National Fuel Gas Company (“National Fuel” or the “Company”) (NYSE:NFG) today announced consolidated earnings for the third quarter of fiscal 2012 and for the nine months ended June 30, 2012.

HIGHLIGHTS
  • Earnings for the third quarter were $43.2 million or $0.52 per share. This compares to earnings of $46.9 million or $0.56 per share in the prior year’s third quarter. The decrease in earnings in the Exploration and Production segment is due to lower commodity prices, and the decrease in earnings in the Utility and Energy Marketing segments is due to warmer weather.
  • In the Pipeline and Storage segment, third quarter earnings of $12.6 million, or $0.15 per share, increased $8.1 million, or $0.10 per share, compared to the prior year’s third quarter, largely driven by the impact of the Line N Expansion and Tioga County Extension projects that were placed in service during the first quarter.
  • Seneca’s production of crude oil and natural gas in the current quarter was 22.1 billion cubic feet equivalent (“Bcfe”), a 30.7% increase over the 16.9 Bcfe in the third quarter of 2011. Appalachian production increased 38.4% to 16.8 Bcfe, including 15.0 Bcfe of production from the Marcellus Shale wells, an increase of 45.6% over the prior year’s third quarter. California crude oil production increased 7.4%. Production for the entire 2012 fiscal year is projected to be between 81 and 85 Bcfe.
  • National Fuel Gas Midstream Corporation’s Trout Run Gathering System located in Lycoming County, Pa., was completed and placed in service on May 30, 2012.
  • The Company is updating and narrowing its GAAP earnings guidance range for fiscal 2012 to reflect actual results for the nine months ended June 30, 2012. The revised GAAP earnings guidance range is $2.38 to $2.48 per share.
  • The Company’s preliminary GAAP earnings guidance for fiscal 2013 is in the range of $2.45 to $2.75 per share. The 2013 preliminary guidance includes oil and gas production for the Exploration and Production segment in the range of 92 to 105 Bcfe and is based on an assumed flat NYMEX price of $3.25 per MMBtu for natural gas and $85 per Bbl for crude oil.
  • A conference call is scheduled for Friday, August 3, 2012, at 11 a.m. Eastern Time.

MANAGEMENT COMMENTS

David F. Smith, Chairman and Chief Executive Officer of National Fuel Gas Company, stated: “In our fiscal third quarter, we were very pleased with our operational performance. Seneca’s Marcellus production continues to grow rapidly, increasing nearly 50 percent over last year’s quarter, with favorable hedging helping to offset lower natural gas prices. In addition, we continue to see great success in California, where crude oil production was up 7.4 percent. In our midstream businesses, the Trout Run Gathering System was placed in service this May, and our Northern Access and Line N 2012 expansion projects are on track for completion this fall.

“In short, even though earnings this quarter were impacted by the lowest natural gas prices in more than a decade, our ongoing accomplishments in all of our businesses make us well positioned for long-term growth.”

SUMMARY OF RESULTS

National Fuel had consolidated earnings for the quarter ended June 30, 2012, of $43.2 million, or $0.52 per share, compared to the prior year’s third quarter earnings of $46.9 million, or $0.56 per share, a decrease of $3.7 million or $0.04 per share. The decrease is mainly due to lower earnings in the Exploration and Production, Utility and Energy Marketing segments, offset by higher earnings in the Pipeline and Storage segment and the All Other category. (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 nine months ended June 30, 2012, of $171.3 million, or $2.05 per share, decreased $49.7 million, or $0.59 per share, from the same period in the prior year, where earnings were $221.0 million or $2.64 per share.
 
          Three Months         Nine Months
Ended June 30, Ended June 30,
2012       2011 2012       2011
(in thousands except per share amounts)
Reported GAAP earnings $ 43,184 $ 46,891 $ 171,275 $ 221,045
Items impacting comparability1:
Pennsylvania impact fee 1,661 8,061
Gain on sale of landfill gas electric generation investments (31,418 )
       
Operating Results $ 44,845 $ 46,891 $ 179,336 $ 189,627  
 
Reported GAAP earnings per share $ 0.52 $ 0.56 $ 2.05 $ 2.64
Items impacting comparability1:
Pennsylvania impact fee 0.02 0.10
Gain on sale of landfill gas electric generation investments (0.37 )
       
Operating Results $ 0.54 $ 0.56 $ 2.15 $ 2.27  

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 nine months ended June 30, 2012, to the comparable periods in fiscal 2011. Excluding these items, Operating Results for the current quarter of $44.8 million, or $0.54 per share, decreased $2.1 million, or $0.02 per share, from the prior year’s third quarter where Operating Results were $46.9 million or $0.56 per share. Excluding these items, Operating Results for the nine months ended June 30, 2012, of $179.3 million, or $2.15 per share, decreased $10.3 million, or $0.12 per share, from the same period in the prior year, where Operating Results were $189.6 million or $2.27 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 third quarter of fiscal 2012 of $21.9 million, or $0.26 per share, decreased $10.9 million, or $0.13 per share, when compared with the prior year’s third quarter.

In February 2012, the Commonwealth of Pennsylvania passed legislation that includes a “natural gas impact fee.” The legislation, which covers essentially all of Seneca’s Marcellus Shale wells, imposes an annual fee for a period of 15 years on each well drilled. The per-well impact fee is adjusted annually based on three factors: The age of the well, changes in the Consumer Price Index and the average monthly NYMEX price for natural gas. The fee is retroactive and applied to wells drilled in the current fiscal year and in all previous years. The impact fee increased property, franchise and other taxes in the current year’s third quarter by $2.6 million (pre-tax).

Excluding the impact fee, the Exploration and Production segment’s Operating Results in the third quarter of fiscal 2012 were $23.6 million, or $0.28 per share, a decrease of $9.2 million, or $0.11 per share, when compared with the prior year’s third quarter.

Overall production of natural gas and crude oil for the current quarter of 22.1 Bcfe increased approximately 5.2 Bcfe compared to the prior year’s third quarter. Production from Seneca’s Appalachia properties increased 38.4 percent, mainly due to a 4.7 Bcfe, or 45.6 percent increase, in production from Marcellus wells. Crude oil production in California increased 7.4 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 June 30, 2012, was $3.93 per thousand cubic feet (“Mcf”), a decrease of $1.55 per Mcf compared to the prior year’s third quarter. Higher crude oil prices realized after hedging increased earnings. The weighted average oil price received by Seneca (after hedging) for the quarter ended June 30, 2012, was $89.70 per Barrel (“Bbl”), an increase of $5.33 per Bbl.

