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National Fuel Reports Third Quarter Earnings and Provides Preliminary Guidance for Fiscal 2020

WILLIAMSVILLE, N.Y., Aug. 01, 2019 (GLOBE NEWSWIRE) -- National Fuel Gas Company (“National Fuel” or the “Company”) (NFG) today announced consolidated results for the third quarter of its 2019 fiscal year and for the nine months ended June 30, 2019.

FISCAL 2019 THIRD QUARTER SUMMARY

  • GAAP earnings of $63.8 million, or $0.73 per share, compared to $63.0 million, or $0.73 per share, in the prior year
  • Adjusted operating results of $61.8 million, or $0.71 per share, compared to $63.3 million, or $0.73 per share, in the prior year (see non-GAAP reconciliation on page 2)
  • Adjusted EBITDA of $182.9 million compared to $175.2 million in the prior year (non-GAAP reconciliation on page 24)
  • E&P segment net production of 54.7 Bcfe, an increase of 23% from the prior year and 12% from the second quarter
  • Average natural gas prices, after the impact of hedging, of $2.36 per Mcf, down $0.07 per Mcf from the prior year
  • Average oil prices, after the impact of hedging, of $62.92 per Bbl, up $4.18 per Bbl from the prior year
  • Gathering segment operating revenues increased $5.0 million on an 18% increase in gathered volumes
  • Utility segment net income increased $3.4 million, or 87%, on higher customer margins

FISCAL 2019 AND FISCAL 2020 GUIDANCE UPDATE SUMMARY

The Company is updating its fiscal 2019 guidance and providing preliminary fiscal 2020 guidance relating to earnings, capital expenditures, and production.  See pages 5 and 6 for additional discussion.

  Updated
FY 2019
Guidance
  Preliminary
FY 2020
Guidance
  Key Forecast Drivers
           
Earnings per Share $3.40 to $3.50   $3.25 to $3.55   Increase in production offset by lower natural gas prices
           
Capital Expenditures ($MM) $745 to $800   $725 to $820    
E&P and Gathering $525 to $550   $455 to $505   Seneca to drop rig in Q2 fiscal 2020
Pipeline and Storage $130 to $150   $180 to $215   Empire North expansion project
Utility $90 to $100   $90 to $100   System modernization backed by rate tracker in NY
           
E&P Production (Bcfe) 205 to 215   235 to 245   Utica and Marcellus development
           

MANAGEMENT COMMENTS

David P. Bauer, President and Chief Executive Officer of National Fuel Gas Company, stated: “Our fiscal third quarter results once again demonstrate why the integrated model is a significant advantage for National Fuel, particularly during periods of commodity price volatility. Our Utility and Gathering businesses led the way with significant year over year earnings growth, along with the strong operational performance of our Exploration and Production business. As we look to fiscal 2020, we do so with a close eye on longer-term natural gas prices and a focus on prudently deploying capital and maintaining our strong balance sheet. We plan to reduce our drilling activity accordingly but will continue to invest in pipeline expansion projects and utility system modernization opportunities that add shareholder value and position National Fuel for long-term growth and success

 
RECONCILIATION OF GAAP EARNINGS TO ADJUSTED OPERATING RESULTS 
    Three Months Ended   Nine Months Ended
    June 30,   June 30,
(in thousands except per share amounts)   2019   2018   2019   2018
Reported GAAP Earnings   $ 63,753     $ 63,025     $ 257,009     $ 353,527  
Items impacting comparability                
Remeasurement of deferred income taxes under 2017 Tax Reform           (5,000 )   (107,000 )
Mark-to-market adjustments due to hedge ineffectiveness (E&P)   (1,020 )   339     (783 )   436  
Tax impact of mark-to-market adjustments due to hedge ineffectiveness   214     (83 )   164     (107 )
Unrealized (gain) loss on other investments (Corporate / All Other)   (1,420 )       1,096      
Tax impact of unrealized (gain) loss on other investments   298         (230 )    
Adjusted Operating Results   $ 61,825     $ 63,281     $ 252,256     $ 246,856  
                 
