National Fuel Gas Company (“National Fuel” or the “Company”) (NYSE:NFG) today announced consolidated earnings for the fourth quarter and fiscal year ended September 30, 2010, of $38.4 million, or $0.46 per share, and $225.9 million, or $2.73 per share, respectively.

HIGHLIGHTS
  • Operating results before items impacting comparability (“Operating Results”) for the fourth quarter of fiscal 2010 of $32.4 million, or $0.39 per share, increased $2.5 million, or $0.02 per share, compared to the prior year fourth quarter, due to higher Operating Results in the Pipeline and Storage, Utility, and Energy Marketing segments.
  • Operating Results for the fiscal year were $219.1 million, or $2.65 per share, an increase of $8.7 million or $0.05 per share. Increased production of natural gas and higher crude oil prices realized in the Exploration and Production segment during the current fiscal year were the main drivers of the increase.
  • Seneca Resources Corporation’s (“Seneca”) fourth quarter production of crude oil and natural gas increased approximately 1.8 billion cubic feet equivalent (“Bcfe”), or 15.5%, to 13.1 Bcfe. Appalachian production increased approximately 120% to 5.2 Bcfe, including production from the Marcellus Shale of 2.9 Bcfe. Total production for fiscal 2010 increased nearly 17% to 49.7 Bcfe.
  • Seneca’s fiscal 2010 Marcellus Shale exit rate was approximately 53 million cubic feet per day (“MMcfd”).
  • Seneca’s total reserves at September 30, 2010, were 700 Bcfe, an increase of 171 Bcfe. Seneca replaced 445% of fiscal 2010 production.
  • The Company sold its landfill gas operations and realized an after-tax gain of $6.3 million. The Company also completed the sale of its sawmill in Marienville, Pennsylvania, including selected timber assets, and realized an after-tax gain of $0.2 million.
  • A conference call is scheduled for Friday, November 5, 2010, at 11 a.m. Eastern Time.

MANAGEMENT COMMENTS

David F. Smith, Chairman and Chief Executive Officer of National Fuel Gas Company, stated: “The fourth quarter marked the end of another excellent year for National Fuel, from both a financial and operational standpoint. The diversity of our businesses allowed for this year’s earnings to increase, with growth occurring in the Exploration and Production, Utility, and Energy Marketing segments. These increases were partially offset by a decrease in Pipeline and Storage earnings due to the effects of a shift in market dynamics associated with the development of the Marcellus Shale.”

“Operationally, we made great progress on our plan to aggressively ramp up Seneca’s Marcellus development program. Since the first Seneca-operated well in Tioga County was completed and brought online in November 2009, Seneca has expanded the program significantly, drilling an additional 29 wells during this fiscal year. Seneca exited the year with net production of 53 million cubic feet per day from the Marcellus, a tremendous increase from almost no production at this same time last year.”

“During the quarter we continued to narrow our focus on the multiple growth opportunities in our core businesses. With the sale of our landfill gas and sawmill operations, we substantially decreased our investment in non-core assets. This will allow us to maintain our focus on growing production from the Marcellus Shale and increasing pipeline capacity that is critical to transport production from the Appalachian Basin to the consuming markets in the northeast and in Canada.”

“As we look forward to 2011, we will build upon the accomplishments from this past year and continue to capitalize on these exciting opportunities, while evaluating additional ways to further enhance value for our shareholders.”

SUMMARY OF RESULTS

National Fuel had consolidated earnings for the quarter ended September 30, 2010, of $38.4 million, or $0.46 per share, compared to the prior year’s fourth quarter earnings of $27.0 million, or $0.33 per share, an increase of $11.4 million or $0.13 per share. (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 discussion of earnings and operating results before items impacting comparability (“Operating Results”) are after tax unless otherwise noted).

Consolidated earnings for the fiscal year ended September 30, 2010, of $225.9 million, or $2.73 per share, increased $125.2 million, or $1.48 per share, from the prior fiscal year, where earnings were $100.7 million or $1.25 per share.

  Three Months     Fiscal year
Ended September 30, Ended September 30,
2010   2009 2010   2009
(in thousands except per share amounts)
Reported GAAP earnings $ 38,402 $ 26,998 $ 225,913 $ 100,708
Items impacting comparability1:
 
Gain on disposal of discontinued operations (6,310 ) (6,310 )
(Income) loss from discontinued operations 301 2,945 (470 ) 2,776
Impairment of oil and gas producing properties 108,207
Impairment of investment in partnership 1,085
Gain on life insurance policies (2,312 )
 
 
       
Operating Results $ 32,393   $ 29,943 $ 219,133   $ 210,464  
 
Reported GAAP earnings per share $ 0.46 $ 0.33 $ 2.73 $ 1.25
Items impacting comparability1:
 
Gain on disposal of discontinued operations (0.07 ) (0.07 )
(Income) loss from discontinued operations 0.00 0.04 (0.01 ) 0.03
Impairment of oil and gas producing properties 1.34
Impairment of investment in partnership 0.01
Gain on life insurance policies (0.03 )
 
 
       
Operating Results $ 0.39   $ 0.37 $ 2.65   $ 2.60  
 

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 quarter and fiscal year ended September 30, 2010, to the comparable periods in fiscal 2009. Excluding these items, Operating Results for the current fourth quarter of $32.4 million, or $0.39 per share, increased $2.5 million or $0.02 per share. Excluding these items, Operating Results for fiscal year ended September 30, 2010, of $219.1 million, or $2.65 per share, increased $8.7 million, or $0.05 per share, from the prior fiscal year. Items impacting comparability will be discussed in more detail within the discussion of segment earnings below.

The items noted above that impacted the comparability of the financial results also had an impact on the consolidated effective tax rate in each year. Excluding these items, the consolidated effective tax rate of 38.4 percent for the fiscal year ended September 30, 2010, is comparable to the consolidated effective tax rate of 37.7 percent for the prior fiscal year.

DISCUSSION OF RESULTS BY SEGMENT

(The following discussion of earnings for each segment is summarized in a tabular form at pages 11 through 14 of 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 fourth quarter of fiscal 2010 of $27.5 million, or $0.33 per share, decreased $0.6 million, or $0.01 per share, when compared with the prior year’s fourth quarter. The decrease is mainly due to a higher effective tax rate in the current quarter relating to effects associated with a federal tax law change. Excluding the impact of the higher effective income tax rate, the Exploration and Production segment earnings increased by $3.8 million.

Overall production for the current quarter of 13.1 Bcfe increased approximately 1.8 Bcfe, or 15.5 percent, compared to the prior year’s fourth quarter. Production increased approximately 120 percent in Appalachia mainly due to higher production from Marcellus wells of 2.9 Bcfe. In the Gulf of Mexico, production decreased 0.9 Bcfe. Production in California decreased 0.2 Bcfe.

In addition to the higher production, higher crude oil prices realized after hedging had a positive impact on earnings for the quarter. Lower natural gas prices realized after hedging reduced earnings. For the quarter ended September 30, 2010, the weighted average oil price received by Seneca (after hedging) was $74.05 per barrel (“Bbl”), an increase of $2.66 per Bbl from the prior year’s quarter. The weighted average natural gas price received by Seneca (after hedging) for the quarter ended September 30, 2010, was $5.72 per thousand cubic feet (“Mcf”), a decrease of $0.28 per Mcf.

Several other items also impacted earnings for the quarter including: higher lease operating expenses (“LOE”) (mainly due to the costs to transport Marcellus production in Appalachia and higher steam fuel costs in California), higher depletion expense (due mainly to the increase in the depletable base and higher production), lower other operating expenses (attributable mostly to decreased plugging and abandonment costs), and lower general and administrative (“G&A”) expenses (a $2.5 million bad debt recovery more than offset additional staffing and associated costs in the East Division).

The Exploration and Production segment’s earnings of $112.5 million, or $1.36 per share, for the fiscal year ended September 30, 2010, compares to a loss of $10.2 million, or $0.13 per share, for the fiscal year ended September 30, 2009. The increase was mainly due to the non-cash impairment charge of $108.2 million taken 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 12-month average 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 impairment charge must be recorded in order to reduce the book value of the reserves to the calculated ceiling. The impairment at December 31, 2008, (which was calculated using quarter-end pricing under the then effective full cost ceiling test rules) was mainly driven by a significant decrease in commodity prices. At September 30, 2010, the ceiling exceeded the book value of Seneca’s oil and gas properties by approximately $270 million.