Depletion, lease operating expenses (“LOE”) and general and administrative expenses (“G&A”) for the current year’s third quarter increased over last year’s third quarter. On a per unit basis, depletion increased $0.19 per thousand cubic feet equivalent (“Mcfe”) due to higher capital spending in the East. LOE decreased $0.12 per Mcfe and G&A decreased $0.08 per Mcfe, largely due to the increase in Marcellus production.

The Exploration and Production segment’s earnings of $74.4 million, or $0.89 per share, for the nine months ended June 30, 2012, decreased $19.0 million, or $0.23 per share, when compared with the nine months ended June 30, 2011. The impact fee, described above, recorded in the current nine-month period was $12.4 million (pre-tax) of which $6.3 million (pre-tax) related to prior fiscal years. Excluding the impact fee, the Exploration and Production segment’s Operating Results for the nine months ended June 30, 2012, were $82.5 million, or $0.99 per share, a decrease of $11.0 million, or $0.13 per share, when compared with the prior year’s nine month period.

Overall production for the nine months ended June 30, 2012, increased 15.7 percent. Excluding fiscal 2011 Gulf of Mexico production of 5.2 Bcfe due to the April 2011 sale of Seneca’s offshore Gulf of Mexico assets, production increased 28.9 percent or 13.2 Bcfe. Production from Seneca’s Appalachia properties increased 38.6 percent, mainly due to a 12.6 Bcfe, or 50 percent increase, in production from Marcellus wells. Crude oil production in California increased 9.1 percent.

Changes in commodity prices realized after hedging also impacted earnings. The weighted average natural gas price received by Seneca (after hedging) for the nine-month period ended June 30, 2012, was $4.40 per Mcf, a decrease of $0.96 per Mcf. Higher crude oil prices realized after hedging increased earnings. The weighted average crude oil price received by Seneca (after hedging) for the nine-month period ended June 30, 2012, was $91.50 per Bbl, an increase of $10.72 per Bbl.

Depletion, LOE and G&A for the nine months ended June 30, 2012, increased compared to the prior year’s nine-month period due in part to the higher production activity discussed above. On a per unit basis, depletion increased $0.14 per Mcfe, LOE decreased $0.04 per Mcfe and G&A per Mcfe was unchanged.

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. 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 $12.6 million, or $0.15 per share, for the quarter ended June 30, 2012, increased $8.1 million, or $0.10 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 fiscal year’s first quarter, and lower operating expenses.

The Pipeline and Storage segment’s earnings of $35.4 million, or $0.42 per share, for the nine months ended June 30, 2012, increased $11.4 million, or $0.13 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 and lower operating expenses noted above. Earnings were reduced by lower efficiency gas revenues due to the decline in natural gas prices and higher depreciation expense.

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 $5.1 million, or $0.06 per share, for the quarter ended June 30, 2012, decreased $1.2 million, or $0.02 per share, when compared with the same period in the prior fiscal year due mainly to weather in Pennsylvania that was 7.7 percent warmer in the current year’s third quarter than the third 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. Higher depreciation expense and higher income taxes also reduced earnings. Lower operating expenses and higher normalized usage in Pennsylvania partially offset the impact of the above items.

The Utility segment’s earnings of $52.7 million, or $0.63 per share, for the nine months ended June 30, 2012, decreased from earnings of $62.4 million, or $0.74 per share, for the nine months ended June 30, 2011. Warmer weather in Pennsylvania was the main reason for the decrease in earnings. Temperatures in Pennsylvania were 22.4 percent warmer in the nine-month period ended June 30, 2012, than the prior year’s nine-month period. Higher depreciation expense, higher income taxes and the impact of certain regulatory adjustments also decreased earnings. Lower operating expenses, lower interest expense and higher normalized usage in Pennsylvania partially offset the above items.

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 June 30, 2012, of $0.9 million, or $0.01 per share, decreased $1.0 million, or $0.01 per share, from the prior year’s third quarter earnings of $1.9 million or $0.02 per share. Earnings for the nine months ended June 30, 2012, of $4.7 million, or $0.06 per share, decreased $4.5 million, or $0.05 per share, from the prior year’s nine-month period. The decrease in earnings in both the current year’s third quarter and nine-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 June 30, 2012, were $2.6 million, or $0.04 per share, an increase of $1.2 million, or $0.02 per share, compared to the prior year’s third quarter earnings. The increase in earnings is mainly due to higher earnings from Midstream’s pipeline gathering and natural gas processing operations, lower Corporate operating expenses and lower state franchise taxes.

Earnings in the Corporate and All Other category for the nine months ended June 30, 2012, were $4.0 million, or $0.05 per share, a decrease of $28.0 million, or $0.33 per share, when compared to the earnings for the nine months ended June 30, 2011. The comparability of the results for the quarters ended June 30, 2012, and June 30, 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 electric generation assets powered by landfill gas.

Excluding this item, Operating Results of $4.0 million, or $0.05 per share, for the nine-month period ended June 30, 2012, increased $3.4 million, or $0.04 per share, when compared with the prior year’s nine-month period. The increase in Operating Results is mainly due to higher earnings from Midstream’s pipeline gathering and natural gas processing operations, lower Corporate operating expenses and lower state franchise taxes.

EARNINGS GUIDANCE

The Company is updating and narrowing its GAAP earnings guidance range for fiscal 2012 to reflect actual results for the nine months ended June 30, 2012. The revised GAAP earnings range is $2.38 to $2.48 per share, excluding any period end regulatory adjustments. The previous guidance range had been $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 85 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 Company’s preliminary GAAP earnings guidance for fiscal 2013 is in the range of $2.45 to $2.75. This includes oil and gas production for the Exploration and Production segment in the range of 92 to 105 Bcfe and is based on an assumed flat NYMEX price of $3.25 per MMBTU for natural gas and $85 per Bbl for crude oil.

EARNINGS TELECONFERENCE

The Company will host a conference call on Friday, August 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) 1-866-578-5788 and using the passcode “62532693.” 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 “85783979.” Both the webcast and telephonic replay will be available until the close of business on Friday, August 10, 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; impairments under the SEC’s full cost ceiling test for natural gas and oil reserves; 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; 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 laws, 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 JUNE 30, 2012
 
  Exploration &   Pipeline &     Energy   Corporate /  
(Thousands of Dollars) Production   Storage   Utility   Marketing   All Other   Consolidated*
 
Third quarter 2011 GAAP earnings $ 32,784 $ 4,503 $ 6,328 $ 1,891 $ 1,385 $ 46,891
 
Drivers of operating results
Higher (lower) crude oil prices 2,495 2,495
Higher (lower) natural gas prices (17,904 ) (17,904 )
Higher (lower) natural gas production 17,315 17,315
Higher (lower) crude oil production 3,098 3,098
Lower (higher) lease operating expenses (2,029 ) (2,029 )
Lower (higher) depreciation / depletion (10,059 ) (698 ) (244 ) (11,001 )
 
