Exhibit 99
 National Fuel Gas Company | ||
| Financial News |
| 6363 Main Street/Williamsville, NY 14221 | ||
| Timothy J. Silverstein | ||
| Investor Relations | ||
| 716-857-6987 | ||
Release Date: Immediate November 4, 2010 | ||
| David P. Bauer | ||
| Treasurer | ||
| 716-857-7318 |
NATIONAL FUEL REPORTS 2010 EARNINGS
Williamsville, N.Y.: National Fuel Gas Company (“National Fuel” or the “Company”) (NYSE:NFG) today announced consolidated earnings for the fourth quarter and fiscal year ended September 30, 2010, of $38.4 million, or $0.46 per share, and $225.9 million, or $2.73 per share, respectively.
HIGHLIGHTS
| • | Operating results before items impacting comparability (“Operating Results”) for the fourth quarter of fiscal 2010 of $32.4 million, or $0.39 per share, increased $2.5 million, or $0.02 per share compared to the prior year fourth quarter, due to higher Operating Results in the Pipeline and Storage, Utility and Energy Marketing segments. |
| • | Operating Results for the fiscal year were $219.1 million, or $2.65 per share, an increase of $8.7 million or $0.05 per share. Increased production of natural gas and higher crude oil prices realized in the Exploration and Production segment during the current fiscal year were the main drivers of the increase. |
| • | Seneca Resources Corporation’s (“Seneca”) fourth quarter production of crude oil and natural gas increased approximately 1.8 billion cubic feet equivalent (“Bcfe”), or 15.5%, to 13.1 Bcfe. Appalachian production increased approximately 120% to 5.2 Bcfe, including production from the Marcellus Shale of 2.9 Bcfe. Total production for fiscal 2010 increased nearly 17% to 49.7 Bcfe. |
| • | Seneca’s fiscal 2010 Marcellus Shale exit rate was approximately 53 million cubic feet per day (“MMcfd”). |
| • | Seneca’s total reserves at September 30, 2010, were 700 Bcfe, an increase of 171 Bcfe. Seneca replaced 445% of fiscal 2010 production. |
| • | The Company sold its landfill gas operations and realized an after-tax gain of $6.3 million. The Company also completed the sale of its sawmill in Marienville, Pennsylvania including selected timber assets, and realized an after-tax gain of $0.2 million. |
| • | A conference call is scheduled for Friday, November 5, 2010, at 11 a.m. Eastern Time. |
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MANAGEMENT COMMENTS
David F. Smith, Chairman and Chief Executive Officer of National Fuel Gas Company stated: “The fourth quarter marked the end of another excellent year for National Fuel, from both a financial and operational standpoint. The diversity of our businesses allowed for this year’s earnings to increase, with growth occurring in the Exploration and Production, Utility, and Energy Marketing segments. These increases were partially offset by a decrease in Pipeline and Storage earnings due to the effects of a shift in market dynamics associated with the development of the Marcellus Shale.”
“Operationally, we made great progress on our plan to aggressively ramp up Seneca’s Marcellus development program. Since the first Seneca-operated well in Tioga County was completed and brought online in November 2009, Seneca has expanded the program significantly, drilling an additional 29 wells during this fiscal year. Seneca exited the year with net production of 53 million cubic feet per day from the Marcellus, a tremendous increase from almost no production at this same time last year.”
“During the quarter we continued to narrow our focus on the multiple growth opportunities in our core businesses. With the sale of our landfill gas and sawmill operations, we substantially decreased our investment in non-core assets. This will allow us to maintain our focus on growing production from the Marcellus Shale and increasing pipeline capacity that is critical to transport production from the Appalachian Basin to the consuming markets in the northeast and in Canada.”
“As we look forward to 2011, we will build upon the accomplishments from this past year and continue to capitalize on these exciting opportunities, while evaluating additional ways to further enhance value for our shareholders.”