Excluding the impact of the ceiling test charge in the prior year’s first quarter, Operating Results for the fiscal year ended September 30, 2010, of $112.5 million, or $1.36 per share, increased $14.6 million, or $0.15 per share, from the prior year. The increase was primarily due to higher natural gas production and higher crude oil prices realized after hedging.

Overall production for the fiscal year ended September 30, 2010, increased 16.8 percent to 49.7 Bcfe, an increase of 7.1 Bcfe compared to the prior fiscal year. Production increased approximately 7.8 Bcfe or 90 percent in Appalachia. Marcellus production of 7.2 Bcfe and higher production from upper Devonian wells more than offset small production declines in California and the Gulf of Mexico.

In addition to overall higher production, higher crude oil prices realized after hedging contributed to the increase in Operating Results for the fiscal year. Lower natural gas prices realized after hedging reduced Operating Results. For the fiscal year ended September 30, 2010, the weighted average oil price received by Seneca (after hedging) was $75.25 per Bbl, an increase of $10.31 per Bbl from the prior fiscal year. The weighted average natural gas price received by Seneca (after hedging) for the fiscal year ended September 30, 2010, was $6.04 per Mcf, a decrease of $0.90 per Mcf.

Other items impacting Operating Results for the fiscal year ended September 30, 2010, were higher depletion expense (mainly due to the increase in production and a higher depletable base), higher LOE (mainly due to higher steam fuel cost and the operating costs associated with the July 2009 acquisition of the Ivanhoe assets in California, and the costs to transport Marcellus production in Appalachia), higher G&A expenses (attributable mostly to additional staffing and associated costs in the East Division that more than offset the recovery of a bad debt expensed in the prior year) and lower other operating expenses (primarily due to lower plugging and abandonment costs).

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”). 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 western Pennsylvania.

The Pipeline and Storage segment’s earnings of $6.7 million, or $0.08 per share, for the quarter ended September 30, 2010, increased $0.9 million, or $0.01 per share, when compared with the same period in the prior fiscal year. The increase in earnings is mainly due to a lower effective tax rate in the current quarter relating to the intercompany tax allocation among subsidiaries. Excluding the impact of the lower effective income tax rate, Pipeline and Storage segment earnings decreased by $1.5 million from the prior year. The decrease was mostly due to increased maintenance and pension expenses. Transportation revenues for both Supply Corporation and Empire were also lower in the current quarter compared to the fourth quarter of 2009. Persistent strong Niagara/Chippawa basis prices have caused shippers to evaluate lower cost supply sources, and certain shippers have reduced their imports of natural gas from Canada. This has resulted in some contract terminations on Supply Corporation from Niagara. In order to counteract the decrease in revenues due to these lower shipping volumes, Supply Corporation’s Northern Access expansion project and Empire’s Tioga County Extension Project have been designed to utilize the existing pipeline system to provide producers of Marcellus gas a transportation path from the Marcellus supply basins to Canadian and other northern markets.

The Pipeline and Storage segment’s earnings of $36.7 million, or $0.44 per share, for the fiscal year ended September 30, 2010, decreased $10.7 million, or $0.15 per share, when compared with the fiscal year ended September 30, 2009. The decrease in earnings for the current fiscal year was due to lower transportation revenues, higher operating expenses (mainly due to increased pension and other operating expenses), higher property taxes and interest expense and lower AFUDC (attributable to the completion of the Empire Connector in December 2008).

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 $0.2 million, for the quarter ended September 30, 2010, compared to a loss of $1.6 million, for the quarter ended September 30, 2009. The change is primarily due to lower operating expenses (including a $1.3 million after-tax adjustment recorded to reduce Distribution’s allowance for doubtful accounts), lower interest expense on over recoveries of purchased gas costs and the impact of certain regulatory true-up adjustments.

The Utility segment’s earnings of $62.5 million, or $0.76 per share, for the fiscal year ended September 30, 2010, increased from earnings of $58.7 million, or $0.73 per share, for the fiscal year ended September 30, 2009. Earnings in the New York Division for the fiscal year ended September 30, 2010, of $39.5 million, or $0.48 per share, increased $1.8 million, or $0.01 per share, compared to the prior year. Lower operating expenses (mainly attributable to a decrease in bad debt expense) and the impact of regulatory true-up adjustments more than offset the impact of lower revenues from customer late payment charges (mainly due to lower gas costs) during the current fiscal year.

For the fiscal year ended September 30, 2010, earnings in the Pennsylvania Division of $23.0 million, or $0.28 per share, increased $2.0 million, or $0.02 per share, compared to the prior year. Lower operating expenses (mainly attributable to a decrease in bad debt expense) and a lower effective tax rate more than offset higher interest expense, warmer weather and lower customer usage during the current fiscal year.

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 September 30, 2010, of $0.3 million compared to a loss of $0.3 million in the prior year fourth quarter. The increase in earnings in the current year fourth quarter is primarily due to proceeds NFR received as a member of a class of claimants in a class action litigation settlement. Excluding this item earnings were consistent with the fourth quarter of the prior fiscal year. The Energy Marketing segment’s earnings for the fiscal year ended September 30, 2010, of $8.8 million increased $1.7 million compared to the prior year. The increase in earnings was mainly due to higher margins in the current fiscal year and proceeds NFR received as a member of a class of claimants in a class action litigation settlement.

Corporate and All Other

The Corporate and All Other category includes the following active, wholly owned subsidiaries of the Company: National Fuel Gas Midstream Corporation (“Midstream”), formed to build, own and operate natural gas processing and pipeline gathering facilities in the Appalachian region; Horizon Power, Inc., a corporation that develops and owns independent electric generation facilities that are fueled by natural gas or landfill gas; and Highland Forest Resources, Inc., a corporation that markets high quality hardwoods from Appalachian land holdings.

Earnings in the Corporate and All Other category for the quarter ended September 30, 2010, were $3.7 million compared to the prior year’s fourth quarter loss of $4.9 million. On September 1, 2010, the Company completed the sale of its landfill gas operations. As a result of this transaction, the Company is presenting the landfill gas operations as discontinued operations. Earnings in the fourth quarter of fiscal 2010 include earnings from discontinued operations of $6.0 million, which included a $0.3 million loss from discontinued operations during the quarter, plus a $6.3 million gain on the sale of the landfill gas operations. Earnings in the fourth quarter of fiscal 2009 include a loss from discontinued operations of $2.9 million. The results of discontinued operations are discussed later in this document and are excluded from the remaining discussion of the Corporate and All Other category quarterly results below.

Excluding discontinued operations, Operating Results in the Corporate and All Other category decreased from a loss of $2.0 million in the prior year fourth quarter to a loss of $2.3 million in the current year fourth quarter. Higher corporate operating expenses and lower earnings from timber operations more than offset earnings from Midstream’s pipeline gathering and natural gas processing operations.

Earnings in the Corporate and All Other category for the fiscal year ended September 30, 2010, were $5.4 million compared to a loss of $2.2 million in the prior fiscal year. As discussed above, as a result of the Company’s sale of its landfill gas operations, the Company is presenting these operations as discontinued operations. Earnings for the fiscal year ended September 30, 2010, include earnings from discontinued operations of $6.8 million, which consists of $0.5 million of income from discontinued operations, and a $6.3 million gain on the sale of the landfill gas operations. Earnings for the fiscal year ended September 30, 2009, include a loss from discontinued operations of $2.8 million. The results of discontinued operations are discussed later in this document and are excluded from the remaining discussion of the Corporate and All Other category fiscal year results below.

The comparability of the Corporate and All Other category earnings for the fiscal years ended September 30, 2010, and 2009 was also impacted by a $2.3 million gain recognized on corporate-owned 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, both of which occurred in the prior year’s first quarter.

Excluding discontinued operations and the items discussed in the immediate preceding paragraph above, Operating Results for the fiscal year ended September 30, 2010, decreased from a loss of $0.7 million for fiscal 2009 to a loss of $1.4 million for fiscal 2010. Revenues from Midstream’s pipeline gathering and processing operations, higher margins from the timber operations (mainly due to lower prices paid for purchased logs and stumpage) and higher interest income were offset by higher depreciation and operating expenses and higher interest expense.