Higher (lower) transportation revenues 5,766 5,766
Higher (lower) efficiency gas revenues (766 ) (766 )
Higher (lower) gathering and processing revenues 1,140 1,140
Lower (higher) operating expenses (1,395 ) 2,052 796 321 1,774
Lower (higher) property, franchise and other taxes 323 713 1,036
 
Warmer weather (2,311 ) (2,311 )
Usage 733 733
 
Higher (lower) margins (876 ) (652 ) (1,528 )
 
(Higher) lower interest expense (2,879 ) 358 (2,521 )
 
Lower (higher) income tax expense / effective tax rate 1,585 762 (779 ) 1,568
 
All other / rounding   565       310       346       (92 )     (40 )     1,089  
 
Third quarter 2012 operating results 23,576 12,627 5,096 923 2,623 44,845
Items impacting comparability:
Pennsylvania impact fee   (1,661 )                     (1,661 )
Third quarter 2012 GAAP earnings $ 21,915     $ 12,627     $ 5,096     $ 923     $ 2,623     $ 43,184  
 
* Amounts do not reflect intercompany eliminations
 
Page 10
NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS PER SHARE
QUARTER ENDED JUNE 30, 2012
 
  Exploration &   Pipeline &     Energy   Corporate /  
Production   Storage   Utility   Marketing   All Other   Consolidated*
 
Third quarter 2011 GAAP earnings $ 0.39 $ 0.05 $ 0.08 $ 0.02 $ 0.02 $ 0.56
 
Drivers of operating results
Higher (lower) crude oil prices 0.03 0.03
Higher (lower) natural gas prices (0.21 ) (0.21 )
Higher (lower) natural gas production 0.21 0.21
Higher (lower) crude oil production 0.04 0.04
Lower (higher) lease operating expenses (0.02 ) (0.02 )
Lower (higher) depreciation / depletion (0.12 ) (0.01 ) - (0.13 )
 
Higher (lower) transportation revenues 0.07 0.07
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 ) 0.02 0.01 - 0.01
Lower (higher) property, franchise and other taxes - 0.01 0.01
 
Warmer weather (0.03 ) (0.03 )
Usage 0.01 0.01
 
Higher (lower) margins (0.01 ) (0.01 ) (0.02 )
 
(Higher) lower interest expense (0.03 ) - (0.03 )
 
Lower (higher) income tax expense / effective tax rate 0.02 0.01 (0.01 ) 0.02
 
All other / rounding   (0.01 )     0.01       0.01       -       0.01       0.02  
 
Third quarter 2012 operating results 0.28 0.15 0.06 0.01 0.04 0.54
Items impacting comparability:
Pennsylvania impact fee   (0.02 )                     (0.02 )
Third quarter 2012 GAAP earnings $ 0.26     $ 0.15     $ 0.06     $ 0.01     $ 0.04     $ 0.52  
 
* Amounts do not reflect intercompany eliminations
 
Page 11
NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS
NINE MONTHS ENDED JUNE 30, 2012
 
  Exploration &   Pipeline &     Energy   Corporate /  
(Thousands of Dollars) Production   Storage   Utility   Marketing   All Other   Consolidated**
 
Nine months ended June 30, 2011 GAAP earnings $ 93,455 $ 24,036 $ 62,399 $ 9,122 $ 32,033 $ 221,045
Items impacting comparability:
Gain on sale of unconsolidated subsidiaries                   (31,418 )     (31,418 )
Nine months ended June 30, 2011 operating results 93,455 24,036 62,399 9,122 615 189,627
 
Drivers of operating results
Higher (lower) Appalachian and West Coast crude oil prices 16,045 16,045
Higher (lower) Appalachian and West Coast natural gas prices (28,237 ) (28,237 )
Higher (lower) Appalachian and West Coast natural gas production 41,531 41,531
Higher (lower) Appalachian and West Coast crude oil production 9,147 9,147
Lower Gulf Coast natural gas and crude oil revenues (24,506 ) (24,506 )
Lower (higher) lease operating expenses (4,153 ) (4,153 )
Lower (higher) depreciation / depletion (16,670 ) (1,138 ) (987 ) (230 ) (19,025 )
Higher (lower) processing plant revenues 992 992
 
Higher (lower) transportation revenues 13,506 13,506
Higher (lower) efficiency gas revenues (4,431 ) (4,431 )
Higher (lower) gathering and processing revenues 2,401 2,401
Lower (higher) operating expenses (3,636 ) 2,013 465 (1,158 )
Lower (higher) property, franchise and other taxes 1,975 727 722 3,424
 
Warmer weather (10,002 ) (10,002 )
Usage 930 930
Regulatory true-up adjustments (873 ) (873 )
 
Higher (lower) income from unconsolidated subsidiaries 305 305
 
Higher (lower) margins (4,340 ) 261 (4,079 )
 
Higher AFUDC * 707 707
Higher (lower) interest income 480 480
Lower (higher) interest expense (4,354 ) 1,130 (3,224 )
 
(Higher) lower income tax expense 1,022 (1,432 ) (410 )
 
All other / rounding   414       (287 )     833       (120 )     (501 )     339  
 
Nine months ended June 30, 2012 operating results 82,483 35,428 52,725 4,662 4,038 179,336
Items impacting comparability:
Pennsylvania impact fee   (8,061 )                     (8,061 )
Nine months ended June 30, 2012 GAAP earnings $ 74,422     $ 35,428     $ 52,725     $ 4,662     $ 4,038     $ 171,275  
 
* 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
NINE MONTHS ENDED JUNE 30, 2012
 
  Exploration &   Pipeline &     Energy   Corporate /  
Production   Storage   Utility   Marketing   All Other   Consolidated**
 
Nine months ended June 30, 2011 GAAP earnings $ 1.12 $ 0.29 $ 0.74 $ 0.11 $ 0.38 $ 2.64
Items impacting comparability:
Gain on sale of unconsolidated subsidiaries                   (0.37 )     (0.37 )
Nine months ended June 30, 2011 operating results 1.12 0.29 0.74 0.11 0.01 2.27
 
Drivers of operating results
Higher (lower) Appalachian and West Coast crude oil prices 0.19 0.19
Higher (lower) Appalachian and West Coast natural gas prices (0.34 ) (0.34 )
Higher (lower) Appalachian and West Coast natural gas production 0.50 0.50
Higher (lower) Appalachian and West Coast crude oil production 0.11 0.11
Lower Gulf Coast natural gas and crude oil revenues (0.29 ) (0.29 )
Lower (higher) lease operating expenses (0.05 ) (0.05 )
Lower (higher) depreciation / depletion (0.20 ) (0.01 ) (0.01 ) - (0.22 )
Higher (lower) processing plant revenues 0.01 0.01
 
