WILLIAMSVILLE, N.Y., Feb. 01, 2018 (GLOBE NEWSWIRE) -- National Fuel Gas Company ("National Fuel" or the "Company") (NYSE:NFG) today announced consolidated results for the first quarter of its 2018 fiscal year.

FISCAL 2018 FIRST QUARTER SUMMARY
  • Consolidated net income of $198.7 million, or $2.30 per share, compared to $88.9 million, or $1.04 per share, in the prior year first quarter
  • Excluding the $111.0 million, or $1.29 per share, reduction in tax expense due to the remeasurement of deferred taxes,  Adjusted Operating Results for the quarter were $87.7 million, or $1.02 per share (see non-GAAP reconciliation on page 21 and discussion of federal tax reform on page 2)
  • Realized net earnings benefit for the quarter of $9.5 million, or $0.11 per share, due to the reduction in the fiscal 2018 federal statutory rate from 2017 Tax Reform Act (see discussion on page 2)
  • Consolidated Adjusted EBITDA of $197.8 million (non-GAAP reconciliation on page 21)
  • Net natural gas and oil production of 40.1 Bcfe
  • Price-related natural gas production curtailments of 1.2 Bcf in Appalachia
  • Average natural gas prices, after the impact of hedging, of $2.72 per Mcf, down $0.25 per Mcf from the prior year
  • Average oil prices, after the impact of hedging, of $59.79 per Bbl, up $5.08 per Bbl from the prior year
  • Weather in Utility segment's Pennsylvania utility service territory 15.9% colder than last year

MANAGEMENT COMMENTS

Ronald J. Tanski, President and Chief Executive Officer of National Fuel Gas Company, stated: "Our 2018 fiscal year is off to a strong start. Operationally, our Utility and Pipeline and Storage subsidiaries entered the winter heating season prepared to provide our customers and service territories with safe and reliable natural gas services.  As expected, operating income in our Exploration and Production segment dipped as older natural gas sales and hedge contracts with more favorable prices continued to expire and production in Seneca's Eastern Development Area followed its normal production curve.  After adding a second rig in 2017 and, in January, connecting the first new Marcellus pad in our Eastern Development Area since 2016, we expect production to increase in the second quarter as we resume our targeted path of measured production growth.

"Perhaps the biggest development in the quarter was the passing of federal tax reform, which we believe will positively impact our business, our shareholders, and our customers. The reduction in the federal tax rate should increase the Company's earnings and cash flows over the long-term, freeing up shareholder capital to be reinvested into growing our business.  We also expect the reduction in the federal tax rate will ultimately benefit our utility and pipeline and storage customers, as well as thousands of Western New York and northwestern Pennsylvania residents and businesses.  We look forward to working with our regulators to evaluate the impact of these positive changes."

DISCUSSION OF FEDERAL INCOME TAX REFORM

On December 22, 2017, the "Tax Cuts and Jobs Act" (the 2017 Tax Reform Act) was enacted, which made significant changes to the taxation of business entities and included provisions that materially impacted the Company's financial statements. The most significant change was the reduction in the statutory corporate tax rate from 35 percent to 21 percent.  As a fiscal year tax payer, the Company is required to use a blended statutory federal tax rate of 24.5 percent for fiscal 2018, including the first quarter ended December 31, 2017.  The Company's income will be taxed at the new 21 percent statutory federal tax rate in fiscal 2019 and beyond.

Excluding the impact on deferred income taxes (discussed below), the reduction in the statutory federal tax rate from 35 percent to 24.5 percent resulted in a benefit of $13.9 million, or $0.16 per share, on the Company's consolidated first quarter earnings.  Consistent with utility rate treatment implemented after previous federal tax reforms, the Company recorded a $6.0 million regulatory refund provision ($4.4 million after-tax, or $0.05 per share) that reduced the Utility segment's operating revenues and deferred the net effect of the reduction in tax rates by increasing the segment's regulatory liability.  The following summarizes the impact of the federal tax rate reduction, excluding the impact on deferred income taxes, on first quarter fiscal 2018 earnings by segment:
(in millions)   Benefit of Tax Rate Reduction   Regulatory Refund Provision   Net Benefit on Q1 FY18 Earnings
Exploration and Production   $ 4.1     $     $ 4.1  
Pipeline and Storage   3.5         3.5  
Gathering   1.6         1.6  
Utility   4.4     (4.4 )    
Energy Marketing   0.2         0.2  
Corporate and All Other   0.1         0.1  
Total Company   $ 13.9     $ (4.4 )   $ 9.5  
                         

Additionally, the Company's deferred income taxes were remeasured as of September 30, 2017, based on the new statutory federal tax rate.  For non-rate regulated activities, the net decrease in the Company's deferred income tax liability was recorded as a reduction to income tax expense, benefiting first quarter earnings by $111.0 million, or $1.29 per share.  For the rate regulated activities of the Utility and Pipeline and Storage segments, the change in deferred income taxes was recorded as a $65.7 million decrease in recoverable future taxes and a $271.0 million increase in taxes refundable to customers.  The 2017 Tax Reform Act includes provisions that stipulate how excess deferred income taxes related to certain accelerated depreciation benefits, which make up substantially all of the regulatory liability, are to be passed back to customers.  Potential refunds of other deferred income taxes will be determined by the federal and state regulatory agencies.  The following summarizes the impact and regulatory accounting treatment of the remeasurement of deferred income taxes by segment:
(in millions)   Decrease / (Increase) in Income Tax   Decrease in Recoverable Future Taxes   Increase in Taxes Refundable to Customers   Net Reduction of Deferred Income Taxes
Exploration and Production   $ 77.3     $     $     $ 77.3  
Pipeline and Storage   14.1     4.4     141.0     159.5  
Gathering   34.9             34.9  
Utility       61.3     130.0     191.3  
Energy Marketing   (0.2 )           (0.2 )
Corporate and All Other   (15.1 )           (15.1 )
Total Company   $ 111.0     $ 65.7     $ 271.0     $ 447.7  
                                 

The 2017 Tax Reform Act also repealed the corporate alternative minimum tax (AMT) and provides that the Company's existing AMT credit carryovers are refundable beginning in fiscal 2019.  As of December 31, 2017, the Company had $92 million of AMT credit carryovers that are expected to be utilized by or refunded to the Company between fiscal 2019 and fiscal 2022.

DISCUSSION OF RESULTS BY SEGMENT

The following discussion of the earnings of each segment is summarized in a tabular form on pages 8 and 9 of this report.  It may be helpful to refer to those tables while reviewing this discussion.  Note that management defines Adjusted EBITDA as reported GAAP earnings before the following items: interest expense, income taxes, depreciation, depletion and amortization, interest and other income, impairments, and other items reflected in operating income that impact comparability.

