National Fuel Gas Company (“National Fuel” or the “Company”)
(NYSE:NFG) today announced consolidated results for the third
quarter of its 2017 fiscal year and for the nine months ended June
30, 2017.
FISCAL 2017 THIRD QUARTER SUMMARY
- Consolidated net income of $59.7
million, or $0.69 per share, compared to consolidated net income of
$8.3 million, or $0.10 per share, and operating results of $58.1
million, or $0.68 per share, in the prior year (see reconciliation
below)
- Adjusted EBITDA of $179.0 million
versus $189.8 million in the prior year (non-GAAP reconciliation on
page 23)
- Gross natural gas production in
Appalachia of 567 MMcf per day, a 6% increase from the prior
year
- Net production of 42.7 Bcfe, a 3%
decrease from prior year
- Average natural gas prices, after the
impact of hedging, of $2.94 per Mcf, up $0.08 per Mcf from the
prior year
- Average oil prices, after the impact of
hedging, of $53.02 per Bbl, down $5.77 per Bbl from the prior
year
- Gathering revenues of $26.9 million on
48.8 Bcf of system throughput, both an increase of 5% from the
prior year
OPERATING RESULTS
Three Months Ended Nine Months Ended
June 30, June 30, (in thousands except per share amounts) 2017
2016 2017 2016
Reported GAAP earnings (loss) $
59,714 $ 8,286 $ 237,906 $ (328,510 )
Items impacting
comparability: Impairment of oil and gas properties (E&P)
82,658 915,552 Tax impact of impairment of oil and gas properties
(34,716 ) (384,531 ) Joint development agreement professional fees
(E&P) 3,173 7,855 Tax impact of joint development agreement
professional fees (1,333 ) (3,299 )
Operating
Results $ 59,714 $ 58,068 $ 237,906 $
207,067
Reported GAAP earnings (loss) per
share $ 0.69 $ 0.10 $ 2.77 $ (3.87 )
Items impacting
comparability: Impairment of oil and gas properties (E&P)
0.97 10.80 Tax impact of impairment of oil and gas properties (0.41
) (4.54 ) Joint development agreement professional fees (E&P)
0.04 0.09 Tax impact of joint development agreement professional
fees (0.02 ) (0.04 ) Earnings per share impact of diluted shares
(0.01 )
Operating Results per diluted
share $ 0.69 $ 0.68 $ 2.77 $ 2.43
MANAGEMENT COMMENTS
Ronald J. Tanski, President and Chief Executive Officer of
National Fuel Gas Company, stated: “Our fiscal third quarter was a
strong one with each of our business segments posting solid
financial results that were in-line with expectations. Across the
system, our talented teams continue to execute on our operational
plans. As is typical during the summer period, our utility and
transmission pipeline construction crews are busy maintaining the
safety and integrity of our thousands of miles of pipelines that
will assure safe, reliable, and affordable natural gas services for
our region and local communities.
“As we look ahead, we continue to manage around the delay in the
Northern Access Project and see plenty of opportunity in the
meantime to extract value from our world class natural gas assets
in Appalachia. After a year of testing, we believe we have
de-risked the Utica potential in our Western Development Area,
adding years of economic drilling inventory on the very same
acreage we have already developed for the Marcellus. Over the next
18 months, we will continue to optimize our well designs and
transition into a Utica development program that will leverage
existing upstream and midstream infrastructure to drive capital,
operational, and marketing efficiencies. While the commodities
futures markets indicate that Seneca Resources, our exploration and
production company, will likely achieve lower prices for its
production next year, our proven success in driving down finding
and development costs and our ability to develop our upstream and
midstream assets efficiently allows us to continue to grow our
integrated business, maintain a strong financial position, and add
shareholder value throughout the commodity price cycle.”
DISCUSSION OF RESULTS BY SEGMENT
The following discussion of the earnings of each segment is
summarized in a tabular form on pages 8 through 11 of this report.
It may be helpful to refer to those tables while reviewing this
discussion. Note that management defines Operating Results as
reported GAAP earnings before items impacting comparability and
Adjusted EBITDA as reported GAAP earnings before the following
items: interest expense, depreciation and amortization, interest
and other income, impairments, items impacting comparability, and
income taxes.
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 Nine
Months Ended June 30, June 30, (in thousands
except per share amounts)
2017 2016
Variance 2017 2016
Variance Net Income / (Loss) $ 30,123 $ (19,165 )
$ 49,288 $ 98,972 $ (469,586 ) $ 568,558 Net
Income / (Loss) Per Share (Diluted) $ 0.35 $ (0.22 ) $ 0.57 $ 1.15
$ (5.54 ) $ 6.69 Adjusted EBITDA $ 89,229 $ 97,924 $ (8,695 ) $
285,675 $ 268,673 $ 17,002
Net income for the Exploration and Production segment in the
third quarter was $30.1 million, or $0.35 per share, compared to a
net loss of $19.2 million, or $0.22 per share, in the prior year
third quarter. The $49.3 million increase in the segment’s earnings
was primarily attributable to the non-recurrence of two items that
reduced earnings in the prior year. In the prior year third
quarter, Seneca recorded an $82.7 million ($47.9 million after-tax)
ceiling test impairment charge to reduce the book value of Seneca’s
oil and gas properties. Seneca also incurred $3.2 million ($1.8
million after-tax) in the prior year third quarter for professional
and legal expenses related to the extension of the joint
development agreement that Seneca executed in June 2016.
Excluding these items, operating results for the segment
declined $0.5 million, or $0.01 per share, as the impact of higher
realized natural gas prices, lower depreciation, depletion and
amortization (“DD&A”) expense, and a lower effective income tax
rate were more than offset by a decline in net natural gas and oil
production, lower realized oil prices and an increase in lease
operating and transportation (“LOE”) expense.
Over the past two years, Seneca significantly reduced its
capital expenditures in response to low commodity prices by
entering into a Joint Development Agreement (“JDA”), where a
partner agreed to participate in 75 new Marcellus wells as an 80
percent working interest owner, and reducing the rig count in
Appalachia and activity in California. As a result, Seneca's net
natural gas and oil production declined 1.3 billion cubic feet
equivalent ("Bcfe"), or 3 percent, to 42.7 Bcfe in the third
quarter. Net natural gas production was down nearly 1.0 Bcf due
mainly to a lower average revenue interest on production from the
Western Development Area (“WDA”) resulting from new JDA wells as
well as natural declines in Marcellus production from the Eastern
Development Area (“EDA”). Seneca’s oil production decreased 58
thousand barrels ("Mbbl") due mainly to temporary changes in steam
operations and a reduction in well workover activity at its North
Midway Sunset field in California, offset partially by increased
activity at South Midway Sunset.
Seneca continues to grow its base of gross natural gas
production. Average daily gross natural gas production during the
quarter increased 6 percent to 567 million cubic feet (“MMcf’) per
day driven primarily by new Marcellus and Utica wells in
Appalachia. In the WDA, average daily natural gas production
increased approximately 38 MMcf per day, or 16 percent, to 284 MMcf
per day during the quarter. Seneca is now producing from 63 of the
75 Marcellus wells that are being developed in the Clermont / Rich
Valley area under the JDA entered into with a partner in fiscal
2016. The 12 remaining JDA wells are expected to be completed and
brought on-line in the first half of fiscal 2018.
In the EDA, average daily gross natural gas production decreased
4 MMcf per day, or 1 percent, to 283 MMcf per day as natural
declines in Marcellus production from Tioga and Lycoming counties
were partially offset by new production from the Company’s Utica
well on DCNR Tract 007 in Tioga County, Pa., which has produced
nearly 2.5 Bcf since it was first turned on-line in November 2016.
In May, Seneca added a second rig and resumed Marcellus development
activities in Lycoming County, Pa., which is expected to arrest
natural production declines and maintain a base of production that
will utilize firm transportation capacity on the Atlantic Sunrise
pipeline expansion project forecasted to be available in the summer
of 2018.
Seneca's average realized natural gas price, after the impact of
hedging, for the third quarter was $2.94 per thousand cubic feet
("Mcf"), an increase of $0.08 per Mcf versus the prior year.
Seneca's average realized oil price, after the impact of hedging,
was $53.02 per barrel ("Bbl"), a decrease of $5.77 per Bbl.