Higher (lower) transportation revenues 0.16 0.16
Higher (lower) efficiency gas revenues (0.05 ) (0.05 )
Higher (lower) gathering and processing revenues 0.03 0.03
Lower (higher) operating expenses (0.04 ) 0.02 0.01 (0.01 )
Lower (higher) property, franchise and other taxes 0.02 0.01 0.01 0.04
 
Warmer weather (0.12 ) (0.12 )
Usage 0.01 0.01
Regulatory true-up adjustments (0.01 ) (0.01 )
 
Higher (lower) income from unconsolidated subsidiaries - -
 
Higher (lower) margins (0.05 ) - (0.05 )
 
Higher AFUDC * 0.01 0.01
Higher (lower) interest income 0.01 0.01
Lower (higher) interest expense (0.05 ) 0.01 (0.04 )
 
(Higher) lower income tax expense 0.01 (0.02 ) (0.01 )
 
All other / rounding   -       (0.01 )     0.02       -       (0.01 )     -  
 
Nine months ended June 30, 2012 operating results 0.99 0.42 0.63 0.06 0.05 2.15
Items impacting comparability:
Pennsylvania impact fee   (0.10 )                     (0.10 )
Nine months ended June 30, 2012 GAAP earnings $ 0.89     $ 0.42     $ 0.63     $ 0.06     $ 0.05     $ 2.05  
 
* 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     Nine Months Ended
June 30, June 30,
(Unaudited) (Unaudited)

SUMMARY OF OPERATIONS
2012   2011 2012   2011
Operating Revenues $ 328,861   $ 380,979   $ 1,313,593   $ 1,492,808  
 
Operating Expenses:
Purchased Gas 50,160 112,725 390,889 582,358
Operation and Maintenance 93,749 95,977 311,857 310,148
Property, Franchise and Other Taxes 20,432 20,179 70,138 63,714
Depreciation, Depletion and Amortization   74,227     57,293     199,925     170,617  
238,568 286,174 972,809 1,126,837
 
Operating Income 90,293 94,805 340,784 365,971
 
Other Income (Expense):
Gain on Sale of Unconsolidated Subsidiaries - - - 50,879
Interest Income 390 325 1,686 1,277
Other Income 1,086 1,813 4,076 4,130
Interest Expense on Long-Term Debt (21,529 ) (17,876 ) (60,594 ) (55,994 )
Other Interest Expense   (828 )   (1,159 )   (2,851 )   (4,014 )
 
Income Before Income Taxes 69,412 77,908 283,101 362,249
 
Income Tax Expense   26,228     31,017     111,826     141,204  
 
Net Income Available for Common Stock $ 43,184   $ 46,891   $ 171,275   $ 221,045  
 
Earnings Per Common Share:
Basic $ 0.52   $ 0.57   $ 2.06   $ 2.68  
Diluted $ 0.52   $ 0.56   $ 2.05   $ 2.64  
 
Weighted Average Common Shares:
Used in Basic Calculation   83,227,602     82,687,467     83,068,083     82,436,603  
Used in Diluted Calculation   83,674,823     83,782,493     83,690,436     83,649,498  
 
Page 14
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
  June 30,   September 30,
(Thousands of Dollars)   2012   2011
 
ASSETS
Property, Plant and Equipment $ 6,438,525 $ 5,646,918
Less - Accumulated Depreciation, Depletion and Amortization   1,817,655       1,646,394  
Net Property, Plant and Equipment   4,620,870       4,000,524  
 
Current Assets:
Cash and Temporary Cash Investments 140,815 80,428
Hedging Collateral Deposits 3,392 19,701
Receivables - Net 113,949 131,885
Unbilled Utility Revenue 12,212 17,284
Gas Stored Underground 24,787 54,325
Materials and Supplies - at average cost 28,137 27,932
Unrecovered Purchased Gas Costs 2,100 -
Other Current Assets 48,246 64,923
Deferred Income Taxes   14,727       15,423  
Total Current Assets   388,365       411,901  
 
Other Assets:
Recoverable Future Taxes 147,652 144,377
Unamortized Debt Expense 13,991 10,571
Other Regulatory Assets 481,900 484,397
Deferred Charges 5,781 5,552
Other Investments 84,495 79,365
Goodwill 5,476 5,476
Fair Value of Derivative Financial Instruments 85,905 76,085
Other   2,418       2,836  
Total Other Assets   827,618       808,659  
Total Assets $ 5,836,853     $ 5,221,084  
 
CAPITALIZATION AND LIABILITIES
Capitalization:
Comprehensive Shareholders' Equity

Common Stock, $1 Par Value Authorized - 200,000,000 Shares;

Issued and Outstanding - 83,270,363 Shares and 82,812,677 Shares, Respectively
$ 83,270 $ 82,813
Paid in Capital 666,012 650,749
Earnings Reinvested in the Business   1,287,898       1,206,022  

Total Common Shareholders' Equity Before Items of Other Comprehensive Loss
2,037,180 1,939,584
Accumulated Other Comprehensive Loss   (47,940 )     (47,699 )
Total Comprehensive Shareholders' Equity 1,989,240 1,891,885
Long-Term Debt, Net of Current Portion   1,149,000       899,000  
Total Capitalization   3,138,240       2,790,885  
 
Current and Accrued Liabilities:
Notes Payable to Banks and Commercial Paper 70,200 40,000
Current Portion of Long-Term Debt 250,000 150,000
Accounts Payable 88,119 126,709
Amounts Payable to Customers 17,761 15,519
Dividends Payable 30,393 29,399
Interest Payable on Long-Term Debt 16,320 25,512
Customer Advances 315 19,643
Customer Security Deposits 16,847 17,321
Other Accruals and Current Liabilities 160,899 108,636
Fair Value of Derivative Financial Instruments   16,193       9,728  
Total Current and Accrued Liabilities   667,047       542,467  
 
Deferred Credits:
Deferred Income Taxes 1,062,824 955,384
Taxes Refundable to Customers 65,554 65,543
Unamortized Investment Tax Credit 2,150 2,586
Cost of Removal Regulatory Liability 148,668 135,940
Other Regulatory Liabilities 39,657 17,177
Pension and Other Post-Retirement Liabilities 481,331 481,520
Asset Retirement Obligations 78,232 75,731
Other Deferred Credits   153,150       153,851  
Total Deferred Credits   2,031,566       1,887,732  
Commitments and Contingencies   -       -  
Total Capitalization and Liabilities $ 5,836,853     $ 5,221,084  
 
Page 15
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
  Nine Months Ended
June 30,
(Thousands of Dollars)   2012   2011
 
