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National Fuel Reports Second Quarter Earnings

WILLIAMSVILLE, N.Y., April 30, 2020 (GLOBE NEWSWIRE) -- National Fuel Gas Company (“National Fuel” or the “Company”) (NFG) today announced consolidated results for the second quarter of its 2020 fiscal year and for the six months ended March 31, 2020.

FISCAL 2020 SECOND QUARTER SUMMARY

  • GAAP net loss of $106.1 million, or $1.23 per share, compared to GAAP net income of $90.6 million, or $1.04 per share, in the prior year, which includes a $129.3 million after-tax impairment of oil and gas properties and a $56.8 million deferred tax valuation allowance described in further detail in this release

  • Adjusted operating results of $84.2 million, or $0.97 per share, compared to $92.9 million, or $1.07 per share, in the prior year (see non-GAAP reconciliation on page 2)

  • Adjusted EBITDA of $231.1 million, an increase of $5.3 million from $225.8 million in the prior year (non-GAAP reconciliation on page 24)

  • E&P segment net production of 59.8 Bcfe, an increase of 11 Bcfe, or 23% from the prior year, including the impact of approximately 2.7 Bcf of curtailments due to sustained low natural gas prices in Appalachia

  • Average natural gas prices, after the impact of hedging, of $2.12 per Mcf, down $0.46 per Mcf from the prior year

  • Average oil prices, after the impact of hedging, of $58.23 per Bbl, down $2.78 per Bbl from the prior year

  • Gathering revenues of $35.3 million, an increase of $5.9 million, or 20%, on higher throughput from the E&P segment

  • Pipeline & Storage revenues of $79.2 million, an increase of $6.9 million, or 10%, from the prior year, largely driven by the successful resolution of a National Fuel Gas Supply Corporation rate proceeding

  • Reducing fiscal 2020 consolidated capital expenditure guidance to a range of $680 to $740 million, a decrease of $30 million from the midpoint of the Company's previous guidance range

MANAGEMENT COMMENTS ON COMPANY’S COVID-19 RESPONSE

David P. Bauer, President and Chief Executive Officer of National Fuel Gas Company, stated: “As we confront the challenges of the COVID-19 pandemic, I am proud to say that National Fuel has continued to safely and reliably provide natural gas service to our over 743,000 utility customers in western New York and northwestern Pennsylvania, operate our extensive network of transportation, compression and gathering infrastructure, and produce essential natural gas supplies.

The continuity of our operations is a direct result of the dedication and hard work of our over 2,000 employees. During this unprecedented situation, National Fuel has remained committed to our workforce - the bedrock of our Company - and has not instituted any furloughs or workforce reductions. With a large portion of our employees now working remotely, we have implemented a number of initiatives to provide the flexibility needed to address this new normal, including additional paid time off to address child care needs, and encouraging the use of alternative work schedules.

With respect to our in-field workforce and customer service representatives, all of whom provide essential services to our communities each and every day, we have adopted appropriate social distancing measures and have provided necessary personal protective equipment in line with directives from federal, state, and local agencies. As this public health crisis evolves, the health and well-being of our employees and our communities will remain our number one priority, and National Fuel will continue to monitor developments affecting our stakeholders in order to take appropriate steps to mitigate the impacts of the COVID-19 virus.”

RECONCILIATION OF GAAP EARNINGS TO ADJUSTED OPERATING RESULTS

Three Months Ended

Six Months Ended

March 31,

March 31,

(in thousands except per share amounts)

2020

2019

2020

2019

Reported GAAP Earnings

$

(106,068

)

$

90,595

$

(19,477

)

$

193,256

Items impacting comparability:

Impairment of oil and gas properties (E&P)

177,761

177,761

Tax impact of impairment of oil and gas properties

(48,503

)

(48,503

)

Deferred tax valuation allowance

56,770

56,770

Remeasurement of deferred income taxes under 2017 Tax Reform

(5,000

)

Mark-to-market adjustments due to hedge ineffectiveness (E&P)

6,742

237

Tax impact of mark-to-market adjustments due to hedge ineffectiveness

(1,416

)

(50

)

Unrealized (gain) loss on other investments (Corporate / All Other)

5,414

(3,831

)

6,433

2,516

Tax impact of unrealized (gain) loss on other investments

(1,137

)

805

(1,351

)

(528

)

Adjusted Operating Results

$

84,237

$

92,895

$

171,633

$

190,431

Reported GAAP Earnings Per Share

$

(1.23

)

$

1.04

$

(0.23

)

$

2.23

Items impacting comparability:

Impairment of oil and gas properties, net of tax (E&P)

1.49

1.49

Deferred tax valuation allowance

0.66

0.66

Remeasurement of deferred income taxes under 2017 Tax Reform

(0.06

)

Mark-to-market adjustments due to hedge ineffectiveness, net of tax (E&P)

0.06

Unrealized (gain) loss on other investments, net of tax (Corporate / All Other)

0.05

(0.03

)

0.06

0.02

Rounding

0.01

Adjusted Operating Results Per Share

$

0.97

$

1.07

$

1.98

$

2.20

MANAGEMENT COMMENTS ON SECOND QUARTER RESULTS

Mr. Bauer added: “Low commodity prices continued to serve as a headwind during the quarter, weighing on our results and requiring the Company to write down the value of its oil and gas reserves in our Exploration and Production segment. Operationally, however, our results were in line with our expectations, driven by the strong performance of our Pipeline and Storage and Gathering businesses, both of which saw significant earnings growth. In these uncertain times, our diversified business model continues to function as designed, providing National Fuel with stability through a consistent, predictable base of cash flows and a strong balance sheet.”

FISCAL 2020 GUIDANCE AND BUSINESS UPDATE

National Fuel is revising its fiscal 2020 earnings guidance to reflect revised commodity price assumptions for the balance of the fiscal year, and the results of the fiscal second quarter. The Company is now projecting that earnings, excluding items impacting comparability, will be within the range of $2.75 to $2.95 per share, or $2.85 per share at the midpoint of the range.

The Company is assuming that NYMEX natural gas prices will average $2.05 per MMBtu for the remainder of fiscal 2020, unchanged from the previous guidance, while also lowering its Appalachian spot price forecast to $1.65 per MMBtu. Additionally, the Company is now assuming that WTI oil prices will average $22.50 per barrel (Bbl) for the remainder of fiscal 2020, a decrease of $32.50 per Bbl from the $55.00 assumed in the previous guidance. These price assumptions are intended to reflect the current NYMEX forward markets for natural gas and oil and consider the impact of local sales point differentials.

The Exploration and Production segment is lowering its fiscal 2020 net production guidance to a range of 230 to 240 Bcfe, which reflects the impacts of curtailments during the second quarter and estimated curtailments for the month of April. During the second quarter, Seneca executed approximately 12.6 Bcf of new NYMEX swap contracts and fixed price physical firm sales for fiscal 2020. The Company currently has financial hedges and fixed price physical firm sales contracts in place on approximately 72% of Seneca’s remaining expected fiscal 2020 natural gas production that, on average, lock-in a price realization after the cost of transportation of $2.16 per Mcf.

