(Source: Business Wire)
National Fuel Gas Company ("National Fuel" or the "Company") (NYSE:NFG) today announced consolidated earnings for the third quarter of fiscal 2009 and for the nine months ended June 30, 2009.
HIGHLIGHTS
Earnings for the third quarter were $42.9 million or $0.53 per share, a decrease of $17.0 million, or $0.19 per share from the third quarter of 2008. A 33% decrease in average commodity prices realized in the quarter this year in the Exploration and Production segment was the main driver of the decrease in earnings.
Production in the Exploration and Production segment for the current quarter increased over 12% with increases in all three divisions. Appalachian and Gulf of Mexico production each increased 16%. California production increased 7% during the quarter. Total production for the entire 2009 fiscal year is expected to be in the upper half of the previously announced range of 38 to 44 billion cubic feet equivalent ("Bcfe").
Seneca Resources Corporation ("Seneca") and joint-venture partner EOG Resources, Inc. ("EOG") have now completed and flow tested four horizontal Marcellus Shale wells at an average initial production ("IP") rate of 2.3 million cubic feet per day ("MMCFD"). Seneca estimates 4 to 8 trillion cubic feet ("TCF") of net risked Marcellus resource potential across an area of 720,000 acres that it considers to be prospective in the Marcellus Shale.
The Company is revising its GAAP earnings guidance range for fiscal 2009 to a range of $1.20 to $1.30 per share. The previous guidance range had been $0.95 to $1.10 per share.
The Company's preliminary GAAP earnings guidance for fiscal 2010 is in the range of $2.30 to $2.60 per share. The 2010 preliminary guidance includes oil and gas production for the Exploration and Production segment in the range of 42 to 48 billion cubic feet equivalent ("Bcfe") and is based on an assumed average NYMEX price, exclusive of basis differential, of $5.00 per Million British Thermal Units ("MMBtu") for natural gas and $75.00 per barrel ("Bbl") for crude oil.
A conference call is scheduled for Friday, August 7, 2009, at 11:00 a.m. Eastern Time.
MANAGEMENT COMMENTS
David F. Smith, Chief Executive Officer and President of National Fuel Gas Company stated: "It's no surprise that the dramatic drop in commodity prices compared to a year ago had a considerable impact on the earnings of our Exploration and Production segment and Pipeline and Storage segment. But putting aside the effect of commodity price changes, the third quarter was another strong quarter for the Company. Production was up 12% over the prior year, and our regulated operations delivered another quarter of consistent results.
"We continue to execute on our Appalachian growth strategy. Last month, we spudded our first Seneca operated Marcellus Shale horizontal well and we commenced construction of National Fuel Gas Midstream Corporation's first Appalachian-region gathering system. While the Marcellus Shale remains our top priority, we believe the current economic climate will create opportunities to invest in additional energy properties, such as our recently announced acquisition of production properties in California. The balance among our various operating segments continues to provide a solid base of earnings and financial strength to allow us to capitalize on these opportunities and others going forward.
"As we prepare for our next heating season, we are injecting natural gas into storage at rates that are substantially below last year's prices. These lower prices should help our customers moderate their utility bills over the upcoming heating season."
SUMMARY OF RESULTS
National Fuel had consolidated earnings for the quarter ended June 30, 2009, of $42.9 million or $0.53 per share, a decrease of $17.0 million, or $0.19 per share, from the prior year's third quarter earnings of $59.9 million or $0.72 per share. The per share amounts reflect a lower number of shares outstanding in the current quarter resulting mainly from the impact of the Company's repurchase of approximately 5.2 million shares of National Fuel common stock in the prior fiscal year. (note: all references to earnings per share are to diluted earnings per share, all amounts are stated in U.S. dollars and all amounts used in the discussions of earnings and operating results before items impacting comparability ("Operating Results") are stated on an after tax basis, unless otherwise noted.)
Consolidated earnings for the nine months ended June 30, 2009, of $73.7 million, or $0.92 per share, decreased $151.8 million, or $1.73 per share, from the same period in the prior year, where earnings were $225.5 million, or $2.65 per share.
