National Fuel Reports Fourth Quarter and Full Year Fiscal 2016 Earnings

WILLIAMSVILLE, N.Y.--()--National Fuel Gas Company (“National Fuel” or the “Company”) (NYSE:NFG) today announced consolidated results for the three months and fiscal year ended September 30, 2016. National Fuel had consolidated earnings for the quarter ended September 30, 2016, of $37.6 million or $0.44 per share, compared to the prior year’s fourth quarter consolidated loss of $187.7 million or $2.22 per share. For fiscal 2016, the Company had a consolidated net loss of $291.0 million or $3.43 per share, versus a consolidated net loss of $379.4 million or $4.50 per share in fiscal 2015.

FISCAL 2016 FOURTH QUARTER SUMMARY

  • Consolidated net income of $37.6 million or $0.44 per share
  • Operating Results (earnings before items impacting comparability) of $56.6 million or $0.66 per share (non-GAAP reconciliation on page 2)
  • Impairment of oil and gas properties of $32.8 million ($19.0 million after tax)
  • Adjusted EBITDA of $170.1 million, up from $153.6 million in the prior year (non-GAAP reconciliation on page 26)
  • Net production of 39.8 Bcfe, a 6% increase from prior year, resulting in record annual net production for fiscal 2016
  • Price-related production curtailments of 6.2 Bcf in Appalachia
  • Average natural gas prices after hedging of $3.09 per Mcf, down $0.26 per Mcf from the prior year
  • Average oil prices after hedging of $60.01 per Bbl, down $6.39 per Bbl from the prior year
  • Midstream businesses Adjusted EBITDA of $67.5 million, up from $56.7 million in the prior year (non-GAAP reconciliation on page 27)

MANAGEMENT COMMENTS

Ronald J. Tanski, President and Chief Executive Officer of National Fuel Gas Company, stated: “We are pleased to finish our 2016 fiscal year with a strong fourth quarter. Realized commodity prices that declined by more than 10% over the entire fiscal year had a negative effect on our financial performance, as did weather that was 16% warmer than normal. Nonetheless, we were able to improve on our overall results from the prior year. Our team’s continued focus on cost control and operational efficiencies across the Company’s entire value chain helped drive the improved results for the year.

“Already into the second month of our 2017 fiscal year, we continue to focus on executing our integrated plans and navigating the Company through an increasingly challenging environment in the domestic energy industry. We expect to continue the methodical development of our vast, industry-leading low cost natural gas resource in the Marcellus and Utica shales. At the same time, we will leverage our valuable pipeline footprint and over 100 years of operational experience to responsibly build out and maintain the infrastructure necessary to supply the clean-burning fuel that keeps our utility customers warm, and connect the new supply sources to demand centers across the region. I am confident that our asset base and unique integrated structure will continue to provide us with a competitive advantage and that our strategy will deliver increasing returns for our shareholders, and position National Fuel as a premier energy company for years to come."

OPERATING RESULTS

      Three Months Ended   Fiscal Year Ended
September 30, September 30,
(in thousands except per share amounts) 2016   2015 2016   2015
Reported GAAP earnings (loss) $ 37,553 $ (187,703 ) $ (290,958 ) $ (379,427 )
Items impacting comparability:
Impairment of oil and gas properties (E&P) 32,756 417,197 948,307 1,126,257
Tax impact of impairment of oil and gas properties (13,757 ) (176,360 ) (398,287 ) (476,097 )
Joint development agreement professional fees (E&P) 7,855
Tax impact of joint development agreement professional fees (3,299 )
Deferred income tax adjustments (E&P) (13,206 ) (13,206 )
Reversal of stock-based compensation (7,776 ) (7,776 )
Tax impact of reversal of stock-based compensation   3,095     3,095  
Operating Results $ 56,552   $ 35,247   $ 263,618   $ 252,846  
 
Reported GAAP earnings (loss) per share $ 0.44 $ (2.22 ) $ (3.43 ) $ (4.50 )
Items impacting comparability:
Impairment of oil and gas properties (E&P) 0.38 4.93 11.18 13.35
Tax impact of impairment of oil and gas properties (0.16 ) (2.09 ) (4.69 ) (5.64 )
Joint development agreement professional fees (E&P) 0.09
Tax impact of joint development agreement professional fees (0.04 )
Deferred income tax adjustments (E&P) (0.15 ) (0.15 )
Reversal of stock-based compensation (0.09 ) (0.09 )
Tax impact of reversal of stock-based compensation 0.04 0.04
Earnings per share impact of dilutive shares (All segments)   (0.01 ) (0.02 ) (0.04 )
Operating Results per diluted share $ 0.66   $ 0.41   $ 3.09   $ 2.97  
 

DISCUSSION OF RESULTS BY SEGMENT

The following discussion of the earnings of each segment is summarized in a tabular form on pages 9 through 12 of this report. It may be helpful to refer to those tables while reviewing this discussion. Note that management defines Operating Results as reported GAAP earnings before items impacting comparability, and Adjusted EBITDA as reported GAAP earnings before the following items: interest expense, depreciation and amortization, interest and other income, impairments, items impacting comparability, and income taxes.

Upstream Business

Exploration and Production Segment

The Exploration and Production segment operations are carried out by Seneca Resources Corporation ("Seneca"). Seneca explores for, develops and produces natural gas and oil reserves, primarily in Pennsylvania and California.

       
Three Months Ended Fiscal Year Ended
September 30, September 30,
(in thousands except per share amounts) 2016   2015   Variance 2016   2015   Variance
Net Income / (Loss) $ 16,744   $ (207,019 )   $ 223,763 $ (452,842 )   $ (556,974 )   $ 104,132
Net Income / (Loss) Per Share (Diluted) $ 0.20 $ (2.45 ) $ 2.65 $ (5.34 ) $ (6.60 ) $ 1.26
Adjusted EBITDA $ 95,157 $ 97,582 $ (2,425 ) $ 363,830 $ 422,289 $ (58,459 )
 

Net income in the Exploration and Production segment in the current year’s fourth quarter was $16.7 million or $0.20 per share, compared to a net loss of $207.0 million or $2.45 per share in the prior year’s fourth quarter, an increase of $223.7 million, or $2.65 per share. The increase in the Exploration and Production segment's fourth quarter net income is mainly due to lower charges that were recorded to write down the value of Seneca’s oil and natural gas reserves under the full cost method of accounting. The non-cash, pre-tax impairment charge recorded in the current year's fourth quarter was $32.8 million ($19.0 million after-tax) versus $417.2 million ($240.8 million after-tax) in the prior year. The full cost method of accounting requires that Seneca perform a quarterly “ceiling test” to compare the present value of future revenues from its oil and natural gas reserves based on an unweighted arithmetic average of the first day of the month oil and gas prices for each month within the 12-month period prior to the end of the reporting period (“the ceiling”) with the book value of those reserves at the balance sheet date. If the book value of the reserves exceeds the ceiling, a non-cash impairment charge must be recorded in order to reduce the book value of the reserves to the calculated ceiling. While possible, Seneca does not expect to incur an impairment charge in the first quarter of fiscal 2017 due to the improvement in oil and gas prices and lower lease operating expenses and development costs.

Excluding items impacting comparability, including the impairment charges discussed above, Operating Results in the Exploration and Production segment in the current year’s fourth quarter were $35.7 million, or $0.42 per share, compared to $19.0 million, or $0.22 per share, in the prior year’s fourth quarter, an increase of $16.7 million or $0.20 per share. The increase in Operating Results is mainly due to higher natural gas production, lower operating expenses and a lower effective tax rate, offset partially by lower realized natural gas and crude oil prices and lower oil production.

Seneca's fourth quarter net production was 39.8 billion cubic feet equivalent ("Bcfe"), an increase of 2.2 Bcfe, or 6 percent, from the prior year, and a decrease of 4.1 Bcfe, or 9 percent, versus the third quarter of fiscal 2016. Net natural gas production increased 2.5 Bcf, or 8 percent, versus prior year due mainly to new incremental firm transportation capacity that became available to Seneca during the first quarter of fiscal 2016. Seneca voluntarily curtailed an estimated 6.2 Bcf of net natural gas production in the fourth quarter as a result of depressed local spot prices in Pennsylvania. Seneca’s crude oil production decreased 54 thousand barrels ("Mbbl"), or 7 percent, due mainly to the continuing impact of a disruption in steam flood operations that occurred during the first quarter in the North Midway Sunset field. Steam volumes increased at North Midway Sunset during the fourth quarter of fiscal 2016 and field production is expected to return to pre-disruption levels in the first half of fiscal 2017.

Seneca's average realized natural gas price, after the impact of hedging, for the fourth quarter was $3.09 per thousand cubic feet ("Mcf"), a decrease of $0.26 per Mcf versus the prior year. Seneca's average realized oil price, after the impact of hedging, was $60.01 per barrel ("Bbl"), a decrease of $6.39 per Bbl. Seneca's average realized natural gas and oil prices benefited from an uplift of $0.82 per Mcf and $20.55 per Bbl, respectively, from financial hedges settled during the quarter.

The decrease in Seneca’s fourth quarter operating expenses was driven by lower lease operating and transportation expense ("LOE") and lower depreciation, depletion and amortization ("DD&A") expense. LOE decreased due to lower per unit operating costs, offset by the impact of higher natural gas production and the associated gathering costs. On a per unit of production basis, LOE decreased from $1.07 per Mcf equivalent ("Mcfe") to $0.97 per Mcfe. The $0.10 per Mcfe decrease is largely due to a reduction in well maintenance and steam fuel costs in Seneca's California division and lower salt water disposal and maintenance costs in Seneca's Appalachian division. DD&A expense decreased due to lower per unit DD&A, offset partially by the impact of higher production. Seneca’s per unit DD&A decreased $0.54 per Mcfe to $0.69 per Mcfe due to a lower depletable fixed asset balance resulting mainly from the ceiling test impairment charges recorded during the prior four quarters.

