Exhibit 99
[NFG LOGO OMITTED]
| National Fuel Gas Company RELEASE DATE: Immediate July 28, 2005 | Financial News 6363 Main Street/Williamsville, NY 14221 Margaret M. Suto Investor Relations 716-857-6987 Ronald J. Tanski Treasurer 716-857-6981 |
Williamsville, New York: National Fuel Gas Company (“National Fuel” or the “Company”) (NYSE:NFG) today announced consolidated earnings for the quarter ended June 30, 2005 of $19.2 million or $0.23 per share, a decrease of $13.4 million from the prior year’s third quarter earnings of $32.6 million or $0.39 per share (note: all references to earnings per share are to diluted earnings per share).
As previously announced, on July 18, 2005 the Company completed the sale of its majority interest in United Energy, a.s. (“United Energy”), a district heating and electric generation business in the Czech Republic. As a result of this transaction, the Company is presenting the Czech Republic operations, which were primarily comprised of United Energy, as discontinued operations. Consolidated earnings for the quarters ended June 30, 2005 and 2004 include losses from discontinued operations of $7.2 million or $0.08 per share and $0.3 million or less than $.01 per share, respectively.
Earnings from continuing operations for the quarter were $26.4 million or $0.31 per share, a decrease of $6.4 million from the prior year’s third quarter earnings from continuing operations of $32.8 million or $0.39 per share. Excluding an $0.8 million (after tax) non-recurring adjustment in the third quarter of 2004 related to the Company’s September 2003 sale of portions of its timber properties, earnings from continuing operations for the quarter decreased $7.2 million. There were no non-recurring items in these operations in the quarter ended June 30, 2005. See further discussion of non-recurring items on page 6 of this document and a reconciliation of reported earnings to earnings before non-recurring items on pages 9 and 10 of this document.
Philip C. Ackerman, Chairman, President and Chief Executive Officer of National Fuel Gas Company commented: “This has been a very active quarter for our Company. In April, we announced the settlement of our utility rate case in New York, which was approved by the Public Service Commission last week. This settlement not only addresses the utility’s need for additional revenue, but also reduces customer bills.” Ackerman continued, “In late May, we were able to avail ourselves of the benefits from the American Jobs Creation Act of 2004 by repatriating over $70 million from our Czech Republic operations at a favorable tax rate of 5.25%. In June, our Board of Directors reaffirmed our commitment to the dividend by raising the annual dividend rate by over 3.5% to $1.16 per share, making this our 35th year of consecutive dividend increases. In June, we also announced the signing of an agreement to sell our Czech operations. We completed the transaction this month, which is expected to result in a
$25 million gain for the year*. These actions demonstrate our responsiveness to challenges in our industry, and further indicate the continuing efforts and dedication of the people who comprise all the divisions of National Fuel.”
CONTINUING OPERATIONS
Please note that the following discussion of earnings from continuing operations excludes certain non-recurring profit and loss items in an effort to provide a clearer picture of actual operating results for the period. A summary of those non-recurring items follows the Discussion of Third Quarter Earnings, Discussion of Nine Month Results, and Earnings Guidance. A reconciliation of reported earnings to the earnings discussed below is provided on page 9 of this document.
Regulated segments
In the Utility segment, a loss of $1.7 million for the quarter ended June 30, 2005 was a decrease in earnings of $5.9 million from the prior year’s third quarter earnings of $4.2 million.
In the New York Division, earnings decreased by $7.2 million principally due to two out-of-period regulatory adjustments recorded during the quarter. The first adjustment related to the final settlement with the Staff of the State of New York Public Service Commission of the earnings sharing liability for the fiscal 2001 to 2003 time period. As a result of that settlement, the New York Division recorded additional earnings sharing expense of $0.6 million. The second adjustment related to a regulatory liability recorded for previous over-collections of New York State gross receipts tax. In preparing for the implementation of the recent settlement agreement in New York, the Company determined that it needed to adjust that regulatory liability, including accrued interest, by $3.5 million (after tax), ($0.6 million of that adjustment related to the first six months of fiscal 2005 and $2.9 million related to fiscal years 2004 and prior). In addition, higher bad debt, pension and post retirement expenses contributed to the decrease in earnings.
For the Pennsylvania Division, earnings increased by $1.3 million principally due to an increase in base rates taking effect early in this quarter. On April 15, 2005, the Company implemented the March 23, 2005 Settlement Agreement approved by the Pennsylvania Public Utility Commission, which among other things provides for a $12.0 million (before tax) annual base rate increase.
In the Pipeline and Storage segment, earnings of $10.8 million for the quarter ended June 30, 2005 were down $1.2 million from the prior year’s third quarter. Lower interest expense was more than offset by higher operating expenses, including approximately $0.5 million of project development costs for the Empire Connector (the proposed Empire State Pipeline expansion project).
Exploration and Production segment
The Exploration and Production segment’s earnings for the third quarter of fiscal 2005 of $13.8 million were down $1.0 million from the prior year’s third quarter primarily due to higher operating and general and administrative expenses. The increase in operating expenses was principally attributable to the Sukunka wells in Canada (which are generally more expensive to operate than Seneca’s other properties) and higher fuel costs in the West division.
Seneca Resources Corporation’s (“Seneca”) revenues for the third quarter of fiscal 2005 were essentially flat compared with the same period last year. Production of 13.4 Bcfe, while down 1.8 Bcfe from the prior year’s third quarter, was consistent with Seneca’s production assumptions, and Seneca remains on track to meet its previously announced fiscal 2005 production target of 50 to 55 Bcfe*. Lower production in the Gulf of Mexico was partially offset by higher production in Canada where the Sukunka 60-E well, in which Seneca has a 20% working interest, averaged 61 Mmcf/day. Higher commodity prices (after hedging) more than offset the impact of the decline in production. For the quarter ended June 30, 2005, the weighted average natural gas price (after hedging) was $6.18/Mcf, an increase of $0.93/Mcf or 18% from the prior year’s quarter, and the weighted average oil price (after hedging) was $28.62/Bbl, an increase of $1.09/Bbl or 4%. The $28.62/Bbl price (after hedging) for oil reflects the lesser value of the California heavy sour crude, which represents the bulk of Seneca’s oil production as compared to the more widely publicized West Texas Intermediate (WTI) price of light sweet crude which is in the $50 — $60 range.
Fifty-three wells were drilled in the quarter ended June 30, 2005 with a success rate of 96%. An unusually wet spring in Western Canada prevented drilling the number of wells that were anticipated in the third quarter. Therefore, Seneca has increased its drilling activity in Canada with 3 rigs currently drilling and a fourth to begin drilling early in the fourth quarter*. One of those rigs is on location and drilling the fourth Sukunka well. The operator has indicated that two more wells will be spudded in the Sukunka area during the fourth quarter*.
Drilling activity continued in the Gulf of Mexico as three offshore exploratory wells were finished this quarter. Seneca completed drilling on two successful exploratory wells in the Viosca Knoll (“VK”) area. Log analysis indicated that the VK 432 #1 well encountered 56 feet of net gas pay while the VK 77 #1 well encountered 31 feet of net gas pay. Seneca is working with its partner to finalize future development plans. Seneca’s working interest is 47% before project payout and 35% after project payout on the VK wells. Seneca expects these two wells to be on production in the first calendar quarter of 2006*. The recently completed Vermilion 225 A-2 well was on production for most of the quarter at an average rate of 3.5 Mmcf/day. Seneca’s working interest in this well is 100%. Seneca also anticipates spudding one more exploratory well in the Gulf in the High Island 37 block in August 2005*. Seneca is the operator on that well.