In addition, the Company is lowering its consolidated capital expenditure guidance to a range of $680 to $740 million, a $30 million decrease from the midpoint of the Company’s prior guidance range. The Company’s other guidance assumptions remain largely unchanged from the previous guidance.

Additional details on the Company's updated forecast assumptions and business segment guidance for fiscal 2020 are outlined in the table on page 8.

DISCUSSION OF SECOND QUARTER RESULTS BY SEGMENT

The following earnings discussion of each operating segment for the quarter ended March 31, 2020 is summarized in a tabular form on pages 9 and 10 of this report (earnings drivers for the six months ended March 31, 2020 are summarized on pages 11 and 12). It may be helpful to refer to those tables while reviewing this discussion. As of the quarter ended September 30, 2019, the Company is no longer reporting the Energy Marketing operations as a reportable segment. The Energy Marketing operations have been included in the All Other category in the disclosures and tables that follow below. Prior year segment information has been restated to reflect this change in presentation.

Note that management defines Adjusted Operating Results as reported GAAP earnings adjusted for items impacting comparability, and Adjusted EBITDA as reported GAAP earnings before the following items: interest expense, income taxes, depreciation, depletion and amortization, other income and deductions, 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 Company, LLC ("Seneca"). Seneca explores for, develops and produces natural gas and oil reserves, primarily in Pennsylvania and California.

Three Months Ended

March 31,

(in thousands)

2020

2019

Variance

GAAP Earnings

$

(175,275

)

$

21,873

$

(197,148

)

Impairment of oil and gas properties, net of tax

129,258

129,258

Deferred tax valuation allowance

60,463

60,463

Mark-to-market adjustments due to hedge ineffectiveness, net of tax

5,326

(5,326

)

Adjusted Operating Results

$

14,446

$

27,199

$

(12,753

)

Adjusted EBITDA

$

79,846

$

83,580

$

(3,734

)

Seneca’s second quarter GAAP earnings decreased $197.1 million versus the prior year, which includes the impact of a non-cash, pre-tax impairment of Seneca’s oil and natural gas reserves, and the recognition of a valuation allowance that reduced the deferred tax asset related to certain state-level net operating loss and credit carryforwards that may not be realized.

During the second quarter, Seneca recorded a non-cash, pre-tax impairment charge of $177.8 million ($129.3 million after-tax) to write-down the value of Seneca’s oil and natural gas reserves under the full cost method of accounting. The full cost method of accounting requires that Seneca perform a quarterly “ceiling test” to compare the present value of future revenues from its oil and natural gas reserves based on an unweighted arithmetic average of the first day of the month oil and gas prices for each month within the 12-month period prior to the end of the reporting period (“the ceiling”) with the book value of those reserves at the balance sheet date. If the book value of the reserves exceeds the ceiling, a non-cash impairment charge must be recorded in order to reduce the book value of the reserves to the calculated ceiling. It is anticipated that the current low commodity price environment will lead to impairments during the remainder of fiscal 2020 and likely in the first quarter of fiscal 2021 as well.

During the quarter ended March 31, 2020, the Company recorded a full valuation allowance in the amount of $60.5 million against certain state deferred tax assets based on its conclusion, considering all available evidence (both positive and negative), that it was more likely than not that these deferred tax assets would not be realized. A significant item of objective negative evidence considered was a projected three-year cumulative pre-tax loss primarily due to the non-cash impairments of Seneca’s oil and gas reserves noted above. Changes in judgment regarding future realization of these deferred tax assets may result in a reversal of all or a portion of the valuation allowance.

Excluding these items noted above, as well as the net impact of non-cash mark-to-market adjustments recorded in the prior year relating to hedge ineffectiveness (see table above), Seneca’s second quarter earnings decreased $12.8 million as the positive impact of higher production was more than offset by the negative impacts of lower realized natural gas and crude oil prices, higher operating expenses, higher interest expense, and a higher effective tax rate.

Seneca produced 59.8 Bcfe during the second quarter, an increase of 11.0 Bcfe, or 23%, from the prior year. Natural gas production increased 10.7 Bcf, or 24%, due primarily to production from new Marcellus and Utica wells completed and connected to sales in Appalachia. Net production increased 5.4 Bcf to 26.6 Bcf in Seneca’s Western Development Area and 5.4 Bcf to 29.0 Bcf in the Eastern Development Area. Seneca curtailed an estimated 2.7 Bcf of net natural gas production during the second quarter due to lower spot pricing at local sales points in Pennsylvania. Oil production for the second quarter increased 42,000 Bbls from the prior year as new production continues to come on-line from Seneca’s development of the Pioneer and 17N assets in the Midway Sunset area of California, as well as the Coalinga assets.

Seneca's average realized natural gas price, after the impact of hedging and transportation costs, was $2.12 per Mcf, a decrease of $0.46 per Mcf from the prior year. This decline was largely due to lower NYMEX prices and lower spot pricing at local sales points in Pennsylvania. Seneca's average realized oil price, after the impact of hedging, was $58.23 per Bbl, a decrease of $2.78 per Bbl compared to the prior year. The decline in oil price realizations was due primarily to lower market prices for crude oil during the quarter and reduced price differentials at local sales points in California.

The increase in Seneca’s operating expenses was largely due to higher production during the quarter. Lease operating and transportation (“LOE”) expense, which increased $5.8 million, includes the fees paid to the Company’s Gathering segment for gathering and compression services used to connect Seneca’s Marcellus and Utica production to sales points along interstate pipelines. In addition to higher production, the $9.2 million increase in depreciation, depletion and amortization (“DD&A”) expense was also due to a higher DD&A rate. Seneca’s general and administrative (“G&A”) costs were relatively flat despite the increased production. On a unit of production basis, G&A expenses during the quarter decreased $0.06 per Mcfe to $0.29 per Mcfe.

The increase in Seneca’s effective tax rate, excluding the impact of the valuation allowance recorded at March 31, 2020 discussed above, was largely driven by the prior year impact of the Enhanced Oil Recovery tax credit, which was not available in the current year.

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

March 31,

(in thousands)

2020

2019

Variance

GAAP Earnings

$

22,087

$

17,749

$

4,338

Adjusted EBITDA

$

49,102

$

41,281

$

7,821

The Pipeline and Storage segment’s second quarter GAAP earnings increased $4.3 million versus the prior year primarily driven by higher operating revenues and lower operation and maintenance (“O&M”) expenses, partially offset by higher DD&A expense. The increase in operating revenues of $6.9 million, or 10%, was largely due to an increase in Supply Corporation's transportation and storage rates effective February 1, 2020, in accordance with Supply Corporation's rate case settlement in principle coupled with new demand charges for transportation service from Supply Corporation's Line N to Monaca expansion project, which was placed in service on November 1, 2019. O&M expense decreased $0.9 million primarily due to lower compressor and facility maintenance costs, partially offset by an increase in pipeline integrity costs. The increase in DD&A expense of $2.1 million was primarily attributable to an increase in Supply Corporation's depreciation rates associated with its rate case settlement in principle.

