National Fuel Gas Company (“National Fuel” or the “Company”) (NYSE:NFG) today announced consolidated earnings for the first quarter of its 2012 fiscal year (the quarter ended December 31, 2011).

HIGHLIGHTS
  • Earnings for the first quarter of fiscal 2012 of $60.7 million, or $0.73 per share, increased $2.2 million, or $0.03 per share, compared to $58.5 million, or $0.70 per share, for the prior year’s first quarter. The increase is mainly due to higher earnings in the Exploration and Production and Pipeline and Storage segments and the All Other category.
  • Seneca Resources Corporation’s (“Seneca”) first quarter production of crude oil and natural gas increased 2.6 billion cubic feet equivalent (“Bcfe”), or approximately 17%, to 18.2 Bcfe. Appalachian production increased approximately 62% to 13.2 Bcfe, including production from the Marcellus Shale of 11.3 Bcfe. This 17% year over year increase occurred despite the fiscal 2011 sale of its offshore Gulf of Mexico assets, which produced 2.6 Bcfe in the first quarter of the previous year.
  • In the Pipeline and Storage segment, the Tioga County Extension and Line N Expansion projects were completed and placed in service.
  • The Company is revising its GAAP earnings guidance range for fiscal 2012 to a range of $2.40 to $2.65 per share. The previous earnings guidance had been a range of $2.85 to $3.15 per share. This revised guidance assumes flat NYMEX equivalent pricing of $3.00 per Million British Thermal Units (“MMBtu”) for natural gas and $100 per barrel (“Bbl”) for crude oil for unhedged production for the remainder of the fiscal year. Production for the entire 2012 fiscal year is projected to be between 85 and 95 Bcfe. The previous guidance for projected production was between 87 and 101 Bcfe. The Company is also reducing capital spending in Appalachia to a range between $675 million and $745 million. The previous range was between $740 million and $820 million. A summary of the factors impacting the revised earnings guidance is presented on page 19 of this report.
  • A conference call is scheduled for Friday, February 3, 2012, at 11 a.m. Eastern Standard Time.

MANAGEMENT COMMENTS

David F. Smith, Chairman and Chief Executive Officer of National Fuel Gas Company, stated: “While declining natural gas prices throughout the quarter have created challenges for natural gas producers, the quality of our assets and the strength of our integrated structure were evident in this quarter’s results, which were in line with our expectations. Reliable earnings from our Utility segment; predictability and growth from our Pipeline and Storage segment; and significant earnings and free cash flow generation from our California oil production all contributed to National Fuel’s performance for the quarter.

“We believe that our integrated business model and appropriate capital spending discipline will continue to generate maximum value for our shareholders. In the current low gas price environment, we will carefully balance our growth plans with our funding capabilities. Our fee ownership position across most of our Pennsylvania acreage allows us to manage our drilling program for maximum long-term value without the concern of lease expirations.

“The combination of a recent debt issuance, favorably priced natural gas hedges, significant cash generation from our California operations and a commitment to fiscal discipline will allow us to meet our funding requirements and maintain a strong balance sheet. As we look out longer, we believe the quality of our integrated asset mix and our outstanding E&P growth opportunities will continue to deliver value in the coming years.”

SUMMARY OF RESULTS

National Fuel had consolidated earnings for the quarter ended December 31, 2011, of $60.7 million, or $0.73 per share, compared to the prior year’s first quarter of $58.5 million, or $0.70 per share, an increase of $2.2 million or $0.03 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 are after tax unless otherwise noted.)

DISCUSSION OF RESULTS BY SEGMENT

The following discussion of the earnings of each segment is summarized in a tabular form at pages 7 and 8 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 produces natural gas and oil reserves in California and Appalachia. Seneca completed the sale of its offshore Gulf of Mexico assets in April, 2011.

The Exploration and Production segment’s earnings in the first quarter of fiscal 2012 of $30.3 million, or $0.36 per share, increased $2.9 million, or $0.03 per share, when compared with the prior year’s first quarter.

Overall production of natural gas and crude oil for the current quarter of 18.2 Bcfe increased approximately 2.6 Bcfe, or 16.6 percent, compared to the prior year’s first quarter. Production from Seneca’s Appalachia properties increased approximately 61.8 percent, mainly due to a 5.4 Bcfe or 91.5 percent increase in production from Marcellus wells. Production in California increased 4.4 percent. Gulf of Mexico production decreased 2.6 Bcfe due to the April 2011 sale of Seneca’s offshore assets.

Changes in commodity prices realized after hedging also impacted earnings. The weighted average natural gas price received by Seneca (after hedging) for the quarter ended December 31, 2011, was $4.78 per thousand cubic feet (“Mcf”), a decrease of $0.48 per Mcf compared to the prior year’s first quarter. Higher crude oil prices realized after hedging contributed to the increase in earnings. The weighted average oil price received by Seneca (after hedging) for the quarter ended December 31, 2011, was $91.38 per Bbl, an increase of $15.14 per Bbl.

