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National Fuel Reports Second Quarter Earnings

WILLIAMSVILLE, N.Y., May 03, 2023 (GLOBE NEWSWIRE) -- National Fuel Gas Company (“National Fuel” or the “Company”) (NYSE:NFG) today announced consolidated results for the second quarter of its 2023 fiscal year and for the six months ended March 31, 2023.

FISCAL 2023 SECOND QUARTER SUMMARY

  • GAAP net income of $140.9 million, or $1.53 per share, compared to GAAP net income of $167.3 million, or $1.82 per share, in the prior year.
  • Adjusted operating results of $141.8 million, or $1.54 per share, compared to $154.4 million, or $1.68 per share, in the prior year (see non-GAAP reconciliation on page 2).
  • Net cash provided by operating activities fiscal year to date of $711 million, an increase of $285 million or 67%, compared to $426 million in the prior year.
  • E&P segment net Appalachian natural gas production of 93.2 Bcfe, an increase of 9.7 Bcfe, or 12%, higher than prior year and 3% higher than fiscal 2023 first quarter.
  • Joint settlement agreement filed in Utility's Pennsylvania rate case for increase in base rates of $23 million (black box settlement) and the addition of a weather normalization mechanism. This joint settlement, pending PaPUC approval, would become effective in August.
  • Company is revising its fiscal 2023 earnings guidance to a range of $5.10 to $5.40 per share, while maintaining capital expenditure guidance with a range of $830 million to $940 million.

MANAGEMENT COMMENTS

David P. Bauer, President and Chief Executive Officer of National Fuel Gas Company, stated: “The Company had strong operational results in the second quarter amidst a challenging commodity price backdrop. Over the first six months of fiscal 2023, we experienced a significant year-over-year increase in free cash flow generation, affording us the flexibility to reduce our absolute leverage levels and further strengthen our investment grade balance sheet.

“With respect to the balance of the fiscal year, our consistent approach to hedging, combined with the durability of our rate-regulated cash flows, position us well to navigate current natural gas pricing headwinds. As we look further ahead, our ongoing investment in the modernization of our rate-regulated infrastructure, along with Seneca’s growing natural gas production and an improved long-term outlook for natural gas prices, should continue to drive significant free cash flow.”

ACQUISITION OF BOLT-ON UPSTREAM ASSETS IN EASTERN DEVELOPMENT AREA

Seneca has entered into an agreement to acquire upstream assets in northwest Tioga County, Pennsylvania from Southwestern Energy for total consideration of $127.0 million, subject to certain purchase price adjustments at closing.

As part of the transaction, Seneca has agreed to purchase approximately 30,000 net acres located in Tioga and Potter counties, Pennsylvania. At closing, these assets are expected to have flowing net production of approximately 20 million cubic feet per day. The transaction is anticipated to close on June 1, 2023 and is subject to customary closing conditions.

Additionally, Seneca entered into two separate transactions to acquire approximately 6,000 bolt-on fee and lease acres, with a modest amount of production and one proved developed non-producing well, in its Lycoming and Tioga operating areas for total consideration of between $20 and $25 million, subject to closing and title adjustments.

RECONCILIATION OF GAAP EARNINGS TO ADJUSTED OPERATING RESULTS

         
  Three Months Ended Six Months Ended
  March 31, March 31,
(in thousands except per share amounts)  2023   2022   2023   2022 
Reported GAAP Earnings $140,880  $167,328  $310,570  $299,720 
Items impacting comparability:        
Unrealized (gain) loss on derivative asset (E&P)  2,471      2,273    
Tax impact of unrealized (gain) loss on derivative asset  (677)     (623)   
Unrealized (gain) loss on other investments (Corporate / All Other)  (1,068)  2,170   (1,278)  6,659 
Tax impact of unrealized (gain) loss on other investments  224   (456)  268   (1,398)
Reduction of other post-retirement regulatory liability (Utility)     (18,533)     (18,533)
Tax impact of reduction of other post-retirement regulatory liability     3,892      3,892 
Adjusted Operating Results $141,830  $154,401  $311,210  $290,340 
         
Reported GAAP Earnings Per Share $1.53  $1.82  $3.37  $3.26 
Items impacting comparability:        
Unrealized (gain) loss on derivative asset, net of tax (E&P)  0.02      0.02    
Unrealized (gain) loss on other investments, net of tax (Corporate / All Other)  (0.01)  0.02   (0.01)  0.05 
Reduction of other post-retirement regulatory liability, net of tax (Utility)     (0.16)     (0.16)
Rounding        (0.01)   
Adjusted Operating Results Per Share $1.54  $1.68  $3.37  $3.15 


FISCAL 2023 GUIDANCE UPDATE

National Fuel is revising its fiscal 2023 earnings guidance with updated forecast assumptions and projections. The Company is now projecting that earnings, excluding items impacting comparability, will be within the range of $5.10 to $5.40 per share, a decrease of $0.30 per share from the midpoint of the Company’s prior guidance range. The decrease from the Company’s prior earnings guidance primarily reflects the impact of lower natural gas prices, as the rest of the Company's assumptions and projections are unchanged.

The Company is now assuming that NYMEX natural gas prices will average $2.50 per MMBtu for the remainder of fiscal 2023, a decrease of $0.75 per MMBtu from the $3.25 per MMBtu assumed in the previous guidance. For guidance purposes, the Company’s updated natural gas price projections approximate the current NYMEX forward curve and consider the impact of local sales point differentials and new physical firm sales, transportation, and financial hedge contracts.

The Exploration and Production segment’s fiscal 2023 net production guidance range of 370 to 390 Bcfe remains unchanged. Capital expenditures are expected to be within the range of $525 to $575 million, which is consistent with prior guidance. During the first half of the year, the Company operated a two-rig program with a dedicated completion crew, while also periodically utilizing a top-hole rig and an additional completion crew. As previously planned, activity levels are expected to decrease during the remainder of the fiscal year as the Company drops its top-hole rig and only utilizes its dedicated completion crew.

Seneca currently has firm sales contracts in place for approximately 92% of its projected remaining fiscal 2023 production, limiting its exposure to in-basin markets. Approximately 77% of Seneca’s expected remaining fiscal 2023 production is either matched by a financial hedge, including a combination of swaps and no-cost collars, or was entered into at a fixed price.

The Company’s other guidance assumptions remain unchanged from the previous guidance. The details are outlined in the table on page 7.

DISCUSSION OF SECOND QUARTER RESULTS BY SEGMENT

The following earnings discussion of each operating segment for the quarter ended March 31, 2023 is summarized in a tabular form on pages 8 and 9 of this report (earnings drivers for the six months ended March 31, 2023 are summarized on pages 10 and 11). 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 primarily natural gas reserves in Pennsylvania.

 Three Months Ended
 March 31,
(in thousands) 2023  2022 Variance
GAAP Earnings$60,982 $71,121 $(10,139)
Unrealized (gain) loss on derivative asset, net of tax 1,794    1,794 
Adjusted Operating Results$62,776 $71,121 $(8,345)
      
Adjusted EBITDA$154,574 $158,450 $(3,876)


Seneca’s second quarter GAAP earnings decreased $10.1 million versus the prior year. Higher production and Appalachian realized natural gas prices were more than offset by the loss of earnings related to Seneca's crude oil production in California which was divested in June 2022. This decrease includes an unrealized loss of $2.5 million ($1.8 million after-tax) recognized from a reduction in the implied fair value of an asset related to the contingent consideration in connection with this divestiture. Excluding this loss, Seneca's earnings decreased $8.3 million.

Seneca produced 93.3 Bcfe during the second quarter, an increase of 6.2 Bcfe, or 7%, from the prior year. This increase was a result of a 9.7 Bcf increase, or 12%, in Appalachian natural gas production, partially offset by a 3.5 Bcfe decrease in production related to the aforementioned California sale.

