NW Natural Reports Results For The Three And Nine Months Ended September 30, 2016

  • Reported consolidated net loss of $8.0 million, or $0.29 per share, for the third quarter of 2016, compared to a net loss of $6.7 million, or $0.24 per share, for 2015.
  • Received Notice to Proceed (NTP) for the North Mist gas storage expansion project allowing the Company to move the project forward with construction to begin this fall. Project costs are estimated to be $128 million with a target in-service date during the winter of 2018-19. 
  • Continued our legacy of excellent customer service with the highest customer satisfaction score among large utilities in the West and the second highest score in the nation in the 2016 J.D. Power Gas Utility Residential Customer Satisfaction study. 
  • Reduced residential rates to the lowest level in 15 years with a credit of $19.4 million to customers in June and an additional rate reduction effective Nov. 1, 2016 in both Oregon and Washington. 
  • Increased the customer growth rate to 1.6% at Sept. 30, 2016 with over 11,500 customers added in the last 12 months.
  • Delivered increasing dividends for the 61st consecutive year. The Company's current annual dividend rate is $1.88 per share. 
  • Reaffirmed earnings guidance for 2016, at $1.98 to $2.18 per share or $2.05 to $2.25 per share adjusted to exclude the effects of the pre-tax charge of $3.3 million, or $0.07 per share after-tax (1), related to the final environmental implementation order received in January 2016 as described below.

PORTLAND, Ore., Nov. 02, 2016 (GLOBE NEWSWIRE) -- Northwest Natural Gas Company, dba NW Natural (NYSE:NWN), reported a consolidated net loss of $8.0 million, or $0.29 per share for the third quarter of 2016, compared to a loss of $6.7 million, or $0.24 per share, for the same period of 2015. The Company's results typically reflect a loss during the third quarter due to the impact of decreased heating requirements during the summer months. Results included higher operations and maintenance (O&M) expense in 2016 as costs moved to more sustainable levels after implementing savings initiatives in 2015, partially offset by higher revenues from the gas storage segment.

Consolidated net income was $30.6 million, or $1.11 per share, for the first nine months of 2016, compared to net income of $24.0 million, or $0.88 per share, for the same period of 2015. Results for the nine month periods were affected by non-cash charges related to the Company's environmental regulatory proceeding in 2015 and 2016. The first quarter of 2016 included a $3.3 million pre-tax, or $0.07 per share after-tax disallowance (1), from the OPUC's 2016 Order (2016 Order), which was related to the Company's compliance filing under the environmental mechanism. The first quarter of 2015 included a $15.0 million pre-tax charge or $0.33 per share after-tax disallowance from the February 2015 OPUC Order (2015 Order) in the environmental docket.

Excluding these charges (2), consolidated net income was $32.6 million, or $1.18 per share for the first nine months of 2016, compared to $1.21 per share on net income of $33.1 million for 2015. The decrease in net income was primarily due to lower other income and higher O&M expense almost entirely offset by strong utility margin and gas storage revenues.

(1)Earnings per share (EPS) calculation based on average diluted shares outstanding of 27.6 million and an income tax rate of 39.5%. (2)See tabular reconciliation of non-GAAP measures in Consolidated Results section below.

North Mist Gas Storage Expansion Project Moves ForwardThe North Mist gas storage expansion project is designed to provide long-term, no-notice underground gas storage to support electric generating plants, which are integrating more wind power into the generation mix. Through our no-notice storage service, the local electric company will be able to draw on our North Mist gas storage facility to meet its fueling needs and rapidly respond to changing conditions in wind generation. Natural gas storage enables electric generation to adjust quickly when renewable energy - like wind and solar - rise and fall with natural variability. The reliability and flexibility of supporting resources like natural gas are vital to the region as we move toward 50% renewable electricity by 2040.

