National Fuel Reports First Quarter Earnings
WILLIAMSVILLE, N.Y., Jan. 30, 2020 (GLOBE NEWSWIRE) -- National Fuel Gas Company (“National Fuel” or the “Company”) (NYSE: NFG) today announced consolidated results for the first quarter of its 2020 fiscal year.
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
| RECONCILIATION OF GAAP EARNINGS TO ADJUSTED OPERATING RESULTS | ||||||||
| Three Months Ended | ||||||||
| December 31, | ||||||||
| (in thousands except per share amounts) | 2019 | 2018 | ||||||
| Reported GAAP Earnings | $ | 86,591 | $ | 102,660 | ||||
| Items impacting comparability | ||||||||
| Remeasurement of deferred income taxes under 2017 Tax Reform | — | (5,000 | ) | |||||
| Mark-to-market adjustments due to hedge ineffectiveness (E&P) | — | (6,505 | ) | |||||
| Tax impact of mark-to-market adjustments due to hedge ineffectiveness | — | 1,366 | ||||||
| Unrealized loss on other investments (Corporate / All Other) | 1,019 | 6,347 | ||||||
| Tax impact of unrealized loss on other investments | (214 | ) | (1,333 | ) | ||||
| Adjusted Operating Results | $ | 87,396 | $ | 97,535 | ||||
| Reported GAAP Earnings per share | $ | 1.00 | $ | 1.18 | ||||
| Items impacting comparability | ||||||||
| Remeasurement of deferred income taxes under 2017 Tax Reform | — | (0.06 | ) | |||||
| Mark-to-market adjustments due to hedge ineffectiveness, net of tax (E&P) | — | (0.06 | ) | |||||
| Unrealized loss on other investments, net of tax (Corporate / All Other) | 0.01 | 0.06 | ||||||
| Adjusted Operating Results per share | $ | 1.01 | $ | 1.12 | ||||
MANAGEMENT COMMENTS
David P. Bauer, President and Chief Executive Officer of National Fuel Gas Company, stated: “Though low natural gas prices weighed on National Fuel’s first quarter earnings, the Company saw strong operational results across our integrated, diversified business that position us well for future success. At the Utility, our ongoing system modernization program continues to enhance the safety and reliability of our distribution system, while at the same time modestly growing rate base and earnings. Our Pipeline and Storage business is focused on the execution of our significant expansion opportunities, including the Line N project placed into service in November and the Empire North project, which is on schedule for a late summer in-service date. Lastly, our Exploration and Production business continues to successfully develop its assets in Pennsylvania and California at a steady pace while navigating the headwinds in the commodity markets.”
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.”
Additional details on the Company's updated forecast assumptions and business segment guidance for fiscal 2020 are outlined in the table on page 7.
DISCUSSION OF FIRST QUARTER RESULTS BY SEGMENT
The following earnings discussion of each operating segment for the quarter ended December 31, 2019, is summarized in a tabular form on pages 8 and 9 of this report. It may be helpful to refer to those tables while reviewing this discussion. As of the quarter ended September 30, 2019, the Company is no longer reporting the Energy Marketing operations as a reportable segment. The Energy Marketing operations have been included in the All Other category in the disclosures and tables that follow below. Prior year segment information has been restated to reflect this change in presentation.
Note that management defines Adjusted Operating Results as reported GAAP earnings adjusted for items impacting comparability, and Adjusted EBITDA as reported GAAP earnings before the following items: interest expense, income taxes, depreciation, depletion and amortization, other income and deductions, impairments, and other items reflected in operating income that impact comparability.
Upstream Business
Exploration and Production Segment
The Exploration and Production segment operations are carried out by Seneca Resources Company, LLC ("Seneca"). Seneca explores for, develops and produces natural gas and oil reserves, primarily in Pennsylvania and California.
| Three Months Ended | |||||||||||
| December 31, | |||||||||||
| (in thousands) | 2019 | 2018 | Variance | ||||||||
| GAAP Earnings | $ | 23,977 | $ | 38,214 | $ | (14,237 | ) | ||||
| Remeasurement of deferred taxes under 2017 Tax Reform | — | (990 | ) | 990 | |||||||
| Mark-to-market adjustments due to hedge ineffectiveness, net of tax | — | (5,139 | ) | 5,139 | |||||||
| Adjusted Operating Results | $ | 23,977 | $ | 32,085 | $ | (8,108 | ) | ||||
| Adjusted EBITDA | $ | 92,100 | $ | 89,896 | $ | 2,204 | |||||
Seneca’s first quarter GAAP earnings decreased $14.2 million versus the prior year, which includes the net impact of non-cash mark-to-market adjustments recorded in the prior year relating to hedge ineffectiveness and the impact of a remeasurement in Seneca’s deferred income taxes under 2017 Tax Reform that lowered income tax expense and benefited earnings in the prior year (see table above). Excluding these items, Seneca’s first quarter earnings decreased $8.1 million as the positive impacts of higher production and better realized crude oil prices were more than offset by the negative impacts of lower realized natural gas prices, higher operating expenses, higher interest expense, and a higher effective tax rate.
Seneca produced 58.4 Bcfe during the first quarter, an increase of 9.1 Bcfe, or 19%, from the prior year. Natural gas production increased 9.0 Bcf, or 20%, due primarily to production from new Marcellus and Utica wells completed and connected to sales in Appalachia. Net production increased 3.8 Bcf to 24.9 Bcf in Seneca’s Western Development Area and increased 5.2 Bcf to 29.3 Bcf in the Eastern Development Area during the first quarter. Oil production for the first quarter increased 29,000 Bbls from the prior year as new production continues to come online from Seneca’s development of the Pioneer and 17N assets in the Midway Sunset area of California.
Seneca's average realized natural gas price, after the impact of hedging and transportation costs, was $2.32 per Mcf, a decrease of $0.29 per Mcf from the prior year. This decline was largely due to lower NYMEX prices and lower spot pricing at local sales points in Pennsylvania. Seneca's average realized oil price, after the impact of hedging, was $62.92 per Bbl, an increase of $1.22 per Bbl over the prior year. The improvement in oil price realizations was due primarily to stronger hedge prices on Brent oil swaps that settled during the quarter when compared to the prior year.
The $16.8 million increase in Seneca’s total operating expenses was largely due to the higher production during the quarter. Lease operating and transportation (“LOE”) expense, which increased $8.2 million, includes the fees paid to the Company’s Gathering segment for gathering and compression services used to connect Seneca’s Marcellus and Utica production to sales points along interstate pipelines. In addition to higher production, the $9.4 million increase in depreciation, depletion and amortization (“DD&A”) expense was also due to a higher DD&A rate, which was driven by an increase in capitalized costs in Seneca’s full cost pool. Other taxes decreased $1.7 million in large part due to lower impact fees in Pennsylvania. The Pennsylvania impact fee, which is assessed on a per well basis, increases and decreases along with the changes in historical NYMEX natural gas prices. Additionally, Seneca’s general and administrative (“G&A”) costs have remained relatively flat as it has increased production. On a unit of production basis, G&A expenses during the quarter decreased $0.05 per Mcfe to $0.26 per Mcfe.
The increase in Seneca’s effective tax rate, excluding the impact of the prior year remeasurement of deferred income taxes discussed above, was largely driven by the prior year impact of the Enhanced Oil Recovery tax credit, which was not available in the current year.
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 | |||||||||||
| December 31, | |||||||||||
| (in thousands) | 2019 | 2018 | Variance | ||||||||
| GAAP Earnings | $ | 18,105 | $ | 25,102 | $ | (6,997 | ) | ||||
| Adjusted EBITDA | $ | 42,942 | $ | 47,824 | $ | (4,882 | ) | ||||
The Pipeline and Storage segment’s first quarter GAAP earnings decreased $7.0 million versus the prior year as lower operating revenues, higher property taxes, and the impact of a higher effective income tax rate were only partially offset by lower operation and maintenance (“O&M”) expenses. The $4.8 million decrease in operating revenues was due largely to the expiration of a significant firm transportation contract on the Empire system in December 2018. Property, franchise and other taxes increased $1.0 million due primarily to the scheduled phase out of tax incentives in certain jurisdictions along the Empire system. The increase in the effective income tax rate, which lowered first quarter earnings by $2.5 million, was largely due to differences in the book and tax treatment of stock compensation. O&M expense decreased $0.7 million due primarily to lower personnel expenses and lower compressor and facility maintenance costs.
