National Fuel Reports Second Quarter Earnings

National Fuel Gas Company (“National Fuel” or the “Company”) (NYSE:NFG) today announced consolidated earnings for the second quarter of fiscal 2012 and for the six months ended March 31, 2012.

HIGHLIGHTS
  • Earnings for the second quarter were $67.4 million or $0.81 per share. During the quarter, Seneca Resources Corporation (“Seneca”) recorded the effect of the new Pennsylvania impact fee. The fee, which applies to all Marcellus Shale wells drilled in Pennsylvania both prior to and subsequent to passage of the bill, reduced current quarter earnings by $6.4 million or $0.08 per share. Excluding the impact fee, operating results before items impacting comparability (“Operating Results”) for the second quarter of fiscal 2012 were $73.8 million or $0.89 per share.
  • In the Pipeline and Storage segment, second quarter earnings increased $1.9 million, or $0.02 per share, largely driven by the impact of the Line N Expansion and Tioga County Extension projects that were placed in service during the first quarter. Also, as part of the ongoing expansion of the Company’s pipeline and gathering infrastructure, construction of National Fuel Gas Midstream Corporation’s Trout Run Gathering System is nearing completion and is expected to be in service during the third quarter of fiscal 2012.
  • Seneca’s production of crude oil and natural gas in the current quarter was 18.4 billion cubic feet equivalent (“Bcfe”) compared to 18.2 Bcfe in the second quarter of 2011. Excluding 2011 production from the Gulf of Mexico assets that Seneca sold in April 2011, Seneca’s production increased approximately 18%. Appalachian production increased approximately 22% to 13.3 Bcfe, including production from the Marcellus Shale of 11.5 Bcfe. California crude oil production increased approximately 11.5%. Production for the entire 2012 fiscal year is projected to be between 81 and 90 Bcfe.
  • A conference call is scheduled for Friday, May 4, 2012, at 11 a.m. Eastern Time.

MANAGEMENT COMMENTS

David F. Smith, Chairman and Chief Executive Officer of National Fuel Gas Company, stated: “The combined effects of declining natural gas prices realized by our Exploration and Production segment, and the warmest winter on record in our Utility segment’s Pennsylvania service territory, were evident in our second quarter results. Since these factors are beyond our control, our focus instead remains on the ongoing financial and operational strength of National Fuel.

“We continue to make strategic decisions intended to maximize the long-term value of our asset base. During the quarter, Seneca reduced its rig count in Appalachia by one-third to four rigs and plans to drop an additional rig in the third quarter. At that time, there will be two development rigs and one rig dedicated to the ongoing delineation of Seneca’s prospects in the Utica Shale and rich-gas regions of the Marcellus. With no near-term lease expiration concerns, our primary objective is to safeguard both the long-term value of these assets and the overall strength of our balance sheet.

“At the same time, we continue to invest capital in our California oil assets, where we saw an 11.5 percent increase in crude oil production over last year’s quarter. We also remain focused on the expansion of our pipeline network, completing two projects last fall, which contributed to the increase in the Pipeline and Storage segment’s earnings. Progress is continuing on several additional projects expected to be in service in the coming year, providing additional growth within our pipeline businesses.

“As we’ve said in the past, we believe our integrated business model creates long-term value for our shareholders through all economic cycles. The low natural gas price environment will be difficult for independent producers, but our diverse asset base and strong balance sheet positions us well to meet any challenges that we may encounter.”

SUMMARY OF RESULTS

National Fuel had consolidated earnings for the quarter ended March 31, 2012, of $67.4 million, or $0.81 per share, compared to the prior year’s second quarter earnings of $115.6 million, or $1.38 per share, a decrease of $48.2 million or $0.57 per share. The decrease is mainly due to the 2011 gain of $31.4 million, or $0.38 per share, on the sale of Horizon Power, Inc.’s interest in certain entities that owned landfill gas electric generation assets in the All Other category. Lower earnings in the Exploration and Production, Utility, and Energy Marketing segments also contributed to the decrease in earnings. (Note: All references to earnings per share are to diluted earnings per share, 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 six months ended March 31, 2012, of $128.1 million, or $1.53 per share, decreased $46.1 million, or $0.55 per share, from the same period in the prior year, where earnings were $174.2 million or $2.08 per share.

  Three Months     Six Months
Ended March 31, Ended March 31,
2012   2011 2012   2011
(in thousands except per share amounts)
Reported GAAP earnings $ 67,392 $ 115,611 $ 128,091 $ 174,154
Items impacting comparability1:
Pennsylvania impact fee 6,400 6,400
Gain on sale of landfill gas electric generation investments (31,418 ) (31,418 )
       
Operating Results $ 73,792 $ 84,193   $ 134,491 $ 142,736  
 
Reported GAAP earnings per share $ 0.81 $ 1.38 $ 1.53 $ 2.08
Items impacting comparability1:
Pennsylvania impact fee 0.08 0.08
Gain on sale of landfill gas electric generation investments (0.38 ) (0.38 )
       
Operating Results $ 0.89 $ 1.00   $ 1.61 $ 1.70  

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 six months ended March 31, 2012, to the comparable periods in fiscal 2011. Excluding these items, Operating Results for the current quarter of $73.8 million, or $0.89 per share, decreased $10.4 million, or $0.11 per share, from the prior year’s second quarter where Operating Results were $84.2 million or $1.00 per share. Excluding these items, Operating Results for the six months ended March 31, 2012, of $134.5 million, or $1.61 per share, decreased $8.2 million, or $0.09 per share, from the same period in the prior year, where Operating Results were $142.7 million or $1.70 per share. Items impacting comparability will be discussed in more detail within the discussion of segment earnings below.

DISCUSSION OF RESULTS BY SEGMENT

The following discussion of the earnings of each segment is summarized in a tabular form at pages 9 and 10 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 second quarter of fiscal 2012 of $22.2 million, or $0.27 per share, decreased $11.1 million, or $0.13 per share, when compared with the prior year’s second quarter.

In February 2012, the Commonwealth of Pennsylvania passed a natural gas impact fee. The legislation, which covers essentially all of Seneca’s Marcellus Shale wells, imposes an annual fee for a period of 15 years on each well drilled. The impact fee is adjusted annually based on three factors: The age of the well, changes in the Consumer Price Index and the average monthly NYMEX price for natural gas. The fee is retroactive and applies to wells drilled in the current fiscal year and in all previous years. The impact fee increased property, franchise and other taxes in the current year’s second quarter by $9.8 million (pre-tax). Of this amount, $1.9 million (pre-tax) relates to the second quarter of fiscal 2012, $2.0 million (pre-tax) to the first quarter of fiscal 2012 and $5.9 million (pre-tax) to prior fiscal years.

Excluding the impact fee, the Exploration and Production segment’s Operating Results in the second quarter of fiscal 2012 were $28.6 million, or $0.35 per share, a decrease of $4.7 million, or $0.05 per share, when compared with the prior year’s second quarter.