Discontinued Operations

Earnings from discontinued operations for the quarter and fiscal year ended September 30, 2010, increased by $8.9 million and $9.6 million, respectively. The increases are primarily the result of the Company’s sale of its landfill gas operations and the recording of a gain of approximately $6.3 million. They also reflect the nonrecurrence of a $2.8 million impairment of landfill gas assets that was recorded during the quarter ended September 30, 2009.

EARNINGS GUIDANCE

The Company is revising its GAAP earnings guidance for fiscal 2011 to a range of $2.40 to $2.70 per share. This updated guidance assumes average NYMEX prices, exclusive of basis differentials, of $4.00 per Million British Thermal Units (“MMBtu”) for natural gas and $80.00 per Bbl for crude oil. The previous guidance range of $2.60 to $2.90 per share had assumed average NYMEX prices, exclusive of basis differentials, of $5.00 per MMBtu for natural gas and $80.00 per Bbl for crude oil. The change in guidance is attributable solely to the $1.00 per MMBtu decrease in the assumed NYMEX natural gas price. Seneca’s production guidance remains unchanged at 60 to 70 Bcfe.

EARNINGS TELECONFERENCE

The Company will host a conference call on Friday, November 5, 2010, 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 on National Fuel’s website at investor.nationalfuelgas.com. For those without Internet access, access is also provided by dialing (toll-free) 1-800-561-2813, using the passcode “34046805.” 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 website link and by phone at (toll-free) 1-888-286-8010, using passcode “78038698.” Both the webcast and telephonic replay will be available until the close of business on Friday, November 12, 2010.

National Fuel is an integrated energy company with $5.1 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 at www.nationalfuelgas.com or through its investor information service at 1-800-334-2188.

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 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, insufficient gathering, processing and transportation capacity, 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; changes in laws and regulations to which the Company is subject, including those involving derivatives, taxes, safety, employment, climate change, other environmental matters, and exploration and production activities such as hydraulic fracturing; the nature and projected profitability of pending and potential projects and other investments, and the ability to obtain necessary governmental approvals and permits; 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; inability to obtain new customers or retain existing ones; significant changes in competitive factors affecting the Company; governmental/regulatory actions, initiatives and proceedings, including those involving derivatives, 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; ability to successfully identify and finance acquisitions or other investments and ability to operate and integrate existing and any subsequently acquired business or properties; 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; 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 SEPTEMBER 30, 2010
           
 
Exploration & Pipeline & Energy Corporate /
(Thousands of Dollars) Production   Storage   Utility   Marketing   All Other **   Consolidated
 
Fourth quarter 2009 GAAP earnings $ 28,128 $ 5,776 $ (1,639 ) $ (343 ) $ (4,924 ) $ 26,998
Items impacting comparability:
Loss from discontinued operations                   2,945       2,945  
Fourth quarter 2009 operating results 28,128 5,776 (1,639 ) (343 ) (1,979 ) 29,943
 
Drivers of operating results
Higher (lower) crude oil prices 1,366 1,366
Higher (lower) natural gas prices (1,523 ) (1,523 )
Higher (lower) natural gas production 8,887 8,887
Higher (lower) crude oil production (4,098 ) (4,098 )
Higher (lower) processing plant revenues 337 337
Derivative mark to market adjustment 275 275
Lower (higher) lease operating expenses (1,472 ) (1,472 )
Lower (higher) depreciation / depletion (2,446 ) (399 ) (738 ) (3,583 )
 
Higher (lower) transportation revenues (398 ) (398 )
Higher (lower) efficiency gas revenues 452 452
Lower (higher) operating expenses 2,052 (1,212 ) 701 (451 ) 1,090
Lower (higher) property, franchise and other taxes (413 ) (413 )
 
Regulatory true-up adjustments 1,835 1,835
 
Higher (lower) margins 365 435 800
 
Higher (lower) AFUDC* 585 585
(Higher) lower interest expense 532 532
 
Lower (higher) income tax expense / effective tax rate (4,462 ) 2,382 (609 ) 318 (179 ) (2,550 )
 
All other   441       (106 )     (602 )     4       591       328  
 
Fourth quarter 2010 operating results 27,485 6,667 218 344 (2,321 ) 32,393
Items impacting comparability:
Gain on disposal of discontinued operations 6,310 6,310
Loss from discontinued operations                   (301 )     (301 )
Fourth quarter 2010 GAAP earnings $ 27,485     $ 6,667     $ 218     $ 344     $ 3,688     $ 38,402  
 
 
* AFUDC = Allowance for Funds Used During Construction
** Includes discontinued operations
 
NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS PER SHARE
QUARTER ENDED SEPTEMBER 30, 2010
           
 
Exploration & Pipeline & Energy Corporate /
Production   Storage   Utility   Marketing   All Other **   Consolidated
 
Fourth quarter 2009 GAAP earnings $ 0.34 $ 0.07 $ (0.02 ) $ - $ (0.06 ) $ 0.33
Items impacting comparability:
Loss from discontinued operations                   0.04       0.04  
Fourth quarter 2009 operating results 0.34 0.07 (0.02 ) - (0.02 ) 0.37
 
Drivers of operating results
Higher (lower) crude oil prices 0.02 0.02
Higher (lower) natural gas prices (0.02 ) (0.02 )
Higher (lower) natural gas production 0.11 0.11
Higher (lower) crude oil production (0.05 ) (0.05 )
Higher (lower) processing plant revenues - -
Derivative mark to market adjustment - -
Lower (higher) lease operating expenses (0.02 ) (0.02 )
Lower (higher) depreciation / depletion (0.03 ) - (0.01 ) (0.04 )
 
Higher (lower) transportation revenues - -
Higher (lower) efficiency gas revenues - -
Lower (higher) operating expenses 0.02 (0.01 ) 0.01 (0.01 ) 0.01
Lower (higher) property, franchise and other taxes - -
 
Regulatory true-up adjustments 0.02 0.02
 
Higher (lower) margins - 0.01 0.01
 
Higher (lower) AFUDC* - -
(Higher) lower interest expense 0.01 0.01
 
Lower (higher) income tax expense / effective tax rate (0.05 ) 0.03 (0.01 ) - - (0.03 )
 
All other / rounding (including impact of higher weighted average shares)   0.01       (0.01 )     (0.01 )         0.01       -  
 
Fourth quarter 2010 operating results 0.33 0.08 - - (0.02 ) 0.39
Items impacting comparability:
Gain on disposal of discontinued operations 0.07 0.07
Loss from discontinued operations                   -       -  
Fourth quarter 2010 GAAP earnings $ 0.33     $ 0.08     $ -     $ -   $ 0.05     $ 0.46  
 
 
* AFUDC = Allowance for Funds Used During Construction
** Includes discontinued operations
 
NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS
YEAR ENDED SEPTEMBER 30, 2010
         
 
Exploration & Pipeline & Energy Corporate /
(Thousands of Dollars) Production   Storage   Utility   Marketing   All Other **   Consolidated
 
Fiscal 2009 GAAP earnings $ (10,238 ) $ 47,358 $ 58,664 $ 7,166 $ (2,242 ) $ 100,708
Items impacting comparability:
Loss from discontinued operations 2,776 2,776
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  
Fiscal 2009 operating results 97,969 47,358 58,664 7,166 (693 ) 210,464
 
Drivers of operating results
Higher (lower) crude oil prices 21,587 21,587
Higher (lower) natural gas prices (17,663 ) (17,663 )
Higher (lower) natural gas production 36,347 36,347
Higher (lower) crude oil production (6,470 ) (6,470 )
Higher (lower) processing plant revenues 1,872 1,872
Lower (higher) lease operating expenses (6,094 ) (6,094 )
Lower (higher) depreciation / depletion (9,988 ) (530 ) (2,407 ) (12,925 )
 
Higher (lower) transportation revenues (664 ) (664 )
Higher (lower) efficiency gas revenues 827 827
Lower (higher) operating expenses 1,187 (4,475 ) 4,366 (87 ) (971 ) 20
Lower (higher) property, franchise and other taxes (1,990 ) (1,990 )
 