Depletion, lease operating expenses (“LOE”) and general and administrative (“G&A”) expenses for the current year’s first quarter increased over last year’s first quarter due to the higher production activity discussed above. On a per unit basis, LOE decreased $0.09 per thousand cubic feet equivalent (“Mcfe”). Excluding the Gulf, on a per unit basis, LOE increased $0.02 per Mcfe largely due to higher non-operated LOE costs per unit and increased transportation, disposal and vacuum services. Depletion increased $0.12 per Mcfe due to higher capital spending in the East. G&A increased $0.04 per Mcfe due to higher labor expenses including additional staffing and relocation costs related to the opening of the Pittsburgh office in the East division.

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 $10.0 million, or $0.12 per share, for the quarter ended December 31, 2011, increased $1.4 million, or $0.02 per share, when compared with the same period in the prior fiscal year. The increase in earnings is mainly due to higher transportation revenues from the Tioga County Extension and Line N Expansion projects, which were completed and placed in service in the current year’s first quarter. Lower efficiency gas revenues due to lower natural gas prices and higher depreciation and operating expenses reduced earnings.

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 $19.4 million, or $0.23 per share, for the quarter ended December 31, 2011, decreased $3.6 million or $0.05 per share. Warmer weather in Pennsylvania and the impact of certain regulatory adjustments were the main reasons for the decrease in earnings in the current year’s first quarter. In New York, the warmer weather did not have a significant impact on earnings for the quarter. The impact of weather variations on earnings in New York is mitigated by that jurisdiction’s weather normalization clause.

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 December 31, 2011, of $0.4 million decreased $0.5 million from the prior year’s first quarter earnings of $0.9 million. The decrease was mainly due to lower average margins and lower retail sales volumes as a result of warmer weather during the current year’s first quarter.

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; and the Northeast division of Seneca Resources Corporation that markets high quality hardwoods from Appalachian land holdings.

The Corporate and All Other category earnings of $0.6 million, or $0.01 per share, for the quarter ended December 31, 2011, compared to a loss of $1.3 million, or $0.02 per share, in the prior year’s first quarter. The increase in earnings is mainly due to higher earnings from Midstream’s pipeline gathering and natural gas processing operation.

EARNINGS GUIDANCE

The Company is updating its earnings guidance for fiscal 2012 to reflect actual first quarter results, changes in commodity prices and a reduced capital expenditure budget in its Exploration and Production segment. The revised GAAP earnings range is $2.40 to $2.65 per share. This includes forecast oil and gas production for fiscal 2012 for the Exploration and Production segment in the range between 85 and 95 Bcfe (previous production range was between 87 and 101 Bcfe), hedges currently in place, and NYMEX equivalent flat commodity pricing on non-hedged volumes exclusive of basis differential of $3.00 per MMBtu for natural gas and $100 per Bbl for crude oil. The revised capital spending in Appalachia is expected to be in a range between $675 million and $745 million. The previous range was between $740 million and $820 million. A summary of the factors impacting the revised earnings guidance is presented on page 19 of this report.

EARNINGS TELECONFERENCE

The Company will host a conference call on Friday, February 3, 2012, 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 at National Fuel’s website at investor.nationalfuelgas.com. For those without Internet access, access is also provided by dialing (toll-free) 1-866-510-0707, and using the passcode “83237053.” 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 “56217287.” Both the webcast and telephonic replay will be available until the close of business on Friday, February 10, 2012.

National Fuel is an integrated energy company with $5.7 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.

Analyst Contact: Timothy J. Silverstein (716) 857-6987

Media Contact: Donna L. DeCarolis (716) 857-7872

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: 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; 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; changes in the price of natural gas or oil; uncertainty of oil and gas reserve estimates; significant differences between the Company’s projected and actual production levels for natural gas or oil; impairments under the SEC’s full cost ceiling test for natural gas and oil reserves; changes in the availability, price or accounting treatment of derivative financial instruments; governmental/regulatory actions, initiatives and proceedings, including those involving rate cases (which address, among other things, allowed rates of return, rate design and retained natural gas), environmental/safety requirements, affiliate relationships, industry structure, and franchise renewal; 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; 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; 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 major accidents, fires, severe weather, natural disasters, terrorist activities, acts of war, cyber attacks or pest infestation; changes in price differential between similar quantities of natural gas at different geographic locations, and the effect of such changes on the demand for pipeline transportation capacity to or from such locations; other changes in price differentials between similar quantities of oil or natural gas having different quality, heating value, geographic location or delivery date; significant differences between the Company’s projected and actual capital expenditures and operating expenses; 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; changes in demographic patterns and weather conditions; 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 thereof.
NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS
QUARTER ENDED DECEMBER 31, 2011
           
Exploration & Pipeline & Energy Corporate /
(Thousands of Dollars) Production   Storage   Utility   Marketing   All Other   Consolidated**
 
First quarter 2011 GAAP earnings $ 27,373 $ 8,578 $ 22,990 $ 932 $ (1,330 ) $ 58,543
 