Seneca’s average Appalachian realized natural gas price, after the impact of hedging and transportation costs, was $2.58 per Mcf, an increase of $0.02 per Mcf from the prior year. The lower Appalachian natural gas prices, before the impact of hedging, were more than offset by an increase in the weighted average hedge price compared to the prior year second quarter.

On an absolute basis, lease operating and transportation expense (“LOE”) decreased $6.8 million primarily due to the California sale. Partly offsetting that decrease were increases in LOE from higher transportation and gathering costs as a result of increased production, as well as higher water management and well maintenance costs in Appalachia. LOE expense includes $55.3 million in intercompany expense for gathering and compression services used to connect Seneca’s production to sales points along interstate pipelines. On a per unit basis, LOE was $0.71 per Mcfe, a decrease of $0.12 per Mcfe from the prior year.

General and administrative (“G&A”) expense decreased by $1.4 million largely due to the California sale. On a per unit basis, G&A expense was $0.19 per Mcfe, a decrease of $0.03 per Mcfe from the prior year. The decrease in Seneca’s other operating expenses of $2.7 million was also primarily due to the sale of Seneca’s California assets. Other taxes decreased $2.4 million largely attributable to both the impact of the sale of Seneca's California assets as well as lower Impact Fees in Pennsylvania.

Depreciation, depletion and amortization (“DD&A”) expense increased $8.1 million due to higher natural gas production and a higher per unit DD&A rate, which was driven by an increase in capitalized costs in Seneca’s full cost pool. DD&A expense was $0.63 per Mcfe, an increase of $0.05 per Mcfe from the prior 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) 2023  2022 Variance
GAAP Earnings$23,858 $25,470 $(1,612)
      
Adjusted EBITDA$58,926 $61,371 $(2,445)


The Pipeline and Storage segment’s second quarter GAAP earnings decreased $1.6 million versus the prior year primarily due to higher operation and maintenance (“O&M”) expense, partially offset by an increase in other income. O&M expense increased $2.8 million primarily due to higher personnel, pipeline integrity, and compressor maintenance costs. The increase in other income of $1.3 million was primarily attributable to a higher weighted average interest rate on intercompany short-term notes receivables.

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 delivers Seneca and other non-affiliated Appalachian production to the interstate pipeline system.

 Three Months Ended
 March 31,
(in thousands) 2023  2022 Variance
GAAP Earnings$24,334 $22,092 $2,242
      
Adjusted EBITDA$46,263 $43,056 $3,207


The Gathering segment’s second quarter GAAP earnings increased $2.2 million versus the prior year primarily due to higher operating revenues, partially offset by higher O&M expense and higher DD&A expense. Operating revenues increased $4.4 million, or 8%, which was the result of a 5.6 Bcf increase in gathered volumes due to an increase in Seneca’s natural gas production. The increase in O&M expense of $1.2 million was due to higher compression leasing expenses, as well as increases in personnel expenses and costs for materials. DD&A expense increased $0.6 million due primarily to higher average depreciable plant in service compared to the prior year.

Downstream Business

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) 2023  2022  Variance
GAAP Earnings$31,720 $53,048  $(21,328)
Reduction of other post-retirement regulatory liability, net of tax   (14,641)  14,641 
Adjusted Operating Results$31,720 $38,407  $(6,687)
      
Adjusted EBITDA$65,820 $77,529  $(11,709)


The Utility segment’s second quarter GAAP earnings decreased $21.3 million versus the prior year. Distribution's prior-year second quarter earnings included a $14.6 million (after-tax) reduction in an other post-employment benefit (“OPEB”) regulatory liability as a result of the February 2022 conclusion of a rate proceeding in Distribution's Pennsylvania service territory.

Excluding the impact of the reduction in the OPEB-related regulatory liability recorded in the prior year's second quarter, the Utility segment's second quarter earnings decreased $6.7 million, due to lower customer margins (operating revenues less purchased gas sold), along with higher O&M and interest expense, partially offset by a decrease in non-service pension and OPEB costs and higher other income.

The decline in customer margin of $8.5 million was due primarily to a $8.0 million reduction in base rates in New York as a result of a rate proceeding that became effective October 1, 2022 which temporarily reduced the Utility’s recovery of pension and OPEB expenses to zero. In addition to lowering rates, the proceeding mandated a corresponding decrease in pension and OPEB expense, most of which had been previously recorded in “below the line” non-service pension and OPEB costs. Additionally, customer margin was lower due to a decrease in customer usage related to weather that was 11% warmer than last year in Pennsylvania (where the Company's current rates are not subject to a weather normalization adjustment mechanism). These decreases were partially offset by higher revenues from the Company’s system modernization tracking mechanism in its New York service territory.

O&M expense increased by $3.0 million due primarily to higher personnel costs and an increase in legal and consulting expenses related to the current Pennsylvania rate case proceeding filed in October 2022. An increase in the accrual for uncollectible accounts, which was generally in line with the increase in the Utility segment’s revenue, also contributed to higher O&M expense for the quarter. Interest expense increased $4.2 million due primarily to a higher weighted average interest rate on intercompany short-term borrowings. The increase in other income of $1.5 million was primarily attributable to interest earned on deferred gas costs.

Corporate and All Other

The Company’s operations that are included in Corporate and All Other generated a combined net loss of less than $0.1 million in the current quarter, which was $4.4 million lower than the combined net loss of $4.4 million in the prior-year second quarter. The reduction in the net loss was primarily driven by unrealized gains on investment securities recognized in the current quarter compared to unrealized losses on investment securities recognized in the prior-year second quarter.

EARNINGS TELECONFERENCE

The Company will host a conference call on Thursday, May 4, 2023, at 11 a.m. Eastern Time to discuss this announcement. To pre-register for this call (recommended), please visit https://www.netroadshow.com/events/login?show=96471e60&confld=49148. After registering, you will receive your access details via email. To join by telephone on the day of the call, dial U.S. toll free 1-833–470–1428 and provide Access Code 565178. The teleconference will be simultaneously webcast online and can be accessed on the NFG Investor Relations website at investor.nationalfuelgas.com. An audio replay of the teleconference call will be available until Thursday, May 11, 2023. To access the telephone replay, dial U.S. toll free 1-866-813-9403 and provide Access Code 313864.

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: 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; governmental/regulatory actions, initiatives and proceedings, including those involving rate cases (which address, among other things, target rates of return, rate design, retained natural gas and system modernization), environmental/safety requirements, affiliate relationships, industry structure, and franchise renewal; the Company’s ability to estimate accurately the time and resources necessary to meet emissions targets; governmental/regulatory actions and/or market pressures to reduce or eliminate reliance on natural gas; changes in economic conditions, including inflationary pressures, supply chain issues, liquidity challenges, and global, national or regional recessions, and their effect on the demand for, and customers’ ability to pay for, the Company’s products and services; changes in the price of natural gas; the creditworthiness or performance of the Company’s key suppliers, customers and counterparties; 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; impairments under the SEC’s full cost ceiling test for natural gas reserves; increased costs or delays or changes in plans with respect to Company projects or related projects of other companies, as well as difficulties or delays in obtaining necessary governmental approvals, permits or orders or in obtaining the cooperation of interconnecting facility operators; the Company’s ability to complete planned strategic transactions; changes in price differentials between similar quantities of natural gas 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 reserves, including among others geology, lease availability and costs, 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 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; negotiations with the collective bargaining units representing the Company's workforce, including potential work stoppages during negotiations; uncertainty of natural gas reserve estimates; significant differences between the Company’s projected and actual production levels for natural gas; changes in demographic patterns and weather conditions (including those related to climate change); 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, as well as economic and operational disruptions due to third-party outages; 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 2023. Additional details on the Company's forecast assumptions and business segment guidance are outlined in the table below.