A lower effective income tax rate also benefited Seneca’s earnings. The lower effective rate was principally attributed to a tax credit related to a solar farm that went in service at Seneca’s California operations in the fourth quarter. Adjustments related to the intercompany tax sharing agreement in place amongst the Company’s subsidiaries also contributed to the lower effective rate.

The net loss in the Exploration and Production segment for fiscal 2016 was $452.8 million or $5.34 per share, compared to a net loss of $557.0 million, or $6.60 per share, in fiscal 2015, an improvement of $104.2 million or $1.26 per share. The decrease in the Exploration and Production segment's fiscal 2016 net loss is mainly due to lower charges that were recorded to write down the value of Seneca’s oil and natural gas reserves under the full cost method of accounting. The total non-cash, pre-tax impairment charge recorded in fiscal 2016 was $948.3 million ($550.0 million after-tax) versus $1.1 billion ($650.2 million after-tax) in the prior fiscal year.

Excluding items impacting comparability, including the impairment charges discussed above, Operating Results in the Exploration and Production segment for fiscal 2016 were $101.7 million, or $1.19 per share, compared to $78.4 million, or $0.92 per share, in fiscal 2015, an increase of $23.3 million or $0.27 per share. The increase in Operating Results is mainly due to higher production, lower operating expenses and a lower effective tax rate, offset partially by lower realized natural gas and crude oil prices and higher interest expense.

Seneca generated record net production of 161.1 Bcfe in fiscal 2016, an increase of 3.3 Bcfe, or 2 percent, versus fiscal 2015. Seneca voluntarily curtailed an estimated 34.6 Bcf of net natural gas production in fiscal 2016. Seneca's average realized natural gas and oil prices, after the impact of hedging, were $3.02 per Mcf and $57.91 per Bbl, respectively, a decrease of $0.36 per Mcf and $12.45 per Bbl, versus fiscal 2015.

LOE expense decreased primarily due to lower repairs and maintenance expenses and overall operating costs, which decreased Seneca’s average per unit LOE by $0.10 per Mcfe, offset slightly by the impact of higher production and the associated gathering costs. Property, franchise and other taxes decreased due to lower Pennsylvania impact fee payments and California assessments. DD&A expense decreased $0.65 per Mcfe to $0.87 per Mcfe as a result of lower depletable fixed asset balance following the ceiling test impairment charges.

Year End Proved Reserves

Seneca’s total proved crude oil and natural gas reserves were 1,849 Bcfe at September 30, 2016 versus 2,344 Bcfe at September 30, 2015. The 495 Bcfe decrease was due primarily to 262 Bcfe of mineral sales, another 262 Bcfe of net negative revisions, and 161 Bcfe of annual production, offset by a 190 Bcfe of extensions and discoveries. Seneca’s total proved undeveloped reserves (“PUDs”) at the end of fiscal 2016 were 543 Bcfe, or 29 percent of proved reserves, which was down from 35 percent of proved reserves at the end of fiscal 2015.

As part of the joint development agreement (“JDA”) entered into in November 2015 and extended in June 2016, Seneca conveyed approximately 246 Bcfe of natural gas reserves to the JDA partner in fiscal 2016. The Company expects to convey an additional 69 Bcfe of proved reserves to the JDA partner in fiscal 2017. In addition to the JDA, the Company sold approximately 16 Bcfe of Upper Devonian reserves in fiscal 2016.

Revisions to previous proved reserve estimates resulted in a net reduction of 262 Bcfe, with 227 Bcfe, or 87 percent, due to lower oil and gas pricing. Similar to the quarterly ceiling test calculation discussed above, Seneca is required under SEC accounting rules to use 12-month historical oil and gas pricing to estimate its proved reserves. Average natural gas and oil prices used to estimate the Company’s proved reserves decreased $0.75 per Mcf and $18.57 per Bbl, respectively, from 2015. The Company is able to record positive price related revisions to its proved reserves if oil and gas prices increase.

Adjusting for sales and revisions, Seneca replaced 117 percent of its production in fiscal 2016 versus 404 percent in fiscal 2015. The decrease was driven primarily by the JDA and an overall reduction in development activity in Appalachia, where the Company went from operating 3 rigs in fiscal 2015 to a single rig in the second quarter of fiscal 2016.

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 Fiscal Year Ended
September 30, September 30,
(in thousands except per share amounts) 2016   2015   Variance 2016   2015   Variance
Net Income / (Loss) $ 16,816   $ 18,485   $ (1,669 ) $ 76,610   $ 80,354   $ (3,744 )
Net Income / (Loss) Per Share (Diluted) $ 0.20 $ 0.22 $ (0.02 ) $ 0.90 $ 0.95 $ (0.05 )
Adjusted EBITDA $ 46,517 $ 40,297 $ 6,220 $ 199,446 $ 188,042 $ 11,404
 

The Pipeline and Storage segment's fourth quarter earnings decreased $1.7 million versus the prior year as the increase in the segment’s operating income was more than offset by lower other income and higher income taxes. Operating income increased $2.9 million, or 9 percent, as a result of the three expansion projects - Northern Access 2015, Westside Expansion & Modernization, and Tuscarora Lateral - that were placed in service during the first quarter of fiscal 2016. Other income decreased $1.4 million as the Company recorded lower allowance for funds used during construction (“AFUDC”) following the in-service of the three expansion projects that were under construction during the prior year. The segment’s effective tax rate was higher in the fourth quarter due to adjustments related to the intercompany tax sharing agreement in place amongst the Company's subsidiaries.

Similarly, the Pipeline and Storage segment's fiscal 2016 earnings decreased $3.7 million versus the prior year as the increase in operating income was more than offset by higher interest expense and income taxes. Operating income increased $4.4 million, or 3 percent, as a result of the three expansion projects that were placed in service during the first quarter of fiscal 2016. The impact of the expansion projects were partially offset by a decrease in revenues from short-term seasonal contracts and a reduction in some of Supply Corporation’s and Empire’s tariff rates, as well as higher post-retirement benefit and executive compensation costs. The increase in interest expense was due to the full year impact of the long-term debt issuance that occurred at the end of the quarter ended June 30, 2015. The segment’s effective tax rate was higher in the fourth quarter due to changes in intercompany tax adjustments recorded in the current year.

Gathering Segment

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

       
Three Months Ended Fiscal Year Ended
September 30, September 30,
(in thousands except per share amounts) 2016   2015   Variance 2016   2015   Variance
Net Income / (Loss) $ 8,537   $ 7,594   $ 943 $ 30,499   $ 31,849   $ (1,350 )
Net Income / (Loss) Per Share (Diluted) $ 0.10 $ 0.09 $ 0.01 $ 0.36 $ 0.38 $ (0.02 )
Adjusted EBITDA $ 20,963 $ 16,426 $ 4,537 $ 78,685 $ 68,881 $ 9,804
 

The Gathering segment’s fourth quarter earnings increased 12 percent due to higher gathering revenues, offset partially by higher Operation and Maintenance ("O&M"), DD&A and interest expenses. Operating revenues increased $5.2 million, or 29 percent, as a result of the increase in Seneca's gross production volumes during the quarter. O&M expense increased on higher costs associated with the operation of various compression facilities that were placed in service during the current fiscal year. DD&A expense increased due to higher gross plant in service during the quarter. Interest expense increased due to a decline in capitalized interest on lower construction work in progress during the current quarter.

The Gathering segment’s fiscal 2016 earnings declined 4 percent versus fiscal 2015 as the increase in operating income was more than offset by an increase in interest expense. Operating income increased $5.4 million, or 9 percent, as gathering revenues from higher system throughput more than offset higher O&M and DD&A expenses. Operating revenues increased $12.2 million, or 16 percent, due to the increase in Seneca's gross production volumes in 2016. O&M expense increased on higher costs associated with the operation of various compression facilities that were placed in service during the current fiscal year. DD&A expense increased due to higher gross plant in service during the year. The increase in interest expense was due to the full year impact of the long-term debt issuance that occurred at the end of the quarter ended June 30, 2015, coupled with lower capitalized interest.

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 Fiscal Year Ended
September 30, September 30,
(in thousands except per share amounts) 2016   2015   Variance 2016   2015   Variance
Net Income / (Loss) $ (1,784 )   $ (3,288 )   $ 1,504 $ 50,960   $ 63,271   $ (12,311 )
Net Income / (Loss) Per Share (Diluted) $ (0.02 ) $ (0.04 ) $ 0.02 $ 0.60 $ 0.75 $ (0.15 )
Adjusted EBITDA $ 10,400 $ 3,311 $ 7,089 $ 148,683 $ 164,037 $ (15,354 )
 

The $0.02 per share improvement in the Utility segment's fourth quarter net loss was largely attributable to lower O&M expenses offset slightly by higher DD&A expense. O&M expense decreased $5.6 million versus the prior year due to lower maintenance, personnel, and post-retirement benefit costs.

The Utility segment’s fiscal 2016 earnings decreased 19 percent due to the warmer winter heating season and the impact of a regulatory true-up adjustment in fiscal 2015, offset partially by a reduction in O&M expenses. Warmer weather during the winter heating season had a negative impact on the segment’s margins, which contributed to a $0.15 per share decline in the Utility’s earnings. In New York, the impact of weather variations on earnings is largely mitigated by that jurisdiction’s weather normalization clause. O&M expense decreased $10.8 million in fiscal 2016 due to a decline in uncollectible customer accounts and lower maintenance, personnel, and post-retirement benefit costs.

Energy Marketing Segment

The Energy Marketing segment's operations are carried out by National Fuel Resources, Inc. (“NFR”). NFR markets natural gas to industrial, wholesale, commercial, public authority and residential customers primarily in western and central New York and northwestern Pennsylvania, offering competitively priced natural gas to its customers.