Drivers of operating results
Higher (lower) Appalachian and West Coast crude oil prices 7,645 7,645
Higher (lower) Appalachian and West Coast natural gas prices (5,205 ) (5,205 )
Higher (lower) Appalachian and West Coast natural gas production 17,080 17,080
Higher (lower) Appalachian and West Coast crude oil production 2,642 2,642
Lower Gulf Coast natural gas and crude oil revenues (12,099 ) (12,099 )
Lower (higher) lease operating expenses (816 ) (816 )
Lower (higher) depreciation / depletion (5,081 ) (718 ) (5,799 )
 
Higher (lower) transportation revenues 2,776 2,776
Higher (lower) efficiency gas revenues (778 ) (778 )
Higher (lower) gathering and processing revenues 1,018 1,018
Lower (higher) operating expenses (1,404 ) (645 ) (323 ) (122 ) (2,494 )
 
Warmer weather (2,280 ) (2,280 )
Regulatory true-up adjustments (878 ) (878 )
 
Higher (lower) income from unconsolidated subsidiaries 662 662
 
Higher (lower) margins (439 ) 394 (45 )
 
Higher AFUDC * 759 759
Higher (lower) interest income (507 ) (507 )
(Higher) lower interest expense 563 374 686 1,623
 
Lower (higher) income tax expense / effective tax rate (927 ) (927 )
 
All other / rounding   544       (13 )     (530 )     58       (280 )     (221 )
 
First quarter 2012 GAAP earnings $ 30,315     $ 9,959     $ 19,353     $ 429     $ 643     $ 60,699  
 
 
* AFUDC = Allowance for Funds Used During Construction
** Amounts do not reflect intercompany eliminations
 
NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS PER SHARE
QUARTER ENDED DECEMBER 31, 2011
           
Exploration & Pipeline & Energy Corporate /
Production   Storage   Utility   Marketing   All Other   Consolidated**
 
First quarter 2011 GAAP earnings $ 0.33 $ 0.10 $ 0.28 $ 0.01 $ (0.02 ) $ 0.70
 
Drivers of operating results
Higher (lower) Appalachian and West Coast crude oil prices 0.09 0.09
Higher (lower) Appalachian and West Coast natural gas prices (0.06 ) (0.06 )
Higher (lower) Appalachian and West Coast natural gas production 0.20 0.20
Higher (lower) Appalachian and West Coast crude oil production 0.03 0.03
Lower Gulf Coast natural gas and crude oil revenues (0.14 ) (0.14 )
Lower (higher) lease operating expenses (0.02 ) (0.02 )
Lower (higher) depreciation / depletion (0.06 ) (0.01 ) (0.07 )
 
Higher (lower) transportation revenues 0.03 0.03
Higher (lower) efficiency gas revenues (0.01 ) (0.01 )
Higher (lower) gathering and processing revenues 0.01 0.01
Lower (higher) operating expenses (0.02 ) (0.01 ) - - (0.03 )
 
Warmer weather (0.03 ) (0.03 )
Regulatory true-up adjustments (0.01 ) (0.01 )
 
Higher (lower) income from unconsolidated subsidiaries 0.01 0.01
 
Higher (lower) margins - - -
 
Higher AFUDC * 0.01 0.01
Higher (lower) interest income (0.01 ) (0.01 )
(Higher) lower interest expense 0.01 - 0.01 0.02
 
Lower (higher) income tax expense / effective tax rate (0.01 ) (0.01 )
 
All other / rounding   0.01       0.01       (0.01 )         0.01       0.02  
 
First quarter 2012 GAAP earnings $ 0.36     $ 0.12     $ 0.23     $ 0.01   $ 0.01     $ 0.73  
 
 
* AFUDC = Allowance for Funds Used During Construction
** Amounts do not reflect intercompany eliminations
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
   
(Thousands of Dollars, except per share amounts)
Three Months Ended
December 31,
(Unaudited)

SUMMARY OF OPERATIONS
2011 2010
Operating Revenues $ 432,423   $ 450,948  
 
Operating Expenses:
Purchased Gas 132,193 163,038
Operation and Maintenance 100,059 97,450
Property, Franchise and Other Taxes 19,230 19,736
Depreciation, Depletion and Amortization   62,547     53,313  
314,029 333,537
 
Operating Income 118,394 117,411
 
Other Income (Expense):
Interest Income 1,105 884
Other Income 1,336 (107 )
Interest Expense on Long-Term Debt (18,641 ) (20,192 )
Other Interest Expense   (770 )   (1,401 )
 
Income Before Income Taxes 101,424 96,595
 
Income Tax Expense   40,725     38,052  
 
Net Income Available for Common Stock $ 60,699   $ 58,543  
 
Earnings Per Common Share:
Basic $ 0.73   $ 0.71  
Diluted $ 0.73   $ 0.70  
 
Weighted Average Common Shares:
Used in Basic Calculation   82,870,931     82,223,428  
Used in Diluted Calculation   83,699,981     83,420,351  
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
   