Seneca's average realized natural gas and oil prices benefited from
an uplift of $0.35 per Mcf and $7.38 per Bbl, respectively, from
financial hedges settled during the quarter.
LOE increased $1.8 million, or $0.07 per Mcf equivalent ("Mcfe")
on a cost per unit of production basis, due primarily to higher
steam fuel and well repair costs in California offset partially by
lower gathering and compression costs in Appalachia. DD&A
expense decreased $3.8 million due to lower production and a
decrease in Seneca’s full cost pool depletion rate. Seneca’s per
unit DD&A decreased by $0.07 per Mcfe to $0.64 per Mcfe due
mainly to a lower depletable fixed asset balance resulting from the
ceiling test impairment charges recorded in the second half of
fiscal 2016.
A decrease in Seneca’s effective tax rate increased the
segment’s earnings by $2.4 million in the third quarter. The
decrease in the effective tax rate was due primarily to an enhanced
oil recovery tax credit related to Seneca’s California properties.
This credit was applicable this year as a result of relatively low
domestic crude oil prices.
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 Nine
Months Ended June 30, June 30, (in thousands
except per share amounts)
2017 2016
Variance 2017 2016
Variance Net Income / (Loss) $ 16,031 $ 17,323
$ (1,292 ) $ 54,656 $ 59,794 $ (5,138 ) Net Income /
(Loss) Per Share (Diluted) $ 0.19 $ 0.20 $ (0.01 ) $ 0.64 $ 0.71 $
(0.07 ) Adjusted EBITDA $ 44,163 $ 48,515 $ (4,352 ) $ 141,279 $
152,929 $ (11,650 )
The Pipeline and Storage segment's third quarter earnings
decreased $1.3 million, or 7 percent, from the prior year due to a
decline in operating revenues offset partially by a lower effective
income tax rate. The $4.1 million decrease in operating revenues
was expected due to a reduction in Supply Corporation and Empire’s
rates related to their respective rate case settlements that went
into effect in 2016, lower reservation revenues resulting from
recent contract terminations and restructurings, and a decline in
short-term interruptible transportation service in the current
quarter.
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 Nine
Months Ended June 30, June 30, (in thousands
except per share amounts)
2017 2016
Variance 2017 2016
Variance Net Income / (Loss) $ 10,107 $ 9,473
$ 634 $ 31,373 $ 21,962 $ 9,411 Net Income / (Loss)
Per Share (Diluted) $ 0.12 $ 0.11 $ 0.01 $ 0.37 $ 0.26 $ 0.11
Adjusted EBITDA $ 23,901 $ 22,433 $ 1,468 $ 73,174 $ 57,722 $
15,452
The Gathering segment’s third quarter earnings increased $0.6
million, or 7 percent, versus the prior year due primarily to
higher operating revenues. Operating revenues increased $1.4
million as the increase in Seneca’s gross natural gas production in
Appalachia, which includes production from joint development wells,
helped drive higher throughput across the Company’s gathering
systems. The Gathering segment transported 48.8 Bcf on its systems
in the third quarter, up 2.5 Bcf or 5 percent from the prior year.
Higher depreciation expense associated with new gathering and
compression assets placed in service during the last twelve months
partially offset the impact of higher operating revenues.
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 Nine
Months Ended June 30, June 30, (in thousands
except per share amounts)
2017 2016
Variance 2017 2016
Variance Net Income / (Loss) $ 4,348 $ 2,179 $
2,169 $ 51,103 $ 52,745 $ (1,642 ) Net Income /
(Loss) Per Share (Diluted) $ 0.05 $ 0.03 $ 0.02 $ 0.59 $ 0.62 $
(0.03 ) Adjusted EBITDA $ 25,322 $ 22,900 $ 2,422 $ 139,232 $
138,284 $ 948
The Utility segment’s third quarter earnings increased $2.2
million due primarily to lower O&M expense offset partially by
higher DD&A expenses. O&M expense decreased $2.5 million
versus the prior year due mainly to lower pension and personnel
costs. DD&A expense increased $0.9 million due to higher
average plant balances for the quarter ended June 30, 2017, which
was primarily driven by the replacement of Distribution’s customer
information system that was placed in service in May 2016.
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 Nine
Months Ended June 30, June 30, (in thousands
except per share amounts)
2017 2016
Variance 2017 2016
Variance Net Income / (Loss) $ (564 ) $ (590 )
$ 26 $ 2,122 $ 4,117 $ (1,995 ) Net Income / (Loss)
Per Share (Diluted) $ (0.01 ) $ (0.01 ) $ — $ 0.02 $ 0.05 $ (0.03 )
Adjusted EBITDA $ (1,017 ) $ (930 ) $ (87 ) $ 3,213 $ 6,569 $
(3,356 )
The Energy Marketing segment's third quarter earnings were
largely unchanged when compared to the prior year.
Corporate and All Other
The Corporate and All Other category had a net loss of $0.3
million for the third quarter compared to a net loss of $0.9
million in the prior year. The $0.6 million improvement impacted
consolidated earnings by less than $0.01 per share.
GUIDANCE
The Company is raising and tightening its earnings guidance for
fiscal 2017 to a range of $3.25 to $3.35 per share to reflect the
impact of actual results for the nine months ended June 30, 2017,
and updates to key forecast assumptions, including revisions to the
Exploration and Production segment’s forecasted production, oil
pricing and operating expense assumptions, as outlined in the table
below.
The Company is also initiating preliminary earnings, production,
capital expenditures, and certain business segment operational
guidance for fiscal 2018. National Fuel is projecting that its
fiscal 2018 earnings will be within a range of $2.70 to $3.05 per
share, or $2.875 per share at the midpoint of the range. The $0.425
per share decrease from the fiscal 2017 earnings guidance midpoint
is being driven primarily by lower expected price realizations
after hedging on Seneca’s natural gas and oil production and higher
expected operating costs at the Company’s regulated businesses,
offset partially by the impact of normal weather on the Utility
segment's earnings and an increase in projected natural gas
production in Appalachia, which will benefit earnings for the
Company’s Exploration and Production and Gathering segments.
Seneca’s fiscal 2018 net production is expected to be in the
range of 185 to 200 Bcfe. Natural gas production in the East
Division is expected to be in a range of 165 to 180 Bcf, an 11
percent increase versus fiscal 2017. Seneca added a second rig and
resumed Marcellus shale development activities in Lycoming County,
Pa. this past May, which is the main driver of the 17.5 Bcf
increase. Seneca’s oil operations in California are expected to
produce approximately 20 Bcfe, relatively flat versus fiscal 2017.
The midpoint of the production range does not assume any price
related curtailments.
Due to the expiration of physical firm sales and financial hedge
contracts with favorable pricing relative to current market prices
and hedge book, Seneca is projecting a significant decrease in
natural gas and oil price realizations in fiscal 2018. Seneca’s
fiscal 2018 natural gas production is 52 percent hedged at an
average hedge price of $2.90 per MMBtu. Assuming NYMEX natural gas
pricing of $3.00 per MMBtu, average Appalachian basin spot prices
of $2.40 per MMBtu, and adjustments for transportation costs,
contracted firm sale differentials, and Btu uplift, Seneca expects
its fiscal 2018 net realized gas price after hedging to be
approximately $2.55 per Mcf, which is a decrease of $0.41 per Mcf
from Seneca’s realized pricing after hedging of $2.96 per Mcf for
the nine months ended June 30, 2017. Seneca is approximately 45
percent hedged on an expected 3 million bbls of oil production in
fiscal 2018 at an average hedge price of $55.46 per Bbl.
Additional details on the Company's forecast assumptions and
business segment guidance for fiscal 2018 are outlined in the table
below.