The estimated cost of the expansion is $128 million with a targeted in-service date during the winter of 2018-19. As of Sept. 30, 2016, the Company has invested $14 million in the expansion and expects to spend an additional $8 million to $10 million in the fourth quarter of 2016 as the Company begins construction and procuring materials. The majority of capital expenditures are anticipated in 2017 with injections and testing planned in early 2018 to meet the targeted in-service date. The expansion will be included in rates under an established tariff when it is placed into service.

Consolidated ResultsFor the three months ended Sept. 30, 2016, NW Natural's consolidated net loss was $0.05 per share or $1.4 million higher compared to the same period in 2015. Results were driven by a $2.8 million increase in O&M expense as well as a $0.7 million decrease in utility margin as a result of lower contributions from our gas reserve investments, which decreased due to regular amortization, offset by customer growth. These factors were partially offset by a $1.7 million increase in gas storage revenues from higher asset management revenues predominately at the Mist storage facility and slightly higher firm storage pricing at the Gill Ranch facility.

The third quarter results are summarized in the table below:
  Three Months Ended September 30,
  2016   2015    
In thousands, except per share data Amount Per Share   Amount Per Share   Change
Net income (loss):              
Utility segment $ (9,511 ) $ (0.35 )   $ (7,529 ) $ (0.28 )   $ (1,982 )
Gas storage segment 1,813   0.06     799   0.04     1,014  
Other (342 )     45       (387 )
Consolidated net income (loss) $ (8,040 ) $ (0.29 )   $ (6,685 ) $ (0.24 )   $ (1,355 )
Utility margin $ 50,923       $ 51,619       $ (696 )
Gas storage operating revenues 7,293       5,596       1,697  
                     

For the nine months ended Sept. 30, 2016, NW Natural net income increased $0.23 per share or $6.6 million compared to 2015. The increase was largely due to the non-cash charges related to the 2015 and 2016 Orders. Excluding these charges on a non-GAAP basis, net income decreased $0.5 million primarily due to several large offsetting factors including a $5.5 million decrease in other income related to the recognition of equity earnings on deferred regulatory assets and a $3.7 million increase in O&M expense. These factors were almost entirely offset by a $4.0 million increase in utility margin attributable to customer growth and gains from gas cost incentive sharing and a $3.4 million increase in gas storage revenues from the same drivers noted for the quarter. In addition, interest expense was lower by $1.8 million due to the redemption of debt for both the utility and Gill Ranch in 2015.

The nine month results are summarized in the table below:

  Nine Months Ended September 30,
  2016   2015    
In thousands, except per share data Amount Per Share   Amount Per Share   Change
Net income (loss):              
Utility segment $ 26,848   $ 0.97     $ 23,051   $ 0.84     $ 3,797  
Gas storage segment 3,988   0.14     827   0.04     3,161  
Other (216 )     120       (336 )
Consolidated net income $ 30,620   $ 1.11     $ 23,998   $ 0.88     $ 6,622  
Adjustments:              
Regulatory environmental disallowance, net of taxes ($1,304 and $5,925) (1) 1,996   0.07     9,075   0.33     (7,079 )
Adjusted consolidated net income (1) $ 32,616   $ 1.18     $ 33,073   $ 1.21     $ (457 )
Utility margin $ 256,958       $ 252,935       $ 4,023  
Gas storage operating revenues 19,654       16,232       3,422  
                     

(1) Regulatory environmental disallowance of $3.3 million in 2016 is recorded in utility other income and expense, net ($2.8 million) and utility O&M expense ($0.5 million). Regulatory environmental disallowance of $15.0 million in 2015 is recorded in utility O&M expense. Adjusted EPS and net income are non-GAAP financial measures based on the after-tax disallowance. EPS is calculated using the combined federal and state statutory tax rate of 39.5% and 27.6 million and 27.4 million diluted shares for the nine months ended September 30, 2016 and 2015, respectively.

Utility ResultsFor the three months ended Sept. 30, 2016, utility segment net loss increased $2.0 million or $0.07 per share compared to the same period in 2015 due to a $1.6 million increase in O&M expense and a $0.7 million decrease in utility margin primarily reflecting lower contributions from our gas reserve investments, which decreased due to regular amortization, offset by strong customer growth.