       
Three Months Ended Fiscal Year Ended
September 30, September 30,
(in thousands except per share amounts) 2016   2015   Variance 2016   2015   Variance
Net Income / (Loss) $ 231   $ 34   $ 197 $ 4,348   $ 7,766   $ (3,418 )
Net Income / (Loss) Per Share (Diluted) $ $ $ $ 0.05 $ 0.09 $ (0.04 )
Adjusted EBITDA $ 87 $ (176 ) $ 263 $ 6,655 $ 12,237 $ (5,582 )
 

The Energy Marketing segment's fourth quarter earnings were relatively flat when compared to the prior year. For fiscal 2016, earnings declined $3.4 million due primarily to lower customer volumes and margins, which were negatively impacted by the warmer winter weather and stronger natural gas prices at local purchase points relative to NFR’s NYMEX-based customer sales contracts.

Corporate and All Other

The Corporate and All Other category net loss of $3.0 million for the quarter ended September 30, 2016, compares to a net loss of $3.5 million in the prior year’s fourth quarter. The $0.5 million decrease in the net loss impacted consolidated earnings by less than $0.01 per share.

The Corporate and All Other category net loss of $0.5 million for the year ended September 30, 2016, compares to a net loss of $5.7 million in the prior year. The $5.2 million decrease in the net loss was due to lower corporate-level expenses and lower income taxes.

EARNINGS GUIDANCE

The Company is reaffirming its earnings guidance for fiscal 2017 with a range of $2.85 to $3.15 per share. While the earnings guidance range remains unchanged, the Company is updating fiscal 2017 capital expenditure and production guidance and revising some of its Exploration & Production forecast assumptions.

       
Updated FY 2017 Guidance Previous FY 2017 Guidance
Consolidated Earnings per Share $2.85 to $3.15 $2.85 to $3.15
Capital Expenditures (Millions)
Exploration & Production (1) $180 - $220 $160 - $200
Pipeline & Storage $390 - $440 $400 - $450
Gathering $65 - $75 $75 - $85
Utility $90 - $100 $90 - $100
Consolidated Capital Expenditures $725 - $835 $725 - $835
 
Exploration & Production Segment Guidance
NYMEX Natural Gas Price Assumption $3.25 $3.00
NYMEX Crude Oil Price Assumption $53.00 $50.00
 
Production (Bcfe)
East Division - Appalachia 125 to 148 130 to 153
West Division - California 20 to 22 20 to 22
Total Production 145 to 170 150 to 175
 
E&P Operating Costs ($/Mcfe)
LOE $0.95 - $1.05 $0.95 - $1.05
G&A $0.35 - $0.40 $0.35 - $0.40
DD&A $0.65 - $0.75 $0.65 - $0.75
 
(1)   Net of initial conveyance proceeds received from joint development partner for working interest in joint development wells
 

EARNINGS TELECONFERENCE

The Company will host a conference call on Friday, November 4, 2016, 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) 844-742-4246, using conference ID number “97603563.” 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) 855-859-2056 or 404-537-3406, using conference ID number “97603563.” Both the webcast and telephonic replay will be available until the close of business on Friday, November 11, 2016.

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.

Certain statements contained herein, including statements identified by the use of the words “anticipates,” “estimates,” “expects,” “forecasts,” “intends,” “plans,” “predicts,” “projects,” “believes,” “seeks,” “will,” “may” and similar expressions, and statements which are other than statements of historical facts, are “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties, which could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. The Company’s expectations, beliefs and projections contained herein are expressed in good faith and are believed to have a reasonable basis, but there can be no assurance that such expectations, beliefs or projections will result or be achieved or accomplished. In addition to other factors, the following are important factors that could cause actual results to differ materially from those discussed in the forward-looking statements: delays or changes in costs or plans with respect to Company projects or related projects of other companies, including difficulties or delays in obtaining necessary governmental approvals, permits or orders or in obtaining the cooperation of interconnecting facility operators; governmental/regulatory actions, initiatives and proceedings, including those involving rate cases (which address, among other things, target rates of return, rate design and retained natural gas), environmental/safety requirements, affiliate relationships, industry structure, and franchise renewal; impairments under the SEC’s full cost ceiling test for natural gas and oil reserves; changes in the price of natural gas or oil; financial and economic conditions, including the availability of credit, and occurrences affecting the Company’s ability to obtain financing on acceptable terms for working capital, capital expenditures and other investments, including any downgrades in the Company’s credit ratings and changes in interest rates and other capital market conditions; factors affecting the Company’s ability to successfully identify, drill for and produce economically viable natural gas and oil reserves, including among others geology, lease availability, title disputes, weather conditions, shortages, delays or unavailability of equipment and services required in drilling operations, insufficient gathering, processing and transportation capacity, the need to obtain governmental approvals and permits, and compliance with environmental laws and regulations; 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; 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 economic conditions, including global, national or regional recessions, and their effect on the demand for, and customers’ ability to pay for, the Company’s products and services; the creditworthiness or performance of the Company’s key suppliers, customers and counterparties; economic disruptions or uninsured losses resulting from major accidents, fires, severe weather, natural disasters, terrorist activities, acts of war, cyber attacks or pest infestation; significant differences between the Company’s projected and actual capital expenditures and operating expenses; 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; increasing health care costs and the resulting effect on health insurance premiums and on the obligation to provide other post-retirement benefits; or increasing costs of insurance, changes in coverage and the ability to obtain insurance. The Company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date thereof.

               
NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS
QUARTER ENDED SEPTEMBER 30, 2016
(Unaudited)
 
 
Upstream Midstream Businesses Downstream Businesses
 
Exploration & Pipeline & Energy Corporate /
(Thousands of Dollars) Production   Storage   Gathering   Utility   Marketing   All Other   Consolidated*
 
Fourth quarter 2015 GAAP earnings $ (207,019 ) $ 18,485 $ 7,594 $ (3,288 ) $ 34 $ (3,509 ) $ (187,703 )
Items impacting comparability:
Impairment of oil and gas producing properties 417,197 417,197
Tax impact of impairment of oil and gas producing properties (176,360 ) (176,360 )
Deferred income tax adjustments (13,206 ) (13,206 )
Reversal of stock-based compensation (2,767 ) (1,900 ) (1,684 ) (1,425 ) (7,776 )
Tax impact of reversal of stock-based compensation 1,170     754         649         522     3,095  
Fourth quarter 2015 operating results 19,015 17,339 7,594 (4,323 ) 34 (4,412 ) 35,247
 
Drivers of operating results
Higher (lower) crude oil prices (3,006 ) (3,006 )
Higher (lower) natural gas prices (5,933 ) (5,933 )
Higher (lower) natural gas production 5,490 5,490
Higher (lower) crude oil production (2,358 ) (2,358 )
Lower (higher) lease operating and transportation expenses 1,121 1,121
Lower (higher) depreciation / depletion 12,286 (912 ) (697 ) (957 ) 9,720
 
Higher (lower) transportation revenues 3,946 3,946
Higher (lower) gathering and processing revenues 3,403 3,403
Lower (higher) other operating expenses 2,547 1,049 (466 ) 4,723 287 8,140
Lower (higher) property, franchise and other taxes 814 814
 
Higher (lower) margins 166 346 512
 
Higher (lower) AFUDC** (1,415 ) (1,415 )
 
Lower (higher) interest expense (441 ) (441 )
 
Lower (higher) income tax expense / effective tax rate 5,992 (2,356 ) (911 ) (1,244 ) 373 1,854
 
All other / rounding (225 )   (835 )   55     17     31     415     (542 )
Fourth quarter 2016 operating results 35,743 16,816 8,537 (1,784 ) 231 (2,991 ) 56,552
Items impacting comparability:
Impairment of oil and gas producing properties (32,756 ) (32,756 )
Tax impact of impairment of oil and gas producing properties 13,757                         13,757  
Fourth quarter 2016 GAAP earnings $ 16,744     $ 16,816     $ 8,537     $ (1,784 )   $ 231     $ (2,991 )   $ 37,553  
 
* Amounts do not reflect intercompany eliminations
** AFUDC = Allowance for Funds Used During Construction
 
               
NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS PER SHARE
QUARTER ENDED SEPTEMBER 30, 2016
(Unaudited)
 
 
Upstream Midstream Businesses Downstream Businesses
 
Exploration & Pipeline & Energy Corporate /
Production   Storage   Gathering   Utility   Marketing   All Other   Consolidated*
 
Fourth quarter 2015 GAAP earnings $ (2.45 ) $ 0.22 $ 0.09 $ (0.04 ) $ $ (0.04 ) $ (2.22 )
Items impacting comparability:
Impairment of oil and gas producing properties 4.93 4.93
Tax impact of impairment of oil and gas producing properties (2.09 ) (2.09 )
Deferred income tax adjustments (0.15 ) (0.15 )
Reversal of stock-based compensation (0.03 ) (0.02 ) (0.02 ) (0.02 ) (0.09 )
Tax impact of reversal of stock-based compensation 0.01 0.01 0.01 0.01 0.04
Earnings per share impact of diluted shares (0.01 ) (0.01 )
Rounding 0.01     (0.01 )                    
Fourth quarter 2015 operating results 0.22 0.20 0.09 (0.05 ) (0.05 ) 0.41
 
Drivers of operating results
Higher (lower) crude oil prices (0.04 ) (0.04 )
Higher (lower) natural gas prices (0.07 ) (0.07 )
Higher (lower) natural gas production 0.06 0.06
Higher (lower) crude oil production (0.03 ) (0.03 )
Lower (higher) lease operating and transportation expenses 0.01 0.01
Lower (higher) depreciation / depletion 0.14 (0.01 ) (0.01 ) (0.01 ) 0.11
 
Higher (lower) transportation revenues 0.05 0.05
Higher (lower) gathering and processing revenues 0.04 0.04
Lower (higher) other operating expenses 0.03 0.01 (0.01 ) 0.06 0.09
Lower (higher) property, franchise and other taxes 0.01 0.01
 
Higher (lower) margins
 
Higher (lower) AFUDC** (0.02 ) (0.02 )
 
Lower (higher) interest expense (0.01 ) (0.01 )
 
Lower (higher) income tax expense / effective tax rate 0.07 (0.03 ) (0.01 ) (0.01 ) 0.02
 