Higher (lower) usage (2,086 ) (2,086 )
Warmer weather in Pennsylvania (816 ) (816 )
Regulatory true-up adjustments 1,215 1,215
Higher (lower) late payment revenue (1,159 ) (1,159 )
 
Higher (lower) margins 1,386 6,460 7,846
 
Higher (lower) AFUDC* (2,252 ) (2,252 )
Higher (lower) interest income (943 ) 3,099 2,156
(Higher) lower interest expense 1,634 (3,086 ) (2,220 ) (3,826 ) (7,498 )
 
Lower (higher) income tax expense / effective tax rate (7,180 ) 1,434 4,739 359 (3,651 ) (4,299 )
 
All other   273       81       (230 )     (8 )     599       715  
 
Fiscal 2010 operating results 112,531 36,703 62,473 8,816 (1,390 ) 219,133
Items impacting comparability:
Gain on disposal of discontinued operations 6,310 6,310
Earnings from discontinued operations                   470       470  
Fiscal 2010 GAAP earnings $ 112,531     $ 36,703     $ 62,473     $ 8,816     $ 5,390     $ 225,913  
 
 
* AFUDC = Allowance for Funds Used During Construction
** Includes discontinued operations
 
NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS PER SHARE
YEAR ENDED SEPTEMBER 30, 2010
           
 
Exploration & Pipeline & Energy Corporate /
Production   Storage   Utility   Marketing   All Other **   Consolidated
 
Fiscal 2009 GAAP earnings $ (0.13 ) $ 0.59 $ 0.73 $ 0.09 $ (0.03 ) $ 1.25
Items impacting comparability:
Loss from discontinued operations 0.03 0.03
Gain on life insurance policies (0.03 ) (0.03 )
Impairment of investment in partnership 0.01 0.01
Impairment of oil and gas properties   1.34                       1.34  
Fiscal 2009 operating results 1.21 0.59 0.73 0.09 (0.02 ) 2.60
 
Drivers of operating results
Higher (lower) crude oil prices 0.26 0.26
Higher (lower) natural gas prices (0.21 ) (0.21 )
Higher (lower) natural gas production 0.44 0.44
Higher (lower) crude oil production (0.08 ) (0.08 )
Higher (lower) processing plant revenues 0.02 0.02
Lower (higher) lease operating expenses (0.07 ) (0.07 )
Lower (higher) depreciation / depletion (0.12 ) (0.01 ) (0.03 ) (0.16 )
 
Higher (lower) transportation revenues (0.01 ) (0.01 )
Higher (lower) efficiency gas revenues 0.01 0.01
Lower (higher) operating expenses 0.01 (0.05 ) 0.05 - (0.01 ) -
Lower (higher) property, franchise and other taxes (0.02 ) (0.02 )
 
Higher (lower) usage (0.03 ) (0.03 )
Warmer weather in Pennsylvania (0.01 ) (0.01 )
Regulatory true-up adjustments 0.01 0.01
Higher (lower) late payment revenue (0.01 ) (0.01 )
 
Higher (lower) margins 0.02 0.08 0.10
 
Higher (lower) AFUDC* (0.03 ) (0.03 )
Higher (lower) interest income (0.01 ) 0.04 0.03
(Higher) lower interest expense 0.02 (0.04 ) (0.03 ) (0.05 ) (0.10 )
 
Lower (higher) income tax expense / effective tax rate (0.09 ) 0.02 0.06 - (0.04 ) (0.05 )
 
All other / rounding (including impact of higher weighted average shares)   (0.02 )     (0.02 )     (0.01 )     -     0.01       (0.04 )
 
Fiscal 2010 operating results 1.36 0.44 0.76 0.11 (0.02 ) 2.65
Items impacting comparability:
Gain on disposal of discontinued operations 0.07 0.07
Earnings from discontinued operations                   0.01       0.01  
Fiscal 2010 GAAP earnings $ 1.36     $ 0.44     $ 0.76     $ 0.11   $ 0.06     $ 2.73  
 
 
* AFUDC = Allowance for Funds Used During Construction
** Includes discontinued operations
       
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 
 
(Thousands of Dollars, except per share amounts)
Three Months Ended Twelve Months Ended
September 30, September 30,
(Unaudited) (Unaudited)

SUMMARY OF OPERATIONS
2010 2009 2010 2009
Operating Revenues $ 286,396   $ 276,796   $ 1,760,503   $ 2,051,543  
 
Operating Expenses:
Purchased Gas 57,023 56,693 658,432 997,216
Operation and Maintenance 87,945 92,202 394,569 401,200
Property, Franchise and Other Taxes 18,168 15,444 75,852 72,102
Depreciation, Depletion and Amortization 49,265 43,514 191,199 170,620
Impairment of Oil and Gas Producing Properties   -     -     -     182,811  
212,401 207,853 1,320,052 1,823,949
 
Operating Income 73,995 68,943 440,451 227,594
 
Other Income (Expense):
Income from Unconsolidated Subsidiaries 792 646 2,488 3,366
Impairment of Investment in Partnership - - - (1,804 )
Interest Income 1,682 1,418 3,729 5,776
Other Income 1,165 859 3,638 8,200
Interest Expense on Long-Term Debt (21,951 ) (22,062 ) (87,190 ) (79,419 )
Other Interest Expense   (1,513 )   (2,473 )   (6,756 )   (7,370 )
 
Income Before Income Taxes 54,170 47,331 356,360 156,343
 
Income Tax Expense   21,777     17,388     137,227     52,859  
 
Income from Continuing Operations 32,393 29,943 219,133 103,484
 
Discontinued Operations:
Income (Loss) from Operations, Net of Tax (301 ) (2,945 ) 470 (2,776 )
Gain on Disposal, Net of Tax   6,310     -     6,310     -  
 
Income (Loss) from Discontinued Operations, Net of Tax   6,009     (2,945 )   6,780     (2,776 )
 
Net Income Available for Common Stock $ 38,402   $ 26,998   $ 225,913   $ 100,708  
 
Earnings Per Common Share:
Basic:
Income from Continuing Operations $ 0.40 $ 0.37 $ 2.70 $ 1.29
Income (Loss) from Discontinued Operations   0.07     (0.03 )   0.08     (0.03 )
Net Income Available for Common Stock $ 0.47   $ 0.34   $ 2.78   $ 1.26  
 
Diluted:
Income from Continuing Operations $ 0.39 $ 0.37 $ 2.65 $ 1.28
Income (Loss) from Discontinued Operations   0.07     (0.04 )   0.08     (0.03 )
Net Income Available for Common Stock $ 0.46   $ 0.33   $ 2.73   $ 1.25  
 
Weighted Average Common Shares:
Used in Basic Calculation   81,981,133     80,240,861     81,380,434     79,649,965  
Used in Diluted Calculation   82,969,012     81,607,864     82,660,598     80,628,685  
   
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
 
September 30, September 30,
(Thousands of Dollars)   2010   2009
 
ASSETS
Property, Plant and Equipment $ 5,637,498 $ 5,184,844
Less - Accumulated Depreciation, Depletion and Amortization   2,187,269       2,051,482  
Net Property, Plant and Equipment   3,450,229       3,133,362  
 
Current Assets:
Cash and Temporary Cash Investments 395,171 408,053
Cash Held in Escrow 2,000 2,000
Hedging Collateral Deposits 11,134 848
Receivables - Net 132,136 144,466
Unbilled Utility Revenue 20,920 18,884
Gas Stored Underground 48,584 55,862
Materials and Supplies - at average cost 24,987 24,520
Other Current Assets 115,969 68,474
Deferred Income Taxes   24,476       53,863  
Total Current Assets   775,377       776,970  
 
Other Assets:
Recoverable Future Taxes 149,712 138,435
Unamortized Debt Expense 12,550 14,815
Other Regulatory Assets 542,801 530,913
Deferred Charges 9,646 2,737
Other Investments 77,839 78,503
Investments in Unconsolidated Subsidiaries 14,828 14,940
Goodwill 5,476 5,476
Intangible Assets 1,677 21,536
Fair Value of Derivative Financial Instruments 65,184 44,817
Other   306       6,625  
Total Other Assets   880,019       858,797  
Total Assets $ 5,105,625     $ 4,769,129  
 