SUMMARY OF RESULTS
National Fuel had consolidated earnings for the quarter ended September 30, 2010, of $38.4 million, or $0.46 per share, compared to the prior year’s fourth quarter earnings of $27.0 million, or $0.33 per share, an increase of $11.4 million or $0.13 per share. (Note: All references to earnings per share are to diluted earnings per share. All amounts are stated in U.S. dollars, and all amounts used in the discussion of earnings and operating results before items impacting comparability (“Operating Results”) are after tax unless otherwise noted).
Consolidated earnings for the fiscal year ended September 30, 2010, of $225.9 million, or $2.73 per share, increased $125.2 million, or $1.48 per share, from the prior fiscal year, where earnings were $100.7 million or $1.25 per share.
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| Three Months | Fiscal year | |||||||||||||||
| Ended September 30, | Ended September 30, | |||||||||||||||
| (in thousands except per share amounts) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Reported GAAP earnings | $ | 38,402 | $ | 26,998 | $ | 225,913 | $ | 100,708 | ||||||||
Items impacting comparability1: | ||||||||||||||||
| Gain on disposal of discontinued operations | (6,310 | ) | (6,310 | ) | ||||||||||||
| (Income) loss from discontinued operations | 301 | 2,945 | (470 | ) | 2,776 | |||||||||||
| Impairment of oil and gas producing properties | 108,207 | |||||||||||||||
| Impairment of investment in partnership | 1,085 | |||||||||||||||
| Gain on life insurance policies | (2,312 | ) | ||||||||||||||
Operating Results | $ | 32,393 | $ | 29,943 | $ | 219,133 | $ | 210,464 | ||||||||
Reported GAAP earnings per share | $ | 0.46 | $ | 0.33 | $ | 2.73 | $ | 1.25 | ||||||||
Items impacting comparability1: | ||||||||||||||||
| Gain on disposal of discontinued operations | (0.07 | ) | (0.07 | ) | ||||||||||||
| (Income) loss from discontinued operations | 0.00 | 0.04 | (0.01 | ) | 0.03 | |||||||||||
| Impairment of oil and gas producing properties | 1.34 | |||||||||||||||
| Impairment of investment in partnership | 0.01 | |||||||||||||||
| Gain on life insurance policies | (0.03 | ) | ||||||||||||||
Operating Results | $ | 0.39 | $ | 0.37 | $ | 2.65 | $ | 2.60 | ||||||||
| 1 | See discussion of these individual items below. |
As outlined in the table above, certain items included in GAAP earnings impacted the comparability of the Company’s financial results when comparing the quarter and fiscal year ended September 30, 2010, to the comparable periods in fiscal 2009. Excluding these items, Operating Results for the current fourth quarter of $32.4 million, or $0.39 per share, increased $2.5 million or $0.02 per share. Excluding these items, Operating Results for fiscal year ended September 30, 2010, of $219.1 million, or $2.65 per share, increased $8.7 million, or $0.05 per share, from the prior fiscal year. Items impacting comparability will be discussed in more detail within the discussion of segment earnings below.
The items noted above that impacted the comparability of the financial results also had an impact on the consolidated effective tax rate in each year. Excluding these items, the consolidated effective tax rate of 38.4 percent for the fiscal year ended September 30, 2010 is comparable to the consolidated effective tax rate of 37.7 percent for the prior fiscal year.
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DISCUSSION OF RESULTS BY SEGMENT
(The following discussion of earnings for each segment is summarized in a tabular form at pages 11 through 14 of this report. It may be helpful to refer to those tables while reviewing this discussion.)
Exploration and Production Segment
The Exploration and Production segment operations are carried out by Seneca Resources Corporation (“Seneca”). Seneca explores for, develops and purchases natural gas and oil reserves in California, in the Appalachian region and in the Gulf of Mexico.