The National Fuel Board of Directors approved an increase in Seneca’s capital budget for fiscal 2005, from $113 million to $139 million. The majority of this increase will go to the Gulf and Canadian divisions to cover development costs associated with the success of the current exploration program*.
Seneca increased its gas hedge positions for fiscal 2006. The current hedging summary is included on page 17 of this document.
Mr. Ackerman added: “Seneca’s production goals continue to be met, and given the successes we recently attained in both Canada and the Gulf of Mexico, our Board felt it appropriate to increase spending in the Exploration and Production segment to take advantage of these successes. In addition, we are forecasting that the production range for next year will be equal to this year’s forecast range of 50-55 Bcfe*. We continue our commitment to remain active in all aspects of the natural gas business, from the bottom of the well to the burner tip.”
Other segments
The Energy Marketing segment’s earnings for the quarter ended June 30, 2005 of $1.5 million were up $0.3 million from the same period in the prior year due to several small items impacting gross margin. While volumes were up 10% almost all of that increase occurred in the lower margin wholesale and industrial customer classes.
The Timber segment’s third quarter earnings of $0.6 million were $0.9 million lower than the prior year’s third quarter principally due to lower gross margins on log sales. Overall log sales volumes increased by 28%, but because more of the current quarter’s harvest was from the Company’s higher cost basis property, gross margins declined from the prior year’s quarter.
DISCONTINUED OPERATIONS
The loss from discontinued operations for the quarter ended June 30, 2005 of $7.2 million was $6.9 million higher than the loss for the quarter ended June 30, 2004. This primarily resulted from the Company recording approximately $6 million of previously unrecorded deferred income tax expense related to United Energy. That deferred income tax adjustment will be reversed in the fourth quarter of fiscal 2005. As discussed above, the Company completed its sale of United Energy on July 18, 2005. During the quarter ended September 30, 2005 (the quarter in which the sale was consummated), the Company will recognize a gain on the sale of approximately $31 million (which includes the fourth quarter reversal of $6 million of deferred income tax expense). When both fiscal quarters are considered together, the Company will realize a net after-tax gain from the sale of approximately $25 million*.
Consolidated earnings for the nine months ended June 30, 2005 were $140.28 million or $1.65 per share, a decrease of $18.55 million from the prior year’s earnings of $158.83 million or $1.92 per share. Earnings for the nine months ended June 30, 2005 and 2004 include as discontinued operations $5.1 million or $0.06 per share and $18.4 million or $0.22 per share, respectively. Earnings from continuing operations for the nine months ended June 30, 2005 were $135.2 million or $1.59 per share, a decrease of $5.2 million from the prior year’s earnings from continuing operations of $140.4 million or $1.70 per share. Excluding non-recurring items for each period, earnings from continuing operations for the nine months ended June 30, 2005 were $132.6 million or $1.56 per share, a decrease of $10.4 million from the prior year’s earnings from continuing operations before non-recurring items of $143.0 million or $1.73 per share.
CONTINUING OPERATIONS
Please note that the following discussion of earnings from continuing operations excludes certain non-recurring profit and loss items in an effort to provide a clearer picture of actual operating results for the period. A summary of those non-recurring items follows the Discussion of Nine Month Results and Earnings Guidance. A reconciliation of reported earnings to the earnings discussed below is provided on page 9 of this document.
Regulated segments
In the Utility segment, the principal contributors to the $10.7 million decrease in earnings were a decline in margins due to lower average usage per customer in both New York and Pennsylvania and the two New York Division out-of-period regulatory adjustments described above. Colder weather and the base rate increase in Pennsylvania partially offset the decrease in margins. Higher bad debt and pension and post retirement expenses in Pennsylvania also contributed to the decrease.
In the Pipeline and Storage segment, earnings increased $0.7 million due to higher efficiency gas revenues, lower interest and operating expenses, partially offset by approximately $3.0 million in project development costs for the Empire Connector. It has been the Company’s policy to reserve for preliminary project costs in its regulated operations as they are incurred. When regulatory approval for the Empire Connector is received, the Company expects to reverse the reserve for these costs*.
Exploration and Production segment
Earnings in the Exploration and Production segment were down $1.3 million, primarily due to expected lower production volumes and higher operating expenses. Higher prices for crude oil and natural gas, lower interest expense and higher interest income partially offset the impact of these items. Production for the first nine months of fiscal 2005 was 39.7 Bcfe.
Other segments
The Energy Marketing segment’s earnings were down $1.0 million, mostly due to the impact of lower throughput and a market related reduction in the benefit of stored gas inventory.
In the Timber segment, earnings decreased by $0.5 million due to the higher cost basis of the trees that were harvested.
DISCONTINUED OPERATIONS
Income from discontinued operations decreased $13.3 million mainly due to the $6.0 million deferred income tax expense related to United Energy discussed above, a $3.7 million charge for U.S. taxes on the dividend repatriated from the Czech Republic and the impact of the $5.2 million deferred tax benefit recorded in fiscal 2004 as a result of the reduction in the statutory income tax rate in the Czech Republic.
Earnings guidance for the Company’s fourth quarter of fiscal 2005 and the entire fiscal year are presented in the table below. The guidance is being revised mostly due to the sale of United Energy. Because the sale was completed early in the quarter, the portion of United Energy’s typical fourth quarter operating losses included in the Company’s results will be smaller than originally forecasted. The avoidance of these losses, combined with interest income earned on the sale proceeds, will cause the Company’s fourth quarter earnings to be higher than originally forecasted. In addition, continued strength in commodity prices, and moderation in the California heavy oil basis differential are expected to support higher earnings in the Exploration and Production segment*. Seneca’s production for the fourth quarter of fiscal 2005 is expected to be in the range of 12 to 14 Bcfe*.
FISCAL 2005 EARNINGS GUIDANCE (per diluted share)
| Reported | Guidance* | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Six Months Ended March 31, 2005 | Three Months Ended June 30, 2005 | Three Months Ended September 30, 2005 | Fiscal Year Ended September 30, 2005 | |||||||||||
| Recurring earnings from | $ | 1 | .25 | $ | 0 | .31 | $0.18 - $0.22 | $1.74 - $1.78 | ||||||
| continuing operations | ||||||||||||||
| Add: non-recurring gain | $ | 0 | .03 | $ | 0 | .00 | $0.00 | $0.03 | ||||||
| on sale of base gas | ||||||||||||||
| Add: earnings from | $ | 0 | .15 | -$ | 0 | .08(1) | $0.32 - $0.34(1) | $0.39 - $0.41 | ||||||
| discontinued operations | ||||||||||||||
| including gain on sale | ||||||||||||||
| of United Energy | ||||||||||||||
| Net income per share | $ | 1 | .43 | $ | 0 | .23 | $0.50 - $0.56 | $2.16 - $2.22 | ||||||
| (1) | Earnings from discontinued operations for the three months ended June 30, 2005 include a charge of $6.0 million for previously unrecorded deferred income tax expense. Earnings from discontinued operations for the three months ended September 30, 2005 include a reversal of that charge. |
FISCAL 2006 EARNINGS GUIDANCE (per diluted share)
The Company’s preliminary consolidated earnings guidance for fiscal 2006 is in the range of $1.95 to $2.10 per share*. This includes oil and gas production in the range of 50 to 55 Bcfe*. Details regarding the production guidance are included on page 18 of this document.