Gathering Segment

The Gathering segment’s operations are carried out by National Fuel Gas Midstream Company, LLC’s limited liability companies. The Gathering segment constructs, owns and operates natural gas gathering pipelines and compression facilities in the Appalachian region, which currently deliver Seneca’s gross Appalachian production to the interstate pipeline system.

Three Months Ended

March 31,

(in thousands)

2020

2019

Variance

GAAP Earnings

$

19,898

$

12,690

$

7,208

Deferred tax valuation allowance

(3,769

)

(3,769

)

Adjusted Operating Results

$

16,129

$

12,690

$

3,439

Adjusted EBITDA

$

29,541

$

24,598

$

4,943

The Gathering segment’s second quarter GAAP earnings increased $7.2 million versus the prior year. Earnings were positively impacted by $3.8 million as a result of the Gathering segment's recognition of an income tax benefit that was recorded as an offset to the valuation allowance described above in the Exploration and Production segment. This offset is a result of the Gathering and Exploration and Production segments’ subsidiaries filing a combined state tax return. Taxable income generated in the Gathering segment is used to offset taxable losses in the Exploration and Production segment, which provided the opportunity to reduce the valuation allowance recorded in the Exploration and Production segment. Excluding this item, the Gathering segment’s earnings increased $3.4 million. The increase was primarily driven by higher operating revenues, which were partially offset by higher O&M expense and a modest increase in DD&A expense. Operating revenues increased $5.9 million, or 20%, primarily due to an 11.0 Bcf increase in gathered volumes from Seneca’s Appalachian natural gas production. The $1.0 million increase in O&M expense was due to an increase in compressor station operating and preventative maintenance activity during the current quarter. The $0.6 million increase in DD&A expense was due primarily to a higher average total value of plant assets in service versus the prior year.

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

March 31,

(in thousands)

2020

2019

Variance

GAAP Earnings

$

31,499

$

35,589

$

(4,090

)

Adjusted EBITDA

$

73,192

$

78,688

$

(5,496

)

The Utility segment’s second quarter GAAP earnings decreased $4.1 million over the prior year primarily driven by a decline in customer margin (operating revenues less purchased gas sold) and higher O&M expense. The $1.5 million decrease in customer margin was due primarily to warmer weather in Distribution's Pennsylvania service territory, partially offset by higher revenues earned through the Company’s system modernization tracking mechanism and the positive impact of adjustments related to regulatory rate and cost recovery mechanisms subject to annual reconciliation. Weather in Distribution's Pennsylvania service territory was 17.5% warmer on average than last year, resulting in a decrease in residential and transportation customer throughput and revenues. The impact of weather variations on earnings in Distribution's New York service territory is largely mitigated by that jurisdiction's weather normalization clause. The $3.3 million increase in O&M expense was primarily attributable to higher personnel costs as well as a higher accrual for bad debt expense given the economic backdrop in the Company's service territory.

Corporate and All Other

The Company’s operations that are included in Corporate and All Other, which now include the Company’s energy marketing business, generated a combined loss of $4.3 million in the current year second quarter, which was a $7.0 million decrease from the combined earnings of $2.7 million generated in the prior-year second quarter. The decrease in earnings was driven primarily by higher unrealized losses on investment securities in the current quarter compared to unrealized gains on investment securities in the prior year second quarter.

EARNINGS TELECONFERENCE

The Company will host a conference call on Friday, May 1, 2020, at 8:30 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 “9349819”. 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 “9349819”. Both the webcast and a telephonic replay will be available until the close of business on Friday, May 8, 2020.

National Fuel is an integrated energy company reporting financial results for four operating segments: Exploration and Production, Pipeline and Storage, Gathering, and Utility. Additional information about National Fuel is available at www.nationalfuelgas.com.

Certain statements contained herein, including statements identified by the use of the words “anticipates,” “estimates,” “expects,” “forecasts,” “intends,” “plans,” “predicts,” “projects,” “believes,” “seeks,” “will,” “may” and similar expressions, and statements which are other than statements of historical facts, are “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties, which could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. The Company’s expectations, beliefs and projections contained herein are expressed in good faith and are believed to have a reasonable basis, but there can be no assurance that such expectations, beliefs or projections will result or be achieved or accomplished. In addition to other factors, the following are important factors that could cause actual results to differ materially from those discussed in the forward-looking statements: 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; the length and severity of the recent COVID-19 pandemic, including its impacts across our businesses on demand, operations, global supply chains and liquidity; 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; 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; delays or changes in costs or plans with respect to Company projects or related projects of other companies, including disruptions due to COVID-19, as well as 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 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; the impact of information technology disruptions, cybersecurity or data security breaches; 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; 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; economic disruptions or uninsured losses resulting from major accidents, fires, severe weather, natural disasters, terrorist activities or acts of war; 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
AND SUBSIDIARIES

GUIDANCE SUMMARY

As discussed on page 2, the Company is revising its earnings guidance for fiscal 2020. Additional details on the Company's forecast assumptions and business segment guidance are outlined in the table below.

While the Company expects to incur additional ceiling test impairment charges in the remaining quarters of fiscal 2020 and likely in the first quarter of fiscal 2021 as well, the amount of these charges is not reasonably determinable at this time. The amount of any ceiling test charge is determined at the end of the applicable quarter and will depend on many factors, including additions to or subtractions from proved reserves, fluctuations in oil and gas prices, and income tax effects related to the differences between the book and tax basis of the Company’s oil and gas properties. Some or all of these factors are likely to be significant. Because the expected ceiling test impairment charges and other potential items impacting comparability are not reasonably determinable at this time, the Company is unable to provide earnings guidance other than on a non-GAAP basis that excludes these items.

Updated FY 2020 Guidance

Previous FY 2020 Guidance

Consolidated Earnings per Share, excluding items impacting comparability

$2.75 to $2.95

$2.95 to $3.15

Consolidated Effective Tax Rate

~ 26%

~ 25%

Capital Expenditures (Millions)

Exploration and Production

$375 - $395

$375 - $410

Pipeline and Storage

$175 - $195

$180 - $215

Gathering

$50 - $60

$50 - $60

Utility

$80 - $90

$90 - $100

Consolidated Capital Expenditures

$680 - $740

$695 - $785

Exploration & Production Segment Guidance

Commodity Price Assumptions

NYMEX natural gas price

$2.05 /MMBtu

$2.05 /MMBtu

Appalachian basin spot price

$1.65 /MMBtu

$1.70 /MMBtu

NYMEX (WTI) crude oil price

$22.50 /Bbl

$55.00 /Bbl

California oil price premium (% of WTI)

90

%

104

%

Production (Bcfe)

East Division - Appalachia

214 to 224

219 to 229

West Division - California

~ 16

~ 16

Total Production

230 to 240

235 to 245

E&P Operating Costs ($/Mcfe)

