National Fuel Reports 2013 Earnings

National Fuel Gas Company (“National Fuel” or the “Company”) (NYSE:NFG) today announced consolidated earnings for the fourth quarter and fiscal year ended September 30, 2013, of $47.8 million, or $0.57 per share, and $260.0 million, or $3.08 per share, respectively. Consolidated earnings before items impacting comparability (“Operating Results”) for the fourth quarter and fiscal year ended September 30, 2013, were $52.5 million, or $0.63 per share, and $264.9 million, or $3.14 per share, respectively.

HIGHLIGHTS
  • Operating Results for the fourth quarter of fiscal 2013 of $52.5 million, or $0.63 per share, increased $16.5 million, or $0.20 per share, from the prior year’s fourth quarter due to higher Operating Results in the Upstream and Midstream businesses.
  • Operating Results for the fiscal year of $264.9 million, or $3.14 per share, increased $53.6 million, or $0.61 per share, compared to the prior fiscal year due to higher Operating Results across all businesses.
  • Adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) for fiscal 2013 were $852.1 million compared to $704.1 million for the prior year, an increase of 21%.
  • In the Pipeline and Storage segment, Operating Results for the fiscal year of $63.2 million, or $0.75 per share, increased 32% compared to the prior year. The increase is largely driven by higher revenues from contracts with non-affiliated shippers to transport gas through the Northern Access and Line N 2012 Expansion pipeline projects that were placed in service in the first quarter.
  • Seneca Resources Corporation’s (“Seneca”) fourth quarter production of natural gas and crude oil was 33.2 billion cubic feet equivalent (“Bcfe”), an increase of 8.7 Bcfe or approximately 35%. Total production for fiscal 2013 increased 45% to 120.7 Bcfe, an increase of 37.3 Bcfe.
  • Seneca’s total reserves at September 30, 2013, were 1,549 Bcfe, an increase of 303 Bcfe or 24%. Seneca replaced 351% of fiscal 2013 production.
  • A conference call is scheduled for Friday, November 8, 2013, at 11 a.m. Eastern Time.

MANAGEMENT COMMENTS

Ronald J. Tanski, President and Chief Executive Officer of National Fuel Gas Company, stated: “The fourth quarter topped off another great fiscal year for National Fuel. While operations in all of our business units improved, Seneca’s exploration and production results were particularly impressive. Seneca had a 57 percent increase in natural gas production over the prior year, and increased its total proved reserves by 24 percent. At the same time, we saw terrific success from our delineation efforts in our legacy Marcellus acreage within the Western Development Area in Pennsylvania. Our team has done a remarkable job evaluating and understanding this acreage, and as a result, we believe we have the opportunity to drill as many as 2,000 future well locations across this acreage.

“Additionally, on the heels of our recent expansion projects, Operating Results in our midstream pipeline businesses reached over $76 million in fiscal 2013, an increase of 40 percent over the prior year. With the ongoing development of the Marcellus Shale, the need for additional infrastructure in the Northeast is significant, and we expect to play a major role in supporting the growth in production volume for both Seneca and other producers.

“The long-term opportunity set for National Fuel continues to improve, and our team is working to turn those opportunities into sustained growth for the foreseeable future.”

CHANGE IN REPORTING STRUCTURE

National Fuel has added “Gathering” as a fifth reporting segment as of September 30, 2013. The new Gathering segment’s operations are carried out by National Fuel Gas Midstream Corporation’s (“Midstream”) subsidiary limited liability companies. The Gathering segment constructs, owns and operates natural gas pipeline gathering and processing facilities in the Appalachian region and currently provides the critical gathering infrastructure for transporting Seneca’s Marcellus Shale production to the interstate pipeline system.

The financial results for National Fuel Gas Midstream Corporation were previously included in the All Other category. Midstream is now reported as a separate segment as a result of strong growth in Marcellus Shale production within the Appalachian region, projected growth in gathering and processing facilities and the increased significance of Midstream’s operations to the Company.

For financial presentation and discussion purposes, in addition to its consolidated financial information, National Fuel will organize its reporting in the following categories:
  • Upstream Business

Exploration and Production segment (Seneca Resources Corporation)
  • Midstream Businesses

Pipeline and Storage segment (National Fuel Gas Supply Corporation and Empire Pipeline, Inc.)Gathering segment (National Fuel Gas Midstream Corporation)
  • Downstream Businesses

Utility segment (National Fuel Gas Distribution Corporation)Energy Marketing segment (National Fuel Resources, Inc.)

SUMMARY OF RESULTS

National Fuel had consolidated earnings for the quarter ended September 30, 2013, of $47.8 million, or $0.57 per share, compared to the prior year’s fourth quarter of $48.8 million, or $0.58 per share, a decrease of $1.0 million or $0.01 per share.

Consolidated earnings for the fiscal year ended September 30, 2013, of $260.0 million, or $3.08 per share, increased $39.9 million, or $0.45 per share, from the same period in the prior year where earnings were $220.1 million or $2.63 per share. (Note: All references to earnings per share are to diluted earnings per share, all amounts are stated in U.S. dollars, and all amounts used in the discussion of earnings are after tax unless otherwise noted.)

OPERATING RESULTS
 
  Three Months   Fiscal Year
Ended September 30, Ended September 30,
2013   2012 2013   2012
(in thousands except per share amounts)
Reported GAAP earnings $

47,842

 
$ 48,802 $

260,001

 
$ 220,077
Items impacting comparability1:
Regulatory adjustment - Utility segment 4,680 4,875
Pennsylvania impact fee 4,034

Eliminate other postretirement regulatory liability
(12,786 ) (12,786 )
               
Operating Results $ 52,522   $ 36,016   $ 264,876   $ 211,325  
 
Reported GAAP earnings per share $ 0.57 $ 0.58 $ 3.08 $ 2.63
Items impacting comparability1:
Regulatory adjustment - Utility segment 0.06 0.06
Pennsylvania impact fee 0.05

Eliminate other postretirement regulatory liability
(0.15 ) (0.15 )
               
Operating Results $ 0.63   $ 0.43   $ 3.14   $ 2.53  
 

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 with equivalent periods in fiscal 2012. Excluding these items, Operating Results for the current quarter of $52.5 million, or $0.63 per share, increased $16.5 million, or $0.20 per share, from the prior year’s fourth quarter where Operating Results were $36.0 million or $0.43 per share. Excluding these items, Operating Results for the fiscal year ended September 30, 2013, of $264.9 million, or $3.14 per share, increased $53.6 million, or $0.61 per share, from the prior year, where Operating Results were $211.3 million or $2.53 per share. Items impacting comparability will be discussed in more detail with 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 11 through 14 of this report. It may be helpful to refer to those tables while reviewing this discussion.

Upstream Business

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 Pennsylvania and California.

The Exploration and Production segment’s earnings in the fourth quarter of fiscal 2013 of $29.3 million, or $0.35 per share, increased $7.2 million, or $0.09 per share, when compared with the prior year’s fourth quarter.

Overall production of natural gas and crude oil for the current quarter of 33.2 Bcfe increased approximately 8.7 Bcfe, or 35.3 percent, compared to the prior year’s fourth quarter. Production from Seneca’s Appalachia properties increased approximately 8.6 Bcfe, or 43.8 percent, largely because of Seneca’s strong well results in Lycoming County. California production of 5.1 Bcfe increased 1.9 percent compared to the prior year’s fourth quarter.

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 September 30, 2013, was $3.99 per thousand cubic feet (“Mcf”), a decrease of $0.09 per Mcf compared to the prior year’s fourth quarter. Higher crude oil prices realized after hedging increased earnings. The weighted average oil price received by Seneca (after hedging) for the quarter ended September 30, 2013, was $99.20 per Bbl, an increase of $10.22 per Bbl. Seneca’s earnings for the quarter also reflect a $2.4 million (after tax) mark-to-market charge related to hedging ineffectiveness associated with certain crude oil hedges.