December 31, September 30,
(Thousands of Dollars)   2011   2011
 
ASSETS
Property, Plant and Equipment $ 5,922,308 $ 5,646,918
Less - Accumulated Depreciation, Depletion and Amortization   1,694,366       1,646,394  
Net Property, Plant and Equipment   4,227,942     $ 4,000,524  
 
Current Assets:
Cash and Temporary Cash Investments 224,262 80,428
Hedging Collateral Deposits 25,118 19,701
Receivables - Net 152,888 131,885
Unbilled Utility Revenue 47,335 17,284
Gas Stored Underground 50,808 54,325
Materials and Supplies - at average cost 27,263 27,932
Unrecovered Purchased Gas Costs 3,002 -
Other Current Assets 43,516 38,334
Deferred Income Taxes   14,921       15,423  
Total Current Assets   589,113       385,312  
 
Other Assets:
Recoverable Future Taxes 145,469 144,377
Unamortized Debt Expense 14,579 10,571
Other Regulatory Assets 570,927 574,644
Deferred Charges 4,429 5,552
Other Investments 81,055 79,365
Goodwill 5,476 5,476
Fair Value of Derivative Financial Instruments 106,115 76,085
Other   2,650       2,836  
Total Other Assets   930,700       898,906  
Total Assets $ 5,747,755     $ 5,284,742  
 
CAPITALIZATION AND LIABILITIES
Capitalization:
Comprehensive Shareholders' Equity
Common Stock, $1 Par Value Authorized - 200,000,000
Shares; Issued and Outstanding - 83,038,485 Shares
and 82,812,677 Shares, Respectively $ 83,038 $ 82,813
Paid in Capital 654,000 650,749
Earnings Reinvested in the Business   1,237,242       1,206,022  
Total Common Shareholders' Equity Before
Items of Other Comprehensive Loss 1,974,280 1,939,584
Accumulated Other Comprehensive Loss   (53,132 )     (47,699 )
Total Comprehensive Shareholders' Equity 1,921,148 1,891,885
Long-Term Debt, Net of Current Portion   1,399,000       899,000  
Total Capitalization   3,320,148       2,790,885  
 
Current and Accrued Liabilities:
Notes Payable to Banks and Commercial Paper 20,000 40,000
Current Portion of Long-Term Debt - 150,000
Accounts Payable 105,209 126,709
Amounts Payable to Customers 11,997 15,519
Dividends Payable 29,479 29,399
Interest Payable on Long-Term Debt 16,320 25,512
Customer Advances 25,814 19,643
Customer Security Deposits 17,685 17,321
Other Accruals and Current Liabilities 146,251 94,787
Fair Value of Derivative Financial Instruments   48,210       9,728  
Total Current and Accrued Liabilities   420,965       528,618  
 
Deferred Credits:
Deferred Income Taxes 991,805 955,384
Taxes Refundable to Customers 65,547 65,543
Unamortized Investment Tax Credit 2,441 2,586
Cost of Removal Regulatory Liability 144,770 135,940
Other Regulatory Liabilities 100,832 94,684
Pension and Other Post-Retirement Liabilities 467,396 481,520
Asset Retirement Obligations 76,930 75,731
Other Deferred Credits   156,921       153,851  
Total Deferred Credits   2,006,642       1,965,239  
Commitments and Contingencies   -       -  
Total Capitalization and Liabilities $ 5,747,755     $ 5,284,742  
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
  Three Months Ended
December 31,
(Thousands of Dollars)   2011   2010
 
Operating Activities:
Net Income Available for Common Stock $ 60,699 $ 58,543
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation, Depletion and Amortization 62,547 53,313
Deferred Income Taxes 39,398 36,600
Other 2,375 3,543
Change in:
Hedging Collateral Deposits (5,417 ) (20,312 )
Receivables and Unbilled Utility Revenue (51,054 ) (53,984 )
Gas Stored Underground and Materials and Supplies (2,226 ) (5,828 )
Unrecovered Purchased Gas Costs (3,002 ) -
Other Current Assets (5,182 ) 8,768
Accounts Payable (21,500 ) 29,246
Amounts Payable to Customers (3,522 ) (14,195 )
Customer Advances 6,171 (5 )
Customer Security Deposits 364 188
Other Accruals and Current Liabilities (4,008 ) 1,387
Other Assets (28,139 ) (10,463 )
Other Liabilities     31,724       670  
Net Cash Provided by Operating Activities   $ 79,228     $ 87,471  
 
Investing Activities:
Capital Expenditures $ (232,670 ) $ (193,802 )
Other     (966 )     (298 )
Net Cash Used in Investing Activities   $ (233,636 )   $ (194,100 )
 