LOE

$0.85 - $0.89

$0.85 - $0.89

G&A

$0.27 - $0.30

$0.27 - $0.30

DD&A

$0.70 - $0.74

$0.73 - $0.77

Other Business Segment Guidance (Millions)

Gathering Segment Revenues

$135 - $140

$135 - $145

Pipeline and Storage Segment Revenues

~ $305

$290 - $295


NATIONAL FUEL GAS COMPANY

RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS

QUARTER ENDED MARCH 31, 2020

(Unaudited)

Upstream

Midstream

Downstream

Exploration &

Pipeline &

Corporate /

(Thousands of Dollars)

Production

Storage

Gathering

Utility

All Other

Consolidated*

Second quarter 2019 GAAP earnings

$

21,873

$

17,749

$

12,690

$

35,589

$

2,694

$

90,595

Items impacting comparability:

Mark-to-market adjustments due to hedge ineffectiveness

6,742

6,742

Tax impact of mark-to-market adjustments due to hedge ineffectiveness

(1,416

)

(1,416

)

Unrealized (gain) loss on other investments

(3,831

)

(3,831

)

Tax impact of unrealized (gain) loss on other investments

805

805

Second quarter 2019 adjusted operating results

27,199

17,749

12,690

35,589

(332

)

92,895

Drivers of adjusted operating results**

Upstream Revenues

Higher (lower) natural gas production

21,887

21,887

Higher (lower) crude oil production

2,030

2,030

Higher (lower) realized natural gas prices, after hedging

(20,168

)

(20,168

)

Higher (lower) realized crude oil prices, after hedging

(1,332

)

(1,332

)

Midstream Revenues

Higher (lower) operating revenues

5,456

4,660

10,116

Downstream Margins***

Impact of usage and weather

(3,814

)

(3,814

)

System modernization tracker revenues

1,689

1,689

Regulatory revenue adjustments

615

615

Higher (lower) energy marketing margins

604

604

Operating Expenses

Lower (higher) lease operating and transportation expenses

(4,573

)

(4,573

)

Lower (higher) operating expenses

(395

)

705

(751

)

(2,880

)

415

(2,906

)

Lower (higher) depreciation / depletion

(7,306

)

(1,630

)

(479

)

(9,415

)

Other Income (Expense)

(Higher) lower other deductions

(365

)

(483

)

(848

)

(Higher) lower interest expense

(486

)

(608

)

(1,094

)

Income Taxes

Lower (higher) income tax expense / effective tax rate

(1,646

)

(2

)

2

343

24

(1,279

)

All other / rounding

(399

)

292

7

(43

)

(27

)

(170

)

Second quarter 2020 adjusted operating results

14,446

22,087

16,129

31,499

76

84,237

Items impacting comparability:

Impairment of oil and gas properties

(177,761

)

(177,761

)

Tax impact of impairment of oil and gas properties

48,503

48,503

Deferred tax valuation allowance

(60,463

)

3,769

(76

)

(56,770

)

Unrealized gain (loss) on other investments

(5,414

)

(5,414

)

Tax impact of unrealized gain (loss) on other investments

1,137

1,137

Second quarter 2020 GAAP earnings

$

(175,275

)

$

22,087

$

19,898

$

31,499

$

(4,277

)

$

(106,068

)

* Amounts do not reflect intercompany eliminations

** Operating results have been calculated using the 21% federal statutory rate effective for the 2019 fiscal year.

*** Downstream margin defined as operating revenues less purchased gas expense.


NATIONAL FUEL GAS COMPANY

RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS PER SHARE

QUARTER ENDED MARCH 31, 2020

(Unaudited)

Upstream

Midstream

Downstream

Exploration &

Pipeline &

Corporate /

Production

Storage

Gathering

Utility

All Other

Consolidated*

Second quarter 2019 GAAP earnings per share

$

0.25

$

0.20

$

0.15

$

0.41

$

0.03

$

1.04

Items impacting comparability:

Mark-to-market adjustments due to hedge ineffectiveness, net of tax

0.06

0.06

Unrealized (gain) loss on other investments, net of tax

(0.03

)

(0.03

)

Second quarter 2019 adjusted operating results per share

0.31

0.20

0.15

0.41

1.07

Drivers of adjusted operating results**

Upstream Revenues

Higher (lower) natural gas production

0.25

0.25

Higher (lower) crude oil production

0.02

0.02

Higher (lower) realized natural gas prices, after hedging

(0.23

)

(0.23

)

Higher (lower) realized crude oil prices, after hedging

(0.02

)

(0.02

)

Midstream Revenues

Higher (lower) operating revenues

0.06

0.05

0.11

Downstream Margins***

Impact of usage and weather

(0.04

)

(0.04

)

System modernization tracker revenues

0.02

0.02

Regulatory revenue adjustments

0.01

0.01

Higher (lower) energy marketing margins

0.01

0.01

Operating Expenses

Lower (higher) lease operating and transportation expenses

(0.05

)

(0.05

)

Lower (higher) operating expenses

0.01

(0.01

)

(0.03

)

(0.03

)

Lower (higher) depreciation / depletion

(0.08

)

(0.02

)

(0.01

)

(0.11

)

Other Income (Expense)

(Higher) lower other deductions

(0.01

)

(0.01

)

(Higher) lower interest expense

(0.01

)

(0.01

)

(0.02

)

Income Taxes

Lower (higher) income tax expense / effective tax rate

(0.02

)

(0.02

)

All other / rounding

0.01

0.01

(0.01

)

0.01

Second quarter 2020 adjusted operating results per share

0.17

0.25

0.19

0.36

0.97

Items impacting comparability:

Impairment of oil and gas properties, net of tax

(1.49

)

(1.49

)

Deferred tax valuation allowance

(0.70

)

0.04

(0.66

)

Unrealized gain (loss) on other investments, net of tax

(0.05

)

(0.05

)

Earnings per share impact of diluted shares

(0.01

)

0.01

Second quarter 2020 GAAP earnings per share

$

(2.03

)

$

0.26

$

0.23

$

0.36

$

(0.05

)

$

(1.23

)

* Amounts do not reflect intercompany eliminations

** Operating results have been calculated using the 21% federal statutory rate effective for the 2019 fiscal year.

*** Downstream margin defined as operating revenues less purchased gas expense.


NATIONAL FUEL GAS COMPANY

RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS

SIX MONTHS ENDED MARCH 31, 2020

(Unaudited)

Upstream

Midstream

Downstream

Exploration &

Pipeline &

Corporate /

(Thousands of Dollars)

Production

Storage

Gathering

Utility

All Other

Consolidated*

Six months ended March 31, 2019 GAAP earnings

$

60,087

$

42,851

$

26,872

$

61,237

$

2,209

$

193,256

Items impacting comparability:

Remeasurement of deferred taxes under 2017 Tax Reform

(990

)

(500

)

(3,510

)

(5,000

)

Mark-to-market adjustments due to hedge ineffectiveness

237

237

Tax impact of mark-to-market adjustments due to hedge ineffectiveness

(50

)

