14,462 )
Customer Security Deposits   (1,399 )   1,493  
Other Accruals and Current Liabilities   37,646     44,690  
Other Assets   (9,541 )   (32 )
Other Liabilities   (5,767 )   202  
Net Cash Provided by Operating Activities   $ 286,766     $ 351,890  
         
Investing Activities:        
Capital Expenditures   $ (261,720 )   $ (208,231 )
Net Proceeds from Sale of Oil and Gas Producing Properties   17,310     26,554  
Other   5,355     (3,225 )
Net Cash Used in Investing Activities   $ (239,055 )   $ (184,902 )
         
Financing Activities:        
Reduction of Long-Term Debt   $ (307,047 )   $ —  
Dividends Paid on Common Stock   (71,091 )   (69,017 )
Net Proceeds From Issuance of Common Stock   2,891     3,230  
Net Cash Used in Financing Activities   $ (375,247 )   $ (65,787 )
         
Net Increase (Decrease) in Cash and Temporary Cash Investments   (327,536 )   101,201  
Cash and Temporary Cash Investments at Beginning of Period   555,530     129,972  
Cash and Temporary Cash Investments at March 31   $ 227,994     $ 231,173  
                   
                   
                   
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
                   
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
                   
UPSTREAM BUSINESS
                   
                   
  Three Months Ended   Six Months Ended
(Thousands of Dollars, except per share amounts) March 31,   March 31,
EXPLORATION AND PRODUCTION SEGMENT 2018   2017   Variance   2018 2017 Variance
Total Operating Revenues $ 146,411     $ 159,553     $ (13,142 )   $ 285,552   $ 320,485   $ (34,933 )
                   
Operating Expenses:                  
Operation and Maintenance:                  
General and Administrative Expense 17,041     16,530     511     30,936   29,504   1,432  
Lease Operating and Transportation Expense 43,808     42,543     1,265     83,455   82,251   1,204  
All Other Operation and Maintenance Expense 2,919     2,781     138     5,454   5,332   122  
Property, Franchise and Other Taxes 3,873     3,729     144     7,443   6,951   492  
Depreciation, Depletion and Amortization 31,986     28,851     3,135     59,411   57,905   1,506  
  99,627     94,434     5,193     186,699   181,943   4,756  
                   
Operating Income 46,784     65,119   (18,335 )   98,853   138,542 (39,689 )
                   
Other Income (Expense):                  
Interest Income 305     147     158     601   233   368  
Interest Expense (13,380 )   (13,303 )   (77 )   (26,753 ) (26,826 ) 73  
                   
Income Before Income Taxes 33,709     51,963     (18,254 )   72,701   111,949   (39,248 )
Income Tax Expense (Benefit) 7,172     18,194     (11,022 )   (60,534 ) 43,100   (103,634 )
Net Income $ 26,537     $ 33,769     $ (7,232 )   $ 133,235   $ 68,849   $ 64,386  
                   
Net Income Per Share (Diluted) $ 0.31     $ 0.39     $ (0.08 )   $ 1.54   $ 0.80   $ 0.74  
                   
                   
                   
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
                   
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
                   
MIDSTREAM BUSINESSES
                   
                   
  Three Months Ended   Six Months Ended
(Thousands of Dollars, except per share amounts) March 31,   March 31,
PIPELINE AND STORAGE SEGMENT 2018   2017   Variance   2018 2017 Variance
Revenues from External Customers $ 53,714     $ 53,163     $ 551     $ 107,025   $ 106,164   $ 861  
Intersegment Revenues 23,044     22,592     452     45,028   44,746   282  
Total Operating Revenues 76,758     75,755     1,003     152,053   150,910   1,143  
                   
Operating Expenses:                  
Purchased Gas 55     (28 )   83     161   194   (33 )
Operation and Maintenance 19,426     19,668     (242 )   36,742   39,911   (3,169 )
Property, Franchise and Other Taxes 7,135     7,012     123     14,235   13,689   546  
Depreciation, Depletion and Amortization 10,838     10,476     362     21,434   20,138   1,296  
  37,454     37,128     326     72,572   73,932   (1,360 )
                   
Operating Income 39,304     38,627     677     79,481   76,978   2,503  
                   
Other Income (Expense):                  
Interest Income 608     319     289     1,153   591   562  
Other Income 209     807     (598 )   954   1,494   (540 )
Interest Expense (7,875 )   (8,342 )   467     (15,752 ) (16,688 ) 936  
                   