All other / rounding 0.02         0.01     (0.01 )       0.01     0.03  
Fourth quarter 2016 operating results 0.42 0.20 0.10 (0.02 ) (0.04 ) 0.66
Items impacting comparability:
Impairment of oil and gas producing properties (0.38 ) (0.38 )
Tax impact of impairment of oil and gas producing properties 0.16                         0.16  
Fourth quarter 2016 GAAP earnings $ 0.20     $ 0.20     $ 0.10     $ (0.02 )   $     $ (0.04 )   $ 0.44  
 
* Amounts do not reflect intercompany eliminations
** AFUDC = Allowance for Funds Used During Construction
 
               
NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS
TWELVE MONTHS ENDED SEPTEMBER 30, 2016
(Unaudited)
 
Upstream Midstream Businesses Downstream Businesses
 
Exploration & Pipeline & Energy Corporate /
(Thousands of Dollars) Production   Storage   Gathering   Utility   Marketing   All Other   Consolidated*
 
Fiscal 2015 GAAP earnings $ (556,974 ) $ 80,354 $ 31,849 $ 63,271 $ 7,766 $ (5,693 ) $ (379,427 )
Items impacting comparability:
Impairment of oil and gas producing properties 1,126,257 1,126,257
Tax impact of impairment of oil and gas producing properties (476,097 ) (476,097 )
Deferred income tax adjustments (13,206 ) (13,206 )
Reversal of stock-based compensation (2,767 ) (1,900 ) (1,684 ) (1,425 ) (7,776 )
Tax impact of reversal of stock-based compensation 1,170     754         649         522     3,095  
Fiscal 2015 operating results 78,383 79,208 31,849 62,236 7,766 (6,596 ) 252,846
 
Drivers of operating results
Higher (lower) crude oil prices (23,643 ) (23,643 )
Higher (lower) natural gas prices (33,645 ) (33,645 )
Higher (lower) natural gas production 8,751 8,751
Higher (lower) crude oil production (5,103 ) (5,103 )
Derivative mark to market adjustments (2,061 ) (2,061 )
Lower (higher) lease operating and transportation expenses 9,026 9,026
Lower (higher) depreciation / depletion 64,906 (3,312 ) (2,895 ) (1,951 ) 56,748
 
Higher (lower) transportation revenues 10,601 10,601
Higher (lower) gathering and processing revenues 7,956 7,956
Lower (higher) other operating expenses 4,946 (1,145 ) (1,603 ) 6,592 1,447 10,237
Lower (higher) property, franchise and other taxes 4,142 (870 ) 3,272
 
Regulatory true-up adjustments (3,389 ) (3,389 )
Warmer weather (12,457 ) (12,457 )
 
Higher (lower) margins (3,589 ) 910 (2,679 )
 
Higher (lower) AFUDC** (904 ) (904 )
 
Higher (lower) interest income (1,102 ) (1,102 )
 
Lower (higher) interest expense (5,660 ) (3,685 ) (4,709 ) (14,054 )
 
Lower (higher) income tax expense / effective tax rate 3,207 (2,695 ) 1,620 2,132
 
All other / rounding (413 )   (588 )   (99 )   (71 )   171     2,086     1,086  
Fiscal 2016 operating results 101,734 76,610 30,499 50,960 4,348 (533 ) 263,618
Items impacting comparability:
Impairment of oil and gas producing properties (948,307 ) (948,307 )
Tax impact of impairment of oil and gas producing properties 398,287 398,287
Joint development agreement professional fees (7,855 ) (7,855 )
Tax impact of joint development agreement professional fees 3,299                         3,299  
Fiscal 2016 GAAP earnings $ (452,842 )   $ 76,610     $ 30,499     $ 50,960     $ 4,348     $ (533 )   $ (290,958 )
 
* Amounts do not reflect intercompany eliminations
** AFUDC = Allowance for Funds Used During Construction
 
               
NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS PER SHARE
TWELVE MONTHS ENDED SEPTEMBER 30, 2016
(Unaudited)
 
Upstream Midstream Businesses Downstream Businesses
 
Exploration & Pipeline & Energy Corporate /
Production   Storage   Gathering   Utility   Marketing   All Other   Consolidated*
 
Fiscal 2015 GAAP earnings $ (6.60 ) $ 0.95 $ 0.38 $ 0.75 $ 0.09 $ (0.07 ) $ (4.50 )
Items impacting comparability:
Impairment of oil and gas producing properties 13.35 13.35
Tax impact of impairment of oil and gas producing properties (5.64 ) (5.64 )
Deferred income tax adjustments (0.15 ) (0.15 )
Reversal of stock-based compensation (0.03 ) (0.02 ) (0.02 ) (0.02 ) (0.09 )
Tax impact of reversal of stock-based compensation 0.01 0.01 0.01 0.01 0.04
Earnings per share impact of diluted shares (0.02 )   (0.01 )       (0.01 )           (0.04 )
Fiscal 2015 operating results 0.92 0.93 0.38 0.73 0.09 (0.08 ) 2.97
 
Drivers of operating results
Higher (lower) crude oil prices (0.28 ) (0.28 )
Higher (lower) natural gas prices (0.39 ) (0.39 )
Higher (lower) natural gas production 0.10 0.10
Higher (lower) crude oil production (0.06 ) (0.06 )
Derivative mark to market adjustments (0.02 ) (0.02 )
Lower (higher) lease operating and transportation expenses 0.11 0.11
Lower (higher) depreciation / depletion 0.76 (0.04 ) (0.03 ) (0.02 ) 0.67
 
Higher (lower) transportation revenues 0.12 0.12
Higher (lower) gathering and processing revenues 0.09 0.09
Lower (higher) other operating expenses 0.06 (0.01 ) (0.02 ) 0.08 0.02 0.13
Lower (higher) property, franchise and other taxes 0.05 (0.01 ) 0.04
 
Regulatory true-up adjustments (0.04 ) (0.04 )
Warmer weather (0.15 ) (0.15 )
 
Higher (lower) margins (0.04 ) 0.01 (0.03 )
 
Higher (lower) AFUDC** (0.01 ) (0.01 )
 
Higher (lower) interest income (0.01 ) (0.01 )
 
Lower (higher) interest expense (0.07 ) (0.04 ) (0.06 ) (0.17 )
 
Lower (higher) income tax expense / effective tax rate 0.04 (0.03 ) 0.02 0.03
 
All other / rounding (0.02 )   (0.01 )               0.02     (0.01 )
Fiscal 2016 operating results 1.19 0.90 0.36 0.60 0.05 (0.01 ) 3.09
Items impacting comparability:
Impairment of oil and gas producing properties (11.18 ) (11.18 )
Tax impact of impairment of oil and gas producing properties 4.69 4.69
Joint development agreement professional fees (0.09 ) (0.09 )
Tax impact of joint development agreement professional fees 0.04 0.04
Earnings per share impact of diluted shares 0.01                     0.01     0.02  
Fiscal 2016 GAAP earnings $ (5.34 )   $ 0.90     $ 0.36     $ 0.60     $ 0.05     $     $ (3.43 )
 
* Amounts do not reflect intercompany eliminations
** AFUDC = Allowance for Funds Used During Construction
 
         
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 
(Thousands of Dollars, except per share amounts)
Three Months Ended Twelve Months Ended
September 30, September 30,
(Unaudited) (Unaudited)

SUMMARY OF OPERATIONS

2016   2015 2016   2015
Operating Revenues:
Utility and Energy Marketing Revenues $ 83,620 $ 87,816 $ 624,602 $ 860,618
Exploration and Production and Other Revenues 155,734 164,537 611,766 696,709
Pipeline and Storage and Gathering Revenues 53,118   48,709   216,048   203,586  
292,472 301,062 1,452,416 1,760,913
Operating Expenses:
Purchased Gas 814 5,256 147,982 349,984
Operation and Maintenance:
Utility and Energy Marketing 41,038 46,525 192,512 203,249
Exploration and Production and Other 36,235 43,460 160,201 184,024
Pipeline and Storage and Gathering 24,477 23,493 88,801 82,730
Property, Franchise and Other Taxes 19,791 21,002 81,714 89,564
Depreciation, Depletion and Amortization 56,117 70,860 249,417 336,158
Impairment of Oil and Gas Producing Properties 32,756   417,197   948,307   1,126,257  
211,228 627,793 1,868,934 2,371,966
 
Operating Income (Loss) 81,244 (326,731 ) (416,518 ) (611,053 )
 
Other Income (Expense):
Interest Income 1,595 2,291 4,235 3,922
Other Income 2,647 3,401 9,820 8,039
Interest Expense on Long-Term Debt (29,083 ) (29,016 ) (117,347 ) (95,916 )
Other Interest Expense 241   (173 ) (3,697 ) (3,555 )
 
Income (Loss) Before Income Taxes 56,644 (350,228 ) (523,507 ) (698,563 )
 
Income Tax Expense (Benefit) 19,091   (162,525 ) (232,549 ) (319,136 )
 
Net Income (Loss) Available for Common Stock $ 37,553   $ (187,703 ) $ (290,958 ) $ (379,427 )
 
Earnings (Loss) Per Common Share:
Basic $ 0.44   $ (2.22 ) $ (3.43 ) $ (4.50 )
Diluted $ 0.44   $ (2.22 ) $ (3.43 ) $ (4.50 )
 
Weighted Average Common Shares:
Used in Basic Calculation 85,016,408 84,570,432 84,847,993 84,387,755
Used in Diluted Calculation 85,629,858 84,570,432 84,847,993 84,387,755
 
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
   
September 30,   September 30,
(Thousands of Dollars)     2016   2015
 
ASSETS
Property, Plant and Equipment $9,539,581 $9,261,323
Less - Accumulated Depreciation, Depletion and Amortization     5,085,099     3,929,428
Net Property, Plant and Equipment     4,454,482     5,331,895
 