DISCUSSION OF NON-RECURRING ITEMS(all amounts are after tax)
There were no non-recurring items in the three months ended June 30, 2005. The comparative consolidated earnings from continuing operations for the three months ended June 30, 2004
exclude an adjustment to the Company’s fiscal 2003 sale of timber properties (Timber segment). In the third quarter of fiscal 2004, the Company received final timber cruise information for the properties it sold and, based on that information, determined that it had overstated the gain on the August 2003 sale by $0.8 million. The pretax amount of the adjustment is recorded as “Adjustment of Gain on Sale of Timber Properties” on the income statement. Including non-recurring items, compared with the same three months in the prior fiscal year, the Timber segment’s earnings were down $0.1 million to $0.6 million.
The comparative consolidated earnings from continuing operations for the nine months ended June 30, 2005 exclude a $2.6 million gain from the Federal Energy Regulatory Commission approved sale of base gas from National Fuel Gas Supply Corporation’s jointly-owned Ellisburg Storage Pool.
The comparative consolidated earnings from continuing operations for the nine months ended June 30, 2004 exclude the $0.8 million adjustment of the gain on sale of timber properties discussed above, $6.4 million of expense associated with the settlement of a pension obligation and a $4.6 million benefit to earnings related to the Seneca’s September 2003 sale of Canadian oil properties.
Including non-recurring items, compared with the same nine months in the prior fiscal year, the Utility segment’s earnings were down $8.5 million, the Pipeline and Storage segment’s earnings were up $5.3 million, the Exploration and Production segment’s earnings were down $5.1 million, the Energy Marketing segment’s earnings were down $0.7 million, the Timber segment’s earnings were up $0.3 million and the Corporate and All Other segment’s earnings were up $3.4 million.
The Company will host a conference call on Friday, July 29, 2005 at 11:00 a.m. (Eastern Daylight Time) to discuss this announcement. There are two ways to access this call. For those with Internet access, you may access the live webcast by going to National Fuel’s Web site athttp://www.nationalfuelgas.com and clicking on the “For Investors” link at the top of the homepage. For those without Internet access, you may access the live call by dialing (toll-free) 1-800-901-5213 and using the passcode “11918242". For those unable to listen to the live conference call, a replay will be available approximately one hour after the conclusion of the call at the same Web site link and by phone at (toll-free) 1-888-286-8010 using passcode “60226570". Both the webcast and telephonic replay will be available until the close of business on Friday, August 5, 2005.
| Analyst Contact: Media Contact: Internet Web Site: Investor Information Service: | Margaret Suto (716) 857-6987 Julie Coppola Cox (716) 857-7079 http://www.nationalfuelgas.com 1-800-334-2188. |
* Certain statements contained herein, including those which are designated with an asterisk (“*”) and those which use words such as “anticipates,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “projects,” and similar expressions, 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 economic conditions, including economic disruptions caused by terrorist activities or acts of war; changes in demographic patterns and weather conditions, including the occurrence of severe weather; changes in the price of natural gas or oil and the effect of such changes on the accounting treatment or valuation of derivative financial instruments or the Company’s natural gas and oil reserves; changes in the availability and/or price of derivative financial instruments; changes in the availability and/or price of natural gas, oil and coal; inability to obtain new customers or retain existing ones; significant changes in competitive factors affecting the Company; governmental/regulatory actions, initiatives and proceedings, including those involving acquisitions, financings, rate cases (which address, among other things, allowed rates of return, rate design and retained gas), affiliate relationships, industry structure, franchise renewal, and environmental/safety requirements; unanticipated impacts of restructuring initiatives in the natural gas and electric industries; significant changes from expectations in actual capital expenditures and operating expenses and unanticipated project delays or changes in project costs; the nature and projected profitability of pending and potential projects and other investments; occurrences affecting the Company’s ability to obtain funds from operations, debt or equity to finance needed capital expenditures and other investments, including any downgrades in the Company’s credit ratings; uncertainty of oil and gas reserve estimates; ability to successfully identify and finance acquisitions and ability to operate and integrate existing and any subsequently acquired business or properties; ability to successfully identify, drill for and produce economically viable natural gas and oil reserves; significant changes from expectations in the Company’s actual production levels for natural gas or oil; regarding foreign operations, changes in trade and monetary policies, inflation and exchange rates, taxes, operating conditions, laws and regulations related to foreign operations, and political and governmental changes; significant changes in tax rates or policies or in rates of inflation or interest; significant changes in the Company’s relationship with its employees or contractors and the potential adverse effects if labor disputes, grievances or shortages were to occur; changes in accounting principles or the application of such principles to the Company; changes in laws and regulations to which the Company is subject, including tax, environmental, safety and employment laws and regulations; the cost and effects of legal and administrative claims against the Company; changes in actuarial assumptions and the return on assets with respect to the Company’s retirement plan and post-retirement benefits; increasing health care costs and the resulting effect on health insurance premiums and on the obligation to provide 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 hereof or to reflect the occurrence of unanticipated events.