CAPITALIZATION AND LIABILITIES
Capitalization:
Comprehensive Shareholders' Equity
Common Stock, $1 Par Value Authorized - 200,000,000
Shares; Issued and Outstanding - 82,075,470 Shares
and 80,499,915 Shares, Respectively $ 82,075 $ 80,500
Paid in Capital 645,619 602,839
Earnings Reinvested in the Business   1,063,262       948,293  
Total Common Shareholders' Equity Before
Items of Other Comprehensive Loss 1,790,956 1,631,632
Accumulated Other Comprehensive Loss   (44,985 )     (42,396 )
Total Comprehensive Shareholders' Equity 1,745,971 1,589,236
Long-Term Debt, Net of Current Portion   1,049,000       1,249,000  
Total Capitalization   2,794,971       2,838,236  
 
Current and Accrued Liabilities:
Notes Payable to Banks and Commercial Paper - -
Current Portion of Long-Term Debt 200,000 -
Accounts Payable 145,223 90,723
Amounts Payable to Customers 38,109 105,778
Dividends Payable 28,316 26,967
Interest Payable on Long-Term Debt 30,512 32,031
Customer Advances 27,638 24,555
Customer Security Deposits 18,320 17,430
Other Accruals and Current Liabilities 16,046 18,875
Fair Value of Derivative Financial Instruments   20,160       2,148  
Total Current and Accrued Liabilities   524,324       318,507  
 
Deferred Credits:
Deferred Income Taxes 800,758 663,876
Taxes Refundable to Customers 69,585 67,046
Unamortized Investment Tax Credit 3,288 3,989
Cost of Removal Regulatory Liability 124,032 105,546
Other Regulatory Liabilities 89,334 120,229
Pension and Other Post-Retirement Liabilities 446,082 415,888
Asset Retirement Obligations 101,618 91,373
Other Deferred Credits   151,633       144,439  
Total Deferred Credits   1,786,330       1,612,386  
Commitments and Contingencies   -       -  
Total Capitalization and Liabilities $ 5,105,625     $ 4,769,129  
   
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
 
Twelve Months Ended
September 30,
(Thousands of Dollars)   2010   2009
 
Operating Activities:
Net Income Available for Common Stock $ 225,913 $ 100,708
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Gain on Sale of Discontinued Operations (10,334 ) -
Impairment of Oil and Gas Producing Properties - 182,811
Depreciation, Depletion and Amortization 191,809 173,410
Deferred Income Taxes 134,679 (2,521 )
Income from Unconsolidated Subsidiaries, Net of Cash Distributions 112 (466 )
Impairment of Investment in Partnership - 1,804
Excess Tax Benefits Associated with Stock-Based Compensation Awards (13,207 ) (5,927 )
Other 9,108 19,829
Change in:
Hedging Collateral Deposits (10,286 ) (847 )
Receivables and Unbilled Utility Revenue 10,262 47,658
Gas Stored Underground and Materials and
Supplies 6,546 43,598
Unrecovered Purchased Gas Costs - 37,708
Prepayments and Other Current Assets (34,288 ) 2,921
Accounts Payable 8,047 (61,149 )
Amounts Payable to Customers (67,669 ) 103,025
Customer Advances 3,083 (8,462 )
Customer Security Deposits 890 3,383
Other Accruals and Current Liabilities (3,649 ) 13,676
Other Assets 7,237 (35,140 )
Other Liabilities     1,442       (4,201 )
Net Cash Provided by Operating Activities   $ 459,695     $ 611,818  
 
Investing Activities:
Capital Expenditures ($455,764 ) ($313,633 )
Investment in Subsidiary, Net of Cash Acquired - (34,933 )
Net Proceeds from Sale of Timber Mill and Related Assets 15,770 -
Net Proceeds from Sale of Landfill Gas Pipeline Assets 38,000 -
Cash Held in Escrow - (2,000 )
Net Proceeds from Sale of Oil and Gas Producing Properties - 3,643
Other     (251 )     (2,806 )
Net Cash Used in Investing Activities     ($402,245 )     ($349,729 )
 
Financing Activities:
Excess Tax Benefits Associated with Stock-Based Compensation Awards $ 13,207 $ 5,927
Net Proceeds from Issuance of Long-Term Debt - 247,780
Reduction of Long-Term Debt - (100,000 )
Dividends Paid on Common Stock (109,596 ) (104,158 )
Net Proceeds From Issuance of Common Stock     26,057       28,176  
Net Cash Provided by (Used In) Financing Activities     ($70,332 )   $ 77,725  
Net Increase / (Decrease) in Cash and Temporary
Cash Investments (12,882 ) 339,814
Cash and Temporary Cash Investments
at Beginning of Period     408,053       68,239  
Cash and Temporary Cash Investments
at September 30   $ 395,171     $ 408,053  
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
           
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
 
 
Three Months Ended Twelve Months Ended
(Thousands of Dollars, except per share amounts) September 30,   September 30,

EXPLORATION AND PRODUCTION SEGMENT
2010   2009   Variance   2010   2009   Variance
Operating Revenues $ 109,716     $ 101,349     $ 8,367     $ 438,028     $ 382,758     $ 55,270  
 
Operating Expenses:
Operation and Maintenance:
General and Administrative Expense 6,279 6,910 (631 ) 31,980 29,374 2,606
Lease Operating Expense 17,503 17,013 490 61,398 53,957 7,441
All Other Operation and Maintenance Expense (136 ) 2,460 (2,596 ) 6,597 11,059 (4,462 )
Property, Franchise and Other Taxes 2,710 935 1,775 10,592 8,657 1,935
Depreciation, Depletion and Amortization 27,421 23,658 3,763 106,182 90,816 15,366
Impairment of Oil and Gas Producing Properties   -       -       -     -       182,811       (182,811 )
  53,777       50,976       2,801     216,749       376,674       (159,925 )
 
Operating Income 55,939 50,373 5,566 221,279 6,084 215,195
 
Other Income (Expense):
Interest Income 480 244 236 980 2,430 (1,450 )
Other Income - - - - - -
Other Interest Expense   (7,840 )     (7,915 )     75     (30,853 )     (33,368 )     2,515  
 
Income (Loss) Before Income Taxes 48,579 42,702 5,877 191,406 (24,854 ) 216,260
Income Tax Expense (Benefit)   21,094       14,574       6,520     78,875       (14,616 )     93,491  
Net Income (Loss) $ 27,485     $ 28,128     $ (643 ) $ 112,531     $ (10,238 )   $ 122,769  
 
Net Income (Loss) Per Share (Diluted) $ 0.33     $ 0.34     $ (0.01 ) $ 1.36     $ (0.13 )   $ 1.49  
 
 
 
 
Three Months Ended Twelve Months Ended
September 30, September 30,

PIPELINE AND STORAGE SEGMENT
2010 2009 Variance 2010 2009 Variance
Revenues from External Customers $ 31,344 $ 31,573 $ (229 ) $ 138,905 $ 137,478 $ 1,427
Intersegment Revenues   19,689       19,770       (81 )   79,978       81,795       (1,817 )
Total Operating Revenues   51,033       51,343       (310 )   218,883       219,273       (390 )
 
Operating Expenses:
Purchased Gas (345 ) (5 ) (340 ) (205 ) 132 (337 )
Operation and Maintenance 22,132 20,268 1,864 77,698 70,814 6,884
Property, Franchise and Other Taxes 5,316 4,681 635 20,532 17,470 3,062
Depreciation, Depletion and Amortization   9,313       8,699       614     35,930       35,115       815  
  36,416       33,643       2,773     133,955       123,531       10,424  
 
Operating Income 14,617 17,700 (3,083 ) 84,928 95,742 (10,814 )
 
Other Income (Expense):
Interest Income 82 52 30 199 995 (796 )
Other Income 174 (411 ) 585 538 2,780 (2,242 )
Other Interest Expense   (6,644 )     (6,821 )     177     (26,328 )     (21,580 )     (4,748 )
 
Income Before Income Taxes 8,229 10,520 (2,291 ) 59,337 77,937 (18,600 )
Income Tax Expense   1,562       4,744       (3,182 )   22,634       30,579       (7,945 )
Net Income $ 6,667     $ 5,776     $ 891   $ 36,703     $ 47,358     $ (10,655 )
 