Three Months Nine Months Ended June 30, Ended June 30, 2009 2008 2009 2008 (in thousands except per share amounts) Reported GAAP earnings $ 42,904 $ 59,855 $ 73,710 $ 225,463 Items impacting comparability1: Gain on sale of turbine (586 ) Impairment of oil and gas producing properties 108,207 Impairment of investment in partnership 1,085 Gain on life insurance proceeds (2,312 ) Operating Results $ 42,904 $ 59,855 $ 180,690 $ 224,877 Reported GAAP earnings per share $ 0.53 $ 0.72 $ 0.92 $ 2.65 Items impacting comparability1: Gain on sale of turbine (0.01 ) Impairment of oil and gas producing properties 1.35 Impairment of investment in partnership 0.01 Gain on life insurance proceeds (0.03 ) Earnings excluding these items $ 0.53 $ 0.72 $ 2.25 $ 2.64 -------------------------------------------------------------------------------
1 See discussion of these individual items below.
As outlined in the table above, certain items included in GAAP earnings impacted the comparability of the Company's financial results when comparing the nine months ended June 30, 2009, to the comparable period in fiscal 2008. Excluding these items, Operating Results for the nine months ended June 30, 2009, of $180.7 million, or $2.25 per share, decreased $44.2 million, or $0.39 per share. Items impacting comparability will be discussed in more detail within the discussion of segment earnings below.
DISCUSSION OF RESULTS BY SEGMENT
(The following discussion of earnings for each segment is summarized in a tabular form within this report. It may be helpful to refer to those tables while reviewing this discussion.)
Exploration and Production Segment
The Exploration and Production segment operations are carried out by Seneca Resources Corporation ("Seneca"). Seneca explores for, develops and purchases natural gas and oil reserves in California, in the Appalachian region, and in the Gulf of Mexico.
The Exploration and Production segment's earnings in the third quarter of fiscal 2009 of $27.1 million, or $0.33 per share, decreased $12.7 million, or $0.15 per share, when compared with the prior year's third quarter. The decrease was primarily due to lower crude oil and natural gas prices realized after hedging. Higher production across all three divisions, lower lease operating expenses ("LOE") and a lower effective tax rate partially offset the impact of lower commodity prices. The decrease in LOE is due to lower steam fuel costs in California.
For the quarter ended June 30, 2009, the weighted average oil price received by Seneca (after hedging) was $67.19 per Bbl, a decrease of $22.36 per Bbl from the prior year's quarter. The weighted average natural gas price received by Seneca (after hedging) for the quarter ended June 30, 2009, was $5.94 per thousand cubic feet ("Mcf"), a decrease of $3.79 per Mcf.
Overall crude oil and natural gas production for the current quarter of 11.5 Bcfe increased over 12 percent compared to the prior year's third quarter. Production increased 16 percent in both the Gulf of Mexico and Appalachian region and seven percent in California.
The Exploration and Production segment's loss of $38.4 million, or $0.47 per share, for the nine months ended June 30, 2009, compares to earnings of $108.4 million, or $1.28 per share, for the nine months ended June 30, 2008. The decrease was due to a non-cash charge of $108.2 million in the first quarter of fiscal 2009 to write down the value of Seneca's oil and natural gas producing properties.
Seneca uses the full cost method of accounting for determining the book value of its oil and natural gas properties. This accounting method requires that Seneca perform a quarterly "ceiling test" to compare the present value of future revenues from its oil and natural gas reserves based on period end spot prices (the "ceiling") with the book value of those reserves at the balance sheet date. If the book value of the reserves exceeds the ceiling calculation, a non-cash charge, or impairment, must be recorded in order to reduce the book value of the reserves to the calculated ceiling. The impairment was mainly driven by a significant decrease in commodity prices.
Excluding the impact of the ceiling test charge in the first quarter of fiscal 2009, Operating Results for the nine months ended June 30, 2009, of $69.8 million or $0.88 per share decreased $38.5 million, or $0.40 per share, from the prior year. The decrease was primarily due to lower crude oil and natural gas prices realized after hedging. For the nine months ended June 30, 2009, the weighted average oil price received by Seneca (after hedging) was $62.67 per Bbl, a decrease of $17.30 per Bbl from the prior year's nine-month period. The weighted average natural gas price received by Seneca (after hedging) for the nine months ended June 30, 2009, was $7.28 per Mcf, a decrease of $1.67 per Mcf.