On a per unit basis, depletion decreased $0.13 per thousand cubic feet equivalent (“Mcfe”) due to higher natural gas reserve balances at September 30, 2013, compared to the prior year. On a per unit basis, lease operating and transportation expenses (“LOE”) at $0.96 per Mcfe were consistent with the prior year’s fourth quarter. General and administrative expenses (“G&A”) increased over the prior year’s fourth quarter due to higher labor expenses; however, on a per unit basis G&A decreased $0.06 per Mcfe. Earnings were also impacted by higher interest expense due to a higher outstanding debt balance.

The Exploration and Production segment’s earnings of $115.4 million, or $1.37 per share, for the fiscal year ended September 30, 2013, increased $18.9 million, or $0.22 per share, when compared with the year ended September 30, 2012.

In February 2012, the Commonwealth of Pennsylvania passed legislation that included a “natural gas impact fee.” The fee was retroactive and applied to wells drilled before and after the legislation was passed. The impact fee recorded in the second quarter of fiscal 2012 that related to prior fiscal years was $6.2 million (pre-tax). Excluding this amount from the prior year’s results, Operating Results for the fiscal year ended September 30, 2013, of $115.4 million, or $1.37 per share, compared to Operating Results of $100.5 million, or $1.20 per share, for the prior year.

Overall production for the fiscal year ended September 30, 2013, increased approximately 44.8 percent to 120.7 Bcfe. Production from Seneca’s Appalachia properties increased approximately 37.9 Bcfe or 60.3 percent. California production of 19.9 Bcfe decreased by approximately 2.9 percent compared with the prior year as a result of a continued constraint in a third-party pipeline used to transport associated natural gas production within the Sespe Field.

Changes in commodity prices realized after hedging also impacted Operating Results. The weighted average natural gas price received by Seneca (after hedging) for the fiscal year ended September 30, 2013, was $4.10 per Mcf, a decrease of $0.32 per Mcf compared to the prior year. Higher crude oil prices realized after hedging increased Operating Results. The weighted average oil price received by Seneca (after hedging) for the fiscal year ended September 30, 2013, was $98.21 per Bbl, an increase of $7.33 per Bbl. Seneca’s Operating Results for the fiscal year were reduced by the $2.4 million mark-to-market adjustment noted above.

On a per unit basis, depletion, LOE and G&A decreased $0.23 per Mcfe, $0.01 per Mcfe and $0.13 per Mcfe, respectively. Earnings were also impacted by higher interest expense due to a higher outstanding debt balance and higher state income taxes due to increased production in Pennsylvania.

Midstream Businesses

Pipeline and Storage Segment

The Pipeline and Storage segment’s operations are carried out by National Fuel Gas Supply Corporation (“Supply Corporation”) and Empire Pipeline, Inc. (“Empire”). The Pipeline and Storage segment provides natural gas transportation and storage services to affiliated and non-affiliated companies through an integrated system of pipelines and underground natural gas storage fields in western New York and western Pennsylvania.

The Pipeline and Storage segment’s earnings of $15.4 million, or $0.18 per share, for the quarter ended September 30, 2013, decreased $9.7 million, or $0.12 per share, when compared with the same period in the prior fiscal year. In the prior year’s fourth quarter, FERC approved Supply Corporation’s rate case settlement. As part of that settlement, Supply Corporation eliminated a regulatory liability associated with its postretirement benefit plan. This adjustment increased earnings for the quarter ended September 30, 2012, by approximately $12.8 million.

Excluding this item, Operating Results in the Pipeline and Storage segment, increased $3.1 million or $0.03 per share. The increase in earnings is mainly due to higher non-affiliated transportation revenues from the Northern Access and Line N 2012 Expansion projects, which were completed and placed in service in the current year’s first quarter. Earnings were reduced by higher operating expenses and a lower allowance for funds used during construction due to the completion of the expansion projects mentioned above.

The Pipeline and Storage segment’s earnings of $63.2 million, or $0.75 per share, for the fiscal year ended September 30, 2013, increased $2.7 million, or $0.03 per share, when compared with the same period in the prior fiscal year. Excluding the $12.8 million adjustment of the regulatory liability associated with Supply Corporation’s postretirement benefit plan discussed above, Operating Results increased $15.5 million or $0.18 per share. The increase was mostly due to higher non-affiliated transportation revenues from the Northern Access and Line N 2012 Expansion projects and lower depreciation expense as required by Supply Corporation’s 2012 rate case settlement. Earnings were reduced by higher operating expenses and lower AFUDC as noted above for the quarter.

Gathering Segment

The Gathering segment’s operations are carried out by National Fuel Gas Midstream Corporation’s (“Midstream”) subsidiary limited liability companies. The Gathering segment constructs, owns and operates natural gas pipeline gathering and processing facilities in the Appalachian region and currently provides the critical gathering infrastructure for transporting Seneca’s Marcellus Shale production to the interstate pipeline system. The financial results for Midstream Corporation were previously included in the All Other category.

The Gathering segment’s earnings of $3.9 million, or $0.05 per share, for the quarter ended September 30, 2013, increased $2.0 million, or $0.03 per share, when compared with the same period in the prior fiscal year. Earnings for the fiscal year ended September 30, 2013, of $13.3 million, or $0.16 per share, increased $6.5 million, or $0.08 per share, compared to the prior fiscal year. The increase in earnings in both the current quarter and fiscal year is mainly due to higher revenues from Midstream’s Trout Run gathering system in Lycoming County, Pa., and natural gas processing operation.

Downstream Businesses

Utility Segment

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

The Utility segment’s earnings of $0.7 million, or $0.01 per share, for the quarter ended September 30, 2013, decreased from earnings of $5.9 million, or $0.07 per share, when compared to the quarter ended September 30, 2012. During the quarter, Distribution recorded a reserve in connection with various issues raised in the current rate proceeding in New York. This reserve reduced earnings by approximately $4.7 million in the current year’s fourth quarter. Excluding this item, Operating Results in the Utility segment decreased $0.5 million, or less than $0.01 per share, mainly due to higher operating expenses.

The Utility segment’s earnings of $65.7 million, or $0.78 per share, for the fiscal year ended September 30, 2013, increased from earnings of $58.6 million, or $0.70 per share, for the fiscal year ended September 30, 2012. Excluding a total $4.9 million reserve recorded this fiscal year in connection with various issues raised in the current rate proceeding noted above, Operating Results increased $12.0 million or $0.14 per share. Colder weather in Pennsylvania was the main reason for the increase in Operating Results in the current fiscal year. Temperatures in Pennsylvania were 17.8 percent colder in the fiscal year ended September 30, 2013, than in the prior year. Lower interest expense (mainly due to a lower outstanding debt balance) and a lower effective income tax rate also contributed to higher Operating Results in the Utility segment.

Energy Marketing Segment

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 loss for the quarter ended September 30, 2013, of $1.2 million compared to a loss of $0.5 million for the prior year’s fourth quarter. The loss was greater in the current year’s fourth quarter primarily due to lower average margins. Earnings for the fiscal year ended September 30, 2013, of $4.6 million increased $0.4 million compared to the prior fiscal year. The increase in earnings for the current fiscal year is mainly due to higher average margins largely driven by a greater benefit derived from the Energy Marketing segment’s contracts for storage capacity.

Corporate and All Other

The Corporate and All Other category primarily includes corporate operations. The category also includes the remaining operations of Seneca’s Northeast division that markets high quality hardwoods from Appalachian land holdings.

The Corporate and All Other category loss of $0.3 million, for the quarter ended September 30, 2013, compares to a loss of $5.6 million for the prior year’s fourth quarter. For the fiscal year ended September 30, 2013, the Corporate and All Other category loss of $2.2 million compares to a loss of $6.6 million for the prior fiscal year. The decrease in the loss for both the fourth quarter and fiscal year is mainly due to lower income taxes due to an intercompany deferred tax reallocation.

EARNINGS GUIDANCE

The Company is increasing its GAAP earnings guidance for fiscal 2014 to a range of $3.10 to $3.40 per share (the previous earnings guidance had been a range of $3.05 to $3.30). This guidance reflects Seneca’s updated production forecast for fiscal 2014, which is now a range of 145 to 165 Bcfe (the previous range had been 134 to 146 Bcfe), and an assumed flat NYMEX price of $4.00 per MMBtu for natural gas and $90 per Bbl for crude oil.