Net Income Per Share (Diluted) $ 0.08     $ 0.07     $ 0.01   $ 0.44     $ 0.59     $ (0.15 )
           
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
 
 
Three Months Ended Twelve Months Ended
(Thousands of Dollars, except per share amounts) September 30, September 30,

UTILITY SEGMENT
2010   2009   Variance 2010   2009   Variance
Revenues from External Customers $ 97,143 $ 87,587 $ 9,556 $ 804,466 $ 1,097,550 $ (293,084 )
Intersegment Revenues   2,009       2,135       (126 )   15,324       15,474       (150 )
Total Operating Revenues   99,152       89,722       9,430     819,790       1,113,024       (293,234 )
 
Operating Expenses:
Purchased Gas 38,384 31,185 7,199 428,376 713,174 (284,798 )
Operation and Maintenance 34,988 36,104 (1,116 ) 181,313 191,192 (9,879 )
Property, Franchise and Other Taxes 9,630 9,392 238 42,772 44,215 (1,443 )
Depreciation, Depletion and Amortization   10,244       10,005       239     40,370       39,675       695  
  93,246       86,686       6,560     692,831       988,256       (295,425 )
 
Operating Income 5,906 3,036 2,870 126,959 124,768 2,191
 
Other Income (Expense):
Interest Income 1,127 1,138 (11 ) 2,144 2,486 (342 )
Other Income 278 161 117 1,059 924 135
Other Interest Expense   (8,779 )     (9,597 )     818     (35,831 )     (32,417 )     (3,414 )
 
Income (Loss) Before Income Taxes (1,468 ) (5,262 ) 3,794 94,331 95,761 (1,430 )
Income Tax Expense (Benefit)   (1,686 )     (3,623 )     1,937     31,858       37,097       (5,239 )
Net Income (Loss) $ 218     $ (1,639 )   $ 1,857   $ 62,473     $ 58,664     $ 3,809  
 
Net Income (Loss) Per Share (Diluted) $ -     $ (0.02 )   $ 0.02   $ 0.76     $ 0.73     $ 0.03  
 
 
 
 
Three Months Ended Twelve Months Ended
September 30, September 30,

ENERGY MARKETING SEGMENT
2010   2009   Variance 2010   2009   Variance
Revenues from External Customers $ 41,699 $ 47,318 $ (5,619 ) $ 344,802 $ 397,763 $ (52,961 )
Intersegment Revenues   -       558       (558 )   -       558       (558 )
Total Operating Revenues   41,699       47,876       (6,177 )   344,802       398,321       (53,519 )
 
Operating Expenses:
Purchased Gas 40,554 47,292 (6,738 ) 325,026 380,677 (55,651 )
Operation and Maintenance 1,425 1,446 (21 ) 6,148 6,014 134
Property, Franchise and Other Taxes 31 19 12 55 41 14
Depreciation, Depletion and Amortization   10       11       (1 )   42       42       -  
  42,020       48,768       (6,748 )   331,271       386,774       (55,503 )
 
Operating Income (Loss) (321 ) (892 ) 571 13,531 11,547 1,984
 
Other Income (Expense):
Interest Income 17 12 5 44 79 (35 )
Other Income 16 24 (8 ) 74 225 (151 )
Other Interest Expense   (6 )     (6 )     -     (27 )     (215 )     188  
 
Income (Loss) Before Income Taxes (294 ) (862 ) 568 13,622 11,636 1,986
Income Tax Expense (Benefit)   (638 )     (519 )     (119 )   4,806       4,470       336  
Net Income (Loss) $ 344     $ (343 )   $ 687   $ 8,816     $ 7,166     $ 1,650  
 
Net Income (Loss) Per Share (Diluted) $ -     $ -     $ -   $ 0.11     $ 0.09     $ 0.02  
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
           
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
 
 
Three Months Ended Twelve Months Ended
September 30, September 30,

ALL OTHER
2010   2009   Variance 2010   2009   Variance
Revenues from External Customers $ 6,272 $ 8,750 $ (2,478 ) $ 33,428 $ 35,100 $ (1,672 )
Intersegment Revenues   897       -       897     2,315       -       2,315  
Total Operating Revenues   7,169       8,750       (1,581 )   35,743       35,100       643  
 
Operating Expenses:
Purchased Gas (41 ) - (41 ) (41 ) - (41 )
Operation and Maintenance 4,360 6,605 (2,245 ) 22,775 32,259 (9,484 )
Property, Franchise and Other Taxes 377 348 29 1,588 1,437 151
Depreciation, Depletion and Amortization   2,036       967       1,069     7,907       4,276       3,631  
  6,732       7,920       (1,188 )   32,229       37,972       (5,743 )
 
Operating Income (Loss) 437 830 (393 ) 3,514 (2,872 ) 6,386
 
Other Income (Expense):
Income from Unconsolidated Subsidiaries 792 646 146 2,488 3,366 (878 )
Impairment of Investment in Partnership - - - - (1,804 ) 1,804
Interest Income 42 40 2 137 583 (446 )
Other Income (160 ) 264 (424 ) (127 ) 294 (421 )
Other Interest Expense   (543 )     (540 )     (3 )   (2,152 )     (2,344 )     192  
 
Income (Loss) from Continuing Operations Before Income Taxes 568 1,240 (672 ) 3,860 (2,777 ) 6,637
Income Tax Expense (Benefit)   (674 )     320       (994 )   464       (3,482 )     3,946  
Income from Continuing Operations 1,242 920 322 3,396 705 2,691
 
Discontinued Operations:
Income (Loss) from Operations, Net of Tax (301 ) (2,945 ) 2,644 470 (2,776 ) 3,246
Gain on Disposal, Net of Tax   6,310       -       6,310     6,310       -       6,310  
Income (Loss) from Discontinued Operations, Net of Tax   6,009       (2,945 )     8,954     6,780       (2,776 )     9,556  
 
Net Income (Loss) $ 7,251     $ (2,025 )   $ 9,276   $ 10,176     $ (2,071 )   $ 12,247  
 
Income from Continuing Operations Per Share (Diluted) $ 0.02 $ 0.02 $ - $ 0.04 $ - $ 0.04
Income (Loss) from Discontinued Operations, Net of
Tax, Per Share (Diluted)   0.07     (0.04 )   0.11     0.08       (0.03 )     0.11  
Net Income (Loss) Per Share (Diluted) $ 0.09     $ (0.02 )   $ 0.11   $ 0.12     $ (0.03 )   $ 0.15  
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
           
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
 
 
Three Months Ended Twelve Months Ended
(Thousands of Dollars, except per share amounts) September 30, September 30,

CORPORATE
2010   2009   Variance 2010   2009   Variance
Revenues from External Customers $ 222 $ 219 $ 3 $ 874 $ 894 $ (20 )
Intersegment Revenues   1,003       1,003       -     3,547       4,065       (518 )
Total Operating Revenues   1,225       1,222       3     4,421       4,959       (538 )
 
Operating Expenses:
Operation and Maintenance 3,463 3,083 380 13,100 11,656 1,444
Property, Franchise and Other Taxes 104 69 35 313 282 31
Depreciation, Depletion and Amortization   241       174       67     768       696       72  
  3,808       3,326       482     14,181       12,634       1,547  
 
Operating Loss (2,583 ) (2,104 ) (479 ) (9,760 ) (7,675 ) (2,085 )
 
Other Income (Expense):
Interest Income 22,385 22,518 (133 ) 89,973 84,761 5,212
Other Income 857 821 36 2,094 3,977 (1,883 )
Interest Expense on Long-Term Debt (21,951 ) (22,062 ) 111 (87,190 ) (79,419 ) (7,771 )
Other Interest Expense   (152 )     (180 )     28     (1,313 )     (3,004 )     1,691  
 
Loss Before Income Taxes (1,444 ) (1,007 ) (437 ) (6,196 ) (1,360 ) (4,836 )
Income Tax Expense (Benefit)   2,119       1,892       227     (1,410 )     (1,189 )     (221 )
Net Loss $ (3,563 )   $ (2,899 )   $ (664 ) $ (4,786 )   $ (171 )   $ (4,615 )
 
Net Loss Per Share (Diluted) $ (0.04 )   $ (0.04 )   $ -   $ (0.06 )   $ -     $ (0.06 )
 