Income Before Income Taxes 32,246     31,411     835     65,836   62,375   3,461  
Income Tax Expense 9,522     12,155     (2,633 )   4,650   23,751   (19,101 )
Net Income $ 22,724     $ 19,256     $ 3,468     $ 61,186   $ 38,624   $ 22,562  
                   
Net Income Per Share (Diluted) $ 0.26     $ 0.22     $ 0.04     $ 0.71   $ 0.45   $ 0.26  
                   
                   
  Three Months Ended   Six Months Ended
  March 31,   March 31,
GATHERING SEGMENT 2018   2017   Variance   2018 2017 Variance
Revenues from External Customers $ (99 )   $ 26     $ (125 )   $ 71   $ 52   $ 19  
Intersegment Revenues 27,832     27,936     (104 )   51,497   55,776   (4,279 )
Total Operating Revenues 27,733     27,962     (229 )   51,568   55,828   (4,260 )
                   
Operating Expenses:                  
Operation and Maintenance 3,572     3,769     (197 )   6,638   6,523   115  
Property, Franchise and Other Taxes 23     21     2     61   32   29  
Depreciation, Depletion and Amortization 4,227     3,997     230     8,315   7,877   438  
  7,822     7,787     35     15,014   14,432   582  
                   
Operating Income 19,911     20,175     (264 )   36,554   41,396   (4,842 )
                   
Other Income (Expense):                  
Interest Income 419     207     212     815   353   462  
Other Income —     —     —     —   1   (1 )
Interest Expense (2,508 )   (2,235 )   (273 )   (4,847 ) (4,328 ) (519 )
                   
Income Before Income Taxes 17,822     18,147     (325 )   32,522   37,422   (4,900 )
Income Tax Expense (Benefit) 6,052     7,862     (1,810 )   (24,647 ) 16,156   (40,803 )
Net Income $ 11,770     $ 10,285     $ 1,485     $ 57,169   $ 21,266   $ 35,903  
                   
Net Income Per Share (Diluted) $ 0.14     $ 0.12     $ 0.02     $ 0.66   $ 0.25   $ 0.41  
                   
                   
                   
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
                   
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
                   
DOWNSTREAM BUSINESSES
                   
                   
  Three Months Ended   Six Months Ended
(Thousands of Dollars, except per share amounts) March 31,   March 31,
UTILITY SEGMENT 2018   2017   Variance   2018 2017 Variance
Revenues from External Customers $ 283,778     $ 257,949     $ 25,829     $ 470,867   $ 428,919   $ 41,948  
Intersegment Revenues 5,700     6,096     (396 )   7,882   7,922   (40 )
Total Operating Revenues 289,478     264,045     25,433     478,749   436,841   41,908  
                   
Operating Expenses:                  
Purchased Gas 151,493     128,212     23,281     233,418   188,945   44,473  
Operation and Maintenance 60,463     62,748     (2,285 )   110,946   112,277   (1,331 )
Property, Franchise and Other Taxes 11,509     11,505     4     21,388   21,710   (322 )
Depreciation, Depletion and Amortization 13,340     13,314     26     26,665   26,415   250  
  236,805     215,779     21,026     392,417   349,347   43,070  
                   
Operating Income 52,673     48,266     4,407     86,332   87,494   (1,162 )
                   
Other Income (Expense):                  
Interest Income 510     144     366     816   278   538  
Other Income 138     45     93     307   137   170  
Interest Expense (6,857 )   (7,194 )   337     (13,695 ) (14,392 ) 697  
                   
Income Before Income Taxes 46,464     41,261     5,203     73,760   73,517   243  
Income Tax Expense 13,104     15,680     (2,576 )   19,407   26,762   (7,355 )
Net Income $ 33,360     $ 25,581     $ 7,779     $ 54,353   $ 46,755   $ 7,598  
                   
Net Income Per Share (Diluted) $ 0.39     $ 0.30     $ 0.09     $ 0.63   $ 0.54   $ 0.09  
                   
                   
  Three Months Ended   Six Months Ended
  March 31,   March 31,
ENERGY MARKETING SEGMENT 2018   2017   Variance   2018 2017 Variance
Revenues from External Customers $ 55,644     $ 50,940     $ 4,704     $ 94,280   $ 87,750   $ 6,530  
Intersegment Revenues (51 )   16     (67 )   76   35   41  
Total Operating Revenues 55,593     50,956     4,637     94,356   87,785   6,571  
                   