The revised earnings guidance range does not include the impact of certain items that impacted the comparability of earnings during the six months ended March 31, 2023, including: (1) after-tax unrealized losses on a derivative asset, which reduced earnings by $0.02 per share; and (2) after-tax unrealized gains on other investments, which increased earnings by $0.01 per share. While the Company expects to record certain adjustments to unrealized gain or loss on a derivative asset and unrealized gain or loss on investments during the six months ending September 30, 2023, 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.

 Previous FY 2023 Guidance Updated FY 2023 Guidance
Consolidated Earnings per Share, excluding items impacting comparability$5.35 to $5.75 $5.10 to $5.40
Consolidated Effective Tax Rate~ 25 - 25.5% ~ 25 - 25.5%
    
Capital Expenditures (Millions)*   
Exploration and Production$525 - $575 $525 - $575
Pipeline and Storage$110 - $130 $110 - $130
Gathering$85 - $105 $85 - $105
Utility$110 - $130 $110 - $130
Consolidated Capital Expenditures$830 - $940 $830 - $940
    
Exploration & Production Segment Guidance**   
    
Commodity Price Assumptions   
NYMEX natural gas price$3.25 /MMBtu $2.50 /MMBtu
Appalachian basin spot price$2.25 /MMBtu $1.80 /MMBtu
    
Production (Bcfe)370 to 390 370 to 390
    
E&P Operating Costs ($/Mcfe)   
LOE$0.67 - $0.69 $0.67 - $0.69
G&A$0.17 - $0.19 $0.17 - $0.19
DD&A$0.60 - $0.64 $0.60 - $0.64
    
Other Business Segment Guidance (Millions)   
Gathering Segment Revenues$230 - $245 $230 - $245
Pipeline and Storage Segment Revenues$360 - $380 $360 - $380

* Capital expenditures guidance excludes capital related to recently announced acquisitions.
** Commodity price assumptions are for the remaining 6 months of the fiscal year.

NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS
QUARTER ENDED MARCH 31, 2023
(Unaudited)
            
 Upstream Midstream Downstream    
            
 Exploration & Pipeline &     Corporate /  
(Thousands of Dollars)Production Storage Gathering Utility All Other Consolidated*
            
Second quarter 2022 GAAP earnings$71,121  $25,470  $22,092  $53,048  $(4,403) $167,328 
Items impacting comparability:           
Reduction of other post-retirement regulatory liability       (18,533)    (18,533)
Tax impact of reduction of other post-retirement regulatory liability       3,892     3,892 
Unrealized (gain) loss on other investments         2,170   2,170 
Tax impact of unrealized (gain) loss on other investments         (456)  (456)
Second quarter 2022 adjusted operating results 71,121   25,470   22,092   38,407   (2,689)  154,401 
Drivers of adjusted operating results**           
Upstream Revenues           
Higher (lower) natural gas production 19,077           19,077 
Higher (lower) crude oil production (28,690)          (28,690)
Higher (lower) realized natural gas prices, after hedging (1,289)          (1,289)
Higher (lower) other operating revenues (2,580)          (2,580)
Midstream Revenues           
Higher (lower) operating revenues     3,458       3,458 
Downstream Margins***           
Impact of usage and weather       (2,919)    (2,919)
Impact of new rates****       (6,333)    (6,333)
System modernization tracker revenues       1,729     1,729 
Operating Expenses           
Lower (higher) lease operating and transportation expenses 5,344           5,344 
Lower (higher) operating expenses 3,184   (2,241)  (920)  (1,718)    (1,695)
Lower (higher) property, franchise and other taxes 1,872           1,872 
Lower (higher) depreciation / depletion (6,366)    (439)      (6,805)
Other Income (Expense)           
(Higher) lower other deductions 1,032   927     5,517   562   8,038 
(Higher) lower interest expense       (3,395)  1,917   (1,478)
Income Taxes           
Lower (higher) income tax expense / effective tax rate 35   (60)  (224)  806   (205)  352 
All other / rounding 36   (238)  367   (374)  (443)  (652)
Second quarter 2023 adjusted operating results 62,776   23,858   24,334   31,720   (858)  141,830 
Items impacting comparability:           
Unrealized gain (loss) on derivative asset (2,471)          (2,471)
Tax impact of unrealized gain (loss) on derivative asset 677           677 
Unrealized gain (loss) on other investments         1,068   1,068 
Tax impact of unrealized gain (loss) on other investments         (224)  (224)
Second quarter 2023 GAAP earnings$60,982  $23,858  $24,334  $31,720  $(14) $140,880 
            
* Amounts do not reflect intercompany eliminations.           
** Drivers of adjusted operating results have been calculated using the 21% federal statutory rate.
*** Downstream margin defined as operating revenues less purchased gas expense.
**** Amount is offset by corresponding decrease in other deductions and will have no earnings impact for the year ended September 30, 2023.


 
NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS PER SHARE
QUARTER ENDED MARCH 31, 2023
(Unaudited)
            
 Upstream Midstream Downstream     
            
 Exploration & Pipeline &     Corporate /  
 Production Storage Gathering Utility All Other Consolidated*
            
Second quarter 2022 GAAP earnings per share$0.77  $0.28  $0.24  $0.58  $(0.05) $1.82 
Items impacting comparability:           
Reduction of other post-retirement liability, net of tax       (0.16)    (0.16)
Unrealized (gain) loss on other investments, net of tax         0.02   0.02 
Second quarter 2022 adjusted operating results per share 0.77   0.28   0.24   0.42   (0.03)  1.68 
Drivers of adjusted operating results**           
Upstream Revenues           
Higher (lower) natural gas production 0.21           0.21 
Higher (lower) crude oil production (0.31)          (0.31)
Higher (lower) realized natural gas prices, after hedging (0.01)          (0.01)
Higher (lower) other operating revenues (0.03)          (0.03)
Midstream Revenues           
Higher (lower) operating revenues     0.04       0.04 
Downstream Margins***           
Impact of usage and weather       (0.03)    (0.03)
Impact of new rates****       (0.07)    (0.07)
System modernization tracker revenues       0.02     0.02 
Operating Expenses           
Lower (higher) lease operating and transportation expenses 0.06           0.06 
Lower (higher) operating expenses 0.03   (0.02)  (0.01)  (0.02)    (0.02)
Lower (higher) property, franchise and other taxes 0.02           0.02 
Lower (higher) depreciation / depletion (0.07)           (0.07)
Other Income (Expense)           
(Higher) lower other deductions 0.01   0.01     0.06   0.01   0.09 
(Higher) lower interest expense       (0.04)  0.02   (0.02)
Income Taxes           
Lower (higher) income tax expense / effective tax rate          0.01      0.01 
All other / rounding    (0.01)  (0.01)     (0.01)  (0.03)
Second quarter 2023 adjusted operating results per share 0.68   0.26   0.26   0.35   (0.01)  1.54 
Items impacting comparability:           
Unrealized gain (loss) on derivative asset, net of tax (0.02)          (0.02)
Unrealized gain (loss) on other investments, net of tax         0.01   0.01 
Second quarter 2023 GAAP earnings per share$0.66  $0.26  $0.26  $0.35  $  $1.53 
            
* Amounts do not reflect intercompany eliminations.           
** Drivers of adjusted operating results have been calculated using the 21% federal statutory rate.
*** Downstream margin defined as operating revenues less purchased gas expense.
**** Amount is offset by corresponding decrease in other deductions and will have no earnings impact for the year ended September 30, 2023.


NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS
SIX MONTHS ENDED MARCH 31, 2023
(Unaudited)
            
 Upstream Midstream Downstream    
            
 Exploration & Pipeline &     Corporate /  
(Thousands of Dollars)Production Storage Gathering Utility All Other Consolidated*
            
Six months ended March 31, 2022 GAAP earnings$133,490  $50,637  $45,229  $75,178  $(4,814) $299,720 
Items impacting comparability:           
Reduction of other post-retirement regulatory liability       (18,533)    (18,533)
Tax impact of reduction of other post-retirement regulatory liability       3,892     3,892 
Unrealized (gain) loss on other investments         6,659   6,659 
Tax impact of unrealized (gain) loss on other investments         (1,398)  (1,398)
Six months ended March 31, 2022 adjusted operating results 133,490   50,637   45,229   60,537   447   290,340 
Drivers of adjusted operating results**           
Upstream Revenues           
Higher (lower) natural gas production 36,513           36,513 
Higher (lower) crude oil production (56,128)          (56,128)
Higher (lower) realized natural gas prices, after hedging 34,518           34,518 
Higher (lower) other operating revenues (2,601)          (2,601)
Midstream Revenues           
Higher (lower) operating revenues   7,119   6,766       13,885 
Downstream Margins***           
Impact of usage and weather       348     348 
Impact of new rates****       (10,059)    (10,059)
System modernization tracker revenues       2,597     2,597 
Higher (lower) other operating revenues       1,741     1,741 
Operating Expenses           
Lower (higher) lease operating and transportation expenses 11,341           11,341 
Lower (higher) operating expenses 6,507   (3,700)  (2,105)  (4,108)  (489)  (3,895)
Lower (higher) property, franchise and other taxes 891           891 
Lower (higher) depreciation / depletion (11,147)  (1,617)  (690)      (13,454)
Other Income (Expense)           
(Higher) lower other deductions 2,304   1,519   438   9,652   (3,881)  10,032 
(Higher) lower interest expense (855)  (852)    (5,423)  3,639   (3,491)
Income Taxes           
Lower (higher) income tax expense / effective tax rate (1,137)  (251)  (776)  739   (158)  (1,583)
All other / rounding 128   480   210   (487)  (116)  215 
Six months ended March 31, 2023 adjusted operating results 153,824   53,335   49,072   55,537   (558)  311,210 
Items impacting comparability:           
Unrealized gain (loss) on derivative asset (2,273)          (2,273)
Tax impact of unrealized gain (loss) on derivative asset 623           623 
Unrealized gain (loss) on other investments         1,278   1,278 
Tax impact of unrealized gain (loss) on other investments         (268)  (268)
Six months ended March 31, 2023 GAAP earnings$152,174  $53,335  $49,072  $55,537  $452  $310,570 
            
* Amounts do not reflect intercompany eliminations.           
** Drivers of adjusted operating results have been calculated using the 21% federal statutory rate.
*** Downstream margin defined as operating revenues less purchased gas expense.
**** Amount is offset by corresponding decrease in other deductions and will have no earnings impact for the year ended September 30, 2023.


 
NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS PER SHARE
SIX MONTHS ENDED MARCH 31, 2023
(Unaudited)
            
 Upstream Midstream Downstream    
            
 Exploration & Pipeline &     Corporate /  
 Production Storage Gathering Utility All Other Consolidated*
Six months ended March 31, 2022 GAAP earnings per share$1.45  $0.55  $0.49  $0.82  $(0.05) $3.26 
Items impacting comparability:           
Reduction of other post-retirement regulatory liability, net of tax       (0.16)    (0.16)
Unrealized (gain) loss on other investments, net of tax         0.05   0.05 
Six months ended March 31, 2022 adjusted operating results per share 1.45   0.55   0.49   0.66      3.15 
Drivers of adjusted operating results**           
Upstream Revenues           
Higher (lower) natural gas production 0.40           0.40 
Higher (lower) crude oil production (0.61)          (0.61)
Higher (lower) realized natural gas prices, after hedging 0.37           0.37 
Higher (lower) other operating revenues (0.03)          (0.03)
Midstream Revenues           
Higher (lower) operating revenues   0.08   0.07       0.15 
Downstream Margins***           
Impact of usage and weather             
Impact of new rates****       (0.11)    (0.11)
System modernization tracker revenues       0.03     0.03 
Higher (lower) other operating revenues       0.02     0.02 
Operating Expenses           
Lower (higher) lease operating and transportation expenses 0.12           0.12 
Lower (higher) operating expenses 0.07   (0.04)  (0.02)  (0.04)  (0.01)  (0.04)
Lower (higher) property, franchise and other taxes 0.01           0.01 
Lower (higher) depreciation / depletion (0.12)  (0.02)  (0.01)      (0.15)
Other Income (Expense)           
(Higher) lower other deductions 0.02   0.02      0.10   (0.04)  0.10 
(Higher) lower interest expense (0.01)  (0.01)    (0.06)  0.04   (0.04)
Income Taxes           
Lower (higher) income tax expense / effective tax rate (0.01)     (0.01)  0.01      (0.01)
All other / rounding 0.01      0.01   (0.01)     0.01 
Six months ended March 31, 2023 adjusted operating results per share 1.67   0.58   0.53   0.60   (0.01)  3.37 
Items impacting comparability:           
Unrealized gain (loss) on derivative asset, net of tax (0.02)          (0.02)
Unrealized gain (loss) on other investments, net of tax         0.01   0.01 
Rounding         0.01   0.01 
Six months ended March 31, 2023 GAAP earnings per share$1.65  $0.58  $0.53  $0.60  $0.01  $3.37 
            
* Amounts do not reflect intercompany eliminations.           
** Drivers of adjusted operating results have been calculated using the 21% federal statutory rate.
*** Downstream margin defined as operating revenues less purchased gas expense.
**** Amount is offset by corresponding decrease in other deductions and will have no earnings impact for the year ended September 30, 2023.


        
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
        
(Thousands of Dollars, except per share amounts)       
 Three Months Ended Six Months Ended
 March 31, March 31,
 (Unaudited) (Unaudited)
SUMMARY OF OPERATIONS 2023   2022   2023   2022 
Operating Revenues:       
Utility Revenues$406,758  $369,092  $718,376  $605,776 
Exploration and Production and Other Revenues 244,552   261,676   521,525   505,957 
Pipeline and Storage and Gathering Revenues 65,951   70,952   136,218   136,544 
  717,261   701,720   1,376,119   1,248,277 
Operating Expenses:       
Purchased Gas 243,839   199,592   415,035   301,219 
Operation and Maintenance:       
Utility 56,453   53,476   106,805   100,120 
Exploration and Production and Other 31,782   49,806   58,655   95,425 
Pipeline and Storage and Gathering 37,479   33,518   70,740   63,446 
Property, Franchise and Other Taxes 25,367   27,717   51,572   52,219 
Depreciation, Depletion and Amortization 100,964   91,245   197,564   179,823 
  495,884   455,354   900,371   792,252 
        
Operating Income 221,377   246,366   475,748   456,025 
        
Other Income (Expense):       
Other Income 2,884   10,018   9,203   8,940 
Interest Expense on Long-Term Debt (27,583)  (30,079)  (57,188)  (60,209)
Other Interest Expense (5,861)  (1,519)  (9,704)  (2,680)
        
Income Before Income Taxes 190,817   224,786   418,059   402,076 
        
Income Tax Expense 49,937   57,458   107,489   102,356 
        
Net Income Available for Common Stock$140,880  $167,328  $310,570  $299,720 
        
Earnings Per Common Share       
Basic$1.53  $1.83  $3.39  $3.28 
Diluted$1.53  $1.82  $3.37  $3.26 
        