Operating Activities:
Net Income Available for Common Stock $ 171,275 $ 221,045

Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Gain on Sale of Unconsolidated Subsidiaries - (50,879 )
Depreciation, Depletion and Amortization 199,925 170,617
Deferred Income Taxes 104,948 140,326
Excess Tax Costs (Benefits) Associated with Stock-Based Compensation Awards (1,511 ) 1,224
Other 6,618 7,351
Change in:
Hedging Collateral Deposits 16,309 (26,850 )
Receivables and Unbilled Utility Revenue 23,008 (25,919 )
Gas Stored Underground and Materials and Supplies 30,853 22,387
Unrecovered Purchased Gas Costs (2,100 ) -
Prepayments and Other Current Assets 18,190 83,541
Accounts Payable (38,590 ) 5,506
Amounts Payable to Customers 2,242 (12,448 )
Customer Advances (19,328 ) (26,617 )
Customer Security Deposits (474 ) (648 )
Other Accruals and Current Liabilities 17,083 36,446
Other Assets (12,796 ) 8,582
Other Liabilities     25,338       (17,382 )
Net Cash Provided by Operating Activities   $ 540,990     $ 536,282  
 
Investing Activities:
Capital Expenditures $ (776,896 ) $ (583,739 )
Net Proceeds from Sale of Unconsolidated Subsidiaries - 59,365
Net Proceeds from Sale of Oil and Gas Producing Properties - 69,435
Other     (1,267 )     (2,908 )
Net Cash Used in Investing Activities   $ (778,163 )   $ (457,847 )
 
Financing Activities:
Changes in Notes Payable to Banks and Commercial Paper $ 30,200 $ -
Excess Tax Benefits (Costs) Associated with Stock-Based Compensation Awards 1,511 (1,224 )
Reduction of Long-Term Debt (150,000 ) (200,000 )
Net Proceeds From Issuance of Long-Term Debt 496,085 -
Dividends Paid on Common Stock (88,404 ) (85,201 )
Net Proceeds From Issuance (Repurchase) of Common Stock     8,168       (4,471 )
Net Cash Provided By (Used in) Financing Activities   $ 297,560     $ (290,896 )

Net Increase (Decrease) in Cash and Temporary Cash Investments
60,387 (212,461 )

Cash and Temporary Cash Investments at Beginning of Period
    80,428       397,171  

Cash and Temporary Cash Investments at June 30
  $ 140,815     $ 184,710  
 
Page 16
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
 
  Three Months Ended       Nine Months Ended
(Thousands of Dollars, except per share amounts)

June 30,
June 30,

EXPLORATION AND PRODUCTION SEGMENT
2012   2011   Variance 2012   2011   Variance
Total Operating Revenues $ 138,549     $ 130,974     $ 7,575   $ 411,449     $ 388,571     $ 22,878  
       
Operating Expenses:
Operation and Maintenance:
General and Administrative Expense 12,952 11,342 1,610 41,253 35,330 5,923
Lease Operating Expense 20,238 17,421 2,817 59,821 53,736 6,085
All Other Operation and Maintenance Expense 1,790 1,252 538 4,865 5,196 (331 )
Property, Franchise and Other Taxes 4,264 2,114 2,150 18,998 9,634 9,364
Depreciation, Depletion and Amortization   52,440       36,964       15,476     136,262       110,615       25,647  
  91,684       69,093       22,591     261,199       214,511       46,688  
 
Operating Income 46,865 61,881 (15,016 ) 150,250 174,060 (23,810 )
 
Other Income (Expense):
Interest Income 403 (10 ) 413 1,070 (11 ) 1,081
Other Income - 1 (1 ) - 1 (1 )
Other Interest Expense   (8,372 )     (3,817 )     (4,555 )   (20,864 )     (13,825 )     (7,039 )
 
Income Before Income Taxes 38,896 58,055 (19,159 ) 130,456 160,225 (29,769 )
Income Tax Expense   16,981       25,271       (8,290 )   56,034       66,770       (10,736 )
Net Income $ 21,915     $ 32,784     $ (10,869 ) $ 74,422     $ 93,455     $ (19,033 )
 
Net Income Per Share (Diluted) $ 0.26     $ 0.39     $ (0.13 ) $ 0.89     $ 1.12     $ (0.23 )
 
 
Three Months Ended Nine Months Ended
June 30, June 30,

PIPELINE AND STORAGE SEGMENT
2012   2011   Variance 2012   2011   Variance
Revenues from External Customers $ 36,631 $ 29,933 $ 6,698 $ 113,976 $ 103,115 $ 10,861
Intersegment Revenues   22,076       20,324       1,752     64,434       60,838       3,596  
Total Operating Revenues   58,707       50,257       8,450     178,410       163,953       14,457  
 
Operating Expenses:
Purchased Gas 65 11 54 193 (14 ) 207
Operation and Maintenance 18,486 21,643 (3,157 ) 58,529 61,627 (3,098 )
Property, Franchise and Other Taxes 5,319 5,173 146 16,232 15,781 451
Depreciation, Depletion and Amortization   9,563       9,567       (4 )   29,546       27,796       1,750  
  33,433       36,394       (2,961 )   104,500       105,190       (690 )
 
Operating Income 25,274 13,863 11,411 73,910 58,763 15,147
 
Other Income (Expense):
Interest Income 46 73 (27 ) 137 252 (115 )
Other Income 524 621 (97 ) 2,031 1,336 695
Other Interest Expense   (6,381 )     (6,423 )     42     (19,279 )     (19,505 )     226  
 
Income Before Income Taxes 19,463 8,134 11,329 56,799 40,846 15,953
Income Tax Expense   6,836       3,631       3,205     21,371       16,810       4,561  
Net Income $ 12,627     $ 4,503     $ 8,124   $ 35,428     $ 24,036     $ 11,392  
 
Net Income Per Share (Diluted) $ 0.15     $ 0.05     $ 0.10   $ 0.42     $ 0.29     $ 0.13  
 
Page 17
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
 
  Three Months Ended       Nine Months Ended
(Thousands of Dollars, except per share amounts) June 30, June 30,

UTILITY SEGMENT
2012   2011   Variance 2012   2011   Variance
Revenues from External Customers $ 117,240   $ 146,215   $ (28,975 ) $ 622,836   $ 750,802   $ (127,966 )
Intersegment Revenues   2,703       3,475       (772 )   12,643       14,680       (2,037 )
Total Operating Revenues   119,943       149,690       (29,747 )   635,479       765,482       (130,003 )
 
Operating Expenses:
Purchased Gas 41,628 68,667 (27,039 ) 316,877 429,716 (112,839 )
Operation and Maintenance 40,719 42,524 (1,805 ) 144,701 146,549 (1,848 )
Property, Franchise and Other Taxes 10,057 11,031 (974 ) 32,627 34,933 (2,306 )
Depreciation, Depletion and Amortization   11,437       10,363       1,074     32,503       30,986       1,517  
  103,841       132,585       (28,744 )   526,708       642,184       (115,476 )
 