Financing Activities:
Changes in Notes Payable to Banks and Commercial Paper $ (20,000 ) $ 20,500
Reduction of Long-Term Debt (150,000 ) (200,000 )
Net Proceeds From Issuance of Long-Term Debt 496,085 -
Dividends Paid on Common Stock (29,398 ) (28,316 )
Proceeds From Issuance (Repurchase) of Common Stock     1,555       (3,104 )
Net Cash Provided By (Used in) Financing Activities   $ 298,242     $ (210,920 )
Net Increase (Decrease) in Cash and Temporary
Cash Investments 143,834 (317,549 )
Cash and Temporary Cash Investments
at Beginning of Period     80,428       397,171  
Cash and Temporary Cash Investments
at December 31   $ 224,262     $ 79,622  
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
     
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
 
Three Months Ended
(Thousands of Dollars, except per share amounts) December 31,

EXPLORATION AND PRODUCTION SEGMENT
2011 2010 Variance
Total Operating Revenues $ 135,974   $ 120,168   $ 15,806  
 
Operating Expenses:
Operation and Maintenance:
General and Administrative Expense 13,860 11,190 2,670
Lease Operating Expense 18,605 17,349 1,256
All Other Operation and Maintenance Expense 1,532 2,043 (511 )
Property, Franchise and Other Taxes 2,546 2,830 (284 )
Depreciation, Depletion and Amortization   41,484     33,667     7,817  
  78,027     67,079     10,948  
 
Operating Income 57,947 53,089 4,858
 
Other Income (Expense):
Interest Income 347 49 298
Other Interest Expense   (5,304 )   (6,101 )   797  
 
Income Before Income Taxes 52,990 47,037 5,953
Income Tax Expense   22,675     19,664     3,011  
Net Income $ 30,315   $ 27,373   $ 2,942  
 
Net Income Per Share (Diluted) $ 0.36   $ 0.33   $ 0.03  
 
 
Three Months Ended
December 31,

PIPELINE AND STORAGE SEGMENT
2011 2010 Variance
Revenues from External Customers $ 35,225 $ 33,513 $ 1,712
Intersegment Revenues   21,064     19,882     1,182  
Total Operating Revenues   56,289     53,395     2,894  
 
Operating Expenses:
Purchased Gas 1 (33 ) 34
Operation and Maintenance 19,514 18,522 992
Property, Franchise and Other Taxes 5,408 5,211 197
Depreciation, Depletion and Amortization   10,092     8,987     1,105  
  35,015     32,687     2,328  
 
Operating Income 21,274 20,708 566
 
Other Income (Expense):
Interest Income 57 75 (18 )
Other Income 1,027 266 761
Other Interest Expense   (6,332 )   (6,576 )   244  
 
Income Before Income Taxes 16,026 14,473 1,553
Income Tax Expense   6,067     5,895     172  
Net Income $ 9,959   $ 8,578   $ 1,381  
 
Net Income Per Share (Diluted) $ 0.12   $ 0.10   $ 0.02  
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
     
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
 
Three Months Ended
(Thousands of Dollars, except per share amounts) December 31,

UTILITY SEGMENT
2011   2010   Variance
Revenues from External Customers $ 208,810 $ 242,842 $ (34,032 )
Intersegment Revenues   4,389       4,570       (181 )
Total Operating Revenues   213,199       247,412       (34,213 )
 
Operating Expenses:
Purchased Gas 108,405 136,774 (28,369 )
Operation and Maintenance 45,333 45,217 116
Property, Franchise and Other Taxes 10,547 10,941 (394 )
Depreciation, Depletion and Amortization   10,561       10,241       320  
  174,846       203,173       (28,327 )
 
Operating Income 38,353 44,239 (5,886 )
 
Other Income (Expense):
Interest Income 646 444 202
Other Income 242 317 (75 )
Other Interest Expense   (8,160 )     (8,736 )     576  
 
Income Before Income Taxes 31,081 36,264 (5,183 )
Income Tax Expense   11,728       13,274       (1,546 )
Net Income $ 19,353     $ 22,990     $ (3,637 )
 
Net Income Per Share (Diluted) $ 0.23     $ 0.28     $ (0.05 )
 
 
Three Months Ended
December 31,

ENERGY MARKETING SEGMENT
2011   2010   Variance
Revenues from External Customers $ 51,222 $ 53,652 $ (2,430 )
Intersegment Revenues   287       -       287  
Total Operating Revenues   51,509       53,652       (2,143 )
 
Operating Expenses:
Purchased Gas 49,090 50,559 (1,469 )
Operation and Maintenance 1,746 1,558 188
Property, Franchise and Other Taxes 9 7 2
Depreciation, Depletion and Amortization   24       9       15  
  50,869       52,133       (1,264 )
 
Operating Income 640 1,519 (879 )
 
Other Income (Expense):
Interest Income 35 9 26
Other Income 35 8 27
Other Interest Expense   (4 )     (6 )     2  
 
Income Before Income Taxes 706 1,530 (824 )
Income Tax Expense   277       598       (321 )
Net Income $ 429     $ 932     $ (503 )
 