 
 
Three Months Ended Twelve Months Ended
September 30, September 30,

INTERSEGMENT ELIMINATIONS
2010   2009   Variance 2010   2009   Variance
Intersegment Revenues $ (23,598 )   $ (23,466 )   $ (132 ) $ (101,164 )   $ (101,892 )   $ 728  
 
Operating Expenses:
Purchased Gas (21,529 ) (21,779 ) 250 (94,724 ) (96,767 ) 2,043
Operation and Maintenance   (2,069 )     (1,687 )     (382 )   (6,440 )     (5,125 )     (1,315 )
  (23,598 )     (23,466 )     (132 )   (101,164 )     (101,892 )     728  
 
Operating Income - - - - - -
 
Other Income (Expense):
Interest Income (22,451 ) (22,586 ) 135 (89,748 ) (85,558 ) (4,190 )
Other Interest Expense   22,451     22,586     (135 )   89,748     85,558     4,190  
 
Net Income $ -     $ -     $ -   $ -     $ -     $ -  
 
Net Income Per Share (Diluted) $ -     $ -     $ -   $ -     $ -     $ -  
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
   
SEGMENT INFORMATION (Continued)
(Thousands of Dollars)
 
 
Three Months Ended Twelve Months Ended
September 30, September 30,
(Unaudited) (Unaudited)
 
Increase Increase
2010 2009 (Decrease) 2010 2009 (Decrease)
 

Capital Expenditures:
Exploration and Production $ 124,325

(1)
$ 36,612

(2)
$ 87,713 $ 398,174

(1)(2)
$ 188,290

(2)
$ 209,884
Pipeline and Storage 15,651 15,264 387 37,894 52,504

(3)
(14,610 )
Utility 18,460 15,798 2,662 57,973 56,178 1,795
Energy Marketing   168   -   168     407   25     382  
Total Reportable Segments 158,604 67,674 90,930 494,448 296,997 197,451
All Other 828 5,868

(2)
(5,040 ) 6,694

(2)
9,507

(2)
(2,813 )
Corporate 8 148 (140 ) 210 297 (87 )
Eliminations   -   -   -     -   (344 )   344  
Total Expenditures from
Continuing Operations 159,440 73,690 85,750 501,352 306,457 194,895
Discontinued Operations   28   50   (22 )   150   216     (66 )
Total Capital Expenditures $ 159,468 $ 73,740 $ 85,728   $ 501,502 $ 306,673   $ 194,829  
 

(1)

Amount for the quarter and year ended September 30, 2010 includes $55.5 million of accrued capital expenditures, the majority of which was in the Appalachian region. This amount has been excluded from the Consolidated Statement of Cash Flows at September 30, 2010 since it represents a non-cash investing activity at that date.
 

(2)

Capital expenditures for the Exploration and Production segment for the year ended September 30, 2010 exclude $9.1 million of capital expenditures, the majority of which was in the Appalachian region. Capital expenditures for All Other for the year ended September 30, 2010 exclude $0.7 million of capital expenditures related to the construction of the Midstream Covington Gathering System. Both of these amounts were accrued at September 30, 2009 and paid during the year ended September 30, 2010. These amounts were excluded from the Consolidated Statement of Cash Flows at September 30, 2009 since they represented non-cash investing activities at that date. These amounts have been included in the Consolidated Statement of Cash Flows at September 30, 2010.
 

(3)

Amount for the year ended September 30, 2009 excludes $16.8 million of capital expenditures related to the Empire Connector project accrued at September 30, 2008 and paid during the year ended September 30, 2009. This amount was excluded from the Consolidated Statement of Cash Flows at September 30, 2008 since it represented a non-cash investing activity at that date. The amount has been included in the Consolidated Statement of Cash Flows at September 30, 2009.

 

 

DEGREE DAYS
         
 
Percent Colder
(Warmer) Than:

Three Months Ended September 30
Normal 2010 2009 Normal (1) Last Year (1)
 
Buffalo, NY 178 140 143 (21.3) (2.1)
Erie, PA 135 105 112 (22.2) (6.3)
 

Twelve Months Ended September 30
 
Buffalo, NY 6,692 6,292 6,701 (6.0) (6.1)
Erie, PA 6,243 5,947 6,176 (4.7) (3.7)
 

 
(1)   Percents compare actual 2010 degree days to normal degree days and actual 2010 degree days to actual 2009 degree days.
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
           

EXPLORATION AND PRODUCTION INFORMATION
 
 
Three Months Ended Twelve Months Ended
September 30, September 30,
Increase Increase
2010 2009 (Decrease) 2010 2009 (Decrease)
 

Gas Production/Prices:
Production (MMcf)
Gulf Coast 2,225 2,767 (542 ) 10,304 9,886 418
West Coast 953 999 (46 ) 3,819 4,063 (244 )
Appalachia   5,137   2,271   2,866     16,222   8,335   7,887  
Total Production   8,315   6,037   2,278     30,345   22,284   8,061  
 
Average Prices (Per Mcf)
Gulf Coast $ 5.08 $ 3.61 $ 1.47 $ 5.22 $ 4.54 $ 0.68
West Coast 4.48 3.36 1.12 4.81 3.91 0.90
Appalachia 4.57 4.09 0.48 4.93 5.52 (0.59 )
Weighted Average 4.70 3.75 0.95 5.01 4.79 0.22
Weighted Average after Hedging 5.72 6.00 (0.28 ) 6.04 6.94 (0.90 )
 

Oil Production/Prices:
Production (Thousands of Barrels)
Gulf Coast 113 170 (57 ) 502 640 (138 )
West Coast 662 691 (29 ) 2,669 2,674 (5 )
Appalachia   15   17   (2 )   49   59   (10 )
Total Production   790   878   (88 )   3,220   3,373   (153 )
 
 
Average Prices (Per Barrel)
Gulf Coast $ 69.44 $ 65.50 $ 3.94 $ 76.57 $ 54.58 $ 21.99
West Coast 71.53 62.56 8.97 71.72 50.90 20.82
Appalachia 71.47 59.08 12.39 75.81 56.15 19.66
Weighted Average 71.23 63.06 8.17 72.54 51.69 20.85
Weighted Average after Hedging 74.05 71.39 2.66 75.25 64.94 10.31
 
Total Production (MMcfe)   13,055   11,305   1,750     49,665   42,522   7,143  
 

Selected Operating Performance Statistics:
General & Administrative Expense per Mcfe (1) $ 0.48 $ 0.61 $ (0.13 ) $ 0.64 $ 0.69 $ (0.05 )
Lease Operating Expense per Mcfe (1) $ 1.34 $ 1.50 $ (0.16 ) $ 1.24 $ 1.27 $ (0.03 )
Depreciation, Depletion & Amortization per Mcfe (1) $ 2.10 $ 2.09 $ 0.01 $ 2.14 $ 2.14 $ -
 
 
(1)   Refer to page 18 for the General and Administrative Expense, Lease Operating Expense and Depreciation, Depletion, and Amortization Expense for the Exploration and Production segment.
         
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 

EXPLORATION AND PRODUCTION INFORMATION
 
 
Hedging Summary for Fiscal 2011
 

SWAPS

Volume

Average Hedge Price
Oil 1.6 MMBBL $70.26 / BBL
Gas 19.9 BCF $6.76 / MCF
 
Hedging Summary for Fiscal 2012
 

SWAPS

Volume

Average Hedge Price
Oil 1.1 MMBBL $70.55 / BBL
Gas 14.6 BCF $7.03 / MCF
 
Hedging Summary for Fiscal 2013
 

SWAPS

Volume

Average Hedge Price
Oil 0.3 MMBBL $75.94 / BBL
Gas 3.8 BCF $6.65 / MCF
 
 

Gross Wells in Process of Drilling

Twelve Months Ended September 30, 2010
East
Marcellus Upper Total

Gulf

West

Shale

Devonian

Company
 
Wells in Process - Beginning of Period
Exploratory 0.00 0.00 16.00 (1) (2) 20.00 (2) 36.00
Developmental 0.00 0.00 14.00 (1) 68.00 82.00
Wells Commenced
Exploratory 1.00 0.00 11.00 18.00 30.00
Developmental 1.00 44.00 51.00 68.00 164.00
Wells Completed
Exploratory 1.00 0.00 22.00 13.00 36.00
Developmental 0.00 44.00 25.00 114.00 183.00
Wells Plugged & Abandoned
Exploratory 0.00 0.00 1.00 1.00 2.00
Developmental 0.00 0.00 0.00 3.00 3.00
Wells Sold
Exploratory 0.00 0.00 0.00 1.00 1.00
Developmental 0.00 0.00 1.00 0.00 1.00
Wells in Process - End of Period
Exploratory 0.00 0.00 4.00 23.00 27.00
Developmental 1.00 0.00 39.00 19.00 59.00
 
(1) Gross exploratory wells were decreased by 11 and developmental wells were increased by 11.
 