The Exploration and Production segment’s earnings in the fourth quarter of fiscal 2010 of $27.5 million, or $0.33 per share, decreased $0.6 million, or $0.01 per share, when compared with the prior year’s fourth quarter. The decrease is mainly due to a higher effective tax rate in the current quarter relating to effects associated with a federal tax law change. Excluding the impact of the higher effective income tax rate, the Exploration and Production segment earnings increased by $3.8 million.
Overall production for the current quarter of 13.1 Bcfe increased approximately 1.8 Bcfe, or 15.5 percent, compared to the prior year’s fourth quarter. Production increased approximately 120 percent in Appalachia mainly due to higher production from Marcellus wells of 2.9 Bcfe. In the Gulf of Mexico, production decreased 0.9 Bcfe. Production in California decreased 0.2 Bcfe.
In addition to the higher production, higher crude oil prices realized after hedging had a positive impact on earnings for the quarter. Lower natural gas prices realized after hedging reduced earnings. For the quarter ended September 30, 2010, the weighted average oil price received by Seneca (after hedging) was $74.05 per barrel (“Bbl”), an increase of $2.66 per Bbl from the prior year’s quarter. The weighted average natural gas price received by Seneca (after hedging) for the quarter ended September 30, 2010, was $5.72 per thousand cubic feet (“Mcf”), a decrease of $0.28 per Mcf.
Several other items also impacted earnings for the quarter including: higher lease operating expenses (“LOE”) (mainly due to the costs to transport Marcellus production in Appalachia and higher steam fuel costs in California), higher depletion expense (due mainly to the increase in the depletable base and higher production), lower other operating expenses (attributable mostly to decreased plugging and abandonment costs), and lower general and administrative (“G&A”) expenses (a $2.5 million bad debt recovery more than offset additional staffing and associated costs in the East Division).
The Exploration and Production segment’s earnings of $112.5 million, or $1.36 per share, for the fiscal year ended September 30, 2010, compares to a loss of $10.2 million, or $0.13 per share, for the fiscal year ended September 30, 2009. The increase was mainly due to the non-cash impairment charge of $108.2 million taken in the first quarter of fiscal 2009 to write down the value of Seneca’s oil and natural gas producing properties. Seneca uses the full cost method of accounting for determining the book value of its oil and natural gas properties. This accounting method 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 12-month average spot
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prices (the “ceiling”) with the book value of those reserves at the balance sheet date. If the book value of the reserves exceeds the ceiling calculation, a non-cash impairment charge must be recorded in order to reduce the book value of the reserves to the calculated ceiling. The impairment at December 31, 2008, (which was calculated using quarter-end pricing under the then effective full cost ceiling test rules) was mainly driven by a significant decrease in commodity prices. At September 30, 2010, the ceiling exceeded the book value of Seneca’s oil and gas properties by approximately $270 million.
Excluding the impact of the ceiling test charge in the prior year’s first quarter, Operating Results for the fiscal year ended September 30, 2010, of $112.5 million, or $1.36 per share, increased $14.6 million, or $0.15 per share, from the prior year. The increase was primarily due to higher natural gas production and higher crude oil prices realized after hedging.
Overall production for the fiscal year ended September 30, 2010, increased 16.8 percent to 49.7 Bcfe, an increase of 7.1 Bcfe compared to the prior fiscal year. Production increased approximately 7.8 Bcfe or 90 percent in Appalachia. Marcellus production of 7.2 Bcfe and higher production from upper Devonian wells more than offset small production declines in California and the Gulf of Mexico.
In addition to overall higher production, higher crude oil prices realized after hedging contributed to the increase in Operating Results for the fiscal year. Lower natural gas prices realized after hedging reduced Operating Results. For the fiscal year ended September 30, 2010, the weighted average oil price received by Seneca (after hedging) was $75.25 per Bbl, an increase of $10.31 per Bbl from the prior fiscal year. The weighted average natural gas price received by Seneca (after hedging) for the fiscal year ended September 30, 2010, was $6.04 per Mcf, a decrease of $0.90 per Mcf.