(50

)

Unrealized (gain) loss on other investments

2,516

2,516

Tax impact of unrealized (gain) loss on other investments

(528

)

(528

)

Six months ended March 31, 2019 adjusted operating results

59,284

42,851

26,372

61,237

687

190,431

Drivers of adjusted operating results**

Upstream Revenues

Higher (lower) natural gas production

40,427

40,427

Higher (lower) crude oil production

3,487

3,487

Higher (lower) realized natural gas prices, after hedging

(32,792

)

(32,792

)

Higher (lower) realized crude oil prices, after hedging

(754

)

(754

)

Midstream Revenues

Higher (lower) operating revenues

1,625

8,688

10,313

Downstream Margins***

Impact of usage and weather

(3,678

)

(3,678

)

System modernization tracker revenues

2,033

2,033

Regulatory revenue adjustments

1,550

1,550

Higher (lower) energy marketing margins

891

891

Operating Expenses

Lower (higher) lease operating and transportation expenses

(11,082

)

(11,082

)

Lower (higher) operating expenses

(1,016

)

1,260

(2,038

)

(2,707

)

)

$

(1.75

)

$

0.69

$

(2.44

)


NATIONAL FUEL GAS COMPANY

AND SUBSIDIARIES

SEGMENT OPERATING RESULTS AND STATISTICS

(UNAUDITED)

MIDSTREAM BUSINESSES

Three Months Ended

Six Months Ended

(Thousands of Dollars, except per share amounts)

March 31,

March 31,

PIPELINE AND STORAGE SEGMENT

2020

2019

Variance

2020

2019

Variance

Revenues from External Customers

$

51,919

$

48,421

$

3,498

$

100,888

$

102,639

$

(1,751

)

Intersegment Revenues

27,326

23,918

3,408

50,577

46,769

3,808

Total Operating Revenues

79,245

72,339

6,906

151,465

149,408

2,057

Operating Expenses:

Purchased Gas

(3

)

510

(513

)

(10

)

813

(823

)

Operation and Maintenance

22,014

22,907

(893

)

42,945

44,540

(1,595

)

Property, Franchise and Other Taxes

8,132

7,641

491

16,487

14,949

1,538

Depreciation, Depletion and Amortization

13,356

11,293

2,063

24,960

22,407

2,553

43,499

42,351

1,148

84,382

82,709

1,673

Operating Income

35,746

29,988

5,758

67,083

66,699

384

Other Income (Expense):

Non-Service Pension and Post-Retirement Benefit (Costs) Credit

(174

)

930

(1,104

)

(349

)

1,397

(1,746

)

Interest and Other Income

1,535

1,043

492

3,088

2,502

586

Interest Expense

(7,152

)

(7,500

)

348

(14,264

)

(14,786

)

522

Income Before Income Taxes

29,955

24,461

5,494

55,558

55,812

(254

)

Income Tax Expense

7,868

6,712

1,156

15,366

12,961

2,405

Net Income

$

22,087

$

17,749

$

4,338

$

40,192

$

42,851

$

(2,659

)

Net Income Per Share (Diluted)

$

0.26

$

0.20

$

0.06

$

0.46

$

0.49

$

(0.03

)

Three Months Ended

Six Months Ended

March 31,

March 31,

GATHERING SEGMENT

2020

2019

Variance

2020

2019

Variance

Revenues from External Customers

$

$

2

$

(2

)

$

$

2

$

(2

)

Intersegment Revenues

35,267

29,366

5,901

70,055

59,056

10,999

Total Operating Revenues

35,267

29,368

5,899

70,055

59,058

10,997

Operating Expenses:

Operation and Maintenance

5,702

4,752

950

11,044

8,464

2,580

Property, Franchise and Other Taxes

24

18

6

38

48

(10

)

Depreciation, Depletion and Amortization

5,279

4,673

606

10,418

9,351

1,067

11,005

9,443

1,562

21,500

17,863

3,637

Operating Income

24,262

19,925

4,337

48,555

41,195

7,360

Other Income (Expense):

Non-Service Pension and Post-Retirement Benefit Costs

(71

)

(1

)

(70

)

(143

)

(83

)

(60

)

Interest and Other Income

89

190

(101

)

157

315

(158

)

Interest Expense

(2,160

)

(2,345

)

185

(4,379

)

(4,723

)

344

Income Before Income Taxes

22,120

17,769

4,351

44,190

36,704

7,486

Income Tax Expense

2,222

5,079

(2,857

)

8,348

9,832

(1,484

)

Net Income

$

19,898

$

12,690

$

7,208

$

35,842

$

26,872

$

8,970

Net Income Per Share (Diluted)

$

0.23

$

0.15

$

0.08

$

0.42

$

0.31

$

0.11


NATIONAL FUEL GAS COMPANY

AND SUBSIDIARIES

SEGMENT OPERATING RESULTS AND STATISTICS

(UNAUDITED)

DOWNSTREAM BUSINESS

Three Months Ended

Six Months Ended

(Thousands of Dollars, except per share amounts)

March 31,

March 31,

UTILITY SEGMENT

2020

2019

Variance

2020

2019

Variance

Revenues from External Customers

$

250,556

$

298,636

$

(48,080

)

$

445,465

$

518,647

$

(73,182

)

Intersegment Revenues

3,937

4,394

(457

)

5,853

7,040

(1,187

)

Total Operating Revenues

254,493

303,030

(48,537

)

451,318

525,687

(74,369

)

Operating Expenses:

Purchased Gas

119,411

165,235

(45,824

)

204,116

277,115

(72,999

)

Operation and Maintenance

51,070

47,795

3,275

93,913

90,950

2,963

Property, Franchise and Other Taxes

10,820

11,312

(492

)

20,634

21,365

(731

)

Depreciation, Depletion and Amortization

13,751

13,365

386

27,382

26,656

726

195,052

237,707

(42,655

)

346,045

416,086

(70,041

)

Operating Income

59,441

65,323

(5,882

)

105,273

109,601

(4,328

)

Other Income (Expense):

Non-Service Pension and Post-Retirement Benefit Costs

(12,388

)

(12,686

)

298

(19,151

)

(19,614

)

463

Interest and Other Income

294

1,068

(774

)

1,245

1,780

(535

)

Interest Expense

(5,516

)

(6,263

)

747

(11,190

)

(12,157

)

967

Income Before Income Taxes

41,831

47,442

(5,611

)

76,177

79,610

(3,433

)

Income Tax Expense

10,332

11,853

(1,521

)

18,095

18,373

(278

)

Net Income

$

31,499

$

35,589

$

(4,090

)

$

58,082

$

61,237

$

(3,155

)

Net Income Per Share (Diluted)

$

0.36

$

0.41

$

(0.05

)

$

0.67

$

0.71

$

(0.04

)


NATIONAL FUEL GAS COMPANY

AND SUBSIDIARIES

SEGMENT OPERATING RESULTS AND STATISTICS

(UNAUDITED)