For the three months ended Sept. 30, 2016, total gas sales and transportation deliveries increased 5% compared to the same period last year primarily due to greater customer usage and growth. As the third quarter is not a primary heating quarter, weather did not significantly affect volumes.

For the nine months ended Sept. 30, 2016, utility segment net income increased $3.8 million or $0.13 per share compared to the same period in 2015 due to a $4.0 million increase in utility margin reflecting customer growth and an increase in gas cost incentive sharing gains, as well as a $12.2 million decrease in O&M expense primarily due to the $15.0 million regulatory disallowance as a result of the 2015 Order offset by higher non-payroll costs. These positive factors were offset by an $8.3 million decrease in other income due to the recognition of $5.3 million of equity earnings on deferred regulatory assets as a result of the 2015 Order and a $2.8 million interest write-off as a result of the 2016 Order.

Although weather for the nine months ended Sept. 30, 2016 was comparable to the prior year, deliveries increased 5% due to comparatively colder weather in the first quarter of 2016 during our peak heating season. Temperatures for the first nine months of 2015 and 2016 were 22% warmer than average.

Customer Growth. NW Natural achieved a customer growth rate for the trailing 12-month period ended Sept. 30, 2016 of 1.6%, with the Company serving over 718,000 customers at quarter end.

Utility Volume and Margin. The following table presents key utility margin metrics:
      Three Months Ended September 30,   Nine Months Ended September 30,   Favorable/(Unfavorable)Change   Favorable/(Unfavorable) % Change
(Dollars and therms in thousands)   2016   2015   2016   2015   QTD   YTD   QTD   YTD
Gas sales and transportation deliveries   162,205     154,664     727,687     692,527     7,541     35,160     5 %   5 %
Weather (in heating degree days)   78     75     2,066     2,068     3     (2 )   4      
Utility operating revenues   $ 80,378     $ 87,475     $ 422,617     $ 476,672     $ (7,097 )   $ (54,055 )   (8 )   (11 )
Less: Cost of gas   28,264     35,856     157,546     223,737     7,592     66,191     21     30  
  Environmental remediation expense   1,191         8,113         (1,191 )   (8,113 )        
Utility margin (1)   $ 50,923     $ 51,619     $ 256,958     $ 252,935     $ (696 )   $ 4,023     (1 )%   2 %
                                                             

(1) In November 2015 the Company began collecting revenues from customers through the environmental mechanism. These collections are included in utility operating revenues and are offset by the amortization of environmental liabilities presented in the environmental remediation expense line in the operating expense section of the income statement. Utility margin provides a key metric in assessing the performance of the utility segment.

Gas Storage ResultsFor the three and nine months ended Sept. 30, 2016, the Company's gas storage segment net income increased $1.0 million or $0.02 per share and $3.2 million or $0.10 per share, respectively, compared to the same periods in 2015. Results reflected an increase in revenues from our asset management agreements at both facilities but predominately our Mist storage facility. Additionally, slightly higher firm pricing at Gill Ranch for the 2016-17 gas storage year also increased revenues. Lower operating costs for the 2016 year-to-date period and lower interest expense for both the 2016 quarter and year-to-date periods at the Gill Ranch facility also contributed to the improved results.

Consolidated OperationsFor the three months ended Sept. 30, 2016, consolidated O&M expense increased $2.8 million compared to the same period in 2015 due to higher non-payroll costs primarily from contract work as utility operational expenses increased mainly from the timing of system integrity work and other maintenance expense. Overall expense levels were elevated in the third quarter and are also expected to be comparatively higher in the fourth quarter as costs move to more sustainable levels in 2016 after implementing cost savings initiatives in the second half of 2015.

For the nine months ended Sept. 30, 2016 consolidated O&M expense decreased $11.7 million compared to the same period in 2015 primarily due to the $15.0 million pre-tax charge from the 2015 Order offset by higher costs primarily related to similar trends noted for the third quarter above.