Other items impacting Operating Results for the fiscal year ended September 30, 2010, were higher depletion expense (mainly due to the increase in production and a higher depletable base), higher LOE (mainly due to higher steam fuel cost and the operating costs associated with the July 2009 acquisition of the Ivanhoe assets in California, and the costs to transport Marcellus production in Appalachia), higher G&A expenses (attributable mostly to additional staffing and associated costs in the East Division that more than offset the recovery of a bad debt expensed in the prior year) and lower other operating expenses (primarily due to lower plugging and abandonment costs).
Pipeline and Storage Segment
The Pipeline and Storage segment 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 western Pennsylvania.
The Pipeline and Storage segment’s earnings of $6.7 million, or $0.08 per share, for the quarter ended September 30, 2010, increased $0.9 million, or $0.01 per share, when compared with the same period in the prior fiscal year. The increase in earnings is mainly due to a lower effective tax rate in the current quarter relating to the intercompany tax allocation among
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subsidiaries. Excluding the impact of the lower effective income tax rate, Pipeline and Storage segment earnings decreased by $1.5 million from the prior year. The decrease was mostly due to increased maintenance and pension expenses. Transportation revenues for both Supply Corporation and Empire were also lower in the current quarter compared to the fourth quarter of 2009. Persistent strong Niagara/Chippawa basis prices have caused shippers to evaluate lower cost supply sources, and certain shippers have reduced their imports of natural gas from Canada. This has resulted in some contract terminations on Supply Corporation from Niagara. In order to counteract the decrease in revenues due to these lower shipping volumes, Supply Corporation’s Northern Access expansion project and Empire’s Tioga County Extension Project have been designed to utilize the existing pipeline system to provide producers of Marcellus gas a transportation path from the Marcellus supply basins to Canadian and other northern markets.
The Pipeline and Storage segment’s earnings of $36.7 million, or $0.44 per share, for the fiscal year ended September 30, 2010, decreased $10.7 million, or $0.15 per share, when compared with the fiscal year ended September 30, 2009. The decrease in earnings for the current fiscal year was due to lower transportation revenues, higher operating expenses (mainly due to increased pension and other operating expenses), higher property taxes and interest expense and lower AFUDC (attributable to the completion of the Empire Connector in December 2008).
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.
The Utility segment’s earnings of $0.2 million, for the quarter ended September 30, 2010, compared to a loss of $1.6 million, for the quarter ended September 30, 2009. The change is primarily due to lower operating expenses (including a $1.3 million after-tax adjustment recorded to reduce Distribution’s allowance for doubtful accounts), lower interest expense on over recoveries of purchased gas costs and the impact of certain regulatory true-up adjustments.
The Utility segment’s earnings of $62.5 million, or $0.76 per share, for the fiscal year ended September 30, 2010, increased from earnings of $58.7 million, or $0.73 per share, for the fiscal year ended September 30, 2009. Earnings in the New York Division for the fiscal year ended September 30, 2010, of $39.5 million, or $0.48 per share, increased $1.8 million, or $0.01 per share, compared to the prior year. Lower operating expenses (mainly attributable to a decrease in bad debt expense) and the impact of regulatory true-up adjustments more than offset the impact of lower revenues from customer late payment charges (mainly due to lower gas costs) during the current fiscal year.
For the fiscal year ended September 30, 2010, earnings in the Pennsylvania Division of $23.0 million, or $0.28 per share, increased $2.0 million, or $0.02 per share, compared to the prior year. Lower operating expenses (mainly attributable to a decrease in bad debt expense) and a lower effective tax rate more than offset higher interest expense, warmer weather and lower customer usage during the current fiscal year.
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Energy Marketing
National Fuel Resources, Inc. (“NFR”) comprises the Company’s Energy Marketing segment. 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.