EARNINGS TELECONFERENCE

The Company will host a conference call on Friday, November 8, 2013, 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) 1-866-700-6293, using passcode “36603841.” 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 “23666033.” Both the webcast and telephonic replay will be available until the close of business on Friday, November 15, 2013.

National Fuel is an integrated energy company with $6.2 billion in assets comprised of the following five operating segments: Exploration and Production, Pipeline and Storage, Gathering, Utility, and Energy Marketing. Additional information about National Fuel is available at www.nationalfuelgas.com.

Certain statements contained herein, including statements identified by the use of the words “anticipates,” “estimates,” “expects,” “forecasts,” “intends,” “plans,” “predicts,” “projects,” “believes,” “seeks,” “will,” “may” and similar expressions, and statements which are other than statements of historical facts, 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.
NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS
QUARTER ENDED SEPTEMBER 30, 2013
 
  Upstream   Midstream Businesses   Downstream Businesses    
   
Exploration & Pipeline & Energy Corporate /
(Thousands of Dollars)   Production     Storage     Gathering     Utility     Marketing     All Other     Consolidated*
 
Fourth quarter 2012 GAAP earnings $ 22,076 $

25,099
$ 1,875 $ 5,866 $ (493 ) $ (5,621 ) $ 48,802
Items impacting comparability:
Elimination of other post-retirement regulatory liability         (12,786 )                             (12,786 )
Fourth quarter 2012 operating results 22,076 12,313 1,875 5,866 (493 ) (5,621 ) 36,016
 
Drivers of operating results
Higher (lower) crude oil prices 4,760 4,760
Higher (lower) natural gas prices (1,637 ) (1,637 )
Higher (lower) natural gas production 22,788 22,788
Higher (lower) crude oil production 644 644
Derivative mark to market adjustments (2,417 ) (2,417 )
Lower (higher) lease operating and transportation expenses (5,478 ) (5,478 )
Lower (higher) depreciation / depletion (8,962 ) (8,962 )
 
Higher (lower) transportation and storage revenues 4,670 4,670
Higher (lower) gathering and processing revenues 2,744 2,744
Lower (higher) operating expenses (2,189 ) (1,521 ) (433 ) (1,704 ) (522 ) (6,369 )
Lower (higher) property, franchise and other taxes 1,592 1,592
 
Higher (lower) usage 306 306
 
Higher (lower) margins (382 ) (382 )
 
Income (loss) from unconsolidated subsidiaries 702 702
 
Higher (lower) AFUDC** (842 ) (842 )
 
(Higher) lower interest expense (1,422 ) 1,228 (194 )
 
Lower (higher) income tax expense / effective tax rate 1,398 1,332 (814 ) 3,527 5,443
 
All other / rounding   (295 )     (510 )     (307 )     460       (277 )     67       (862 )
Fourth quarter 2013 operating results 29,266 15,442 3,879 5,342 (1,152 ) (255 ) 52,522
Items impacting comparability:
Regulatory adjustment - Utility segment                     (4,680 )                 (4,680 )
Fourth quarter 2013 GAAP earnings $ 29,266     $ 15,442     $ 3,879     $ 662     $ (1,152 )   $ (255 )   $ 47,842  
 
* Amounts do not reflect intercompany eliminations
** AFUDC = Allowance for Funds Used During Construction
 
NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS PER SHARE
QUARTER ENDED SEPTEMBER 30, 2013
 
  Upstream   Midstream Businesses   Downstream Businesses    
   
Exploration & Pipeline & Energy Corporate /
  Production     Storage     Gathering     Utility     Marketing     All Other     Consolidated*
 
Fourth quarter 2012 GAAP earnings $ 0.26 $ 0.30 $

0.02

 
$ 0.07 $ (0.01 ) $ (0.06 ) $ 0.58
Items impacting comparability:
Elimination of other post-retirement regulatory liability         (0.15 )                             (0.15 )
Fourth quarter 2012 operating results 0.26 0.15 0.02 0.07 (0.01 ) (0.06 ) 0.43
 
Drivers of operating results
Higher (lower) crude oil prices 0.06 0.06
Higher (lower) natural gas prices (0.02 ) (0.02 )
Higher (lower) natural gas production 0.27 0.27
Higher (lower) crude oil production 0.01 0.01
Derivative mark to market adjustments (0.03 ) (0.03 )
Lower (higher) lease operating and transportation expenses (0.06 ) (0.06 )
Lower (higher) depreciation / depletion (0.11 ) (0.11 )
 
Higher (lower) transportation and storage revenues 0.06 0.06
Higher (lower) gathering and processing revenues 0.03 0.03
Lower (higher) operating expenses (0.03 ) (0.02 ) - (0.02 ) (0.01 ) (0.08 )
Lower (higher) property, franchise and other taxes 0.02 0.02
 
Higher (lower) usage - -
 
Higher (lower) margins - -
 
Income (loss) from unconsolidated subsidiaries 0.01 0.01
 
Higher (lower) AFUDC** (0.01 ) (0.01 )
 
(Higher) lower interest expense (0.02 ) 0.01 (0.01 )
 
Lower (higher) income tax expense / effective tax rate 0.02 0.02 (0.01 ) 0.04 0.07
 
All other / rounding   -       (0.02 )     -       0.02       -       (0.01 )     (0.01 )
Fourth quarter 2013 operating results 0.35 0.18 0.05 0.07 (0.01 ) (0.01 ) 0.63
Items impacting comparability:
Regulatory adjustment - Utility segment                     (0.06 )                 (0.06 )
Fourth quarter 2013 GAAP earnings $ 0.35     $ 0.18     $ 0.05     $ 0.01     $ (0.01 )   $ (0.01 )   $ 0.57  
 
* Amounts do not reflect intercompany eliminations
** AFUDC = Allowance for Funds Used During Construction
 
NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS
TWELVE MONTHS ENDED SEPTEMBER 30, 2013
 
  Upstream   Midstream Businesses   Downstream Businesses    
     
Exploration & Pipeline & Energy Corporate /
(Thousands of Dollars)   Production     Storage     Gathering     Utility     Marketing     All Other     Consolidated*
 
Fiscal 2012 GAAP earnings $ 96,498 $ 60,527 6,855 $ 58,590 $ 4,169 $ (6,562 ) $ 220,077
Items impacting comparability:
Elimination of other post-retirement regulatory liability (12,786 ) (12,786 )
Pennsylvania impact fee   4,034                                     4,034  
Fiscal 2012 operating results 100,532 47,741 6,855 58,590 4,169 (6,562 ) 211,325
 
Drivers of operating results
Higher (lower) crude oil prices 13,492 13,492
Higher (lower) natural gas prices (21,846 ) (21,846 )
Higher (lower) natural gas production 107,922 107,922
Higher (lower) crude oil production (2,337 ) (2,337 )
Derivative mark to market adjustments (2,722 ) (2,722 )
Lower (higher) lease operating and transportation expenses (23,323 ) (23,323 )
Lower (higher) depreciation / depletion (36,275 ) 1,967 (1,465 ) (35,773 )
 
Higher (lower) transportation and storage revenues 18,957 18,957
Higher (lower) gathering and processing revenues 11,249 11,249
Lower (higher) operating expenses (8,993 ) (2,571 ) (1,487 ) (1,185 ) (14,236 )
Lower (higher) property, franchise and other taxes (546 ) 1,811 1,265
 
Colder weather 7,027 7,027
Higher (lower) usage 684 684
 
Higher (lower) margins 487 487
 
Income (loss) from unconsolidated subsidiaries 805 805
 
Higher (lower) AFUDC** (1,351 ) (1,351 )
 
Lower (higher) interest expense (6,826 ) (420 ) (545 ) 2,668 (5,123 )
 
Lower (higher) income tax expense / effective tax rate (3,961 ) (980 ) (1,288 ) 1,214 3,445 (1,570 )
 