Page 9
| (Thousands of Dollars) | Three Months Ended June 30, 2005 (unaudited) | Three Months Ended June 30, 2004 (unaudited) | Nine Months Ended June 30, 2005 (unaudited) | Nine Months Ended June 30, 2004 (unaudited) | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Utility | ||||||||||||||
| Reported earnings | $ | (1,684 | ) | $ | 4,167 | $ | 45,269 | $ | 53,772 | |||||
| Pension settlement loss | -- | -- | -- | 2,193 | ||||||||||
| Earnings before non-recurring items | (1,684 | ) | 4,167 | 45,269 | 55,965 | |||||||||
| Pipeline and Storage | ||||||||||||||
| Reported earnings | 10,843 | 12,063 | 41,577 | 36,233 | ||||||||||
| Pension settlement loss | -- | -- | -- | 1,967 | ||||||||||
| Base gas sale | -- | -- | (2,636 | ) | -- | |||||||||
| Earnings before non-recurring items | 10,843 | 12,063 | 38,941 | 38,200 | ||||||||||
| Exploration and Production | ||||||||||||||
| Reported earnings | 13,830 | 14,822 | 38,984 | 44,065 | ||||||||||
| Adjustment of loss on sale of oil and | ||||||||||||||
| gas producing properties | -- | -- | -- | (4,645 | ) | |||||||||
| Pension settlement loss | -- | -- | -- | 851 | ||||||||||
| Earnings before non-recurring items | 13,830 | 14,822 | 38,984 | 40,271 | ||||||||||
| Energy Marketing | ||||||||||||||
| Reported earnings | 1,548 | 1,241 | 4,909 | 5,588 | ||||||||||
| Pension settlement loss | -- | -- | -- | 323 | ||||||||||
| Earnings before non-recurring items | 1,548 | 1,241 | 4,909 | 5,911 | ||||||||||
| Timber | ||||||||||||||
| Reported earnings | 555 | 652 | 4,201 | 3,871 | ||||||||||
| Adjustment of gain on sale of timber properties | -- | 764 | -- | 764 | ||||||||||
| Pension settlement loss | -- | -- | -- | 78 | ||||||||||
| Earnings before non-recurring items | 555 | 1,416 | 4,201 | 4,713 | ||||||||||
| Corporate and All Other | ||||||||||||||
| Reported earnings | 1,301 | (124 | ) | 263 | (3,096 | ) | ||||||||
| Pension settlement loss | -- | -- | -- | 994 | ||||||||||
| Earnings before non-recurring items | 1,301 | (124 | ) | 263 | (2,102 | ) | ||||||||
| Consolidated Earnings from Continuing Operations | ||||||||||||||
| Reported earnings from continuing operations | 26,393 | 32,821 | 135,203 | 140,433 | ||||||||||
| Total non-recurring items from above | -- | 764 | (2,636 | ) | 2,525 | |||||||||
| Earnings from continuing operations before | ||||||||||||||
| non-recurring items | $ | 26,393 | $ | 33,585 | $ | 132,567 | $ | 142,958 | ||||||
| Discontinued Operations | ||||||||||||||
| Reported earnings from discontinued operations | (7,237 | ) | (258 | ) | 5,073 | 18,399 | ||||||||
| Consolidated | ||||||||||||||
| Reported earnings | $ | 19,156 | $ | 32,563 | $ | 140,276 | $ | 158,832 | ||||||
Page 10
| (Diluted Earnings Per Share) | Three Months Ended June 30, 2005 (unaudited) | Three Months Ended June 30, 2004 (unaudited) | Nine Months Ended June 30 , 2005 (unaudited) | Nine Months Ended June 30, 2004 (unaudited) | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Utility | ||||||||||||||
| Reported earnings | $ | (0.02 | ) | $ | 0.05 | $ | 0.53 | $ | 0.65 | |||||
| Pension settlement loss | -- | -- | -- | 0.03 | ||||||||||
| Earnings before non-recurring items | (0.02 | ) | 0.05 | 0.53 | 0.68 | |||||||||
| Pipeline and Storage | ||||||||||||||
| Reported earnings | 0.13 | 0.14 | 0.49 | 0.44 | ||||||||||
| Pension settlement loss | -- | -- | -- | 0.02 | ||||||||||
| Base gas sale | -- | -- | (0.03 | ) | -- | |||||||||
| Earnings before non-recurring items | 0.13 | 0.14 | 0.46 | 0.46 | ||||||||||
| Exploration and Production | ||||||||||||||
| Reported earnings | 0.16 | 0.18 | 0.46 | 0.53 | ||||||||||
| Adjustment of loss on sale of oil and | ||||||||||||||
| gas producing properties | -- | -- | -- | (0.06 | ) | |||||||||
| Pension settlement loss | -- | -- | -- | 0.01 | ||||||||||
| Earnings before non-recurring items | 0.16 | 0.18 | 0.46 | 0.48 | ||||||||||
| Energy Marketing | ||||||||||||||
| Reported earnings | 0.02 | 0.02 | 0.06 | 0.07 | ||||||||||
| Pension settlement loss | -- | -- | -- | -- | ||||||||||
| Earnings before non-recurring items | 0.02 | 0.02 | 0.06 | 0.07 | ||||||||||
| Timber | ||||||||||||||
| Reported earnings | 0.01 | 0.01 | 0.05 | 0.05 | ||||||||||
| Adjustment of gain on sale of timber properties | -- | 0.01 | -- | 0.01 | ||||||||||
| Pension settlement loss | -- | -- | -- | -- | ||||||||||
| Earnings before non-recurring items | 0.01 | 0.02 | 0.05 | 0.06 | ||||||||||
| Corporate and All Other | ||||||||||||||
| Reported earnings (including rounding) | 0.01 | (0.01 | ) | -- | (0.04 | ) | ||||||||
| Pension settlement loss (including rounding) | -- | -- | -- | 0.02 | ||||||||||
| Earnings before non-recurring items | 0.01 | (0.01 | ) | -- | (0.02 | ) | ||||||||
| Consolidated Earnings from Continuing Operations | ||||||||||||||
| Reported earnings from continuing operations | 0.31 | 0.39 | 1.59 | 1.70 | ||||||||||
| Total non-recurring items from above | -- | 0.01 | (0.03 | ) | 0.03 | |||||||||
| Earnings from continuing operations before | ||||||||||||||
| non-recurring items | $ | 0.31 | $ | 0.40 | $ | 1.56 | $ | 1.73 | ||||||
| Discontinued Operations | ||||||||||||||
| Reported earnings from discontinued operations | (0.08 | ) | -- | 0.06 | 0.22 | |||||||||
| Consolidated | ||||||||||||||
| Reported earnings | $ | 0.23 | $ | 0.39 | $ | 1.65 | $ | 1.92 | ||||||
Page 11
(Thousands of Dollars, except per share amounts)
| Three Months Ended June 30, (Unaudited) | Nine Months Ended June 30, (Unaudited) | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| SUMMARY OF OPERATIONS | 2005 | 2004 | 2005 | 2004 | ||||||||||
| Operating Revenues | $ | 400,359 | $ | 396,884 | $ | 1,636,484 | $ | 1,640,474 | ||||||
| Operating Expenses: | ||||||||||||||
| Purchased Gas | 181,100 | 174,907 | 877,510 | 871,593 | ||||||||||
| Operation and Maintenance | 94,534 | 86,362 | 297,549 | 293,370 | ||||||||||
| Property, Franchise and Other Taxes | 16,598 | 17,080 | 53,551 | 53,795 | ||||||||||
| Depreciation, Depletion and Amortization | 45,099 | 43,601 | 132,438 | 130,350 | ||||||||||