Updated FY 2017 Guidance
Preliminary FY 2018 Guidance Consolidated Earnings per
Share $3.25 to $3.35 $2.70 to $3.05
Capital Expenditures (Millions) Exploration & Production
(1) $230 - $250 $275 - $325 Pipeline & Storage $100 - $110 $110
- $140 Gathering $35 - $45 $60 - $80 Utility
$90 -
$100 $90 - $100 Consolidated Capital
Expenditures $455 - $505 $535 - $645
Updated FY 2017 Guidance
Preliminary FY 2018 Guidance Exploration & Production
Segment Guidance Commodity Price Assumptions
NYMEX natural gas price $3.00 /MMBtu $3.00 /MMBtu Appalachian basin
spot price $2.00 /MMBtu $2.40 /MMBtu NYMEX (WTI) crude oil price
$50.00 /Bbl $50.00 /Bbl California oil price (% of WTI) 92% 92%
Production (Bcfe) East Division - Appalachia (2) 150
to 160 165 to 180 West Division - California
~ 20
~ 20
Total Production 170 to 180 185 to 200
E&P Operating Costs ($/Mcfe) LOE (3) ~$0.95 $0.90 -
$1.00 G&A ~$0.35 $0.30 - $0.35 DD&A ~$0.65 $0.65 - $0.70
Other Business Segment Guidance Gathering Segment
Revenues (Millions) ~$110 $115 - $125 Pipeline & Storage
Segment Revenues (Millions) ~$295 ~$295 (1) Net of
conveyance proceeds received from joint development partner for
working interest in joint development wells. (2) Seneca East
Division - Appalachia production guidance assumes approximately 35
Bcf of spot sales in FY18. (3) FY17 reflects full year average LOE.
Fourth quarter FY17 LOE expected to be $1.00-$1.05 due to an
increase in well workover and steam activity in California.
EARNINGS TELECONFERENCE
The Company will host a conference call on Friday, August 4,
2017, 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) 844-862-1432, using conference ID number “51109130.”
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)
855-859-2056 using conference ID number “51109130.” Both the
webcast and a telephonic replay will be available until the close
of business on Friday, August 11, 2017.
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.
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; impairments
under the SEC’s full cost ceiling test for natural gas and oil
reserves; changes in the price of natural gas or oil; 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; economic disruptions or uninsured losses resulting
from major accidents, fires, severe weather, natural disasters,
terrorist activities, acts of war, cyber attacks or pest
infestation; 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 JUNE 30,
2017 (Unaudited) Upstream
Midstream Businesses Downstream Businesses
Exploration & Pipeline & Energy Corporate / (Thousands of
Dollars) Production Storage Gathering Utility
Marketing All Other Consolidated*
Third quarter 2016 GAAP earnings $ (19,165 ) $ 17,323 $
9,473 $ 2,179 $ (590 ) $ (934 ) $ 8,286
Items impacting
comparability: Impairment of oil and gas producing properties
82,658 82,658 Tax impact of impairment of oil and gas producing
properties (34,716 ) (34,716 ) Joint development agreement
professional fees 3,173 3,173 Tax impact of joint development
agreement professional fees (1,333 )
(1,333 )
Third
quarter 2016 operating results 30,617 17,323 9,473 2,179 (590 )
(934 ) 58,068
Drivers of operating results Higher
(lower) crude oil prices (2,511 ) (2,511 ) Higher (lower) natural
gas prices 2,228 2,228 Higher (lower) natural gas production (1,805
) (1,805 ) Higher (lower) crude oil production (2,229 ) (2,229 )
Derivative mark to market adjustments 619 619 Lower (higher) lease
operating and transportation expenses (1,150 ) (1,150 ) Lower
(higher) depreciation / depletion 2,490 331 (340 ) (554 ) 1,927
Higher (lower) transportation revenues (2,380 ) (2,380 )
Higher (lower) gathering and processing revenues 913 913 Lower
(higher) other operating expenses 1,769 (392 ) 1,377 Lower (higher)
property, franchise and other taxes (428 ) (328 ) (756 )
Higher (lower) margins (630 ) (630 ) Lower (higher) interest
expense (401 ) (401 ) Lower (higher) income tax expense /
effective tax rate 2,383 1,214 291 987 1,580 6,455 All other
/ rounding (91 ) (129 ) 171 (33 )
26 45 (11 )
Third quarter
2017 GAAP earnings and operating results $ 30,123
$ 16,031 $ 10,107 $ 4,348
$ (564 ) $ (331 ) $ 59,714 * Amounts do
not reflect intercompany eliminations
NATIONAL FUEL GAS
COMPANY RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP
EARNINGS PER SHARE QUARTER ENDED JUNE 30, 2017
(Unaudited) Upstream Midstream
Businesses Downstream Businesses Exploration
& Pipeline & Energy Corporate / Production Storage
Gathering Utility Marketing All Other
Consolidated*
Third quarter 2016 GAAP earnings
$ (0.22 ) $ 0.20 $ 0.11 $ 0.03 $ (0.01 ) $ (0.01 ) $ 0.10
Items
impacting comparability: Impairment of oil and gas producing
properties 0.97 0.97 Tax impact of impairment of oil and gas
producing properties (0.41 ) (0.41 ) Joint development agreement
professional fees 0.04 0.04 Tax impact of joint development
agreement professional fees (0.02 )
(0.02 )
Third
quarter 2016 operating results 0.36 0.20 0.11 0.03 (0.01 )
(0.01 ) 0.68
Drivers of operating results Higher
(lower) crude oil prices (0.03 ) (0.03 ) Higher (lower) natural gas
prices 0.03 0.03 Higher (lower) natural gas production (0.02 )
(0.02 ) Higher (lower) crude oil production (0.03 ) (0.03 )
Derivative mark to market adjustments 0.01 0.01 Lower (higher)
lease operating and transportation expenses (0.01 ) (0.01 ) Lower
(higher) depreciation / depletion 0.03 — — (0.01 ) 0.02
Higher (lower) transportation revenues (0.03 ) (0.03 ) Higher
(lower) gathering and processing revenues 0.01 0.01 Lower (higher)
other operating expenses 0.02 — 0.02 Lower (higher) property,
franchise and other taxes — — — Higher (lower) margins (0.01
) (0.01 ) Lower (higher) interest expense — — Lower
(higher) income tax expense / effective tax rate 0.03 0.01 — 0.01
0.02 0.07 All other / rounding (0.02 ) 0.01
— — — (0.01 )
(0.02 )
Third quarter 2017 GAAP earnings and operating
results $ 0.35 $ 0.19 $ 0.12
$ 0.05 $ (0.01 ) $ (0.01 ) $
0.69 * Amounts do not reflect intercompany
eliminations
NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS
NINE MONTHS ENDED JUNE 30, 2017 (Unaudited)
Upstream Midstream Businesses Downstream
Businesses Exploration & Pipeline & Energy
Corporate / (Thousands of Dollars) Production Storage
Gathering Utility Marketing All Other
Consolidated*
Nine months ended June 30, 2016 GAAP
earnings $ (469,586 ) $ 59,794 $ 21,962 $ 52,745 $ 4,117 $
2,458 $ (328,510 )
Items impacting comparability: Impairment
of oil and gas producing properties 915,552 915,552 Tax impact of
impairment of oil and gas producing properties (384,531 ) (384,531
) Joint development agreement professional fees 7,855 7,855 Tax
impact of joint development agreement professional fees (3,299 )