All other / rounding   (272 )     448       2       378       (67 )     (545 )     (56 )
Fiscal 2013 operating results 115,391 63,245 13,321 70,561 4,589 (2,231 ) 264,876
Items impacting comparability:
Regulatory adjustment - Utility segment                     (4,875 )                 (4,875 )
Fiscal 2013 GAAP earnings $ 115,391     $ 63,245       13,321     $ 65,686     $ 4,589     $ (2,231 )   $ 260,001  
 
*Amounts do not reflect intercompany eliminations
** AFUDC = Allowance for Funds Used During Construction
 
NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS PER SHARE
TWELVE MONTHS ENDED SEPTEMBER 30, 2013
 
  Upstream   Midstream Businesses   Downstream Businesses    
   
Exploration & Pipeline & Energy Corporate /
  Production     Storage     Gathering     Utility     Marketing     All Other     Consolidated*
 
Fiscal 2012 GAAP earnings $ 1.15 $ 0.72 $ 0.08 $ 0.70 $ 0.05 $ (0.07 ) $ 2.63
Items impacting comparability:
Elimination of other post-retirement regulatory liability (0.15 ) (0.15 )
Pennsylvania impact fee   0.05                                     0.05  
Fiscal 2012 operating results 1.20 0.57 0.08 0.70 0.05 (0.07 ) 2.53
 
Drivers of operating results
Higher (lower) crude oil prices 0.16 0.16
Higher (lower) natural gas prices (0.26 ) (0.26 )
Higher (lower) natural gas production 1.28 1.28
Higher (lower) crude oil production (0.03 ) (0.03 )
Derivative mark to market adjustments (0.03 ) (0.03 )
Lower (higher) lease operating and transportation expenses (0.28 ) (0.28 )
Lower (higher) depreciation / depletion (0.43 ) 0.02 (0.02 ) (0.43 )
 
Higher (lower) transportation and storage revenues 0.22 0.22
Higher (lower) gathering and processing revenues 0.13 0.13
Lower (higher) operating expenses (0.11 ) (0.03 ) (0.02 ) (0.01 ) (0.17 )
Lower (higher) property, franchise and other taxes (0.01 ) 0.02 0.01
 
Colder weather 0.08 0.08
Higher (lower) usage 0.01 0.01
 
Higher (lower) margins 0.01 0.01
 
Income (loss) from unconsolidated subsidiaries 0.01 0.01
 
Higher (lower) AFUDC** (0.02 ) (0.02 )
 
Lower (higher) interest expense (0.08 ) - (0.01 ) 0.03 (0.06 )
 
Lower (higher) income tax expense / effective tax rate (0.05 ) (0.01 ) (0.02 ) 0.01 0.04 (0.03 )
 
All other / rounding   -       0.01       0.02       0.01       (0.01 )     (0.02 )     0.01  
Fiscal 2013 operating results 1.37 0.75 0.16 0.84 0.05 (0.03 ) 3.14
Items impacting comparability:
Regulatory adjustment - Utility segment                     (0.06 )                 (0.06 )
Fiscal 2013 GAAP earnings $ 1.37     $ 0.75     $ 0.16     $ 0.78     $ 0.05     $ (0.03 )   $ 3.08  
 
*Amounts do not reflect intercompany eliminations
** AFUDC = Allowance for Funds Used During Construction
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 
(Thousands of Dollars, except per share amounts)  
Three Months Ended   Twelve Months Ended
September 30, September 30,
(Unaudited) (Unaudited)

SUMMARY OF OPERATIONS
2013   2012 2013   2012
Operating Revenues $ 338,863   $ 313,261   $ 1,829,551   $ 1,626,853  
 
Operating Expenses:
Purchased Gas 33,532 24,700 460,432 415,589
Operation and Maintenance 103,557 89,541 442,090 401,397
Property, Franchise and Other Taxes 18,881 20,150 82,431 90,288
Depreciation, Depletion and Amortization   86,257     71,606     326,760     271,530  
242,227 205,997 1,311,713 1,178,804
 
Operating Income 96,636 107,264 517,838 448,049
 
Other Income (Expense):
Interest Income 2,491 2,002 4,335 3,689
Other Income 1,032 1,058 4,697 5,133
Interest Expense on Long-Term Debt (23,042 ) (21,408 ) (90,273 ) (82,002 )
Other Interest Expense   (941 )   (1,386 )   (3,838 )   (4,238 )
 
Income Before Income Taxes 76,176 87,530 432,759 370,631
 
Income Tax Expense   28,334     38,728     172,758     150,554  
 
Net Income Available for Common Stock $ 47,842   $ 48,802   $ 260,001   $ 220,077  
 
Earnings Per Common Share:
Basic $ 0.57   $ 0.59   $ 3.11   $ 2.65  
Diluted $ 0.57   $ 0.58   $ 3.08   $ 2.63  
 
Weighted Average Common Shares:
Used in Basic Calculation   83,628,686     83,305,793     83,518,857     83,127,844  
Used in Diluted Calculation   84,502,703     83,855,991     84,341,220     83,739,771  
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
  September 30,     September 30,
(Thousands of Dollars)   2013     2012
 
ASSETS
Property, Plant and Equipment $ 7,316,195 $ 6,615,813
Less - Accumulated Depreciation, Depletion and Amortization     2,161,477         1,876,010  
Net Property, Plant and Equipment     5,154,718         4,739,803  
 
Current Assets:
Cash and Temporary Cash Investments 64,858 74,494
Hedging Collateral Deposits 1,094 364
Receivables - Net 133,182 115,818
Unbilled Utility Revenue 19,483 19,652
Gas Stored Underground 51,484 49,795
Materials and Supplies - at average cost 29,904 28,577
Unrecovered Purchased Gas Costs 12,408 -
Other Current Assets 56,905 56,121
Deferred Income Taxes     79,359         10,755  
Total Current Assets     448,677         355,576  
 
Other Assets:
Recoverable Future Taxes 163,355 150,941
Unamortized Debt Expense 16,645 13,409
Other Regulatory Assets 259,171 546,851
Deferred Charges 9,382 7,591
Other Investments 96,308 86,774
Goodwill 5,476 5,476
Prepaid Post-Retirement Benefit Costs 22,774 -
Fair Value of Derivative Financial Instruments 48,989 27,616
Other     2,447         1,105  
Total Other Assets     624,547         839,763  
Total Assets   $ 6,227,942       $ 5,935,142  
 
CAPITALIZATION AND LIABILITIES
Capitalization:
Comprehensive Shareholders' Equity

Common Stock, $1 Par Value Authorized - 200,000,000 Shares; Issued and Outstanding - 83,661,969 Shares and 83,330,140 Shares, Respectively
$ 83,662 $ 83,330
Paid in Capital 687,684 669,501
Earnings Reinvested in the Business 1,442,617 1,306,284
Accumulated Other Comprehensive Loss     (19,234 )       (99,020 )
Total Comprehensive Shareholders' Equity 2,194,729 1,960,095
Long-Term Debt, Net of Current Portion     1,649,000         1,149,000  
Total Capitalization     3,843,729         3,109,095  
 
Current and Accrued Liabilities:
Notes Payable to Banks and Commercial Paper - 171,000
Current Portion of Long-Term Debt - 250,000
Accounts Payable 105,283 87,985
Amounts Payable to Customers 12,828 19,964
Dividends Payable 31,373 30,416
Interest Payable on Long-Term Debt 29,960 29,491
Customer Advances 21,959 24,055
Customer Security Deposits 16,183 17,942
Other Accruals and Current Liabilities 76,746 79,099
Fair Value of Derivative Financial Instruments     639         24,527  
Total Current and Accrued Liabilities     294,971         734,479  
 
Deferred Credits:
Deferred Income Taxes 1,347,007 1,065,757
Taxes Refundable to Customers 85,655 66,392
Unamortized Investment Tax Credit 1,579 2,005
Cost of Removal Regulatory Liability 155,747 139,611
Other Regulatory Liabilities 68,749 21,014
Pension and Other Post-Retirement Liabilities 158,014 516,197
Asset Retirement Obligations 130,981 119,246
Other Deferred Credits     141,510         161,346  
Total Deferred Credits     2,089,242         2,091,568  
Commitments and Contingencies     -         -  
Total Capitalization and Liabilities   $ 6,227,942       $ 5,935,142  
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
  Twelve Months Ended
September 30,
(Thousands of Dollars)   2013   2012
 