Operating Expenses:                  
Purchased Gas 52,980     47,661     5,319     88,423   79,999   8,424  
Operation and Maintenance 1,689     1,913     (224 )   3,327   3,556   (229 )
Depreciation, Depletion and Amortization 68     70     (2 )   138   140   (2 )
  54,737     49,644     5,093     91,888   83,695   8,193  
                   
Operating Income 856     1,312     (456 )   2,468   4,090   (1,622 )
                   
Other Income (Expense):                  
Interest Income 161     138     23     295   271   24  
Other Income 22     33     (11 )   25   35   (10 )
Interest Expense —     (11 )   11     (12 ) (24 ) 12  
                   
Income Before Income Taxes 1,039     1,472     (433 )   2,776   4,372   (1,596 )
Income Tax Expense 461     567     (106 )   1,152   1,685   (533 )
Net Income $ 578     $ 905     $ (327 )   $ 1,624   $ 2,687   $ (1,063 )
                   
Net Income Per Share (Diluted) $ 0.01     $ 0.01     $ —     $ 0.02   $ 0.03   $ (0.01 )
                   
 
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
                   
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
                   
  Three Months Ended   Six Months Ended
(Thousands of Dollars, except per share amounts) March 31,   March 31,
ALL OTHER 2018   2017   Variance   2018 2017 Variance
Total Operating Revenues $ 1,232     $ 218     $ 1,014     $ 2,328   $ 772   $ 1,556  
Operating Expenses:                  
Operation and Maintenance 367     394     (27 )   691   909   (218 )
Property, Franchise and Other Taxes 145     150     (5 )   288   294   (6 )
Depreciation, Depletion and Amortization 506     102     404     645   343   302  
  1,018     646     372     1,624   1,546   78  
                   
Operating Income (Loss) 214     (428 )   642     704   (774 ) 1,478  
Other Income (Expense):                  
Interest Income 91     49     42     163   89   74  
                   
Income (Loss) Before Income Taxes 305     (379 )   684     867   (685 ) 1,552  
Income Tax Expense (Benefit) 98     (158 )   256     1,378   (285 ) 1,663  
Net Income (Loss) $ 207     $ (221 )   $ 428     $ (511 ) $ (400 ) $ (111 )
                   
Net Income (Loss) Per Share (Diluted) $ —     $ —     $ —     $ —   $ —   $ —  
                   
                   
  Three Months Ended   Six Months Ended
  March 31,   March 31,
CORPORATE 2018   2017   Variance   2018 2017 Variance
Revenues from External Customers $ 225     $ 226     $ (1 )   $ 438   $ 434   $ 4  
Intersegment Revenues 999     977     22     1,999   1,953   46  
Total Operating Revenues 1,224     1,203     21     2,437   2,387   50  
Operating Expenses:                  
Operation and Maintenance 3,957     4,003     (46 )   7,519   7,395   124  
Property, Franchise and Other Taxes 117     125     (8 )   235   245   (10 )
Depreciation, Depletion and Amortization 190     189     1     377   376   1  
  4,264     4,317     (53 )   8,131   8,016   115  
                   
Operating Loss (3,040 )   (3,114 )   74     (5,694 ) (5,629 ) (65 )
                   
Other Income (Expense):                  
Interest Income 29,877     30,693     (816 )   61,697   62,498   (801 )
Other Income 401     859     (458 )   1,206   1,689   (483 )
Interest Expense on Long-Term Debt (27,148 )   (28,913 )   1,765     (55,235 ) (58,016 ) 2,781  
Other Interest Expense (1,559 )   (1,145 )   (414 )   (2,942 ) (1,898 ) (1,044 )
                   
Loss Before Income Taxes (1,469 )   (1,620 )   151     (968 ) (1,356 ) 388  
Income Tax Expense (Benefit) 1,860     (1,329 )   3,189     15,587   (1,766 ) 17,353  
Net Income (Loss) $ (3,329 )   $ (291 )   $ (3,038 )   $ (16,555 ) $ 410   $ (16,965 )
                   
Net Income (Loss) Per Share (Diluted) $ (0.05 )   $ —     $ (0.05 )   $ (0.19 ) $ —   $ (0.19 )
                   