Overall production for the nine months ended June 30, 2009, was 31.2 Bcfe compared to 31.3 Bcfe for the prior year nine-month period. Lower production in the Gulf of Mexico as a result of curtailments due to Hurricane Ike, was offset by increases in both California and Appalachia.
Other items impacting Operating Results for the nine months ended June 30, 2009, were lower depletion and LOE and higher general and administrative ("G&A") expenses. The impact of lower state income taxes had a positive impact on earnings for the current nine month period. The decrease in depletion expense was mainly due to a lower depletable base resulting from the ceiling test impairment recorded in the first quarter of fiscal 2009 described above. The decrease in LOE is due to lower steam fuel costs in California, lower workover expenses and the shut-in of certain properties related to Hurricane Ike in the Gulf of Mexico. The increase in G&A expenses is due to additional staffing and other costs in the East division, and a bad debt charge related to a refiner bankruptcy in California.
Seneca continues to evaluate and develop the Company's significant Marcellus Shale acreage position. Seneca and joint-venture partner EOG have now completed and flow tested four horizontal Marcellus Shale wells. The IP rates of those wells ranged from 1.4 to 3.3 million cubic feet per day ("MMCFD") and averaged 2.3 MMCFD. Seneca has also drilled seven vertical wells outside of the joint venture with EOG and is currently drilling its second Seneca-operated horizontal well in Tioga County, Pennsylvania. Seneca estimates 4 to 8 TCF of net risked Marcellus resource potential across an area of 720,000 acres that it considers to be prospective in the Marcellus Shale. This estimate is based upon certain risk assumptions that vary across the acreage.
On July 17, 2009, Seneca completed the purchase of Ivanhoe Energy's U.S. oil and gas subsidiary for $39.2 million. Assets acquired include proved oil and gas reserves of 1.8 million barrels of oil equivalent ("MMBOE") and approximately $5 million of other assets, such that the cost of the reserves was approximately $34 million, or $19 per proved Bbl.
Pipeline and Storage Segment
The Pipeline and Storage segment operations are carried out by National Fuel Gas Supply Corporation ("Supply Corporation") and Empire Pipeline, Inc. ("Empire"). These companies provide natural gas transportation and storage services to affiliated and non-affiliated companies through an integrated system of pipelines and underground natural gas storage fields in western New York and western Pennsylvania.
The Pipeline and Storage segment's earnings of $9.2 million, for the quarter ended June 30, 2009, decreased $3.3 million when compared with the same period in the prior fiscal year. The decrease was primarily due to lower efficiency gas revenues, mainly the result of lower commodity prices and lower transported volumes during the quarter. Higher transportation revenues from the Empire Connector, which was placed in service in mid December 2008, partially offset these decreases. Higher interest expense and a lower allowance for funds used during construction ("AFUDC") in the third quarter of the current fiscal year also contributed to the decrease in earnings compared to the prior year's third quarter.
The Pipeline and Storage segment's earnings of $41.6 million for the nine months ended June 30, 2009, increased $0.7 million when compared with the nine months ended June 30, 2008. The increase is due to higher transportation revenues, mainly the result of incremental revenue from the Empire Connector, which was placed in service in mid December 2008 and the addition of several new contracts for firm transportation services. Higher AFUDC related to the construction of the Empire Connector also contributed to the increase in earnings for the current nine-month period. Partially offsetting the increased earnings were lower efficiency gas revenues mainly due to lower natural gas prices, higher depreciation expense and higher interest expense during the current nine month period.
Utility Segment
The Utility segment operations are carried out by National Fuel Gas Distribution Corporation ("Distribution"), which sells or transports natural gas to customers located in western New York and northwestern Pennsylvania. The Utility segment's earnings of $5.4 million, or $0.07 per share, for the quarter ended June 30, 2009, compares to earnings of $7.8 million, or $0.09 per share, for the quarter ended June 30, 2008.