Weighted Average Common Shares:       
Used in Basic Calculation 91,794,765   91,444,638   91,686,110   91,354,488 
Used in Diluted Calculation 92,256,348   92,064,711   92,264,717   92,047,467 


 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
  
 March 31, September 30,
(Thousands of Dollars) 2023   2022 
ASSETS   
Property, Plant and Equipment$12,978,137  $12,551,909 
Less - Accumulated Depreciation, Depletion and Amortization 6,162,406   5,985,432 
Net Property, Plant and Equipment 6,815,731   6,566,477 
Current Assets:   
Cash and Temporary Cash Investments 71,533   46,048 
Hedging Collateral Deposits    91,670 
Receivables - Net 257,965   361,626 
Unbilled Revenue 60,018   30,075 
Gas Stored Underground 6,554   32,364 
Materials and Supplies - at average cost 45,204   40,637 
Unrecovered Purchased Gas Costs 26,851   99,342 
Other Current Assets 75,233   59,369 
Total Current Assets 543,358   761,131 
Other Assets:   
Recoverable Future Taxes 104,426   106,247 
Unamortized Debt Expense 8,062   8,884 
Other Regulatory Assets 61,497   67,101 
Deferred Charges 85,053   77,472 
Other Investments 74,618   95,025 
Goodwill 5,476   5,476 
Prepaid Pension and Post-Retirement Benefit Costs 224,701   196,597 
Fair Value of Derivative Financial Instruments 42,424   9,175 
Other 1,896   2,677 
Total Other Assets 608,153   568,654 
Total Assets$7,967,242  $7,896,262 
CAPITALIZATION AND LIABILITIES   
Capitalization:   
Comprehensive Shareholders' Equity   
Common Stock, $1 Par Value Authorized - 200,000,000 Shares; Issued and   
Outstanding - 91,795,080 Shares and 91,478,064 Shares, Respectively$91,795  $91,478 
Paid in Capital 1,031,341   1,027,066 
Earnings Reinvested in the Business 1,810,454   1,587,085 
Accumulated Other Comprehensive Loss (54,864)  (625,733)
Total Comprehensive Shareholders' Equity 2,878,726   2,079,896 
Long-Term Debt, Net of Current Portion and Unamortized Discount and Debt Issuance Costs 2,085,235   2,083,409 
Total Capitalization 4,963,961   4,163,305 
Current and Accrued Liabilities:   
Notes Payable to Banks and Commercial Paper 410,000   60,000 
Current Portion of Long-Term Debt    549,000 
Accounts Payable 119,497   178,945 
Amounts Payable to Customers 2,830   419 
Dividends Payable 43,602   43,452 
Interest Payable on Long-Term Debt 14,303   17,376 
Customer Advances    26,108 
Customer Security Deposits 34,382   24,283 
Other Accruals and Current Liabilities 257,923   257,327 
Fair Value of Derivative Financial Instruments 34,763   785,659 
Total Current and Accrued Liabilities 917,300   1,942,569 
Other Liabilities:   
Deferred Income Taxes 1,000,526   698,229 
Taxes Refundable to Customers 354,274   362,098 
Cost of Removal Regulatory Liability 265,626   259,947 
Other Regulatory Liabilities 189,378   188,803 
Other Post-Retirement Liabilities 2,977   3,065 
Asset Retirement Obligations 160,910   161,545 
Other Liabilities 112,290   116,701 
Total Other Liabilities 2,085,981   1,790,388 
Commitments and Contingencies     
Total Capitalization and Liabilities$7,967,242  $7,896,262 


     
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
  Six Months Ended
  March 31,
(Thousands of Dollars)  2023   2022 
     
Operating Activities:    
Net Income Available for Common Stock $310,570  $299,720 
Adjustments to Reconcile Net Income to Net Cash    
Provided by Operating Activities:    
Depreciation, Depletion and Amortization  197,564   179,823 
Deferred Income Taxes  80,745   94,212 
Stock-Based Compensation  11,286   10,631 
Reduction of Other Post-Retirement Regulatory Liability     (18,533)
Other  10,758   14,494 
Change in:    
Receivables and Unbilled Revenue  71,760   (166,584)
Gas Stored Underground and Materials, Supplies and Emission Allowances  21,243   32,040 
Unrecovered Purchased Gas Costs  72,491   29,377 
Other Current Assets  (15,864)  (8,605)
Accounts Payable  (29,169)  2,006 
Amounts Payable to Customers  2,411   3,401 
Customer Advances  (26,108)  (17,223)
Customer Security Deposits  10,099   1,474 
Other Accruals and Current Liabilities  28,741   11,164 
Other Assets  (26,901)  (32,659)
Other Liabilities  (8,417)  (9,119)
Net Cash Provided by Operating Activities $711,209  $425,619 
     
Investing Activities:    
Capital Expenditures $(496,362) $(415,415)
Net Proceeds from Sale of Oil and Gas Producing Properties     13,525 
Deposit Paid for Upstream Assets  (12,700)   
Sale of Fixed Income Mutual Fund Shares in Grantor Trust  10,000   30,000 
Other  14,413   13,689 
Net Cash Used in Investing Activities $(484,649) $(358,201)
     
Financing Activities:    
Proceeds from Issuance of Short-Term Note Payable to Bank $250,000  $ 
Net Change in Other Short-Term Notes Payable to Banks and Commercial Paper  100,000   59,500 
Reduction of Long-Term Debt  (549,000)   
Dividends Paid on Common Stock  (87,051)  (83,091)
Net Repurchases of Common Stock  (6,694)  (9,026)
Net Cash Used in Financing Activities $(292,745) $(32,617)
     
Net Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash  (66,185)  34,801 
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period  137,718   120,138 
Cash, Cash Equivalents, and Restricted Cash at March 31 $71,533  $154,939 


          
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
          
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
          
UPSTREAM BUSINESS
          
          
 Three Months Ended Six Months Ended
(Thousands of Dollars, except per share amounts)March 31, March 31,
EXPLORATION AND PRODUCTION SEGMENT 2023   2022  Variance  2023  2022 Variance
Total Operating Revenues$244,552  $261,593  $(17,041) $521,525 $505,791 $15,734 
Operating Expenses:         
Operation and Maintenance:         
General and Administrative Expense 17,435   18,798   (1,363)  33,033  36,553  (3,520)
Lease Operating and Transportation Expense 65,783   72,548   (6,765)  127,328  141,684  (14,356)
All Other Operation and Maintenance Expense 2,089   4,756   (2,667)  4,612  9,328  (4,716)
Property, Franchise and Other Taxes 4,671   7,041   (2,370)  11,647  12,775  (1,128)
Depreciation, Depletion and Amortization 58,605   50,547   8,058   114,164  100,054  14,110 
  148,583   153,690   (5,107)  290,784  300,394  (9,610)
          
Operating Income 95,969   107,903   (11,934)  230,741  205,397  25,344 
          
Other Income (Expense):         
Non-Service Pension and Post-Retirement Benefit (Costs) Credit 347   (186)  533   694  (372) 1,066 
Interest and Other Income (1,623)  75   (1,698)  (292) 131  (423)
Interest Expense (12,186)  (12,206)  20   (25,420) (24,338) (1,082)
Income Before Income Taxes 82,507   95,586   (13,079)  205,723  180,818  24,905 
Income Tax Expense 21,525   24,465   (2,940)  53,549  47,328  6,221 
Net Income$60,982  $71,121  $(10,139) $152,174 $133,490 $18,684 
Net Income Per Share (Diluted)$0.66  $0.77  $(0.11) $1.65 $1.45 $0.20 
          