| 337,331 | 321,950 | 1,361,048 | 1,349,108 | |||||||||||
| Adjustment of Gain on Sale of Timber Properties | -- | (1,252 | ) | -- | (1,252 | ) | ||||||||
| Adjustment of Loss on Sale of Oil and Gas Producing Properties | -- | -- | -- | 4,645 | ||||||||||
| Operating Income | 63,028 | 73,682 | 275,436 | 294,759 | ||||||||||
| Other Income (Expense): | ||||||||||||||
| Income from Unconsolidated Subsidiaries | 675 | 306 | 1,914 | 403 | ||||||||||
| Other Income | 1,094 | 799 | 7,762 | 3,422 | ||||||||||
| Interest Expense on Long-Term Debt | (18,294 | ) | (20,190 | ) | (54,989 | ) | (63,990 | ) | ||||||
| Other Interest Expense | (4,557 | ) | (1,095 | ) | (8,911 | ) | (4,830 | ) | ||||||
| Income from Continuing Operations Before Income Taxes | 41,946 | 53,502 | 221,212 | 229,764 | ||||||||||
| Income Tax Expense | 15,553 | 20,681 | 86,009 | 89,331 | ||||||||||
| Income from Continuing Operations | $ | 26,393 | $ | 32,821 | $ | 135,203 | $ | 140,433 | ||||||
| Income (Loss) from Discontinued Operations, Net of Tax | (7,237 | ) | (258 | ) | 5,073 | 18,399 | ||||||||
| Net Income Available for Common Stock | $ | 19,156 | $ | 32,563 | $ | 140,276 | $ | 158,832 | ||||||
| Earnings Per Common Share: | ||||||||||||||
| Basic: | ||||||||||||||
| Income from Continuing Operations | $ | 0.32 | $ | 0.40 | $ | 1.62 | $ | 1.72 | ||||||
| Income (Loss) from Discontinued Operations | (0.09 | ) | -- | 0.06 | 0.22 | |||||||||
| Net Income Available for Common Stock | $ | 0.23 | $ | 0.40 | $ | 1.68 | $ | 1.94 | ||||||
| Diluted: | ||||||||||||||
| Income from Continuing Operations | $ | 0.31 | $ | 0.39 | $ | 1.59 | $ | 1.70 | ||||||
| Income (Loss) from Discontinued Operations | (0.08 | ) | -- | 0.06 | 0.22 | |||||||||
| Net Income Available for Common Stock | $ | 0.23 | $ | 0.39 | $ | 1.65 | $ | 1.92 | ||||||
| Weighted Average Common Shares: | ||||||||||||||
| Used in Basic Calculation | 83,568,251 | 82,178,424 | 83,343,711 | 81,848,043 | ||||||||||
| Used in Diluted Calculation | 84,897,466 | 83,119,373 | 84,771,403 | 82,717,332 | ||||||||||
Page 12
| (Thousands of Dollars) | June 30, 2005 | September 30, 2004 | ||||||
|---|---|---|---|---|---|---|---|---|
| ASSETS | ||||||||
| Property, Plant and Equipment | $ | 4,351,718 | $ | 4,602,779 | ||||
| Less - Accumulated Depreciation, Depletion and Amortization | 1,533,840 | 1,596,015 | ||||||
| Net Property, Plant, and Equipment of Discontinued | ||||||||
| Operations Held for Sale | 223,707 | -- | ||||||
| Net Property, Plant and Equipment | $ | 3,041,585 | $ | 3,006,764 | ||||
| Current Assets: | ||||||||
| Cash and Temporary Cash Investments | 62,072 | 66,153 | ||||||
| Receivables - Net | 221,408 | 129,825 | ||||||
| Unbilled Utility Revenue | 14,562 | 18,574 | ||||||
| Gas Stored Underground | 28,641 | 68,511 | ||||||
| Materials and Supplies - at average cost | 48,885 | 43,922 | ||||||
| Unrecovered Purchased Gas Costs | -- | 7,532 | ||||||
| Prepayments | 51,230 | 38,760 | ||||||
| Fair Value of Derivative Financial Instruments | -- | 23 | ||||||
| Current Assets of Discontinued Operations | ||||||||
| Held for Sale | 14,530 | -- | ||||||
| Total Current Assets | 441,328 | 373,300 | ||||||
| Other Assets: | ||||||||
| Recoverable Future Taxes | 83,847 | 83,847 | ||||||
| Unamortized Debt Expense | 18,074 | 19,573 | ||||||
| Other Regulatory Assets | 71,175 | 66,862 | ||||||
| Deferred Charges | 4,481 | 3,411 | ||||||
| Other Investments | 78,142 | 72,556 | ||||||
| Investments in Unconsolidated Subsidiaries | 15,818 | 16,444 | ||||||
| Goodwill | 5,476 | 5,476 | ||||||
| Intangible Assets | 43,997 | 45,994 | ||||||
| Other | 15,966 | 17,571 | ||||||
| Other Assets of Discontinued Operations Held for Sale | 309 | -- | ||||||
| Total Other Assets | 337,285 | 331,734 | ||||||
| Total Assets | $ | 3,820,198 | $ | 3,711,798 | ||||
| CAPITALIZATION AND LIABILITIES | ||||||||
| Capitalization: | ||||||||
| Comprehensive Shareholders' Equity | ||||||||
| Common Stock, $1 Par Value Authorized - 200,000,000 | ||||||||
| Shares; Issued and Outstanding - 83,898,311 Shares | ||||||||
| and 82,990,340 Shares, Respectively | $ | 83,898 | $ | 82,990 | ||||
| Paid in Capital | 518,621 | 506,560 | ||||||
| Earnings Reinvested in the Business | 788,253 | 718,926 | ||||||
| Total Common Shareholder Equity Before | ||||||||
| Items of Other Comprehensive Loss | 1,390,772 | 1,308,476 | ||||||
| Accumulated Other Comprehensive Loss | (65,013 | ) | (54,775 | ) | ||||
| Total Comprehensive Shareholders' Equity | 1,325,759 | 1,253,701 | ||||||
| Long-Term Debt, Net of Current Portion | 1,121,354 | 1,133,317 | ||||||
| Long-Term Debt of Discontinued Operations Held for Sale, | ||||||||
| Net of Current Portion | 1,258 | -- | ||||||
| �� Total Capitalization | 2,448,371 | 2,387,018 | ||||||
| Minority Interest in Discontinued Operations Held for Sale | 27,923 | 37,048 | ||||||
| Current and Accrued Liabilities: | ||||||||
| Notes Payable to Banks and Commercial Paper | 12,700 | 156,800 | ||||||
| Current Portion of Long-Term Debt | 9,400 | 14,260 | ||||||
| Accounts Payable | 130,856 | 115,979 | ||||||
| Amounts Payable to Customers | 40,646 | 3,154 | ||||||
| Other Accruals and Current Liabilities | 160,861 | 91,164 | ||||||
| Fair Value of Derivative Financial Instruments | 126,331 | 95,099 | ||||||
| Current Liabilities of Discontinued Operations Held for Sale | 56,143 | -- | ||||||
| Total Current and Accrued Liabilities | 536,937 | 476,456 | ||||||
| Deferred Credits: | ||||||||
| Accumulated Deferred Income Taxes | 425,882 | 458,095 | ||||||
| Taxes Refundable to Customers | 11,065 | 11,065 | ||||||
| Unamortized Investment Tax Credit | 6,972 | 7,498 | ||||||
| Cost of Removal Regulatory Liability | 85,925 | 82,020 | ||||||
| Other Regulatory Liabilities | 72,388 | 67,669 | ||||||
| Pension Liability | 91,706 | 91,587 | ||||||
| Asset Retirement Obligation | 33,965 | 32,292 | ||||||
| Other Deferred Credits | 54,736 | 61,050 | ||||||
| Deferred Credits of Discontinued Operations Held for Sale | 24,328 | -- | ||||||
| Total Deferred Credits | 806,967 | 811,276 | ||||||