The Energy Marketing segment’s earnings for the quarter ended September 30, 2010, of $0.3 million compared to a loss of $0.3 million in the prior year fourth quarter. The increase in earnings in the current year fourth quarter is primarily due to proceeds NFR received as a member of a class of claimants in a class action litigation settlement. Excluding this item earnings were consistent with the fourth quarter of the prior fiscal year. The Energy Marketing segment’s earnings for the fiscal year ended September 30, 2010 of $8.8 million increased $1.7 million compared to the prior year. The increase in earnings was mainly due to higher margins in the current fiscal year and proceeds NFR received as a member of a class of claimants in a class action litigation settlement.
Corporate and All Other
The Corporate and All Other category includes the following active, wholly owned subsidiaries of the Company: National Fuel Gas Midstream Corporation (“Midstream”), formed to build, own and operate natural gas processing and pipeline gathering facilities in the Appalachian region; Horizon Power, Inc., a corporation that develops and owns independent electric generation facilities that are fueled by natural gas or landfill gas; and Highland Forest Resources, Inc., a corporation that markets high quality hardwoods from Appalachian land holdings.
Earnings in the Corporate and All Other category for the quarter ended September 30, 2010, were $3.7 million compared to the prior year’s fourth quarter loss of $4.9 million. On September 1, 2010, the Company completed the sale of its landfill gas operations. As a result of this transaction, the Company is presenting the landfill gas operations as discontinued operations. Earnings in the fourth quarter of fiscal 2010 include earnings from discontinued operations of $6.0 million, which included a $0.3 million loss from discontinued operations during the quarter plus a $6.3 million gain on the sale of the landfill gas operations. Earnings in the fourth quarter of fiscal 2009 include a loss from discontinued operations of $2.9 million. The results of discontinued operations are discussed later in this document and are excluded from the remaining discussion of the Corporate and All Other category quarterly results below.
Excluding discontinued operations, Operating Results in the Corporate and All Other category decreased from a loss of $2.0 million in the prior year fourth quarter to a loss of $2.3 million in the current year fourth quarter. Higher corporate operating expenses and lower earnings from timber operations more than offset earnings from Midstream’s pipeline gathering and natural gas processing operations.
Earnings in the Corporate and All Other category for the fiscal year ended September 30, 2010, were $5.4 million compared to a loss of $2.2 million in the prior fiscal year. As discussed above, as a result of the Company’s sale of its landfill gas operations, the Company is presenting these operations as discontinued operations. Earnings for the fiscal year ended September 30,
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2010, include earnings from discontinued operations of $6.8 million, which consists of $0.5 million of income from discontinued operations, and a $6.3 million gain on the sale of the landfill gas operations. Earnings for the fiscal year ended September 30, 2009, include a loss from discontinued operations of $2.8 million. The results of discontinued operations are discussed later in this document and are excluded from the remaining discussion of the Corporate and All Other category fiscal year results below.
The comparability of the Corporate and All Other category earnings for the fiscal years ended September 30, 2010, and 2009 was also impacted by a $2.3 million gain recognized on corporate-owned executive life insurance policies and a $1.1 million impairment in the value of Horizon Power’s 50 percent investment in Energy Systems North East, LLC, both of which occurred in the prior year’s first quarter.
Excluding discontinued operations and the items discussed in the immediate preceding paragraph above, Operating Results for the fiscal year ended September 30, 2010, decreased from a loss of $0.7 million for fiscal 2009 to a loss of $1.4 million for fiscal 2010. Revenues from Midstream’s pipeline gathering and processing operations, higher margins from the timber operations (mainly due to lower prices paid for purchased logs and stumpage) and higher interest income were offset by higher depreciation and operating expenses and higher interest expense.
Discontinued Operations
Earnings from discontinued operations for the quarter and fiscal year ended September 30, 2010, increased by $8.9 million and $9.6 million, respectively. The increases are primarily the result of the Company’s sale of its landfill gas operations and the recording of a gain of approximately $6.3 million. They also reflect the nonrecurrence of a $2.8 million impairment of landfill gas assets that was recorded during the quarter ended September 30, 2009.