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 2023   2022  Variance  2023  2022 Variance
Revenues from External Customers$64,223  $67,795  $(3,572) $131,844 $129,342 $2,502 
Intersegment Revenues 30,880   27,602   3,278   60,915  54,405  6,510 
Total Operating Revenues 95,103   95,397   (294)  192,759  183,747  9,012 
Operating Expenses:         
Purchased Gas 462   989   (527)  887  1,437  (550)
Operation and Maintenance 27,275   24,438   2,837   51,294  46,611  4,683 
Property, Franchise and Other Taxes 8,440   8,599   (159)  17,123  17,180  (57)
Depreciation, Depletion and Amortization 17,728   17,294   434   35,142  33,095  2,047 
  53,905   51,320   2,585   104,446  98,323  6,123 
          
Operating Income 41,198   44,077   (2,879)  88,313  85,424  2,889 
          
Other Income (Expense):         
Non-Service Pension and Post-Retirement Benefit Credit 1,330   767   563   2,660  1,534  1,126 
Interest and Other Income 958   192   766   2,822  1,595  1,227 
Interest Expense (10,877)  (10,618)  (259)  (21,829) (20,750) (1,079)
Income Before Income Taxes 32,609   34,418   (1,809)  71,966  67,803  4,163 
Income Tax Expense 8,751   8,948   (197)  18,631  17,166  1,465 
Net Income$23,858  $25,470  $(1,612) $53,335 $50,637 $2,698 
Net Income Per Share (Diluted)$0.26  $0.28  $(0.02) $0.58 $0.55 $0.03 
          
          
 Three Months Ended Six Months Ended
 March 31, March 31,
GATHERING SEGMENT 2023   2022  Variance  2023  2022 Variance
Revenues from External Customers$1,728  $3,157  $(1,429) $4,374 $7,202 $(2,828)
Intersegment Revenues 55,253   49,447   5,806   109,020  97,627  11,393 
Total Operating Revenues 56,981   52,604   4,377   113,394  104,829  8,565 
Operating Expenses:         
Operation and Maintenance 10,715   9,551   1,164   20,403  17,739  2,664 
Property, Franchise and Other Taxes 3   (3)  6   14  2  12 
Depreciation, Depletion and Amortization 8,918   8,362   556   17,626  16,753  873 
  19,636   17,910   1,726   38,043  34,494  3,549 
          
Operating Income 37,345   34,694   2,651   75,351  70,335  5,016 
          
Other Income (Expense):         
Non-Service Pension and Post-Retirement Benefit (Costs) Credit 37   (56)  93   75  (112) 187 
Interest and Other Income 225   18   207   395  27  368 
Interest Expense (3,900)  (4,071)  171   (7,943) (8,219) 276 
Income Before Income Taxes 33,707   30,585   3,122   67,878  62,031  5,847 
Income Tax Expense 9,373   8,493   880   18,806  16,802  2,004 
Net Income$24,334  $22,092  $2,242  $49,072 $45,229 $3,843 
Net Income Per Share (Diluted)$0.26  $0.24  $0.02  $0.53 $0.49 $0.04 
          


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 2023   2022  Variance  2023  2022 Variance
Revenues from External Customers$406,758  $369,092  $37,666  $718,376 $605,776 $112,600 
Intersegment Revenues 358   110   248   420  184  236 
Total Operating Revenues 407,116   369,202   37,914   718,796  605,960  112,836 
Operating Expenses:         
Purchased Gas 271,881   225,469   46,412   470,301  352,680  117,621 
Operation and Maintenance 57,292   54,249   3,043   108,568  101,710  6,858 
Property, Franchise and Other Taxes 12,123   11,955   168   22,531  22,013  518 
Depreciation, Depletion and Amortization 15,553   14,997   556   30,428  29,827  601 
  356,849   306,670   50,179   631,828  506,230  125,598 
          
Operating Income 50,267   62,532   (12,265)  86,968  99,730  (12,762)
          
Other Income (Expense):         
Non-Service Pension and Post-Retirement Benefit (Costs) Credit (5)  13,023   (13,028)  (13) 8,697  (8,710)
Interest and Other Income 1,769   289   1,480   3,211  813  2,398 
Interest Expense (9,709)  (5,504)  (4,205)  (17,752) (11,028) (6,724)
Income Before Income Taxes 42,322   70,340   (28,018)  72,414  98,212  (25,798)
Income Tax Expense 10,602   17,292   (6,690)  16,877  23,034  (6,157)
Net Income$31,720  $53,048  $(21,328) $55,537 $75,178 $(19,641)
Net Income Per Share (Diluted)$0.35  $0.58  $(0.23) $0.60 $0.82 $(0.22)
          


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 2023   2022  Variance  2023  2022 Variance
Revenues from External Customers$  $  $  $ $ $ 
Intersegment Revenues           $6 $(6)
Total Operating Revenues            6  (6)
Operating Expenses:         
Purchased Gas            6  (6)
Operation and Maintenance          21  5  16 
           21  11  10 
          
Operating Loss          (21) (5) (16)
Other Income (Expense):         
Interest and Other Income (62)     (62)  (387) 2  (389)
Interest Expense (28)     (28)  (49)   (49)
Loss before Income Taxes (90)     (90)  (457) (3) (454)
Income Tax Expense (Benefit) (21)     (21)  (107) 4  (111)
Net Loss$(69)     (69)  (350) (7) (343)
Net Loss Per Share (Diluted)$     $  $   $0.00 
      
 Three Months Ended Six Months Ended
 March 31, March 31,
CORPORATE 2023   2022  Variance  2023  2022 Variance
Revenues from External Customers$  $83  $(83) $ $166 $(166)
Intersegment Revenues 1,153   1,082   71   2,304  2,165  139 
Total Operating Revenues 1,153   1,165   (12)  2,304  2,331  (27)
Operating Expenses:         
Operation and Maintenance 4,265   3,835   430   7,447  6,844  603 
Property, Franchise and Other Taxes 130   125   5   257  249  8 
Depreciation, Depletion and Amortization 160   45   115   204  94  110 
  4,555   4,005   550   7,908  7,187  721 
          
Operating Loss (3,402)  (2,840)  (562)  (5,604) (4,856) (748)
Other Income (Expense):         
Non-Service Pension and Post-Retirement Benefit Costs (354)  (1,017)  663   (709) (2,034) 1,325 
Interest and Other Income 37,409   28,740   8,669   75,286  61,918  13,368 
Interest Expense on Long-Term Debt (27,583)  (30,079)  2,496   (57,188) (60,209) 3,021 
Other Interest Expense (6,308)  (947)  (5,361)  (11,250) (1,604) (9,646)
Income (Loss) before Income Taxes (238)  (6,143)  5,905   535  (6,785) 7,320 
Income Tax Benefit (293)  (1,740)  1,447   (267) (1,978) 1,711 
Net Income (Loss)$55  $(4,403) $4,458  $802 $(4,807)$5,609 
Net Income (Loss) Per Share (Diluted)$  $(0.05) $0.05  $0.01 $(0.05)$0.06 
          
          
 Three Months Ended Six Months Ended
 March 31, March 31,
INTERSEGMENT ELIMINATIONS 2023   2022  Variance  2023  2022 Variance
Intersegment Revenues$(87,644) $(78,241) $(9,403) $(172,659)$(154,387)$(18,272)
Operating Expenses:         
Purchased Gas (28,504)  (26,866)  (1,638)  (56,153) (52,904) (3,249)
Operation and Maintenance (59,140)  (51,375)  (7,765)  (116,506) (101,483) (15,023)
  (87,644)  (78,241)  (9,403)  (172,659) (154,387) (18,272)
Operating Income               
Other Income (Expense):         
Interest and Other Deductions (37,147)  (31,827)  (5,320)  (74,539) (63,259) (11,280)
Interest Expense 37,147   31,827   5,320   74,539  63,259  11,280 
Net Income$  $  $  $ $ $ 
Net Income 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
  2023  2022 (Decrease)  2023  2022 (Decrease)
            