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, primarily in Pennsylvania and California.
  Three Months Ended
  December 31,
(in thousands except per share amounts) 2017   2016   Variance
Net Income $ 106,698     $ 35,080     $ 71,618  
Net Income Per Share (Diluted) $ 1.24     $ 0.41     $ 0.83  
Adjusted EBITDA $ 79,495     $ 102,476     $ (22,981 )

Excluding the impact of federal tax reform as discussed on page 2, earnings for the Exploration and Production segment declined $9.8 million, as the positive impact of higher realized crude oil prices was more than offset by lower natural gas and crude oil production and a decline in realized natural gas prices.

Seneca's first quarter net production was 40.1 billion cubic feet equivalent ("Bcfe"), a decrease of 4.8 Bcfe, or 11 percent, from the prior year, and a decrease of 0.2 Bcfe, or 1 percent, versus the fiscal 2017 fourth quarter.  Net natural gas production decreased 4.5 billion cubic feet ("Bcf") versus the prior year due mainly to natural declines from Marcellus wells in the Eastern Development Area ("EDA") where the Company last brought on a new development pad in fiscal 2016, offset partially by higher net production in the Western Development Area ("WDA") from new Marcellus and Utica wells completed and connected to sales during the past year.  As a result of depressed local daily spot prices in Pennsylvania, Seneca voluntarily curtailed an estimated 1.2 Bcf of net natural gas production during the first quarter.

Seneca's oil production decreased 48 thousand barrels ("Mbbl"), or 7 percent, versus the prior year and was relatively flat when compared to the fiscal 2017 fourth quarter.  The year over year decrease in production was largely due to the lagging impact of a significant reduction in well workover activity in California over the last few years in response to low crude oil prices, as well as modifications made to steam operations at the Midway Sunset fields.  Over the past two quarters, Seneca has seen a steady improvement in production levels at North and South Midway Sunset as the Company has recently increased workover activity and the fields continue to respond favorably to steaming operations.  Seneca also temporarily shut-in production at its Sespe field in Ventura County, California for a short period due to the wildfires that affected the region during the quarter.

Seneca's average realized natural gas price, after the impact of hedging and all marketing and transportation costs, was $2.72 per thousand cubic feet ("Mcf"), a decrease of $0.25 per Mcf from the prior year.  The decline in Seneca's realized natural gas price is primarily attributable to the expiration of physical firm sales and financial hedge contracts over the past 12 months that had favorable pricing relative to current market prices and hedge book. Seneca's average realized oil price, after the impact of hedging, was $59.79 per barrel ("Bbl"), an increase of $5.08 per Bbl.  The improvement in oil price realizations was due primarily to higher market prices for West Texas Intermediate (WTI) crude oil during the quarter and stronger price differentials relative to WTI at local sales points in California.

Lease operating and transportation expense ("LOE") was relatively flat when compared to the prior year as the impact of lower natural gas production in Appalachia, which resulted in lower gathering and other variable operating costs, was offset by  an increase in well workover activities as well as higher steam volumes at South Midway Sunset in California.  Depreciation, depletion and amortization ("DD&A") expense decreased $1.6 million as the impact of lower production was slightly offset by a higher per unit DD&A rate, which increased by $0.03 per thousand cubic feet equivalent ("Mcfe") to $0.68 per Mcfe due mainly to a higher depletable fixed asset balance at December 31, 2017.

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 Pennsylvania.
  Three Months Ended
  December 31,
(in thousands except per share amounts) 2017   2016   Variance
Net Income $ 38,462     $ 19,368     $ 19,094  
Net Income Per Share (Diluted) $ 0.45     $ 0.23     $ 0.22  
Adjusted EBITDA $ 50,773     $ 48,014     $ 2,759  

Excluding the impacts of federal tax reform as discussed on page 2, the Pipeline and Storage segment's earnings increased $1.5 million due to lower Operation and Maintenance ("O&M") expense, which was partially offset by an increase in DD&A expense.  O&M expense decreased $2.9 million compared to the prior year first quarter due mostly to lower pension and post-retirement benefit expenses and a decrease in the reserve for preliminary engineering costs on projects in development.

Gathering Segment

The Gathering segment's operations are carried out by National Fuel Gas Midstream Corporation's subsidiary limited liability companies. The Gathering segment constructs, owns and operates natural gas gathering pipelines and compression facilities in the Appalachian region which currently delivers Seneca's gross Appalachian production to the interstate pipeline system.
  Three Months Ended
  December 31,
(in thousands except per share amounts) 2017   2016   Variance
Net Income $ 45,400     $ 10,981     $ 34,419  
Net Income Per Share (Diluted) $ 0.53     $ 0.13     $ 0.40  
Adjusted EBITDA $ 20,731     $ 25,101     $ (4,370 )

Excluding the impacts of federal tax reform as discussed on page 2, the Gathering segment's earnings decreased $2.0 million versus the prior year first quarter due mainly to lower operating revenues. Operating revenues declined $4.0 million due primarily to lower throughput from Seneca, which decreased by 7.4 Bcf versus the prior year.  Most of the decrease in throughput occurred on Midstream Corporation's Covington (Tioga Co., Pa.) and Trout Run (Lycoming Co., Pa.) gathering systems, which serve producing areas where Seneca did not add any new wells over the last year and have been subject to price-related production curtailments.   In 2017, Seneca resumed development activities on its Lycoming Co., Pa. acreage. Production from new wells is expected to help increase Trout Run system throughput starting in the second quarter of fiscal 2018.

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.
  Three Months Ended
  December 31,
(in thousands except per share amounts) 2017   2016   Variance
Net Income $ 20,993     $ 21,175     $ (182 )
Net Income Per Share (Diluted) $ 0.24     $ 0.25     $ (0.01 )
Adjusted EBITDA $ 46,985     $ 52,331     $ (5,346 )

Excluding the impact of federal tax reform as discussed on page 2, the Utility segment's earnings were relatively flat versus the prior year as the impact of colder weather and new customer rates in Distribution's New York service territory (effective in April 2017) was offset by an increase in O&M expense.  Weather in Distribution's Pennsylvania service territory was 15.9 percent colder on average than last year, resulting in higher residential and transportation customer throughput and revenues.  In New York, the impact of weather variations on earnings is largely mitigated by that jurisdiction's weather normalization clause.  O&M expense increased nearly $1.0 million due mainly to higher amortization of environmental remediation costs that resulted from the April 2017 rate case order in New York.

Energy Marketing Segment

The Energy Marketing segment's operations are carried out by National Fuel Resources, Inc. ("NFR").  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.
  Three Months Ended
  December 31,
(in thousands except per share amounts) 2017   2016   Variance
Net Income $ 1,046     $ 1,782     $ (736 )
Net Income Per Share (Diluted) $ 0.01     $ 0.02     $ (0.01 )
Adjusted EBITDA $ 1,680     $ 2,846     $ (1,166 )

The $0.7 million decrease in the Energy Marketing segment's first quarter earnings was primarily attributable to lower customer margins. NFR's customer margins were negatively impacted by stronger natural gas prices at local purchase points relative to NYMEX-based customer sales contracts.