Overall production of natural gas and crude oil for the current quarter of 18.4 Bcfe increased approximately 0.2 Bcfe compared to the prior year’s second quarter. Excluding Gulf of Mexico production of 2.6 Bcfe due to the sale of Seneca’s offshore Gulf of Mexico assets, production increased approximately 17.8 percent or 2.8 Bcfe. Production from Seneca’s Appalachia properties increased approximately 21.7 percent, mainly due to a 2.5 Bcfe, or 27.8 percent increase, in production from Marcellus wells. Crude oil production in California increased 11.5 percent due to additional wells drilled at the Sespe and Midway Sunset fields.

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 March 31, 2012, was $4.64 per thousand cubic feet (“Mcf”), a decrease of $0.68 per Mcf compared to the prior year’s second quarter. Higher crude oil prices realized after hedging increased earnings. The weighted average oil price received by Seneca (after hedging) for the quarter ended March 31, 2012, was $93.40 per Barrel (“Bbl”), an increase of $11.12 per Bbl.

Depletion, lease operating expenses (“LOE”), and general and administrative expenses (“G&A”) for the current year’s second quarter increased over last year’s second quarter. On a per unit basis, depletion increased $0.11 per thousand cubic feet equivalent (“Mcfe”) due to higher capital spending in the East. LOE increased $0.10 per Mcfe largely due to higher transportation and compression costs and an increase in costs on non-operated joint venture wells. G&A increased $0.08 per Mcfe due to higher labor expenses including increased staffing, mainly in the East.

The Exploration and Production segment’s earnings of $52.5 million, or $0.63 per share, for the six months ended March 31, 2012, decreased $8.2 million, or $0.10 per share, when compared with the six months ended March 31, 2011. Excluding the impact fee discussed above, the Exploration and Production segment’s Operating Results for the six months ended March 31, 2012, were $58.9 million, or $0.71 per share, a decrease of $1.8 million, or $0.02 per share, when compared with the prior year’s six month period.

Overall production for the six months ended March 31, 2012, increased approximately 8.2 percent. Excluding Gulf of Mexico production of 5.3 Bcfe due to the April 2011 sale of Seneca’s offshore Gulf of Mexico assets, production increased approximately 28.0 percent or 8.0 Bcfe. Production from Seneca’s Appalachia properties increased approximately 38.8 percent, mainly due to a 7.9 Bcfe or 53.0 percent increase in production from Marcellus wells. Crude oil production in California increased 9.9 percent.

Changes in commodity prices realized after hedging also impacted earnings. The weighted average natural gas price received by Seneca (after hedging) for the six-month period ended March 31, 2012, was $4.71 per Mcf, a decrease of $0.59 per Mcf. Higher crude oil prices realized after hedging increased earnings. The weighted average crude oil price received by Seneca (after hedging) for the six-month period ended March 31, 2012, was $92.39 per Bbl, an increase of $13.18 per Bbl.

Depletion, LOE and G&A for the six months ended March 31, 2012, increased compared to the prior year’s six-month period due in part to the higher production activity discussed above. On a per unit basis, depletion increased $0.12 per Mcfe, LOE increased $0.01 per Mcfe and G&A increased $0.06 per Mcfe primarily due to the reasons described above for the quarter.

Pipeline and Storage Segment

The Pipeline and Storage segment operations are carried out by National Fuel Gas Supply Corporation and Empire Pipeline, Inc. 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 $12.8 million, or $0.15 per share, for the quarter ended March 31, 2012, increased $1.9 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 and offset a decrease in revenue due to the turnback of other pipeline capacity at Niagara. Lower operating expenses also contributed to the increase in earnings for the quarter. Earnings were reduced by lower efficiency gas revenues due to the decline in natural gas prices and higher depreciation expense.

The Pipeline and Storage segment’s earnings of $22.8 million, or $0.27 per share, for the six months ended March 31, 2012, increased $3.3 million, or $0.04 per share, when compared with the same period in the prior fiscal year. The increase was mostly due to higher transportation revenues from the Tioga County Extension and Line N Expansion projects noted above. Earnings were reduced by lower efficiency gas revenues due to the decline in natural gas prices and higher depreciation.

Utility Segment

The Utility segment operations are carried out by National Fuel Gas Distribution Corporation, which sells or transports natural gas to customers located in western New York and northwestern Pennsylvania.

The Utility segment’s earnings of $28.3 million, or $0.34 per share, for the quarter ended March 31, 2012, decreased $4.8 million, or $0.06 per share, when compared with the same period in the prior fiscal year. Warmer weather in Pennsylvania was the main reason for the decrease in earnings in the current year’s second quarter. Temperatures in Pennsylvania were 27.4 percent warmer in the current year’s second quarter than the second quarter of 2011. 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.

The Utility segment’s earnings of $47.6 million, or $0.57 per share, for the six months ended March 31, 2012, decreased from earnings of $56.1 million, or $0.67 per share, for the six months ended March 31, 2011. Warmer weather in Pennsylvania and the impact of certain regulatory adjustments were the main reasons for the decrease in earnings. Higher operating expenses also reduced earnings.

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 March 31, 2012, of $3.3 million, or $0.04 per share, decreased $3.0 million, or $0.03 per share, from the prior year’s second quarter earnings of $6.3 million or $0.07 per share. Earnings for the six months ended March 31, 2012, of $3.7 million, or $0.04 per share, decreased $3.5 million, or $0.05 per share, from the prior year’s six-month period. The decrease in earnings in both the current year’s second quarter and six-month period was mainly due to lower average margins and lower retail sales volumes. The decrease in margins was primarily driven by a lower benefit derived from the Energy Marketing segment’s contracts for storage capacity. The lower sales volumes were largely a result of warmer weather.

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 Seneca’s Northeast division, which markets high quality hardwoods from Appalachian land holdings.

Earnings in the Corporate and All Other category for the quarter ended March 31, 2012, were $0.8 million, or $0.01 per share, a decrease of $31.2 million, or $0.37 per share, compared to the prior year’s second quarter earnings. The comparability of the results for the quarters ended March 31, 2012, and March 31, 2011, was impacted by a $31.4 million gain realized on the February 2011 Horizon Power, Inc. sale of its interest in certain entities that owned landfill gas electric generation assets.

Excluding the item noted above, Operating Results in the Corporate and All Other category of $0.8 million, or $0.01 per share, for the quarter ended March 31, 2012, increased from Operating Results of $0.6 million, or less than $0.01 per share, in the prior year’s second quarter. The increase in earnings is mainly due to higher earnings from Midstream’s pipeline gathering and natural gas processing operations and Seneca’s increased sales of standing timber.

Earnings in the Corporate and All Other category for the six months ended March 31, 2012, were $1.4 million, or $0.02 per share, a decrease of $29.2 million, or $0.34 per share, when compared to the earnings for the six months ended March 31, 2011. The comparability of the results for the six months ended March 31, 2012, and the prior year’s six-month period was impacted by the $31.4 million gain on the sale of landfill gas electric generation assets described above.

Excluding this item, Operating Results of $1.4 million, or $0.02 per share, for the six-month period ended March 31, 2012, compares to a loss of $0.8 million, or $0.02 per share, in the prior year’s six-month period. The increase in Operating Results is mainly due to higher earnings from Midstream’s pipeline gathering and natural gas processing operations and Seneca’s increased sales of standing timber.