Current Assets:
Cash and Temporary Cash Investments 129,972 113,596
Hedging Collateral Deposits 1,484 11,124
Receivables - Net 133,201 105,004
Unbilled Revenue 18,382 20,746
Gas Stored Underground 34,332 34,252
Materials and Supplies - at average cost 33,866 30,414
Unrecovered Purchased Gas Costs 2,440
Other Current Assets     59,354     60,665
Total Current Assets     413,031     375,801
 
Other Assets:
Recoverable Future Taxes 177,261 168,214
Unamortized Debt Expense 1,688 2,218
Other Regulatory Assets 320,750 278,227
Deferred Charges 20,978 15,129
Other Investments 110,664 92,990
Goodwill 5,476 5,476
Prepaid Post-Retirement Benefit Costs 17,649 24,459
Fair Value of Derivative Financial Instruments 113,804 270,363
Other     604     167
Total Other Assets     768,874     857,243
Total Assets     $5,636,387     $6,564,939
 
CAPITALIZATION AND LIABILITIES
Capitalization:
Comprehensive Shareholders' Equity
Common Stock, $1 Par Value Authorized - 200,000,000
Shares; Issued and Outstanding - 85,118,886 Shares
and 84,594,383 Shares, Respectively $85,119 $84,594
Paid in Capital 771,164 744,274
Earnings Reinvested in the Business 676,361 1,103,200
Accumulated Other Comprehensive Income (Loss)     (5,640 )   93,372
Total Comprehensive Shareholders' Equity 1,527,004 2,025,440
Long-Term Debt, Net of Unamortized Discount and Debt Issuance Costs     2,086,252     2,084,009
Total Capitalization     3,613,256     4,109,449
 
Current and Accrued Liabilities:
Notes Payable to Banks and Commercial Paper
Current Portion of Long-Term Debt
Accounts Payable 108,056 180,388
Amounts Payable to Customers 19,537 56,778
Dividends Payable 34,473 33,415
Interest Payable on Long-Term Debt 34,900 36,200
Customer Advances 14,762 16,236
Customer Security Deposits 16,019 16,490
Other Accruals and Current Liabilities 74,430 96,557
Fair Value of Derivative Financial Instruments     1,560     10,076
Total Current and Accrued Liabilities     303,737     446,140
 
Deferred Credits:
Deferred Income Taxes 823,795 1,137,962
Taxes Refundable to Customers 93,318 89,448
Unamortized Investment Tax Credit 383 731
Cost of Removal Regulatory Liability 193,424 184,907
Other Regulatory Liabilities 99,789 108,617
Pension and Other Post-Retirement Liabilities 277,113 202,807
Asset Retirement Obligations 112,330 156,805
Other Deferred Credits     119,242     128,073
Total Deferred Credits     1,719,394     2,009,350
Commitments and Contingencies        
Total Capitalization and Liabilities     $5,636,387     $6,564,939
 
       
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Twelve Months Ended
September 30,
(Thousands of Dollars)       2016   2015
 
Operating Activities:
Net Income (Loss) Available for Common Stock $ (290,958 ) $ (379,427 )
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by Operating Activities:
Impairment of Oil and Gas Producing Properties 948,307 1,126,257
Depreciation, Depletion and Amortization 249,417 336,158
Deferred Income Taxes (246,794 ) (357,587 )
Excess Tax Benefits Associated with Stock-Based Compensation Awards (1,868 ) (9,064 )
Stock-Based Compensation 5,755 3,208
Other 12,620 9,823
Change in:
Hedging Collateral Deposits 9,640 (8,390 )
Receivables and Unbilled Revenue (6,408 ) 51,638
Gas Stored Underground and Materials and Supplies (3,532 ) 3,438
Unrecovered Purchased Gas Costs (2,440 )
Other Current Assets 3,179 3,150
Accounts Payable (40,664 ) 34,687
Amounts Payable to Customers (37,241 ) 23,033
Customer Advances (1,474 ) (2,769 )
Customer Security Deposits (471 ) 729
Other Accruals and Current Liabilities 3,453 (7,173 )
Other Assets 1,941 2,696
Other Liabilities       (13,483 )   23,173  
Net Cash Provided by Operating Activities       $ 588,979     $ 853,580  
 
Investing Activities:
Capital Expenditures $ (581,576 ) $ (1,018,179 )
Net Proceeds from Sale of Oil and Gas Producing Properties 137,316
Other       (9,236 )   (6,611 )
Net Cash Used in Investing Activities       $ (453,496 )   $ (1,024,790 )
 
Financing Activities:
Changes in Notes Payable to Banks and Commercial Paper $ $ (85,600 )
Excess Tax Benefits Associated with Stock-Based Compensation Awards 1,868 9,064
Dividends Paid on Common Stock (134,824 ) (130,719 )
Net Proceeds From Issuance of Long-Term Debt 444,635
Net Proceeds From Issuance of Common Stock       13,849     10,540  
Net Cash (Used in) Provided by Financing Activities       $ (119,107 )   $ 247,920  
 
Net Increase in Cash and Temporary Cash Investments 16,376 76,710
Cash and Temporary Cash Investments at Beginning of Period       113,596     36,886  
Cash and Temporary Cash Investments at September 30       $ 129,972     $ 113,596  
 
         
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
 
UPSTREAM BUSINESS
 
 
Three Months Ended Twelve Months Ended
(Thousands of Dollars, except per share amounts) September 30, September 30,

EXPLORATION AND PRODUCTION SEGMENT

2016   2015   Variance 2016 2015 Variance
Total Operating Revenues $ 154,530     $ 163,851     $ (9,321 ) $ 607,113   $ 693,441   $ (86,328 )
 
Operating Expenses:
Operation and Maintenance:
General and Administrative Expense 14,928 15,321 (393 ) 70,598 66,114 4,484
Lease Operating and Transportation Expense 38,463 40,186 (1,723 ) 153,914 167,800 (13,886 )
All Other Operation and Maintenance Expense 2,429 3,189 (760 ) 12,832 14,304 (1,472 )
Property, Franchise and Other Taxes 3,553 4,806 (1,253 ) 13,794 20,167 (6,373 )
Depreciation, Depletion and Amortization 27,377 46,277 (18,900 ) 139,963 239,818 (99,855 )
Impairment of Oil and Gas Producing Properties 32,756     417,197     (384,441 ) 948,307   1,126,257   (177,950 )
119,506     526,976     (407,470 ) 1,339,408   1,634,460   (295,052 )
 
Operating Income (Loss) 35,024 (363,125) 398,149 (732,295 ) (941,019) 208,724
 
Other Income (Expense):
Interest Income 78 661 (583 ) 858 2,554 (1,696 )
Interest Expense (13,552 )   (14,176 )   624   (55,434 ) (46,726 ) (8,708 )
 
Income (Loss) Before Income Taxes 21,550 (376,640 ) 398,190 (786,871 ) (985,191 ) 198,320
Income Tax Expense (Benefit) 4,806     (169,621 )   174,427   (334,029 ) (428,217 ) 94,188  
Net Income (Loss) $ 16,744     $ (207,019 )   $ 223,763   $ (452,842 ) $ (556,974 ) $ 104,132  
 
Net Income (Loss) Per Share (Diluted) $ 0.20     $ (2.45 )   $ 2.65   $ (5.34 ) $ (6.60 ) $ 1.26  
 
         
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
 
MIDSTREAM BUSINESSES
 
 
Three Months Ended Twelve Months Ended
(Thousands of Dollars, except per share amounts) September 30, September 30,

PIPELINE AND STORAGE SEGMENT

2016   2015   Variance 2016 2015 Variance
Revenues from External Customers $ 53,047 $ 48,573 $ 4,474 $ 215,674 $ 203,089 $ 12,585
Intersegment Revenues 22,483     21,903     580   90,755   88,251   2,504  
Total Operating Revenues 75,530     70,476     5,054   306,429   291,340   15,089  
 
Operating Expenses:
Purchased Gas (10 ) (32 ) 22 1,048 462 586
Operation and Maintenance 22,256 21,971 285 79,402 75,741 3,661
Property, Franchise and Other Taxes 6,767 6,340 427 26,533 25,195 1,338
Depreciation, Depletion and Amortization 11,128     9,726     1,402   43,273   38,178   5,095  
40,141     38,005     2,136   150,256   139,576   10,680  
 
Operating Income 35,389 32,471 2,918 156,173 151,764 4,409
 
Other Income (Expense):
Interest Income 242 124 118 770 474 296
Other Income 583 1,999 (1,416 ) 3,235 3,887 (652 )
Interest Expense (8,309 )   (7,745 )   (564 ) (33,327 ) (27,658 ) (5,669 )
 
Income Before Income Taxes 27,905 26,849 1,056 126,851 128,467 (1,616 )
Income Tax Expense 11,089     8,364     2,725   50,241   48,113   2,128  
Net Income $ 16,816     $ 18,485     $ (1,669 ) $ 76,610   $ 80,354   $ (3,744 )
 
Net Income Per Share (Diluted) $ 0.20     $ 0.22     $ (0.02 ) $ 0.90   $ 0.95   $ (0.05 )
 
 
Three Months Ended Twelve Months Ended
September 30, September 30,

GATHERING SEGMENT

2016   2015   Variance 2016 2015 Variance
Revenues from External Customers $ 71 $ 136 $ (65 ) $ 374 $ 497 $ (123 )
Intersegment Revenues 23,471     18,169     5,302   89,073   76,709   12,364  
Total Operating Revenues 23,542     18,305     5,237   89,447   77,206   12,241  
 
Operating Expenses:
Operation and Maintenance 2,547 1,831 716 10,613 8,147 2,466
Property, Franchise and Other Taxes 32 48 (16 ) 149 178 (29 )
Depreciation, Depletion and Amortization 3,876     2,804     1,072   15,282   10,829   4,453  
6,455     4,683     1,772   26,044   19,154   6,890  
 