Reported GAAP Earnings per share   $ 0.73     $ 0.73     $ 2.96     $ 4.09  
Items impacting comparability                
Remeasurement of deferred income taxes under 2017 Tax Reform           (0.06 )   (1.24 )
Mark-to-market adjustments due to hedge ineffectiveness (E&P)   (0.01 )       (0.01 )   0.01  
Tax impact of mark-to-market adjustments due to hedge ineffectiveness                
Unrealized (gain) loss on other investments (Corporate / All Other)   (0.02 )       0.01      
Tax impact of unrealized (gain) loss on other investments                
Rounding   0.01         0.01      
Adjusted Operating Results per share   $ 0.71     $ 0.73     $ 2.91     $ 2.86  
                                 

DISCUSSION OF RESULTS BY SEGMENT

The following discussion of earnings of each operating segment for the quarter ended June 30, 2019, is summarized in a tabular form on pages 9 and 10 of this report (earnings drivers for the nine months ended June 30, 2019, are summarized on pages 11 and 12).  It may be helpful to refer to those tables while reviewing this discussion.  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
  June 30,
(in thousands) 2019   2018   Variance
GAAP Earnings $ 26,512     $ 27,817     $ (1,305 )
Mark-to-market adjustments due to hedge ineffectiveness $ (1,020 )   $ 339     $ (1,359 )
Tax impact of mark-to-market adjustments due to hedge ineffectiveness $ 214     $ (83 )   $ 297  
Adjusted Operating Results $ 25,706     $ 28,073     $ (2,367 )
           
Adjusted EBITDA $ 88,175     $ 77,567     $ 10,608  

The Exploration and Production segment’s third quarter GAAP earnings decreased $1.3 million versus the prior year, which includes the net impact of non-cash mark-to-market adjustments recorded during the current and prior year quarters relating to hedge ineffectiveness.  Excluding these adjustments (see table above), the $2.4 million reduction in the Exploration and Production segment’s third quarter earnings was due primarily to a higher effective income tax rate, which was largely the result of tax benefits realized in the prior year that did not recur in the current year.  Before considering these tax items, Seneca’s third quarter earnings were higher due primarily to the positive impacts of higher natural gas production and better realized crude oil prices, which were partially offset by the impacts of lower crude oil production, lower realized natural gas prices, higher lease operating and transportation (“LOE”) expense, and higher depreciation, depletion and amortization (“DD&A”) expense.

Seneca’s third quarter net production was 54.7 Bcfe, an increase of 10.1 Bcfe, or 23 percent, from the prior year.  Natural gas production increased 10.3 billion cubic feet (“Bcf”), or 25 percent, due primarily to production from new Marcellus and Utica wells completed and connected to sales in Appalachia.  Net production increased 4.8 Bcf in Seneca’s Eastern Development Area due largely to increased Utica development in the EDA-Tioga area and Marcellus development in the EDA-Lycoming area.  Net gas production increased 5.5 Bcf in the WDA-Clermont area, where Seneca added a second rig in May 2018 and continues to experience stronger production and shallower declines from its Utica development program. Seneca’s oil production for the third quarter decreased 25 thousand barrels ("Mbbl"), or 4 percent, from the prior year.

Seneca's average realized natural gas price, after the impact of hedging and transportation costs, was $2.36 per thousand cubic feet ("Mcf"), a decrease of $0.07 per Mcf from the prior year. Seneca's average realized oil price, after the impact of hedging, was $62.92 per barrel ("Bbl"), an increase of $4.18 per Bbl over the prior year.  The improvement in oil price realizations was due primarily to stronger price differentials at local sales points in California relative to West Texas Intermediate (WTI) prices.

LOE expense increased $10.1 million due mostly to higher gathering expenses in Appalachia resulting from the increase in natural gas production coupled with an increase in well repair costs in California.  DD&A expense increased $8.8 million due to the increase in production and a $0.03 per Mcfe increase in the unit depletion rate.