| Commitments and Contingencies | -- | -- | ||||||
| Total Capitalization and Liabilities | $ | 3,820,198 | $ | 3,711,798 | ||||
Page 13
| Nine Months Ended June 30, | ||||||||
|---|---|---|---|---|---|---|---|---|
| (Thousands of Dollars) | 2005 | 2004 | ||||||
| Operating Activities: | ||||||||
| Net Income Available for Common Stock | $ | 140,276 | $ | 158,832 | ||||
| Adjustments to Reconcile Net Income to Net Cash | ||||||||
| Provided by Operating Activities: | ||||||||
| Adjustment of Gain on Sale of Timber Properties | -- | 1,252 | ||||||
| Adjustment of Loss on Sale of Oil and Gas Producing Properties | -- | (4,645 | ) | |||||
| Depreciation, Depletion and Amortization | 145,814 | 141,768 | ||||||
| Deferred Income Taxes | 1,994 | (8,993 | ) | |||||
| (Income) Loss from Unconsolidated Subsidiaries, Net of Cash Distributions | (374 | ) | 361 | |||||
| Minority Interest in Foreign Subsidiaries | 2,899 | 3,378 | ||||||
| Other | (9,342 | ) | (148 | ) | ||||
| Change in: | ||||||||
| Receivables and Unbilled Utility Revenue | (91,223 | ) | (73,998 | ) | ||||
| Gas Stored Underground and Materials and | ||||||||
| Supplies | 30,687 | 55,917 | ||||||
| Unrecovered Purchased Gas Costs | 7,532 | 27,616 | ||||||
| Prepayments | (12,503 | ) | 13,619 | |||||
| Accounts Payable | 23,886 | (3,094 | ) | |||||
| Amounts Payable to Customers | 37,492 | 21,561 | ||||||
| Other Accruals and Current Liabilities | 72,972 | 122,000 | ||||||
| Other Assets | (9,066 | ) | (21,194 | ) | ||||
| Other Liabilities | 1,867 | (25,997 | ) | |||||
| Net Cash Provided by Operating Activities | $ | 342,911 | $ | 408,235 | ||||
| Investing Activities: | ||||||||
| Capital Expenditures | ($157,401 | ) | ($122,295 | ) | ||||
| Net Proceeds from Sale of Oil and Gas Producing Properties | 90 | 5,062 | ||||||
| Other | 4,001 | 2,073 | ||||||
| Net Cash Used in Investing Activities | ($153,310 | ) | ($115,160 | ) | ||||
| Financing Activities: | ||||||||
| Change in Notes Payable to Banks and | ||||||||
| Commercial Paper | ($107,243 | ) | ($ 78,300 | ) | ||||
| Reduction of Long-Term Debt | (10,740 | ) | (139,441 | ) | ||||
| Dividends Paid on Common Stock | (69,847 | ) | (66,056 | ) | ||||
| Dividends Paid to Minority Interest | (12,676 | ) | -- | |||||
| Proceeds From Issuance of Common Stock | 12,499 | 14,597 | ||||||
| Net Cash Used In Financing Activities | ($188,007 | ) | ($269,200 | ) | ||||
| Effect of Exchange Rates on Cash | (40 | ) | 1,616 | |||||
| Net Increase in Cash and Temporary | ||||||||
| Cash Investments | 1,554 | 25,491 | ||||||
| Cash and Temporary Cash Investments | ||||||||
| at Beginning of Period | 66,153 | 51,421 | ||||||
| Cash and Temporary Cash Investments | ||||||||
| at June 30 | $ | 67,707 | $ | 76,912 | ||||
Page 14
| Three Months Ended June 30, (Unaudited) | Nine Months Ended June 30, (Unaudited) | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2005 | 2004 | Increase (Decrease) | 2005 | 2004 | Increase (Decrease) | |||||||||||||||
| Operating Revenues | ||||||||||||||||||||
| Utility | $ | 191,909 | $ | 209,551 | $ | (17,642 | ) | $ | 1,004,383 | $ | 1,043,125 | $ | (38,742 | ) | ||||||
| Pipeline and Storage | 50,598 | 50,448 | 150 | 161,188 | 158,045 | 3,143 | ||||||||||||||
| Exploration and Production | 77,370 | 76,992 | 378 | 219,527 | 225,594 | (6,067 | ) | |||||||||||||
| Energy Marketing | 88,048 | 67,376 | 20,672 | 276,106 | 240,732 | 35,374 | ||||||||||||||
| Timber | 15,028 | 13,071 | 1,957 | 46,995 | 41,624 | 5,371 | ||||||||||||||
| Total Reportable Segments | 422,953 | 417,438 | 5,515 | 1,708,199 | 1,709,120 | (921 | ) | |||||||||||||
| All Other | 2,878 | 3,400 | (522 | ) | 10,214 | 10,468 | (254 | ) | ||||||||||||
| Corporate | 692 | 628 | 64 | 2,013 | 1,885 | 128 | ||||||||||||||
| Intersegment Eliminations | (26,164 | ) | (24,582 | ) | (1,582 | ) | (83,942 | ) | (80,999 | ) | (2,943 | ) | ||||||||
| Total Consolidated | $ | 400,359 | $ | 396,884 | $ | 3,475 | $ | 1,636,484 | $ | 1,640,474 | $ | (3,990 | ) | |||||||
| Operating Income (Loss) | ||||||||||||||||||||
| Before Income Taxes | ||||||||||||||||||||
| Utility | $ | 5,168 | $ | 11,833 | $ | (6,665 | ) | $ | 95,310 | $ | 108,196 | $ | (12,886 | ) | ||||||
| Pipeline and Storage | 20,017 | 22,783 | (2,766 | ) | 71,347 | 69,255 | 2,092 | |||||||||||||
| Exploration and Production | 32,853 | 35,754 | (2,901 | ) | 93,090 | 104,293 | (11,203 | ) | ||||||||||||
| Energy Marketing | 2,231 | 1,834 | 397 | 7,458 | 8,777 | (1,319 | ) | |||||||||||||
| Timber | 1,390 | 1,538 | (148 | ) | 8,199 | 7,586 | 613 | |||||||||||||
| Total Reportable Segments | 61,659 | 73,742 | (12,083 | ) | 275,404 | 298,107 | (22,703 | ) | ||||||||||||
| All Other | 265 | 569 | (304 | ) | 1,608 | 2,554 | (946 | ) | ||||||||||||
| Corporate | 1,104 | (629 | ) | 1,733 | (1,576 | ) | (5,902 | ) | 4,326 | |||||||||||
| Total Consolidated | $ | 63,028 | $ | 73,682 | $ | (10,654 | ) | $ | 275,436 | $ | 294,759 | $ | (19,323 | ) | ||||||
| Income (Loss) from | ||||||||||||||||||||
| Continuing Operations | ||||||||||||||||||||
| Utility | $ | (1,684 | ) | $ | 4,167 | $ | (5,851 | ) | $ | 45,269 | $ | 53,772 | $ | (8,503 | ) | |||||
| Pipeline and Storage | 10,843 | 12,063 | (1,220 | ) | 41,577 | 36,233 | 5,344 | |||||||||||||
| Exploration and Production | 13,830 | 14,822 | (992 | ) | 38,984 | 44,065 | (5,081 | ) | ||||||||||||
| Energy Marketing | 1,548 | 1,241 | 307 | 4,909 | 5,588 | (679 | ) | |||||||||||||
| Timber | 555 | 652 | (97 | ) | 4,201 | 3,871 | 330 | |||||||||||||
| Total Reportable Segments | 25,092 | 32,945 | (7,853 | ) | 134,940 | 143,529 | (8,589 | ) | ||||||||||||
| All Other | 270 | 394 | (124 | ) | 1,522 | 1,350 | 172 | |||||||||||||
| Corporate | 1,031 | (518 | ) | 1,549 | (1,259 | ) | (4,446 | ) | 3,187 | |||||||||||
| Total Consolidated | $ | 26,393 | $ | 32,821 | $ | (6,428 | ) | $ | 135,203 | $ | 140,433 | $ | (5,230 | ) | ||||||
Page 15
| Three Months Ended June 30, (Unaudited) | Nine Months Ended June 30, (Unaudited) | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2005 | 2004 | Increase (Decrease) | 2005 | 2004 | Increase (Decrease) | |||||||||||||||