(3,299 )
Nine months ended June 30, 2016 operating
results 65,991 59,794 21,962 52,745 4,117 2,458 207,067
Drivers of operating results Higher (lower) crude oil prices
(4,889 ) (4,889 ) Higher (lower) natural gas prices (2,960 ) (2,960
) Higher (lower) natural gas production 24,737 24,737 Higher
(lower) crude oil production (4,999 ) (4,999 ) Derivative mark to
market adjustments 510 510 Lower (higher) lease operating and
transportation expenses (4,830 ) (4,830 ) Lower (higher)
depreciation / depletion 17,701 970 (391 ) (2,594 ) 15,686
Higher (lower) transportation revenues (4,519 ) (4,519 ) Higher
(lower) gathering and processing revenues 10,927 10,927 Lower
(higher) other operating expenses 4,144 (2,191 ) (930 ) (3,876 )
(1,059 ) (3,912 ) Lower (higher) property, franchise and other
taxes (655 ) (558 ) (1,213 ) Regulatory true-up adjustments
948 948 Higher (lower) usage 2,209 2,209 Impact of new rates 927
927 Higher (lower) margins (1,932 ) (951 ) (2,883 )
Higher (lower) AFUDC** (469 ) (914 ) (1,383 ) Lower (higher)
interest expense 1,048 1,048 Lower (higher) income tax
expense / effective tax rate 3,395 1,731 (563 ) 887 (491 ) 4,959
All other / rounding (221 ) (102 ) 368
771 (63 ) (277 ) 476
Nine months ended June 30, 2017 GAAP earnings and operating
results $ 98,972 $ 54,656 $ 31,373
$ 51,103 $ 2,122 $ (320 )
$ 237,906 * Amounts do not reflect
intercompany eliminations ** AFUDC = Allowance for Funds Used
During Construction
NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS PER
SHARE NINE MONTHS ENDED JUNE 30, 2017 (Unaudited)
Upstream Midstream Businesses Downstream
Businesses Exploration & Pipeline & Energy
Corporate / Production Storage Gathering
Utility Marketing All Other Consolidated*
Nine months ended June 30, 2016 GAAP earnings $ (5.54
) $ 0.71 $ 0.26 $ 0.62 $ 0.05 $ 0.03 $ (3.87 )
Items impacting
comparability: Impairment of oil and gas producing properties
10.80 10.80 Tax impact of impairment of oil and gas producing
properties (4.54 ) (4.54 ) Joint development agreement professional
fees 0.09 0.09 Tax impact of joint development agreement
professional fees (0.04 ) (0.04 ) Earnings per share impact of
diluted shares (0.01 )
(0.01 )
Nine months ended
June 30, 2016 operating results 0.77 0.70 0.26 0.62 0.05 0.03
2.43
Drivers of operating results Higher (lower)
crude oil prices (0.06 ) (0.06 ) Higher (lower) natural gas prices
(0.03 ) (0.03 ) Higher (lower) natural gas production 0.29 0.29
Higher (lower) crude oil production (0.06 ) (0.06 ) Derivative mark
to market adjustments 0.01 0.01 Lower (higher) lease operating and
transportation expenses (0.06 ) (0.06 ) Lower (higher) depreciation
/ depletion 0.21 0.01 — (0.03 ) 0.19 Higher (lower)
transportation revenues (0.05 ) (0.05 ) Higher (lower) gathering
and processing revenues 0.12 0.12 Lower (higher) other operating
expenses 0.05 (0.03 ) (0.01 ) (0.05 ) (0.01 ) (0.05 ) Lower
(higher) property, franchise and other taxes (0.01 ) (0.01 ) (0.02
) Regulatory true-up adjustments 0.01 0.01 Higher (lower)
usage 0.03 0.03 Impact of new rates 0.01 0.01 Higher (lower)
margins (0.02 ) (0.01 ) (0.03 ) Higher (lower) AFUDC** (0.01
) (0.01 ) (0.02 ) Lower (higher) interest expense 0.01 0.01
Lower (higher) income tax expense / effective tax rate 0.04
0.02 (0.01 ) 0.01 (0.01 ) 0.05 All other / rounding (0.01 )
0.01 0.01 — (0.01
) — —
Nine months ended June 30,
2017 GAAP earnings and operating results $ 1.15 $
0.64 $ 0.37 $ 0.59 $ 0.02
$ — $ 2.77 * Amounts do
not reflect intercompany eliminations ** AFUDC = Allowance for
Funds Used During Construction
NATIONAL FUEL GAS COMPANY AND
SUBSIDIARIES (Thousands of Dollars, except per share
amounts) Three Months Ended Nine Months Ended June 30, June 30,
(Unaudited) (Unaudited)
SUMMARY OF
OPERATIONS
2017 2016 2017 2016 Operating Revenues: Utility and
Energy Marketing Revenues $ 146,360 $ 123,976 $ 663,029 $ 540,981
Exploration and Production and Other Revenues 151,925 158,578
473,617 456,032 Pipeline and Storage and Gathering Revenues 50,083
53,063 156,298 162,930 348,368 335,617
1,292,944 1,159,943 Operating Expenses: Purchased Gas 46,135 23,477
264,349 147,168 Operation and Maintenance: Utility and Energy
Marketing 44,467 46,616 158,796 151,474 Exploration and Production
and Other 34,098 35,427 102,153 123,965 Pipeline and Storage and
Gathering 23,250 23,215 69,016 64,324 Property, Franchise and Other
Taxes 21,447 20,261 64,368 61,923 Depreciation, Depletion and
Amortization 55,617 58,802 168,812 193,300 Impairment of Oil and
Gas Producing Properties — 82,658 — 915,552
225,014 290,456 827,494 1,657,706 Operating Income
(Loss) 123,354 45,161 465,450 (497,763 ) Other Income
(Expense): Interest Income 853 564 2,844 2,640 Other Income 1,370
1,519 4,728 7,173 Interest Expense on Long-Term Debt (29,225 )
(28,897 ) (87,241 ) (88,263 ) Other Interest Expense (846 ) (1,321
) (2,680 ) (3,938 ) Income (Loss) Before Income Taxes 95,506
17,026 383,101 (580,151 ) Income Tax Expense (Benefit)
35,792 8,740 145,195 (251,641 )
Net
Income (Loss) Available for Common Stock $ 59,714 $
8,286 $ 237,906 $ (328,510 )
Earnings
(Loss) Per Common Share: Basic $ 0.70 $ 0.10 $
2.79 $ (3.87 ) Diluted $ 0.69 $ 0.10 $ 2.77
$ (3.87 )
Weighted Average Common Shares: Used
in Basic Calculation 85,422,313 84,917,664 85,315,154 84,791,447
Used in Diluted Calculation 86,064,464 85,470,216 85,950,742
84,791,447 NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited) June
30, September 30, (Thousands of Dollars)
2017 2016
ASSETS Property, Plant and
Equipment $9,816,295 $9,539,581 Less - Accumulated Depreciation,
Depletion and Amortization 5,232,771
5,085,099 Net Property, Plant and Equipment
4,583,524 4,454,482
Current Assets: Cash and Temporary Cash Investments 285,325 129,972
Hedging Collateral Deposits 2,142 1,484 Receivables - Net 127,876
133,201 Unbilled Revenue 19,729 18,382 Gas Stored Underground
17,793 34,332 Materials and Supplies - at average cost 34,706
33,866 Unrecovered Purchased Gas Costs 3,757 2,440 Other Current
Assets 50,852 59,354
Total Current Assets 542,180
413,031 Other Assets: Recoverable Future Taxes
182,469 177,261 Unamortized Debt Expense 1,292 1,688 Other
Regulatory Assets 315,126 320,750 Deferred Charges 28,821 20,978
Other Investments 126,485 110,664 Goodwill 5,476 5,476 Prepaid
Post-Retirement Benefit Costs 18,619 17,649 Fair Value of
Derivative Financial Instruments 63,036 113,804 Other
479 604 Total Other Assets
741,803 768,874 Total Assets
$5,867,507 $5,636,387
CAPITALIZATION AND LIABILITIES Capitalization:
Comprehensive Shareholders' Equity Common Stock, $1 Par Value
Authorized - 200,000,000 Shares; Issued and Outstanding -
85,467,963 Shares and 85,118,886 Shares, Respectively $85,468