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
  June 30,
(in thousands) 2019   2018   Variance
GAAP Earnings $ 15,792     $ 20,723     $ (4,931 )
           
Adjusted EBITDA $ 37,328     $ 46,072     $ (8,744 )

The Pipeline and Storage segment’s third quarter GAAP earnings decreased $5.0 million versus the prior year.  The decrease was driven primarily by lower operating revenues and higher operation and maintenance (“O&M”) expenses, which were partially offset by the impact of a lower effective tax rate.  The $5.0 million decrease in operating revenues was due largely to the expiration of a significant firm transportation contract on the Empire system in December 2018.  The impact of the contract expiration was partially offset by an increase in Empire’s transportation rates following the settlement of Empire’s rate case that was effective starting in January 2019. O&M expense increased $3.5 million due primarily to an increase in pipeline integrity maintenance activity during the quarter and higher personnel costs. The reduction in the Pipeline and Storage segment’s effective tax rate was due mostly to the impact of the 2017 Tax Reform Act, which lowered the Company’s statutory federal income tax rate from a blended 24.5 percent in fiscal 2018 to 21 percent in fiscal 2019, and decreased income tax expense on current period income by $0.6 million.

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 delivers Seneca’s gross Appalachian production to the interstate pipeline system.

  Three Months Ended
  June 30,
(in thousands) 2019   2018   Variance
GAAP Earnings $ 14,638     $ 11,566     $ 3,072  
           
Adjusted EBITDA $ 27,852     $ 23,090     $ 4,762  

The Gathering segment’s third quarter GAAP earnings increased $3.1 million over the prior year.  The increase was driven primarily by higher operating revenues, which were partially offset by an increase in DD&A expense.  Operating revenues increased $5.0 million, or 18 percent, due primarily to a 9.4 Bcf net increase in gathered volume from Seneca’s Appalachian natural gas production. Throughput on the Gathering segment’s Wellsboro, Clermont, and Trout Run systems increased 4.9 Bcf, 3.6 Bcf, and 2.6 Bcf, respectively. The $1.0 million increase in DD&A expense was largely due to a $0.7 million impairment recorded during the quarter to write-down the Company’s minority ownership in a non-operated gas processing facility. The benefit of a lower statutory federal income tax rate due to the 2017 Tax Reform Act was offset by the net impact of other items that increased the Gathering segment’s effective tax rate, including the non-recurrence of a tax benefit recorded in the prior year relating to the blended federal rate’s impact on deferred taxes.

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
  June 30,
(in thousands) 2019   2018   Variance
GAAP Earnings $ 7,362     $ 3,930     $ 3,432  
           
Adjusted EBITDA $ 33,163     $ 30,300     $ 2,863  

The Utility segment’s third quarter GAAP earnings increased $3.4 million over the prior year.  The increase was due primarily to higher customer margin (operating revenues less purchased gas sold) and lower interest expense.  A number of items contributed to the increase in customer margin, including changes in customer usage and a modest increase in residential customers, an increase in revenues relating to a system modernization tracking mechanism, and the net impact of adjustments related to regulatory rate mechanisms.  These positive items were partially offset by $1.8 million increase in the refund provision recorded by the Utility segment during the quarter to return the net effect of the 2017 Tax Reform Act to its customers.  Interest expense decreased $0.8 million due primarily to the Company’s early refinancing of an 8.75 percent coupon 10-year note that was set to mature in May 2019.

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.

  Three Months Ended
  June 30,
(in thousands) 2019   2018   Variance
GAAP Earnings $ (1,441 )   $ (190 )   $ (1,251 )
           
Adjusted EBITDA $ (2,075 )   $ (295 )   $ (1,780 )

The Energy Marketing segment’s third quarter GAAP earnings decreased $1.3 million due primarily to a decline in customer margins (operating revenues less purchased gas sold).

Corporate and All Other

Corporate and All Other operations had combined earnings of $0.9 million in the current year third quarter, which was $1.7 million higher than the loss of $0.8 million in the prior-year third quarter.  The increase in earnings was primarily attributable to the impact of $1.4 million in unrealized gains on investments in equity securities recorded during the quarter ($1.1 million after-tax), lower interest expense and a lower effective tax rate.  Unrealized gains and losses on investments in equity securities are now recognized in earnings following the adoption of new accounting guidance in the current year.  These unrealized gains and losses had been previously recorded as other comprehensive income. These increases were partially offset by lower operating revenues from the sale of standing timber by the Company’s land and timber operations.