In the New York Division, earnings decreased $1.1 million. The decrease is primarily due to higher interest expense partially offset by lower operating expenses. In the Pennsylvania Division, earnings decreased $1.3 million. The decrease is mainly due to lower customer usage due to customer conservation efforts and higher interest expense.
The Utility segment's earnings of $60.3 million for the nine months ended June 30, 2009, decreased $1.9 million compared to the nine months ended June 30, 2008. Earnings in Distribution's New York Division for the nine months ended June 30, 2009, of $40.7 million decreased $0.5 million compared to the prior year. Lower margins in the first quarter of fiscal 2009 primarily as a result of the rate design change approved by the New York State Public Service Commission's December 28, 2007 rate order and higher interest expense more than offset the impact of lower operating expenses.
For the nine months ended June 30, 2009, earnings in Distribution's Pennsylvania Division of $19.6 million decreased $1.4 million compared to the prior year. The positive impact of colder weather and lower interest expense was offset by lower customer usage per account, higher bad debt expense and a higher effective tax rate.
Energy Marketing
National Fuel Resources, Inc. ("NFR") comprises the Company's Energy Marketing segment. NFR markets natural gas to industrial, wholesale, commercial, public authority and residential customers primarily in western and central New York and northwestern Pennsylvania, offering competitively priced natural gas to its customers.
The Energy Marketing segment's earnings for the quarter ended June 30, 2009, of $1.3 million increased $0.9 million compared to the third quarter of last year. Earnings increased as a result of lower bad debt expense and higher margins, primarily driven by lower pipeline transportation fuel costs due to lower natural gas commodity prices.
The Energy Marketing segment's earnings for the nine months ended June 30, 2009, of $7.5 million increased $0.4 million compared to the prior year. An increase in margin and lower operating expenses due to lower bad debt expense were somewhat offset by higher state income taxes.
Corporate and All Other
Other active, wholly owned subsidiaries of the Company include Highland Forest Resources, Inc., a corporation that markets high quality hardwoods from New York and Pennsylvania land holdings; Horizon LFG, Inc., a corporation engaged, through subsidiaries, in the purchase, processing, transportation and sale of landfill gas; and Horizon Power, Inc., a corporation that develops and owns independent electric generation facilities that are fueled by natural gas or landfill gas.
The Corporate and All Other category had a loss of $0.1 million for the quarter ended June 30, 2009 compared to a loss of $0.8 million in the prior year's third quarter. Expenses related to a proxy contest in fiscal 2008 did not recur in the current year and lower income taxes were the primary reasons for the decreased loss. The positive impact of these items was partially offset by lower income from unconsolidated subsidiaries and higher interest expense.
Earnings in the Corporate and All Other category for the nine months ended June 30, 2009, were $2.7 million, a decrease of $4.1 million when compared to the prior year's earnings. The comparability of the results for the nine months ended June 30, 2009, is impacted by a $0.6 million gain in the second quarter of fiscal 2008 related to the sale of a gas-powered turbine that the Company had previously planned to use in the development of a co-generation plant, and in the first quarter of fiscal 2009, by a $2.3 million gain recognized on executive life insurance policies and a $1.1 million impairment in the value of Horizon Power's 50 percent investment in Energy Systems North East, LLC, a partnership that owns an 80-megawatt combined cycle, natural gas-fired power plant in the town of North East, Pennsylvania. Excluding these items, Operating Results decreased $4.8 million. Lower margins from the timber operations as a result of decreased sales volumes and prices, lower margins in the landfill gas operations and a decrease in income from unconsolidated subsidiaries contributed to the decrease in Operating Results. The non-recurrence of expenses related to the proxy contest, noted above, and lower income taxes partially offset the decrease in Operating Results.
EARNINGS GUIDANCE
The Company is revising its earnings guidance for fiscal 2009 to reflect actual results for the nine months ended June 30, 2009. The revised GAAP earnings range is $1.20 to $1.30 per share. The previous guidance range had been $0.95 to $1.10 per share. The revised guidance includes actual results for the first nine months of fiscal 2009, the impairment charge recorded in the first quarter, forecasted oil and gas production for fiscal 2009 for the Exploration and Production segment in the upper half of the previously announced range of 38 to 44 Bcfe, hedges currently in place, and NYMEX equivalent flat commodity pricing on non-hedged volumes exclusive of basis differential, of $3.53 per MMBtu for natural gas and $60.50 per Bbl for crude oil.