Gathering Segment
The Gathering segment’s operations are carried out by National Fuel Gas Midstream Company, LLC’s limited liability companies. The Gathering segment constructs, owns and operates natural gas gathering pipelines and compression facilities in the Appalachian region, which currently deliver Seneca’s gross Appalachian production to the interstate pipeline system.
| Three Months Ended | |||||||||||
| December 31, | |||||||||||
| (in thousands) | 2019 | 2018 | Variance | ||||||||
| GAAP Earnings | $ | 15,944 | $ | 14,183 | $ | 1,761 | |||||
| Remeasurement of deferred taxes under 2017 Tax Reform | — | (500 | ) | 500 | |||||||
| Adjusted Operating Results | $ | 15,944 | $ | 13,683 | $ | 2,261 | |||||
| Adjusted EBITDA | $ | 29,431 | $ | 25,948 | $ | 3,483 | |||||
The Gathering segment’s first quarter GAAP earnings increased $1.8 million versus the prior year, which includes the impact of a remeasurement in the Gathering segment’s deferred income taxes under 2017 Tax Reform that lowered income tax expense and benefited earnings in the prior year (see table above). Excluding this item, the Gathering segment’s earnings increased $2.3 million. The increase was driven primarily by higher operating revenues, which were partially offset by higher O&M expense and a modest increase in DD&A expense. Operating revenues increased $5.1 million, or 17%, due primarily to a 9.7 Bcf increase in gathered volumes from Seneca’s Appalachian natural gas production. The $1.6 million increase in O&M expense was due to an increase in compressor station operating and preventative maintenance activity during the quarter. The $0.5 million increase in DD&A expense was due primarily to higher average plant assets in-service versus the prior year.
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 | |||||||||||
| December 31, | |||||||||||
| (in thousands) | 2019 | 2018 | Variance | ||||||||
| GAAP Earnings | $ | 26,583 | $ | 25,649 | $ | 934 | |||||
| Adjusted EBITDA | $ | 59,463 | $ | 57,569 | $ | 1,894 | |||||
The Utility segment’s first quarter GAAP earnings increased $0.9 million over the prior year as an increase in customer margin (operating revenues less purchased gas sold) was partially offset by the impact of a higher effective income tax rate. The $1.3 million increase in customer margin was due primarily to higher revenues earned through the Company’s system modernization tracking mechanism and the positive impact of adjustments related to regulatory rate and cost recovery mechanisms subject to annual reconciliation. Warmer weather in the Utility segment’s service territories was not a significant driver of customer margin or earnings for the quarter. In New York, which represented 73% of the Utility segment’s residential and commercial customer throughput during the quarter, the impact of weather variations on customer margin and earnings is largely mitigated by that jurisdiction’s weather normalization clause (“WNC”). The modest earnings impact of warmer weather in Pennsylvania, which does not have a WNC, was partially offset by the impact of customer growth in New York. The increase in the effective income tax rate was largely due to differences in the book and tax treatment of stock compensation.
Corporate and All Other
The Company’s operations that are included in Corporate and All Other, which now include the Company’s energy marketing business, generated combined earnings of $2.0 million in the current year first quarter, which was a $2.5 million increase over the combined loss of $0.5 million generated in the prior year first quarter. The increase in earnings was driven primarily by lower unrealized losses coupled with an increase in realized gains on investment securities sold in the current year. These positive items were partially offset by the impact of the prior year remeasurement of deferred income taxes under 2017 Tax Reform that lowered income tax expense.
EARNINGS TELECONFERENCE
The Company will host a conference call on Friday, January 31, 2020, at 11 a.m. Eastern Time to discuss this announcement. There are two ways to access this call. For those with Internet access, visit the NFG Investor Relations News & Events page at National Fuel’s website at investor.nationalfuelgas.com. For those without Internet access, audio access is also provided by dialing (toll-free) 833-287-0795, using conference ID number “8154487”. For those unable to listen to the live conference call, an audio replay will be available approximately two hours following the teleconference at the same website link and by phone at (toll-free) 800-585-8367 using conference ID number “8154487”. Both the webcast and a telephonic replay will be available until the close of business on Friday, February 7, 2020.
National Fuel is an integrated energy company reporting financial results for four operating segments: Exploration and Production, Pipeline and Storage, Gathering, and Utility. Additional information about National Fuel is available at www.nationalfuelgas.com.
| Analyst Contact: | Kenneth E. Webster | 716-857-7067 |
| Media Contact: | Karen L. Merkel | 716-857-7654 |
Certain statements contained herein, including statements identified by the use of the words “anticipates,” “estimates,” “expects,” “forecasts,” “intends,” “plans,” “predicts,” “projects,” “believes,” “seeks,” “will,” “may” and similar expressions, and statements which are other than statements of historical facts, are “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties, which could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. The Company’s expectations, beliefs and projections contained herein are expressed in good faith and are believed to have a reasonable basis, but there can be no assurance that such expectations, beliefs or projections will result or be achieved or accomplished. In addition to other factors, the following are important factors that could cause actual results to differ materially from those discussed in the forward-looking statements: changes in the price of natural gas or oil; impairments under the SEC’s full cost ceiling test for natural gas and oil reserves; 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; 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 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; 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; other changes in price differentials between similar quantities of natural gas or oil having different quality, heating value, hydrocarbon mix or delivery date; the cost and effects of legal and administrative claims against the Company or activist shareholder campaigns to effect changes at the Company; uncertainty of oil and gas reserve estimates; significant differences between the Company’s projected and actual production levels for natural gas or oil; changes in demographic patterns and weather conditions; changes in the availability, price or accounting treatment of derivative financial instruments; changes in laws, actuarial assumptions, the interest rate environment and the return on plan/trust assets related to the Company’s pension and other post-retirement benefits, which can affect future funding obligations and costs and plan liabilities; changes in economic conditions, including global, national or regional recessions, and their effect on the demand for, and customers’ ability to pay for, the Company’s products and services; the creditworthiness or performance of the Company’s key suppliers, customers and counterparties; the impact of information technology, cybersecurity or data security breaches; economic disruptions or uninsured losses resulting from major accidents, fires, severe weather, natural disasters, terrorist activities or acts of war; significant differences between the Company’s projected and actual capital expenditures and operating expenses; or increasing costs of insurance, changes in coverage and the ability to obtain insurance. The Company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date thereof.