Operating Activities:
Net Income Available for Common Stock $ 260,001 $ 220,077

Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Depreciation, Depletion and Amortization 326,760 271,530
Deferred Income Taxes 167,887 144,150
Excess Tax Benefits Associated with Stock-Based Compensation Awards (675 ) (985 )
Elimination of Other Post-Retirement Regulatory Liability - (21,672 )
Other 27,411 12,952
Change in:
Hedging Collateral Deposits (730 ) 19,337
Receivables and Unbilled Utility Revenue (17,135 ) 13,859
Gas Stored Underground and Materials and Supplies (3,016 ) 5,405
Unrecovered Purchased Gas Costs (12,408 ) -
Other Current Assets (109 ) 9,790
Accounts Payable 8,303 (16,773 )
Amounts Payable to Customers (7,136 ) 4,445
Customer Advances (2,096 ) 4,412
Customer Security Deposits (1,759 ) 621
Other Accruals and Current Liabilities (6,534 ) 10,633
Other Assets (5,757 ) (4,396 )
Other Liabilities     5,565       (14,375 )
Net Cash Provided by Operating Activities   $ 738,572     $ 659,010  
 
Investing Activities:
Capital Expenditures $ (703,461 ) $ (1,035,007 )
Other     (2,522 )     446  
Net Cash Used in Investing Activities   $ (705,983 )   $ (1,034,561 )
 
Financing Activities:
Changes in Notes Payable to Banks and Commercial Paper $ (171,000 ) $ 131,000
Excess Tax Benefits Associated with Stock-Based Compensation Awards 675 985
Reduction of Long-Term Debt (250,000 ) (150,000 )
Net Proceeds From Issuance of Long-Term Debt 495,415 496,085
Dividends Paid on Common Stock (122,710 ) (118,798 )
Net Proceeds From Issuance of Common Stock     5,395       10,345  
Net Cash Provided By (Used in) Financing Activities   $ (42,225 )   $ 369,617  

Net Decrease in Cash and Temporary Cash Investments
(9,636 ) (5,934 )

Cash and Temporary Cash Investments at Beginning of Period
    74,494       80,428  

Cash and Temporary Cash Investments at September 30
  $ 64,858     $ 74,494  
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
 
UPSTREAM BUSINESS
 
  Three Months Ended   Twelve Months Ended
(Thousands of Dollars, except per share amounts) September 30, September 30,

EXPLORATION AND PRODUCTION SEGMENT
2013   2012   Variance 2013   2012   Variance
Total Operating Revenues $ 184,195     $ 146,732     $ 37,463   $ 702,937     $ 558,180     $ 144,757  
       
Operating Expenses:
Operation and Maintenance:
General and Administrative Expense 15,073 12,540 2,533 62,162 53,792 8,370
Lease Operating and Transportation Expense 31,967 23,540 8,427 119,243 83,361 35,882
All Other Operation and Maintenance Expense 2,454 1,620 834 11,950 6,485 5,465
Property, Franchise and Other Taxes 5,295 4,622 673 17,199 23,620 (6,421 )
Depreciation, Depletion and Amortization   65,150       51,363       13,787     243,431       187,624       55,807  
  119,939       93,685       26,254     453,985       354,882       99,103  
 
Operating Income 64,256 53,047 11,209 248,952 203,298 45,654
 
Other Income (Expense):
Interest Income 312 423 (111 ) 1,501 1,493 8
Other Interest Expense   (10,566 )     (8,379 )     (2,187 )   (39,745 )     (29,243 )     (10,502 )
 
Income Before Income Taxes 54,002 45,091 8,911 210,708 175,548 35,160
Income Tax Expense   24,736       23,015       1,721     95,317       79,050       16,267  
Net Income $ 29,266     $ 22,076     $ 7,190   $ 115,391     $ 96,498     $ 18,893  
 
Net Income Per Share (Diluted) $ 0.35     $ 0.26     $ 0.09   $ 1.37     $ 1.15     $ 0.22  
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
 
MIDSTREAM BUSINESSES
 
  Three Months Ended   Twelve Months Ended
(Thousands of Dollars, except per share amounts) September 30, September 30,

PIPELINE AND STORAGE SEGMENT
2013  

2012
  Variance 2013   2012   Variance
Revenues from External Customers $ 45,288   $ 58,336   $ (13,048 ) $ 178,184   $ 172,312   $ 5,872
Intersegment Revenues   21,207       22,529       (1,322 )   89,424       86,963       2,461  
Total Operating Revenues   66,495       80,865       (14,370 )   267,608       259,275       8,333  
 
Operating Expenses:
Purchased Gas 525 480 45 1,573 674 899
Operation and Maintenance 22,209 19,868 2,341 82,351 78,397 3,954
Property, Franchise and Other Taxes 5,876 5,386 490 22,458 21,618 840
Depreciation, Depletion and Amortization   8,997       8,636       361     35,156       38,182       (3,026 )
  37,607       34,370       3,237     141,538       138,871       2,667  
 
Operating Income 28,888 46,495 (17,607 ) 126,070 120,404 5,666
 
Other Income (Expense):
Interest Income 37 61 (24 ) 193 199 (6 )
Other Income 256 1,151 (895 ) 1,856 3,182 (1,326 )
Other Interest Expense   (6,705 )     (6,324 )     (381 )   (26,248 )     (25,603 )     (645 )
 
Income Before Income Taxes 22,476 41,383 (18,907 ) 101,871 98,182 3,689
Income Tax Expense   7,034       16,284       (9,250 )   38,626       37,655       971  
Net Income $ 15,442     $ 25,099     $ (9,657 ) $ 63,245     $ 60,527     $ 2,718  
 
Net Income Per Share (Diluted) $ 0.18     $ 0.30     $ (0.12 ) $ 0.75     $ 0.72     $ 0.03  
 
 
Three Months Ended Twelve Months Ended
September 30, September 30,

GATHERING SEGMENT
2013   2012   Variance 2013   2012   Variance
Revenues from External Customers $ 456 $ 126 $ 330 $ 1,324 $ 704 $ 620
Intersegment Revenues   9,835       5,943       3,892     33,457       16,771       16,686  
Total Operating Revenues   10,291       6,069       4,222     34,781       17,475       17,306  
 
Operating Expenses:
Operation and Maintenance 1,447 780 667 4,727 2,439 2,288
Property, Franchise and Other Taxes 44 169 (125 ) 277 222 55
Depreciation, Depletion and Amortization   1,138       913       225     3,945       1,691       2,254  
  2,629       1,862       767     8,949       4,352       4,597  
 
Operating Income 7,662 4,207 3,455 25,832 13,123 12,709
 
Other Income (Expense):
Interest Income 22 - 22 55 1 54
Other Income 3 - 3 4 - 4
Other Interest Expense   (589 )     (441 )     (148 )   (2,283 )     (1,444 )     (839 )
 
Income Before Income Taxes 7,098 3,766 3,332 23,608 11,680 11,928
Income Tax Expense   3,219       1,891       1,328     10,287       4,825       5,462  
Net Income $ 3,879     $ 1,875     $ 2,004   $ 13,321     $ 6,855     $ 6,466  
 
Net Income Per Share (Diluted) $ 0.05     $ 0.02     $ 0.03   $ 0.16     $ 0.08     $ 0.08  
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
 
DOWNSTREAM BUSINESSES
 
  Three Months Ended   Twelve Months Ended
(Thousands of Dollars, except per share amounts) September 30, September 30,

UTILITY SEGMENT
2013   2012   Variance 2013   2012   Variance
Revenues from External Customers $ 77,108   $ 81,682   $ (4,574 ) $ 730,319   $ 704,518   $ 25,801
Intersegment Revenues   2,008       1,961       47     16,020       14,604       1,416  
Total Operating Revenues   79,116       83,643       (4,527 )   746,339       719,122       27,217  
 