Corporate and All Other

For the first quarter of fiscal 2018, the Corporate and All Other category had a net loss of $13.9 million compared to net income of $0.5 million in the prior year first quarter.  The decrease in earnings was primarily attributable to the non-cash $15.1 million loss recorded to remeasure certain deferred tax assets resulting from federal tax reform.

GUIDANCE

National Fuel is revising its fiscal 2018 earnings guidance to $3.20 to $3.40 per share, or $3.30 per share at the midpoint of the range.  The revised earnings guidance does not include the impact of the remeasurement of deferred income taxes resulting from the 2017 Tax Reform Act, which reduced the Company's consolidated income tax expense and benefited earnings for the three months ended December 31, 2017 by $111.0 million, or $1.29 per share.  While the Company expects to record additional adjustments to its deferred income taxes as a result of the 2017 Tax Reform Act during the remaining nine months of fiscal 2018, the amounts of these and other potential adjustments are not reasonably determinable at this time.  The final determination of the impact of the income tax effects of certain items will require additional analysis and further interpretation of the 2017 Tax Reform Act from yet to be issued U.S. Treasury regulations, state income tax guidance, federal and state regulatory guidance, and technical corrections.  Some or all of these factors may be significant.  Because the amounts of final adjustments are not reasonably determinable at this time, the Company is unable to provide earnings guidance other than on a non-GAAP basis that excludes the impact of the remeasurement of deferred income taxes and other potential adjustments.

The revised earnings guidance range reflects the impact of actual results for the three months ended December 31, 2017, the impact of lower federal income tax rates on fiscal 2018 income, and other updates to key forecast assumptions, including revisions to the Exploration and Production segment's forecasted production, natural gas and oil pricing, and operating expense assumptions, as outlined in the table below.

The Exploration and Production segment's fiscal 2018 forecasted production was reduced by 5 Bcfe at the midpoint of the range to reflect first quarter actual production, which was negatively impacted by 1.2 Bcf of voluntary price-related natural gas curtailments and approximately 2 Bcf of unforecasted operational natural gas curtailments, and adjustments made to Seneca's operations schedule in Appalachia that pushed a portion of fiscal 2018 production to fiscal 2019.

Excluding the impact of the remeasurement of deferred income taxes, the Company expects that the reduction in the statutory federal tax rate from 35 percent to 24.5 percent will lower the Company's effective income tax rate for fiscal 2018 to approximately 27 percent. Furthermore, consistent with utility rate treatment implemented after previous tax reforms, the Company expects to record a regulatory refund provision of approximately $16.0 million in fiscal 2018 to reduce the Utility segment's operating revenues and defer the net effect of the reduction in tax rates by increasing the segment's regulatory liability. The Company recorded a $6.0 million ($4.4 million after-tax) regulatory refund provision in the first quarter.  The Company's earnings guidance, including the impact from the Utility segment's projected regulatory refund provision, assumes normal weather.

Additional details on the Company's forecast assumptions and business segment guidance for fiscal 2018 are outlined in the table below.
               
    Updated FY 2018 Guidance         Previous FY 2018 Guidance
Consolidated Earnings per Share (1)   $3.20 to $3.40         $2.75 to $3.05
               
Consolidated Effective Tax Rate (1)   ~27%         ~38%
               
Capital Expenditures (Millions)              
Exploration and Production (2)   $300 - $330         $275 - $325
Pipeline and Storage   $110 - $140         $110 - $140
Gathering   $60 - $80         $60 - $80
Utility   $90 - $100         $90 - $100
Consolidated Capital Expenditures   $560 - $650         $535 - $645
               
Exploration & Production Segment Guidance              
               
Commodity Price Assumptions              
NYMEX natural gas price   $3.00 /MMBtu         $3.00 /MMBtu
Appalachian basin spot price (winter/summer)   $2.40/$2.00 /MMBtu         $2.40 /MMBtu
NYMEX (WTI) crude oil price   $60.00 /Bbl         $50.00 /Bbl
California oil price (% of WTI)   98%         95%
               
Production (Bcfe)              
East Division - Appalachia (3)   160 to 175         165 to 180
West Division - California   ~ 20         ~ 20
Total Production   180 to 195         185 to 200
               
E&P Operating Costs ($/Mcfe)              
LOE   $0.90 - $1.00         $0.90 - $1.00
G&A   $0.30 - $0.35         $0.30 - $0.35
DD&A   ~ $0.70         $0.65 - $0.70
               
Other Business Segment Guidance (Millions)              
Gathering Segment Revenues   $110 - $120         $115 - $125
Pipeline and Storage Segment Revenues   ~$295         ~$295
Utility Segment Regulatory Refund Provision   ~$16         $0

 

(1)   Excludes earnings impact of the remeasurement of deferred income taxes resulting from the 2017 Tax Reform Act.(2)   Net of conveyance proceeds received from joint development partner for working interest in joint development wells.(3)   Seneca East Division - Appalachia production guidance assumes approximately 17.5 Bcf of spot sales in FY18.

EARNINGS TELECONFERENCE

The Company will host a conference call on Friday, February 2, 2018, 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 NFG Investor Relations News & Events page at National Fuel's website at investor.nationalfuelgas.com.  For those without Internet access, audio access is also provided by dialing (toll-free) 833-287-0795, using conference ID number "8999277."  For those unable to listen to the live conference call, an audio replay will be available approximately two hours following the teleconference at the same website link and by phone at (toll-free) 800-585-8367 using conference ID number "8999277."  Both the webcast and a telephonic replay will be available until the close of business on Friday, February 9, 2018.

National Fuel is an integrated energy company reporting financial results for 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.
Analyst Contact: Brian M. Welsch 716-857-7875
Media Contact: Karen L. Merkel 716-857-7654

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: 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; governmental/regulatory actions, initiatives and proceedings, including those involving rate cases (which address, among other things, target rates of return, rate design and retained natural gas), environmental/safety requirements, affiliate relationships, industry structure, and franchise renewal; 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; impairments under the SEC's full cost ceiling test for natural gas and oil reserves; changes in the price of natural gas or oil; 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; 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; increasing health care costs and the resulting effect on health insurance premiums and on the obligation to provide other post-retirement benefits; changes in price differentials between similar quantities of natural gas or oil sold at different geographic locations, and the effect of such changes on commodity production, revenues and demand for pipeline transportation capacity to or from such locations; other changes in price differentials between similar quantities of natural gas or oil having different quality, heating value, hydrocarbon mix or delivery date; the cost and effects of legal and administrative claims against the Company or activist shareholder campaigns to effect changes at the Company; 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; 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; 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; significant differences between the Company's projected and actual capital expenditures and operating expenses; or increasing costs of insurance, changes in coverage and the ability to obtain insurance. The Company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date thereof.
                           
NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS
QUARTER ENDED DECEMBER 31, 2017
(Unaudited)
                           
                           
  Upstream   Midstream Businesses   Downstream Businesses        
                           
  Exploration &   Pipeline &           Energy   Corporate /    
(Thousands of Dollars) Production   Storage   Gathering   Utility   Marketing   All Other   Consolidated*
                           
First quarter 2017 GAAP earnings $ 35,080     $ 19,368     $ 10,981     $ 21,175     $ 1,782     $ 522     $ 88,908  
                           
Earnings drivers**                          
Higher (lower) crude oil prices 2,218                         2,218  
Higher (lower) natural gas prices (5,951 )                       (5,951 )
Higher (lower) natural gas production (8,641 )                       (8,641 )
Higher (lower) crude oil production (1,726 )                       (1,726 )
Lower (higher) depreciation / depletion 1,059     (607 )   (135 )               317  
                           
Higher (lower) gathering and processing revenues         (2,619 )               (2,619 )
Lower (higher) other operating expenses (588 )   1,903     (203 )   (696 )           416  
                           
Colder weather             1,241             1,241  
Impact of new rates             1,021             1,021  
Regulatory true-up adjustments             (1,213 )           (1,213 )
                           
Higher (lower) margins                 (761 )   352     (409 )
                           
(Higher) lower interest expense     306                     306  
                           
Lower (higher) income tax expense / effective tax rate 3,870         949                 4,819  
                           
Impact of 2017 Tax Reform Act                          
Impact of tax rate change (35% to 24.5%) on current period earnings 4,094     3,527     1,544     4,406     183     111     13,865  
Refund provision on tax rate change             (4,406 )           (4,406 )
Remeasurement of deferred income taxes under2017 Tax Reform 77,300     14,100     34,900         (200 )   (15,100 )   111,000  
                           
All other / rounding (17 )   (135 )   (17 )   (535 )   42     170     (492 )
First quarter 2018 GAAP earnings $ 106,698     $ 38,462     $ 45,400     $ 20,993     $ 1,046     $ (13,945 )   $ 198,654  
                           
* Amounts do not reflect intercompany eliminations
** Earnings drivers have been calculated using a 35% federal statutory rate. The impact of the change to a blended year 24.5% federal statutory rate is broken out separately under the caption "Impact of 2017 Tax Reform Act."

NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS PER SHARE
QUARTER ENDED DECEMBER 31, 2017
(Unaudited)
                             
    Upstream   Midstream Businesses   Downstream Businesses        
                             
    Exploration &   Pipeline &           Energy   Corporate /    
    Production   Storage   Gathering   Utility   Marketing   All Other   Consolidated*
                             
First quarter 2017 GAAP earnings   $ 0.41     $ 0.23     $ 0.13     $ 0.25     $ 0.02     $     $ 1.04  
                             
Earnings drivers**                            
Higher (lower) crude oil prices   0.03                         0.03  
Higher (lower) natural gas prices   (0.07 )                       (0.07 )
Higher (lower) natural gas production   (0.10 )                       (0.10 )
Higher (lower) crude oil production   (0.02 )                       (0.02 )
Lower (higher) depreciation / depletion   0.01     (0.01 )                    
                             
Higher (lower) gathering and processing revenues           (0.03 )               (0.03 )
Lower (higher) other operating expenses   (0.01 )   0.02         (0.01 )            
                             
Colder weather               0.01             0.01  
Impact of new rates               0.01             0.01  
Regulatory true-up adjustments               (0.01 )           (0.01 )
                             
Higher (lower) margins                   (0.01 )       (0.01 )
                             
(Higher) lower interest expense                            
                             
Lower (higher) income tax expense / effective tax rate   0.04         0.01                 0.05  
                             
Impact of 2017 Tax Reform Act                            
Impact of tax rate change (35% to 24.5%) on current period earnings   0.05     0.04     0.02     0.05             0.16  
Refund provision on tax rate change               (0.05 )           (0.05 )
Remeasurement of deferred income taxes under2017 Tax Reform   0.90     0.16     0.40             (0.17 )   1.29  
                             
All other / rounding       0.01         (0.01 )            
First quarter 2018 GAAP earnings   $ 1.24     $ 0.45     $ 0.53     $ 0.24     $ 0.01     $ (0.17 )   $ 2.30  
                             
* Amounts do not reflect intercompany eliminations
** Earnings drivers have been calculated using a 35% federal statutory rate. The impact of the change to a blended year 24.5% federal statutory rate is broken out separately under the caption "Impact of 2017 Tax Reform Act."

         
         
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
         
(Thousands of Dollars, except per share amounts)        
  Three Months Ended  
  December 31,  
  (Unaudited)  
SUMMARY OF OPERATIONS 2017   2016  
Operating Revenues:        
Utility and Energy Marketing Revenues $ 225,725     $ 207,780    
Exploration and Production and Other Revenues 140,450     161,694    
Pipeline and Storage and Gathering Revenues 53,480     53,026    
  419,655     422,500    
Operating Expenses:        
Purchased Gas 94,034     70,243    
Operation and Maintenance:        
Utility and Energy Marketing 51,369     50,422    
Exploration and Production and Other 35,542     30,461    
Pipeline and Storage and Gathering 20,037     22,660    
Property, Franchise and Other Taxes 20,848     20,379    
Depreciation, Depletion and Amortization 55,830     56,196    
  277,660     250,361    
         
Operating Income 141,995     172,139    
         
Other Income (Expense):        
Interest Income 2,249     1,600    
Other Income 1,722     1,614    
Interest Expense on Long-Term Debt (28,087 )   (29,103 )  
Other Interest Expense (502 )   (910 )  
         
Income Before Income Taxes 117,377     145,340    
         
Income Tax Expense (Benefit) (81,277 )   56,432    
         
Net Income Available for Common Stock $ 198,654     $ 88,908    
         
Earnings Per Common Share        
Basic $ 2.32     $ 1.04    
Diluted $ 2.30     $ 1.04    
         
Weighted Average Common Shares:        
Used in Basic Calculation 85,630,296     85,189,851    
Used in Diluted Calculation 86,325,537     85,797,989    
         

NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
   
  December 31,   September 30,
(Thousands of Dollars) 2017   2017
       
ASSETS      
Property, Plant and Equipment $ 10,023,252     $ 9,945,560  
Less - Accumulated Depreciation, Depletion and Amortization   5,294,211       5,271,486  
Net Property, Plant and Equipment   4,729,041       4,674,074  
       
Current Assets:      
Cash and Temporary Cash Investments   166,289       555,530  
Hedging Collateral Deposits   4,465       1,741  
Receivables - Net   161,029       112,383  
Unbilled Revenue   74,790       22,883  
Gas Stored Underground   24,139       35,689  
Materials and Supplies - at average cost   35,139       33,926  
Unrecovered Purchased Gas Costs   7,787       4,623  
Other Current Assets   47,914       51,505  
Total Current Assets   521,552       818,280  
       
Other Assets:      
Recoverable Future Taxes   116,792       181,363  
Unamortized Debt Expense   8,148       1,159  
Other Regulatory Assets   174,577       174,433  
Deferred Charges   34,063       30,047  
Other Investments   123,368       125,265  
Goodwill   5,476       5,476  
Prepaid Post-Retirement Benefit Costs   57,054       56,370  
Fair Value of Derivative Financial Instruments   21,107       36,111  
Other   754       742  
Total Other Assets   541,339       610,966  
Total Assets $ 5,791,932     $ 6,103,320  
       