| NATIONAL FUEL GAS COMPANYAND SUBSIDIARIES | |||||
| GUIDANCE SUMMARY | |||||
| As discussed on page 2, the Company is revising its earnings guidance for fiscal 2020. Additional details on the Company's forecast assumptions and business segment guidance are outlined in the table below. | |||||
| Updated FY 2020 Guidance | Previous FY 2020 Guidance | ||||
| Consolidated Earnings per Share | $2.95 to $3.15 | $3.00 to $3.30 | |||
| Consolidated Effective Tax Rate | ~ 25% | ~ 25% | |||
| Capital Expenditures (Millions) | |||||
| Exploration and Production | $375 - $410 | $415 - $455 | |||
| Pipeline and Storage | $180 - $215 | $180 - $215 | |||
| Gathering | $50 - $60 | $40 - $50 | |||
| Utility | $90 - $100 | $90 - $100 | |||
| Consolidated Capital Expenditures | $695 - $785 | $725 - $820 | |||
| Exploration & Production Segment Guidance | |||||
| Commodity Price Assumptions | |||||
| NYMEX natural gas price | $2.05 /MMBtu | $2.40 /MMBtu | |||
| Appalachian basin spot price (winter | summer) | $1.70 /MMBtu | $1.70 /MMBtu | $2.20 /MMBtu | $2.00 /MMBtu | |||
| NYMEX (WTI) crude oil price | $55.00 /Bbl | $55.00 /Bbl | |||
| California oil price premium (% of WTI) | 104% | 106% | |||
| Production (Bcfe) | |||||
| East Division - Appalachia | 219 to 229 | 219 to 229 | |||
| West Division - California | ~ 16 | ~ 16 | |||
| Total Production | 235 to 245 | 235 to 245 | |||
| E&P Operating Costs ($/Mcfe) | |||||
| LOE | $0.85 - $0.89 | $0.85 - $0.89 | |||
| G&A | $0.27 - $0.30 | $0.27 - $0.30 | |||
| DD&A | $0.73 - $0.77 | $0.73 - $0.77 | |||
| Other Business Segment Guidance (Millions) | |||||
| Gathering Segment Revenues | $135 - $145 | $135 - $145 | |||
| Pipeline and Storage Segment Revenues | $290 - $295 | $290 - $295 | |||
| NATIONAL FUEL GAS COMPANY | |||||||||||||||||||||||
| RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS | |||||||||||||||||||||||
| QUARTER ENDED DECEMBER 31, 2019 | |||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||
| Upstream | Midstream | Downstream | |||||||||||||||||||||
| Exploration & | Pipeline & | Corporate / | |||||||||||||||||||||
| (Thousands of Dollars) | Production | Storage | Gathering | Utility | All Other | Consolidated* | |||||||||||||||||
| First quarter 2019 GAAP earnings | $ | 38,214 | $ | 25,102 | $ | 14,183 | $ | 25,649 | $ | (488 | ) | $ | 102,660 | ||||||||||
| Items impacting comparability: | |||||||||||||||||||||||
| Remeasurement of deferred taxes under 2017 Tax Reform | (990 | ) | (500 | ) | (3,510 | ) | (5,000 | ) | |||||||||||||||
| Mark-to-market adjustments due to hedge ineffectiveness | (6,505 | ) | (6,505 | ) | |||||||||||||||||||
| Tax impact of mark-to-market adjustments due to hedge ineffectiveness | 1,366 | 1,366 | |||||||||||||||||||||
| Unrealized (gain) loss on other investments | 6,347 | 6,347 | |||||||||||||||||||||
| Tax impact of unrealized (gain) loss on other investments | (1,333 | ) | (1,333 | ) | |||||||||||||||||||
| First quarter 2019 adjusted operating results | 32,085 | 25,102 | 13,683 | 25,649 | 1,016 | 97,535 | |||||||||||||||||
| Drivers of adjusted operating results** | |||||||||||||||||||||||
| Upstream Revenues | |||||||||||||||||||||||
| Higher (lower) natural gas production | 18,513 | 18,513 | |||||||||||||||||||||
| Higher (lower) crude oil production | 1,454 | 1,454 | |||||||||||||||||||||
| Higher (lower) realized natural gas prices, after hedging | (12,597 | ) | (12,597 | ) | |||||||||||||||||||
| Higher (lower) realized crude oil prices, after hedging | 581 | 581 | |||||||||||||||||||||
| Midstream Revenues | |||||||||||||||||||||||
| Higher (lower) operating revenues | (3,831 | ) | 4,027 | 196 | |||||||||||||||||||
| Downstream Margins*** | |||||||||||||||||||||||
| System modernization tracker revenues | 344 | 344 | |||||||||||||||||||||
| Regulatory revenue adjustments | 935 | 935 | |||||||||||||||||||||
| Operating Expenses | |||||||||||||||||||||||
| Lower (higher) lease operating and transportation expenses | (6,508 | ) | (6,508 | ) | |||||||||||||||||||
| Lower (higher) operating expenses | (622 | ) | 555 | (1,288 | ) | (1,355 | ) | ||||||||||||||||
| Lower (higher) property, franchise and other taxes | 1,312 | (827 | ) | 485 | |||||||||||||||||||
| Lower (higher) depreciation / depletion | (7,464 | ) | (7,464 | ) | |||||||||||||||||||
| Other Income (Expense) | |||||||||||||||||||||||
| (Higher) lower other deductions | 1,461 | 1,461 | |||||||||||||||||||||
| (Higher) lower interest expense | (706 | ) | (706 | ) | |||||||||||||||||||
| Income Taxes | |||||||||||||||||||||||
| Lower (higher) income tax expense / effective tax rate | (1,332 | ) | (2,457 | ) | (216 | ) | (785 | ) | (288 | ) | (5,078 | ) | |||||||||||
| All other / rounding | (739 | ) | (437 | ) | (262 | ) | 440 | 598 | (400 | ) | |||||||||||||
| First quarter 2020 adjusted operating results | 23,977 | 18,105 | 15,944 | 26,583 | 2,787 | 87,396 | |||||||||||||||||
| Items impacting comparability: | |||||||||||||||||||||||
| Unrealized gain (loss) on other investments | (1,019 | ) | (1,019 | ) | |||||||||||||||||||
| Tax impact of unrealized gain (loss) on other investments | 214 | 214 | |||||||||||||||||||||
| First quarter 2020 GAAP earnings | $ | 23,977 | $ | 18,105 | $ | 15,944 | $ | 26,583 | $ | 1,982 | $ | 86,591 | |||||||||||
| * Amounts do not reflect intercompany eliminations | |||||||||||||||||||||||
| ** Operating results have been calculated using the 21% federal statutory rate effective for the 2019 fiscal year. | |||||||||||||||||||||||
| *** Downstream margin defined as operating revenues less purchased gas expense. | |||||||||||||||||||||||
| NATIONAL FUEL GAS COMPANY | |||||||||||||||||||||||
| RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS PER SHARE | |||||||||||||||||||||||
| QUARTER ENDED DECEMBER 31, 2019 | |||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||
| Upstream | Midstream | Downstream | |||||||||||||||||||||
| Exploration & | Pipeline & | Corporate / | |||||||||||||||||||||
| Production | Storage | Gathering | Utility | All Other | Consolidated* | ||||||||||||||||||
| First quarter 2019 GAAP earnings per share | $ | 0.44 | $ | 0.29 | $ | 0.16 | $ | 0.30 | $ | (0.01 | ) | $ | 1.18 | ||||||||||
| Items impacting comparability: | |||||||||||||||||||||||
| Remeasurement of deferred taxes under 2017 Tax Reform | (0.01 | ) | (0.01 | ) | (0.04 | ) | (0.06 | ) | |||||||||||||||
| Mark-to-market adjustments due to hedge ineffectiveness, net of tax | (0.06 | ) | (0.06 | ) | |||||||||||||||||||
| Unrealized (gain) loss on other investments, net of tax | 0.06 | 0.06 | |||||||||||||||||||||
| Rounding | 0.01 | (0.01 | ) | — | |||||||||||||||||||
| First quarter 2019 adjusted operating results per share | 0.37 | 0.29 | 0.16 | 0.30 | — | 1.12 | |||||||||||||||||
| Drivers of adjusted operating results** | |||||||||||||||||||||||
| Upstream Revenues | |||||||||||||||||||||||
| Higher (lower) natural gas production | 0.21 | 0.21 | |||||||||||||||||||||
| Higher (lower) crude oil production | 0.02 | 0.02 | |||||||||||||||||||||
| Higher (lower) realized natural gas prices, after hedging | (0.14 | ) | (0.14 | ) | |||||||||||||||||||