$85,119 Paid in Capital 790,291 771,164 Earnings Reinvested in the
Business 841,593 676,361 Accumulated Other Comprehensive Loss
(33,304 ) (5,640 ) Total Comprehensive
Shareholders' Equity 1,684,048 1,527,004 Long-Term Debt, Net of
Unamortized Discount and Debt Issuance Costs
1,787,954 2,086,252 Total Capitalization
3,472,002 3,613,256
Current and Accrued Liabilities: Notes Payable to Banks and
Commercial Paper — — Current Portion of Long-Term Debt 300,000 —
Accounts Payable 98,842 108,056 Amounts Payable to Customers 13,070
19,537 Dividends Payable 35,469 34,473 Interest Payable on
Long-Term Debt 28,985 34,900 Customer Advances 224 14,762 Customer
Security Deposits 17,522 16,019 Other Accruals and Current
Liabilities 107,101 74,430 Fair Value of Derivative Financial
Instruments 922 1,560
Total Current and Accrued Liabilities 602,135
303,737 Deferred Credits: Deferred
Income Taxes 881,547 823,795 Taxes Refundable to Customers 93,321
93,318 Cost of Removal Regulatory Liability 199,739 193,424 Other
Regulatory Liabilities 88,647 99,789 Pension and Other
Post-Retirement Liabilities 299,326 277,113 Asset Retirement
Obligations 115,354 112,330 Other Deferred Credits
115,436 119,625 Total Deferred Credits
1,793,370 1,719,394
Commitments and Contingencies —
— Total Capitalization and Liabilities
$5,867,507 $5,636,387
NATIONAL FUEL GAS COMPANY AND
SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) Nine Months Ended June 30, (Thousands of
Dollars) 2017 2016 Operating
Activities: Net Income (Loss) Available for Common Stock $ 237,906
$ (328,510 ) Adjustments to Reconcile Net Income (Loss) to Net Cash
Provided by Operating Activities: Impairment of Oil and Gas
Producing Properties — 915,552 Depreciation, Depletion and
Amortization 168,812 193,300 Deferred Income Taxes 105,073 (269,248
) Excess Tax Benefits Associated with Stock-Based Compensation
Awards — (1,786 ) Stock-Based Compensation 8,857 3,138 Other 11,084
9,685 Change in: Hedging Collateral Deposits (658 ) 8,116
Receivables and Unbilled Revenue (15,885 ) (7,756 ) Gas Stored
Underground and Materials and Supplies 15,699 15,683 Unrecovered
Purchased Gas Costs (1,317 ) (933 ) Other Current Assets 8,502
15,334 Accounts Payable 5,046 (53,687 ) Amounts Payable to
Customers (6,467 ) (21,337 ) Customer Advances (14,538 ) (16,198 )
Customer Security Deposits 1,503 (396 ) Other Accruals and Current
Liabilities 25,423 3,375 Other Assets (3,548 ) 3,775 Other
Liabilities 5,638 (8,152 ) Net
Cash Provided by Operating Activities $
551,130 $ 459,955 Investing Activities:
Capital Expenditures $ (314,774 ) $ (481,781 ) Net Proceeds from
Sale of Oil and Gas Producing Properties 26,554 115,235 Other
(10,186 ) (11,163 ) Net Cash Used in
Investing Activities $ (298,406 ) $
(377,709 ) Financing Activities: Excess Tax Benefits
Associated with Stock-Based Compensation Awards $ — $ 1,786
Dividends Paid on Common Stock (103,594 ) (100,419 ) Net Proceeds
From Issuance of Common Stock 6,223
8,358 Net Cash Used in Financing Activities
$ (97,371 ) $ (90,275 ) Net Increase
(Decrease) in Cash and Temporary Cash Investments 155,353 (8,029 )
Cash and Temporary Cash Investments at Beginning of Period
129,972 113,596 Cash and
Temporary Cash Investments at June 30 $
285,325 $ 105,567
NATIONAL FUEL GAS COMPANY AND
SUBSIDIARIES SEGMENT OPERATING RESULTS AND
STATISTICS (UNAUDITED) UPSTREAM BUSINESS
Three Months Ended Nine Months Ended (Thousands of
Dollars, except per share amounts) June 30, June 30,
EXPLORATION AND
PRODUCTION SEGMENT
2017 2016 Variance 2017 2016 Variance Total Operating
Revenues $ 151,161 $ 156,835 $ (5,674 )
$ 471,646 $ 452,583 $ 19,063 Operating
Expenses: Operation and Maintenance: General and Administrative
Expense 14,170 16,573 (2,403 ) 43,674 55,671 (11,997 ) Lease
Operating and Transportation Expense 40,630 38,861 1,769 122,881
115,451 7,430 All Other Operation and Maintenance Expense 2,835
3,011 (176 ) 8,168 10,402 (2,234 ) Property, Franchise and Other
Taxes 4,297 3,639 658 11,248 10,241 1,007 Depreciation, Depletion
and Amortization 27,448 31,279 (3,831 ) 85,353 112,586 (27,233 )
Impairment of Oil and Gas Producing Properties —
82,658 (82,658 ) — 915,552 (915,552 )
89,380 176,021 (86,641 ) 271,324
1,219,903 (948,579 ) Operating Income (Loss) 61,781
(19,186) 80,967 200,322 (767,320) 967,642 Other Income
(Expense): Interest Income 217 88 129 451 781 (330 ) Interest
Expense (13,444 ) (13,753 ) 309 (40,270 )
(41,882 ) 1,612 Income (Loss) Before Income Taxes
48,554 (32,851 ) 81,405 160,503 (808,421 ) 968,924 Income Tax
Expense (Benefit) 18,431 (13,686 ) 32,117
61,531 (338,835 ) 400,366 Net Income (Loss) $
30,123 $ (19,165 ) $ 49,288 $ 98,972
$ (469,586 ) $ 568,558 Net Income (Loss) Per
Share (Diluted) $ 0.35 $ (0.22 ) $ 0.57
$ 1.15 $ (5.54 ) $ 6.69
NATIONAL FUEL GAS COMPANY AND
SUBSIDIARIES SEGMENT OPERATING RESULTS AND
STATISTICS (UNAUDITED) MIDSTREAM
BUSINESSES Three Months Ended Nine Months Ended
(Thousands of Dollars, except per share amounts) June 30, June 30,
PIPELINE AND
STORAGE SEGMENT
2017 2016 Variance 2017 2016 Variance Revenues from
External Customers $ 50,049 $ 52,998 $ (2,949 ) $ 156,212 $ 162,627
$ (6,415 ) Intersegment Revenues 21,643 22,795
(1,152 ) 66,389 68,272 (1,883 ) Total
Operating Revenues 71,692 75,793 (4,101
) 222,601 230,899 (8,298 ) Operating Expenses:
Purchased Gas (13 ) 356 (369 ) 181 1,059 (878 ) Operation and
Maintenance 20,607 20,492 115 60,517 57,145 3,372 Property,
Franchise and Other Taxes 6,935 6,430 505 20,624 19,766 858
Depreciation, Depletion and Amortization 10,513
11,023 (510 ) 30,651 32,144 (1,493 )
38,042 38,301 (259 ) 111,973
110,114 1,859 Operating Income 33,650 37,492
(3,842 ) 110,628 120,785 (10,157 ) Other Income (Expense):
Interest Income 393 237 156 984 527 457 Other Income 449 657 (208 )
1,944 2,651 (707 ) Interest Expense (8,489 ) (8,528 )
39 (25,177 ) (25,017 ) (160 ) Income Before Income
Taxes 26,003 29,858 (3,855 ) 88,379 98,946 (10,567 ) Income Tax
Expense 9,972 12,535 (2,563 ) 33,723
39,152 (5,429 ) Net Income $ 16,031 $
17,323 $ (1,292 ) $ 54,656 $ 59,794 $
(5,138 ) Net Income Per Share (Diluted) $ 0.19
$ 0.20 $ (0.01 ) $ 0.64 $ 0.71 $ (0.07
) Three Months Ended Nine Months Ended June 30, June
30,
GATHERING
SEGMENT
2017 2016 Variance 2017 2016 Variance Revenues from
External Customers $ 34 $ 65 $ (31 ) $ 86 $ 303 $ (217 )
Intersegment Revenues 26,853 25,417
1,436 82,629 65,601 17,028 Total
Operating Revenues 26,887 25,482 1,405
82,715 65,904 16,811 Operating
Expenses: Operation and Maintenance 2,973 3,018 (45 ) 9,496 8,066
1,430 Property, Franchise and Other Taxes 13 31 (18 ) 45 116 (71 )
Depreciation, Depletion and Amortization 4,131 3,608
523 12,008 11,407 601