| Depreciation, Depletion | ||||||||||||||||||||
| and Amortization: | ||||||||||||||||||||
| Utility | $ | 10,084 | $ | 9,838 | $ | 246 | $ | 30,081 | $ | 28,970 | $ | 1,111 | ||||||||
| Pipeline and Storage | 9,560 | 8,986 | 574 | 28,915 | 26,883 | 2,032 | ||||||||||||||
| Exploration and Production | 23,416 | 22,880 | 536 | 67,544 | 68,742 | (1,198 | ) | |||||||||||||
| Energy Marketing | 22 | 23 | (1 | ) | 66 | 79 | (13 | ) | ||||||||||||
| Timber | 1,707 | 1,554 | 153 | 4,904 | 4,774 | 130 | ||||||||||||||
| Total Reportable Segments | 44,789 | 43,281 | 1,508 | 131,510 | 129,448 | 2,062 | ||||||||||||||
| All Other | 194 | 196 | (2 | ) | 580 | 558 | 22 | |||||||||||||
| Corporate | 116 | 124 | (8 | ) | 348 | 344 | 4 | |||||||||||||
| Total Consolidated | $ | 45,099 | $ | 43,601 | $ | 1,498 | $ | 132,438 | $ | 130,350 | $ | 2,088 | ||||||||
| Expenditures for | ||||||||||||||||||||
| Long-Lived Assets | ||||||||||||||||||||
| Utility | $ | 12,719 | $ | 12,674 | $ | 45 | $ | 34,993 | $ | 38,703 | $ | (3,710 | ) | |||||||
| Pipeline and Storage | 4,917 | 5,062 | (145 | ) | 13,122 | 13,682 | (560 | ) | ||||||||||||
| Exploration and Production | 24,174 | 12,969 | 11,205 | 86,048 | 58,077 | 27,971 | ||||||||||||||
| Energy Marketing | 12 | (11 | ) | 23 | 46 | 10 | 36 | |||||||||||||
| Timber | 5 | 281 | (276 | ) | 18,701 | 2,174 | 16,527 | |||||||||||||
| Total Reportable Segments | 41,827 | 30,975 | 10,852 | 152,910 | 112,646 | 40,264 | ||||||||||||||
| All Other | 67 | 90 | (23 | ) | 170 | 93 | 77 | |||||||||||||
| Corporate | 20 | 895 | (875 | ) | 106 | 5,413 | (5,307 | ) | ||||||||||||
| Total Expenditures from | ||||||||||||||||||||
| Continuing Operations | $ | 41,914 | $ | 31,960 | $ | 9,954 | $ | 153,186 | $ | 118,152 | $ | 35,034 | ||||||||
DEGREE DAYS
| Percent Colder (Warmer) Than: | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Three Months Ended June 30 | Normal | 2005 | 2004 | Normal | Last Year | ||||||
| Buffalo, NY | 927 | 911 | 884 | (1 | .7) | 3 | .1 | ||||
| Erie, PA | 885 | 952 | 786 | 7 | .6 | 21 | .1 | ||||
| Nine Months Ended June 30 | |||||||||||
| Buffalo, NY | 6,514 | 6,551 | 6,474 | 0 | .6 | 1 | .2 | ||||
| Erie, PA | 6,108 | 6,215 | 5,991 | 1 | .8 | 3 | .7 | ||||
Page 16
Three Months Ended Nine Months Ended
June 30, June 30,
-------------------------------------- -------------------------------------
Increase Increase
2005 2004 (Decrease) 2005 2004 (Decrease)
----------- ----------- -------------------------- ---------- -------------
Gas Production/Prices:
Production (MMcf)
Gulf Coast 3,365 4,563 (1,198) 9,433 14,050 (4,617)
West Coast 975 1,018 (43) 3,000 3,018 (18)
Appalachia 1,156 1,208 (52) 3,499 3,894 (395)
Canada 2,134 1,578 556 5,959 4,874 1,085
----------- ----------- ------------ ---------- ---------- -------------
7,630 8,367 (737) 21,891 25,836 (3,945)
=========== =========== ============ ========== ========== =============
Average Prices (Per Mcf)
Gulf Coast $ 6.92 $ 6.06 $ 0.86 $ 6.72 $ 5.52 $ 1.20
West Coast 6.87 5.87 1.00 6.54 5.44 1.10
Appalachia 6.97 6.23 0.74 7.16 5.88 1.28
Canada 6.08 5.02 1.06 5.70 4.86 0.84
Weighted Average 6.69 5.87 0.82 6.49 5.44 1.05
Weighted Average after Hedging 6.18 5.25 0.93 6.05 5.04 1.01
Oil Production/Prices:
Production (Thousands of Barrels)
Gulf Coast 251 395 (144) 801 1,184 (383)
West Coast 630 651 (21) 1,916 2,012 (96)
Appalachia 11 4 7 23 15 8
Canada 75 89 (14) 229 253 (24)
----------- ----------- ------------ ---------- ---------- -------------
967 1,139 (172) 2,969 3,464 (495)
=========== =========== ============ ========== ========== =============
Average Prices (Per Barrel)
Gulf Coast $49.83 $ 36.80 $ 13.03 $47.73 $ 33.43 $ 14.30
West Coast 42.57 33.56 9.01 39.10 30.26 8.84
Appalachia 50.95 32.55 18.40 46.71 29.50 17.21
Canada 41.66 32.25 9.41 40.39 29.50 10.89
Weighted Average 44.48 34.58 9.90 41.59 31.28 10.31
Weighted Average after Hedging 28.62 27.53 1.09 27.00 25.98 1.02
Total Production (Mmcfe) 13,432 15,201 (1,769) 39,705 46,620 (6,915)
=========== =========== ============ ========== ========== =============
Selected Operating Performance Statistics:
General & Administrative Expense per Mcfe $ 0.47 $ 0.33 $ 0.14 $ 0.43 $ 0.37 $ 0.06
Lease Operating Expense per Mcfe $ 0.97 $ 0.78 $ 0.19 $ 0.94 $ 0.76 $ 0.18
Depreciation, Depletion & Amortization per Mcfe $ 1.74 $ 1.51 $ 0.23 $ 1.70 $ 1.47 $ 0.23
Page 17
Hedging Summary for Fiscal 2005
SWAPS Volume Average Hedge Price
Oil 0.7 MMBBL $30.44 / BBL
Gas 2.9 BCF $5.70 / MCF
No-cost Collars Volume Floor Price Ceiling Price
Gas 1.2 BCF $5.14 / MCF $7.14 / MCF
Hedging Summary for Fiscal 2006
SWAPS Volume Average Hedge Price
Oil 1.9 MMBBL $34.14 / BBL
Gas 9.2 BCF $6.17 / MCF
No-cost Collars Volume Floor Price Ceiling Price
Gas 3.3 BCF $6.49 / MCF $8.55 / MCF
Hedging Summary for Fiscal 2007
SWAPS Volume Average Hedge Price
Oil 0.9 MMBBL $37.03 / BBL
Gas 0.7 BCF $5.84 / MCF
Drilling Program
Nine Months Ended June 30, 2005:
Gross Wells Drilled
Gulf West East Canada Total
--------------- --------------- -------------- ----------- ----------
Exploratory
Successful 7 0 2 17 26
Unsuccessful 1 0 1 2 4
Developmental
Successful 2 91 39 0 132
Unsuccessful 0 0 0 0 0
Total
Successful 9 91 41 17 158
Unsuccessful 1 0 1 2 4
Success Ratio 90% 100% 98% 89% 98%
Page 18
Total Production (Bcfe) 50 - 55
Production by Division (Bcfe)
Gulf 15.5 - 16.5
East 5 - 6
West 19 - 20
Canada 10.5 - 12.5
Crude Oil Average 2006 NYMEX ($/Bbl) as of May 17, 2005 (without hedges): $51.56
Forecast price differentials
Gulf -$0.75 to -$1.50
East -$4.00 to -$6.00
West -$7.00 to -$12.00
Canada -$6.00 to -$8.00
Natural Gas Average 2006 NYMEX ($/Mmbtu) as of May 17, 2005 (without hedges): $7.18
Forecast price differentials
Gulf $0.10 to $0.40
East $0.30 to $0.70
West -$0.10 to -$0.40
Canada -$0.60 to -$1.00
Cost and Expenses $ per Mcfe
Lease Operating Expenses $0.90 - $1.00
Depreciation, Depletion and Amortization $1.70 - $1.80
Other Taxes (% of Revenue) $0.07 - $0.10
Other Operating Expenses $6M - $8M