EARNINGS GUIDANCE
The Company is revising its GAAP earnings guidance for fiscal 2011 to a range of $2.40 to $2.70 per share. This updated guidance assumes average NYMEX prices, exclusive of basis differentials, of $4.00 per Million British Thermal Units (“MMBtu”) for natural gas and $80.00 per Bbl for crude oil. The previous guidance range of $2.60 to $2.90 per share had assumed average NYMEX prices, exclusive of basis differentials, of $5.00 per MMBtu for natural gas and $80.00 per Bbl for crude oil. The change in guidance is attributable solely to the $1.00 per MMBtu decrease in the assumed NYMEX natural gas price. Seneca’s production guidance remains unchanged at 60 to 70 Bcfe.
EARNINGS TELECONFERENCE
The Company will host a conference call on Friday, November 5, 2010, 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 Investor Relations page on National Fuel’s website atinvestor.nationalfuelgas.com. For those without Internet access, access is also provided by dialing (toll-free) 1-800-561-2813, using the passcode “34046805.” For those unable to listen to
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the live conference call, a replay will be available at approximately 2 p.m. Eastern Time at the same website link and by phone at (toll-free) 1-888-286-8010, using passcode “78038698.” Both the webcast and telephonic replay will be available until the close of business on Friday, November 12, 2010.
National Fuel is an integrated energy company with $5.1 billion in assets comprised of the following four operating segments: Exploration and Production, Pipeline and Storage, Utility, and Energy Marketing. Additional information about National Fuel is available at www.nationalfuelgas.com or through its investor information service at 1-800-334-2188.
Analyst Contact: | Timothy J. Silverstein | 716-857-6987 | ||
Media Contact: | Donna L. DeCarolis | 716-857-7872 |
Certain statements contained herein, including those regarding estimated future earnings, and statements that are identified by the use of the words “anticipates,” “estimates,” “expects,” “forecasts,” “intends,” “plans,” “predicts,” “projects,” “believes,” “seeks,” “will,” “may” 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: financial and economic conditions, including the availability of credit, and their effect on the Company’s ability to obtain financing on acceptable terms for working capital, capital expenditures and other investments; occurrences affecting the Company’s ability to obtain financing under credit lines or other credit facilities or through the issuance of commercial paper, other short-term notes or debt or equity securities, including any downgrades in the Company’s credit ratings and changes in interest rates and other capital market conditions; 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 terrorist activities, acts of war, major accidents, fires, hurricanes, other severe weather, pest infestation or other natural disasters; changes in demographic patterns and weather conditions; changes in the availability and/or price of natural gas or oil and the effect of such changes on the accounting treatment of derivative financial instruments or the valuation of the Company’s natural gas and oil reserves; impairments under the SEC’s full cost ceiling test for natural gas and oil reserves; uncertainty of oil and gas reserve estimates; 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, weather conditions, shortages, delays or unavailability of equipment and services required in drilling operations, insufficient gathering, processing and transportation capacity, and the need to obtain governmental approvals and permits and comply with environmental laws and regulations; significant differences between the Company’s projected and actual production levels for natural gas or oil; changes in the availability and/or price of derivative financial instruments; changes in the price differentials between oil having different quality and/or different geographic locations, or changes in the price differentials between natural gas having different heating values and/or different geographic locations; changes in laws and regulations to which the Company is subject, including those involving derivatives, taxes, safety, employment, climate change, other environmental matters, and exploration and production activities such as hydraulic fracturing; the nature and projected profitability of pending and potential projects and other investments, and the ability to obtain necessary governmental approvals and permits; significant differences between the Company’s projected and actual capital expenditures and operating expenses, and unanticipated project delays or
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changes in project costs or plans; 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 derivatives, acquisitions, financings, rate cases (which address, among other things, allowed rates of return, rate design and retained natural gas), affiliate relationships, industry structure, franchise renewal, and environmental/safety requirements; unanticipated impacts of restructuring initiatives in the natural gas and electric industries; ability to successfully identify and finance acquisitions or other investments and ability to operate and integrate existing and any subsequently acquired business or properties; changes in 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; 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; the cost and effects of legal and administrative claims against the Company or activist shareholder campaigns to effect changes at the Company; 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 hereof.
