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National Fuel Gas' CEO Discusses F2Q12 Results - Earnings Call Transcript

Stocks in this article: NFG

With that, we will begin with Dave Smith.

Dave Smith

Thank you Tim and good morning. As you read in last night's release, National Fuel's earnings for second quarter were $0.81 per share. Excluding the $0.08 per share charge related to the new Marcellus impact fee on Pennsylvania most of which relates to Marcellus wells drilled in prior quarters, operating results for the quarter were $0.89 per share, which is $0.11 less than last year's second quarter. This drop was largely due to three factors.

First; the winter of 2011 and 2012 was unseasonably warm. In fact it was the warmest on record on our service territories. The mild weather impact the earnings by $0.05 per share in the Pennsylvania service territory of our utility and was the significant contributor to the $0.03 per share drop in earnings at National Fuel Resources, our non-regulated energy market subsidiary.

Second; and as you all know, natural gas prices continue to decline throughout the second quarter. While our hedging program did help, our actually realized natural gas price still decreased by $0.68 per Mcf quarter over quarter. That decrease in the sale of our offshore Gulf of Mexico properties last April which is the third factor was the largest contributor to the $0.05 per share drop in operating results at Seneca.

Of the three, only the sale of the Gulf, which incidentally we believe was the right decision, was within our control. Since we can't control gas prices much less the weather, we focused on managing our businesses and put particular emphasis on controlling our budgets. We also continue to execute on our plans to grow our Midstream assets all with a view to maintaining our strong balance sheet in creating long-term shareholder value.

In the Pipeline and Storage segment, our ongoing expansion efforts are progressing according to plan. Construction has actually commenced on the Northern Access and Line N 2012 projects with both projects still scheduled to be in service by November 1, 2012. When these projects ramp up to their fully contracted volumes, they will add just about $20 million in annual revenues. At our National Fuel Midstream subsidiary, construction of our Trout Run project was completed last week and will go into service when Seneca's Tract 100 wells are connected which should be in the next few weeks and Matt will address that in his remarks.

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