Operating Income 16,102 17,105 (1,003 ) 108,771 123,298 (14,527 )
 
Other Income (Expense):
Interest Income 99 38 61 820 485 335
Other Income (5 ) 300 (305 ) 671 897 (226 )
Other Interest Expense   (8,110 )     (8,659 )     549     (24,509 )     (26,247 )     1,738  
 
Income Before Income Taxes 8,086 8,784 (698 ) 85,753 98,433 (12,680 )
Income Tax Expense   2,990       2,456       534     33,028       36,034       (3,006 )
Net Income $ 5,096     $ 6,328     $ (1,232 ) $ 52,725     $ 62,399     $ (9,674 )
 
Net Income Per Share (Diluted) $ 0.06     $ 0.08     $ (0.02 ) $ 0.63     $ 0.74     $ (0.11 )
 
 
Three Months Ended Nine Months Ended
June 30, June 30,

ENERGY MARKETING SEGMENT
2012   2011   Variance 2012   2011   Variance
Revenues from External Customers $ 35,377 $ 71,746 $ (36,369 ) $ 161,822 $ 246,719 $ (84,897 )
Intersegment Revenues   579       156       423     1,135       156       979  
Total Operating Revenues   35,956       71,902       (35,946 )   162,957       246,875       (83,918 )
 
Operating Expenses:
Purchased Gas 33,114 67,711 (34,597 ) 150,475 227,716 (77,241 )
Operation and Maintenance 1,347 1,415 (68 ) 4,920 4,553 367
Property, Franchise and Other Taxes 36 8 28 60 34 26
Depreciation, Depletion and Amortization   22       9       13     69       28       41  
  34,519       69,143       (34,624 )   155,524       232,331       (76,807 )
 
Operating Income 1,437 2,759 (1,322 ) 7,433 14,544 (7,111 )
 
Other Income (Expense):
Interest Income 59 36 23 127 72 55
Other Income 25 27 (2 ) 88 61 27
Other Interest Expense   (9 )     (4 )     (5 )   (17 )     (15 )     (2 )
 
Income Before Income Taxes 1,512 2,818 (1,306 ) 7,631 14,662 (7,031 )
Income Tax Expense   589       927       (338 )   2,969       5,540       (2,571 )
Net Income $ 923     $ 1,891     $ (968 ) $ 4,662     $ 9,122     $ (4,460 )
 
Net Income Per Share (Diluted) $ 0.01     $ 0.02     $ (0.01 ) $ 0.06     $ 0.11     $ (0.05 )
 
Page 18
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
 
  Three Months Ended       Nine Months Ended
(Thousands of Dollars, except per share amounts) June 30, June 30,

ALL OTHER
2012   2011   Variance 2012   2011   Variance
Revenues from External Customers $ 824   $ 1,873   $ (1,049 ) $ 2,784   $ 2,895   $ (111 )
Intersegment Revenues   4,307       2,810       1,497     10,828       7,026       3,802  
Total Operating Revenues   5,131       4,683       448     13,612       9,921       3,691  
 
Operating Expenses:
Purchased Gas - - - - 48 (48 )
Operation and Maintenance 876 944 (68 ) 2,794 3,130 (336 )
Property, Franchise and Other Taxes 205 90 115 569 490 79
Depreciation, Depletion and Amortization   567       203       364     959       630       329  
  1,648       1,237       411     4,322       4,298       24  
 
Operating Income 3,483 3,446 37 9,290 5,623 3,667
 
Other Income (Expense):
Gain on Sale of Unconsolidated Subsidiaries - - - - 50,879 (50,879 )
Interest Income 38 48 (10 ) 136 197 (61 )
Other Income (70 ) 177 (247 ) (220 ) (409 ) 189
Other Interest Expense   (427 )     (541 )     114     (1,290 )     (1,637 )     347  
 
Income Before Income Taxes 3,024 3,130 (106 ) 7,916 54,653 (46,737 )
Income Tax Expense   209       417       (208 )   2,359       20,333       (17,974 )
Net Income $ 2,815     $ 2,713     $ 102   $ 5,557     $ 34,320     $ (28,763 )
 
Net Income Per Share (Diluted) $ 0.04     $ 0.03     $ 0.01   $ 0.07     $ 0.41     $ (0.34 )
 
Page 19
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
 
  Three Months Ended       Nine Months Ended
(Thousands of Dollars, except per share amounts) June 30, June 30,

CORPORATE
2012  

2011
  Variance 2012   2011   Variance
Revenues from External Customers $ 240   $ 238   $ 2 $ 726   $ 706   $ 20
Intersegment Revenues   780       1,028       (248 )   2,837       2,955       (118 )
Total Operating Revenues   1,020       1,266       (246 )   3,563       3,661       (98 )
 
Operating Expenses:
Operation and Maintenance 3,139 3,565 (426 ) 10,195 10,574 (379 )
Property, Franchise and Other Taxes 551 1,763 (1,212 ) 1,652 2,842 (1,190 )
Depreciation, Depletion and Amortization   198       187       11     586       562       24  
  3,888       5,515       (1,627 )   12,433       13,978       (1,545 )
 
Operating Loss (2,868 ) (4,249 ) 1,381 (8,870 ) (10,317 ) 1,447
 
Other Income (Expense):
Interest Income 22,799 18,897 3,902 65,568 58,717 6,851
Other Income 612 687 (75 ) 1,506 2,244 (738 )
Interest Expense on Long-Term Debt (21,529 ) (17,876 ) (3,653 ) (60,594 ) (55,994 ) (4,600 )
Other Interest Expense   (583 )     (472 )     (111 )   (3,064 )     (1,220 )     (1,844 )
 
Loss Before Income Taxes (1,569 ) (3,013 ) 1,444 (5,454 ) (6,570 ) 1,116
Income Tax Benefit   (1,377 )     (1,685 )     308     (3,935 )     (4,283 )     348  
Net Loss $ (192 )   $ (1,328 )   $ 1,136   $ (1,519 )   $ (2,287 )   $ 768  
 
Net Loss Per Share (Diluted) $ -     $ (0.01 )   $ 0.01   $ (0.02 )   $ (0.03 )   $ 0.01  
 
 
Three Months Ended Nine Months Ended
June 30, June 30,

INTERSEGMENT ELIMINATIONS
2012   2011   Variance 2012   2011   Variance
Intersegment Revenues $ (30,445 )  

$

(27,793

)
  $ (2,652 ) $ (91,877 )   $ (85,655 )   $ (6,222 )
 