Net Income Per Share (Diluted) $ 0.01     $ 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
2011   2010   Variance
Revenues from External Customers $ 937 $ 549 $ 388
Intersegment Revenues   3,362       1,678       1,684  
Total Operating Revenues   4,299       2,227       2,072  
 
Operating Expenses:
Purchased Gas - 49 (49 )
Operation and Maintenance 948 1,055 (107 )
Property, Franchise and Other Taxes 171 217 (46 )
Depreciation, Depletion and Amortization   194       221       (27 )
  1,313       1,542       (229 )
 
Operating Income 2,986 685 2,301
 
Other Income (Expense):
Interest Income 62 66 (4 )
Other Income (77 ) (1,094 ) 1,017
Other Interest Expense   (454 )     (548 )     94  
 
Income (Loss) Before Income Taxes 2,517 (891 ) 3,408
Income Tax Expense (Benefit)   1,113       (317 )     1,430  
Net Income (Loss) $ 1,404     $ (574 )   $ 1,978  
 
Net Income (Loss) Per Share (Diluted) $ 0.02     $ (0.01 )   $ 0.03  
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
     
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
 
Three Months Ended
(Thousands of Dollars, except per share amounts) December 31,

CORPORATE
2011   2010   Variance
Revenues from External Customers $ 255 $ 224 $ 31
Intersegment Revenues   1,028       1,028       -  
Total Operating Revenues   1,283       1,252       31  
 
Operating Expenses:
Operation and Maintenance 3,348 3,363 (15 )
Property, Franchise and Other Taxes 549 530 19
Depreciation, Depletion and Amortization   192       188       4  
  4,089       4,081       8  
 
Operating Loss (2,806 ) (2,829 ) 23
 
Other Income (Expense):
Interest Income 20,306 21,082 (776 )
Other Income 109 396 (287 )
Interest Expense on Long-Term Debt (18,641 ) (20,192 ) 1,551
Other Interest Expense   (864 )     (275 )     (589 )
 
Loss Before Income Taxes (1,896 ) (1,818 ) (78 )
Income Tax Benefit   (1,135 )     (1,062 )     (73 )
Net Loss $ (761 )   $ (756 )   $ (5 )
 
Net Loss Per Share (Diluted) $ (0.01 )   $ (0.01 )   $ -  
 
 
Three Months Ended
December 31,

INTERSEGMENT ELIMINATIONS
2011   2010   Variance
Intersegment Revenues $ (30,130 )   $ (27,158 )   $ (2,972 )
 
Operating Expenses:
Purchased Gas (25,303 ) (24,311 ) (992 )
Operation and Maintenance   (4,827 )     (2,847 )     (1,980 )
  (30,130 )     (27,158 )     (2,972 )
 
Operating Income - - -
 
Other Income (Expense):
Interest Income (20,348 ) (20,841 ) 493
Other Interest Expense   20,348       20,841       (493 )
 
Net Income $ -     $ -     $ -  
 
Net Income Per Share (Diluted) $ -     $ -     $ -  
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
         
SEGMENT INFORMATION (Continued)
(Thousands of Dollars)
 
 
Three Months Ended
December 31,
(Unaudited)
 
Increase
  2011   2010 (Decrease)
 

Capital Expenditures:
Exploration and Production $ 191,876 (1)(2) $ 179,830 (3)(4) $ 12,046
Pipeline and Storage 44,190 (1)(2) 9,219 (3) 34,971
Utility 11,265 10,921 344
Energy Marketing   140   88   52
Total Reportable Segments 247,471 200,058 47,413
All Other 31,404 (1)(2) 829 30,575
Corporate   76   10   66
Total Capital Expenditures $ 278,951 $ 200,897 $ 78,054

(1)
 

Capital expenditures for the three months ended December 31, 2011 include $88.1 million of accrued capital expenditures in the Exploration and Production segment, the majority of which was in the Appalachian region, $15.8 million of accrued capital expenditures in the Pipeline and Storage segment, and $14.5 million of accrued capital expenditures in the All Other category. These amounts have been excluded from the Consolidated Statement of Cash Flows at December 31, 2011 since they represent non-cash investing activities at that date.
 

(2)

Capital expenditures for the three months ended December 31, 2011 exclude $63.5 million of capital expenditures in the Exploration and Production segment, the majority of which was in the Appalachian region, $7.3 million of capital expenditures in the Pipeline and Storage segment, and $1.4 million of capital expenditures in the All Other category. These amounts were accrued at September 30, 2011 and paid during the three months ended December 31, 2011. These amounts were excluded from the Consolidated Statements of Cash Flows at September 30, 2011 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, 2011.
 

(3)

Capital expenditures for the three months ended December 31, 2010 include $60.7 million of accrued capital expenditures in the Exploration and Production segment, the majority of which was in the Appalachian region, and $2.0 million of accrued capital expenditures in the Pipeline and Storage segment. These amounts were excluded from the Consolidated Statement of Cash Flows at December 31, 2010 since they represented non-cash investing activities at that date.
 