The Company's preliminary GAAP earnings guidance for fiscal 2010 is in the range of $2.30 to $2.60 per share. This includes oil and gas production for the Exploration and Production segment in the range of 42 to 48 Bcfe and is based on an assumed average NYMEX price, exclusive of basis differential, of $5.00 per MMBtu for natural gas and $75.00 per Bbl for crude oil. Further details regarding the production guidance are included within this document.
EARNINGS TELECONFERENCE
The Company will host a conference call on Friday, August 7, 2009, at 11 a.m. (Eastern Time) to discuss this announcement. There are two ways to access this call. For those with Internet access, visit the investor relations page at National Fuel's Web site at investor.nationalfuelgas.com. For those without Internet access, access is also provided by dialing (toll-free) 1-866-700-7441, and using the passcode "18477482." For those unable to listen to the live conference call, a replay will be available at approximately 2 p.m. (Eastern Time) at the same Web site link and by phone at (toll free) 888-286-8010 using passcode "79992917." Both the webcast and telephonic replay will be available until the close of business on Tuesday, September 8, 2009.
National Fuel is an integrated energy company with $4.4 billion in assets comprised of the following four operating segments: Exploration and Production, Pipeline and Storage, Utility, and Energy Marketing. Additional information about National Fuel is available on its Internet Web site: http://www.nationalfuelgas.com or through its investor information service at 1-800-334-2188.
The Securities and Exchange Commission (the "SEC") permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. The Company uses the terms "probable," "possible," "resource potential" and other descriptions of volumes of reserves or resources potentially recoverable through additional drilling or recovery techniques that the SEC's guidelines would prohibit us from including in filings with the SEC. These estimates are by their nature more speculative than estimates of proved reserves and, accordingly, are subject to substantially greater risk of being actually realized. Investors are urged to consider closely the disclosure in our Form 10-K and Forms 10-Q, available at www.nationalfuelgas.com. You can also obtain these forms on the SEC's website at www.sec.gov.
Certain statements contained herein, including those regarding estimated future earnings, and statements that are identified by the use of the words "anticipates," "estimates," "expects," "forecasts," "intends," "plans," "predicts," "projects," "believes," "seeks," "will," "may" and similar expressions, are "forward-looking statements" as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties, which could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. The Company's expectations, beliefs and projections contained herein are expressed in good faith and are believed to have a reasonable basis, but there can be no assurance that such expectations, beliefs or projections will result or be achieved or accomplished. In addition to other factors, the following are important factors that could cause actual results to differ materially from those discussed in the forward-looking statements: financial and economic conditions, including the availability of credit, and their effect on the Company's ability to obtain financing on acceptable terms for working capital, capital expenditures and other investments; occurrences affecting the Company's ability to obtain financing under credit lines or other credit facilities or through the issuance of commercial paper, other short-term notes or debt or equity securities, including any downgrades in the Company's credit ratings and changes in interest rates and other capital market conditions; changes in economic conditions, including global, national or regional recessions, and their effect on the demand for, and customers' ability to pay for, the Company's products and services; the creditworthiness or performance of the Company's key suppliers, customers