Administrative and General $22M - $24M
Capital Investment by Division Number of Wells to be Drilled
Gulf $31M - $32M 10 - 13
East $19M - $20M 90 - 105
West $20M - $21M 70 - 80
Canada $40M - $42M 46 - 50
Total $110M - $115M
Page 19
Utility Throughput - (millions of cubic feet - MMcf)
Three Months Ended Nine Months Ended
June 30, June 30,
--------------------------------------- ----------------------------------------
Increase Increase
2005 2004 (Decrease) 2005 2004 (Decrease)
------------ ---------- ----------- ------------ ----------- ------------
Retail Sales:
Residential Sales 10,698 10,899 (201) 63,125 65,791 (2,666)
Commercial Sales 1,814 1,812 2 11,340 12,019 (679)
Industrial Sales 120 797 (677) 721 2,050 (1,329)
------------ ---------- ----------- ------------ ----------- ------------
12,632 13,508 (876) 75,186 79,860 (4,674)
------------ ---------- ----------- ------------ ----------- ------------
Off-System Sales - 4,151 (4,151) - 14,254 (14,254)
Transportation 13,776 13,923 (147) 50,345 51,597 (1,252)
------------ ---------- ----------- ------------ ----------- ------------
26,408 31,582 (5,174) 125,531 145,711 (20,180)
============ ========== =========== ============ =========== ============
Pipeline & Storage Throughput- (MMcf)
Three Months Ended Nine Months Ended
June 30, June 30,
--------------------------------------- ----------------------------------------
Increase Increase
2005 2004 (Decrease) 2005 2004 (Decrease)
------------ ---------- ----------- ------------ ----------- ------------
Firm Transportation - Affiliated 17,895 17,774 121 102,801 108,022 (5,221)
Firm Transportation - Non-Affiliated 53,049 48,366 4,683 181,736 176,329 5,407
Interruptible Transportation 7,162 6,995 167 10,004 10,891 (887)
------------ ---------- ----------- ------------ ----------- ------------
78,106 73,135 4,971 294,541 295,242 (701)
============ ========== =========== ============ =========== ============
Energy Marketing Volumes
Three Months Ended Nine Months Ended
June 30, June 30,
--------------------------------------- ----------------------------------------
Increase Increase
2005 2004 (Decrease) 2005 2004 (Decrease)
------------ ---------- ----------- ------------ ----------- ------------
Natural Gas (MMcf) 10,925 9,918 1,007 34,115 35,908 (1,793)
============ ========== =========== ============ =========== ============
Timber Board Feet (Thousands)
Three Months Ended Nine Months Ended
June 30, June 30,
--------------------------------------- ----------------------------------------
Increase Increase
2005 2004 (Decrease) 2005 2004 (Decrease)
------------ ---------- ----------- ------------ ----------- ------------
Log Sales 1,619 1,392 227 5,934 5,208 726
Green Lumber Sales 3,475 1,956 1,519 8,179 7,154 1,025
Kiln Dry Lumber Sales 4,110 3,824 286 11,373 10,909 464
------------ ---------- ----------- ------------ ----------- ------------
9,204 7,172 2,032 25,486 23,271 2,215
============ ========== =========== ============ =========== ============
Page 20
Quarter Ended June 30 (unaudited) 2005 2004
------------- --------------
Operating Revenues $ 400,359,000 $ 396,884,000
============= ==============
Income from Continuing Operations $ 26,393,000 $ 32,821,000
Loss from Discontinued Operations, Net of Tax (7,237,000) (258,000)
------------- --------------
Net Income Available for Common Stock $ 19,156,000 $ 32,563,000
============= ==============
Earnings Per Common Share:
Basic:
Income from Continuing Operations $ 0.32 $ 0.40
Loss from Discontinued Operations (0.09) -
------------- --------------
Net Income Available for Common Stock $ 0.23 $ 0.40
============= ==============
Diluted:
Income from Continuing Operations $ 0.31 $ 0.39
Loss from Discontinued Operations (0.08) -
------------- --------------
Net Income Available for Common Stock $ 0.23 $ 0.39
============= ==============
Weighted Average Common Shares:
Used in Basic Calculation 83,568,251 82,178,424
============= ==============
Used in Diluted Calculation 84,897,466 83,119,373
============= ==============
Nine Months Ended June 30 (unaudited)
Operating Revenues $ 1,636,484,000 $ 1,640,474,000
============= ==============
Income from Continuing Operations $ 135,203,000 $ 140,433,000
Income from Discontinued Operations, Net of Tax 5,073,000 18,399,000
------------- --------------
Net Income Available for Common Stock $ 140,276,000 $ 158,832,000
============= ==============
Earnings Per Common Share:
Basic:
Income from Continuing Operations $ 1.62 $ 1.72
Income from Discontinued Operations 0.06 0.22
------------- --------------
Net Income Available for Common Stock $ 1.68 $ 1.94
============= ==============
Diluted:
Income from Continuing Operations $ 1.59 $ 1.70
Income from Discontinued Operations 0.06 0.22
------------- --------------
Net Income Available for Common Stock $ 1.65 $ 1.92
============= ==============
Weighted Average Common Shares:
Used in Basic Calculation 83,343,711 81,848,043
============= ==============
Used in Diluted Calculation 84,771,403 82,717,332
============= ==============
Twelve Months Ended June 30 (unaudited)
Operating Revenues $ 1,903,979,000 $ 1,925,592,000
============= ==============
Income from Continuing Operations $ 149,035,000 $ 202,343,000
Income (Loss) from Discontinued Operations, Net of Tax (1,005,000) 14,634,000
------------- --------------
Net Income Available for Common Stock $ 148,030,000 $ 216,977,000
============= ==============
Earnings Per Common Share:
Basic:
Income from Continuing Operations $ 1.79 $ 2.48
Income (Loss) from Discontinued Operations (0.01) 0.18
------------- --------------
Net Income Available for Common Stock $ 1.78 $ 2.66
============= ==============
Diluted:
Income from Continuing Operations $ 1.76 $ 2.45
Income (Loss) from Discontinued Operations (0.01) 0.18
------------- --------------
Net Income Available for Common Stock $ 1.75 $ 2.63
============= ==============
Weighted Average Common Shares:
Used in Basic Calculation 83,164,757 81,722,179
============= ==============
Used in Diluted Calculation 84,559,840 82,586,783
============= ==============