7,117 6,657 460 21,549
19,589 1,960 Operating Income 19,770 18,825
945 61,166 46,315 14,851 Other Income (Expense): Interest
Income 288 88 200 641 188 453 Other Income — 1 (1 ) 1 3 (2 )
Interest Expense (2,411 ) (1,794 ) (617 ) (6,739 )
(6,781 ) 42 Income Before Income Taxes 17,647 17,120
527 55,069 39,725 15,344 Income Tax Expense 7,540
7,647 (107 ) 23,696 17,763 5,933
Net Income $ 10,107 $ 9,473 $ 634
$ 31,373 $ 21,962 $ 9,411 Net
Income Per Share (Diluted) $ 0.12 $ 0.11
$ 0.01 $ 0.37 $ 0.26 $ 0.11
NATIONAL FUEL
GAS COMPANY AND SUBSIDIARIES SEGMENT OPERATING
RESULTS AND STATISTICS (UNAUDITED) DOWNSTREAM
BUSINESSES Three Months Ended Nine Months Ended
(Thousands of Dollars, except per share amounts) June 30, June 30,
UTILITY
SEGMENT
2017 2016 Variance 2017 2016 Variance Revenues from
External Customers $ 121,900 $ 106,568 $ 15,332 $ 550,819 $ 463,154
$ 87,665 Intersegment Revenues 3,391 1,729
1,662 11,314 10,757 557 Total
Operating Revenues 125,291 108,297
16,994 562,133 473,911 88,222
Operating Expenses: Purchased Gas 46,536 29,514 17,022 235,481
155,764 79,717 Operation and Maintenance 43,506 45,990 (2,484 )
155,783 148,883 6,900 Property, Franchise and Other Taxes 9,927
9,893 34 31,637 30,980 657 Depreciation, Depletion and Amortization
13,086 12,234 852 39,502
35,511 3,991 113,055 97,631
15,424 462,403 371,138 91,265
Operating Income 12,236 10,666 1,570 99,730 102,773 (3,043 )
Other Income (Expense): Interest Income 141 115 26 418 321
97 Other Income 438 345 93 576 1,749 (1,173 ) Interest Expense
(7,062 ) (7,192 ) 130 (21,454 ) (21,684 ) 230
Income Before Income Taxes 5,753 3,934 1,819 79,270
83,159 (3,889 ) Income Tax Expense 1,405 1,755
(350 ) 28,167 30,414 (2,247 ) Net Income $
4,348 $ 2,179 $ 2,169 $ 51,103
$ 52,745 $ (1,642 ) Net Income Per Share
(Diluted) $ 0.05 $ 0.03 $ 0.02 $
0.59 $ 0.62 $ (0.03 ) Three Months
Ended Nine Months Ended June 30, June 30,
ENERGY MARKETING
SEGMENT
2017 2016 Variance 2017 2016 Variance Revenues from
External Customers $ 24,460 $ 17,408 $ 7,052 $ 112,210 $ 77,827 $
34,383 Intersegment Revenues 565 231
334 600 855 (255 ) Total Operating Revenues
25,025 17,639 7,386 112,810
78,682 34,128 Operating Expenses:
Purchased Gas 24,336 17,191 7,145 104,335 67,235 37,100 Operation
and Maintenance 1,706 1,376 330 5,262 4,872 390 Property, Franchise
and Other Taxes — 2 (2 ) — 6 (6 ) Depreciation, Depletion and
Amortization 69 70 (1 ) 210 208
2 26,111 18,639 7,472
109,807 72,321 37,486 Operating
Income (Loss) (1,086 ) (1,000 ) (86 ) 3,003 6,361 (3,358 )
Other Income (Expense): Interest Income 146 145 1 418 286 132 Other
Income 22 20 2 57 44 13 Interest Expense (13 ) (11 )
(2 ) (38 ) (37 ) (1 ) Income (Loss) Before Income Taxes (931
) (846 ) (85 ) 3,440 6,654 (3,214 ) Income Tax Expense (Benefit)
(367 ) (256 ) (111 ) 1,318 2,537 (1,219
) Net Income (Loss) $ (564 ) $ (590 ) $ 26 $
2,122 $ 4,117 $ (1,995 ) Net Income (Loss) Per
Share (Diluted) $ (0.01 ) $ (0.01 ) $ — $ 0.02
$ 0.05 $ (0.03 )
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
2017 2016 Variance 2017 2016 Variance Total Operating
Revenues $ 538 $ 1,508 $ (970 ) $ 1,311
$ 2,775 $ (1,464 ) Operating Expenses: Operation and
Maintenance 435 256 179 1,344 495 849 Property, Franchise and Other
Taxes 151 144 7 445 449 (4 ) Depreciation, Depletion and
Amortization 182 399 (217 ) 525
888 (363 ) 768 799 (31 ) 2,314
1,832 482 Operating Income (Loss) (230
) 709 (939 ) (1,003 ) 943 (1,946 ) Other Income (Expense): Interest
Income 59 32 27 147
83 64 Income (Loss) Before Income Taxes
(171 ) 741 (912 ) (856 ) 1,026 (1,882 ) Income Tax Expense
(Benefit) (73 ) 311 (384 ) (358 ) 431
(789 ) Net Income (Loss) $ (98 ) $ 430 $ (528
) $ (498 ) $ 595 $ (1,093 ) Net Income (Loss) Per
Share (Diluted) $ — $ 0.01 $ (0.01 ) $
— $ 0.01 $ (0.01 ) Three Months Ended
Nine Months Ended June 30, June 30,
CORPORATE
2017 2016 Variance 2017 2016 Variance Revenues from
External Customers $ 226 $ 235 $ (9 ) $ 660 $ 674 $ (14 )
Intersegment Revenues 977 967 10
2,930 2,900 30 Total Operating Revenues 1,203
1,202 1 3,590 3,574
16 Operating Expenses: Operation and Maintenance
3,658 3,236 422 11,054 10,273 781 Property, Franchise and Other
Taxes 124 122 2 369 365 4 Depreciation, Depletion and Amortization
188 189 (1 ) 563 556 7
3,970 3,547 423 11,986
11,194 792 Operating Loss (2,767 )
(2,345 ) (422 ) (8,396 ) (7,620 ) (776 ) Other Income
(Expense): Interest Income 31,185 30,684 501 93,684 92,767 917
Other Income 461 496 (35 ) 2,150 2,726 (576 ) Interest Expense on
Long-Term Debt (29,225 ) (28,897 ) (328 ) (87,241 ) (88,263 ) 1,022
Other Interest Expense (1,003 ) (868 ) (135 ) (2,901
) (850 ) (2,051 ) Loss Before Income Taxes (1,349 ) (930 )
(419 ) (2,704 ) (1,240 ) (1,464 ) Income Tax Expense (Benefit)
(1,116 ) 434 (1,550 ) (2,882 ) (3,103 ) 221
Net Income (Loss) $ (233 ) $ (1,364 ) $ 1,131
$ 178 $ 1,863 $ (1,685 ) Net Income
(Loss) Per Share (Diluted) $ (0.01 ) $ (0.02 ) $ 0.01
$ — $ 0.02 $ (0.02 ) Three
Months Ended Nine Months Ended June 30, June 30,
INTERSEGMENT
ELIMINATIONS
2017 2016 Variance 2017 2016 Variance Intersegment
Revenues $ (53,429 ) $ (51,139 ) $ (2,290 ) $
(163,862 ) $ (148,385 ) $ (15,477 ) Operating Expenses: Purchased
Gas (24,724 ) (23,584 ) (1,140 ) (75,648 ) (76,890 ) 1,242
Operation and Maintenance (28,705 ) (27,555 ) (1,150
) (88,214 ) (71,495 ) (16,719 ) (53,429 ) (51,139 )
(2,290 ) (163,862 ) (148,385 ) (15,477 ) Operating Income —
— — — — — Other Income (Expense): Interest Income (31,576 )
(30,825 ) (751 ) (93,899 ) (92,313 ) (1,586 ) Interest Expense
31,576 30,825 751 93,899
92,313 1,586 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 2017 2016 (Decrease) 2017 2016 (Decrease)
Capital
Expenditures:
Exploration and Production $ 70,719 (1)(2) $ 47,269 (3) $ 23,450 $
168,545 (1)(2) $ 214,923 (3)(4) $ (46,378 ) Pipeline and Storage
16,750 (1)(2) 18,325 (3) (1,575 ) 53,528 (1)(2) 76,020 (3)(4)
(22,492 ) Gathering 9,214 (1)(2) 9,192 (3) 22 23,705 (1)(2) 43,715
(3)(4) (20,010 ) Utility 20,116 (1)(2) 26,280 (3) (6,164 ) 56,411
(1)(2) 72,288 (3)(4) (15,877 ) Energy Marketing 3 19
(16 ) 14 28 (14 ) Total Reportable Segments 116,802
101,085 15,717 302,203 406,974 (104,771 ) All Other — — — 40 37 3
Corporate 22 36 (14 ) 86 191 (105 ) Eliminations 295 —
295 (482 ) — (482 ) Total Capital Expenditures
$ 117,119 $ 101,121 $ 15,998 $ 301,847
$ 407,202 $ (105,355 ) (1)
Capital expenditures for the quarter and
nine months ended June 30, 2017, include accounts payable and
accrued liabilities related to capital expenditures of $25.0
million, $10.3 million, $5.2 million, and $7.0 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
June 30, 2017, since they represent non-cash investing activities
at that date.