| Higher (lower) realized crude oil prices, after hedging | 0.01 | 0.01 | |||||||||||||||||||||
| Midstream Revenues | |||||||||||||||||||||||
| Higher (lower) operating revenues | (0.04 | ) | 0.05 | 0.01 | |||||||||||||||||||
| Downstream Margins*** | |||||||||||||||||||||||
| System modernization tracker revenues | — | — | |||||||||||||||||||||
| Regulatory revenue adjustments | 0.01 | 0.01 | |||||||||||||||||||||
| Operating Expenses | |||||||||||||||||||||||
| Lower (higher) lease operating and transportation expenses | (0.07 | ) | (0.07 | ) | |||||||||||||||||||
| Lower (higher) operating expenses | (0.01 | ) | 0.01 | (0.01 | ) | (0.01 | ) | ||||||||||||||||
| Lower (higher) property, franchise and other taxes | 0.02 | (0.01 | ) | 0.01 | |||||||||||||||||||
| Lower (higher) depreciation / depletion | (0.09 | ) | (0.09 | ) | |||||||||||||||||||
| Other Income (Expense) | |||||||||||||||||||||||
| (Higher) lower other deductions | 0.02 | 0.02 | |||||||||||||||||||||
| (Higher) lower interest expense | (0.01 | ) | (0.01 | ) | |||||||||||||||||||
| Income Taxes | |||||||||||||||||||||||
| Lower (higher) income tax expense / effective tax rate | (0.02 | ) | (0.03 | ) | — | (0.01 | ) | — | (0.06 | ) | |||||||||||||
| All other / rounding | (0.01 | ) | (0.01 | ) | (0.02 | ) | 0.01 | 0.01 | (0.02 | ) | |||||||||||||
| First quarter 2020 adjusted operating results per share | 0.28 | 0.21 | 0.18 | 0.31 | 0.03 | 1.01 | |||||||||||||||||
| Items impacting comparability: | |||||||||||||||||||||||
| Unrealized gain (loss) on other investments, net of tax | (0.01 | ) | (0.01 | ) | |||||||||||||||||||
| First quarter 2020 GAAP earnings per share | $ | 0.28 | $ | 0.21 | $ | 0.18 | $ | 0.31 | $ | 0.02 | $ | 1.00 | |||||||||||
| * Amounts do not reflect intercompany eliminations | |||||||||||||||||||||||
| ** Operating results have been calculated using the 21% federal statutory rate effective for the 2019 fiscal year. | |||||||||||||||||||||||
| *** Downstream margin defined as operating revenues less purchased gas expense. | |||||||||||||||||||||||
| NATIONAL FUEL GAS COMPANY | |||||||
| AND SUBSIDIARIES | |||||||
| (Thousands of Dollars, except per share amounts) | |||||||
| Three Months Ended | |||||||
| December 31, | |||||||
| (Unaudited) | |||||||
| SUMMARY OF OPERATIONS | 2019 | 2018 | |||||
| Operating Revenues: | |||||||
| Utility and Energy Marketing Revenues | $ | 228,026 | $ | 272,092 | |||
| Exploration and Production and Other Revenues | 167,193 | 163,937 | |||||
| Pipeline and Storage and Gathering Revenues | 48,969 | 54,218 | |||||
| 444,188 | 490,247 | ||||||
| Operating Expenses: | |||||||
| Purchased Gas | 92,272 | 138,660 | |||||
| Operation and Maintenance: | |||||||
| Utility and Energy Marketing | 43,256 | 43,915 | |||||
| Exploration and Production and Other | 36,693 | 32,795 | |||||
| Pipeline and Storage and Gathering | 25,885 | 24,934 | |||||
| Property, Franchise and Other Taxes | 23,144 | 24,005 | |||||
| Depreciation, Depletion and Amortization | 74,918 | 64,255 | |||||
| 296,168 | 328,564 | ||||||
| Operating Income | 148,020 | 161,683 | |||||
| Other Income (Expense): | |||||||
| Other Income (Deductions) | (3,040 | ) | (9,602 | ) | |||
| Interest Expense on Long-Term Debt | (25,443 | ) | (25,439 | ) | |||
| Other Interest Expense | (1,551 | ) | (1,073 | ) | |||
| Income Before Income Taxes | 117,986 | 125,569 | |||||
| Income Tax Expense | 31,395 | 22,909 | |||||
| Net Income Available for Common Stock | $ | 86,591 | $ | 102,660 | |||
| Earnings Per Common Share | |||||||
| Basic | $ | 1.00 | $ | 1.19 | |||
| Diluted | $ | 1.00 | $ | 1.18 | |||
| Weighted Average Common Shares: | |||||||
| Used in Basic Calculation | 86,378,450 | 86,032,729 | |||||
| Used in Diluted Calculation | 86,883,152 | 86,708,814 | |||||
| NATIONAL FUEL GAS COMPANY | |||||||
| AND SUBSIDIARIES | |||||||
| CONSOLIDATED BALANCE SHEETS | |||||||
| (Unaudited) | |||||||
| December 31, | September 30, | ||||||
| (Thousands of Dollars) | 2019 | 2019 | |||||
| ASSETS | |||||||
| Property, Plant and Equipment | $ | 11,402,308 | $ | 11,204,838 | |||
| Less - Accumulated Depreciation, Depletion and Amortization | 5,756,084 | 5,695,328 | |||||
| Net Property, Plant and Equipment | 5,646,224 | 5,509,510 | |||||
| Current Assets: | |||||||
| Cash and Temporary Cash Investments | 34,966 | 20,428 | |||||
| Hedging Collateral Deposits | 9,666 | 6,832 | |||||
| Receivables - Net | 158,944 | 139,956 | |||||
| Unbilled Revenue | 58,306 | 18,758 | |||||
| Gas Stored Underground | 29,991 | 36,632 | |||||
| Materials and Supplies - at average cost | 40,373 | 40,717 | |||||
| Unrecovered Purchased Gas Costs | 1,619 | 2,246 | |||||
| Other Current Assets | 96,831 | 97,054 | |||||
| Total Current Assets | 430,696 | 362,623 | |||||
| Other Assets: | |||||||
| Recoverable Future Taxes | 116,188 | 115,197 | |||||
| Unamortized Debt Expense | 13,578 | 14,005 | |||||
| Other Regulatory Assets | 165,409 | 167,320 | |||||
| Deferred Charges | 56,936 | 33,843 | |||||
| Other Investments | 141,229 | 144,917 | |||||
| Goodwill | 5,476 | 5,476 | |||||
| Prepaid Post-Retirement Benefit Costs | 64,999 | 60,517 | |||||
| Fair Value of Derivative Financial Instruments | 40,569 | 48,669 | |||||
| Other | 21,354 | 80 | |||||
| Total Other Assets | 625,738 | 590,024 | |||||
| Total Assets | $ | 6,702,658 | $ | 6,462,157 | |||
| CAPITALIZATION AND LIABILITIES | |||||||
| Capitalization: | |||||||
| Comprehensive Shareholders' Equity | |||||||
| Common Stock, $1 Par Value Authorized - 200,000,000 Shares; Issued and | |||||||
| Outstanding - 86,551,528 Shares and 86,315,287 Shares, Respectively | $ | 86,552 | $ | 86,315 | |||
| Paid in Capital | 831,146 | 832,264 | |||||
| Earnings Reinvested in the Business | 1,320,592 | 1,272,601 | |||||
| Accumulated Other Comprehensive Loss | (56,150 | ) | (52,155 | ) | |||
| Total Comprehensive Shareholders' Equity | 2,182,140 | 2,139,025 | |||||
| Long-Term Debt, Net of Current Portion and Unamortized Discount and Debt Issuance Costs | 2,134,339 | 2,133,718 | |||||
| Total Capitalization | 4,316,479 | 4,272,743 | |||||
| Current and Accrued Liabilities: | |||||||
| Notes Payable to Banks and Commercial Paper | 139,800 | 55,200 | |||||
| Current Portion of Long-Term Debt | — | — | |||||
| Accounts Payable | 126,985 | 132,208 | |||||
| Amounts Payable to Customers | 3,444 | 4,017 | |||||
| Dividends Payable | 37,650 | 37,547 | |||||
| Interest Payable on Long-Term Debt | 29,461 | 18,508 | |||||
| Customer Advances | 13,727 | 13,044 | |||||
| Customer Security Deposits | 15,510 | 16,210 | |||||
| Other Accruals and Current Liabilities | 173,603 | 139,600 | |||||
| Fair Value of Derivative Financial Instruments | 6,282 | 5,574 | |||||
| Total Current and Accrued Liabilities | 546,462 | 421,908 | |||||
| Deferred Credits: | |||||||
| Deferred Income Taxes | 708,774 | 653,382 | |||||
| Taxes Refundable to Customers | 361,556 | 366,503 | |||||
| Cost of Removal Regulatory Liability | 222,172 | 221,699 | |||||
| Other Regulatory Liabilities | 148,350 | 142,367 | |||||