Capital Expenditures:           
Exploration and Production$155,112(1)$134,748 (3)$20,364 $323,617 (1)(2)$273,960 (3)(4)$49,657 
Pipeline and Storage 16,838(1) 14,404 (3) 2,434  33,265 (1)(2) 38,465 (3)(4) (5,200)
Gathering 20,788(1) 11,055 (3) 9,733  34,081 (1)(2) 19,975 (3)(4) 14,106 
Utility 23,942(1) 23,925 (3) 17  49,230 (1)(2) 43,308 (3)(4) 5,922 
Total Reportable Segments 216,680  184,132  32,548  440,193  375,708  64,485 
All Other            
Corporate 391  271  120  403  496  (93)
Total Capital Expenditures$217,071 $184,403 $32,668 $440,596 $376,204 $64,392 


(1)Capital expenditures for the quarter and six months ended March 31, 2023, include accounts payable and accrued liabilities related to capital expenditures of $56.1 million, $2.2 million, $2.0 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, 2023, since they represent non-cash investing activities at that date.
  
(2)Capital expenditures for the six months ended March 31, 2023, exclude capital expenditures of $83.0 million, $15.2 million, $10.7 million and $11.4 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, 2022 and paid during the six months ended March 31, 2023. These amounts were excluded from the Consolidated Statement of Cash Flows at September 30, 2022, 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, 2023.
  
(3)Capital expenditures for the quarter and six months ended March 31, 2022, include accounts payable and accrued liabilities related to capital expenditures of $52.5 million, $3.5 million, $3.4 million, and $4.1 million in the Exploration and Production segment, Pipeline and Storage segment, Gathering segment and Utility segment, respectively. These amounts have been excluded from the Consolidated Statement of Cash Flows at March 31, 2022, since they represent non-cash investing activities at that date.
  
(4)Capital expenditures for the six months ended March 31, 2022, exclude capital expenditures of $47.9 million, $39.4 million, $4.8 million and $10.6 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, 2021 and paid during the six months ended March 31, 2022. These amounts were excluded from the Consolidated Statement of Cash Flows at September 30, 2021, 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, 2022.


          
DEGREE DAYS         
       Percent Colder
       (Warmer) Than:
Three Months Ended March 31,Normal 2023 2022 Normal (1) Last Year (1)
Buffalo, NY3,290 2,820 3,161 (14.3) (10.8)
Erie, PA3,108 2,645 2,973 (14.9) (11.0)
          
Six Months Ended March 31,         
Buffalo, NY5,543 4,868 4,865 (12.2) 0.1 
Erie, PA5,152 4,632 4,533 (10.1) 2.2 

(1)   Percents compare actual 2023 degree days to normal degree days and actual 2023 degree days to actual 2022 degree days.

             
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
             
EXPLORATION AND PRODUCTION INFORMATION
             
  Three Months Ended Six Months Ended
  March 31, March 31,
      Increase     Increase
   2023  2022 (Decrease)  2023  2022 (Decrease)
             
Gas Production/Prices:            
Production (MMcf)            
Appalachia  93,241  83,565  9,676   183,815  164,954  18,861 
West Coast    397  (397)    805  (805)
Total Production  93,241  83,962  9,279   183,815  165,759  18,056 
             
Average Prices (Per Mcf)            
Appalachia $2.79 $3.97 $(1.18) $3.77 $4.18 $(0.41)
West Coast N/M  10.04 N/M N/M  9.91 N/M
Weighted Average  2.79  4.00  (1.21)  3.77  4.21  (0.44)
Weighted Average after Hedging  2.58  2.60  (0.02)  2.80  2.56  0.24 
             
Oil Production/Prices:            
Production (Thousands of Barrels)            
Appalachia  7  1  6   15  1  14 
West Coast    522  (522)    1,070  (1,070)
Total Production  7  523  (516)  15  1,071  (1,056)
             
Average Prices (Per Barrel)            
Appalachia $74.12 $78.32 $(4.20) $78.25 $75.38 $2.87 
West Coast N/M  94.95 N/M N/M  85.93 N/M
Weighted Average  74.12  94.93  (20.81)  78.25  85.93  (7.68)
Weighted Average after Hedging  74.12  70.45  3.67   78.25  67.30  10.95 
             
Total Production (MMcfe)  93,283  87,100  6,183   183,905  172,185  11,720 
             
Selected Operating Performance Statistics:            
General & Administrative Expense per Mcfe (1) $0.19 $0.22 $(0.03) $0.18 $0.21 $(0.03)
Lease Operating and Transportation Expense per Mcfe (1)(2) $0.71 $0.83 $(0.12) $0.69 $0.82 $(0.13)
Depreciation, Depletion & Amortization per Mcfe (1) $0.63 $0.58 $0.05  $0.62 $0.58 $0.04 
             


N/M Not Meaningful (as a result of the sale of Seneca's West Coast assets in June 2022)
  
(1)Refer to page 15 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 $0.58 and $0.55 per Mcfe for the three months ended March 31, 2023 and March 31, 2022, respectively. Amounts include transportation expense of $0.58 and $0.56 per Mcfe for the six months ended March 31, 2023 and March 31, 2022, respectively.

   

NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
        
EXPLORATION AND PRODUCTION INFORMATION
 
Hedging Summary for Remaining Six Months of Fiscal 2023 Volume  Average Hedge Price
Gas Swaps       
NYMEX 65,640,000 MMBTU $2.88 / MMBTU
No Cost Collars 47,880,000 MMBTU $3.43 / MMBTU (Floor) / $4.13 / MMBTU (Ceiling)
Fixed Price Physical Sales 41,700,181 MMBTU $2.25 / MMBTU
Total 155,220,181 MMBTU   
        
Hedging Summary for Fiscal 2024 Volume  Average Hedge Price
Gas Swaps       
NYMEX 119,180,000 MMBTU $3.28 / MMBTU
No Cost Collars 65,280,000 MMBTU $3.33 / MMBTU (Floor) / $4.17 / MMBTU (Ceiling)
Fixed Price Physical Sales 73,687,093 MMBTU $2.42 / MMBTU
Total 258,147,093 MMBTU   
        
Hedging Summary for Fiscal 2025 Volume  Average Hedge Price
Gas Swaps       
NYMEX 59,560,000 MMBTU $3.39 / MMBTU
No Cost Collars 43,960,000 MMBTU $3.49 / MMBTU (Floor) / $4.65 / MMBTU (Ceiling)
Fixed Price Physical Sales 70,289,781 MMBTU $2.46 / MMBTU
Total 173,809,781 MMBTU   
        
Hedging Summary for Fiscal 2026 Volume  Average Hedge Price
Gas Swaps       
NYMEX 15,520,000 MMBTU $4.03 / MMBTU
No Cost Collars 42,720,000 MMBTU $3.53 / MMBTU (Floor) / $4.76 / MMBTU (Ceiling)
Fixed Price Physical Sales 62,893,544 MMBTU $2.37 / MMBTU
Total 121,133,544 MMBTU   
        
Hedging Summary for Fiscal 2027 Volume  Average Hedge Price
Gas Swaps       
NYMEX 12,000,000 MMBTU $4.29 / MMBTU
No Cost Collars 3,560,000 MMBTU $3.53 / MMBTU (Floor) / $4.76 / MMBTU (Ceiling)
Fixed Price Physical Sales 45,517,002 MMBTU $2.39 / MMBTU
Total 61,077,002 MMBTU   
        