EARNINGS GUIDANCE

The Company is updating its earnings guidance for fiscal 2012 to reflect actual results for the six months ended March 31, 2012, and a change in assumed natural gas prices for the second half of fiscal 2012. The revised GAAP earnings range is $2.30 to $2.45 per share. This includes forecast oil and gas production for fiscal 2012 for the Exploration and Production segment in the range between 81 and 90 Bcfe, hedges currently in place, and NYMEX equivalent flat commodity pricing on non-hedged volumes exclusive of basis differential of $2.25 per MMBtu for natural gas and $100 per Bbl for crude oil.

EARNINGS TELECONFERENCE

The Company will host a conference call on Friday, May 4, 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) 1-866-831-6162 and using the passcode “73317573.” 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 “11631131.” Both the webcast and telephonic replay will be available until the close of business on Friday, May 11, 2012.

National Fuel is an integrated energy company with $5.8 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: 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; changes in demographic patterns and weather conditions; 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; 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.

Page 9
NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS
QUARTER ENDED MARCH 31, 2012
             
Exploration & Pipeline & Energy Corporate /
(Thousands of Dollars) Production   Storage   Utility   Marketing   All Other   Consolidated*
 
Second quarter 2011 GAAP earnings $ 33,299 $ 10,955 $ 33,081 $ 6,299 $ 31,977 $ 115,611
Items impacting comparability:
Gain on sale of unconsolidated subsidiaries                   (31,418 )     (31,418 )
Second quarter 2011 operating results 33,299 10,955 33,081 6,299 559 84,193
 
Drivers of operating results
Higher (lower) Appalachian and West Coast crude oil prices 6,151 6,151
Higher (lower) Appalachian and West Coast natural gas prices (6,644 ) (6,644 )
Higher (lower) Appalachian and West Coast natural gas production 8,230 8,230
Higher (lower) Appalachian and West Coast crude oil production 3,700 3,700
Lower Gulf Coast natural gas and crude oil revenues (12,524 ) (12,524 )
Lower (higher) lease operating expenses (1,308 ) (1,308 )
Lower (higher) depreciation / depletion (1,530 ) (423 ) (1,953 )
Higher (lower) processing plant revenues 664 664
 
Higher (lower) transportation revenues 4,964 4,964
Higher (lower) efficiency gas revenues (2,887 ) (2,887 )
Higher (lower) gathering and processing revenues 242 242
Lower (higher) operating expenses (838 ) 606 (433 ) (665 )
Lower (higher) property, franchise and other taxes 1,526 1,526
 
Warmer weather (4,379 ) (4,379 )
 
Higher (lower) income from unconsolidated subsidiaries (361 ) (361 )
 
Higher (lower) margins (3,026 ) 519 (2,507 )
 
Higher (lower) interest income 2,390 2,390
(Higher) lower interest expense (2,038 ) 398 (2,276 ) (3,916 )
 
Lower (higher) income tax expense / effective tax rate (337 ) (170 ) (507 )
 
All other / rounding   241       (374 )     (392 )     37       (129 )     (617 )
 
Second quarter 2012 operating results 28,592 12,841 28,275 3,310 774 73,792
Items impacting comparability:
Pennsylvania impact fee   (6,400 )                     (6,400 )
Second quarter 2012 GAAP earnings $ 22,192     $ 12,841     $ 28,275     $ 3,310     $ 774     $ 67,392  
 

* Amounts do not reflect intercompany eliminations
 

Page 10
NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS PER SHARE
QUARTER ENDED MARCH 31, 2012
             
Exploration & Pipeline & Energy Corporate /
Production   Storage   Utility   Marketing   All Other   Consolidated*
 
Second quarter 2011 GAAP earnings $ 0.40 $ 0.13 $ 0.40 $ 0.07 $ 0.38 $ 1.38
Items impacting comparability:
Gain on sale of unconsolidated subsidiaries                   (0.38 )     (0.38 )
Second quarter 2011 operating results 0.40 0.13 0.40 0.07 - 1.00
 
Drivers of operating results
Higher (lower) Appalachian and West Coast crude oil prices 0.07 0.07
Higher (lower) Appalachian and West Coast natural gas prices (0.08 ) (0.08 )
Higher (lower) Appalachian and West Coast natural gas production 0.10 0.10
Higher (lower) Appalachian and West Coast crude oil production 0.04 0.04
Lower Gulf Coast natural gas and crude oil revenues (0.15 ) (0.15 )
Lower (higher) lease operating expenses (0.02 ) (0.02 )
Lower (higher) depreciation / depletion (0.02 ) (0.01 ) (0.03 )
Higher (lower) processing plant revenues 0.01 0.01
 
Higher (lower) transportation revenues 0.06 0.06
Higher (lower) efficiency gas revenues (0.03 ) (0.03 )
Higher (lower) gathering and processing revenues - -
Lower (higher) operating expenses (0.01 ) 0.01 (0.01 ) (0.01 )
Lower (higher) property, franchise and other taxes 0.02 0.02
 
Warmer weather (0.05 ) (0.05 )
 
Higher (lower) income from unconsolidated subsidiaries - -
 
Higher (lower) margins (0.04 ) 0.01 (0.03 )
 
Higher (lower) interest income 0.03 0.03
(Higher) lower interest expense (0.02 ) - (0.03 ) (0.05 )
 
Lower (higher) income tax expense / effective tax rate - -
 
All other / rounding   0.01       (0.01 )     -       0.01       -       0.01  
 
Second quarter 2012 operating results 0.35 0.15 0.34 0.04 0.01 0.89
Items impacting comparability:
Pennsylvania impact fee   (0.08 )                     (0.08 )
Second quarter 2012 GAAP earnings $ 0.27     $ 0.15     $ 0.34     $ 0.04     $ 0.01     $ 0.81  
 

* Amounts do not reflect intercompany eliminations
 

Page 11
NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS
SIX MONTHS ENDED MARCH 31, 2012
             
Exploration & Pipeline & Energy Corporate /
(Thousands of Dollars) Production   Storage   Utility   Marketing   All Other   Consolidated**
 
Six months ended March 31, 2011 GAAP earnings $ 60,672 $ 19,533 $ 56,071 $ 7,231 $ 30,647 $ 174,154
Items impacting comparability:
Gain on sale of unconsolidated subsidiaries                   (31,418 )     (31,418 )
Six months ended March 31, 2011 operating results 60,672 19,533 56,071 7,231 (771 ) 142,736
 
Drivers of operating results
Higher (lower) crude oil prices 13,827 13,827
Higher (lower) natural gas prices (11,863 ) (11,863 )
Higher (lower) natural gas production 25,324 25,324
Higher (lower) crude oil production 6,311 6,311
Lower Gulf Coast natural gas and crude oil revenues (24,624 ) (24,624 )
Lower (higher) lease operating expenses (2,124 ) (2,124 )
Lower (higher) depreciation / depletion (6,611 ) (1,141 ) (7,752 )
Higher (lower) processing plant revenues 822 822
 