(2) Marcellus Shale gross exploratory wells were increased by 2 and Upper Devonian gross exploratory wells were decreased by 2.
 
 

Net Wells in Process of Drilling

Twelve Months Ended September 30, 2010
East
Marcellus Upper Total

Gulf

West

Shale

Devonian

Company
 
Wells in Process - Beginning of Period
Exploratory 0.00 0.00 14.00 (3) (4) 19.00 (4) 33.00
Developmental 0.00 0.00 8.50 (3) 67.00 75.50
Wells Commenced
Exploratory 0.29 0.00 11.00 18.00 29.29
Developmental 0.20 41.72 32.17 68.00 142.09
Wells Completed
Exploratory 0.29 0.00 20.00 13.00 33.29
Developmental 0.00 41.72 17.55 114.00 173.27
Wells Plugged & Abandoned
Exploratory 0.00 0.00 1.00 1.00 2.00
Developmental 0.00 0.00 0.00 3.00 3.00
Wells Sold
Exploratory 0.00 0.00 0.00 1.00 1.00
Developmental 0.00 0.00 0.50 0.00 0.50
Wells in Process - End of Period
Exploratory 0.00 0.00 4.00 22.00 26.00
Developmental 0.20 0.00 22.62 18.00 40.82
 
(3) Net exploratory wells were decreased by 6.50 and developmental wells were increased by 6.50.
 
(4) Marcellus Shale net exploratory wells were increased by 1 and Upper Devonian net exploratory wells were decreased by 1.
       
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 

EXPLORATION AND PRODUCTION INFORMATION
 
Reserve Quantity Information
 
 
Gas MMcf
U.S.
Gulf Coast West Coast Appalachian Total
Region   Region   Region   Company
Proved Developed and
Undeveloped Reserves:
September 30, 2009 26,167 72,959 149,828 248,954
Extensions and Discoveries 2,881 269 189,979 193,129
Revisions of Previous Estimates 6,683 2,315 7,677 16,675
Production (10,304 )   (3,819 )   (16,222 )   (30,345 )
September 30, 2010 25,427 71,724 331,262 428,413
 
Proved Developed Reserves:
 
September 30, 2009 18,051 67,603 120,579 206,233
September 30, 2010 19,293 66,178 210,817 296,288
 
 
Oil Mbbl
U.S.
Gulf Coast West Coast Appalachian Total
Region   Region   Region   Company
Proved Developed and
Undeveloped Reserves:
September 30, 2009 1,452 44,824 311 46,587
Extensions and Discoveries 222 828 4 1,054
Revisions of Previous Estimates 332 484 2 818
Production (502 )   (2,669 )   (49 )   (3,220 )
September 30, 2010 1,504 43,467 268 45,239
 
Proved Developed Reserves:
 
September 30, 2009 1,194 37,711 285 39,190
September 30, 2010 1,066 36,353 263 37,682
           
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 
 
Pipeline & Storage Throughput- (millions of cubic feet - MMcf)
 
Three Months Ended Twelve Months Ended
September 30, September 30,
Increase Increase
2010 2009 (Decrease) 2010 2009 (Decrease)
Firm Transportation - Affiliated 10,249 10,473 (224 ) 99,451 108,677 (9,226 )
Firm Transportation - Non-Affiliated 41,425 41,298 127 197,456 239,617 (42,161 )
Interruptible Transportation 884 512 372   4,459 3,888 571  
52,558 52,283 275   301,366 352,182 (50,816 )
 
Utility Throughput - (MMcf)
Three Months Ended Twelve Months Ended
September 30, September 30,
Increase Increase
2010 2009 (Decrease) 2010 2009 (Decrease)
Retail Sales:
Residential Sales 3,720 3,835 (115 ) 54,012 58,835 (4,823 )
Commercial Sales 537 567 (30 ) 8,203 9,551 (1,348 )
Industrial Sales 134 16 118   646 515 131  
4,391 4,418 (27 ) 62,861 68,901 (6,040 )
Off-System Sales 1,865 - 1,865 5,899 513 5,386
Transportation 8,148 7,275 873   60,105 59,751 354  
14,404 11,693 2,711   128,865 129,165 (300 )
 
Energy Marketing Volumes
Three Months Ended Twelve Months Ended
September 30, September 30,
Increase Increase
2010 2009 (Decrease)   2010 2009 (Decrease)
Natural Gas (MMcf) 7,155 10,400 (3,245 ) 58,299 60,858 (2,559 )
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
FISCAL 2011 EARNINGS GUIDANCE AND SENSITIVITY
           
 
Earnings per share sensitivity to changes

Fiscal 2011 (Diluted earnings per share guidance*)

from prices used in guidance* ^
 
$1 change per MMBtu gas   $5 change per Bbl oil
Earnings Range Increase   Decrease Increase   Decrease
 
Consolidated Earnings $2.40 - $2.70 + $0.19 - $0.19 + $0.05 - $0.05
 
 
*   Please refer to forward looking statement footnote beginning at page 9 of this document.
 
^ This sensitivity table is current as of November 4, 2010 and only considers revenue from the Exploration and Production segment's crude oil and natural gas sales. This revenue is based upon pricing used in the Company's earnings forecast. For its fiscal 2011 earnings forecast, the Company is utilizing flat NYMEX equivalent commodity pricing, exclusive of basis differential, of $4 per MMBtu for natural gas and $80 per Bbl for crude oil. The sensitivities will become obsolete with the passage of time, changes in Seneca's production forecast, changes in basis differential, as additional hedging contracts are entered into, and with the settling of hedge contracts at their maturity.
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
   
 

Quarter Ended September 30 (unaudited)
2010 2009
 
Operating Revenues $ 286,396,000 $ 276,796,000  
 
Income from Continuing Operations $ 32,393,000 $ 29,943,000
Income (Loss) from Discontinued Operations, Net of Tax   6,009,000   (2,945,000 )
Net Income Available for Common Stock $ 38,402,000 $ 26,998,000  
 
Earnings Per Common Share:
Basic:
Income from Continuing Operations $ 0.40 $ 0.37
Income (Loss) from Discontinued Operations   0.07   (0.03 )
Net Income Available for Common Stock $ 0.47 $ 0.34  
 
Diluted:
Income from Continuing Operations $ 0.39 $ 0.37
Income (Loss) from Discontinued Operations   0.07   (0.04 )
Net Income Available for Common Stock $ 0.46 $ 0.33  
 
Weighted Average Common Shares:
Used in Basic Calculation   81,981,133   80,240,861  
Used in Diluted Calculation   82,969,012   81,607,864  
 
 

Twelve Months Ended September 30 (unaudited)
 
Operating Revenues $ 1,760,503,000 $ 2,051,543,000  
 
Income from Continuing Operations $ 219,133,000 $ 103,484,000
Income (Loss) from Discontinued Operations, Net of Tax   6,780,000   (2,776,000 )
Net Income Available for Common Stock $ 225,913,000 $ 100,708,000  
 
Earnings Per Common Share:
Basic:
Income from Continuing Operations $ 2.70 $ 1.29
Income (Loss) from Discontinued Operations   0.08   (0.03 )
Net Income Available for Common Stock $ 2.78 $ 1.26  
 
Diluted:
Income from Continuing Operations $ 2.65 $ 1.28
Income (Loss) from Discontinued Operations   0.08   (0.03 )
Net Income Available for Common Stock $ 2.73 $ 1.25  
 
Weighted Average Common Shares:
Used in Basic Calculation   81,380,434   79,649,965  
Used in Diluted Calculation   82,660,598   80,628,685  

Copyright Business Wire 2010