Operating Expenses:
Purchased Gas 24,797 23,448 1,349 362,250 340,325 21,925
Operation and Maintenance 34,940 32,237 2,703 177,597 176,938 659
Property, Franchise and Other Taxes 9,400 9,246 154 42,323 41,873 450
Depreciation, Depletion and Amortization   10,693       10,254       439     42,729       42,757       (28 )
  79,830       75,185       4,645     624,899       601,893       23,006  
 
Operating Income (Loss) (714 ) 8,458 (9,172 ) 121,440 117,229 4,211
 
Other Income (Expense):
Interest Income 2,423 1,945 478 3,417 2,765 652
Other Income 270 216 54 970 887 83
Other Interest Expense   (6,782 )     (8,671 )     1,889     (29,076 )     (33,181 )     4,105  
 
Income (Loss) Before Income Taxes (4,803 ) 1,948 (6,751 ) 96,751 87,700 9,051
Income Tax Expense (Benefit)   (5,465 )     (3,918 )     (1,547 )   31,065       29,110       1,955  
Net Income $ 662     $ 5,866     $ (5,204 ) $ 65,686     $ 58,590     $ 7,096  
 
Net Income Per Share (Diluted) $ 0.01     $ 0.07     $ (0.06 ) $ 0.78     $ 0.70     $ 0.08  
 
 
Three Months Ended Twelve Months Ended
September 30, September 30,

ENERGY MARKETING SEGMENT
2013   2012   Variance 2013   2012   Variance
Revenues from External Customers $ 29,707 $ 24,757 $ 4,950 $ 211,990 $ 186,579 $ 25,411
Intersegment Revenues   305       290       15     1,384       1,425       (41 )
Total Operating Revenues   30,012       25,047       4,965     213,374       188,004       25,370  
 
Operating Expenses:
Purchased Gas 30,683 25,130 5,553 200,226 175,605 24,621
Operation and Maintenance 1,609 1,454 155 6,099 6,373 (274 )
Property, Franchise and Other Taxes 9 22 (13 ) 86 81 5
Depreciation, Depletion and Amortization   47       21       26     123       90       33  
  32,348       26,627       5,721     206,534       182,149       24,385  
 
Operating Income (Loss) (2,336 ) (1,580 ) (756 ) 6,840 5,855 985
 
Other Income (Expense):
Interest Income 34 62 (28 ) 169 188 (19 )
Other Income 13 12 1 66 100 (34 )
Other Interest Expense   (8 )     (22 )     14     (36 )     (41 )     5  
 
Income (Loss) Before Income Taxes (2,297 ) (1,528 ) (769 ) 7,039 6,102 937
Income Tax Expense (Benefit)   (1,145 )     (1,035 )     (110 )   2,450       1,933       517  
Net Income (Loss) $ (1,152 )   $ (493 )   $ (659 ) $ 4,589     $ 4,169     $ 420  
 
Net Income (Loss) Per Share (Diluted) $ (0.01 )   $ (0.01 )   $ -   $ 0.05     $ 0.05     $ -  
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
 
  Three Months Ended   Twelve Months Ended
(Thousands of Dollars, except per share amounts) September 30, September 30,

ALL OTHER
2013   2012   Variance   2013   2012   Variance
Total Operating Revenues $ 1,880     $ 1,397     $ 483     $ 3,910     $ 3,603     $ 307  
       
Operating Expenses:
Operation and Maintenance 355 446 (91 ) 1,263 1,581 (318 )
Property, Franchise and Other Taxes 100 158 (58 ) 581 674 (93 )
Depreciation, Depletion and Amortization   33       219       (186 )   577       400       177  
  488       823       (335 )   2,421       2,655       (234 )
 
Operating Income 1,392 574 818 1,489 948 541
 
Other Income (Expense):
Interest Income 21 39 (18 ) 115 174 (59 )
Other Income (132 ) (1,085 ) 953 (179 ) (1,305 ) 1,126
Other Interest Expense   (1 )     (8 )     7     (2 )     (294 )     292  
 
Income (Loss) Before Income Taxes 1,280 (480 ) 1,760 1,423 (477 ) 1,900
Income Tax Expense (Benefit)   393       85       308     529       (490 )     1,019  
Net Income (Loss) $ 887     $ (565 )   $ 1,452   $ 894     $ 13     $ 881  
 
Net Income (Loss) Per Share (Diluted) $ 0.01     $ -     $ 0.01   $ 0.01     $ -     $ 0.01  
 
Three Months Ended Twelve Months Ended
September 30, September 30,

CORPORATE
2013   2012   Variance 2013   2012   Variance
Revenues from External Customers $ 229 $ 231 $ (2 ) $ 887 $ 957 $ (70 )
Intersegment Revenues   957       1,028       (71 )   3,419       3,865       (446 )
Total Operating Revenues   1,186       1,259       (73 )   4,306       4,822       (516 )
 
Operating Expenses:
Operation and Maintenance 5,342 4,449 893 16,785 14,644 2,141
Property, Franchise and Other Taxes (1,843 ) 547 (2,390 ) (493 ) 2,200 (2,693 )
Depreciation, Depletion and Amortization   199       200       (1 )   799       786       13  
  3,698       5,196       (1,498 )   17,091       17,630       (539 )
 
Operating Loss (2,512 ) (3,937 ) 1,425 (12,785 ) (12,808 ) 23
 
Other Income (Expense):
Interest Income 23,891 22,768 1,123 95,141 88,337 6,804
Other Income 622 764 (142 ) 1,980 2,269 (289 )
Interest Expense on Long-Term Debt (23,042 ) (21,408 ) (1,634 ) (90,273 ) (82,002 ) (8,271 )
Other Interest Expense   (539 )     (837 )     298     (2,704 )     (3,900 )     1,196  
 
Loss Before Income Taxes (1,580 ) (2,650 ) 1,070 (8,641 ) (8,104 ) (537 )
Income Tax Expense (Benefit)   (438 )     2,406       (2,844 )   (5,516 )     (1,529 )     (3,987 )
Net Loss $ (1,142 )   $ (5,056 )   $ 3,914   $ (3,125 )   $ (6,575 )   $ 3,450  
 
Net Loss Per Share (Diluted) $ (0.02 )   $ (0.06 )   $ 0.04   $ (0.04 )   $ (0.07 )   $ 0.03  
 
Three Months Ended Twelve Months Ended
September 30, September 30,

INTERSEGMENT ELIMINATIONS
2013   2012   Variance 2013   2012   Variance
Intersegment Revenues $ (34,312 )   $ (31,751 )   $ (2,561 ) $ (143,704 )   $ (123,628 )   $ (20,076 )
 
Operating Expenses:
Purchased Gas (22,473 ) (24,358 ) 1,885 (103,617 ) (101,015 ) (2,602 )
Operation and Maintenance   (11,839 )     (7,393 )     (4,446 )   (40,087 )     (22,613 )     (17,474 )
  (34,312 )     (31,751 )     (2,561 )   (143,704 )     (123,628 )     (20,076 )
 
Operating Income - - - - - -
 
Other Income (Expense):
Interest Income (24,249 ) (23,296 ) (953 ) (96,256 ) (89,468 ) (6,788 )
Other Interest Expense   24,249       23,296       953     96,256       89,468       6,788  
 
Net Income $ -     $ -     $ -   $ -     $ -     $ -  
 
Net Income Per Share (Diluted) $ -     $ -     $ -   $ -     $ -     $ -  
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 
SEGMENT INFORMATION (Continued)
(Thousands of Dollars)
 
  Three Months Ended   Twelve Months Ended
September 30, September 30,
(Unaudited) (Unaudited)
       
Increase Increase
2013 2012 (Decrease) 2013 2012 (Decrease)
 

Capital Expenditures:
Exploration and Production $

148,120

(1)
$

95,251

(2)
$ 52,869 $

533,129

(1)(2)
$

693,810

(2)(3)
$ (160,681 )
Pipeline and Storage 15,144

(1)
46,914

(2)
(31,770 ) 56,144

(1)(2)
144,167

(2)(3)
(88,023 )
Gathering 19,944

(1)
13,224

(2)
6,720 54,792

(1)(2)
80,012

(2)(3)
(25,220 )
Utility 29,002

(1)
18,426

(2)
10,576 71,970

(1)(2)
58,284

(2)(3)
13,686
Energy Marketing 67 350 (283 ) 595 770 (175 )
Total Reportable Segments 212,277 174,165 38,112 716,630 977,043 (260,413 )
All Other 215 5 210 307 5 302
Corporate 76 55 21   160 346 (186 )
Total Capital Expenditures $ 212,568 $ 174,225 $ 38,343   $ 717,097 $ 977,394 $ (260,297 )
   

(1)
 

Capital expenditures for the quarter and year ended September 30, 2013 include accounts payable and accrued liabilities related to capital expenditures of $58.5 million, $5.6 million, $10.3 million, and $6.7 million in the Exploration and Production segment, Pipeline and Storage segment, Utility segment and Gathering segment, respectively. These amounts have been excluded from the Consolidated Statement of Cash Flows at September 30, 2013 since they represent non-cash investing activities at that date.
 