Higher (lower) transportation revenues 7,741 7,741
Higher (lower) efficiency gas revenues (3,665 ) (3,665 )
Higher (lower) gathering and processing revenues 1,260 1,260
Lower (higher) operating expenses (2,242 ) (755 ) (2,997 )
Lower (higher) property, franchise and other taxes 1,711 1,711
 
Warmer weather in Pennsylvania (6,646 ) (6,646 )
Regulatory true-up adjustments (873 ) (873 )
 
Higher (lower) income from unconsolidated subsidiaries 302 302
 
Higher (lower) margins (3,465 ) 913 (2,552 )
 
Higher AFUDC * 612 612
Higher (lower) interest income 1,884 1,884
Lower (higher) interest expense (1,476 ) 772 (1,590 ) (2,294 )
 
(Higher) lower income tax expense (1,267 ) (652 ) (363 ) (2,282 )
 
All other / rounding   447       (279 )     (289 )     (27 )     (219 )     (367 )
 
Six months ended March 31, 2012 operating results 58,907 22,801 47,628 3,739 1,416 134,491
Items impacting comparability:
Pennsylvania impact fee   (6,400 )                     (6,400 )
Six months ended March 31, 2012 GAAP earnings $ 52,507     $ 22,801     $ 47,628     $ 3,739     $ 1,416     $ 128,091  
 
* AFUDC = Allowance for Funds Used During Construction
**Amounts do not reflect intercompany eliminations
 

Page 12
NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS PER SHARE
SIX MONTHS ENDED MARCH 31, 2012
             
Exploration & Pipeline & Energy Corporate /
Production   Storage   Utility   Marketing   All Other   Consolidated**
 
Six months ended March 31, 2011 GAAP earnings $ 0.73 $ 0.23 $ 0.67 $ 0.09 $ 0.36 $ 2.08
Items impacting comparability:
Gain on sale of unconsolidated subsidiaries                   (0.38 )     (0.38 )
Six months ended March 31, 2011 operating results 0.73 0.23 0.67 0.09 (0.02 ) 1.70
 
Drivers of operating results
Higher (lower) crude oil prices 0.17 0.17
Higher (lower) natural gas prices (0.14 ) (0.14 )
Higher (lower) natural gas production 0.30 0.30
Higher (lower) crude oil production 0.08 0.08
Lower Gulf Coast natural gas and crude oil revenues (0.29 ) (0.29 )
Lower (higher) lease operating expenses (0.03 ) (0.03 )
Lower (higher) depreciation / depletion (0.08 ) (0.01 ) (0.09 )
Higher (lower) processing plant revenues 0.01 0.01
 
Higher (lower) transportation revenues 0.09 0.09
Higher (lower) efficiency gas revenues (0.04 ) (0.04 )
Higher (lower) gathering and processing revenues 0.02 0.02
Lower (higher) operating expenses (0.03 ) (0.01 ) (0.04 )
Lower (higher) property, franchise and other taxes 0.02 0.02
 
Warmer weather in Pennsylvania (0.08 ) (0.08 )
Regulatory true-up adjustments (0.01 ) (0.01 )
 
Higher (lower) income from unconsolidated subsidiaries - -
 
Higher (lower) margins (0.04 ) 0.01 (0.03 )
 
Higher AFUDC * 0.01 0.01
Higher (lower) interest income 0.02 0.02
Lower (higher) interest expense (0.02 ) 0.01 (0.02 ) (0.03 )
 
(Higher) lower income tax expense (0.02 ) (0.01 ) - (0.03 )
 
All other / rounding   0.01       (0.01 )     -       (0.01 )     0.01       -  
 
Six months ended March 31, 2012 operating results 0.71 0.27 0.57 0.04 0.02 1.61
Items impacting comparability:
Pennsylvania impact fee   (0.08 )                     (0.08 )
Six months ended March 31, 2012 GAAP earnings $ 0.63     $ 0.27     $ 0.57     $ 0.04     $ 0.02     $ 1.53  
 
* AFUDC = Allowance for Funds Used During Construction
**Amounts do not reflect intercompany eliminations
 

Page 13
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
             
(Thousands of Dollars, except per share amounts)
Three Months Ended Six Months Ended
March 31, March 31,
(Unaudited) (Unaudited)

SUMMARY OF OPERATIONS
2012 2011 2012 2011
Operating Revenues $ 552,309   $ 660,881   $ 984,732   $ 1,111,829  
 
Operating Expenses:
Purchased Gas 208,537 306,595 340,730 469,633
Operation and Maintenance 118,047 116,721 218,106 214,171
Property, Franchise and Other Taxes 30,477 23,798 49,707 43,534
Depreciation, Depletion and Amortization   63,151     60,011     125,698     113,324  
420,212 507,125 734,241 840,662
 
Operating Income 132,097 153,756 250,491 271,167
 
Other Income (Expense):
Gain on Sale of Unconsolidated Subsidiaries - 50,879 - 50,879
Interest Income 192 68 1,297 951
Other Income 1,654 2,424 2,990 2,317
Interest Expense on Long-Term Debt (20,425 ) (17,926 ) (39,066 ) (38,118 )
Other Interest Expense   (1,253 )   (1,454 )   (2,023 )   (2,855 )
 
Income Before Income Taxes 112,265 187,747 213,689 284,341
 
Income Tax Expense   44,873     72,136     85,598     110,187  
 
Net Income Available for Common Stock $ 67,392   $ 115,611   $ 128,091   $ 174,154  
 
Earnings Per Common Share:
Basic $ 0.81   $ 1.40   $ 1.54   $ 2.12  
Diluted $ 0.81   $ 1.38   $ 1.53   $ 2.08  
 
Weighted Average Common Shares:
Used in Basic Calculation   83,107,884     82,400,851     82,988,750     82,311,162  
Used in Diluted Calculation   83,678,261     83,673,977     83,712,681     83,561,775  
 

Page 14
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
     
March 31, September 30,

(Thousands of Dollars)
  2012     2011
 
ASSETS
Property, Plant and Equipment $ 6,180,827 $ 5,646,918
Less - Accumulated Depreciation, Depletion and Amortization   1,750,636         1,646,394  
Net Property, Plant and Equipment   4,430,191         4,000,524  
 
Current Assets:
Cash and Temporary Cash Investments 192,243 80,428
Hedging Collateral Deposits 18,872 19,701
Receivables - Net 168,757 131,885
Unbilled Utility Revenue 31,318 17,284
Gas Stored Underground 16,195 54,325
Materials and Supplies - at average cost 28,395 27,932
Other Current Assets 40,354 38,334
Deferred Income Taxes   20,281         15,423  
Total Current Assets   516,415         385,312  
 
Other Assets:
Recoverable Future Taxes 146,561 144,377
Unamortized Debt Expense 14,552 10,571
Other Regulatory Assets 504,399 510,986
Deferred Charges 7,993 5,552
Other Investments 85,555 79,365
Goodwill 5,476 5,476
Fair Value of Derivative Financial Instruments 121,760 76,085
Other   2,594         2,836  
Total Other Assets   888,890         835,248  
Total Assets $ 5,835,496       $ 5,221,084  
 