Three Months Ended

Six Months Ended

(Thousands of Dollars, except per share amounts)

March 31,

March 31

ALL OTHER

2020

2019

Variance

2020

2019

Variance

Revenues from External Customers

$

32,925

$

59,328

$

(26,403

)

$

67,161

$

112,416

$

(45,255

)

Intersegment Revenues

79

43

36

256

375

(119

)

Total Operating Revenues

33,004

59,371

(26,367

)

67,417

112,791

(45,374

)

Operating Expenses:

Purchased Gas

29,151

56,820

(27,669

)

61,184

108,337

(47,153

)

Operation and Maintenance

1,875

1,944

(69

)

3,578

3,822

(244

)

Property, Franchise and Other Taxes

176

134

42

320

270

50

Depreciation, Depletion and Amortization

206

254

(48

)

408

536

(128

)

31,408

59,152

(27,744

)

65,490

112,965

(47,475

)

Operating Income (Loss)

1,596

219

1,377

1,927

(174

)

2,101

Other Income (Expense):

Non-Service Pension and Post-Retirement Benefit Costs

(69

)

(11

)

(58

)

(138

)

(133

)

(5

)

Interest and Other Income

193

360

(167

)

471

666

(195

)

Interest Expense

(24

)

(8

)

(16

)

(42

)

(13

)

(29

)

Income Before Income Taxes

1,696

560

1,136

2,218

346

1,872

Income Tax Expense (Benefit)

527

144

383

678

(153

)

831

Net Income

$

1,169

$

416

$

753

$

1,540

$

499

$

1,041

Net Income Per Share (Diluted)

$

0.01

$

0.01

$

$

0.02

$

0.01

$

0.01

Three Months Ended

Six Months Ended

March 31,

March 31,

CORPORATE

2020

2019

Variance

2020

2019

Variance

Revenues from External Customers

$

135

$

55

$

80

$

270

$

109

$

161

Intersegment Revenues

1,094

1,165

(71

)

2,187

2,329

(142

)

Total Operating Revenues

1,229

1,220

9

2,457

2,438

19

Operating Expenses:

Operation and Maintenance

3,499

3,955

(456

)

6,142

6,751

(609

)

Property, Franchise and Other Taxes

120

120

237

235

2

Depreciation, Depletion and Amortization

184

191

(7

)

378

380

(2

)

3,803

4,266

(463

)

6,757

7,366

(609

)

Operating Loss

(2,574

)

(3,046

)

472

(4,300

)

(4,928

)

628

Other Income (Expense):

Non-Service Pension and Post-Retirement Benefit Costs

(775

)

(647

)

(128

)

(1,550

)

(1,385

)

(165

)

Interest and Other Income

22,801

32,761

(9,960

)

53,874

56,377

(2,503

)

Interest Expense on Long-Term Debt

(25,270

)

(25,273

)

3

(50,713

)

(50,713

)

Other Interest Expense

(1,605

)

(1,324

)

(281

)

(3,023

)

(2,367

)

(656

)

Income (Loss) before Income Taxes

(7,423

)

2,471

(9,894

)

(5,712

)

(3,016

)

(2,696

)

Income Tax Expense (Benefit)

(1,977

)

193

(2,170

)

(1,878

)

(4,726

)

2,848

Net Income (Loss)

$

(5,446

)

$

2,278

$

(7,724

)

$

(3,834

)

$

1,710

$

(5,544

)

Net Income (Loss) Per Share (Diluted)

$

(0.06

)

$

0.02

$

(0.08

)

$

(0.05

)

$

0.02

$

(0.07

)

Three Months Ended

Six Months Ended

March 31,

March 31,

INTERSEGMENT ELIMINATIONS

2020

2019

Variance

2020

2019

Variance

Intersegment Revenues

$

(67,703

)

$

(58,886

)

$

(8,817

)

$

(128,928

)

$

(115,569

)

$

(13,359

)

Operating Expenses:

Purchased Gas

(30,289

)

(27,528

)

(2,761

)

(54,748

)

(52,568

)

(2,180

)

Operation and Maintenance

(37,414

)

(31,358

)

(6,056

)

(74,180

)

(63,001

)

(11,179

)

(67,703

)

(58,886

)

(8,817

)

(128,928

)

(115,569

)

(13,359

)

Operating Income

Other Income (Expense):

Interest and Other Deductions

(28,728

)

(29,201

)

473

(57,675

)

(57,897

)

222

Interest Expense

28,728

29,201

(473

)

57,675

57,897

(222

)

Net Income (Loss)

$

$

$

$

$

$

Net Income (Loss) Per Share (Diluted)

$

$

$

$

$

$


NATIONAL FUEL GAS COMPANY

AND SUBSIDIARIES

SEGMENT INFORMATION (Continued)

(Thousands of Dollars)

Three Months Ended

Six Months Ended

March 31,

March 31,

(Unaudited)

(Unaudited)

Increase

Increase

2020

2019

(Decrease)

2020

2019

(Decrease)

Capital Expenditures:

Exploration and Production

$

102,424

(1)

$

142,571

(3)

$

(40,147

)

$

229,343

(1)(2)

$

262,786

(3)(4)

$

(33,443

)

Pipeline and Storage

25,554

(1)

22,674

(3)

2,880

82,638

(1)(2)

52,638

(3)(4)

30,000

Gathering

15,072

(1)

12,680

(3)

2,392

24,910

(1)(2)

21,470

(3)(4)

3,440

Utility

19,457

(1)

19,735

(3)

(278

)

36,622

(1)(2)

35,657

(3)(4)

965

Total Reportable Segments

162,507

197,660

(35,153

)

373,513

372,551

962

All Other

1

22

(21

)

22

41

(19

)

Corporate

134

85

49

320

103

217

Total Capital Expenditures

$

162,642

$

197,767

$

(35,125

)

$

373,855

$

372,695

$

1,160

(1) Capital expenditures for the quarter and six months ended March 31, 2020, include accounts payable and accrued liabilities related to capital expenditures of $41.2 million, $9.7 million, $4.4 million, and $4.2 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 March 31, 2020, since they represent non-cash investing activities at that date.

(2) Capital expenditures for the six months ended March 31, 2020, exclude capital expenditures of $38.0 million, $23.8 million, $6.6 million and $12.7 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, 2019 and paid during the six months ended March 31, 2020. These amounts were excluded from the Consolidated Statement of Cash Flows at September 30, 2019, since they represented non-cash investing activities at that date. These amounts have been included in the Consolidated Statement of Cash Flows at March 31, 2020.

(3) Capital expenditures for the quarter and six months ended March 31, 2019, include accounts payable and accrued liabilities related to capital expenditures of $53.4 million, $10.7 million, $7.4 million, and $3.4 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 March 31, 2019, since they represent non-cash investing activities at that date.