DISCUSSION OF GUIDANCE UPDATE

National Fuel is revising its full-year earnings guidance for fiscal 2019.  The Company projects that earnings on a non-GAAP basis will be within the range of $3.40 to $3.50 per share, or $3.45 per share at the midpoint of the range. The Company’s revised earnings guidance range reflects the impact of actual results for the nine months ended June 30, 2019, and, among other forecast updates, lower commodity price assumptions to reflect current market prices for natural gas and crude oil for the remaining three months of the fiscal year.  The Company is reaffirming its Exploration and Production segment’s fiscal 2019 net production guidance, which is expected to be in the range of 205 to 215 Bcfe.  The Company now expects fiscal 2019 consolidated capital expenditures to be within the range of $745 million to $800 million, or $772.5 million at the midpoint.

The Company is also initiating preliminary guidance for fiscal 2020.  National Fuel is projecting that its fiscal 2020 earnings will be within a range of $3.25 to $3.55 per share, or $3.40 per share at the midpoint of the range and generally in line with fiscal 2019. The Company’s fiscal 2020 earnings projections are largely being driven by an increase in Seneca’s forecasted natural gas production and the associated impact on Gathering segment revenues, offset by lower expected natural gas price realizations and modest increases in operating expenses.  Seneca’s fiscal 2020 net production is expected to be in the range of 235 to 245 Bcfe, an increase of 30 Bcf versus fiscal 2019.  The Company is projecting its natural gas price realizations after hedging to decline approximately $0.20 per Mcf, driven in large part by lower expected NYMEX and regional spot prices for natural gas.

In response to the deterioration in near-term commodity prices, the Company’s Exploration and Production segment is planning to reduce its development activity in Appalachia and drop one of the three horizontal drilling rigs it is currently operating during the second quarter of fiscal 2020.  As a result, the Exploration and Production segment’s capital expenditures are expected to be in the range of $415 million to $455 million, a $50 million reduction versus fiscal 2019 at the midpoint.  At the reduced activity level, Seneca expects to generate production to fully utilize its firm sales and transportation commitments.  Gathering segment capital expenditures are expected to be $40 million to $50 million in fiscal 2020, a decline of $7.5 million at the midpoint.

Pipeline and Storage segment capital expenditures are expected to be in the range of $180 million to $215 million.  The $57.5 million increase at the midpoint of the range is due primarily to higher spending on expansion projects, including the fully-subscribed Empire North project that is expected to add $25 million in annual revenues after the project goes into service, which is anticipated in the second half of fiscal 2020.  Utility segment capital expenditures are expected to be flat versus fiscal 2019 at $90 million to $100 million as the Company continues to invest in the modernization of its gas distribution systems.

Mr. Bauer added: “Our integrated model and diversified asset base in Appalachia provide the flexibility to respond to market conditions and to efficiently allocate capital to opportunities across the natural gas value chain. Just as we have done in the past, we will again lean on that flexibility in fiscal 2020 by reducing the level of investment at the drill bit while continuing to invest in the expansion and modernization of our rate-regulated pipeline and utility systems, which we expect will generate future earnings growth and stable, value-added returns for our shareholders.”

In total, the Company’s consolidated capital expenditures in fiscal 2020 are expected to be in a range of $725 million to $820 million, flat versus fiscal 2019 at the midpoint of the respective ranges.

The Company’s fiscal 2019 earnings guidance range does not include the impact of certain items that impacted the comparability of earnings during the nine months ended June 30, 2019, including: (1) the remeasurement of deferred income taxes resulting from the 2017 Tax Reform Act, which reduced the Company’s income tax expense and benefited consolidated earnings in the nine months ended June 30, 2019 by $0.06 per share; (2) the full-year impact of the Exploration and Production segment’s mark-to-market adjustments for hedge ineffectiveness; and (3) the unrealized loss on other investments due to the change in an accounting rule discussed above, which lowered earnings by $0.01 per share.  While the Company expects to record additional adjustments to one or more of these items during the remaining three months ending September 30, 2019, the amounts of these and other potential adjustments are not reasonably determinable at this time.   As such, the Company is unable to provide earnings guidance other than on a non-GAAP basis.