CAPITALIZATION AND LIABILITIES
Capitalization:
Comprehensive Shareholders' Equity

Common Stock, $1 Par Value Authorized - 200,000,000 Shares; Issued and Outstanding - 83,173,850 Shares and 82,812,677 Shares, Respectively
$ 83,174 $ 82,813
Paid in Capital 660,495 650,749
Earnings Reinvested in the Business   1,275,107         1,206,022  

Total Common Shareholders' Equity Before Items of Other Comprehensive Loss
2,018,776 1,939,584
Accumulated Other Comprehensive Loss   (51,889 )       (47,699 )
Total Comprehensive Shareholders' Equity 1,966,887 1,891,885
Long-Term Debt, Net of Current Portion   1,149,000         899,000  
Total Capitalization   3,115,887         2,790,885  
 
Current and Accrued Liabilities:
Notes Payable to Banks and Commercial Paper 20,000 40,000
Current Portion of Long-Term Debt 250,000 150,000
Accounts Payable 98,053 126,709
Amounts Payable to Customers 17,327 15,519
Dividends Payable 29,527 29,399
Interest Payable on Long-Term Debt 29,491 25,512
Customer Advances 204 19,643
Customer Security Deposits 17,021 17,321
Other Accruals and Current Liabilities 197,952 94,787
Fair Value of Derivative Financial Instruments   66,887         9,728  
Total Current and Accrued Liabilities   726,462         528,618  
 
Deferred Credits:
Deferred Income Taxes 1,040,789 955,384
Taxes Refundable to Customers 65,550 65,543
Unamortized Investment Tax Credit 2,296 2,586
Cost of Removal Regulatory Liability 146,771 135,940
Other Regulatory Liabilities 37,327 31,026
Pension and Other Post-Retirement Liabilities 472,717 481,520
Asset Retirement Obligations 77,230 75,731
Other Deferred Credits   150,467         153,851  
Total Deferred Credits   1,993,147         1,901,581  
Commitments and Contingencies   -         -  
Total Capitalization and Liabilities $ 5,835,496       $ 5,221,084  
 

Page 15
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
    Six Months Ended
March 31,
(Thousands of Dollars)     2012     2011
   
Operating Activities:
Net Income Available for Common Stock $ 128,091 $ 174,154
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Gain on Sale of Unconsolidated Subsidiaries - (50,879 )
Depreciation, Depletion and Amortization 125,698 113,324
Deferred Income Taxes 81,696 106,510
Excess Tax Benefits Associated with Stock-Based Compensation Awards (1,076 ) -
Other 4,269 5,703
Change in:
Hedging Collateral Deposits 829 (50,692 )
Receivables and Unbilled Utility Revenue (50,906 ) (123,393 )
Gas Stored Underground and Materials and Supplies 37,156 30,144
Prepayments and Other Current Assets (943 ) 57,447
Accounts Payable (28,656 ) 33,234
Amounts Payable to Customers 1,808 (12,634 )
Customer Advances (19,439 ) (24,938 )
Customer Security Deposits (300 ) (256 )
Other Accruals and Current Liabilities 65,039 93,473
Other Assets (48,692 ) 15,239
Other Liabilities       44,323         (23,214 )
Net Cash Provided by Operating Activities     $ 338,897       $ 343,222  
 
Investing Activities:
Capital Expenditures $ (499,607 ) $ (392,338 )
Net Proceeds from Sale of Unconsolidated Subsidiaries - 59,365
Other       (789 )       (3,097 )
Net Cash Used in Investing Activities     $ (500,396 )     $ (336,070 )
 
Financing Activities:
Changes in Notes Payable to Banks and Commercial Paper $ (20,000 ) $ -
Excess Tax Benefits Associated with Stock-Based Compensation Awards 1,076 -
Reduction of Long-Term Debt (150,000 ) (200,000 )
Net Proceeds From Issuance of Long-Term Debt 496,085 -
Dividends Paid on Common Stock (58,877 ) (56,723 )
Net Proceeds From Issuance (Repurchase) of Common Stock       5,030         (2,833 )
Net Cash Provided By (Used in) Financing Activities     $ 273,314       $ (259,556 )
Net Increase (Decrease) in Cash and Temporary
Cash Investments 111,815 (252,404 )
Cash and Temporary Cash Investments
at Beginning of Period       80,428         397,171  
Cash and Temporary Cash Investments
at March 31     $ 192,243       $ 144,767  
 
 

Page 16
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
                 
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
 
Three Months Ended Six Months Ended
(Thousands of Dollars, except per share amounts) March 31, March 31,

EXPLORATION AND PRODUCTION SEGMENT
2012   2011   Variance 2012   2011   Variance
Total Operating Revenues $ 136,926     $ 137,430     $ (504 ) $ 272,899     $ 257,598     $ 15,301  
 
Operating Expenses:
Operation and Maintenance:
General and Administrative Expense 14,441 12,798 1,643 28,301 23,988 4,313
Lease Operating Expense 20,978 18,966 2,012 39,583 36,315 3,268
All Other Operation and Maintenance Expense 1,542 1,900 (358 ) 3,074 3,942 (868 )
Property, Franchise and Other Taxes 12,188 4,690 7,498 14,734 7,520 7,214
Depreciation, Depletion and Amortization   42,339       39,984       2,355     83,822       73,652       10,170  
  91,488       78,338       13,150     169,514       145,417       24,097  
 
Operating Income 45,438 59,092 (13,654 ) 103,385 112,181 (8,796 )
 
Other Income (Expense):
Interest Income 320 (51 ) 371 668 (1 ) 669
Other Interest Expense   (7,189 )     (3,906 )     (3,283 )   (12,493 )     (10,008 )     (2,485 )
 
Income Before Income Taxes 38,569 55,135 (16,566 ) 91,560 102,172 (10,612 )
Income Tax Expense   16,377       21,836       (5,459 )   39,053       41,500       (2,447 )
Net Income $ 22,192     $ 33,299     $ (11,107 ) $ 52,507     $ 60,672     $ (8,165 )
 
Net Income Per Share (Diluted) $ 0.27     $ 0.40     $ (0.13 ) $ 0.63     $ 0.73     $ (0.10 )
 
 
Three Months Ended Six Months Ended
March 31, March 31,

PIPELINE AND STORAGE SEGMENT
2012   2011   Variance 2012   2011   Variance
Revenues from External Customers $ 42,120 $ 39,669 $ 2,451 $ 77,345 $ 73,182 $ 4,163
Intersegment Revenues   21,294       20,632       662     42,359       40,514       1,845  
Total Operating Revenues   63,414       60,301       3,113     119,704       113,696       6,008  
 
Operating Expenses:
Purchased Gas 127 8 119 128 (25 ) 153
Operation and Maintenance 20,529 21,462 (933 ) 40,042 39,983 59
Property, Franchise and Other Taxes 5,505 5,397 108 10,913 10,608 305
Depreciation, Depletion and Amortization   9,892       9,242       650     19,983       18,229       1,754  
  36,053       36,109       (56 )   71,066       68,795       2,271  
 