and counterparties; economic disruptions or uninsured losses resulting from terrorist activities, acts of war, major accidents, fires, hurricanes, other severe weather, pest infestation or other natural disasters; changes in 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 demographic patterns and weather conditions; changes in the availability and/or price of natural gas or oil and the effect of such changes on the accounting treatment of derivative financial instruments or the valuation of the Company's natural gas and oil reserves; impairments under the SEC's full cost ceiling test for natural gas and oil reserves; uncertainty of oil and gas reserve estimates; factors affecting the Company's ability to successfully identify, drill for and produce economically viable natural gas and oil reserves, including among others geology, lease availability, weather conditions, shortages, delays or unavailability of equipment and services required in drilling operations, and the need to obtain governmental approvals and permits and comply with environmental laws and regulations; significant differences between the Company's projected and actual production levels for natural gas or oil; changes in the availability and/or price of derivative financial instruments; changes in the price differentials between oil having different quality and/or different geographic locations, or changes in the price differentials between natural gas having different heating values and/or different geographic locations; inability to obtain new customers or retain existing ones; significant changes in competitive factors affecting the Company; changes in laws and regulations to which the Company is subject, including tax, environmental, safety and employment laws and regulations; governmental/regulatory actions, initiatives and proceedings, including those involving acquisitions, financings, rate cases (which address, among other things, allowed rates of return, rate design and retained natural gas), affiliate relationships, industry structure, franchise renewal, and environmental/safety requirements; unanticipated impacts of restructuring initiatives in the natural gas and electric industries; significant differences between the Company's projected and actual capital expenditures and operating expenses and unanticipated project delays or changes in project costs or plans; the nature and projected profitability of pending and potential projects and other investments, and the ability to obtain necessary governmental approvals and permits; ability to successfully identify and finance acquisitions or other investments and ability to operate and integrate existing and any subsequently acquired business or properties; significant changes in tax rates or policies or in rates of inflation or interest; significant changes in the Company's relationship with its employees or contractors and the potential adverse effects if labor disputes, grievances or shortages were to occur; changes in accounting principles or the application of such principles to the Company; the cost and effects of legal and administrative claims against the Company or activist shareholder campaigns to effect changes at the Company; increasing health care costs and the resulting effect on health insurance premiums and on the obligation to provide other post-retirement benefits; or increasing costs of insurance, changes in coverage and the ability to obtain insurance. The Company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date hereof.