| Pension and Other Post-Retirement Liabilities | 129,616 | 133,729 | |||||
| Asset Retirement Obligations | 128,382 | 127,458 | |||||
| Other Deferred Credits | 140,867 | 122,368 | |||||
| Total Deferred Credits | 1,839,717 | 1,767,506 | |||||
| Commitments and Contingencies | — | — | |||||
| Total Capitalization and Liabilities | $ | 6,702,658 | $ | 6,462,157 | |||
| NATIONAL FUEL GAS COMPANY | |||||||
| AND SUBSIDIARIES | |||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
| (Unaudited) | |||||||
| Three Months Ended | |||||||
| December 31, | |||||||
| (Thousands of Dollars) | 2019 | 2018 | |||||
| Operating Activities: | |||||||
| Net Income Available for Common Stock | $ | 86,591 | $ | 102,660 | |||
| Adjustments to Reconcile Net Income to Net Cash | |||||||
| Provided by Operating Activities: | |||||||
| Depreciation, Depletion and Amortization | 74,918 | 64,255 | |||||
| Deferred Income Taxes | 51,366 | 64,175 | |||||
| Stock-Based Compensation | 3,266 | 5,311 | |||||
| Other | 1,911 | 2,182 | |||||
| Change in: | |||||||
| Receivables and Unbilled Revenue | (58,655 | ) | (101,541 | ) | |||
| Gas Stored Underground and Materials and Supplies | 6,985 | 8,353 | |||||
| Unrecovered Purchased Gas Costs | 627 | (4,496 | ) | ||||
| Other Current Assets | 14 | (1,195 | ) | ||||
| Accounts Payable | 8,280 | 1,502 | |||||
| Amounts Payable to Customers | (573 | ) | (3,394 | ) | |||
| Customer Advances | 683 | (6,258 | ) | ||||
| Customer Security Deposits | (700 | ) | (1,861 | ) | |||
| Other Accruals and Current Liabilities | 15,438 | 38,412 | |||||
| Other Assets | (28,259 | ) | (42,400 | ) | |||
| Other Liabilities | 5,857 | (21,333 | ) | ||||
| Net Cash Provided by Operating Activities | $ | 167,749 | $ | 104,372 | |||
| Investing Activities: | |||||||
| Capital Expenditures | $ | (198,495 | ) | $ | (177,567 | ) | |
| Other | 5,212 | (2,549 | ) | ||||
| Net Cash Used in Investing Activities | $ | (193,283 | ) | $ | (180,116 | ) | |
| Financing Activities: | |||||||
| Changes in Notes Payable to Banks and Commercial Paper | $ | 84,600 | $ | — | |||
| Dividends Paid on Common Stock | (37,547 | ) | (36,532 | ) | |||
| Net Repurchases of Common Stock | (4,147 | ) | (8,233 | ) | |||
| Net Cash Provided by (Used in) Financing Activities | $ | 42,906 | $ | (44,765 | ) | ||
| Net Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash | 17,372 | (120,509 | ) | ||||
| Cash, Cash Equivalents, and Restricted Cash at Beginning of Period | 27,260 | 233,047 | |||||
| Cash, Cash Equivalents, and Restricted Cash at December 31 | $ | 44,632 | $ | 112,538 | |||
| NATIONAL FUEL GAS COMPANY | |||||||||||
| AND SUBSIDIARIES | |||||||||||
| SEGMENT OPERATING RESULTS AND STATISTICS | |||||||||||
| (UNAUDITED) | |||||||||||
| UPSTREAM BUSINESS | |||||||||||
| Three Months Ended | |||||||||||
| (Thousands of Dollars, except per share amounts) | December 31, | ||||||||||
| EXPLORATION AND PRODUCTION SEGMENT | 2019 | 2018 | Variance | ||||||||
| Total Operating Revenues | $ | 165,939 | $ | 162,876 | $ | 3,063 | |||||
| Operating Expenses: | |||||||||||
| Operation and Maintenance: | |||||||||||
| General and Administrative Expense | 15,380 | 15,198 | 182 | ||||||||
| Lease Operating and Transportation Expense | 50,800 | 42,562 | 8,238 | ||||||||
| All Other Operation and Maintenance Expense | 2,958 | 2,353 | 605 | ||||||||
| Property, Franchise and Other Taxes | 4,701 | 6,362 | (1,661 | ) | |||||||
| Depreciation, Depletion and Amortization | 44,148 | 34,700 | 9,448 | ||||||||
| 117,987 | 101,175 | 16,812 | |||||||||
| Operating Income | 47,952 | 61,701 | (13,749 | ) | |||||||
| Other Income (Expense): | |||||||||||
| Non-Service Pension and Post-Retirement Benefit Costs | (395 | ) | (4 | ) | (391 | ) | |||||
| Interest and Other Income | 234 | 282 | (48 | ) | |||||||
| Interest Expense | (14,057 | ) | (13,163 | ) | (894 | ) | |||||
| Income Before Income Taxes | 33,734 | 48,816 | (15,082 | ) | |||||||
| Income Tax Expense | 9,757 | 10,602 | (845 | ) | |||||||
| Net Income | $ | 23,977 | $ | 38,214 | $ | (14,237 | ) | ||||
| Net Income Per Share (Diluted) | $ | 0.28 | $ | 0.44 | $ | (0.16 | ) | ||||
| NATIONAL FUEL GAS COMPANY | |||||||||||
| AND SUBSIDIARIES | |||||||||||
| SEGMENT OPERATING RESULTS AND STATISTICS | |||||||||||
| (UNAUDITED) | |||||||||||
| MIDSTREAM BUSINESSES | |||||||||||
| Three Months Ended | |||||||||||
| (Thousands of Dollars, except per share amounts) | December 31, | ||||||||||
| PIPELINE AND STORAGE SEGMENT | 2019 | 2018 | Variance | ||||||||
| Revenues from External Customers | $ | 48,969 | $ | 54,218 | $ | (5,249 | ) | ||||
| Intersegment Revenues | 23,251 | 22,851 | 400 | ||||||||
| Total Operating Revenues | 72,220 | 77,069 | (4,849 | ) | |||||||
| Operating Expenses: | |||||||||||
| Purchased Gas | (7 | ) | 304 | (311 | ) | ||||||
| Operation and Maintenance | 20,930 | 21,633 | (703 | ) | |||||||
| Property, Franchise and Other Taxes | 8,355 | 7,308 | 1,047 | ||||||||
| Depreciation, Depletion and Amortization | 11,605 | 11,114 | 491 | ||||||||
| 40,883 | 40,359 | 524 | |||||||||
| Operating Income | 31,337 | 36,710 | (5,373 | ) | |||||||
| Other Income (Expense): | |||||||||||
| Non-Service Pension and Post-Retirement Benefit (Costs) Credit | (174 | ) | 467 | (641 | ) | ||||||
| Interest and Other Income | 1,552 | 1,459 | 93 | ||||||||
| Interest Expense | (7,112 | ) | (7,286 | ) | 174 | ||||||
| Income Before Income Taxes | 25,603 | 31,350 | (5,747 | ) | |||||||
| Income Tax Expense | 7,498 | 6,248 | 1,250 | ||||||||
| Net Income | $ | 18,105 | $ | 25,102 | $ | (6,997 | ) | ||||
| Net Income Per Share (Diluted) | $ | 0.21 | $ | 0.29 | $ | (0.08 | ) | ||||
| Three Months Ended | |||||||||||
| December 31, | |||||||||||
| GATHERING SEGMENT | 2019 | 2018 | Variance | ||||||||
| Revenues from External Customers | $ | — | $ | — | $ | — | |||||
| Intersegment Revenues | 34,788 | 29,690 | 5,098 | ||||||||
| Total Operating Revenues | 34,788 | 29,690 | 5,098 | ||||||||
| Operating Expenses: | |||||||||||
| Operation and Maintenance | 5,342 | 3,711 | 1,631 | ||||||||
| Property, Franchise and Other Taxes | 15 | 31 | (16 | ) | |||||||
| Depreciation, Depletion and Amortization | 5,138 | 4,679 | 459 | ||||||||
| 10,495 | 8,421 | 2,074 | |||||||||
| Operating Income | 24,293 | 21,269 | 3,024 | ||||||||
| Other Income (Expense): | |||||||||||
| Non-Service Pension and Post-Retirement Benefit Costs | (71 | ) | (82 | ) | 11 | ||||||
| Interest and Other Income | 68 | 125 | (57 | ) | |||||||
| Interest Expense | (2,219 | ) | (2,377 | ) | 158 | ||||||
| Income Before Income Taxes | 22,071 | 18,935 | 3,136 | ||||||||
| Income Tax Expense | 6,127 | 4,752 | 1,375 | ||||||||
| Net Income | $ | 15,944 | $ | 14,183 | $ | 1,761 | |||||
| Net Income Per Share (Diluted) | $ | 0.18 | $ | 0.16 | $ | 0.02 | |||||
| NATIONAL FUEL GAS COMPANY | |||||||||||
| AND SUBSIDIARIES | |||||||||||
| SEGMENT OPERATING RESULTS AND STATISTICS | |||||||||||
| (UNAUDITED) | |||||||||||
| DOWNSTREAM BUSINESS | |||||||||||
| Three Months Ended | |||||||||||
| (Thousands of Dollars, except per share amounts) | December 31, | ||||||||||
| UTILITY SEGMENT | 2019 | 2018 | Variance | ||||||||