CAPITALIZATION AND LIABILITIES      
Capitalization:      
Comprehensive Shareholders' Equity      
Common Stock, $1 Par Value Authorized - 200,000,000 Shares; Issued and      
Outstanding - 85,760,846 Shares and 85,543,125 Shares, Respectively $ 85,761     $ 85,543  
Paid in Capital   800,348       796,646  
Earnings Reinvested in the Business   1,014,733       851,669  
Accumulated Other Comprehensive Loss   (40,919 )     (30,123 )
Total Comprehensive Shareholders' Equity   1,859,923       1,703,735  
Long-Term Debt, Net of Current Portion and Unamortized Discount and Debt Issuance Costs   2,084,465       2,083,681  
Total Capitalization   3,944,388       3,787,416  
       
Current and Accrued Liabilities:      
Notes Payable to Banks and Commercial Paper          
Current Portion of Long-Term Debt         300,000  
Accounts Payable   132,409       126,443  
Amounts Payable to Customers   251        
Dividends Payable   35,590       35,500  
Interest Payable on Long-Term Debt   27,962       35,031  
Customer Advances   18,398       15,701  
Customer Security Deposits   22,503       20,372  
Other Accruals and Current Liabilities   121,596       111,889  
Fair Value of Derivative Financial Instruments   6,579       1,103  
Total Current and Accrued Liabilities   365,288       646,039  
       
Deferred Credits:      
Deferred Income Taxes   453,285       891,287  
Taxes Refundable to Customers   366,768       95,739  
Cost of Removal Regulatory Liability   205,554       204,630  
Other Regulatory Liabilities   118,551       113,716  
Pension and Other Post-Retirement Liabilities   125,055       149,079  
Asset Retirement Obligations   106,516       106,395  
Other Deferred Credits   106,527       109,019  
Total Deferred Credits   1,482,256       1,669,865  
Commitments and Contingencies          
Total Capitalization and Liabilities $ 5,791,932     $ 6,103,320  

NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
    Three Months Ended
    December 31,
(Thousands of Dollars)   2017   2016
         
Operating Activities:        
Net Income Available for Common Stock   $ 198,654     $ 88,908  
Adjustments to Reconcile Net Income to Net Cash   Provided by Operating Activities:        
Depreciation, Depletion and Amortization   55,830     56,196  
Deferred Income Taxes   (94,676 )   44,852  
Stock-Based Compensation   3,905     2,482  
Other   3,678     3,607  
Change in:        
Hedging Collateral Deposits   (2,724 )   1,484  
Receivables and Unbilled Revenue   (83,357 )   (67,395 )
Gas Stored Underground and Materials and Supplies   10,337     10,597  
Unrecovered Purchased Gas Costs   (3,164 )   (1,257 )
Other Current Assets   3,591     9,576  
Accounts Payable   13,173     18,805  
Amounts Payable to Customers   251     (16,306 )
Customer Advances   2,697     (983 )
Customer Security Deposits   2,131     673  
Other Accruals and Current Liabilities   11,532     5,919  
Other Assets   (5,275 )   (8,389 )
Other Liabilities   (21,775 )   (4,122 )
Net Cash Provided by Operating Activities   $ 94,808     $ 144,647  
         
Investing Activities:        
Capital Expenditures   $ (142,613 )   $ (106,053 )
Net Proceeds from Sale of Oil and Gas Producing Properties       5,759  
Other   2,612     (4,297 )
Net Cash Used in Investing Activities   $ (140,001 )   $ (104,591 )
         
Financing Activities:        
Reduction of Long-Term Debt   $ (307,047 )   $  
Dividends Paid on Common Stock   (35,500 )   (34,473 )
Net Proceeds From Issuance (Repurchase) of Common Stock   (1,501 )   938  
Net Cash Used in Financing Activities   $ (344,048 )   $ (33,535 )
         
Net Increase (Decrease) in Cash and Temporary Cash Investments   (389,241 )   6,521  
Cash and Temporary Cash Investments at Beginning of Period   555,530     129,972  
Cash and Temporary Cash Investments at December 31   $ 166,289     $ 136,493  

NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
           
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
           
UPSTREAM BUSINESS
           
  Three Months Ended
(Thousands of Dollars, except per share amounts) December 31,
EXPLORATION AND PRODUCTION SEGMENT 2017   2016   Variance
Total Operating Revenues $ 139,141     $ 160,932     $ (21,791 )
           
Operating Expenses:          
Operation and Maintenance:          
General and Administrative Expense 13,895     12,974     921  
Lease Operating and Transportation Expense 39,647     39,708     (61 )
All Other Operation and Maintenance Expense 2,535     2,552     (17 )
Property, Franchise and Other Taxes 3,569     3,222     347  
Depreciation, Depletion and Amortization 27,425     29,053     (1,628 )
  87,071     87,509     (438 )
           
Operating Income 52,070     73,423     (21,353 )
           
Other Income (Expense):          
Interest Income 296     86     210  
Interest Expense (13,374 )   (13,523 )   149  
           
Income Before Income Taxes 38,992     59,986     (20,994 )
Income Tax Expense (Benefit) (67,706 )   24,906     (92,612 )
Net Income $ 106,698     $ 35,080     $ 71,618  
           
Net Income Per Share (Diluted) $ 1.24     $ 0.41     $ 0.83  
           

NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
           
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
           
MIDSTREAM BUSINESSES
           
  Three Months Ended
(Thousands of Dollars, except per share amounts) December 31,
PIPELINE AND STORAGE SEGMENT 2017   2016   Variance
Revenues from External Customers $ 53,310     $ 53,000     $ 310  
Intersegment Revenues 21,985     22,155     (170 )
Total Operating Revenues 75,295     75,155     140  
           
Operating Expenses:          
Purchased Gas 106     222     (116 )
Operation and Maintenance 17,316     20,242     (2,926 )
Property, Franchise and Other Taxes 7,100     6,677     423  
Depreciation, Depletion and Amortization 10,596     9,662     934  
  35,118     36,803     (1,685 )
           
Operating Income 40,177     38,352     1,825  
           
Other Income (Expense):          
Interest Income 544     273     271  
Other Income 745     686     59  
Interest Expense (7,876 )   (8,347 )   471  
           
Income Before Income Taxes 33,590     30,964     2,626  
Income Tax Expense (Benefit) (4,872 )   11,596     (16,468 )
Net Income $ 38,462     $ 19,368     $ 19,094  
           
Net Income Per Share (Diluted) $ 0.45     $ 0.23     $ 0.22  
           
           
  Three Months Ended
  December 31,
GATHERING SEGMENT 2017   2016   Variance
Revenues from External Customers $ 170     $ 26     $ 144  
Intersegment Revenues 23,665     27,840     (4,175 )
Total Operating Revenues 23,835     27,866     (4,031 )
           