Operating Income 27,361 24,192 3,169 48,638 44,901 3,737
 
Other Income (Expense):
Interest Income 34 103 (69 ) 90 178 (88 )
Other Income 481 449 32 1,507 715 792
Other Interest Expense   (6,566 )     (6,505 )     (61 )   (12,899 )     (13,082 )     183  
 
Income Before Income Taxes 21,310 18,239 3,071 37,336 32,712 4,624
Income Tax Expense   8,469       7,284       1,185     14,535       13,179       1,356  
Net Income $ 12,841     $ 10,955     $ 1,886   $ 22,801     $ 19,533     $ 3,268  
 
Net Income Per Share (Diluted) $ 0.15     $ 0.13     $ 0.02   $ 0.27     $ 0.23     $ 0.04  
 

Page 17
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
                 
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
 
Three Months Ended Six Months Ended
(Thousands of Dollars, except per share amounts) March 31, March 31,

UTILITY SEGMENT
2012   2011   Variance 2012   2011   Variance
Revenues from External Customers $ 296,786 $ 361,745 $ (64,959 ) $ 505,596 $ 604,587 $ (98,991 )
Intersegment Revenues   5,551       6,635       (1,084 )   9,940       11,205       (1,265 )
Total Operating Revenues   302,337       368,380       (66,043 )   515,536       615,792       (100,256 )
 
Operating Expenses:
Purchased Gas 166,845 224,274 (57,429 ) 275,250 361,049 (85,799 )
Operation and Maintenance 58,649 58,808 (159 ) 103,982 104,025 (43 )
Property, Franchise and Other Taxes 12,024 12,960 (936 ) 22,571 23,901 (1,330 )
Depreciation, Depletion and Amortization   10,505       10,382       123     21,066       20,623       443  
  248,023       306,424       (58,401 )   422,869       509,598       (86,729 )
 
Operating Income 54,314 61,956 (7,642 ) 92,667 106,194 (13,527 )
 
Other Income (Expense):
Interest Income 75 3 72 721 447 274
Other Income 435 279 156 677 596 81
Other Interest Expense   (8,240 )     (8,852 )     612     (16,400 )     (17,589 )     1,189  
 
Income Before Income Taxes 46,584 53,386 (6,802 ) 77,665 89,648 (11,983 )
Income Tax Expense   18,309       20,305       (1,996 )   30,037       33,577       (3,540 )
Net Income $ 28,275     $ 33,081     $ (4,806 ) $ 47,628     $ 56,071     $ (8,443 )
 
Net Income Per Share (Diluted) $ 0.34     $ 0.40     $ (0.06 ) $ 0.57     $ 0.67     $ (0.10 )
 
 
Three Months Ended Six Months Ended
March 31, March 31,

ENERGY MARKETING SEGMENT
2012   2011   Variance 2012   2011   Variance
Revenues from External Customers $ 75,223 $ 121,321 $ (46,098 ) $ 126,445 $ 174,973 $ (48,528 )
Intersegment Revenues   269       -       269     556       -       556  
Total Operating Revenues   75,492       121,321       (45,829 )   127,001       174,973       (47,972 )
 
Operating Expenses:
Purchased Gas 68,271 109,445 (41,174 ) 117,361 160,003 (42,642 )
Operation and Maintenance 1,826 1,582 244 3,572 3,140 432
Property, Franchise and Other Taxes 14 18 (4 ) 23 26 (3 )
Depreciation, Depletion and Amortization   23       9       14     47       18       29  
  70,134       111,054       (40,920 )   121,003       163,187       (42,184 )
 
Operating Income 5,358 10,267 (4,909 ) 5,998 11,786 (5,788 )
 
Other Income (Expense):
Interest Income 33 26 7 69 35 34
Other Income 27 25 2 62 33 29
Other Interest Expense   (4 )     (5 )     1     (8 )     (10 )     2  
 
Income Before Income Taxes 5,414 10,313 (4,899 ) 6,121 11,844 (5,723 )
Income Tax Expense   2,104       4,014       (1,910 )   2,382       4,613       (2,231 )
Net Income $ 3,310     $ 6,299     $ (2,989 ) $ 3,739     $ 7,231     $ (3,492 )
 
Net Income Per Share (Diluted) $ 0.04     $ 0.07     $ (0.03 ) $ 0.04     $ 0.09     $ (0.05 )
 

Page 18
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
                 
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
 
Three Months Ended Six Months Ended
(Thousands of Dollars, except per share amounts) March 31, March 31,

ALL OTHER
2012   2011   Variance 2012   2011   Variance
Revenues from External Customers $ 1,023 $ 472 $ 551 $ 1,960 $ 1,021 $ 939
Intersegment Revenues   3,159       2,538       621     6,520       4,216       2,304  
Total Operating Revenues   4,182       3,010       1,172     8,480       5,237       3,243  
 
Operating Expenses:
Purchased Gas - - - - 49 (49 )
Operation and Maintenance 969 1,129 (160 ) 1,918 2,187 (269 )
Property, Franchise and Other Taxes 193 183 10 364 400 (36 )
Depreciation, Depletion and Amortization   198       207       (9 )   393       427       (34 )
  1,360       1,519       (159 )   2,675       3,063       (388 )
 
Operating Income 2,822 1,491 1,331 5,805 2,174 3,631
 
Other Income (Expense):
Gain on Sale of Unconsolidated Subsidiaries - 50,879 (50,879 ) - 50,879 (50,879 )
Interest Income 37 85 (48 ) 99 150 (51 )
Other Income (74 ) 509 (583 ) (149 ) (586 ) 437
Other Interest Expense   (408 )     (550 )     142     (862 )     (1,095 )     233  
 
Income Before Income Taxes 2,377 52,414 (50,037 ) 4,893 51,522 (46,629 )
Income Tax Expense   1,038       20,233       (19,195 )   2,150       19,916       (17,766 )
Net Income $ 1,339     $ 32,181     $ (30,842 ) $ 2,743     $ 31,606     $ (28,863 )
 
Net Income Per Share (Diluted) $ 0.02     $ 0.38     $ (0.36 ) $ 0.03     $ 0.37     $ (0.34 )
 

Page 19
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
                 
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
 
Three Months Ended Six Months Ended
(Thousands of Dollars, except per share amounts) March 31, March 31,

CORPORATE
2012   2011   Variance 2012   2011   Variance
Revenues from External Customers $ 231 $ 244 $ (13 ) $ 487 $ 468 $ 19
Intersegment Revenues   1,028       899       129     2,056       1,927       129  
Total Operating Revenues   1,259       1,143       116     2,543       2,395       148  
 
Operating Expenses:
Operation and Maintenance 3,708 3,648 60 7,056 7,010 46
Property, Franchise and Other Taxes 553 550 3 1,102 1,079 23
Depreciation, Depletion and Amortization   194       187       7     387       375       12  
  4,455       4,385       70     8,545       8,464       81  
 