(2)
Capital expenditures for the nine months
ended June 30, 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 nine months ended June 30, 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 June 30, 2017.
(3)
Capital expenditures for the quarter and
nine months ended June 30, 2016, include accounts payable and
accrued liabilities related to capital expenditures of $26.7
million, $7.6 million, $2.8 million, and $7.3 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
June 30, 2016, since they represent non-cash investing activities
at that date.
(4)
Capital expenditures for the nine months
ended June 30, 2016, exclude capital expenditures of $46.2 million,
$33.9 million, $22.4 million and $16.5 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, 2015 and
paid during the nine months ended June 30, 2016. These amounts were
excluded from the Consolidated Statement of Cash Flows at September
30, 2015, 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, 2016.
DEGREE
DAYS
Percent Colder (Warmer) Than:
Three Months Ended
June 30
Normal 2017 2016 Normal (1) Last Year (1) Buffalo, NY 912
767 927 (15.9) (17.3) Erie, PA 871 705 936 (19.1) (24.7)
Nine Months Ended
June 30
Buffalo, NY 6,455 5,599 5,567 (13.3) 0.6 Erie, PA 6,023
5,082 5,159 (15.6) (1.5) (1) Percents compare actual
2017 degree days to normal degree days and actual 2017 degree days
to actual 2016 degree days.
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
EXPLORATION AND
PRODUCTION INFORMATION
Three Months Ended Nine Months Ended June 30, June
30, Increase Increase 2017 2016 (Decrease) 2017 2016 (Decrease)
Gas
Production/Prices:
Production (MMcf) Appalachia 37,904 38,846 (942 ) 118,517 105,747
12,770 West Coast 733 763 (30 ) 2,246 2,310
(64 ) Total Production 38,637 39,609 (972 )
120,763 108,057 12,706 Average Prices
(Per Mcf) Appalachia $ 2.58 $ 1.73 $ 0.85 $ 2.55 $ 1.84 $ 0.71 West
Coast 3.39 2.84 0.55 4.07 3.13 0.94 Weighted Average 2.59 1.75 0.84
2.58 1.87 0.71 Weighted Average after Hedging 2.94 2.86 0.08 2.96
3.00 (0.04 )
Oil
Production/Prices:
Production (Thousands of Barrels) Appalachia 1 6 (5 ) 3 16 (13 )
West Coast 669 722 (53 ) 2,062 2,183
(121 ) Total Production 670 728 (58 ) 2,065
2,199 (134 ) Average Prices (Per Barrel) Appalachia $
48.34 $ 58.28 $ (9.94 ) $ 48.85 $ 44.05 $ 4.80 West Coast 45.63
38.89 6.74 45.71 34.02 11.69 Weighted Average 45.64 39.04 6.60
45.76 34.10 11.66 Weighted Average after Hedging 53.02 58.79 (5.77
) 53.58 57.22 (3.64 ) Total Production (Mmcfe) 42,657
43,977 (1,320 ) 133,153 121,251 11,902
Selected
Operating Performance Statistics:
General & Administrative Expense per Mcfe (1) $ 0.33 $ 0.38 $
(0.05 ) $ 0.33 $ 0.46 $ (0.13 ) Lease Operating and Transportation
Expense per Mcfe (1)(2) $ 0.95 $ 0.88 $ 0.07 $ 0.92 $ 0.95 $ (0.03
) Depreciation, Depletion & Amortization per Mcfe (1) $ 0.64 $
0.71 $ (0.07 ) $ 0.64 $ 0.93 $ (0.29 ) (1) Refer to
page 15 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 and $0.53 per Mcfe for the three
months ended June 30, 2017 and June 30, 2016, respectively. Amounts
include transportation expense of $0.54 and $0.52 per Mcfe for the
nine months ended June 30, 2017 and June 30, 2016, respectively.
NATIONAL FUEL GAS COMPANY AND
SUBSIDIARIES
EXPLORATION AND
PRODUCTION INFORMATION
Hedging Summary
for the Remaining Three Months of Fiscal 2017
Volume
Average Hedge
Price
Oil Swaps Brent 24,000 BBL $ 91.00 / BBL NYMEX 396,000 BBL $ 58.34
/ BBL
Total 420,000 BBL $ 60.21 /
BBL Gas Swaps NYMEX 9,990,000 MMBTU $ 4.35 / MMBTU
Dominion Transmission Appalachian (DOM) 450,000 MMBTU $ 3.82 /
MMBTU Dawn Ontario (DAWN) 3,330,000 MMBTU $ 3.71 / MMBTU Fixed
Price Physical Sales 17,381,568 MMBTU $ 2.45 / MMBTU
Total
31,151,568 MMBTU $ 3.21 / MMBTU
Hedging Summary
for Fiscal 2018
Volume
Average Hedge
Price
Oil Swaps Brent 24,000 BBL $ 91.00 / BBL NYMEX 1,275,000 BBL $
54.79 / BBL
Total 1,299,000 BBL $
55.46 / BBL Gas Swaps NYMEX 42,570,000 MMBTU $ 3.34 /
MMBTU DOM 180,000 MMBTU $ 3.82 / MMBTU DAWN 8,400,000 MMBTU $ 3.08
/ MMBTU Fixed Price Physical Sales 42,902,876 MMBTU $ 2.42 / MMBTU
Total 94,052,876 MMBTU $ 2.90 /
MMBTU
Hedging Summary
for Fiscal 2019
Volume
Average Hedge
Price
Oil Swaps NYMEX 912,000 BBL $ 53.84 / BBL Gas Swaps NYMEX
27,060,000 MMBTU $ 3.17 / MMBTU DAWN 7,200,000 MMBTU $ 3.00 / MMBTU
Fixed Price Physical Sales 32,328,272 MMBTU $ 2.51 / MMBTU
Total 66,588,272 MMBTU $ 2.83 /
MMBTU
Hedging Summary
for Fiscal 2020
Volume
Average Hedge
Price
Oil Swaps NYMEX 168,000 BBL $ 50.08 / BBL Gas Swaps NYMEX
16,880,000 MMBTU $ 3.07 / MMBTU DAWN 7,200,000 MMBTU $ 3.00 / MMBTU
Fixed Price Physical Sales 38,232,955 MMBTU $ 2.30 / MMBTU
Total 62,312,955 MMBTU $ 2.59 /
MMBTU
Hedging Summary
for Fiscal 2021
Volume
Average Hedge
Price
Gas Swaps NYMEX 4,840,000 MMBTU $ 3.01 / MMBTU DAWN 600,000 MMBTU $
3.00 / MMBTU Fixed Price Physical Sales 38,650,830 MMBTU $ 2.22 /
MMBTU
Total 44,090,830 MMBTU $ 2.31
/ MMBTU
Hedging Summary
for Fiscal 2022
Volume
Average Hedge
Price
Fixed Price Physical Sales 35,245,042 MMBTU $ 2.24 / MMBTU
Hedging Summary
for Fiscal 2023
Volume
Average Hedge
Price
Fixed Price Physical Sales 31,170,734 MMBTU $ 2.26 / MMBTU
Hedging Summary
for Fiscal 2024
Volume
Average Hedge
Price
Fixed Price Physical Sales 15,499,436 MMBTU $ 2.26 / MMBTU
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 2017 2016 (Decrease) 2017 2016
(Decrease) Firm Transportation - Affiliated 17,734 19,836 (2,102 )
92,583 87,169 5,414 Firm Transportation - Non-Affiliated 165,717
153,543 12,174 495,015 470,991 24,024 Interruptible Transportation
1,060 6,354 (5,294 ) 5,078 18,469
(13,391 ) 184,511 179,733 4,778 592,676
576,629 16,047
Gathering Volume -
(MMcf) Three Months Ended Nine Months Ended June 30, June 30,
Increase Increase 2017 2016 (Decrease) 2017 2016 (Decrease)
Gathered Volume - Affiliated 48,838 46,360 2,478
150,005 119,355 30,650
Utility Throughput - (MMcf) Three Months Ended Nine Months
Ended June 30, June 30, Increase Increase 2017 2016 (Decrease) 2017
2016 (Decrease) Retail Sales: Residential Sales 8,105 9,209 (1,104
) 48,817 46,828 1,989 Commercial Sales 1,170 1,254 (84 ) 7,373
6,770 603 Industrial Sales 48 — 48 282
233 49 9,323 10,463 (1,140 ) 56,472 53,831 2,641
Off-System Sales — — — 1,295 1,243 52 Transportation 13,799
14,857 (1,058 ) 60,453 59,770 683
23,122 25,320 (2,198 ) 118,220 114,844
3,376
Energy Marketing Volume Three Months
Ended Nine Months Ended June 30, June 30, Increase Increase 2017
2016 (Decrease) 2017 2016 (Decrease) Natural Gas (MMcf) 7,722
8,537 (815 ) 32,969 33,800 (831 )
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 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 Operating Results as reported GAAP earnings
before items impacting comparability. The table at page 1 of this
report reconciles National Fuel's reported GAAP earnings to
Operating Results for the three and nine months ended June 30, 2017
and 2016.