(4)

Capital expenditures for the Exploration and Production segment for the three months ended December 31, 2010 exclude $55.5 million of capital expenditures, the majority of which was in the Appalachian region. This amount was accrued at September 30, 2010 and paid during the three months ended December 31, 2010. This amount was excluded from the Consolidated Statements of Cash Flows at September 30, 2010 since it represented a non-cash investing activity at that date. This amount has been included in the Consolidated Statement of Cash Flows at December 31, 2010.
 

DEGREE DAYS
           
Percent Colder
(Warmer) Than:

Three Months Ended December 31
Normal 2011 2010 Normal (1)   Last Year (1)
 
Buffalo, NY 2,260 1,848 2,332 (18.2) (20.8)
Erie, PA 2,081 1,721 2,160 (17.3) (20.3)
 

(1) Percents compare actual 2011 degree days to normal degree days and actual 2011 degree days to actual 2010 degree days.
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
     
EXPLORATION AND PRODUCTION INFORMATION
 
 
Three Months Ended
December 31,
Increase
2011 2010 (Decrease)
 

Gas Production/Prices:
Production (MMcf)
Appalachia 13,111 8,082 5,029
West Coast 817 935 (118 )
Gulf Coast   -   2,013   (2,013 )
Total Production   13,928   11,030   2,898  
 
Average Prices (Per Mcf)
Appalachia $ 3.39 $ 4.03 $ (0.64 )
West Coast 4.95 3.92 1.03
Gulf Coast N/M 4.55 N/M
Weighted Average 3.48 4.11 (0.63 )
Weighted Average after Hedging 4.78 5.26 (0.48 )
 

Oil Production/Prices:
Production (Thousands of Barrels)
Appalachia 10 10 -
West Coast 709 654 55
Gulf Coast   -   106   (106 )
Total Production   719   770   (51 )
 
Average Prices (Per Barrel)
Appalachia $ 88.16 $ 81.40 $ 6.76
West Coast 109.23 80.45 28.78
Gulf Coast N/M 83.97 N/M
Weighted Average 108.93 80.95 27.98
Weighted Average after Hedging 91.38 76.24 15.14
 
Total Production (MMcfe)   18,242   15,650   2,592  
 

Selected Operating Performance Statistics:
General & Administrative Expense per Mcfe (1) $ 0.76 $ 0.72 $ 0.04
Lease Operating Expense per Mcfe (1) $ 1.02 $ 1.11 $ (0.09 )
Depreciation, Depletion & Amortization per Mcfe (1) $ 2.27 $ 2.15 $ 0.12

(1)
 

Refer to page 12 for the General and Administrative Expense, Lease Operating Expense and Depreciation, Depletion, and Amortization Expense for the Exploration and Production segment.
 
N/M Not Meaningful
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
   

EXPLORATION AND PRODUCTION INFORMATION
 
 
Hedging Summary for the Remaining Nine Months of Fiscal 2012
 

SWAPS

Volume

Average Hedge Price
Oil 1.2 MMBBL $77.03 / BBL
Gas 26.2 BCF $5.89 / MCF
 
Hedging Summary for Fiscal 2013
 

SWAPS

Volume

Average Hedge Price
Oil 1.2 MMBBL $89.51 / BBL
Gas 30.7 BCF $5.25 / MCF
 
Hedging Summary for Fiscal 2014
 

SWAPS

Volume

Average Hedge Price
Oil 0.5 MMBBL $94.96 / BBL
Gas 11.4 BCF $4.63 / MCF

Gross Wells in Process of Drilling
                 

Quarter Ended December 31, 2011
East
Marcellus Upper Total
Shale Devonian West Company
 
Wells in Process - Beginning of Period
Exploratory 5.00 0.00 0.00 5.00
Developmental 101.00 (1) 0.00 0.00 101.00
Wells Commenced
Exploratory 1.00 0.00 0.00 1.00
Developmental 16.00 0.00 14.00 30.00
Wells Completed
Exploratory 2.00 0.00 0.00 2.00
Developmental 12.00 0.00 13.00 25.00
Wells Plugged & Abandoned
Exploratory 0.00 0.00 0.00 0.00
Developmental 0.00 0.00 0.00 0.00
Wells in Process - End of Period
Exploratory 4.00 0.00 0.00 4.00
Developmental 105.00 0.00 1.00 106.00
 

(1) Beginning of year number has been adjusted to remove one developmental well.