Operating Income 17,087 13,622 3,465 63,403 58,052 5,351
 
Other Income (Expense):
Interest Income 109 46 63 297 140 157
Other Income 1 1 5 5
Interest Expense (2,091 )   (1,413 )   (678 ) (8,872 ) (1,627 ) (7,245 )
 
Income Before Income Taxes 15,106 12,256 2,850 54,833 56,570 (1,737 )
Income Tax Expense 6,569     4,662     1,907   24,334   24,721   (387 )
Net Income $ 8,537     $ 7,594     $ 943   $ 30,499   $ 31,849   $ (1,350 )
 
Net Income Per Share (Diluted) $ 0.10     $ 0.09     $ 0.01   $ 0.36   $ 0.38   $ (0.02 )
 
         
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
 
DOWNSTREAM BUSINESSES
 
 
Three Months Ended Twelve Months Ended
(Thousands of Dollars, except per share amounts) September 30, September 30,

UTILITY SEGMENT

2016   2015   Variance 2016 2015 Variance
Revenues from External Customers $ 67,870 $ 70,712 $ (2,842 ) $ 531,024 $ 700,761 $ (169,737 )
Intersegment Revenues 2,367     1,836     531   13,123   15,506   (2,383 )
Total Operating Revenues 70,237     72,548     (2,311 ) 544,147   716,267   (172,120 )
 
Operating Expenses:
Purchased Gas 10,392 12,164 (1,772 ) 166,155 307,653 (141,498 )
Operation and Maintenance 40,294 45,899 (5,605 ) 189,178 200,023 (10,845 )
Property, Franchise and Other Taxes 9,151 9,490 (339 ) 40,131 42,870 (2,739 )
Depreciation, Depletion and Amortization 13,107     11,635     1,472   48,618   45,616   3,002  
72,944     79,188     (6,244 ) 444,082   596,162   (152,080 )
 
Operating Income (Loss) (2,707 ) (6,640 ) 3,933 100,065 120,105 (20,040 )
 
Other Income (Expense):
Interest Income 1,415 2,178 (763 ) 1,737 2,220 (483 )
Other Income 593 662 (69 ) 2,342 2,265 77
Interest Expense (5,898 )   (7,030 )   1,132   (27,582 ) (28,176 ) 594  
 
Income (Loss) Before Income Taxes (6,597 ) (10,830 ) 4,233 76,562 96,414 (19,852 )
Income Tax Expense (Benefit) (4,813 )   (7,542 )   2,729   25,602   33,143   (7,541 )
Net Income (Loss) $ (1,784 )   $ (3,288 )   $ 1,504   $ 50,960   $ 63,271   $ (12,311 )
 
Net Income (Loss) Per Share (Diluted) $ (0.02 )   $ (0.04 )   $ 0.02   $ 0.60   $ 0.75   $ (0.15 )
 
 
Three Months Ended Twelve Months Ended
September 30, September 30,

ENERGY MARKETING SEGMENT

2016   2015   Variance 2016 2015 Variance
Revenues from External Customers $ 15,750 $ 17,104 $ (1,354 ) $ 93,578 $ 159,857 $ (66,279 )
Intersegment Revenues 30     53     (23 ) 884   849   35  
Total Operating Revenues 15,780     17,157     (1,377 ) 94,462   160,706   (66,244 )
 
Operating Expenses:
Purchased Gas 14,111 15,743 (1,632 ) 81,347 142,068 (60,721 )
Operation and Maintenance 1,575 1,583 (8 ) 6,447 6,386 61
Property, Franchise and Other Taxes 7 7 13 15 (2 )
Depreciation, Depletion and Amortization 70     57     13   278   209   69  
15,763     17,390     (1,627 ) 88,085   148,678   (60,593 )
 
Operating Income (Loss) 17 (233 ) 250 6,377 12,028 (5,651 )
 
Other Income (Expense):
Interest Income 136 54 82 422 195 227
Other Income 15 21 (6 ) 58 117 (59 )
Interest Expense (13 )   (7 )   (6 ) (49 ) (27 ) (22 )
 
Income (Loss) Before Income Taxes 155 (165 ) 320 6,808 12,313 (5,505 )
Income Tax Expense (Benefit) (76 )   (199 )   123   2,460   4,547   (2,087 )
Net Income $ 231     $ 34     $ 197   $ 4,348   $ 7,766   $ (3,418 )
 
Net Income Per Share (Diluted) $     $     $   $ 0.05   $ 0.09   $ (0.04 )
 
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
         
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
 
Three Months Ended Twelve Months Ended
(Thousands of Dollars, except per share amounts) September 30, September 30,

ALL OTHER

2016   2015   Variance 2016 2015 Variance
Total Operating Revenues $ 978     $ 446     $ 532   $ 3,753   $ 2,352   $ 1,401  
Operating Expenses:
Operation and Maintenance 281 226 55 776 936 (160 )
Property, Franchise and Other Taxes 145 182 (37 ) 593 644 (51 )
Depreciation, Depletion and Amortization 373     187     186   1,260   832   428  
799     595     204   2,629   2,412   217  
 
Operating Income (Loss) 179 (149 ) 328 1,124 (60 ) 1,184
 
Other Income (Expense):
Interest Income 35 18 17 117 66 51
Other Income 98     1     97   98   5   93  
 
Income (Loss) Before Income Taxes 312 (130 ) 442 1,339 11 1,328
Income Tax Expense (Benefit) 130     (63 )   193   561   13   548  
Net Income (Loss) $ 182     $ (67 )   $ 249   $ 778   $ (2 ) $ 780  
 
Net Income (Loss) Per Share (Diluted) $     $     $   $ 0.01   $   $ 0.01  
 
 
Three Months Ended Twelve Months Ended
September 30, September 30,

CORPORATE

2016   2015   Variance 2016 2015 Variance
Revenues from External Customers $ 226 $ 240 $ (14 ) $ 900 $ 916 $ (16 )
Intersegment Revenues 1,091     1,195     (104 ) 3,991   3,987   4  
Total Operating Revenues 1,317     1,435     (118 ) 4,891   4,903   (12 )
Operating Expenses:
Operation and Maintenance 4,740 3,809 931 15,012 15,655 (643 )
Property, Franchise and Other Taxes 136 129 7 501 495 6
Depreciation, Depletion and Amortization 186     174     12   743   676   67  
5,062     4,112     950   16,256   16,826   (570 )
 
Operating Loss (3,745 ) (2,677 ) (1,068 ) (11,365 ) (11,923 ) 558
 
Other Income (Expense):
Interest Income 30,389 29,999 390 123,156 104,477 18,679
Other Income 1,357 717 640 4,082 1,760 2,322
Interest Expense on Long-Term Debt (29,083 ) (29,016 ) (67 ) (117,347 ) (95,916 ) (21,431 )
Other Interest Expense (705 )   (591 )   (114 ) (1,555 ) (5,545 ) 3,990  
 
Loss Before Income Taxes (1,787 ) (1,568 ) (219 ) (3,029 ) (7,147 ) 4,118
Income Tax Expense (Benefit) 1,386     1,874     (488 ) (1,718 ) (1,456 ) (262 )
Net Loss $ (3,173 )   $ (3,442 )   $ 269   $ (1,311 ) $ (5,691 ) $ 4,380  
 
Net Loss Per Share (Diluted) $ (0.04 )   $ (0.04 )   $   $ (0.01 ) $ (0.07 ) $ 0.06  
 
 
Three Months Ended Twelve Months Ended
September 30, September 30,

INTERSEGMENT ELIMINATIONS

2016   2015   Variance 2016 2015 Variance
Intersegment Revenues $ (49,442 )   $ (43,156 )   $ (6,286 ) $ (197,826 ) $ (185,302 ) $ (12,524 )
Operating Expenses:
Purchased Gas (23,679 ) (22,619 ) (1,060 ) (100,568 ) (100,199 ) (369 )
Operation and Maintenance (25,763 )   (20,537 )   (5,226 ) (97,258 ) (85,103 ) (12,155 )
(49,442 )   (43,156 )   (6,286 ) (197,826 ) (185,302 ) (12,524 )
 
Operating Income
 
Other Income (Expense):
Interest Income (30,809 ) (30,789 ) (20 ) (123,122 ) (106,204 ) (16,918 )
Interest Expense 30,809     30,789     20   123,122   106,204   16,918  
Net Income $     $     $   $   $   $  
 
Net Income Per Share (Diluted) $     $     $   $   $   $  
 
     
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 
SEGMENT INFORMATION (Continued)
(Thousands of Dollars)
 
 
Three Months Ended Twelve Months Ended
September 30, September 30,
(Unaudited) (Unaudited)
Increase Increase
2016 2015 (Decrease) 2016 2015 (Decrease)
 

Capital Expenditures:

Exploration and Production (4) $ 41,181 (1) $ 119,863 (2) $ (78,682 ) $ 256,104 (1)(2) $ 557,313 (2)(3) $ (301,209 )
Pipeline and Storage 38,230 (1) 115,528 (2) (77,298 ) 114,250 (1)(2) 230,192 (2)(3) (115,942 )
Gathering 10,578 (1) 30,952 (2) (20,374 ) 54,293 (1)(2) 118,166 (2)(3) (63,873 )
Utility 25,719 (1) 29,034 (2) (3,315 ) 98,007 (1)(2) 94,371 (2)(3) 3,636
Energy Marketing 6   4   2   34   128   (94 )
Total Reportable Segments 115,714 295,381 (179,667 ) 522,688 1,000,170 (477,482 )
All Other 37 37
Corporate 136   205   (69 ) 326   339   (13 )
Total Capital Expenditures $ 115,850   $ 295,586   $ (179,736 ) $ 523,051   $ 1,000,509   $ (477,458 )
 
(1)   Capital expenditures for the quarter and year ended September 30, 2016, include accounts payable and accrued liabilities related to capital expenditures of $25.2 million, $18.7 million, $5.3 million, and $11.2 million in the Exploration and Production segment, Pipeline and Storage segment, Gathering segment and Utility segment, respectively. These amounts have been excluded from the Consolidated Statement of Cash Flows at September 30, 2016, since they represent non-cash investing activities at that date.
 