| Revenues from External Customers | $ | 194,910 | $ | 220,012 | $ | (25,102 | ) | ||||
| Intersegment Revenues | 1,915 | 2,645 | (730 | ) | |||||||
| Total Operating Revenues | 196,825 | 222,657 | (25,832 | ) | |||||||
| Operating Expenses: | |||||||||||
| Purchased Gas | 84,705 | 111,880 | (27,175 | ) | |||||||
| Operation and Maintenance | 42,843 | 43,155 | (312 | ) | |||||||
| Property, Franchise and Other Taxes | 9,814 | 10,053 | (239 | ) | |||||||
| Depreciation, Depletion and Amortization | 13,630 | 13,290 | 340 | ||||||||
| 150,992 | 178,378 | (27,386 | ) | ||||||||
| Operating Income | 45,833 | 44,279 | 1,554 | ||||||||
| Other Income (Expense): | |||||||||||
| Non-Service Pension and Post-Retirement Benefit Costs | (6,764 | ) | (6,928 | ) | 164 | ||||||
| Interest and Other Income | 950 | 712 | 238 | ||||||||
| Interest Expense | (5,673 | ) | (5,893 | ) | 220 | ||||||
| Income Before Income Taxes | 34,346 | 32,170 | 2,176 | ||||||||
| Income Tax Expense | 7,763 | 6,521 | 1,242 | ||||||||
| Net Income | $ | 26,583 | $ | 25,649 | $ | 934 | |||||
| Net Income Per Share (Diluted) | $ | 0.31 | $ | 0.30 | $ | 0.01 | |||||
| NATIONAL FUEL GAS COMPANY | |||||||||||
| AND SUBSIDIARIES | |||||||||||
| SEGMENT OPERATING RESULTS AND STATISTICS | |||||||||||
| (UNAUDITED) | |||||||||||
| Three Months Ended | |||||||||||
| (Thousands of Dollars, except per share amounts) | December 31, | ||||||||||
| ALL OTHER | 2019 | 2018 | Variance | ||||||||
| Revenues from External Customers | $ | 34,235 | $ | 53,087 | $ | (18,852 | ) | ||||
| Intersegment Revenues | 177 | 332 | (155 | ) | |||||||
| Total Operating Revenues | 34,412 | 53,419 | (19,007 | ) | |||||||
| Operating Expenses: | |||||||||||
| Purchased Gas | 32,033 | 51,516 | (19,483 | ) | |||||||
| Operation and Maintenance | 1,703 | 1,878 | (175 | ) | |||||||
| Property, Franchise and Other Taxes | 142 | 135 | 7 | ||||||||
| Depreciation, Depletion and Amortization | 203 | 282 | (79 | ) | |||||||
| 34,081 | 53,811 | (19,730 | ) | ||||||||
| Operating Income (Loss) | 331 | (392 | ) | 723 | |||||||
| Other Income (Expense): | |||||||||||
| Non-Service Pension and Post-Retirement Benefit Costs | (69 | ) | (122 | ) | 53 | ||||||
| Interest and Other Income | 278 | 305 | (27 | ) | |||||||
| Interest Expense | (18 | ) | (5 | ) | (13 | ) | |||||
| Income (Loss) Before Income Taxes | 522 | (214 | ) | 736 | |||||||
| Income Tax Expense (Benefit) | 151 | (296 | ) | 447 | |||||||
| Net Income | $ | 371 | $ | 82 | $ | 289 | |||||
| Net Income Per Share (Diluted) | $ | — | $ | — | $ | — | |||||
| Three Months Ended | |||||||||||
| December 31, | |||||||||||
| CORPORATE | 2019 | 2018 | Variance | ||||||||
| Revenues from External Customers | $ | 135 | $ | 54 | $ | 81 | |||||
| Intersegment Revenues | 1,094 | 1,165 | (71 | ) | |||||||
| Total Operating Revenues | 1,229 | 1,219 | 10 | ||||||||
| Operating Expenses: | |||||||||||
| Operation and Maintenance | 2,644 | 2,797 | (153 | ) | |||||||
| Property, Franchise and Other Taxes | 117 | 116 | 1 | ||||||||
| Depreciation, Depletion and Amortization | 194 | 190 | 4 | ||||||||
| 2,955 | 3,103 | (148 | ) | ||||||||
| Operating Loss | (1,726 | ) | (1,884 | ) | 158 | ||||||
| Other Income (Expense): | |||||||||||
| Non-Service Pension and Post-Retirement Benefit Costs | (775 | ) | (738 | ) | (37 | ) | |||||
| Interest and Other Income | 31,073 | 23,617 | 7,456 | ||||||||
| Interest Expense on Long-Term Debt | (25,443 | ) | (25,439 | ) | (4 | ) | |||||
| Other Interest Expense | (1,419 | ) | (1,044 | ) | (375 | ) | |||||
| Income (Loss) before Income Taxes | 1,710 | (5,488 | ) | 7,198 | |||||||
| Income Tax Expense (Benefit) | 99 | (4,918 | ) | 5,017 | |||||||
| Net Income (Loss) | $ | 1,611 | $ | (570 | ) | $ | 2,181 | ||||
| Net Income (Loss) Per Share (Diluted) | $ | 0.02 | $ | (0.01 | ) | $ | 0.03 | ||||
| Three Months Ended | |||||||||||
| December 31, | |||||||||||
| INTERSEGMENT ELIMINATIONS | 2019 | 2018 | Variance | ||||||||
| Intersegment Revenues | $ | (61,225 | ) | $ | (56,683 | ) | $ | (4,542 | ) | ||
| Operating Expenses: | |||||||||||
| Purchased Gas | (24,459 | ) | (25,040 | ) | 581 | ||||||
| Operation and Maintenance | (36,766 | ) | (31,643 | ) | (5,123 | ) | |||||
| (61,225 | ) | (56,683 | ) | (4,542 | ) | ||||||
| Operating Income | — | — | — | ||||||||
| Other Income (Expense): | |||||||||||
| Interest and Other Deductions | (28,947 | ) | (28,695 | ) | (252 | ) | |||||
| Interest Expense | 28,947 | 28,695 | 252 | ||||||||
| Net Income (Loss) | $ | — | $ | — | $ | — | |||||
| Net Income (Loss) Per Share (Diluted) | $ | — | $ | — | $ | — | |||||
| NATIONAL FUEL GAS COMPANY | |||||||||||||
| AND SUBSIDIARIES | |||||||||||||
| SEGMENT INFORMATION (Continued) | |||||||||||||
| (Thousands of Dollars) | |||||||||||||
| Three Months Ended | |||||||||||||
| December 31, | |||||||||||||
| (Unaudited) | |||||||||||||
| Increase | |||||||||||||
| 2019 | 2018 | (Decrease) | |||||||||||
| Capital Expenditures: | |||||||||||||
| Exploration and Production | $ | 126,918 | (1)(2) | $ | 120,214 | (3)(4) | $ | 6,704 | |||||
| Pipeline and Storage | 57,084 | (1)(2) | 29,964 | (3)(4) | 27,120 | ||||||||
| Gathering | 9,838 | (1)(2) | 8,790 | (3)(4) | 1,048 | ||||||||
| Utility | 17,165 | (1)(2) | 15,923 | (3)(4) | 1,242 | ||||||||
| Total Reportable Segments | 211,005 | 174,891 | 36,114 | ||||||||||
| All Other | 22 | 20 | 2 | ||||||||||
| Corporate | 185 | 17 | 168 | ||||||||||
| Total Capital Expenditures | $ | 211,212 | $ | 174,928 | $ | 36,284 | |||||||
| (1) | Capital expenditures for the three months ended December 31, 2019, include accounts payable and accrued liabilities related to capital expenditures of $62.3 million, $22.7 million, $5.3 million, and $3.5 million in the Exploration and Production segment, Pipeline and Storage segment, Gathering segment and Utility segment, respectively. These amounts have been excluded from the Consolidated Statement of Cash Flows at December 31, 2019, since they represent non-cash investing activities at that date. |
| (2) | Capital expenditures for the three months ended December 31, 2019, exclude capital expenditures of $38.0 million, $23.8 million, $6.6 million and $12.7 million in the Exploration and Production segment, Pipeline and Storage segment, Gathering segment and Utility segment, respectively. These amounts were in accounts payable and accrued liabilities at September 30, 2019 and paid during the three months ended December 31, 2019. These amounts were excluded from the Consolidated Statement of Cash Flows at September 30, 2019, since they represented non-cash investing activities at that date. These amounts have been included in the Consolidated Statement of Cash Flows at December 31, 2019. |
| (3) | Capital expenditures for the three months ended December 31, 2018, include accounts payable and accrued liabilities related to capital expenditures of $66.1 million, $12.9 million, $4.4 million, and $2.8 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 December 31, 2018, since they represent non-cash investing activities at that date. |