(2)

Capital expenditures for the year ended September 30, 2013 exclude capital expenditures of $38.9 million, $12.7 million, $3.2 million and $12.7 million in the Exploration and Production segment, Pipeline and Storage segment, Utility segment and Gathering segment, respectively. These amounts were in accounts payable and accrued liabilities at September 30, 2012 and paid during the year ended September 30, 2013. These amounts were excluded from the Consolidated Statement of Cash Flows at September 30, 2012 since they represented non-cash investing activities at that date. These amounts have been included in the Consolidated Statement of Cash Flows at September 30, 2013.
 

(3)

Capital expenditures for the year ended September 30, 2012 exclude capital expenditures of $103.3 million, $16.4 million, $2.3 million and $3.1 million in the Exploration and Production segment, Pipeline and Storage segment, Utility segment and Gathering segment, respectively. These amounts were in accounts payable and accrued liabilities at September 30, 2011 and paid during the year ended September 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 September 30, 2012.

 

DEGREE DAYS
   
 
            Percent Colder
(Warmer) Than:

Three Months Ended September 30
Normal 2013 2012 Normal (1)     Last Year (1)
 
Buffalo, NY 162 168 125 3.7 34.4
Erie, PA 124 132 124 6.5 6.5
 

Twelve Months Ended September 30
 
Buffalo, NY 6,617 6,139 5,296 (7.2) 15.9
Erie, PA 6,147 5,888 4,999 (4.2) 17.8
    (1)   Percents compare actual 2013 degree days to normal degree days and actual 2013 degree days to actual 2012 degree days.
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 

EXPLORATION AND PRODUCTION INFORMATION
 
  Three Months Ended   Twelve Months Ended
September 30, September 30,
    Increase     Increase
2013 2012 (Decrease) 2013 2012 (Decrease)
 

Gas Production/Prices:
Production (MMcf)
Appalachia

28,116

 

19,538

 
8,578

100,633

 

62,663

 
37,970
West Coast 819   798   21   3,060   3,468   (408 )
Total Production 28,935   20,336   8,599   103,693   66,131   37,562  
 
Average Prices (Per Mcf)
Appalachia $ 3.26 $ 2.72 $ 0.54 $ 3.49 $ 2.71 $ 0.78
West Coast (3) 6.62 5.01 1.61 6.61 6.27 0.34
Weighted Average 3.35 2.81 0.54 3.58 2.89 0.69
Weighted Average after Hedging 3.99 4.08 (0.09 ) 4.10 4.42 (0.32 )
 

Oil Production/Prices:
Production (Thousands of Barrels)
Appalachia 7 8 (1 ) 28 36 (8 )
West Coast 710   698   12   2,803   2,834   (31 )
Total Production 717   706   11   2,831   2,870   (39 )
 
Average Prices (Per Barrel)
Appalachia $ 105.96 $ 92.81 $ 13.15 $ 96.48 $ 93.94 $ 2.54
West Coast 105.18 102.76 2.42 103.14 107.13 (3.99 )
Weighted Average 105.19 102.65 2.54 103.07 106.97 (3.90 )
Weighted Average after Hedging 99.20 88.98 10.22 98.21 90.88 7.33
 
Total Production (Mmcfe) 33,237   24,572   8,665   120,679   83,351   37,328  
 

Selected Operating Performance Statistics:
General & Administrative Expense per Mcfe (1) $ 0.45 $ 0.51 $ (0.06 ) $ 0.52 $ 0.65 $ (0.13 )
Lease Operating and Transportation Expense per Mcfe (1)(2) $ 0.96 $ 0.96 $ - $ 0.99 $ 1.00 $ (0.01 )
Depreciation, Depletion & Amortization per Mcfe (1) $ 1.96 $ 2.09 $ (0.13 ) $ 2.02 $ 2.25 $ (0.23 )
   

(1)
  Refer to page 18 for the General and Administrative Expense, Lease Operating Expense and Depreciation, Depletion, and Amortization Expense for the Exploration and Production segment.

(2)
Amounts include transportation expense of $0.34 and $0.30 per Mcfe for the three months ended September 30, 2013 and September 30, 2012, respectively. Amounts include transportation expense of $0.34 and $0.24 per Mcfe for the twelve months ended September 30, 2013 and September 30, 2012, respectively.

(3)
Prices reflect revenues from gas produced on the West Coast, including natural gas liquids.
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 

EXPLORATION AND PRODUCTION INFORMATION
 
Hedging Summary for Fiscal 2014
 

SWAPS
    Volume   Average Hedge Price
Oil  
Midway Sunset (MWSS) 0.62 MMBBL $ 95.68 / BBL
Brent 1.35 MMBBL $ 102.32 / BBL
Total 1.97 MMBBL $ 100.22 / BBL
 
Gas
NYMEX 62.72 BCF $ 4.24 / MCF
Dominion Transmission Appalachian (DOM) 27.43 BCF $ 4.26 / MCF
Southern California City Gate (SoCal) 1.14 BCF $ 4.57 / MCF
Total 91.29 BCF $ 4.25 / MCF
 
Hedging Summary for Fiscal 2015
 

SWAPS
Volume Average Hedge Price
Oil
Brent 0.66 MMBBL $ 97.84 / BBL
NYMEX 0.40 MMBBL $ 90.14 / BBL
Total 1.06 MMBBL $ 94.95 / BBL
 
Gas
NYMEX 38.29 BCF $ 4.35 / MCF
DOM 17.83 BCF $ 4.07 / MCF
SoCal 1.14 BCF $ 4.57 / MCF
Total 57.26 BCF $ 4.27 / MCF
 
Hedging Summary for Fiscal 2016
 

SWAPS
Volume Average Hedge Price
Oil
Brent 0.60 MMBBL $ 94.61 / BBL
NYMEX 0.30 MMBBL $ 86.09 / BBL
Total 0.90 MMBBL $ 91.77 / BBL
 
Gas
NYMEX 22.40 BCF $ 4.57 / MCF
DOM 17.94 BCF $ 4.07 / MCF
Total 40.34 BCF $ 4.35 / MCF
 
Hedging Summary for Fiscal 2017
 

SWAPS
Volume Average Hedge Price
Oil
Brent 0.30 MMBBL $ 91.55 / BBL
 
Gas
NYMEX 20.89 BCF $ 4.77 / MCF
DOM 17.94 BCF $ 4.07 / MCF
Total 38.83 BCF $ 4.45 / MCF
 
Hedging Summary for Fiscal 2018
 

SWAPS
Volume Average Hedge Price
Oil
Brent 0.08 MMBBL $ 91.00 / BBL
 
Gas
NYMEX 5.29 BCF $ 4.81 / MCF
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 

EXPLORATION AND PRODUCTION INFORMATION
 

Gross Wells in Process of Drilling
       

Twelve Months Ended September 30, 2013
Total

East

West

Company
Wells in Process - Beginning of Period
Exploratory 1.000 1.000 2.000
Developmental 77.000 (1) 0.000 77.000
Wells Commenced
Exploratory 0.000 4.000 4.000
Developmental 46.000 75.000 121.000
Wells Completed
Exploratory 0.000 5.000 5.000
Developmental 42.000 75.000 117.000
Wells Plugged & Abandoned
Exploratory 1.000 0.000 1.000
Developmental 5.000 0.000 5.000
Wells in Process - End of Period
Exploratory 0.000 0.000 0.000
Developmental 76.000 0.000 76.000
 

(1) Beginning of year number has been adjusted to remove five developmental wells.
 