Operating Loss (3,196 ) (3,242 ) 46 (6,002 ) (6,069 ) 67
 
Other Income (Expense):
Interest Income 22,463 18,739 3,724 42,769 39,820 2,949
Other Income 785 1,162 (377 ) 893 1,559 (666 )
Interest Expense on Long-Term Debt (20,425 ) (17,926 ) (2,499 ) (39,066 ) (38,118 ) (948 )
Other Interest Expense   (1,616 )     (473 )     (1,143 )   (2,480 )     (749 )     (1,731 )
 
Loss Before Income Taxes (1,989 ) (1,740 ) (249 ) (3,886 ) (3,557 ) (329 )
Income Tax Benefit   (1,424 )     (1,536 )     112     (2,559 )     (2,598 )     39  
Net Loss $ (565 )   $ (204 )   $ (361 ) $ (1,327 )   $ (959 )   $ (368 )
 
Net Loss Per Share (Diluted) $ (0.01 )   $ -     $ (0.01 ) $ (0.01 )   $ (0.01 )   $ -  
 
 
 
Three Months Ended Six Months Ended
March 31, March 31,

INTERSEGMENT ELIMINATIONS
2012   2011   Variance 2012   2011   Variance
Intersegment Revenues $ (31,301 )   $ (30,704 )   $ (597 ) $ (61,431 )   $ (57,862 )   $ (3,569 )
 
Operating Expenses:
Purchased Gas (26,706 ) (27,132 ) 426 (52,009 ) (51,443 ) (566 )
Operation and Maintenance   (4,595 )     (3,572 )     (1,023 )   (9,422 )     (6,419 )     (3,003 )
  (31,301 )     (30,704 )     (597 )   (61,431 )     (57,862 )     (3,569 )
 
Operating Income - - - - - -
 
Other Income (Expense):
Interest Income (22,770 ) (18,837 ) (3,933 ) (43,119 ) (39,678 ) (3,441 )
Other Interest Expense   22,770       18,837       3,933     43,119       39,678       3,441  
 
Net Income $ -     $ -     $ -   $ -     $ -     $ -  
 
Net Income Per Share (Diluted) $ -     $ -     $ -   $ -     $ -     $ -  
 

Page 20
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
                       
SEGMENT INFORMATION (Continued)
(Thousands of Dollars)
 
 
Three Months Ended Six Months Ended
March 31, March 31,
(Unaudited) (Unaudited)
 
Increase Increase
2012 2011 (Decrease) 2012 2011 (Decrease)
 

Capital Expenditures:
Exploration and Production $ 217,254

(1)(2)
$ 135,364

(3)(4)
$ 81,890 $ 409,131

(1)(2)
$ 315,194

(3)(4)
$ 93,937
Pipeline and Storage 19,031

(1)(2)
30,279

(3)
(11,248 ) 63,221

(1)(2)
39,498

(3)
23,723
Utility 14,076 14,514 (438 ) 25,340 25,435 (95 )
Energy Marketing   126   174   (48 )   266   261   5  
Total Reportable Segments 250,487 180,331 70,156 497,958 380,388 117,570
All Other 12,233

(1)(2)
1,440 10,793 43,637

(1)(2)
2,269 41,368
Corporate   94   4   90     170   15   155  
Total Capital Expenditures $ 262,814 $ 181,775 $ 81,039   $ 541,765 $ 382,672 $ 159,093  

(1)
 

Capital expenditures for the quarter and six months ended March 31, 2012 include $93.6 million of accrued capital expenditures in the Exploration and Production segment, the majority of which was in the Appalachian region, $12.9 million of accrued capital expenditures in the Pipeline and Storage segment, and $7.9 million of accrued capital expenditures in the All Other category. These amounts have been excluded from the Consolidated Statement of Cash Flows at March 31, 2012 since they represent non-cash investing activities at that date.

(2)

Capital expenditures for the six months ended March 31, 2012 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 six months ended March 31, 2012. 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 March 31, 2012.

 

(3)

Capital expenditures for the quarter and six months ended March 31, 2011 include $43.9 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 March 31, 2011 since they represented non-cash investing activities at that date.

(4)

Capital expenditures for the Exploration and Production segment for the six months ended March 31, 2011 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 six months ended March 31, 2011. 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 March 31, 2011.

DEGREE DAYS
           
 
Percent Colder
(Warmer) Than:

Three Months Ended March 31
Normal 2012 2011 Normal (1)   Last Year (1)
 
Buffalo, NY 3,364 2,572 3,494 (23.5) (26.4)
Erie, PA 3,176 2,403 3,312 (24.3) (27.4)
 

Six Months Ended March 31
 
Buffalo, NY 5,624 4,420 5,826 (21.4) (24.1)
Erie, PA 5,257 4,124 5,472 (21.6) (24.6)
(1)   Percents compare actual 2012 degree days to normal degree days and actual 2012 degree days to actual 2011 degree days.

Page 21
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
                       

EXPLORATION AND PRODUCTION INFORMATION
 
 
Three Months Ended Six Months Ended
March 31, March 31,
Increase Increase
2012 2011 (Decrease)   2012 2011 (Decrease)
 

Gas Production/Prices:
Production (MMcf)
Appalachia 13,236 10,848 2,388 26,347 18,930 7,417
West Coast 828 855 (27 ) 1,645 1,790 (145 )
Gulf Coast   -   2,056   (2,056 )   -   4,070   (4,070 )
Total Production   14,064   13,759   305     27,992   24,790   3,202  
 
Average Prices (Per Mcf)
Appalachia $ 2.74 $ 4.40 $ (1.66 ) $ 3.06 $ 4.24 $ (1.18 )
West Coast 3.49 4.46 (0.97 ) 4.22 4.18 0.04
Gulf Coast N/M 4.87 N/M N/M 4.71 N/M
Weighted Average 2.78 4.48 (1.70 ) 3.13 4.31 (1.18 )
Weighted Average after Hedging 4.64 5.32 (0.68 ) 4.71 5.30 (0.59 )
 

Oil Production/Prices:
Production (Thousands of Barrels)
Appalachia 8 11 (3 ) 18 21 (3 )
West Coast 717 643 74 1,426 1,297 129
Gulf Coast   -   92   (92 )   -   197   (197 )
Total Production   725   746   (21 )   1,444   1,515   (71 )
 
Average Prices (Per Barrel)
Appalachia $ 100.35 $ 86.53 $ 13.82 $ 93.54 $ 84.07 $ 9.47
West Coast 112.17 95.35 16.82 110.71 87.84 22.87
Gulf Coast N/M 96.12 N/M N/M 89.61 N/M
Weighted Average 112.05 95.31 16.74 110.50 88.01 22.49
Weighted Average after Hedging 93.40 82.28 11.12 92.39 79.21 13.18
 
Total Production (Mmcfe)   18,414   18,235   179     36,656   33,880   2,776  
 

Selected Operating Performance Statistics:
General & Administrative Expense per Mcfe (1) $ 0.78 $ 0.70 $ 0.08 $ 0.77 $ 0.71 $ 0.06
Lease Operating Expense per Mcfe (1) $ 1.14 $ 1.04 $ 0.10 $ 1.08 $ 1.07 $ 0.01
Depreciation, Depletion & Amortization per Mcfe (1) $ 2.30 $ 2.19 $ 0.11 $ 2.29 $ 2.17 $ 0.12