Operating Expenses:          
Operation and Maintenance 3,066     2,754     312  
Property, Franchise and Other Taxes 38     11     27  
Depreciation, Depletion and Amortization 4,088     3,880     208  
  7,192     6,645     547  
           
Operating Income 16,643     21,221     (4,578 )
           
Other Income (Expense):          
Interest Income 398     146     252  
Other Income     1     (1 )
Interest Expense (2,340 )   (2,093 )   (247 )
           
Income Before Income Taxes 14,701     19,275     (4,574 )
Income Tax Expense (Benefit) (30,699 )   8,294     (38,993 )
Net Income $ 45,400     $ 10,981     $ 34,419  
           
Net Income Per Share (Diluted) $ 0.53     $ 0.13     $ 0.40  
           

NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
           
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
           
DOWNSTREAM BUSINESSES
           
  Three Months Ended
(Thousands of Dollars, except per share amounts) December 31,
UTILITY SEGMENT 2017   2016   Variance
Revenues from External Customers $ 187,089     $ 170,971     $ 16,118  
Intersegment Revenues 2,182     1,826     356  
Total Operating Revenues 189,271     172,797     16,474  
           
Operating Expenses:          
Purchased Gas 81,924     60,732     21,192  
Operation and Maintenance 50,482     49,529     953  
Property, Franchise and Other Taxes 9,880     10,205     (325 )
Depreciation, Depletion and Amortization 13,325     13,102     223  
  155,611     133,568     22,043  
           
Operating Income 33,660     39,229     (5,569 )
           
Other Income (Expense):          
Interest Income 305     134     171  
Other Income 169     92     77  
Interest Expense (6,837 )   (7,198 )   361  
           
Income Before Income Taxes 27,297     32,257     (4,960 )
Income Tax Expense 6,304     11,082     (4,778 )
Net Income $ 20,993     $ 21,175     $ (182 )
           
Net Income Per Share (Diluted) $ 0.24     $ 0.25     $ (0.01 )
           
           
  Three Months Ended
  December 31,
ENERGY MARKETING SEGMENT 2017   2016   Variance
Revenues from External Customers $ 38,636     $ 36,809     $ 1,827  
Intersegment Revenues 126     19     107  
Total Operating Revenues 38,762     36,828     1,934  
           
Operating Expenses:          
Purchased Gas 35,445     32,339     3,106  
Operation and Maintenance 1,637     1,643     (6 )
Depreciation, Depletion and Amortization 69     70     (1 )
  37,151     34,052     3,099  
           
Operating Income 1,611     2,776     (1,165 )
           
Other Income (Expense):          
Interest Income 134     134      
Other Income 3     3      
Interest Expense (11 )   (13 )   2  
           
Income Before Income Taxes 1,737     2,900     (1,163 )
Income Tax Expense 691     1,118     (427 )
Net Income $ 1,046     $ 1,782     $ (736 )
           
Net Income Per Share (Diluted) $ 0.01     $ 0.02     $ (0.01 )
           

NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
           
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
           
  Three Months Ended
(Thousands of Dollars, except per share amounts) December 31,
ALL OTHER 2017   2016   Variance
Total Operating Revenues $ 1,096     $ 554     $ 542  
Operating Expenses:          
Operation and Maintenance 324     516     (192 )
Property, Franchise and Other Taxes 144     143     1  
Depreciation, Depletion and Amortization 139     241     (102 )
  607     900     (293 )
           
Operating Income (Loss) 489     (346 )   835  
Other Income (Expense):          
Interest Income 72     39     33  
           
Income (Loss) Before Income Taxes 561     (307 )   868  
Income Tax Expense (Benefit) 1,280     (128 )   1,408  
Net Loss $ (719 )   $ (179 )   $ (540 )
           
Net Income (Loss) Per Share (Diluted) $ (0.01 )   $     $ (0.01 )
           
           
  Three Months Ended
  December 31,
CORPORATE 2017   2016   Variance
Revenues from External Customers $ 213     $ 208     $ 5  
Intersegment Revenues 1,000     976     24  
Total Operating Revenues 1,213     1,184     29  
Operating Expenses:          
Operation and Maintenance 3,563     3,391     172  
Property, Franchise and Other Taxes 117     121     (4 )
Depreciation, Depletion and Amortization 188     188      
  3,868     3,700     168  
           
Operating Loss (2,655 )   (2,516 )   (139 )
           
Other Income (Expense):          
Interest Income 31,819     31,805     14  
Other Income 805     832     (27 )
Interest Expense on Long-Term Debt (28,087 )   (29,103 )   1,016  
Other Interest Expense (1,383 )   (753 )   (630 )
           
Income Before Income Taxes 499     265     234  
Income Tax Expense (Benefit) 13,725     (436 )   14,161  
Net Income (Loss) $ (13,226 )   $ 701     $ (13,927 )
           
Net Income (Loss) Per Share (Diluted) $ (0.16 )   $     $ (0.16 )
           
           
  Three Months Ended
  December 31,
INTERSEGMENT ELIMINATIONS 2017   2016   Variance
Intersegment Revenues $ (48,958 )   $ (52,816 )   $ 3,858  
Operating Expenses:          
Purchased Gas (23,441 )   (23,050 )   (391 )
Operation and Maintenance (25,517 )   (29,766 )   4,249  
  (48,958 )   (52,816 )   3,858  
           
Operating Income          
           
Other Income (Expense):          
Interest Income (31,319 )   (31,017 )   (302 )
Interest Expense 31,319     31,017     302  
Net Income $     $     $  
           
Net Income Per Share (Diluted) $     $     $  
                       

NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
           
SEGMENT INFORMATION (Continued)
(Thousands of Dollars)
           
  Three Months Ended
  December 31,
  (Unaudited)
          Increase
  2017   2016   (Decrease)
           
Capital Expenditures:          
Exploration and Production $ 74,725   (1)(2) $ 40,689   (3)(4) $ 34,036  
Pipeline and Storage 22,274   (1)(2) 25,392   (3)(4) (3,118 )
Gathering 12,931   (1)(2) 11,344   (3)(4) 1,587  
Utility 16,535   (1)(2) 17,052   (3)(4) (517 )
Energy Marketing 18     7     11  
Total Reportable Segments 126,483     94,484     31,999  
All Other 1     39     (38 )
Corporate 29     60     (31 )
Total Capital Expenditures $ 126,513     $ 94,583     $ 31,930  
                       

(1) Capital expenditures for the three months ended December 31, 2017, include accounts payable and accrued liabilities related to capital expenditures of $37.1 million, $10.7 million, $4.7 million, and $3.6 million in the Exploration and Production segment, Pipeline and Storage segment, Gathering segment and Utility segment, respectively.  These amounts have been excluded from the Consolidated Statement of Cash Flows at December 31, 2017, since they represent non-cash investing activities at that date.