For the three months ended Sept. 30, 2016, other income was comparable to the same period in 2015. For the nine months ended Sept. 30, 2016 other income decreased $8.1 million compared to the same period in 2015 due to the recognition of $5.3 million of equity earnings from deferred environmental expenses in the first quarter of 2015 as a result of the 2015 Order. In addition, the 2016 Order resulted in a write-off of $2.8 million of interest in the first quarter of 2016.

Cash FlowsCash provided by operations increased $33.7 million to $206.4 million for the first nine months of 2016 due to historically low natural gas prices decreasing payables, higher collections under regulatory mechanisms and the first year of collections from our environmental mechanism. In addition, the enactment of bonus depreciation resulted in a federal tax refund in 2016 and an increase in deferred tax liabilities. These in flows were partially offset by a decrease in cash from the early credit of gas cost savings to customers in June 2016.

Cash out flows from investing activities increased $7.0 million to $95.2 million primarily due to higher capital expenditures from projects such as infrastructure upgrades in Clark County, Washington to support customer growth, the refurbishment of our liquefied natural gas facility in Newport, Oregon, the North Mist expansion, and our on-going investment in technology.

Cash out flows from financing activities increased $20.3 million to $109.1 million primarily due to reducing short-term debt and commercial paper balances with cash flows from operations.

2016 Earnings GuidanceThe Company reaffirmed earnings guidance today in the range of $1.98 to $2.18 per share including the effects of the pre-tax charge of $3.3 million or $0.07 per share after-tax (1), related to the 2016 Order. Excluding the charge on a non-GAAP basis, earnings guidance is $2.05 to $2.25 per share. The Company's 2016 earnings guidance assumes customer growth from the utility segment, average weather conditions, sustainable operations and maintenance expense levels and normal inflationary increases, slow recovery of the gas storage market, the impact of the five-year extension of bonus depreciation resulting from the enactment of the Federal PATH Act of 2015, and no significant changes in prevailing legislative and regulatory policies, mechanisms, or outcomes.

(1)EPS calculation based on average diluted shares outstanding of 27.6 million and an income tax rate of 39.5%.

Dividend DeclarationThe board of directors of NW Natural declared a quarterly dividend of 47 cents per share on the Company's common stock. The dividends will be paid on Nov. 15, 2016 to shareholders of record on Oct. 31, 2016. The Company's indicated annual dividend rate is $1.88 per share.

Presentation of ResultsIn addition to presenting the results of operations and earnings amounts in total, certain financial measures are expressed in cents per share or exclude the after-tax regulatory charges related to the Orders implementing the SRRM in 2015 and 2016, which are non-GAAP financial measures. The Company presents net income and EPS excluding the regulatory disallowance along with the GAAP measures to illustrate the magnitude of this disallowance on ongoing business and operational results. Although the excluded amounts are properly included in the determination of these items under GAAP, the Company believes the amount and nature of such disallowance make period to period comparisons of operations difficult or potentially confusing. Financial measures are expressed in cents per share as these amounts reflect factors that directly impact earnings, including income taxes. All references in this section to EPS are on the basis of diluted shares. The Company uses such non-GAAP financial measures to analyze its financial performance because it believes they provide useful information to its investors and creditors in evaluating its financial condition and results of operations.

Conference Call ArrangementsAs previously reported, NW Natural will conduct a conference call and webcast starting at 8 a.m. Pacific Time (11 a.m. Eastern Time) on Nov. 2, 2016 to review the Company's financial and operating results for the three and nine months ended Sept. 30, 2016.

To hear the conference call live, please dial 1-866-267-6789 within the United States and 1-855-669-9657 from Canada. International callers can dial 1-412-902-4110. To access the conference replay, please call 1-877-344-7529 and enter the conference identification pass code 10094048. To hear the replay from Canada, please dial 1-855-669-9658 and from international locations, please dial 1-412-317-0088.

To hear the conference by webcast, log on to NW Natural's corporate website at nwnatural.com.

