National Fuel Gas (NFG) Tops Q1 EPS by 4c; Lowers FY20 EPS Guidance, 'Decrease in Expected Earnings due to Decline in Natural Gas Prices'

National Fuel Gas (NYSE: NFG) reported Q1 EPS of $1.01, $0.04 better than the analyst estimate of $0.97.

FISCAL 2020 FIRST QUARTER SUMMARY

• GAAP earnings of $86.6 million, or $1.00 per share, compared to $102.7 million, or $1.18 per share, in the prior year
• Adjusted operating results of $87.4 million, or $1.01 per share, compared to $97.5 million, or $1.12 per share, in the prior year (see non-GAAP reconciliation below)
• Adjusted EBITDA of $222.9 million, an increase of $3.5 million from $219.4 million in the prior year (non-GAAP reconciliation on page 21)
• E&P segment net production of 58.4 Bcfe, an increase of 19% from the prior year
• Average natural gas prices, after the impact of hedging, of $2.32 per Mcf, down $0.29 per Mcf from the prior year
• Average oil prices, after the impact of hedging, of $62.92 per Bbl, up $1.22 per Bbl from the prior year
• Gathering revenues of $34.8 million, an increase of $5.1 million, or 17%, on higher throughput from E&P segment
• Due to low natural gas prices, the Company is reducing drilling activity; E&P segment completed the planned drop of a drilling rig in Appalachia in January and intends to drop an additional drilling rig in the summer of 2020
• Revising fiscal 2020 earnings guidance to a range of $2.95 to $3.15 per share to reflect lower natural gas prices

GUIDANCE:

National Fuel Gas sees FY2020 EPS of $2.95-$3.15, versus the consensus of $3.09.

FISCAL 2020 GUIDANCE AND BUSINESS UPDATE

National Fuel is revising its fiscal 2020 earnings guidance to reflect the results of the first quarter and updated forecast assumptions and projections. The Company is now projecting that earnings will be within the range of $2.95 to $3.15 per share, or $3.05 per share at the midpoint of the range. Substantially all of the decrease in expected earnings is due to the decline in natural gas prices that has occurred since the Company’s guidance was updated in November 2019, which is expected to lower the price realizations on Seneca’s Appalachian production. The Company’s other earnings guidance assumptions, including production, remain largely unchanged from the previous guidance.

The revised earnings guidance now assumes that NYMEX natural gas prices will average $2.05 per MMBtu for the remaining nine months of fiscal 2020, a decrease of $0.35 per MMBtu from the $2.40 per MMBtu assumed in the previous guidance. The Company is also lowering its Appalachian spot price forecast to $1.70 per MMBtu for the remainder of the fiscal year. These price assumptions are intended to reflect the current NYMEX forward markets for natural gas and oil and consider the impact of local sales point differentials. The Company currently has financial hedges and fixed price physical firm sales contracts in place on approximately 60% of Seneca’s remaining expected fiscal 2020 natural gas production that, on average, lock-in a price realization after the cost of transportation of $2.28 per Mcf.

As planned, the Company dropped a rig in January after completing its latest development pad in Tioga County, Pa. In response to the sustained decline in NYMEX pricing and regional pricing basis, the Company plans to further reduce its development activity level in Appalachia by dropping down to a single drilling rig during the summer of 2020 and deferring some completion activity in the Eastern Development Area to fiscal 2021. Coupled with lower service costs, Seneca’s reduced activity level is expected to result in lower capital expenditures in fiscal 2020 and going forward. The Company now expects Exploration and Production capital expenditures in fiscal 2020 to be in the range of $375 to $410 million, at the midpoint a reduction of $42.5 million from the previous guidance. The reduction in activity level is not expected to have a material impact on Seneca’s production in fiscal 2020.

Mr. Bauer added: “Facing the continued deterioration of natural gas prices, we are slowing down our development pace in Appalachia and intend to move to a single-rig drilling program this summer. This lower activity level will allow us to reduce our capital expenditures at Seneca by approximately $100 million from fiscal 2019 levels, maintaining our focus on the balance sheet. Overall, we remain steadfast in our commitment to the responsible development of our integrated Appalachian asset base, with responsible capital allocation at the heart of our financial decisions.”

For earnings history and earnings-related data on National Fuel Gas (NFG) click here.

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