                   
  Three Months Ended   Six Months Ended
  March 31,   March 31,
INTERSEGMENT ELIMINATIONS 2018   2017   Variance   2018 2017 Variance
Intersegment Revenues $ (57,524 )   $ (57,617 )   $ 93     $ (106,482 ) $ (110,432 ) $ 3,950  
Operating Expenses:                  
Purchased Gas (27,920 )   (27,874 )   (46 )   (51,360 ) (50,924 ) (436 )
Operation and Maintenance (29,604 )   (29,743 )   139     (55,122 ) (59,508 ) 4,386  
  (57,524 )   (57,617 )   93     (106,482 ) (110,432 ) 3,950  
                   
Operating Income —     —     —     —   —   —  
                   
Other Income (Expense):                  
Interest Income (30,946 )   (31,306 )   360     (62,265 ) (62,322 ) 57  
Interest Expense 30,946     31,306     (360 )   62,265   62,322   (57 )
Net Income $ —     $ —     $ —     $ —   $ —   $ —  
                   
Net Income Per Share (Diluted) $ —     $ —     $ —     $ —   $ —   $ —  
                       
                       
                       
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
                       
SEGMENT INFORMATION (Continued)
(Thousands of Dollars)
                       
                       
  Three Months Ended   Six Months Ended
  March 31,   March 31,
  (Unaudited)   (Unaudited)
          Increase           Increase
  2018   2017   (Decrease)   2018   2017   (Decrease)
                       
Capital Expenditures:                      
Exploration and Production $ 84,559   (1 ) $ 57,137   (3 ) $ 27,422     $ 159,285   (1)(2) $ 97,826   (3)(4) $ 61,459  
Pipeline and Storage 15,167   (1 ) 11,386   (3 ) 3,781     37,440   (1)(2) 36,778   (3)(4) 662  
Gathering 19,352   (1 ) 3,147   (3 ) 16,205     32,283   (1)(2) 14,491   (3)(4) 17,792  
Utility 15,755   (1 ) 19,244   (3 ) (3,489 )   32,290   (1)(2) 36,296   (3)(4) (4,006 )
Energy Marketing 4     5     (1 )   22     11     11  
Total Reportable Segments 134,837     90,919     43,918     261,320     185,402     75,918  
All Other —     —     —     1     39     (38 )
Corporate 15     3     12     44     64     (20 )
Eliminations (19,922 )   (777 )   (19,145 )   (19,922 )   (777 )   (19,145 )
Total Capital Expenditures $ 114,930     $ 90,145     $ 24,785     $ 241,443     $ 184,728     $ 56,715  

(1)  Capital expenditures for the quarter and six months ended March 31, 2018, include accounts payable and accrued liabilities related to capital expenditures of $38.8 million, $9.0 million, $1.6 million, and $2.5 million in the Exploration and Production segment, Pipeline and Storage segment, Gathering segment and Utility segment, respectively.  These amounts have been excluded from the Consolidated Statement of Cash Flows at March 31, 2018, since they represent non-cash investing activities at that date.

(2)  Capital expenditures for the six months ended March 31, 2018, exclude capital expenditures of $36.5 million, $25.1 million, $3.9 million and $6.7 million in the Exploration and Production segment, Pipeline and Storage segment, Gathering segment and Utility segment, respectively.  These amounts were in accounts payable and accrued liabilities at September 30, 2017 and paid during the six months ended March 31, 2018.  These amounts were excluded from the Consolidated Statement of Cash Flows at September 30, 2017, since they represented non-cash investing activities at that date.  These amounts have been included in the Consolidated Statement of Cash Flows at March 31, 2018.

(3)  Capital expenditures for the quarter and six months ended March 31, 2017, include accounts payable and accrued liabilities related to capital expenditures of $23.2 million, $5.8 million, $2.2 million, and $5.7 million in the Exploration and Production segment, Pipeline and Storage segment, Gathering segment and Utility segment, respectively.  These amounts have been excluded from the Consolidated Statement of Cash Flows at March 31, 2017, since they represent non-cash investing activities at that date.

(4)  Capital expenditures for the six months ended March 31, 2017, exclude capital expenditures of $25.2 million, $18.7 million, $5.3 million and $11.2 million in the Exploration and Production segment, Pipeline and Storage segment, Gathering segment and Utility segment, respectively.  These amounts were in accounts payable and accrued liabilities at September 30, 2016 and paid during the six months ended March 31, 2017.  These amounts were excluded from the Consolidated Statement of Cash Flows at September 30, 2016, since they represented non-cash investing activities at that date.  These amounts have been included in the Consolidated Statement of Cash Flows at March 31, 2017.