(2) Capital expenditures for the three months ended December 31, 2017, exclude capital expenditures of $36.5 million, $25.1 million, $3.9 million and $6.7 million in the Exploration and Production segment, Pipeline and Storage segment, Gathering segment and Utility segment, respectively.  These amounts were in accounts payable and accrued liabilities at September 30, 2017 and paid during the three months ended December 31, 2017.  These amounts were excluded from the Consolidated Statement of Cash Flows at September 30, 2017, since they represented non-cash investing activities at that date.  These amounts have been included in the Consolidated Statement of Cash Flows at December 31, 2017.

(3) Capital expenditures for the three months ended December 31, 2016, include accounts payable and accrued liabilities related to capital expenditures of $25.3 million, $8.7 million, $7.9 million, and $7.1 million in the Exploration and Production segment, Pipeline and Storage segment, Gathering segment and Utility segment, respectively.  These amounts have been excluded from the Consolidated Statement of Cash Flows at December 31, 2016, since they represent non-cash investing activities at that date.

(4) Capital expenditures for the three months ended December 31, 2016, exclude capital expenditures of $25.2 million, $18.7 million, $5.3 million and $11.2 million in the Exploration and Production segment, Pipeline and Storage segment, Gathering segment and Utility segment, respectively.  These amounts were in accounts payable and accrued liabilities at September 30, 2016 and paid during the three months ended December 31, 2016.  These amounts were excluded from the Consolidated Statement of Cash Flows at September 30, 2016, since they represented non-cash investing activities at that date.  These amounts have been included in the Consolidated Statement of Cash Flows at December 31, 2016.
                   
DEGREE DAYS                  
                   
              Percent Colder
              (Warmer) Than:
Three Months Ended December 31 Normal   2017   2016     Normal (1)   Last Year (1)
                   
Buffalo, NY 2,253   2,227   1,966   (1.2 )   13.3
Erie, PA 2,044   2,029   1,750   (0.7 )   15.9
                   

(1) Percents compare actual 2017 degree days to normal degree days and actual 2017 degree days to actual 2016 degree days.
             
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
             
EXPLORATION AND PRODUCTION INFORMATION
             
             
    Three Months Ended
    December 31,
            Increase
    2017   2016   (Decrease)
             
Gas Production/Prices:            
Production (MMcf)            
Appalachia   35,414     39,807     (4,393 )
West Coast   695     776     (81 )
Total Production   36,109     40,583     (4,474 )
             
Average Prices (Per Mcf)            
Appalachia   $ 2.35     $ 2.35     $  
West Coast   5.00     4.24     0.76  
Weighted Average   2.40     2.39     0.01  
Weighted Average after Hedging   2.72     2.97     (0.25 )
             
Oil Production/Prices:            
Production (Thousands of Barrels)            
Appalachia   1         1  
West Coast   672     721     (49 )
Total Production   673     721     (48 )
             
Average Prices (Per Barrel)            
Appalachia   $ 43.85     N/M     N/M  
West Coast   57.88     $ 43.69     $ 14.19  
Weighted Average   57.86     43.82     14.04  
Weighted Average after Hedging   59.79     54.71     5.08  
             
Total Production (Mmcfe)   40,147     44,909     (4,762 )
             
Selected Operating Performance Statistics:            
General & Administrative Expense per Mcfe (1)   $ 0.35     $ 0.29     $ 0.06  
Lease Operating and Transportation Expense per Mcfe (1)(2)   $ 0.99     $ 0.88     $ 0.11  
Depreciation, Depletion & Amortization per Mcfe (1)   $ 0.68     $ 0.65     $ 0.03  
             

N/M - Not Meaningful

(1) Refer to page 13 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 $0.54 and $0.53 per Mcfe for the three months ended December 31, 2017 and December 31, 2016, respectively.
 
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
             
EXPLORATION AND PRODUCTION INFORMATION
 
Hedging Summary for the Remaining Nine Months of Fiscal 2018 Volume     Average Hedge Price
Oil Swaps            
Brent   342,000   BBL   $ 63.55 / BBL
NYMEX   1,260,000   BBL   $ 52.67 / BBL
Total   1,602,000   BBL   $ 54.99 / BBL
             
Gas Swaps            
NYMEX   30,780,000   MMBTU   $ 3.17 / MMBTU
DAWN   5,400,000   MMBTU   $ 3.00 / MMBTU
Fixed Price Physical Sales   49,897,980   MMBTU   $ 2.42 / MMBTU
Total   86,077,980   MMBTU   $ 2.73 / MMBTU
             
Hedging Summary for Fiscal 2019   Volume     Average Hedge Price
Oil Swaps            
Brent   612,000   BBL   $ 61.26 / BBL
NYMEX   1,068,000   BBL   $ 53.42 / BBL
Total   1,680,000   BBL   $ 56.28 / BBL
             
Gas Swaps            
NYMEX   46,420,000   MMBTU   $ 3.03 / MMBTU
DAWN   7,200,000   MMBTU   $ 3.00 / MMBTU
Fixed Price Physical Sales   34,502,725   MMBTU   $ 2.48 / MMBTU
Total   88,122,725   MMBTU   $ 2.81 / MMBTU
             
Hedging Summary for Fiscal 2020   Volume     Average Hedge Price
Oil Swaps            
Brent   456,000   BBL   $ 59.16 / BBL
NYMEX   324,000   BBL   $ 50.52 / BBL
Total   780,000   BBL   $ 55.57 / BBL
             
Gas Swaps            
NYMEX   18,640,000   MMBTU   $ 3.04 / MMBTU
DAWN   7,200,000   MMBTU   $ 3.00 / MMBTU
Fixed Price Physical Sales   38,689,152   MMBTU   $ 2.28 / MMBTU
Total   64,529,152   MMBTU   $ 2.58 / MMBTU
             
Hedging Summary for Fiscal 2021   Volume     Average Hedge Price
Oil Swaps            
Brent   300,000   BBL   $ 60.00 / BBL
NYMEX   156,000   BBL   $ 51.00 / BBL
Total   456,000   BBL   $ 56.92 / BBL
             
Gas Swaps            
NYMEX   4,840,000   MMBTU   $ 3.01 / MMBTU
  DAWN   600,000   MMBTU   $ 3.00 / MMBTU
Fixed Price Physical Sales   41,572,469   MMBTU   $ 2.22 / MMBTU
Total   47,012,469   MMBTU   $ 2.31 / MMBTU
             
Hedging Summary for Fiscal 2022   Volume     Average Hedge Price
Oil Swaps            
NYMEX   156,000   BBL   $ 51.00 / BBL
             
Fixed Price Physical Sales   40,567,336   MMBTU   $ 2.23 / MMBTU
             
Hedging Summary for Fiscal 2023   Volume     Average Hedge Price
             
Fixed Price Physical Sales   35,769,734   MMBTU   $ 2.25 / MMBTU
             
Hedging Summary for Fiscal 2024   Volume     Average Hedge Price
             
Fixed Price Physical Sales   20,111,036   MMBTU   $ 2.24 / MMBTU
             
Hedging Summary for Fiscal 2025   Volume     Average Hedge Price
             
Fixed Price Physical Sales   2,293,200   MMBTU   $ 2.18 / MMBTU

NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
             
Pipeline & Storage Throughput - (millions of cubic feet - MMcf)
             