| (4) | Capital expenditures for the three months ended December 31, 2018, exclude capital expenditures of $51.3 million, $21.9 million, $6.1 million and $9.5 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, 2018 and paid during the three months ended December 31, 2018. These amounts were excluded from the Consolidated Statement of Cash Flows at September 30, 2018, since they represented non-cash investing activities at that date. These amounts have been included in the Consolidated Statement of Cash Flows at December 31, 2018. |
| DEGREE DAYS | |||||||||||
| Percent Colder | |||||||||||
| (Warmer) Than: | |||||||||||
| Three Months Ended December 31 | Normal | 2019 | 2018 | Normal (1) | Last Year (1) | ||||||
| Buffalo, NY | 2,253 | 2,232 | 2,325 | (0.9 | ) | (4.0 | ) | ||||
| Erie, PA | 2,044 | 1,906 | 2,030 | (6.8 | ) | (6.1 | ) | ||||
| (1) Percents compare actual 2019 degree days to normal degree days and actual 2019 degree days to actual 2018 degree days. | |||||||||||
| NATIONAL FUEL GAS COMPANY | ||||||||||||
| AND SUBSIDIARIES | ||||||||||||
| EXPLORATION AND PRODUCTION INFORMATION | ||||||||||||
| Three Months Ended | ||||||||||||
| December 31, | ||||||||||||
| Increase | ||||||||||||
| 2019 | 2018 | (Decrease) | ||||||||||
| Gas Production/Prices: | ||||||||||||
| Production (MMcf) | ||||||||||||
| Appalachia | 54,284 | 45,305 | 8,979 | |||||||||
| West Coast | 487 | 502 | (15 | ) | ||||||||
| Total Production | 54,771 | 45,807 | 8,964 | |||||||||
| Average Prices (Per Mcf) | ||||||||||||
| Appalachia | $ | 2.16 | $ | 2.93 | $ | (0.77 | ) | |||||
| West Coast | 4.98 | 6.73 | (1.75 | ) | ||||||||
| Weighted Average | 2.19 | 2.97 | (0.78 | ) | ||||||||
| Weighted Average after Hedging | 2.32 | 2.61 | (0.29 | ) | ||||||||
| Oil Production/Prices: | ||||||||||||
| Production (Thousands of Barrels) | ||||||||||||
| Appalachia | — | 1 | (1 | ) | ||||||||
| West Coast | 601 | 571 | 30 | |||||||||
| Total Production | 601 | 572 | 29 | |||||||||
| Average Prices (Per Barrel) | ||||||||||||
| Appalachia | $ | 54.49 | $ | 66.31 | $ | (11.82 | ) | |||||
| West Coast | 62.63 | 65.71 | (3.08 | ) | ||||||||
| Weighted Average | 62.63 | 65.71 | (3.08 | ) | ||||||||
| Weighted Average after Hedging | 62.92 | 61.70 | 1.22 | |||||||||
| Total Production (MMcfe) | 58,377 | 49,239 | 9,138 | |||||||||
| Selected Operating Performance Statistics: | ||||||||||||
| General & Administrative Expense per Mcfe (1) | $ | 0.26 | $ | 0.31 | $ | (0.05 | ) | |||||
| Lease Operating and Transportation Expense per Mcfe (1)(2) | $ | 0.87 | $ | 0.86 | $ | 0.01 | ||||||
| Depreciation, Depletion & Amortization per Mcfe (1) | $ | 0.76 | $ | 0.70 | $ | 0.06 | ||||||
| (1) | Refer to page 13 for the General and Administrative Expense, Lease Operating and Transportation Expense and Depreciation, Depletion, and Amortization Expense for the Exploration and Production segment. |
| (2) | Amounts include transportation expense of $0.57 and $0.54 per Mcfe for the three months ended December 31, 2019 and December 31, 2018, respectively. |
| NATIONAL FUEL GAS COMPANY | |||||||
| AND SUBSIDIARIES | |||||||
| EXPLORATION AND PRODUCTION INFORMATION | |||||||
| Hedging Summary for Remaining Nine Months of Fiscal 2020 | Volume | Average Hedge Price | |||||
| Oil Swaps | |||||||
| Brent | 1,035,000 | BBL | $ | 64.55 / BBL | |||
| NYMEX | 243,000 | BBL | $ | 50.52 / BBL | |||
| Total | 1,278,000 | BBL | $ | 61.88 / BBL | |||
| Gas Swaps | |||||||
| NYMEX | 66,150,000 | MMBTU | $ | 2.69 / MMBTU | |||
| DAWN | 5,400,000 | MMBTU | $ | 3.00 / MMBTU | |||
| Fixed Price Physical Sales | 33,588,417 | MMBTU | $ | 2.35 / MMBTU | |||
| Total | 105,138,417 | MMBTU | $ | 2.60 / MMBTU | |||
| Hedging Summary for Fiscal 2021 | Volume | Average Hedge Price | |||||
| Oil Swaps | |||||||
| Brent | 696,000 | BBL | $ | 64.29 / BBL | |||
| NYMEX | 156,000 | BBL | $ | 51.00 / BBL | |||
| Total | 852,000 | BBL | $ | 61.86 / BBL | |||
| Gas Swaps | |||||||
| NYMEX | 14,750,000 | MMBTU | $ | 2.73 / MMBTU | |||
| DAWN | 600,000 | MMBTU | $ | 3.00 / MMBTU | |||
| Fixed Price Physical Sales | 42,052,246 | MMBTU | $ | 2.22 / MMBTU | |||
| Total | 57,402,246 | MMBTU | $ | 2.36 / MMBTU | |||
| Hedging Summary for Fiscal 2022 | Volume | Average Hedge Price | |||||
| Oil Swaps | |||||||
| Brent | 300,000 | BBL | $ | 60.07 / BBL | |||
| NYMEX | 156,000 | BBL | $ | 51.00 / BBL | |||
| Total | 456,000 | BBL | $ | 56.97 / BBL | |||
| Gas Swaps | |||||||
| NYMEX | 200,000 | MMBTU | $ | 2.50 / MMBTU | |||
| Fixed Price Physical Sales | 40,328,564 | MMBTU | $ | 2.23 / MMBTU | |||
| Total | 40,528,564 | MMBTU | $ | 2.23 / MMBTU | |||
| Hedging Summary for Fiscal 2023 | Volume | Average Hedge Price | |||||
| Fixed Price Physical Sales | 36,961,007 | MMBTU | $ | 2.26 / MMBTU | |||
| Hedging Summary for Fiscal 2024 | Volume | Average Hedge Price | |||||
| Fixed Price Physical Sales | 20,801,194 | MMBTU | $ | 2.25 / MMBTU | |||
| Hedging Summary for Fiscal 2025 | Volume | Average Hedge Price | |||||
| Fixed Price Physical Sales | 2,293,200 | MMBTU | $ | 2.18 / MMBTU | |||
| NATIONAL FUEL GAS COMPANY | |||||||||
| AND SUBSIDIARIES | |||||||||
| Pipeline & Storage Throughput - (millions of cubic feet - MMcf) | |||||||||
| Three Months Ended | |||||||||
| December 31, | |||||||||
| Increase | |||||||||
| 2019 | 2018 | (Decrease) | |||||||
| Firm Transportation - Affiliated | 34,667 | 35,700 | (1,033 | ) | |||||
| Firm Transportation - Non-Affiliated | 173,981 | 156,201 | 17,780 | ||||||
| Interruptible Transportation | 714 | 916 | (202 | ) | |||||
| 209,362 | 192,817 | 16,545 | |||||||
| Gathering Volume - (MMcf) | |||||||||
| Three Months Ended | |||||||||
| December 31, | |||||||||
| Increase | |||||||||
| 2019 | 2018 | (Decrease) | |||||||
| Gathered Volume - Affiliated | 64,392 | 54,688 | 9,704 | ||||||
| Utility Throughput - (MMcf) | |||||||||
| Three Months Ended | |||||||||
| December 31, | |||||||||
| Increase | |||||||||
| 2019 | 2018 | (Decrease) | |||||||
| Retail Sales: | |||||||||
| Residential Sales | 19,476 | 19,780 | (304 | ) | |||||
| Commercial Sales | 2,812 | 2,846 | (34 | ) | |||||
| Industrial Sales | 217 | 204 | 13 | ||||||
| 22,505 | 22,830 | (325 | ) | ||||||
| Transportation | 20,556 | 22,270 | (1,714 | ) | |||||
| 43,061 | 45,100 | (2,039 | ) | ||||||
NATIONAL FUEL GAS COMPANYAND SUBSIDIARIES
NON-GAAP FINANCIAL MEASURES
In addition to financial measures calculated in accordance with generally accepted accounting principles (GAAP), this press release contains information regarding Adjusted Operating Results and Adjusted EBITDA, which are non-GAAP financial measures. The Company believes that these non-GAAP financial measures are useful to investors because they provide an alternative method for assessing the Company's ongoing operating results and for comparing the Company’s financial performance to other companies. The Company's management uses these non-GAAP financial measures for the same purpose, and for planning and forecasting purposes. The presentation of non-GAAP financial measures is not meant to be a substitute for financial measures in accordance with GAAP.