Additional details on the Company's forecast assumptions and business segment guidance for fiscal 2019 are outlined in the table on page 8.

EARNINGS TELECONFERENCE

The Company will host a conference call on Friday, August 2, 2019, 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 “2194110”.  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 “2194110”.  Both the webcast and a telephonic replay will be available until the close of business on Friday, August 9, 2019.

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: Kenneth E. Webster 716-857-7067
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: 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 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; financial and economic conditions, including the availability of credit, and occurrences affecting the Company’s ability to obtain financing on acceptable terms for working capital, capital expenditures and other investments, including any downgrades in the Company’s credit ratings and changes in interest rates and other capital market conditions; changes in the price of natural gas or oil; impairments under the SEC’s full cost ceiling test for natural gas and oil reserves; 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; the impact of  information technology, cybersecurity or data security breaches; 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 pages 5 and 6, the Company is revising its earnings guidance for fiscal 2019 and initiating preliminary guidance for fiscal 2020.  Additional details on the Company's forecast assumptions and business segment guidance for fiscal 2019 and fiscal 2020 are outlined in the table below.

The Company's fiscal 2019 earnings guidance range does not include the impact of certain items that impacted the comparability of earnings during the nine months ended June 30, 2019, including: (1) the remeasurement of deferred income taxes resulting from the 2017 Tax Reform Act, which reduced the Company’s income tax expense and benefited consolidated earnings in the nine months ended June 30, 2019 by $0.06 per share; (2) the full-year impact of the Exploration and Production segment’s mark-to-market adjustments for hedging ineffectiveness; and (3) the unrealized loss on other investments due to the change in an accounting rule discussed on page 6, which lowered earnings by $0.01 per share.  While the Company expects to record additional adjustments to one or more of these items during the remaining three months ending September 30, 2019, the amounts of these and other potential adjustments are not reasonably determinable at this time.  As such, the Company is unable to provide earnings guidance other than on a non-GAAP basis.

  Updated FY 2019 Guidance   Preliminary FY 2020 Guidance
Consolidated Earnings per Share $3.40 to $3.50   $3.25 to $3.55
Consolidated Effective Tax Rate ~ 24%   ~ 25%
       
Capital Expenditures (Millions)      
Exploration and Production $475 - $495   $415 - $455
Pipeline and Storage $130 - $150   $180 - $215
Gathering $50 - $55   $40 - $50
Utility $90 - $100   $90 - $100
Consolidated Capital Expenditures $745 - $800   $725 - $820
       
Exploration & Production Segment Guidance      
       
Commodity Price Assumptions (1)      
NYMEX natural gas price $2.40 /MMBtu   $2.55 /MMBtu
Appalachian basin spot price (winter | summer) $2.10 /MMBtu   $2.20 /MMBtu | $2.00 /MMBtu
NYMEX (WTI) crude oil price $57.50 /Bbl   $55.00 /Bbl
California oil price premium (% of WTI) 108%   108%
       
Production (Bcfe)      
East Division - Appalachia 189 to 199   219 to 229
West Division - California ~ 16   ~ 16
Total Production 205 to 215   235 to 245
       
E&P Operating Costs ($/Mcfe)      
LOE $0.85 - $0.90   $0.85 - $0.90
G&A ~$0.30   $0.25 - $0.30
DD&A $0.70 - $0.75   $0.70 - $0.75
       
Other Business Segment Guidance (Millions)      
Gathering Segment Revenues $125 - $130   $135 - $145
Pipeline and Storage Segment Revenues ~$285   $290 - $295
 
(1)  Revised commodity price assumptions reflect the Company's forecast for the remainder of fiscal 2019.
 