(2) Capital expenditures for the year ended September 30, 2016, exclude capital expenditures of $46.2 million, $33.9 million, $22.4 million and $16.5 million in the Exploration and Production segment, Pipeline and Storage segment, Gathering segment and Utility segment, respectively. These amounts were in accounts payable and accrued liabilities at September 30, 2015 and paid during the year ended September 30, 2016. These amounts were excluded from the Consolidated Statement of Cash Flows at September 30, 2015, since they represented non-cash investing activities at that date. These amounts have been included in the Consolidated Statement of Cash Flows at September 30, 2016.
 
(3) Capital expenditures for the year ended September 30, 2015, exclude capital expenditures of $80.1 million, $28.1 million, $20.1 million and $8.3 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, 2014 and paid during the year ended September 30, 2015. These amounts were excluded from the Consolidated Statements of Cash Flows at September 30, 2014, since they represented non-cash investing activities at that date. These amounts have been included in the Consolidated Statement of Cash Flows at September 30, 2015.
 
(4) The capital expenditures for the Exploration and Production segment do not include any proceeds from the sale of oil and gas assets.
 
             

DEGREE DAYS

 
Percent Colder
(Warmer) Than:
Three Months Ended September 30 Normal 2016 2015 Normal (1) Last Year (1)
 
Buffalo, NY 162 44 70 (72.8) (37.1)
Erie, PA 124 23 51 (81.5) (54.9)
 
Twelve Months Ended September 30
 
Buffalo, NY 6,653 5,611 6,968 (15.7) (19.5)
Erie, PA 6,181 5,182 6,586 (16.2) (21.3)
 
(1)   Percents compare actual 2016 degree days to normal degree days and actual 2016 degree days to actual 2015 degree days.
 
               
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 

EXPLORATION AND PRODUCTION INFORMATION

 
 
Three Months Ended Twelve Months Ended
September 30, September 30,
Increase Increase
2016 2015 (Decrease) 2016 2015 (Decrease)
 

Gas Production/Prices:

Production (MMcf)
Appalachia 34,711 32,183 2,528 140,457 136,404 4,053
West Coast 779   785   (6 ) 3,090   3,159   (69 )
Total Production 35,490   32,968   2,522   143,547   139,563   3,984  
 
Average Prices (Per Mcf)
Appalachia $ 2.24 $ 2.21 $ 0.03 $ 1.94 $ 2.48 $ (0.54 )
West Coast 3.62 3.54 0.08 3.25 4.11 (0.86 )
Weighted Average 2.27 2.24 0.03 1.97 2.51 (0.54 )
Weighted Average after Hedging 3.09 3.35 (0.26 ) 3.02 3.38 (0.36 )
 

Oil Production/Prices:

Production (Thousands of Barrels)
Appalachia 12 8 4 28 30 (2 )
West Coast 712   770   (58 ) 2,895   3,004   (109 )
Total Production 724   778   (54 ) 2,923   3,034   (111 )
 
Average Prices (Per Barrel)
Appalachia $ 63.46 $ 44.93 $ 18.53 $ 52.15 $ 57.44 $ (5.29 )
West Coast 39.06 42.33 (3.27 ) 35.26 51.37 (16.11 )
Weighted Average 39.46 42.36 (2.90 ) 35.42 51.43 (16.01 )
Weighted Average after Hedging 60.01 66.40 (6.39 ) 57.91 70.36 (12.45 )
 
Total Production (Mmcfe) 39,834   37,636   2,198   161,085   157,767   3,318  
 

Selected Operating Performance Statistics:

General & Administrative Expense per Mcfe (1) $ 0.37 $ 0.41 $ (0.04 ) $ 0.44 $ 0.42 $ 0.02
Lease Operating and Transportation Expense per Mcfe (1)(2) $ 0.97 $ 1.07 $ (0.10 ) $ 0.96 $ 1.06 $ (0.10 )
Depreciation, Depletion & Amortization per Mcfe (1) $ 0.69 $ 1.23 $ (0.54 ) $ 0.87 $ 1.52 $ (0.65 )
 

(1)

 

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

(2) Amounts include transportation expense of $0.52 and $0.52 per Mcfe for the three months ended September 30, 2016 and September 30, 2015, respectively. Amounts include transportation expense of $0.52 and $0.52 per Mcfe for the twelve months ended September 30, 2016 and September 30, 2015, respectively.
 
 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
     

EXPLORATION AND PRODUCTION INFORMATION

 
Hedging Summary for Fiscal 2017

Volume

Average Hedge Price

Oil Swaps
Brent 123,000 BBL $ 92.27 / BBL
NYMEX 1,185,000 BBL $ 61.34 / BBL
Total 1,308,000 BBL $ 64.25 / BBL
 
Gas Swaps
NYMEX 35,710,000 MMBTU $ 4.29 / MMBTU
Dominion Transmission Appalachian (DOM) 6,540,000 MMBTU $ 3.86 / MMBTU
Michigan Consolidated City Gate (Mich Con) 3,000,000 MMBTU $ 4.10 / MMBTU
Dawn Ontario (DAWN) 19,100,000 MMBTU $ 3.70 / MMBTU
Fixed Price Physical Sales 56,150,079 MMBTU $ 2.60 / MMBTU
Total 120,500,079 MMBTU $ 3.38 / MMBTU
 
Hedging Summary for Fiscal 2018

Volume

Average Hedge Price

Oil Swaps
Brent 24,000 BBL $ 91.00 / BBL
NYMEX 663,000 BBL $ 55.19 / BBL
Total 687,000 BBL $ 56.44 / BBL
 
Gas Swaps
NYMEX 42,570,000 MMBTU $ 3.34 / MMBTU
DAWN 8,400,000 MMBTU $ 3.08 / MMBTU
Fixed Price Physical Sales 29,366,235 MMBTU $ 2.46 / MMBTU
Total 80,336,235 MMBTU $ 2.99 / MMBTU
 
Hedging Summary for Fiscal 2019

Volume

Average Hedge Price

Oil Swaps
NYMEX 300,000 BBL $ 53.00 / BBL
Total 300,000 BBL $ 53.00 / BBL
 
Gas Swaps
NYMEX 27,060,000 MMBTU $ 3.17 / MMBTU
DAWN 7,200,000 MMBTU $ 3.00 / MMBTU
Fixed Price Physical Sales 11,947,289 MMBTU $ 3.09 / MMBTU
Total 46,207,289 MMBTU $ 3.13 / MMBTU
 
Hedging Summary for Fiscal 2020

Volume

Average Hedge Price

Gas Swaps
NYMEX 16,880,000 MMBTU $ 3.07 / MMBTU
DAWN 7,200,000 MMBTU $ 3.00 / MMBTU
Fixed Price Physical Sales 3,566,558 MMBTU $ 3.24 / MMBTU
Total 27,646,558 MMBTU $ 3.07 / MMBTU
 
Hedging Summary for Fiscal 2021

Volume

Average Hedge Price

Gas Swaps
NYMEX 4,840,000 MMBTU $ 3.01 / MMBTU
DAWN 600,000 MMBTU $ 3.00 / MMBTU
Total 5,440,000 MMBTU $ 3.01 / MMBTU
 
       
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 

EXPLORATION AND PRODUCTION INFORMATION

 

Gross Wells in Process of Drilling

Twelve Months Ended September 30, 2016

Total
East West Company
Wells in Process - Beginning of Period
Exploratory 4.000 (1) 0.000 4.000
Developmental 96.000 (1) 0.000 96.000
Wells Commenced
Exploratory 3.000 0.000 3.000
Developmental 43.000 25.000 68.000
Wells Completed
Exploratory 1.000 0.000 1.000
Developmental 51.000 25.000 76.000
Wells Plugged & Abandoned
Exploratory 0.000 0.000 0.000
Developmental 1.000 0.000 1.000
Wells in Process - End of Period
Exploratory 6.000 0.000 6.000
Developmental 87.000 0.000 87.000
 
(1)   Gross exploratory wells were increased by 4 and developmental wells were decreased by 4.
       

Net Wells in Process of Drilling

Twelve Months Ended September 30, 2016

Total
East West Company
Wells in Process - Beginning of Period
Exploratory 4.000 (1) 0.000 4.000
Developmental 81.500 (1) 0.000 81.500
Wells Commenced
Exploratory 3.000 0.000 3.000
Developmental 43.000 25.000 68.000
Wells Completed
Exploratory 1.000 0.000 1.000
Developmental 31.800 25.000 56.800
Wells Plugged & Abandoned
Exploratory 0.000 0.000 0.000
Developmental 1.000 0.000 1.000
Well Interest Sold (2)
Exploratory 0.000 0.000 0.000
Developmental 28.800 0.000 28.800
Wells in Process - End of Period
Exploratory 6.000 0.000 6.000
Developmental 62.900 (2) 0.000 62.900
 
(1)   Net exploratory wells were increased by 4 and developmental wells were decreased by 4.
(2) Seneca's East Division sold an 80% working interest in 36 of the existing developmental wells in process to IOG during the twelve months ended September 30, 2016.
 