NATIONAL FUEL GAS COMPANY RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS QUARTER ENDED JUNE 30, 2009 Exploration & Pipeline & Energy Corporate / (Thousands of Dollars) Production Storage Utility Marketing All Other Consolidated Third quarter 2008 GAAP earnings $ 39,791 $ 12,534 $ 7,848 $ 478 $ (796 ) $ 59,855 Drivers of operating results Higher (lower) crude oil prices (12,261 ) (12,261 ) Higher (lower) natural gas prices (15,946 ) (15,946 ) Higher (lower) natural gas production 4,155 4,155 Higher (lower) crude oil production 5,758 5,758 Lower (higher) lease operating expenses 2,838 2,838 Higher (lower) transportation revenues 2,183 2,183 Higher (lower) efficiency gas revenues (2,534 ) (2,534 ) Lower (higher) operating costs 480 632 1,063 2,175 Higher (lower) usage (430 ) (430 ) Income from unconsolidated subsidiaries (607 ) (607 ) Higher (lower) margins 395 (234 ) 161 Higher (lower) AFUDC* (937 ) (937 ) Higher (lower) interest income (1,254 ) 272 (982 ) Lower (higher) interest expense 1,659 (1,401 ) (1,861 ) (774 ) (2,377 ) Lower (higher) income tax expense / effective tax rate 2,443 803 3,246 All other / rounding (100 ) (624 ) (641 ) (174 ) 146 (1,393 ) Third quarter 2009 GAAP earnings $ 27,083 $ 9,221 $ 5,396 $ 1,331 $ (127 ) $ 42,904 * AFUDC = Allowance for Funds Used During Construction -------------------------------------------------------------------------------
NATIONAL FUEL GAS COMPANY RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS PER SHARE QUARTER ENDED JUNE 30, 2009 Exploration & Pipeline & Energy Corporate / Production Storage Utility Marketing All Other Consolidated Third quarter 2008 GAAP earnings $ 0.48 $ 0.15 $ 0.09 $ - $ - $ 0.72 Drivers of operating results Higher (lower) crude oil prices (0.15 ) (0.15 ) Higher (lower) natural gas prices (0.20 ) (0.20 ) Higher (lower) natural gas production 0.05 0.05 Higher (lower) crude oil production 0.07 0.07 Lower (higher) lease operating expenses 0.04 0.04 Higher (lower) transportation and storage revenues 0.03 0.03 Higher (lower) efficiency gas revenues (0.03 ) (0.03 ) Lower (higher) operating costs 0.01 0.01 0.01 0.03 Higher (lower) usage (0.01 ) (0.01 ) Income from unconsolidated subsidiaries (0.01 ) (0.01 ) Higher (lower) margins 0.01 - 0.01 Higher (lower) AFUDC* (0.01 ) (0.01 ) Higher (lower) interest income (0.02 ) - (0.02 ) Lower (higher) interest expense 0.02 (0.02 ) (0.02 ) (0.01 ) (0.03 ) Lower (higher) income tax expense / effective tax rate 0.03 0.01 0.04 All other / rounding (including impact of lower weighted average shares) 0.01 (0.01 ) - - - - Third quarter 2009 GAAP earnings $ 0.33 $ 0.11 $ 0.07 $ 0.02 $ - $ 0.53 * AFUDC = Allowance for Funds Used During Construction -------------------------------------------------------------------------------
NATIONAL FUEL GAS COMPANY RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS NINE MONTHS ENDED JUNE 30, 2009 Exploration & Pipeline & Energy Corporate / (Thousands of Dollars) Production Storage Utility Marketing All Other Consolidated Nine months ended June 30, 2008 GAAP earnings $ 108,385 $ 40,931 $ 62,228 $ 7,079 $ 6,840 $ 225,463 Items impacting comparability: Gain on sale of turbine (586 ) (586 ) Nine months ended June 30, 2008 operating results 108,385 40,931 62,228 7,079 6,254 224,877 Drivers of operating results Higher (lower) crude oil prices (28,048 ) (28,048 ) Higher (lower) natural gas prices (17,543 ) (17,543 ) Higher (lower) natural gas production (6,799 ) (6,799 ) Higher (lower) crude oil production 8,996 8,996 Lower (higher) lease operating expenses 3,145 3,145 Higher (lower) transportation revenues 7,884 7,884 Higher (lower) efficiency gas revenues (4,384 ) (4,384 ) Lower (higher) operating costs (3,030 ) 1,695 391 3,665 2,721 Lower (higher) depreciation / depletion 1,911 (1,162 ) 749 Colder weather in Pennsylvania 1,961 1,961 Higher (lower) usage (1,886 ) (1,886 ) Regulatory true-up adjustments (356 ) (356 ) Income from unconsolidated subsidiaries (1,483 ) (1,483 ) Higher (lower) margins (1,419 ) 612 (6,887 ) (7,694 ) Higher (lower) AFUDC* 661 661 Higher (lower) interest income (4,611 ) 141 (1,895 ) (6,365 ) Lower (higher) interest expense 4,695 (3,114 ) (683 ) (1,341 ) (443 ) Lower (higher) income tax expense / effective tax rate 3,180 (1,212 ) (380 ) 3,474 5,062 All other / rounding (440 ) 625 (25 ) (193 ) (332 ) (365 ) Nine months ended June 30, 2009 operating results 69,841 41,582 60,303 7,509 1,455 180,690 Items impacting comparability: Gain on life insurance policies 2,312 2,312 Impairment of investment in partnership (1,085 ) (1,085 ) Impairment of oil and gas properties (108,207 ) (108,207 ) Nine months ended June 30, 2009 GAAP