 


NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS
QUARTER ENDED JUNE 30, 2019
(Unaudited)
                           
  Upstream   Midstream
Businesses
  Downstream
Businesses
       
                           
  Exploration &   Pipeline &           Energy   Corporate /    
(Thousands of Dollars) Production   Storage   Gathering   Utility   Marketing   All Other   Consolidated*
                           
Third quarter 2018 GAAP earnings $ 27,817     $ 20,723     $ 11,566     $ 3,930     $ (190 )   $ (821 )   $ 63,025  
                           
Items impacting comparability:                          
Mark-to-market adjustments due to hedge ineffectiveness 339                         339  
Tax impact of mark-to-market adjustments due to hedge ineffectiveness (83 )                       (83 )
Third quarter 2018 adjusted operating results 28,073     20,723     11,566     3,930     (190 )   (821 )   63,281  
                           
Drivers of adjusted operating results**                          
                           
Upstream Revenues                          
Higher (lower) natural gas production 18,891                         18,891  
Higher (lower) crude oil production (1,119 )                       (1,119 )
Higher (lower) realized natural gas prices, after hedging (2,950 )                       (2,950 )
Higher (lower) realized crude oil prices, after hedging 1,817                         1,817  
                           
Midstream and All Other Revenues                          
Higher (lower) operating revenues     (3,693 )   3,773             (485 )   (405 )
                           
Downstream Margins***                          
Impact of usage and weather             1,425             1,425  
System modernization tracker revenues             1,033             1,033  
Lower (higher) refund provision on tax rate change             (1,386 )           (1,386 )
Regulatory true-up adjustments             1,069             1,069  
Higher (lower) marketing margins                 (1,251 )       (1,251 )
                           
Operating Expenses                          
Lower (higher) lease operating and transportation expenses (7,618 )                       (7,618 )
Lower (higher) operating expenses     (2,606 )                   (2,606 )
Lower (higher) depreciation / depletion (6,613 )       (786 )               (7,399 )
                           
Other Income (Expense)                          
(Higher) lower interest expense (455 )   335     162     588         636     1,266  
                           
Income Taxes                          
Impact of tax rate reduction due to 2017 Tax Reform 953     602     819     271     (69 )   (20 )   2,556  
Lower (higher) income tax expense / effective tax rate (4,281 )   169     (789 )   269     75     723     (3,834 )
                           
All other / rounding (992 )   262     (107 )   163     (6 )   (265 )   (945 )
Third quarter 2019 adjusted operating results 25,706     15,792     14,638     7,362     (1,441 )   (232 )   61,825  
                           
Items impacting comparability:                          
Mark-to-market adjustments due to hedge ineffectiveness 1,020                         1,020  
Tax impact of mark-to-market adjustments due to hedge ineffectiveness (214 )                       (214 )
Unrealized gain (loss) on other investments                     1,420     1,420  
Tax impact of unrealized gain (loss) on other investments                     (298 )   (298 )
Third quarter 2019 GAAP earnings $ 26,512     $ 15,792     $ 14,638     $ 7,362     $ (1,441 )   $ 890     $ 63,753  
                           
* Amounts do not reflect intercompany eliminations                          
** Operating results have been calculated using the 24.5% federal statutory rate effective for the 2018 fiscal year. The impact of the change to a 21% federal statutory rate for the 2019 fiscal year is broken out separately under the caption "Income Taxes".
*** 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 JUNE 30, 2019
(Unaudited)
                           
  Upstream   Midstream
Businesses
  Downstream
Businesses
       
                           
  Exploration &   Pipeline &           Energy   Corporate /    
  Production   Storage   Gathering   Utility   Marketing   All Other   Consolidated*
                           
Third quarter 2018 GAAP earnings per share $ 0.32     $ 0.24     $ 0.13     $ 0.05     $     $ (0.01 )   $ 0.73  
Items impacting comparability:                          
Mark-to-market adjustments due to hedge ineffectiveness                          
Tax impact of mark-to-market adjustments due to hedge ineffectiveness                          
Third quarter 2018 adjusted operating results per share 0.32     0.24     0.13     0.05         (0.01 )   0.73  
                           
