In February 2012, the Commonwealth of Pennsylvania passed legislation that includes a “natural gas impact fee.” The legislation, which covers essentially all of Seneca’s Marcellus Shale wells, imposes an annual fee for a period of 15 years on each well drilled. The per well impact fee is adjusted annually based on three factors: The age of the well, changes in the Consumer Price Index and the average monthly NYMEX price for natural gas. The fee is retroactive and applied to wells drilled in the current fiscal year and in all previous years. The impact fee increased property, franchise and other taxes in the current year’s fourth quarter by $1.4 million (pre-tax).
The Exploration and Production segment’s earnings of $96.5 million, or $1.15 per share, for the fiscal year ended September 30, 2012, decreased $27.7 million, or $0.33 per share, when compared to the prior fiscal year. The impact fee, described above, recorded in the current fiscal year was $13.8 million (pre-tax) of which $6.2 million (pre-tax) related to prior fiscal years and $1.4 million (pre-tax) related to the fourth quarter of fiscal 2012. Excluding the $6.2 million impact fee related to prior fiscal years, the Exploration and Production segment’s Operating Results for the fiscal year ended September 30, 2012, were $100.5 million, or $1.20 per share, a decrease of $23.7 million, or $0.28 per share, when compared with the prior fiscal year.
Overall production for the fiscal year ended September 30, 2012, increased 23.3 percent. Excluding fiscal 2011 Gulf of Mexico production of 5.2 Bcfe due to the April 2011 sale of Seneca’s offshore Gulf of Mexico assets, production increased 33.4 percent or 20.9 Bcfe. Production from Seneca’s Appalachian properties increased 45.4 percent, mainly due to a 20.5 Bcfe or 58.1 percent increase in Marcellus production. Crude oil production in California increased 7.8 percent.