    Three Months Ended
    December 31,
            Increase
    2017   2016   (Decrease)
Firm Transportation - Affiliated   34,841     31,607     3,234  
Firm Transportation - Non-Affiliated   171,860     159,174     12,686  
Interruptible Transportation   882     3,046     (2,164 )
    207,583     193,827     13,756  
             
Gathering Volume - (MMcf)            
    Three Months Ended
    December 31,
            Increase
    2017   2016   (Decrease)
Gathered Volume - Affiliated   43,162     50,569     (7,407 )
             
             
Utility Throughput - (MMcf)            
    Three Months Ended
    December 31,
            Increase
    2017   2016   (Decrease)
Retail Sales:            
Residential Sales   17,847     15,764     2,083  
Commercial Sales   2,596     2,299     297  
Industrial Sales   144     77     67  
    20,587     18,140     2,447  
Off-System Sales   22     173     (151 )
Transportation   21,427     19,565     1,862  
    42,036     37,878     4,158  
             
Energy Marketing Volume            
    Three Months Ended
    December 31,
            Increase
    2017   2016   (Decrease)
Natural Gas (MMcf)   11,979     11,127     852  
             

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 Adjusted 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 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 Adjusted Operating Results as reported GAAP earnings before items impacting comparability.  The following table reconciles National Fuel's reported GAAP earnings to Adjusted Operating Results for the three months ended December 31, 2017 and 2016:
    Three Months Ended
    December 31,
(in thousands except per share amounts)   2017   2016
Reported GAAP Earnings   $ 198,654     $ 88,908  
Items impacting comparability        
Remeasurement of deferred income taxes under 2017 Tax Reform   (111,000 )    
Adjusted Operating Results   $ 87,654     $ 88,908  
         
Reported GAAP Earnings per share   $ 2.30     $ 1.04  
Items impacting comparability        
Remeasurement of deferred income taxes under 2017 Tax Reform   (1.29 )    
Rounding   0.01      
Adjusted Operating Results per share   $ 1.02     $ 1.04  
                 

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

The following tables reconcile National Fuel's reported GAAP earnings to Adjusted EBITDA for the three months ended December 31, 2017 and 2016:

    Three Months Ended
    December 31,
    2017   2016
(in thousands)        
Reported GAAP Earnings   $ 198,654     $ 88,908  
Depreciation, Depletion and Amortization   55,830     56,196  
Interest and Other Income   (3,971 )   (3,214 )
Interest Expense   28,589     30,013  
Income Taxes   (81,277 )   56,432  
Adjusted EBITDA   $ 197,825     $ 228,335  
         
Adjusted EBITDA by Segment        
Pipeline and Storage Adjusted EBITDA   $ 50,773     $ 48,014  
Gathering Adjusted EBITDA   20,731     25,101  
Total Midstream Businesses Adjusted EBITDA   71,504     73,115  
Exploration and Production Adjusted EBITDA   79,495     102,476  
Utility Adjusted EBITDA   46,985     52,331  
Energy Marketing Adjusted EBITDA   1,680     2,846  
Corporate and All Other Adjusted EBITDA   (1,839 )   (2,433 )
Total Adjusted EBITDA   $ 197,825     $ 228,335  
                 

NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES NON-GAAP FINANCIAL MEASURES  SEGMENT ADJUSTED EBITDA
 
    Three Months Ended
    December 31,
(in thousands)   2017   2016
Exploration and Production Segment        
Reported GAAP Earnings   $ 106,698     $ 35,080  
Depreciation, Depletion and Amortization   27,425     29,053  
Interest and Other Income   (296 )   (86 )
Interest Expense   13,374     13,523  
Income Taxes   (67,706 )   24,906  
Adjusted EBITDA   $ 79,495     $ 102,476  
         
Pipeline and Storage Segment        
Reported GAAP Earnings   $ 38,462     $ 19,368  
Depreciation, Depletion and Amortization   10,596     9,662  
Interest and Other Income   (1,289 )   (959 )
Interest Expense   7,876     8,347  
Income Taxes   (4,872 )   11,596  
Adjusted EBITDA   $ 50,773     $ 48,014  
         
Gathering Segment        
Reported GAAP Earnings   $ 45,400     $ 10,981  
Depreciation, Depletion and Amortization   4,088     3,880  
Interest and Other Income   (398 )   (147 )
Interest Expense   2,340     2,093  
Income Taxes   (30,699 )   8,294  
Adjusted EBITDA   $ 20,731     $ 25,101  
         
Utility Segment        
Reported GAAP Earnings   $ 20,993     $ 21,175  
Depreciation, Depletion and Amortization   13,325     13,102  
Interest and Other Income   (474 )   (226 )
Interest Expense   6,837     7,198  
Income Taxes   6,304     11,082  
Adjusted EBITDA   $ 46,985     $ 52,331  
         
Energy Marketing Segment        
Reported GAAP Earnings   $ 1,046     $ 1,782  
Depreciation, Depletion and Amortization   69     70  
Interest and Other Income   (137 )   (137 )
Interest Expense   11     13  
Income Taxes   691     1,118  
Adjusted EBITDA   $ 1,680     $ 2,846  
         
Corporate and All Other        
Reported GAAP Earnings   $ (13,945 )   $ 522  
Depreciation, Depletion and Amortization   327     429  
Interest and Other Income   (1,377 )   (1,659 )
Interest Expense   (1,849 )   (1,161 )
Income Taxes   15,005     (564 )
Adjusted EBITDA   $ (1,839 )   $ (2,433 )
                 

NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
         
         
Quarter Ended December 31 (unaudited)   2017   2016
         
Operating Revenues   $ 419,655,000     $ 422,500,000  
         
Net Income Available for Common Stock   $ 198,654,000     $ 88,908,000  
         
Earnings Per Common Share        
Basic   $ 2.32     $ 1.04  
Diluted   $ 2.30     $ 1.04  
         
Weighted Average Common Shares:        
Used in Basic Calculation   85,630,296     85,189,851  
Used in Diluted Calculation   86,325,537     85,797,989  
         
Twelve Months Ended December 31 (unaudited)        
         
Operating Revenues   $ 1,577,036,000     $ 1,499,721,000  
         
Net Income (Loss) Available for Common Stock   $ 393,229,000     $ (12,941,000 )
         
Earnings (Loss) Per Common Share        
Basic   $ 4.60     $ (0.15 )
Diluted   $ 4.56     $ (0.15 )
         
Weighted Average Common Shares:        
Used in Basic Calculation   85,475,937     84,983,380  
Used in Diluted Calculation   86,160,885     84,983,380  
         

 
Brian M. WelschInvestor Relations716-857-7875David P. BauerTreasurer716-857-7318

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