(4) Capital expenditures for the six months ended March 31, 2019, exclude capital expenditures of $51.3 million, $21.9 million, $6.1 million and $9.5 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, 2018 and paid during the six months ended March 31, 2019. These amounts were excluded from the Consolidated Statement of Cash Flows at September 30, 2018, since they represented non-cash investing activities at that date. These amounts have been included in the Consolidated Statement of Cash Flows at March 31, 2019.

DEGREE DAYS

Percent Colder

(Warmer) Than:

Three Months Ended March 31

Normal

2020

2019

Normal (1)

Last Year (1)

Buffalo, NY

3,326

2,738

3,372

(17.7

)

(18.8

)

Erie, PA

3,142

2,555

3,096

(18.7

)

(17.5

)

Six Months Ended March 31

Buffalo, NY

5,579

4,970

5,697

(10.9

)

(12.8

)

Erie, PA

5,186

4,461

5,126

(14.0

)

(13.0

)

(1) Percents compare actual 2020 degree days to normal degree days and actual 2020 degree days to actual 2019 degree days.

NATIONAL FUEL GAS COMPANY

AND SUBSIDIARIES

EXPLORATION AND PRODUCTION INFORMATION

Three Months Ended

Six Months Ended

March 31,

March 31,

Increase

Increase

2020

2019

(Decrease)

2020

2019

(Decrease)

Gas Production/Prices:

Production (MMcf)

Appalachia

55,638

44,883

10,755

109,922

90,188

19,734

West Coast

479

487

(8

)

966

989

(23

)

Total Production

56,117

45,370

10,747

110,888

91,177

19,711

Average Prices (Per Mcf)

Appalachia

$

1.77

$

2.65

$

(0.88

)

$

1.97

$

2.79

$

(0.82

)

West Coast

4.34

6.06

(1.72

)

4.67

6.40

(1.73

)

Weighted Average

1.80

2.69

(0.89

)

1.99

2.83

(0.84

)

Weighted Average after Hedging

2.12

2.58

(0.46

)

2.22

2.60

(0.38

)

Oil Production/Prices:

Production (Thousands of Barrels)

Appalachia

1

1

2

2

West Coast

605

563

42

1,206

1,134

72

Total Production

606

564

42

1,208

1,136

72

Average Prices (Per Barrel)

Appalachia

$

55.90

$

47.54

$

8.36

$

55.48

$

55.93

$

(0.45

)

West Coast

49.91

61.85

(11.94

)

56.25

63.79

(7.54

)

Weighted Average

49.92

61.82

(11.90

)

56.25

63.78

(7.53

)

Weighted Average after Hedging

58.23

61.01

(2.78

)

60.57

61.36

(0.79

)

Total Production (MMcfe)

59,753

48,754

10,999

118,136

97,993

20,143

Selected Operating Performance Statistics:

General & Administrative Expense per Mcfe (1)

$

0.29

$

0.35

$

(0.06

)

$

0.28

$

0.33

$

(0.05

)

Lease Operating and Transportation Expense per Mcfe (1)(2)

$

0.87

$

0.94

$

(0.07

)

$

0.87

$

0.90

$

(0.03

)

Depreciation, Depletion & Amortization per Mcfe (1)

$

0.76

$

0.74

$

0.02

$

0.76

$

0.72

$

0.04

(1) Refer to page 16 for the General and Administrative Expense, Lease Operating and Transportation Expense and Depreciation, Depletion, and Amortization Expense for the Exploration and Production segment.

(2) Amounts include transportation expense of $0.56 and $0.56 per Mcfe for the three months ended March 31, 2020 and March 31, 2019, respectively. Amounts include transportation expense of $0.57 and $0.55 per Mcfe for the six months ended March 31, 2020 and March 31, 2019, respectively.

NATIONAL FUEL GAS COMPANY

AND SUBSIDIARIES

EXPLORATION AND PRODUCTION INFORMATION

Hedging Summary for Remaining Six Months of Fiscal 2020

Volume

Average Hedge Price

Oil Swaps

Brent

690,000

BBL

$

64.55 / BBL

NYMEX

162,000

BBL

$

50.52 / BBL

Total

852,000

BBL

$

61.88 / BBL

Gas Swaps

NYMEX

45,700,000

MMBTU

$

2.67 / MMBTU

DAWN

3,600,000

MMBTU

$

3.00 / MMBTU

Fixed Price Physical Sales

29,608,125

MMBTU

$

2.18 / MMBTU

Total

78,908,125

MMBTU

Hedging Summary for Fiscal 2021

Volume

Average Hedge Price

Oil Swaps

Brent

696,000

BBL

$

64.29 / BBL

NYMEX

156,000

BBL

$

51.00 / BBL

Total

852,000

BBL

$

61.86 / BBL

Gas Swaps

NYMEX

117,920,000

MMBTU

$

2.61/ MMBTU

DAWN

600,000

MMBTU

$

3.00 / MMBTU

No Cost Collars

25,850,000

MMBTU

$

2.28 / MMBTU (Floor) / $2.77 / MMBTU (Ceiling)

Fixed Price Physical Sales

46,810,846

MMBTU

$

2.22 / MMBTU

Total

191,180,846

MMBTU

Hedging Summary for Fiscal 2022

Volume

Average Hedge Price

Oil Swaps

Brent

300,000

BBL

$

60.07 / BBL

NYMEX

156,000

BBL

$

51.00 / BBL

Total

456,000

BBL

$

56.97 / BBL

Gas Swaps

NYMEX

62,550,000

MMBTU

$

2.52 / MMBTU

No Cost Collars

2,350,000

MMBTU

$

2.28 / MMBTU (Floor) / $2.77 / MMBTU (Ceiling)

Fixed Price Physical Sales

40,588,964

MMBTU

$

2.23 / MMBTU

Total

105,488,964

MMBTU

Hedging Summary for Fiscal 2023

Volume

Average Hedge Price

Gas Swaps

NYMEX

17,500,000

MMBTU

$

2.47 / MMBTU

Fixed Price Physical Sales

36,961,007

MMBTU

$

2.26 / MMBTU

Total

54,461,007

MMBTU

Hedging Summary for Fiscal 2024

Volume

Average Hedge Price

Gas Swaps

NYMEX

1,150,000

MMBTU

$

2.45 / MMBTU

Fixed Price Physical Sales

20,801,194

MMBTU

$

2.25 / MMBTU

Total

21,951,194

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

Six Months Ended

March 31,

March 31,

Increase

Increase

2020

2019

(Decrease)

2020

2019

(Decrease)

Firm Transportation - Affiliated

42,602

50,967

(8,365

)

77,269

86,668

(9,399

)

Firm Transportation - Non-Affiliated

153,197

148,653

4,544

327,178

304,855

22,323

Interruptible Transportation

531

750

(219

)

1,244

1,665

(421

)

196,330

200,370

(4,040

)

405,691

393,188

12,503

Gathering Volume - (MMcf)

Three Months Ended

Six Months Ended

March 31,

March 31,

Increase

Increase

2020

2019

(Decrease)

2020

2019

(Decrease)

Gathered Volume - Affiliated

65,134

54,157

10,977

129,526

108,845

20,681

Utility Throughput - (MMcf)