Management defines Adjusted EBITDA as reported GAAP earnings
before the following items: interest expense, depreciation,
depletion and amortization, interest and other income, impairments,
items impacting comparability and income taxes.
The following tables reconcile National Fuel's reported GAAP
earnings to Adjusted EBITDA for the three and nine months ended
June 30, 2017 and 2016:
Three Months Ended Nine
Months Ended June 30, June 30, 2017 2016 2017 2016 (in thousands)
Reported GAAP Earnings $ 59,714 $ 8,286 $ 237,906 $ (328,510
) Depreciation, Depletion and Amortization 55,617 58,802 168,812
193,300 Interest and Other Income (2,223 ) (2,083 ) (7,572 ) (9,813
) Interest Expense 30,071 30,218 89,921 92,201 Income Taxes 35,792
8,740 145,195 (251,641 ) Impairment of Oil and Gas Producing
Properties
— 82,658 — 915,552 Joint Development Agreement Professional
Fees
— 3,173 — 7,855
Adjusted EBITDA
$ 178,971 $ 189,794 $ 634,262 $ 618,944
Adjusted EBITDA by Segment Pipeline and Storage
Adjusted EBITDA $ 44,163 $ 48,515 $ 141,279 $ 152,929 Gathering
Adjusted EBITDA 23,901 22,433 73,174 57,722
Total Midstream Businesses Adjusted EBITDA 68,064 70,948
214,453 210,651 Exploration and Production Adjusted EBITDA 89,229
97,924 285,675 268,673 Utility Adjusted EBITDA 25,322 22,900
139,232 138,284 Energy Marketing Adjusted EBITDA (1,017 ) (930 )
3,213 6,569 Corporate and All Other Adjusted EBITDA (2,627 ) (1,048
) (8,311 ) (5,233 )
Total Adjusted EBITDA $ 178,971 $
189,794 $ 634,262 $ 618,944
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
NON-GAAP FINANCIAL MEASURES
SEGMENT ADJUSTED EBITDA
Three Months Ended Nine Months Ended
June 30, June 30, (in thousands) 2017 2016 2017 2016
Exploration and
Production Segment
Reported GAAP Earnings $ 30,123 $ (19,165 ) $ 98,972 $ (469,586 )
Depreciation, Depletion and Amortization 27,448 31,279 85,353
112,586 Interest and Other Income (217 ) (88 ) (451 ) (781 )
Interest Expense 13,444 13,753 40,270 41,882 Income Taxes 18,431
(13,686 ) 61,531 (338,835 ) Impairment of Oil and Gas Producing
Properties — 82,658 — 915,552 Joint Development Agreement
Professional Fees — 3,173 — 7,855
Adjusted EBITDA $ 89,229 $ 97,924 $ 285,675 $
268,673
Pipeline and
Storage Segment
Reported GAAP Earnings $ 16,031 $ 17,323 $ 54,656 $ 59,794
Depreciation, Depletion and Amortization 10,513 11,023 30,651
32,144 Interest and Other Income (842 ) (894 ) (2,928 ) (3,178 )
Interest Expense 8,489 8,528 25,177 25,017 Income Taxes 9,972
12,535 33,723 39,152 Adjusted EBITDA $
44,163 $ 48,515 $ 141,279 $ 152,929
Gathering
Segment
Reported GAAP Earnings $ 10,107 $ 9,473 $ 31,373 $ 21,962
Depreciation, Depletion and Amortization 4,131 3,608 12,008 11,407
Interest and Other Income (288 ) (89 ) (642 ) (191 ) Interest
Expense 2,411 1,794 6,739 6,781 Income Taxes 7,540 7,647
23,696 17,763 Adjusted EBITDA $ 23,901
$ 22,433 $ 73,174 $ 57,722
Utility
Segment
Reported GAAP Earnings $ 4,348 $ 2,179 $ 51,103 $ 52,745
Depreciation, Depletion and Amortization 13,086 12,234 39,502
35,511 Interest and Other Income (579 ) (460 ) (994 ) (2,070 )
Interest Expense 7,062 7,192 21,454 21,684 Income Taxes 1,405
1,755 28,167 30,414 Adjusted EBITDA $
25,322 $ 22,900 $ 139,232 $ 138,284
Energy Marketing
Segment
Reported GAAP Earnings $ (564 ) $ (590 ) $ 2,122 $ 4,117
Depreciation, Depletion and Amortization 69 70 210 208 Interest and
Other Income (168 ) (165 ) (475 ) (330 ) Interest Expense 13 11 38
37 Income Taxes (367 ) (256 ) 1,318 2,537 Adjusted
EBITDA $ (1,017 ) $ (930 ) $ 3,213 $ 6,569
Corporate and All
Other
Reported GAAP Earnings $ (331 ) $ (934 ) $ (320 ) $ 2,458
Depreciation, Depletion and Amortization 370 588 1,088 1,444
Interest and Other Income (129 ) (387 ) (2,082 ) (3,263 ) Interest
Expense (1,348 ) (1,060 ) (3,757 ) (3,200 ) Income Taxes (1,189 )
745 (3,240 ) (2,672 ) Adjusted EBITDA $ (2,627 ) $ (1,048 )
$ (8,311 ) $ (5,233 )
NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES
Quarter Ended
June 30 (unaudited)
2017 2016 Operating Revenues $ 348,368,000 $
335,617,000 Net Income Available for Common Stock $
59,714,000 $ 8,286,000 Earnings Per Common
Share: Basic $ 0.70 $ 0.10 Diluted $ 0.69 $
0.10 Weighted Average Common Shares: Used in Basic
Calculation 85,422,313 84,917,664 Used in Diluted
Calculation 86,064,464 85,470,216
Nine Months Ended
June 30 (unaudited)
Operating Revenues $ 1,292,944,000 $ 1,159,943,000
Net Income (Loss) Available for Common Stock $
237,906,000 $ (328,510,000 ) Earnings (Loss) Per
Common Share: Basic $ 2.79 $ (3.87 ) Diluted $ 2.77 $
(3.87 ) Weighted Average Common Shares: Used in Basic
Calculation 85,315,154 84,791,447 Used in Diluted
Calculation 85,950,742 84,791,447
Twelve Months
Ended June 30 (unaudited)
Operating Revenues $ 1,585,416,000 $ 1,461,005,000
Net Income (Loss) Available for Common Stock $
275,459,000 $ (516,213,000 ) Earnings (Loss) Per
Common Share: Basic $ 3.23 $ (6.09 ) Diluted $ 3.21 $
(6.09 ) Weighted Average Common Shares: Used in Basic
Calculation 85,239,850 84,735,887 Used in Diluted
Calculation 85,881,424 84,735,887
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170803006507/en/
National Fuel Gas CompanyAnalyst:Brian M.
Welsch, 716-857-7875orMedia:Karen L.
Merkel, 716-857-7654
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