Operating Expenses:
Purchased Gas (24,647 ) (23,664 ) (983 ) (76,656 ) (75,108 ) (1,548 )
Operation and Maintenance   (5,798 )     (4,129 )     (1,669 )   (15,221 )     (10,547 )     (4,674 )
  (30,445 )     (27,793 )     (2,652 )   (91,877 )     (85,655 )     (6,222 )
 
Operating Income - - - - - -
 
Other Income (Expense):
Interest Income (23,054 ) (18,757 ) (4,297 ) (66,172 ) (58,435 ) (7,737 )
Other Interest Expense   23,054       18,757       4,297     66,172       58,435       7,737  
 
Net Income $ -     $ -     $ -   $ -     $ -     $ -  
 
Net Income Per Share (Diluted) $ -     $ -     $ -   $ -     $ -     $ -  
 
Page 20
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 
SEGMENT INFORMATION (Continued)
(Thousands of Dollars)
 
  Three Months Ended     Nine Months Ended
June 30, June 30,
(Unaudited) (Unaudited)
       
Increase Increase
2012 2011 (Decrease) 2012 2011 (Decrease)
 

Capital Expenditures:
Exploration and Production

$

189,429

 

(1)(2)

$

158,321

 

(3)(4)
$ 31,108

$

598,560

 

(1)(2)

$

473,515

 

(3)(4)

$

125,045

 
Pipeline and Storage 34,032

(1)(2)
35,471

(3)
(1,439 ) 97,253

(1)(2)
74,969

(3)
22,284
Utility 14,518 13,994 524 39,858 39,429 429
Energy Marketing   154     68     86     420     329     91  
Total Reportable Segments 238,133 207,854 30,279 736,091 588,242 147,849
All Other 23,151

(1)(2)
4,018 19,133 66,788

(1)(2)
6,287 60,501
Corporate   121     193     (72 )   291     208     83  
Total Capital Expenditures $ 261,405   $ 212,065   $ 49,340   $ 803,170   $ 594,737   $ 208,433  

(1)
 

Capital expenditures for the quarter and nine months ended June 30, 2012 include $74.2 million of accrued capital expenditures in the Exploration and Production segment, the majority of which was in the Appalachian region, $8.0 million of accrued capital expenditures in the Pipeline and Storage segment, and $16.2 million of accrued capital expenditures in the All Other category. These amounts have been excluded from the Consolidated Statement of Cash Flows at June 30, 2012 since they represent non-cash investing activities at that date.

 

(2)

Capital expenditures for the nine months ended June 30, 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 nine months ended June 30, 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 June 30, 2012.

 

(3)

Capital expenditures for the quarter and nine months ended June 30, 2011 include $60.7 million of accrued capital expenditures in the Exploration and Production segment, the majority of which was in the Appalachian region, and $5.9 million of accrued capital expenditures in the Pipeline and Storage segment. These amounts were excluded from the Consolidated Statement of Cash Flows at June 30, 2011 since they represented non-cash investing activities at that date.

 

(4)

Capital expenditures for the Exploration and Production segment for the nine months ended June 30, 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 nine months ended June 30, 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 June 30, 2011.

DEGREE DAYS
 
 
  Percent Colder
(Warmer) Than:

Three Months Ended June 30
Normal   2012   2011 Normal (1)   Last Year (1)
 
Buffalo, NY

927

 

751

 

848

 
(19.0 ) (11.4 )
Erie, PA 885 751 814 (15.1 ) (7.7 )
 

Nine Months Ended June 30
 
Buffalo, NY 6,551 5,171 6,674 (21.1 ) (22.5 )
Erie, PA 6,142 4,875 6,286 (20.6 ) (22.4 )
 

(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     Nine Months Ended
June 30, June 30,
    Increase     Increase
2012 2011 (Decrease) 2012 2011 (Decrease)
 

Gas Production/Prices:
Production (MMcf)
Appalachia

16,778

 
12,090 4,688

43,125

 

31,020

 
12,105
West Coast 1,025 826 199 2,670 2,616 54
Gulf Coast   -     22     (22 )   -     4,092     (4,092 )
Total Production   17,803     12,938     4,865     45,795     37,728     8,067  
 
Average Prices (Per Mcf)
Appalachia $ 2.14 $ 4.55 $ (2.41 ) $ 2.70 $ 4.36 $ (1.66 )
West Coast 2.97 4.87 (1.90 ) 3.74 4.40 (0.66 )
Gulf Coast N/M N/M N/M N/M 5.02 N/M
Weighted Average 2.19 4.67 (2.48 ) 2.76 4.44 (1.68 )
Weighted Average after Hedging 3.93 5.48 (1.55 ) 4.40 5.36 (0.96 )
 

Oil Production/Prices:
Production (Thousands of Barrels)
Appalachia 11 13 (2 ) 29 35 (6 )
West Coast 710 661 49 2,136 1,958 178
Gulf Coast   -     (9 )

(1)
  9     -     187     (187 )
Total Production   721     665     56     2,165     2,180     (15 )
 
Average Prices (Per Barrel)
Appalachia $ 95.43 $ 92.89 $ 2.54 $ 94.24 $ 87.36 $ 6.88
West Coast 104.24 108.30 (4.06 ) 108.56 94.74 13.82
Gulf Coast N/M N/M N/M N/M 88.57 N/M
Weighted Average 104.11 107.97 (3.86 ) 108.37 94.10 14.27
Weighted Average after Hedging 89.70 84.37 5.33 91.50 80.78 10.72
 
Total Production (Mmcfe)   22,129     16,928     5,201     58,785     50,808     7,977  
 

Selected Operating Performance Statistics:
General & Administrative Expense per Mcfe (2) $ 0.59 $ 0.67 $ (0.08 ) $ 0.70 $ 0.70 $ -
Lease Operating Expense per Mcfe (2) $ 0.91 $ 1.03 $ (0.12 ) $ 1.02 $ 1.06 $ (0.04 )
Depreciation, Depletion & Amortization per Mcfe (2) $ 2.37 $ 2.18 $ 0.19 $ 2.32 $ 2.18 $ 0.14

(1)
 

The sale of Gulf Coast properties in April 2011 and various adjustments to prior months' production resulted in negative oil production.
 