earnings $ (38,366 ) $ 41,582 $ 60,303 $ 7,509 $ 2,682 $ 73,710 * 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, 2009 Exploration & Pipeline & Energy Corporate / Production Storage Utility Marketing All Other Consolidated Nine months ended June 30, 2008 GAAP earnings $ 1.28 $ 0.48 $ 0.73 $ 0.08 $ 0.08 $ 2.65 Items impacting comparability: Gain on sale of turbine (0.01 ) (0.01 ) Nine months ended June 30, 2008 operating results 1.28 0.48 0.73 0.08 0.07 2.64 Drivers of operating results Higher (lower) crude oil prices (0.35 ) (0.35 ) Higher (lower) natural gas prices (0.22 ) (0.22 ) Higher (lower) natural gas production (0.08 ) (0.08 ) Higher (lower) crude oil production 0.11 0.11 Lower (higher) lease operating expenses 0.04 0.04 Higher (lower) transportation and storage revenues 0.10 0.10 Higher (lower) efficiency gas revenues (0.05 ) (0.05 ) Lower (higher) operating costs (0.04 ) 0.02 - 0.05 0.03 Lower (higher) depreciation / depletion 0.02 (0.01 ) 0.01 Colder weather in Pennsylvania 0.02 0.02 Higher (lower) usage (0.02 ) (0.02 ) Regulatory true-up adjustments - - Income from unconsolidated subsidiaries (0.02 ) (0.02 ) Higher (lower) margins (0.02 ) 0.01 (0.09 ) (0.10 ) Higher (lower) AFUDC* 0.01 0.01 Higher (lower) interest income (0.06 ) - (0.02 ) (0.08 ) Lower (higher) interest expense 0.06 (0.04 ) (0.01 ) (0.02 ) (0.01 ) Lower (higher) income tax expense / effective tax rate 0.04 (0.02 ) - 0.04 0.06 All other / rounding (including impact of lower weighted average shares) 0.08 0.03 0.05 - - 0.16 Nine months ended June 30, 2009 operating results 0.88 0.52 0.75 0.09 0.01 2.25 Items impacting comparability: Gain on life insurance policies 0.03 0.03 Impairment of investment in partnership (0.01 ) (0.01 ) Impairment of oil and gas properties (1.35 ) (1.35 ) Nine months ended June 30, 2009 GAAP earnings $ (0.47 ) $ 0.52 $ 0.75 $ 0.09 $ 0.03 $ 0.92 * 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 2009 2008 2009 2008 Operating Revenues $ 367,111 $ 548,382 $ 1,778,919 $ 2,002,503 Operating Expenses: Purchased Gas 126,969 272,893 941,171 1,082,340 Operation and Maintenance 90,821 102,602 310,605 325,642 Property, Franchise and Other Taxes 17,576 19,135 56,709 58,206 Depreciation, Depletion and Amortization 43,659 42,804 127,715 129,337 Impairment of Oil and Gas Producing Properties - - 182,811 - 279,025 437,434 1,619,011 1,595,525 Operating Income 88,086 110,948 159,908 406,978 Other Income (Expense): Income from Unconsolidated Subsidiaries 627 1,561 915 4,866 Interest Income 1,460 3,086 4,358 8,356 Other Income 664 1,649 6,459 4,982 Interest Expense on Long-Term Debt (21,756 ) (19,468 ) (57,357 ) (52,045 ) Other Interest Expense (2,539 ) (1,199 ) (5,013 ) (4,209 ) Income Before Income Taxes 66,542 96,577 109,270 368,928 Income Tax Expense 23,638 36,722 35,560 143,465 Net Income Available for Common Stock $ 42,904 $ 59,855 $ 73,710 $ 225,463 Earnings Per Common Share: Basic $ 0.54 $ 0.74 $ 0.93 $ 2.72 Diluted $ 0.53 $ 0.72 $ 0.92 $ 2.65 Weighted Average Common Shares: Used in Basic Calculation 79,551,195 81,342,788 79,450,838 82,789,748 Used in Diluted Calculation 80,391,402 83,712,193 80,248,787 85,000,381 -------------------------------------------------------------------------------
NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) June 30, September 30, (Thousands of Dollars) 2009 2008 ASSETS Property, Plant and Equipment $ 5,078,088 $ 4,873,969 Less - Accumulated Depreciation, Depletion and Amortization 2,010,584 1,719,869 Net Property, Plant and Equipment 3,067,504 3,154,100 Current Assets: Cash and Temporary Cash Investments 433,230 68,239 Cash Held in Escrow 2,000 - Hedging Collateral Deposits 6,359 1 Receivables - Net 200,594 185,397 Unbilled Utility Revenue 14,568 24,364 Gas Stored Underground 27,721 87,294 Materials and Supplies - at average cost 24,768 31,317 Unrecovered Purchased Gas Costs 1,900 37,708 Other Current Assets 32,477 65,158 Deferred Income Taxes 33,009 - Total Current Assets 776,626 499,478 Other Assets: Recoverable Future Taxes 83,543 82,506 Unamortized Debt Expense A service of YellowBrix, Inc.