Hedging Summary for Fiscal 2028 Volume  Average Hedge Price
Gas Swaps       
NYMEX 1,000,000 MMBTU $4.29 / MMBTU
Fixed Price Physical Sales 11,850,451 MMBTU $2.48 / MMBTU
Total 12,850,451 MMBTU   
        
Hedging Summary for Fiscal 2029 Volume  Average Hedge Price
Fixed Price Physical Sales 766,673 MMBTU $2.54 / 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
  2023 2022 (Decrease) 2023 2022 (Decrease)
Firm Transportation - Affiliated 48,147 46,459 1,688  86,616 74,656 11,960 
Firm Transportation - Non-Affiliated 182,934 185,571 (2,637) 369,089 350,967 18,122 
Interruptible Transportation 619 752 (133) 1,927 1,520 407 
  231,700 232,782 (1,082) 457,632 427,143 30,489 
             
Gathering Volume - (MMcf)            
  Three Months Ended Six Months Ended
  March 31, March 31,
      Increase     Increase
  2023 2022 (Decrease) 2023 2022 (Decrease)
Gathered Volume 109,344 103,736 5,608  217,371 204,829 12,542 
             
             
Utility Throughput - (MMcf)            
  Three Months Ended Six Months Ended
  March 31, March 31,
      Increase     Increase
  2023 2022 (Decrease) 2023 2022 (Decrease)
Retail Sales:            
Residential Sales 27,884 32,026 (4,142) 48,037 49,521 (1,484)
Commercial Sales 4,384 4,923 (539) 7,378 7,466 (88)
Industrial Sales 267 268 (1) 418 392 26 
  32,535 37,217 (4,682) 55,833 57,379 (1,546)
Transportation 22,788 25,745 (2,957) 41,098 43,338 (2,240)
  55,323 62,962 (7,639) 96,931 100,717 (3,786)
             

 

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, Adjusted EBITDA and free cash flow, 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 or liquidity and for comparing the Company’s financial performance to other companies. The Company's management uses these non-GAAP financial measures for the same purpose, and for planning and forecasting purposes. The presentation of non-GAAP financial measures is not meant to be a substitute for financial measures in accordance with GAAP.

Management defines 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 six months ended March 31, 2023 and 2022:

  Three Months Ended Six Months Ended
  March 31, March 31,
(in thousands except per share amounts)  2023   2022   2023   2022 
Reported GAAP Earnings $140,880  $167,328  $310,570  $299,720 
Items impacting comparability:        
Unrealized (gain) loss on derivative asset (E&P)  2,471      2,273    
Tax impact of unrealized (gain) loss on derivative asset  (677)     (623)   
Unrealized (gain) loss on other investments (Corporate / All Other)  (1,068)  2,170   (1,278)  6,659 
Tax impact of unrealized (gain) loss on other investments  224   (456)  268   (1,398)
Reduction of other post-retirement regulatory liability (Utility)     (18,533)     (18,533)
Tax impact of reduction of other post-retirement regulatory liability     3,892      3,892 
Adjusted Operating Results $141,830  $154,401  $311,210  $290,340 
         
Reported GAAP Earnings Per Share $1.53  $1.82  $3.37  $3.26 
Items impacting comparability:        
Unrealized (gain) loss on derivative asset, net of tax (E&P)  0.02      0.02    
Unrealized (gain) loss on other investments, net of tax (Corporate / All Other)  (0.01)  0.02   (0.01)  0.05 
Reduction of other post-retirement regulatory liability, net of tax (Utility)     (0.16)     (0.16)
Rounding        (0.01)   
Adjusted Operating Results Per Share $1.54  $1.68  $3.37  $3.15 

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 six months ended March 31, 2023 and 2022:

  Three Months Ended Six Months Ended
  March 31, March 31,
(in thousands)  2023   2022   2023   2022 
Reported GAAP Earnings $140,880  $167,328  $310,570  $299,720 
Depreciation, Depletion and Amortization  100,964   91,245   197,564   179,823 
Other (Income) Deductions  (2,884)  (10,018)  (9,203)  (8,940)
Interest Expense  33,444   31,598   66,892   62,889 
Income Taxes  49,937   57,458   107,489   102,356 
Adjusted EBITDA $322,341  $337,611  $673,312  $635,848 
         
Adjusted EBITDA by Segment        
Pipeline and Storage Adjusted EBITDA $58,926  $61,371  $123,455  $118,519 
Gathering Adjusted EBITDA  46,263   43,056   92,977   87,088 
Total Midstream Businesses Adjusted EBITDA  105,189   104,427   216,432   205,607 
Exploration and Production Adjusted EBITDA  154,574   158,450   344,905   305,451 
Utility Adjusted EBITDA  65,820   77,529   117,396   129,557 
Corporate and All Other Adjusted EBITDA  (3,242)  (2,795)  (5,421)  (4,767)
Total Adjusted EBITDA $322,341  $337,611  $673,312  $635,848 


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)  2023   2022   2023   2022 
Exploration and Production Segment        
Reported GAAP Earnings $60,982  $71,121  $152,174  $133,490 
Depreciation, Depletion and Amortization  58,605   50,547   114,164   100,054 
Other (Income) Deductions  1,276   111   (402)  241 
Interest Expense  12,186   12,206   25,420   24,338 
Income Taxes  21,525   24,465   53,549   47,328 
Adjusted EBITDA $154,574  $158,450  $344,905  $305,451 
         
Pipeline and Storage Segment        
Reported GAAP Earnings $23,858  $25,470  $53,335  $50,637 
Depreciation, Depletion and Amortization  17,728   17,294   35,142   33,095 
Other (Income) Deductions  (2,288)  (959)  (5,482)  (3,129)
Interest Expense  10,877   10,618   21,829   20,750 
Income Taxes  8,751   8,948   18,631   17,166 
Adjusted EBITDA $58,926  $61,371  $123,455  $118,519 
         
Gathering Segment        
Reported GAAP Earnings $24,334  $22,092  $49,072  $45,229 
Depreciation, Depletion and Amortization  8,918   8,362   17,626   16,753 
Other (Income) Deductions  (262)  38   (470)  85 
Interest Expense  3,900   4,071   7,943   8,219 
Income Taxes  9,373   8,493   18,806   16,802 
Adjusted EBITDA $46,263  $43,056  $92,977  $87,088 
         
Utility Segment        
Reported GAAP Earnings $31,720  $53,048  $55,537  $75,178 
Depreciation, Depletion and Amortization  15,553   14,997   30,428   29,827 
Other (Income) Deductions  (1,764)  (13,312)  (3,198)  (9,510)
Interest Expense  9,709   5,504   17,752   11,028 
Income Taxes  10,602   17,292   16,877   23,034 
Adjusted EBITDA $65,820  $77,529  $117,396  $129,557 
         
Corporate and All Other        
Reported GAAP Earnings $(14) $(4,403) $452  $(4,814)
Depreciation, Depletion and Amortization  160   45   204   94 
Other (Income) Deductions  154   4,104   349   3,373 
Interest Expense  (3,228)  (801)  (6,052)  (1,446)
Income Taxes  (314)  (1,740)  (374)  (1,974)
Adjusted EBITDA $(3,242) $(2,795) $(5,421) $(4,767)


Management defines free cash flow as net cash provided by operating activities less capital expenditures. The Company is unable to provide a reconciliation of projected free cash flow as described in this release to its comparable financial measure calculated in accordance with GAAP without unreasonable efforts. This is due to our inability to reliably predict the comparable GAAP projected metrics, including operating income and total production costs, given the unknown effect, timing, and potential significance of certain income statement items.


Timothy J. Silverstein
Treasurer
716-857-6987

Analyst Contact:
Brandon J. Haspett
716-857-7697

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

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