                   
                   
                   
DEGREE DAYS                  
                   
              Percent Colder
              (Warmer) Than:
Three Months Ended March 31 Normal   2018   2017     Normal (1)   Last Year (1)
                   
Buffalo, NY 3,290   3,208   2,866   (2.5 )   11.9
Erie, PA 3,108   3,075   2,627   (1.1 )   17.1
                   
Six Months Ended March 31                  
                   
Buffalo, NY 5,543   5,435   4,832   (1.9 )   12.5  
Erie, PA 5,152   5,104   4,377   (0.9 )   16.6  
                   

(1)  Percents compare actual 2018 degree days to normal degree days and actual 2018 degree days to actual 2017 degree days.

                         
                         
                         
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
                         
EXPLORATION AND PRODUCTION INFORMATION
                         
                         
    Three Months Ended   Six Months Ended
    March 31,   March 31,
            Increase           Increase
    2018   2017   (Decrease)   2018   2017   (Decrease)
                         
Gas Production/Prices:                        
Production (MMcf)                        
Appalachia   41,403     40,805     598     76,817     80,612     (3,795 )
West Coast   675     737     (62 )   1,370     1,513     (143 )
Total Production   42,078     41,542     536     78,187     82,125     (3,938 )
                         
Average Prices (Per Mcf)                        
Appalachia   $ 2.46     $ 2.71     $ (0.25 )   $ 2.41     $ 2.54     $ (0.13 )
West Coast   4.40     4.57     (0.17 )   4.70     4.40     0.30  
Weighted Average   2.49     2.75     (0.26 )   2.45     2.57     (0.12 )
Weighted Average after Hedging   2.52     2.96     (0.44 )   2.61     2.96     (0.35 )
                         
Oil Production/Prices:                        
Production (Thousands of Barrels)                        
Appalachia   1     2     (1 )   2     2     —  
West Coast   662     672     (10 )   1,334     1,393     (59 )
Total Production   663     674     (11 )   1,336     1,395     (59 )
                         
Average Prices (Per Barrel)                        
Appalachia   $ 58.54     $ 49.87     $ 8.67     $ 49.82     $ 49.04     $ 0.78  
West Coast   65.39     $ 47.96     17.43     61.61     45.75     15.86  
Weighted Average   65.39     47.96     17.43     61.60     45.82     15.78  
Weighted Average after Hedging   58.31     52.92     5.39     59.05     53.85     5.20  
                         
Total Production (Mmcfe)   46,056     45,586     470     86,203     90,495     (4,292 )
                         
Selected Operating Performance Statistics:                        
General & Administrative Expense per Mcfe (1)   $ 0.37     $ 0.36     $ 0.01     $ 0.36     $ 0.33     $ 0.03  
Lease Operating and Transportation Expense per Mcfe (1)(2)   $ 0.95     $ 0.93     $ 0.02     $ 0.97     $ 0.91     $ 0.06  
Depreciation, Depletion & Amortization per Mcfe (1)   $ 0.69     $ 0.63     $ 0.06     $ 0.69     $ 0.64     $ 0.05  
                         

(1)  Refer to page 16 for the General and Administrative Expense, Lease Operating Expense and Depreciation, Depletion, and Amortization Expense for the Exploration and Production segment.

(2)  Amounts include transportation expense of $0.54 per Mcfe for both the three months ended March 31, 2018 and March 31, 2017.  Amounts include transportation expense of $0.54 per Mcfe for both the six months ended March 31, 2018 and March 31, 2017.

 
 
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
             
EXPLORATION AND PRODUCTION INFORMATION
 
Hedging Summary for the Remaining Six Months of Fiscal 2018 Volume     Average Hedge Price
Oil Swaps            
Brent   228,000   BBL   $ 63.55 / BBL
NYMEX   840,000   BBL   $ 52.67 / BBL
Total   1,068,000   BBL   $ 54.99 / BBL
             
Gas Swaps            
NYMEX   20,520,000   MMBTU   $ 3.17 / MMBTU
DAWN   3,600,000   MMBTU   $ 3.00 / MMBTU
Fixed Price Physical Sales   38,109,910   MMBTU   $ 2.33 / MMBTU
Total   62,229,910   MMBTU   $ 2.65 / MMBTU
             