Forward-Looking StatementsThis report, and other presentations made by NW Natural from time to time, may contain forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as "anticipates," "assumes," "intends," "plans," "seeks," "believes," "estimates," "expects" and similar references to future periods. Examples of forward-looking statements include, but are not limited to, statements regarding the following: plans, objectives, goals, strategies, future events, the economy, investments, customer growth, weather and its impacts, environmental remediation cost recoveries, levels and pricing of gas storage contracts, gas storage development or costs, events or timing related thereto, financial results and positions, operation and maintenance expense, capital expenditures, free cash flow levels, revenues and earnings and the timing thereof, dividends, effects of regulatory disallowance, performance, support of renewable energy, effects of legislative policies, including bonus depreciation, timing or effects of future regulatory proceedings or future regulatory approvals, regulatory prudence reviews, effects of and recoveries under regulatory mechanisms, including, but not limited to, SRRM, and other statements that are other than statements of historical facts.

Forward-looking statements are based on the Company's current expectations and assumptions regarding its business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. The Company's actual results may differ materially from those contemplated by the forward-looking statements. The Company cautions you therefore against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future operational or financial performance. Important factors that could cause actual results to differ materially from those in the forward-looking statements are discussed by reference to the factors described in Part I, Item 1A "Risk Factors", and Part II, Item 7 and Item 7A "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Quantitative and Qualitative Disclosure about Market Risk" in the Company's most recent Annual Report on Form 10-K and in Part I, Items 2 and 3 "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Quantitative and Qualitative Disclosures About Market Risk", and Part II, Item 1A, "Risk Factors", in the Company's quarterly reports filed thereafter.

All forward-looking statements made in this report and all subsequent forward-looking statements, whether written or oral and whether made by or on behalf of the Company, are expressly qualified by these cautionary statements. Any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law. New factors emerge from time to time and it is not possible for the Company to predict all such factors, nor can it assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statements.

About NW NaturalNW Natural (NYSE:NWN) is headquartered in Portland, Ore., and provides natural gas service to more than 718,000 residential, commercial, and industrial customers through approximately 14,000 miles of mains and service lines in western Oregon and southwestern Washington. It is the largest independent natural gas utility in the Pacific Northwest with $3.0 billion in total assets. NW Natural and its subsidiaries currently own and operate underground gas storage facilities with storage capacity of approximately 31 Bcf in Oregon and California. Additional information is available at nwnatural.com.

 
  NORTHWEST NATURAL GAS COMPANY
  Financial Highlights (Unaudited)
  Third Quarter - 2016
                                       
      Three Months Ended     Nine Months Ended     Twelve Months Ended  
In thousands, except per share amounts, customer, and degree day data   September 30,     September 30,     September 30,  
2016   2015 Change 2016   2015 Change 2016   2015 Change
Operating revenues $ 87,727     $ 93,128     (6 )% $ 442,439     $ 493,073     (10 )% $ 673,157     $ 733,356     (8 )%
                                     
Operating expenses:                                    
  Cost of gas   28,264       35,856     (21 )   157,546       223,737     (30 )   261,114       343,519     (24 )
  Operations and maintenance   34,870       32,031     9     109,771       121,458     (10 )   145,834       155,355     (6 )
  Environmental remediation   1,191           100     8,113           100     11,626           100  
  General taxes   7,211       6,772     6     23,333       23,153     1     30,461       30,052     1  
  Depreciation and amortization   20,628       20,342     1     61,435       60,683     1     81,675       80,640     1  
  Total operating expenses   92,164       95,001     (3 )   360,198       429,031     (16 )   530,710       609,566     (13 )
Income (loss) from operations   (4,437 )     (1,873 )   137     82,241       64,042     28     142,447       123,790     15  
Other income (expense), net   652       746     (13 )   (1,144 )     6,930     (117 )   (327 )     6,811     (105 )
Interest expense, net   9,729       10,111     (4 )   29,183       31,030     (6 )   40,692       41,569     (2 )
Income (loss) before income taxes   (13,514 )     (11,238 )   20     51,914       39,942     30     101,428       89,032     14  
Income tax expense   (5,474 )     (4,553 )   20     21,294       15,944     34     41,103       36,564     12  
Net income (loss) $ (8,040 )   $ (6,685 )   20     30,620       23,998     28   $ 60,325     $ 52,468     15  
                                     