       
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 

EXPLORATION AND PRODUCTION INFORMATION

 
Reserve Quantity Information
(Unaudited)
 
 
Gas MMcf
U.S.
Appalachian West Coast Total
Region Region Company
Proved Developed and Undeveloped Reserves:
September 30, 2015 2,092,782 49,346 2,142,128
Extensions and Discoveries 185,347 185,347
Revisions of Previous Estimates (245,029 ) (3,132 ) (248,161 )
Production (140,457 ) (3,090 ) (143,547 )
Sales of Minerals in Place (261,192 )   (261,192 )
September 30, 2016 1,631,451   43,124   1,674,575  
 
Proved Developed Reserves:
 
September 30, 2015 1,267,498 49,346 1,316,844
September 30, 2016 1,089,492 43,124 1,132,616
 
 
Oil Mbbl
U.S.
Appalachian West Coast Total
Region Region Company
Proved Developed and Undeveloped Reserves:
September 30, 2015 220 33,502 33,722
Extensions and Discoveries 530 530
Revisions of Previous Estimates (46 ) (2,201 ) (2,247 )
Production (28 ) (2,895 ) (2,923 )
Sales of Minerals in Place (73 )   (73 )
September 30, 2016 73   28,936   29,009  
 
Proved Developed Reserves:
 
September 30, 2015 220 33,150 33,370
September 30, 2016 73 28,698 28,771
 
               
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 
 
Pipeline & Storage Throughput - (millions of cubic feet - MMcf)
 
Three Months Ended Twelve Months Ended
September 30, September 30,
Increase Increase
2016 2015 (Decrease) 2016 2015 (Decrease)
Firm Transportation - Affiliated 13,468 15,128 (1,660 ) 100,637 110,431 (9,794 )
Firm Transportation - Non-Affiliated 169,247 149,626 19,621 640,238 626,775 13,463
Interruptible Transportation 5,079   4,040   1,039   23,548   12,874   10,674  
187,794   168,794   19,000   764,423   750,080   14,343  
 
Gathering Volume - (MMcf)
Three Months Ended Twelve Months Ended
September 30, September 30,
Increase Increase
2016 2015 (Decrease) 2016 2015 (Decrease)
Gathered Volume - Affiliated 42,600   32,934   9,666   161,955   139,629   22,326  
 
 
Utility Throughput - (MMcf)
Three Months Ended Twelve Months Ended
September 30, September 30,
Increase Increase
2016 2015 (Decrease) 2016 2015 (Decrease)
Retail Sales:
Residential Sales 3,143 3,285 (142 ) 49,971 59,600 (9,629 )
Commercial Sales 477 471 6 7,247 8,710 (1,463 )
Industrial Sales 11   21   (10 ) 244   337   (93 )
3,631 3,777 (146 ) 57,462 68,647 (11,185 )
Off-System Sales 1,243 3,787 (2,544 )
Transportation 11,078   10,240   838   70,847   78,749   (7,902 )
14,709   14,017   692   129,552   151,183   (21,631 )
 
Energy Marketing Volume
Three Months Ended Twelve Months Ended
September 30, September 30,
Increase Increase
2016 2015 (Decrease) 2016 2015 (Decrease)
Natural Gas (MMcf) 6,048   6,537   (489 ) 39,849   46,752   (6,903 )
 

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 Operating Results and Adjusted EBITDA, which are non-GAAP financial measures. The Company believes that these non-GAAP financial measures are useful to investors because they provide an alternative method for assessing the Company's ongoing operating results and for comparing the Company’s financial performance to other companies. The Company's management uses these non-GAAP financial measures for the same purpose, and for planning and forecasting purposes. The presentation of non-GAAP financial measures is not meant to be a substitute for financial measures in accordance with GAAP.

Management defines Operating Results as reported GAAP earnings before items impacting comparability. The table at page 2 of this report reconciles National Fuel's reported GAAP earnings to Operating Results for the three and twelve months ended September 30, 2016 and 2015.

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

The following tables reconcile National Fuel's reported GAAP earnings to Adjusted EBITDA for the three and twelve months ended September 30, 2016 and 2015:

           
Three Months Ended Twelve Months Ended
September 30, September 30,
2016 2015 2016 2015
(in thousands)
Reported GAAP Earnings $ 37,553 $ (187,703 ) $ (290,958 ) $ (379,427 )
Depreciation, Depletion and Amortization 56,117 70,860 249,417 336,158
Interest and Other Income (4,242 ) (5,692 ) (14,055 ) (11,961 )
Interest Expense 28,842 29,189 121,044 99,471
Income Taxes 19,091 (162,525 ) (232,549 ) (319,136 )
Impairment of Oil and Gas Producing

Properties

32,756 417,197 948,307 1,126,257
Reversal of Stock-Based Compensation (7,776 ) (7,776 )
Joint Development Agreement Professional

Fees

    7,855    
Adjusted EBITDA $ 170,117   $ 153,550   $ 789,061   $ 843,586  
 
Adjusted EBITDA by Segment
Pipeline and Storage Adjusted EBITDA $ 46,517 $ 40,297 $ 199,446 $ 188,042
Gathering Adjusted EBITDA 20,963   16,426   78,685   68,881  
Total Midstream Businesses Adjusted EBITDA 67,480 56,723 278,131 256,923
Exploration and Production Adjusted EBITDA 95,157 97,582 363,830 422,289
Utility Adjusted EBITDA 10,400 3,311 148,683 164,037
Energy Marketing Adjusted EBITDA 87 (176 ) 6,655 12,237
Corporate and All Other Adjusted EBITDA (3,007 ) (3,890 ) (8,238 ) (11,900 )
Total Adjusted EBITDA $ 170,117   $ 153,550   $ 789,061   $ 843,586  
 
 

NATIONAL FUEL GAS COMPANY

AND SUBSIDIARIES

NON-GAAP FINANCIAL MEASURES

SEGMENT ADJUSTED EBITDA

       
Three Months Ended Twelve Months Ended
September 30, September 30,
(in thousands) 2016   2015 2016   2015

Exploration and Production Segment

Reported GAAP Earnings $ 16,744 $ (207,019 ) $ (452,842 ) $ (556,974 )
Depreciation, Depletion and Amortization 27,377 46,277 139,963 239,818
Interest and Other Income (78 ) (661 ) (858 ) (2,554 )
Interest Expense 13,552 14,176 55,434 46,726
Income Taxes 4,806 (169,621 ) (334,029 ) (428,217 )
Impairment of Oil and Gas Producing Properties 32,756 417,197 948,307 1,126,257
Reversal of Stock-Based Compensation (2,767 ) (2,767 )
Joint Development Agreement Professional Fees     7,855    
Adjusted EBITDA $ 95,157   $ 97,582   $ 363,830   $ 422,289  
 

Pipeline and Storage Segment

Reported GAAP Earnings $ 16,816 $ 18,485 $ 76,610 $ 80,354
Depreciation, Depletion and Amortization 11,128 9,726 43,273 38,178
Interest and Other Income (825 ) (2,123 ) (4,005 ) (4,361 )
Interest Expense 8,309 7,745 33,327 27,658
Income Taxes 11,089 8,364 50,241 48,113
Reversal of Stock-Based Compensation   (1,900 )   (1,900 )
Adjusted EBITDA $ 46,517   $ 40,297   $ 199,446   $ 188,042  
 

Gathering Segment

Reported GAAP Earnings $ 8,537 $ 7,594 $ 30,499 $ 31,849
Depreciation, Depletion and Amortization 3,876 2,804 15,282 10,829
Interest and Other Income (110 ) (47 ) (302 ) (145 )
Interest Expense 2,091 1,413 8,872 1,627
Income Taxes 6,569   4,662   24,334   24,721  
Adjusted EBITDA $ 20,963   $ 16,426   $ 78,685   $ 68,881  
 

Utility Segment

Reported GAAP Earnings $ (1,784 ) $ (3,288 ) $ 50,960 $ 63,271
Depreciation, Depletion and Amortization 13,107 11,635 48,618 45,616
Interest and Other Income (2,008 ) (2,840 ) (4,079 ) (4,485 )
Interest Expense 5,898 7,030 27,582 28,176
Income Taxes (4,813 ) (7,542 ) 25,602 33,143
Reversal of Stock-Based Compensation   (1,684 )   (1,684 )
Adjusted EBITDA $ 10,400   $ 3,311   $ 148,683   $ 164,037  
 

Energy Marketing Segment

Reported GAAP Earnings $ 231 $ 34 $ 4,348 $ 7,766
Depreciation, Depletion and Amortization 70 57 278 209
Interest and Other Income (151 ) (75 ) (480 ) (312 )
Interest Expense 13 7 49 27
Income Taxes (76 ) (199 ) 2,460   4,547  
Adjusted EBITDA $ 87   $ (176 ) $ 6,655   $ 12,237  
 

Corporate and All Other

Reported GAAP Earnings $ (2,991 ) $ (3,509 ) $ (533 ) $ (5,693 )
Depreciation, Depletion and Amortization 559 361 2,003 1,508
Interest and Other Income (1,070 ) 54 (4,331 ) (104 )
Interest Expense (1,021 ) (1,182 ) (4,220 ) (4,743 )
Income Taxes 1,516 1,811 (1,157 ) (1,443 )
Reversal of Stock-Based Compensation   (1,425 )   (1,425 )
Adjusted EBITDA $ (3,007 ) $ (3,890 ) $ (8,238 ) $ (11,900 )
 
       
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
 
 

Quarter Ended September 30 (unaudited)

2016 2015
 
Operating Revenues $ 292,472,000   $ 301,062,000  
 
Net Income (Loss) Available for Common Stock $ 37,553,000   $ (187,703,000 )
 
Earnings (Loss) Per Common Share:
Basic $ 0.44   $ (2.22 )
Diluted $ 0.44   $ (2.22 )
 
Weighted Average Common Shares:
Used in Basic Calculation 85,016,408   84,570,432  
Used in Diluted Calculation 85,629,858   84,570,432  
 

Twelve Months Ended September 30 (unaudited)

 
Operating Revenues $ 1,452,416,000   $ 1,760,913,000  
 
Net Income (Loss) Available for Common Stock $ (290,958,000 ) $ (379,427,000 )
 
Earnings (Loss) Per Common Share:
Basic $ (3.43 ) $ (4.50 )
Diluted $ (3.43 ) $ (4.50 )
 
Weighted Average Common Shares:
Used in Basic Calculation 84,847,993   84,387,755  
Used in Diluted Calculation 84,847,993   84,387,755  

Contacts

National Fuel Gas Company
Analyst:
Brian M. Welsch, 716-857-7875
or
Media:
Karen L. Merkel, 716-857-7654

Contacts

National Fuel Gas Company
Analyst:
Brian M. Welsch, 716-857-7875
or
Media:
Karen L. Merkel, 716-857-7654