Management defines Adjusted Operating Results as reported GAAP earnings before items impacting comparability. The following table reconciles National Fuel's reported GAAP earnings to Adjusted Operating Results for the three months ended December 31, 2019 and 2018:
| Three Months Ended | ||||||||
| December 31, | ||||||||
| (in thousands except per share amounts) | 2019 | 2018 | ||||||
| Reported GAAP Earnings | $ | 86,591 | $ | 102,660 | ||||
| Items impacting comparability | ||||||||
| Remeasurement of deferred income taxes under 2017 Tax Reform | — | (5,000 | ) | |||||
| Mark-to-market adjustments due to hedge ineffectiveness (E&P) | — | (6,505 | ) | |||||
| Tax impact of mark-to-market adjustments due to hedge ineffectiveness | — | 1,366 | ||||||
| Unrealized loss on other investments (Corporate/All Other) | 1,019 | 6,347 | ||||||
| Tax impact of unrealized loss on other investments | (214 | ) | (1,333 | ) | ||||
| Adjusted Operating Results | $ | 87,396 | $ | 97,535 | ||||
| Reported GAAP Earnings per share | $ | 1.00 | $ | 1.18 | ||||
| Items impacting comparability | ||||||||
| Remeasurement of deferred income taxes under 2017 Tax Reform | — | (0.06 | ) | |||||
| Mark-to-market adjustments due to hedge ineffectiveness, net of tax (E&P) | — | (0.06 | ) | |||||
| Unrealized loss on other investments, net of tax (Corporate/All Other) | 0.01 | 0.06 | ||||||
| Adjusted Operating Results per share | $ | 1.01 | $ | 1.12 | ||||
Management defines Adjusted EBITDA as reported GAAP earnings before the following items: interest expense, income taxes, depreciation, depletion and amortization, other income and deductions, impairments, and other items reflected in operating income that impact comparability. The following tables reconcile National Fuel's reported GAAP earnings to Adjusted EBITDA for the three months ended December 31, 2019 and 2018:
| Three Months Ended | ||||||||
| December 31, | ||||||||
| (in thousands) | 2019 | 2018 | ||||||
| Reported GAAP Earnings | $ | 86,591 | $ | 102,660 | ||||
| Depreciation, Depletion and Amortization | 74,918 | 64,255 | ||||||
| Other (Income) Deductions | 3,040 | 9,602 | ||||||
| Interest Expense | 26,994 | 26,512 | ||||||
| Income Taxes | 31,395 | 22,909 | ||||||
| Mark-to-Market Adjustments due to Hedge Ineffectiveness | — | (6,505 | ) | |||||
| Adjusted EBITDA | $ | 222,938 | $ | 219,433 | ||||
| Adjusted EBITDA by Segment | ||||||||
| Pipeline and Storage Adjusted EBITDA | $ | 42,942 | $ | 47,824 | ||||
| Gathering Adjusted EBITDA | 29,431 | 25,948 | ||||||
| Total Midstream Businesses Adjusted EBITDA | 72,373 | 73,772 | ||||||
| Exploration and Production Adjusted EBITDA | 92,100 | 89,896 | ||||||
| Utility Adjusted EBITDA | 59,463 | 57,569 | ||||||
| Corporate and All Other Adjusted EBITDA | (998 | ) | (1,804 | ) | ||||
| Total Adjusted EBITDA | $ | 222,938 | $ | 219,433 | ||||
| NATIONAL FUEL GAS COMPANYAND SUBSIDIARIESNON-GAAP FINANCIAL MEASURES SEGMENT ADJUSTED EBITDA | ||||||||
| Three Months Ended | ||||||||
| December 31, | ||||||||
| (in thousands) | 2019 | 2018 | ||||||
| Exploration and Production Segment | ||||||||
| Reported GAAP Earnings | $ | 23,977 | $ | 38,214 | ||||
| Depreciation, Depletion and Amortization | 44,148 | 34,700 | ||||||
| Other (Income) Deductions | 161 | (278 | ) | |||||
| Interest Expense | 14,057 | 13,163 | ||||||
| Income Taxes | 9,757 | 10,602 | ||||||
| Mark-to-Market Adjustments due to Hedge Ineffectiveness | — | (6,505 | ) | |||||
| Adjusted EBITDA | $ | 92,100 | $ | 89,896 | ||||
| Pipeline and Storage Segment | ||||||||
| Reported GAAP Earnings | $ | 18,105 | $ | 25,102 | ||||
| Depreciation, Depletion and Amortization | 11,605 | 11,114 | ||||||
| Other (Income) Deductions | (1,378 | ) | (1,926 | ) | ||||
| Interest Expense | 7,112 | 7,286 | ||||||
| Income Taxes | 7,498 | 6,248 | ||||||
| Adjusted EBITDA | $ | 42,942 | $ | 47,824 | ||||
| Gathering Segment | ||||||||
| Reported GAAP Earnings | $ | 15,944 | $ | 14,183 | ||||
| Depreciation, Depletion and Amortization | 5,138 | 4,679 | ||||||
| Other (Income) Deductions | 3 | (43 | ) | |||||
| Interest Expense | 2,219 | 2,377 | ||||||
| Income Taxes | 6,127 | 4,752 | ||||||
| Adjusted EBITDA | $ | 29,431 | $ | 25,948 | ||||
| Utility Segment | ||||||||
| Reported GAAP Earnings | $ | 26,583 | $ | 25,649 | ||||
| Depreciation, Depletion and Amortization | 13,630 | 13,290 | ||||||
| Other (Income) Deductions | 5,814 | 6,216 | ||||||
| Interest Expense | 5,673 | 5,893 | ||||||
| Income Taxes | 7,763 | 6,521 | ||||||
| Adjusted EBITDA | $ | 59,463 | $ | 57,569 | ||||
| Corporate and All Other | ||||||||
| Reported GAAP Earnings | $ | 1,982 | $ | (488 | ) | |||
| Depreciation, Depletion and Amortization | 397 | 472 | ||||||
| Other (Income) Deductions | (1,560 | ) | 5,633 | |||||
| Interest Expense | (2,067 | ) | (2,207 | ) | ||||
| Income Taxes | 250 | (5,214 | ) | |||||
| Adjusted EBITDA | $ | (998 | ) | $ | (1,804 | ) | ||
(3)(4)
Kenneth E. Webster Investor Relations 716-857-7067 Karen M. Camiolo Treasurer 716-857-7344