Net Wells in Process of Drilling
                 

Quarter Ended December 31, 2011
East
Marcellus Upper Total
Shale Devonian West Company
 
Wells in Process - Beginning of Period
Exploratory 5.00 0.00 0.00 5.00
Developmental 68.00 (2) 0.00 0.00 68.00
Wells Commenced
Exploratory 1.00 0.00 0.00 1.00
Developmental 10.50 0.00 13.99 24.49
Wells Completed
Exploratory 2.00 0.00 0.00 2.00
Developmental 9.00 0.00 12.99 21.99
Wells Plugged & Abandoned
Exploratory 0.00 0.00 0.00 0.00
Developmental 0.00 0.00 0.00 0.00
Wells in Process - End of Period
Exploratory 4.00 0.00 0.00 4.00
Developmental 69.50 0.00 1.00 70.50
 

(2) Beginning of year number has been adjusted to remove one developmental well.
  NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
           

EXPLORATION AND PRODUCTION INFORMATION
 
Updated Fiscal 2012 Financial & Operating Guidance
 
New Guidance Prior Guidance
 
Total Production (Bcfe) 85 - 95 87 - 101
 
Production by Division (Bcfe)
East 66 - 74 68 - 80
West 19 - 21 19 - 21
 
Cost and Expenses $ per Mcfe
Lease Operating Expenses $0.85 - $1.00 $0.85 - $1.00
Depreciation, Depletion and Amortization $2.20 - $2.30 $2.20 - $2.30
Other Taxes $0.10 - $0.20 $0.10 - $0.20
 
Other Operating Expenses (in millions) $7 - $9 $7 - $9
General and Administrative (in millions) $54 - $58 $54 - $58
 
Capital Investment by Division (in millions)
 
East Division $675 - $745 $740 - $820
West Division $45 - $55 $45 - $55
Exploration & Production Segment Total $720 - $800 $785 - $875
 
Number of Net Horizontal Wells to be Drilled
East Division 60 - 90 100 - 125
 
Updated Pricing Guidance for the Remaining Nine Months of Fiscal 2012
 
Guidance Based on Crude Oil Average 2012 NYMEX Price ($/Bbl) (without hedges) of $100.00
 
Forecast price differentials
West -$3.00 to +$3.00 -$3.00 to +$3.00
 
Guidance Based on Natural Gas Average 2012 NYMEX Price ($/MMBtu) (without hedges) of $3.00
 

Forecast price differentials
East -$0.25 to -$0.10 -$0.10 to +$0.10
West -$0.30 to -$0.10 -$0.30 to -$0.10
  Earnings per share sensitivity to changes from prices used in guidance* ^
     
$1 change per MMBtu gas $5 change per Bbl oil
Increase Decrease Increase Decrease
 
+ $0.23 - $0.23 + $0.03 - $0.03
*   Please refer to forward looking statement footnote beginning at page 5 of this document.
 
^ This sensitivity table is current as of February 3, 2012 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 2012 earnings forecast, the Company is utilizing flat NYMEX equivalent commodity pricing, exclusive of basis differential, of $3 per MMBtu for natural gas and $100 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
     
 
Pipeline & Storage Throughput - (millions of cubic feet - MMcf)
 
Three Months Ended
December 31,
Increase
2011 2010 (Decrease)
Firm Transportation - Affiliated 26,177 32,069 (5,892)
Firm Transportation - Non-Affiliated 57,431 57,180 251
Interruptible Transportation 808 125 683
84,416 89,374 (4,958)
 
Utility Throughput - (MMcf)
Three Months Ended
December 31,
Increase
2011 2010 (Decrease)
Retail Sales:
Residential Sales 14,549 17,160 (2,611)
Commercial Sales 1,994 2,469 (475)
Industrial Sales 101 146 (45)
16,644 19,775 (3,131)
Off-System Sales 2,745 1,863 882
Transportation 16,928 18,110 (1,182)
36,317 39,748 (3,431)
 
Energy Marketing Volumes
Three Months Ended
December 31,
Increase
2011 2010 (Decrease)
Natural Gas (MMcf) 10,312 10,746 (434)
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
   
 

Quarter Ended December 31 (unaudited)
2011 2010
 
Operating Revenues $ 432,423,000 $ 450,948,000
 
Net Income Available for Common Stock $ 60,699 $ 58,543
 
Earnings Per Common Share:
Basic $ 0.73 $ 0.71
Diluted $ 0.73 $ 0.70
 
Weighted Average Common Shares:
Used in Basic Calculation   82,870,931   82,223,428
Used in Diluted Calculation   83,699,981   83,420,351
 
 

Twelve Months Ended December 31 (unaudited)
 
Operating Revenues $ 1,760,317,000 $ 1,757,316,000
 
Income from Continuing Operations $ 260,557,000 $ 213,452,000
Income from Discontinued Operations, Net of Tax   -   6,506,000
Net Income Available for Common Stock $ 260,557,000 $ 219,958,000
 
Earnings Per Common Share:
Basic:
Income from Continuing Operations $ 3.15 $ 2.61
Income from Discontinued Operations   -   0.08
Net Income Available for Common Stock $ 3.15 $ 2.69
 
Diluted:
Income from Continuing Operations $ 3.11 $ 2.57
Income from Discontinued Operations   -   0.08
Net Income Available for Common Stock $ 3.11 $ 2.65
 
Weighted Average Common Shares:
Used in Basic Calculation   82,677,232   81,786,524
Used in Diluted Calculation   83,726,544   82,989,108

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