Hedging Summary for Fiscal 2019   Volume     Average Hedge Price
Oil Swaps            
Brent   612,000   BBL   $ 61.26 / BBL
NYMEX   1,068,000   BBL   $ 53.42 / BBL
Total   1,680,000   BBL   $ 56.28 / BBL
             
Gas Swaps            
NYMEX   46,420,000   MMBTU   $ 3.03 / MMBTU
DAWN   7,200,000   MMBTU   $ 3.00 / MMBTU
Fixed Price Physical Sales   43,507,349   MMBTU   $ 2.44 / MMBTU
Total   97,127,349   MMBTU   $ 2.76 / MMBTU
             
Hedging Summary for Fiscal 2020   Volume     Average Hedge Price
Oil Swaps            
Brent   600,000   BBL   $ 59.60 / BBL
NYMEX   324,000   BBL   $ 50.52 / BBL
Total   924,000   BBL   $ 56.42 / BBL
             
Gas Swaps            
NYMEX   18,640,000   MMBTU   $ 3.04 / MMBTU
DAWN   7,200,000   MMBTU   $ 3.00 / MMBTU
Fixed Price Physical Sales   41,716,849   MMBTU   $ 2.28 / MMBTU
Total   67,556,849   MMBTU   $ 2.57 / MMBTU
             
Hedging Summary for Fiscal 2021   Volume     Average Hedge Price
Oil Swaps            
Brent   300,000   BBL   $ 60.00 / BBL
NYMEX   156,000   BBL   $ 51.00 / BBL
Total   456,000   BBL   $ 56.92 / BBL
             
Gas Swaps            
NYMEX   4,840,000   MMBTU   $ 3.01 / MMBTU
  DAWN   600,000   MMBTU   $ 3.00 / MMBTU
Fixed Price Physical Sales   41,937,357   MMBTU   $ 2.22 / MMBTU
Total   47,377,357   MMBTU   $ 2.31 / MMBTU
             
Hedging Summary for Fiscal 2022   Volume     Average Hedge Price
Oil Swaps            
NYMEX   156,000   BBL   $ 51.00 / BBL
             
Fixed Price Physical Sales   40,839,635   MMBTU   $ 2.23 / MMBTU
             
Hedging Summary for Fiscal 2023   Volume     Average Hedge Price
             
Fixed Price Physical Sales   37,376,584   MMBTU   $ 2.26 / MMBTU
             
Hedging Summary for Fiscal 2024   Volume     Average Hedge Price
             
Fixed Price Physical Sales   20,111,036   MMBTU   $ 2.24 / MMBTU
             
Hedging Summary for Fiscal 2025   Volume     Average Hedge Price
             
Fixed Price Physical Sales   2,293,200   MMBTU   $ 2.18 / MMBTU
                         
                         
                         
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
                         
                         
                         
Pipeline & Storage Throughput - (millions of cubic feet - MMcf)        
                         
    Three Months Ended   Six Months Ended
    March 31,   March 31,
            Increase           Increase
    2018   2017   (Decrease)   2018   2017   (Decrease)
Firm Transportation - Affiliated   47,551     43,243     4,308     82,392     74,850     7,542  
Firm Transportation - Non-Affiliated   152,128     170,124     (17,996 )   323,989     329,298     (5,309 )
Interruptible Transportation   1,165     971     194     2,046     4,017     (1,971 )
    200,844     214,338     (13,494 )   408,427     408,165     262  
                         
Gathering Volume - (MMcf)                        
    Three Months Ended   Six Months Ended
    March 31,   March 31,
            Increase           Increase
    2018   2017   (Decrease)   2018   2017   (Decrease)
Gathered Volume - Affiliated   51,374     50,598     776     94,536     101,167     (6,631 )
                         
                         
Utility Throughput - (MMcf)                        
    Three Months Ended   Six Months Ended
    March 31,   March 31,
            Increase           Increase
    2018   2017   (Decrease)   2018   2017   (Decrease)
Retail Sales:                        
Residential Sales   28,568     24,949     3,619     46,415     40,713     5,702  
Commercial Sales   4,500     3,903     597     7,096     6,202     894  
Industrial Sales   287     157     130     431     234     197  
    33,355     29,009     4,346     53,942     47,149     6,793  
Off-System Sales   119     1,122     (1,003 )   141     1,295     (1,154 )
Transportation   29,624     27,089     2,535     51,051     46,654     4,397  
    63,098     57,220     5,878     105,134     95,098     10,036  
                         