Drivers of adjusted operating results**                          
                           
Upstream Revenues                          
Higher (lower) natural gas production 0.22                         0.22  
Higher (lower) crude oil production (0.01 )                       (0.01 )
Higher (lower) realized natural gas prices, after hedging (0.03 )                       (0.03 )
Higher (lower) realized crude oil prices, after hedging 0.02                         0.02  
                           
Midstream and All Other Revenues                          
Higher (lower) operating revenues     (0.04 )   0.04             (0.01 )   (0.01 )
                           
Downstream Margins***                          
Impact of usage and weather             0.02             0.02  
System modernization tracker revenues             0.01             0.01  
Lower (higher) refund provision on tax rate change             (0.02 )           (0.02 )
Regulatory true-up adjustments             0.01             0.01  
Higher (lower) marketing margins                 (0.01 )       (0.01 )
                           
Operating Expenses                          
Lower (higher) lease operating and transportation expenses (0.09 )                       (0.09 )
Lower (higher) operating expenses     (0.03 )                   (0.03 )
Lower (higher) depreciation / depletion (0.08 )       (0.01 )               (0.09 )
                           
Other Income (Expense)                          
(Higher) lower interest expense (0.01 )           0.01         0.01     0.01  
                           
Income Taxes                          
Impact of tax rate reduction due to 2017 Tax Reform 0.01     0.01     0.01                 0.03  
Lower (higher) income tax expense / effective tax rate (0.05 )       (0.01 )           0.01     (0.05 )
                           
All other / rounding         0.01         (0.01 )        
Third quarter 2019 adjusted operating results per share 0.30     0.18     0.17     0.08     (0.02 )       0.71  
                           
Items impacting comparability:                          
Mark-to-market adjustments due to hedge ineffectiveness 0.01                         0.01  
Tax impact of mark-to-market adjustments due to hedge ineffectiveness                          
Unrealized gain (loss) on other investments                     0.02     0.02  
Tax impact of unrealized gain (loss) on other investments                          
Rounding                     (0.01 )   (0.01 )
Third quarter 2019 GAAP earnings per share $ 0.31     $ 0.18     $ 0.17     $ 0.08     $ (0.02 )   $ 0.01     $ 0.73  
                           
* Amounts do not reflect intercompany eliminations                          
** Operating results have been calculated using the 24.5% federal statutory rate effective for the 2018 fiscal year. The impact of the change to a 21% federal statutory rate for the 2019 fiscal year is broken out separately under the caption "Income Taxes".
*** Downstream margin defined as operating revenues less purchased gas expense.
 
 


...
NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS
NINE MONTHS ENDED JUNE 30, 2019
(Unaudited)
                           
  Upstream   Midstream
Businesses
  Downstream
Businesses
       
                           
  Exploration &   Pipeline &           Energy   Corporate /    
(Thousands of Dollars) Production   Storage   Gathering   Utility   Marketing   All Other   Consolidated*
                           
Nine months ended June 30, 2018 GAAP earnings $ 161,052     $ 81,909     $ 68,736     $ 58,283     $ 1,434     $ (17,887 )   $ 353,527  
                           
Items impacting comparability:                          
Remeasurement of deferred taxes under 2017 Tax Reform (76,510 )   (14,100 )   (34,500 )       359     17,751     (107,000 )
Mark-to-market adjustments due to hedge ineffectiveness 436                         436  
Tax impact of mark-to-market adjustments due to hedge ineffectiveness (107 )                       (107 )
Nine months ended June 30, 2018 adjusted operating results 84,871     67,809     34,236     58,283     1,793     (136 )   246,856  
                           
Drivers of adjusted operating results**                          
                           
Upstream Revenues                          
Higher (lower) natural gas production 44,802                         44,802  
Higher (lower) crude oil production (10,025 )                       (10,025 )
Higher (lower) realized natural gas prices, after hedging (4,248 )                       (4,248 )
Higher (lower) realized crude oil prices, after hedging 3,782                         3,782  
                           
Midstream and All Other Revenues                          
Higher (lower) operating revenues     (5,690 )   9,428             (1,249 )   2,489  
                           
Downstream Margins***                          
Impact of usage and weather             3,684