Three Months Ended

Six Months Ended

March 31,

March 31,

Increase

Increase

2020

2019

(Decrease)

2020

2019

(Decrease)

Retail Sales:

Residential Sales

26,155

30,906

(4,751

)

45,631

50,686

(5,055

)

Commercial Sales

4,033

4,712

(679

)

6,846

7,558

(712

)

Industrial Sales

183

284

(101

)

400

488

(88

)

30,371

35,902

(5,531

)

52,877

58,732

(5,855

)

Transportation

25,157

28,928

(3,771

)

45,712

51,198

(5,486

)

55,528

64,830

(9,302

)

98,589

109,930

(11,341

)


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 and six months ended March 31, 2020 and 2019:

Three Months Ended

Six Months Ended

March 31,

March 31,

(in thousands except per share amounts)

2020

2019

2020

2019

Reported GAAP Earnings

$

(106,068

)

$

90,595

$

(19,477

)

$

193,256

Items impacting comparability

Impairment of oil and gas properties (E&P)

177,761

177,761

Tax impact of impairment of oil and gas properties

(48,503

)

(48,503

)

Deferred tax valuation allowance

56,770

56,770

Remeasurement of deferred income taxes under 2017 Tax Reform

(5,000

)

Mark-to-market adjustments due to hedge ineffectiveness (E&P)

6,742

237

Tax impact of mark-to-market adjustments due to hedge ineffectiveness

(1,416

)

(50

)

Unrealized (gain) loss on other investments (Corporate/All Other)

5,414

(3,831

)

6,433

2,516

Tax impact of unrealized (gain) loss on other investments

(1,137

)

805

(1,351

)

(528

)

Adjusted Operating Results

$

84,237

$

92,895

$

171,633

$

190,431

Reported GAAP Earnings per share

$

(1.23

)

$

1.04

$

(0.23

)

$

2.23

Items impacting comparability

Impairment of oil and gas properties, net of tax (E&P)

1.49

1.49

Deferred tax valuation allowance

0.66

0.66

Remeasurement of deferred income taxes under 2017 Tax Reform

(0.06

)

Mark-to-market adjustments due to hedge ineffectiveness, net of tax (E&P)

0.06

Unrealized (gain) loss on other investments, net of tax (Corporate/All Other)

0.05

(0.03

)

0.06

0.02

Rounding

0.01

Adjusted Operating Results per share

$

0.97

$

1.07

$

1.98

$

2.20

Management defines Adjusted EBITDA as reported GAAP earnings before the following items: interest expense, income taxes, depreciation, depletion and amortization, other income and deductions, 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 and six months ended March 31, 2020 and 2019:

Three Months Ended

Six Months Ended

March 31,

March 31,

(in thousands)

2020

2019

2020

2019

Reported GAAP Earnings

$

(106,068

)

$

90,595

$

(19,477

)

$

193,256

Depreciation, Depletion and Amortization

77,912

65,664

152,830

129,918

Other (Income) Deductions

17,480

5,919

20,520

15,521

Interest Expense

27,162

27,060

54,156

53,573

Income Taxes

36,846

29,785

68,241

52,693

Mark-to-Market Adjustments due to Hedge Ineffectiveness

6,742

237

Impairment of Oil and Gas Producing Properties

177,761

177,761

Adjusted EBITDA

$

231,093

$

225,765

$

454,031

$

445,198

Adjusted EBITDA by Segment

Pipeline and Storage Adjusted EBITDA

$

49,102

$

41,281

$

92,043

$

89,106

Gathering Adjusted EBITDA

29,541

24,598

58,973

50,546

Total Midstream Businesses Adjusted EBITDA

78,643

65,879

151,016

139,652

Exploration and Production Adjusted EBITDA

79,846

83,580

171,947

173,475

Utility Adjusted EBITDA

73,192

78,688

132,655

136,257

Corporate and All Other Adjusted EBITDA

(588

)

(2,382

)

(1,587

)

(4,186

)

Total Adjusted EBITDA

$

231,093

$

225,765

$

454,031

$

445,198

NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
NON-GAAP FINANCIAL MEASURES
SEGMENT ADJUSTED EBITDA

Three Months Ended

Six Months Ended

March 31,

March 31,

(in thousands)

2020

2019

2020

2019

Exploration and Production Segment

Reported GAAP Earnings

$

(175,275

)

$

21,873

$

(151,299

)

$

60,087

Depreciation, Depletion and Amortization

45,136

35,888

89,284

70,588

Other (Income) Deductions

187

(275

)

349

(554

)

Interest Expense

14,163

13,548

28,220

26,711

Income Taxes

17,874

5,804

27,632

16,406

Mark-to-Market Adjustments due to Hedge Ineffectiveness

6,742

237

Impairment of Oil and Gas Producing Properties

177,761

177,761

Adjusted EBITDA

$

79,846

$

83,580

$

171,947

$

173,475

Pipeline and Storage Segment

Reported GAAP Earnings

$

22,087

$

17,749

$

40,192

$

42,851

Depreciation, Depletion and Amortization

13,356

11,293

24,960

22,407

Other (Income) Deductions

(1,361

)

(1,973

)

(2,739

)

(3,899

)

Interest Expense

7,152

7,500

14,264

14,786

Income Taxes

7,868

6,712

15,366

12,961

Adjusted EBITDA

$

49,102

$

41,281

$

92,043

$

89,106

Gathering Segment

Reported GAAP Earnings

$

19,898

$

12,690

$

35,842

$

26,872

Depreciation, Depletion and Amortization

5,279

4,673

10,418

9,351

Other (Income) Deductions

(18

)

(189

)

(14

)

(232

)

Interest Expense

2,160

2,345

4,379

4,723

Income Taxes

2,222

5,079

8,348

9,832

Adjusted EBITDA

$

29,541

$

24,598

$

58,973

$

50,546

Utility Segment

Reported GAAP Earnings

$

31,499

$

35,589

$

58,082

$

61,237

Depreciation, Depletion and Amortization

13,751

13,365

27,382

26,656

Other (Income) Deductions

12,094

11,618

17,906

17,834

Interest Expense

5,516

6,263

11,190

12,157

Income Taxes

10,332

11,853

18,095

18,373

Adjusted EBITDA

$

73,192

$

78,688

$

132,655

$

136,257

Corporate and All Other

Reported GAAP Earnings

$

(4,277

)

$

2,694

$

(2,294

)

$

2,209

Depreciation, Depletion and Amortization

390

445

786

916

Other (Income) Deductions

6,578

(3,262

)

5,018

2,372

Interest Expense

(1,829

)

(2,596

)

(3,897

)

(4,804

)

Income Taxes

(1,450

)

337

(1,200

)

(4,879

)

Adjusted EBITDA

$

(588

)

$

(2,382

)

$

(1,587

)

$

(4,186

)


Analyst Contact:
Kenneth E. Webster
716-857-7067

Media Contact:
Karen L. Merkel
716-857-7654