(1)
 

Refer to page 16 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
 

Page 22
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
   

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

SWAPS

Volume

Average Hedge Price
Oil 0.8 MMBBL $77.03 / BBL
Gas 17.5 BCF $5.89 / MCF
 
Hedging Summary for Fiscal 2013
 

SWAPS

Volume

Average Hedge Price
Oil 1.5 MMBBL $92.52 / BBL
Gas 38.9 BCF $4.97 / MCF
 
Hedging Summary for Fiscal 2014
 

SWAPS

Volume

Average Hedge Price
Oil 0.6 MMBBL $95.68 / BBL
Gas 19.5 BCF $4.34 / MCF
 
Hedging Summary for Fiscal 2015
 

SWAPS

Volume

Average Hedge Price
Gas 4.1 BCF $4.04 / MCF
 
Hedging Summary for Fiscal 2016
 

SWAPS

Volume

Average Hedge Price
Gas 4.1 BCF $4.04 / MCF
 
Hedging Summary for Fiscal 2017
 

SWAPS

Volume

Average Hedge Price
Gas 4.2 BCF $4.04 / MCF

Gross Wells in Process of Drilling
         

Six Months Ended March 31, 2012
Total

East

West

Company
Wells in Process - Beginning of Period
Exploratory 5.00 0.00 5.00
Developmental 101.00

(1)
0.00 101.00
Wells Commenced
Exploratory 3.00 0.00 3.00
Developmental 29.00 37.00 66.00
Wells Completed
Exploratory 6.00 0.00 6.00
Developmental 31.00 35.00 66.00
Wells Plugged & Abandoned
Exploratory 0.00 0.00 0.00
Developmental 0.00 0.00 0.00
Wells in Process - End of Period
Exploratory 2.00 0.00 2.00
Developmental 99.00 2.00 101.00
 
(1) Beginning of year number has been adjusted to remove one developmental well.
 

Net Wells in Process of Drilling

Six Months Ended March 31, 2012
Total

East

West

Company
Wells in Process - Beginning of Period
Exploratory 5.00 0.00 5.00
Developmental 68.00 (2) 0.00 68.00
Wells Commenced
Exploratory 3.00 0.00 3.00
Developmental 23.00 36.99 59.99
Wells Completed
Exploratory 6.00 0.00 6.00
Developmental 23.50 34.99 58.49
Wells Plugged & Abandoned
Exploratory 0.00 0.00 0.00
Developmental 0.00 0.00 0.00
Wells in Process - End of Period
Exploratory 2.00 0.00 2.00
Developmental 67.50 2.00 69.50
 
(2) Beginning of year number has been adjusted to remove one developmental well.
 

Page 23
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
FISCAL 2012 EARNINGS GUIDANCE AND SENSITIVITIES
           
 
 
 
Earnings per share sensitivity to changes
Fiscal 2012 (Diluted earnings per share guidance*) from NYMEX prices used in guidance* ^
 
$0.25 change per MMBtu gas   $5 change per Bbl oil
Range Increase Decrease Increase Decrease
 
Consolidated Earnings $2.30 - $2.45 + $0.04 - $0.04 + $0.02 - $0.02

*

Please refer to forward looking statement footnote beginning at page 8 of this document.
 

^

This sensitivity table is current as of May 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 $2.25 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.

Page 24
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
                       
 
Pipeline & Storage Throughput - (millions of cubic feet - MMcf)
 
Three Months Ended Six Months Ended
March 31, March 31,
Increase Increase
2012 2011 (Decrease) 2012 2011 (Decrease)
Firm Transportation - Affiliated 37,490 46,277 (8,787 ) 63,668 78,345 (14,677 )
Firm Transportation - Non-Affiliated 80,560 77,692 2,868 137,990 134,873 3,117
Interruptible Transportation 456 1,095 (639 ) 1,264 1,220 44  
118,506 125,064 (6,558 ) 202,922 214,438 (11,516 )
 
Utility Throughput - (MMcf)
Three Months Ended Six Months Ended
March 31, March 31,
Increase Increase
2012 2011 (Decrease) 2012 2011 (Decrease)
Retail Sales:
Residential Sales 21,384 28,048 (6,664 ) 35,933 45,207 (9,274 )
Commercial Sales 3,161 4,372 (1,211 ) 5,155 6,842 (1,687 )
Industrial Sales 187 393 (206 ) 288 539 (251 )
24,732 32,813 (8,081 ) 41,376 52,588 (11,212 )
Off-System Sales 6,799 3,458 3,341 9,544 5,321 4,223
Transportation 22,719 27,472 (4,753 ) 39,647 45,581 (5,934 )
54,250 63,743 (9,493 ) 90,567 103,490 (12,923 )
 
Energy Marketing Volumes
Three Months Ended Six Months Ended
March 31, March 31,
Increase Increase
2012 2011 (Decrease) 2012 2011 (Decrease)
Natural Gas (MMcf) 17,727 21,609 (3,882 ) 28,039 32,355 (4,316 )
 

Page 25
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
       
 

Quarter Ended March 31 (unaudited)
2012 2011
 
Operating Revenues $ 552,309,000 $ 660,881,000
 
Net Income Available for Common Stock $ 67,392,000 $ 115,611,000
 
Earnings Per Common Share:
Basic $ 0.81 $ 1.40
Diluted $ 0.81 $ 1.38
 
Weighted Average Common Shares:
Used in Basic Calculation   83,107,884   82,400,851
Used in Diluted Calculation   83,678,261   83,673,977
 

Six Months Ended March 31 (unaudited)
 
Operating Revenues $ 984,732,000 $ 1,111,829,000
 
Net Income Available for Common Stock $ 128,091,000 $ 174,154,000
 
Earnings Per Common Share:
Basic $ 1.54 $ 2.12
Diluted $ 1.53 $ 2.08
 
Weighted Average Common Shares:
Used in Basic Calculation   82,988,750   82,311,162
Used in Diluted Calculation   83,712,681   83,561,775
 

Twelve Months Ended March 31 (unaudited)
 
Operating Revenues $ 1,651,745,000 $ 1,750,217,000
 
Income from Continuing Operations $ 212,338,000 $ 249,189,000
Income from Discontinued Operations, Net of Tax   -   5,952,000
Net Income Available for Common Stock $ 212,338,000 $ 255,141,000
 
Earnings Per Common Share:
Basic:
Income from Continuing Operations $ 2.56 $ 3.04
Income from Discontinued Operations   -   0.07
Net Income Available for Common Stock $ 2.56 $ 3.11
 
Diluted:
Income from Continuing Operations $ 2.54 $ 2.99
Income from Discontinued Operations   -   0.07
Net Income Available for Common Stock $ 2.54 $ 3.06
 
Weighted Average Common Shares:
Used in Basic Calculation   82,852,270   82,100,883
Used in Diluted Calculation   83,747,858   83,283,900

Copyright Business Wire 2010

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