Common shares outstanding:                                    
  Average diluted for period   27,554       27,363       27,629       27,399       27,590       27,370    
  End of period   27,558       27,367       27,558       27,367       27,558       27,367    
                                       
Per share information:                                    
Diluted earnings (loss) per share $ (0.29 )   $ (0.24 )   $ 1.11     $ 0.88     $ 2.19     $ 1.92    
Dividends declared per share of common stock   0.4700       0.4650       1.4025       1.3950       1.8680       1.8600    
Book value per share, end of period   28.27       27.74       28.27       27.74       28.27       27.74    
Market closing price, end of period   60.11       45.84       60.11       45.84       60.11       45.84    
                                     
Capital structure, end of period:                                    
  Common stock equity   49.6 %     47.5 %     49.6 %     47.5 %     49.6 %     47.5 %  
  Long-term debt   33.8       38.4       33.8       38.4       33.8       38.4    
  Short-term debt (including amounts due in one year)   16.6       14.1       16.6       14.1       16.6       14.1    
  Total   100.0 %     100.0 %     100.0 %     100.0 %     100.0 %     100.0 %  
                                       
Operating statistics:                                    
Customers - end of period   718,139       706,566     1.6 %   718,139       706,566     1.6 %   718,139       706,566     1.6 %
Utility volumes - therms:                                    
  Residential and commercial sales   55,610       53,662       381,109       357,545       594,292       557,916    
  Industrial sales and transportation   106,595       101,002       346,578       334,982       469,480       460,902    
Total utility volumes sold and delivered   162,205       154,664       727,687       692,527       1,063,772       1,018,818    
Utility operating revenues:                                    
  Residential and commercial sales $ 68,508     $ 73,236     $ 388,689     $ 432,067     $ 601,457     $ 652,950    
  Industrial sales and transportation   13,412       15,959       42,048       53,623       59,920       73,660    
  Other revenues   619       651       3,132       3,188       3,858       3,926    
  Less: Revenue taxes   2,161       2,371       11,252       12,206       17,080       18,217    
Total utility operating revenues   80,378       87,475       422,617       476,672       648,155       712,319    
  Less: Cost of gas   28,264       35,856       157,546       223,737       261,114       343,519    
  Environmental remediation expense   1,191             8,113             11,626          
Utility margin, net $ 50,923     $ 51,619       256,958     $ 252,935     $ 375,415     $ 368,800    
Degree days:                                    
  Average (25-year average)   95       95       2,657       2,641       4,256       4,240    
  Actual   78       75     4 %   2,066       2,068   —%   3,456       3,422     1 %
Percent colder (warmer) than average weather   (18 )%     (21 )%     (22 )%     (22 )%     (19 )%     (19 )%  