Energy Marketing Volume                        
    Three Months Ended   Six Months Ended
    March 31,   March 31,
            Increase           Increase
    2018   2017   (Decrease)   2018   2017   (Decrease)
Natural Gas (MMcf)   16,112     14,120     1,992     28,091     25,248     2,843  
                         
                         

NATIONAL FUEL GAS COMPANYAND SUBSIDIARIES

NON-GAAP FINANCIAL MEASURES

In addition to financial measures calculated in accordance with generally accepted accounting principles (GAAP), this press release contains information regarding Adjusted Operating Results and Adjusted EBITDA, which are non-GAAP financial measures.  The Company believes that these non-GAAP financial measures are useful to investors because they provide an alternative method for assessing the Company's ongoing operating results and for comparing the Company’s financial performance to other companies.  The Company's management uses these non-GAAP financial measures for the same purpose, and for planning and forecasting purposes.  The presentation of non-GAAP financial measures is not meant to be a substitute for financial measures in accordance with GAAP.

Management defines Adjusted Operating Results as reported GAAP earnings before items impacting comparability.  The following table reconciles National Fuel's reported GAAP earnings to Adjusted Operating Results for the three and six months ended March 31, 2018 and 2017:

         
    Three Months Ended   Six Months Ended
    March 31,   March 31,
(in thousands except per share amounts)   2018   2017   2018   2017
Reported GAAP Earnings   $ 91,847     $ 89,284     $ 290,501     $ 178,191  
Items impacting comparability                
Remeasurement of deferred income taxes under 2017 Tax Reform   4,000     —     (107,000 )   —  
Adjusted Operating Results   $ 95,847     $ 89,284     $ 183,501     $ 178,191  
                 
Reported GAAP Earnings per share   $ 1.06     $ 1.04     $ 3.37     $ 2.07  
Items impacting comparability                
Remeasurement of deferred income taxes under 2017 Tax Reform   0.05     —     (1.24 )   —  
Adjusted Operating Results per share   $ 1.11     $ 1.04     $ 2.13     $ 2.07  
 

Management defines Adjusted EBITDA as reported GAAP earnings before the following items:  interest expense, income taxes, depreciation, depletion and amortization, interest and other income, impairments, and other items reflected in operating income that impact comparability.

The following tables reconcile National Fuel's reported GAAP earnings to Adjusted EBITDA for the three and six months ended March 31, 2018 and 2017:

         
    Three Months Ended   Six Months Ended
    March 31,   March 31,
    2018   2017   2018   2017
(in thousands)                
Reported GAAP Earnings   $ 91,847     $ 89,284     $ 290,501     $ 178,191  
Depreciation, Depletion and Amortization   61,155     56,999     116,985     113,194  
Interest and Other Income   (1,795 )   (2,135 )   (5,767 )   (5,347 )
Interest Expense   28,381     29,837     56,971     59,850  
Income Taxes   38,269     52,971     (43,007 )   109,403  
Adjusted EBITDA   $ 217,857     $ 226,956     $ 415,683     $ 455,291  
                 
Adjusted EBITDA by Segment                
Pipeline and Storage Adjusted EBITDA   $ 50,142     $ 49,103     $ 100,915     $ 97,116  
Gathering Adjusted EBITDA   24,138     24,172     44,869     49,273  
Total Midstream Businesses Adjusted EBITDA   74,280     73,275     145,784     146,389  
Exploration and Production Adjusted EBITDA   78,770     93,970     158,264     196,447  
Utility Adjusted EBITDA   66,013     61,580     112,997     113,909  
Energy Marketing Adjusted EBITDA   924     1,382     2,606     4,230  
Corporate and All Other Adjusted EBITDA   (2,130 )   (3,251 )   (3,968 )   (5,684 )
Total Adjusted EBITDA   $ 217,857     $ 226,956     $ 415,683     $ 455,291  
 

 
 
NATIONAL FUEL GAS COMPANYAND SUBSIDIARIESNON-GAAP FINANCIAL MEASURES SEGMENT ADJUSTED EBITDA
         
    Three Months Ended   Six Months Ended
    March 31,   March 31,
(in thousands)   2018   2017   2018   2017
Exploration and Production Segment                
Reported GAAP Earnings   $ 26,537     $ 33,769     $ 133,235     $ 68,849  
Depreciation, Depletion and Amortization   31,986     28,851     59,411     57,905  
Interest and Other Income   (305 )   (147 )   (601 )   (233 )
Interest Expense   13,380     13,303     26,753     26,826  
Income Taxes   7,172     18,194     (60,534 )   43,100  
Adjusted EBITDA   $ 78,770     $ 93,970     $ 158,264     $ 196,447  
                 