(2)

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 Three Months of Fiscal 2012  
 

SWAPS

Volume
 

Average Hedge Price
Oil 0.4 MMBBL $77.03 / BBL
Gas 12.4 BCF $4.99 / MCF
 
Hedging Summary for Fiscal 2013
 

SWAPS

Volume

Average Hedge Price
Oil 1.5 MMBBL $92.52 / BBL
Gas 46.7 BCF $4.82 / MCF
 
Hedging Summary for Fiscal 2014
 

SWAPS

Volume

Average Hedge Price
Oil 0.6 MMBBL $95.68 / BBL
Gas 27.4 BCF $4.26 / MCF
 
Hedging Summary for Fiscal 2015
 

SWAPS

Volume

Average Hedge Price
Gas 17.8 BCF $4.07 / MCF
 
Hedging Summary for Fiscal 2016
 

SWAPS

Volume

Average Hedge Price
Gas 17.9 BCF $4.07 / MCF
 
Hedging Summary for Fiscal 2017
 

SWAPS

Volume

Average Hedge Price
Gas 17.9 BCF $4.07 / MCF
 
 

Gross Wells in Process of Drilling

Nine Months Ended June 30, 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 50.00 57.00 107.00
Wells Completed
Exploratory 7.00 0.00 7.00
Developmental 55.00 56.00 111.00
Wells Plugged & Abandoned
Exploratory 0.00 0.00 0.00
Developmental 2.00 0.00 2.00
Wells in Process - End of Period
Exploratory 1.00 0.00 1.00
Developmental 94.00 1.00 95.00
 
(1) Beginning of year number has been adjusted to remove one developmental well.
 

Net Wells in Process of Drilling

Nine Months Ended June 30, 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 40.00 56.99 96.99
Wells Completed
Exploratory 7.00 0.00 7.00
Developmental 38.50 55.99 94.49
Wells Plugged & Abandoned
Exploratory 0.00 0.00 0.00
Developmental 2.00 0.00 2.00
Wells in Process - End of Period
Exploratory 1.00 0.00 1.00
Developmental 67.50 1.00 68.50
 
(2) Beginning of year number has been adjusted to remove one developmental well.
 
Page 23
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 

EXPLORATION AND PRODUCTION INFORMATION
 
Updated Fiscal 2013 Financial & Operating Guidance
 
  Guidance
 
Total Production (Bcfe) 92 - 105
 
Production by Division (Bcfe)
East 72 - 83
West 20 - 22
 
Cost and Expenses $ per Mcfe
Lease Operating Expenses $0.90 - $1.10
Depreciation, Depletion and Amortization $2.30 - $2.40
Other Taxes $0.15 - $0.25
 
Other Operating Expenses (in millions) $7 - $9
General and Administrative (in millions) $59 - $63
 
Capital Investment by Division (in millions)
 
East Division $340 - $425
West Division $60 - $75
Exploration & Production Segment Total $400 - $500
 
Updated Pricing Guidance for Fiscal 2013
 
Guidance Based on Crude Oil Average 2012 NYMEX Price ($/Bbl) (without hedges) of $85.00
 
Forecast price differentials
West +$5.00 to +$10.00
 
Guidance Based on Natural Gas Average 2012 NYMEX Price ($/MMBtu) (without hedges) of $3.25
 
Forecast price differentials
East -$0.10 to -$0.20
West +$0.10 to +$0.20
 
 
Earnings per share sensitivity to changes from prices used in guidance* ^
 
$0.50 change per MMBtu gas   $5 change per Bbl oil
Increase   Decrease Increase   Decrease
   

+$0.13
-$0.13

+$0.05
-$0.05
*   Please refer to forward looking statement footnote beginning at page 7 of this document.
 
^ This sensitivity table is current as of August 2, 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 2013 earnings forecast, the Company is utilizing flat NYMEX equivalent commodity pricing, exclusive of basis differential, of $3.25 per MMBtu for natural gas and $85 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     Nine Months Ended
June 30, June 30,
    Increase     Increase
2012 2011 (Decrease) 2012 2011 (Decrease)
Firm Transportation - Affiliated

17,507

 

17,538

 
(31 )

81,174

 

95,884

 
(14,710 )
Firm Transportation - Non-Affiliated 62,414 35,788 26,626 200,405 170,661 29,744
Interruptible Transportation 247   489   (242 ) 1,511   1,709   (198 )
80,168   53,815   26,353   283,090   268,254   14,836  
 
Utility Throughput - (MMcf)
Three Months Ended Nine Months Ended
June 30, June 30,
Increase Increase
2012 2011 (Decrease) 2012 2011 (Decrease)
Retail Sales:
Residential Sales 7,543 8,867 (1,324 ) 43,476 54,075 (10,599 )
Commercial Sales 954 1,203 (249 ) 6,109 8,044 (1,935 )
Industrial Sales 168   79   89   456   618   (162 )
8,665 10,149 (1,484 ) 50,041 62,737 (12,696 )
Off-System Sales - 867 (867 ) 9,544 6,188 3,356
Transportation 12,016   12,335   (319 ) 51,663   57,916   (6,253 )
20,681   23,351   (2,670 ) 111,248   126,841   (15,593 )
 
Energy Marketing Volumes
Three Months Ended Nine Months Ended
June 30, June 30,
Increase Increase
2012 2011 (Decrease) 2012 2011 (Decrease)
Natural Gas (MMcf) 10,818   13,508   (2,690 ) 38,857   45,863   (7,006 )
 
Page 25
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 

Quarter Ended June 30 (unaudited)
  2012   2011
 
Operating Revenues $

328,861,000

 
$

380,979,000

 
 
Net Income Available for Common Stock $ 43,184,000   $ 46,891,000  
 
Earnings Per Common Share:
Basic $ 0.52   $ 0.57  
Diluted $ 0.52   $ 0.56  
 
Weighted Average Common Shares:
Used in Basic Calculation   83,227,602     82,687,467  
Used in Diluted Calculation   83,674,823     83,782,493  
 

Nine Months Ended June 30 (unaudited)
 
Operating Revenues $ 1,313,593,000   $ 1,492,808,000  
 
Net Income Available for Common Stock $ 171,275,000   $ 221,045,000  
 
Earnings Per Common Share:
Basic $ 2.06   $ 2.68  
Diluted $ 2.05   $ 2.64  
 
Weighted Average Common Shares:
Used in Basic Calculation   83,068,083     82,436,603  
Used in Diluted Calculation   83,690,436     83,649,498  
 

Twelve Months Ended June 30 (unaudited)
 
Operating Revenues $ 1,599,626,000   $ 1,779,205,000  
 
Income from Continuing Operations $ 208,631,000 $ 253,438,000
Income from Discontinued Operations, Net of Tax   -     6,009,000  
Net Income Available for Common Stock $ 208,631,000   $ 259,447,000  
 
Earnings Per Common Share:
Basic:
Income from Continuing Operations $ 2.51 $ 3.08
Income from Discontinued Operations   -     0.07  
Net Income Available for Common Stock $ 2.51   $ 3.15  
 
Diluted:
Income from Continuing Operations $ 2.49 $ 3.04
Income from Discontinued Operations   -     0.07  
Net Income Available for Common Stock $ 2.49   $ 3.11  
 
Weighted Average Common Shares:
Used in Basic Calculation   82,986,564     82,321,791  
Used in Diluted Calculation   83,717,869     83,508,416  

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