NORTHWEST NATURAL GAS COMPANY            
Consolidated Balance Sheets (Unaudited)     September 30,     September 30,
In thousands     2016     2015
Assets:            
Current assets:            
  Cash and cash equivalents   $ 6,230     $ 5,227  
  Accounts receivable     25,506       29,800  
  Accrued unbilled revenue     15,537       15,752  
  Allowance for uncollectible accounts     (289 )     (308 )
  Regulatory assets     55,280       82,712  
  Derivative instruments     4,857       2,956  
  Inventories     67,470       80,974  
  Gas reserves     16,257       17,822  
  Income taxes receivable     2,257        
  Deferred tax assets           15,663  
  Other current taxes     17,480       25,972  
    Total current assets     210,585       276,570  
Non-current assets:            
  Property, plant, and equipment     3,177,196       3,072,998  
  Less: Accumulated depreciation     943,334       905,137  
    Total property, plant, and equipment, net     2,233,862       2,167,861  
  Gas reserves     103,976       117,784  
  Regulatory assets     341,188       333,953  
  Derivative instruments     1,151       299  
  Other investments     67,853       68,503  
  Restricted cash           4,500  
  Other non-current assets     1,269       1,248  
    Total non-current assets     2,749,299       2,694,148  
    Total assets   $ 2,959,884     $ 2,970,718  
Liabilities and equity:            
Current liabilities:            
  Short-term debt   $ 194,900     $ 225,200  
  Current maturities of long-term debt     64,994        
  Accounts payable     55,933       54,425  
  Taxes accrued     11,954       11,854  
  Interest accrued     9,671       9,800  
  Regulatory liabilities     27,921       34,127  
  Derivative instruments     5,334       21,949  
  Other current liabilities     31,997       27,924  
    Total current liabilities     402,704       385,279  
Long-term debt     530,219       614,053  
Deferred credits and other non-current liabilities:            
  Deferred tax liabilities     544,575       527,336  
  Regulatory liabilities     342,143       334,490  
  Pension and other postretirement benefit liabilities     216,909       228,861  
  Derivative instruments     1,682       3,540  
  Other non-current liabilities     142,450       117,950  
    Total deferred credits and other non-current liabilities     1,247,759       1,212,177  
Equity:            
  Common stock     389,834       380,208  
  Retained earnings     396,938       388,082  
  Accumulated other comprehensive loss     (7,570 )     (9,081 )
    Total equity     779,202       759,209  
    Total liabilities and equity   $ 2,959,884     $ 2,970,718  

NORTHWEST NATURAL GAS COMPANY            
Consolidated Statements of Cash Flows (Unaudited)     Nine Months Ended September 30,
In thousands     2016     2015
Operating activities:            
  Net income   $ 30,620     $ 23,998  
  Adjustments to reconcile net income to cash provided by operations:            
    Depreciation and amortization     61,435       60,683  
    Regulatory amortization of gas reserves     11,403       13,606  
    Deferred tax liabilities, net     17,810       7,153  
    Qualified defined benefit pension plan expense     3,989       4,238  
    Contributions to qualified defined benefit pension plans     (11,250 )     (11,780 )
    Deferred environmental expenditures     (8,302 )     (8,063 )
    Regulatory disallowance of prior environmental cost deferrals     3,287       15,000  
    Interest income on deferred environmental expenses           (5,322 )
    Amortization of environmental remediation     8,113        
    Other     4,817       669  
    Changes in assets and liabilities:            
      Receivables     83,377       82,586  
      Inventories     3,226       (3,142 )
      Taxes accrued     7,170       2,823  
      Accounts payable     (17,612 )     (36,230 )
      Interest accrued     3,798       3,721  
      Deferred gas costs     (10,470 )     27,042  
      Other, net     14,988       (4,237 )
    Cash provided by operating activities     206,399       172,745  
Investing activities:            
  Capital expenditures     (98,111 )     (86,923 )
  Restricted cash           (1,500 )
  Other     2,868       181  
    Cash used in investing activities     (95,243 )     (88,242 )
Financing activities:            
  Common stock issued, net     4,832       1,252  
  Long-term debt retired           (40,000 )
  Change in short-term debt     (75,135 )     (9,500 )
  Cash dividend payments on common stock     (38,556 )     (38,122 )
  Other     (278 )     (2,440 )
    Cash used in financing activities     (109,137 )     (88,810 )
Increase (decrease) in cash and cash equivalents     2,019       (4,307 )
Cash and cash equivalents, beginning of period     4,211       9,534  
Cash and cash equivalents, end of period   $ 6,230     $ 5,227  
                   
Supplemental disclosure of cash flow information:            
  Interest paid, net of capitalization   $ 23,271     $ 25,264  
  Income taxes paid (refunded)     (6,900 )     10,631  
                   
Investor Contact:Nikki SparleyPhone: 503-721-2530Email: nikki.sparley@nwnatural.comMedia Contact:Melissa MoorePhone: 503-220-2436Email: melissa.moore@nwnatural.com

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