Pipeline and Storage Segment                
Reported GAAP Earnings   $ 22,724     $ 19,256     $ 61,186     $ 38,624  
Depreciation, Depletion and Amortization   10,838     10,476     21,434     20,138  
Interest and Other Income   (817 )   (1,126 )   (2,107 )   (2,085 )
Interest Expense   7,875     8,342     15,752     16,688  
Income Taxes   9,522     12,155     4,650     23,751  
Adjusted EBITDA   $ 50,142     $ 49,103     $ 100,915     $ 97,116  
                 
Gathering Segment                
Reported GAAP Earnings   $ 11,770     $ 10,285     $ 57,169     $ 21,266  
Depreciation, Depletion and Amortization   4,227     3,997     8,315     7,877  
Interest and Other Income   (419 )   (207 )   (815 )   (354 )
Interest Expense   2,508     2,235     4,847     4,328  
Income Taxes   6,052     7,862     (24,647 )   16,156  
Adjusted EBITDA   $ 24,138     $ 24,172     $ 44,869     $ 49,273  
                 
Utility Segment                
Reported GAAP Earnings   $ 33,360     $ 25,581     $ 54,353     $ 46,755  
Depreciation, Depletion and Amortization   13,340     13,314     26,665     26,415  
Interest and Other Income   (648 )   (189 )   (1,123 )   (415 )
Interest Expense   6,857     7,194     13,695     14,392  
Income Taxes   13,104     15,680     19,407     26,762  
Adjusted EBITDA   $ 66,013     $ 61,580     $ 112,997     $ 113,909  
                 
Energy Marketing Segment                
Reported GAAP Earnings   $ 578     $ 905     $ 1,624     $ 2,687  
Depreciation, Depletion and Amortization   68     70     138     140  
Interest and Other Income   (183 )   (171 )   (320 )   (306 )
Interest Expense   —     11     12     24  
Income Taxes   461     567     1,152     1,685  
Adjusted EBITDA   $ 924     $ 1,382     $ 2,606     $ 4,230  
                 
Corporate and All Other                
Reported GAAP Earnings   $ (3,122 )   $ (512 )   $ (17,066 )   $ 10  
Depreciation, Depletion and Amortization   696     291     1,022     719  
Interest and Other Income   577     (295 )   (801 )   (1,954 )
Interest Expense   (2,239 )   (1,248 )   (4,088 )   (2,408 )
Income Taxes   1,958     (1,487 )   16,965     (2,051 )
Adjusted EBITDA   $ (2,130 )   $ (3,251 )   $ (3,968 )   $ (5,684 )
         
         
         
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
         
         
Quarter Ended March 31 (unaudited)   2018   2017
         
Operating Revenues   $ 540,905,000     $ 522,075,000  
         
Net Income Available for Common Stock   $ 91,847,000     $ 89,284,000  
         
Earnings Per Common Share        
Basic   $ 1.07     $ 1.05  
Diluted   $ 1.06     $ 1.04  
         
Weighted Average Common Shares:        
Used in Basic Calculation   85,809,233     85,334,887  
Used in Diluted Calculation   86,323,636     86,006,614  
         
Six Months Ended March 31 (unaudited)        
         
Operating Revenues   $ 960,561,000     $ 944,576,000  
         
Net Income Available for Common Stock   $ 290,501,000     $ 178,191,000  
         
Earnings Per Common Share:        
Basic   $ 3.39     $ 2.09  
Diluted   $ 3.37     $ 2.07  
         
Weighted Average Common Shares:        
Used in Basic Calculation   85,718,779     85,261,575  
Used in Diluted Calculation   86,318,892     85,897,282  
         
Twelve Months Ended March 31 (unaudited)        
         
Operating Revenues   $ 1,595,866,000     $ 1,572,665,000  
         
Net Income Available for Common Stock   $ 395,792,000     $ 224,030,000  
         
Earnings Per Common Share        
Basic   $ 4.62     $ 2.63  
Diluted   $ 4.59     $ 2.61  
         
Weighted Average Common Shares:        
Used in Basic Calculation   85,592,904     85,114,029  
Used in Diluted Calculation   86,232,666     85,738,474  
         

 

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