 

Net Wells in Process of Drilling

Twelve Months Ended September 30, 2013
Total

East

West

Company
Wells in Process - Beginning of Period
Exploratory 1.000 0.125 1.125
Developmental 57.000

(2)
0.000 57.000
Wells Commenced
Exploratory 0.000 0.500 0.500
Developmental 46.000 74.996 120.996
Wells Completed
Exploratory 0.000 0.625 0.625
Developmental 39.500 74.996 114.496
Wells Plugged & Abandoned
Exploratory 1.000 0.000 1.000
Developmental 2.500 0.000 2.500
Wells in Process - End of Period
Exploratory 0.000 0.000 0.000
Developmental 61.000 0.000 61.000
 

(2) Beginning of year number has been adjusted to remove five developmental wells (2.50 net wells).
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 

EXPLORATION AND PRODUCTION INFORMATION
 
Reserve Quantity Information
 
  Gas MMcf
U.S.
Appalachian   West Coast   Total
Region   Region   Company

Proved Developed and Undeveloped Reserves:
September 30, 2012 925,411 63,023 988,434
Extensions and Discoveries 360,922 702 361,624
Revisions of Previous Estimates 53,038 112 53,150
Production (100,633 )   (3,060 )   (103,693 )
September 30, 2013 1,238,738     60,777     1,299,515  
 
Proved Developed Reserves:
 
September 30, 2012 544,560 59,923 604,483
September 30, 2013 807,055 59,862 866,917
 
 
Oil Mbbl
U.S.
Appalachian West Coast Total
Region   Region   Company

Proved Developed and Undeveloped Reserves:
September 30, 2012 306 42,556 42,862
Extensions and Discoveries - 2,443 2,443
Revisions of Previous Estimates 5 (881 ) (876 )
Production (28 )   (2,803 )   (2,831 )
September 30, 2013 283     41,315     41,598  
 
Proved Developed Reserves:
 
September 30, 2012 306 38,138 38,444
September 30, 2013 283 38,082 38,365
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 
Pipeline & Storage Throughput - (millions of cubic feet - MMcf)
 
  Three Months Ended   Twelve Months Ended
September 30, September 30,
    Increase     Increase
2013 2012 (Decrease) 2013 2012 (Decrease)
Firm Transportation - Affiliated 11,064 12,563 (1,499 ) 97,702 93,738 3,964
Firm Transportation - Non-Affiliated 137,533 75,334 62,199 478,103 275,739 202,364
Interruptible Transportation 1,491 151 1,340   3,997 1,662 2,335  
150,088 88,048 62,040   579,802 371,139 208,663  
 
Gathering Volume - (MMcf)
Three Months Ended Twelve Months Ended
September 30, September 30,
Increase Increase
2013 2012 (Decrease) 2013 2012 (Decrease)
Gathered Volume - Affiliated 26,728 16,324 10,404   93,598 48,562 45,036  
 
Utility Throughput - (MMcf)
Three Months Ended Twelve Months Ended
September 30, September 30,
Increase Increase
2013 2012 (Decrease) 2013 2012 (Decrease)
Retail Sales:
Residential Sales 3,629 3,560 69 52,753 47,036 5,717
Commercial Sales 461 573 (112 ) 7,486 6,682 804
Industrial Sales 128 381 (253 ) 947 837 110  
4,218 4,514 (296 ) 61,186 54,555 6,631
Off-System Sales - - - 6,717 9,544 (2,827 )
Transportation 9,613 9,364 249   69,149 61,027 8,122  
13,831 13,878 (47 ) 137,052 125,126 11,926  
 
Energy Marketing Volume
Three Months Ended Twelve Months Ended
September 30, September 30,
Increase Increase
2013 2012 (Decrease) 2013 2012 (Decrease)
Natural Gas (MMcf) 6,608 6,899 (291 ) 46,875 45,756 1,119  
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
FISCAL 2014 EARNINGS GUIDANCE AND SENSITIVITIES
 
    Earnings per share sensitivity to changes
Fiscal 2014 (Diluted earnings per share guidance*) from prices used in guidance* ^
 
 

$0.50 change per MMBtu
 

gas
$5 change per Bbl oil
Range Increase   Decrease Increase   Decrease
   
Consolidated Earnings $ 3.10 - $ 3.40 +$ 0.18 -$ 0.18 +$ 0.03 -$ 0.03

* Please refer to forward looking statement footnote beginning at page 9 of document.

^ This sensitivity table is current as of November 7, 2013 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 2014 earnings forecast, the Company is utilizing flat NYMEX equivalent commodity pricing, exclusive of basis differential, of $4.00 per MMBtu for natural gas and $90 per Bbl for crude oil. The sensitivities will become obsolete with the passage of time, changes in Seneca's production forecast, changes in basis differential, as additional hedging contracts are entered into, and with the settling of hedge contracts at their maturity.

NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES

NON-GAAP FINANCIAL MEASURES

In addition to financial measures calculated in accordance with generally accepted accounting principles (GAAP), this press release contains information regarding Operating Results and Adjusted EBITDA, which are non-GAAP financial measures. The Company believes that these non-GAAP financial measures are useful to investors because they provide an alternative method for assessing the Company's ongoing operating results, for measuring the Company’s cash flow and liquidity, and for comparing the Company’s financial performance to other companies. The Company's management uses these non-GAAP financial measures for the same purpose, and for planning and forecasting purposes. The presentation of non-GAAP financial measures is not meant to be a substitute for financial measures in accordance with GAAP.

Management defines Operating Results as reported GAAP earnings before items impacting comparability. The tables at page 4 of this report reconcile National Fuel’s reported GAAP earnings to Operating Results for the three and twelve months ended September 30, 2013 and 2012.

Management defines Adjusted EBITDA as reported GAAP earnings before the following items: interest expense, depreciation, depletion and amortization, interest and other income, impairments, items impacting comparability and income taxes.

The following tables reconcile National Fuel's reported GAAP earnings to Adjusted EBITDA for the three and twelve months ended September 30, 2013 and 2012:

  Three Months   Twelve Months
Ended September 30, Ended September 30,
2013   2012 2013   2012
(in thousands)
Reported GAAP Earnings $ 47,842 $ 48,802 $ 260,001 $ 220,077
Depreciation, Depletion and Amortization 86,257 71,606 326,760 271,530
Interest and Other Income (3,523 ) (3,060 ) (9,032 ) (8,822 )
Interest Expense 23,983 22,794 94,111 86,240
Income Taxes 28,334 38,728 172,758 150,554
Regulatory Adjustment - Utility segment 7,200 - 7,500 -
Elimination of Other Post-Retirement Regulatory Liability - (21,672 ) - (21,672 )
Pennsylvania Impact Fee   -     -     -     6,206  
Adjusted EBITDA $ 190,093   $ 157,198   $ 852,098   $ 704,113  
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 

Quarter Ended September 30 (unaudited)
  2013   2012
 
Operating Revenues $

338,863,000

 
$

313,261,000

 
 
Net Income Available for Common Stock $ 47,842,000   $ 48,802,000  
 
Earnings Per Common Share:
Basic $ 0.57   $ 0.59  
Diluted $ 0.57   $ 0.58  
 
Weighted Average Common Shares:
Used in Basic Calculation   83,628,686     83,305,793  
Used in Diluted Calculation   84,502,703     83,855,991  
 

Twelve Months Ended September 30 (unaudited)
 
Operating Revenues $ 1,829,551,000   $ 1,626,853,000  
 
Net Income Available for Common Stock $ 260,001,000   $ 220,077,000  
 
Earnings Per Common Share:
Basic $ 3.11   $ 2.65  
Diluted $ 3.08   $ 2.63  
 
Weighted Average Common Shares:
Used in Basic Calculation   83,518,857     83,127,844  
Used in Diluted Calculation   84,341,220     83,739,771  

Copyright Business Wire 2010

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