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NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS
QUARTER ENDED SEPTEMBER 30, 2010
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS
QUARTER ENDED SEPTEMBER 30, 2010
| Exploration & | Pipeline & | Energy | Corporate / | |||||||||||||||||||||
| (Thousands of Dollars) | Production | Storage | Utility | Marketing | All Other ** | Consolidated | ||||||||||||||||||
Fourth quarter 2009 GAAP earnings | $ | 28,128 | $ | 5,776 | $ | (1,639 | ) | $ | (343 | ) | $ | (4,924 | ) | $ | 26,998 | |||||||||
Items impacting comparability: | ||||||||||||||||||||||||
| Loss from discontinued operations | 2,945 | 2,945 | ||||||||||||||||||||||
Fourth quarter 2009 operating results | 28,128 | 5,776 | (1,639 | ) | (343 | ) | (1,979 | ) | 29,943 | |||||||||||||||
Drivers of operating results | ||||||||||||||||||||||||
| Higher (lower) crude oil prices | 1,366 | 1,366 | ||||||||||||||||||||||
| Higher (lower) natural gas prices | (1,523 | ) | (1,523 | ) | ||||||||||||||||||||
| Higher (lower) natural gas production | 8,887 | 8,887 | ||||||||||||||||||||||
| Higher (lower) crude oil production | (4,098 | ) | (4,098 | ) | ||||||||||||||||||||
| Higher (lower) processing plant revenues | 337 | 337 | ||||||||||||||||||||||
| Derivative mark to market adjustment | 275 | 275 | ||||||||||||||||||||||
| Lower (higher) lease operating expenses | (1,472 | ) | (1,472 | ) | ||||||||||||||||||||
| Lower (higher) depreciation / depletion | (2,446 | ) | (399 | ) | (738 | ) | (3,583 | ) | ||||||||||||||||
| Higher (lower) transportation revenues | (398 | ) | (398 | ) | ||||||||||||||||||||
| Higher (lower) efficiency gas revenues | 452 | 452 | ||||||||||||||||||||||
| Lower (higher) operating expenses | 2,052 | (1,212 | ) | 701 | (451 | ) | 1,090 | |||||||||||||||||
| Lower (higher) property, franchise and other taxes | (413 | ) | (413 | ) | ||||||||||||||||||||
| Regulatory true-up adjustments | 1,835 | 1,835 | ||||||||||||||||||||||
| Higher (lower) margins | 365 | 435 | 800 | |||||||||||||||||||||
| Higher (lower) AFUDC* | 585 | 585 | ||||||||||||||||||||||
| (Higher) lower interest expense | 532 | 532 | ||||||||||||||||||||||
| Lower (higher) income tax expense / effective tax rate | (4,462 | ) | 2,382 | (609 | ) | 318 | (179 | ) | (2,550 | ) | ||||||||||||||
| All other | 441 | (106 | ) | (602 | ) | 4 | 591 | 328 | ||||||||||||||||
Fourth quarter 2010 operating results | 27,485 | 6,667 | 218 | 344 | (2,321 | ) | 32,393 | |||||||||||||||||
Items impacting comparability: | ||||||||||||||||||||||||
| Gain on disposal of discontinued operations | 6,310 | 6,310 | ||||||||||||||||||||||
| Loss from discontinued operations | (301 | ) | (301 | ) | ||||||||||||||||||||
Fourth quarter 2010 GAAP earnings | $ | 27,485 | $ | 6,667 | $ | 218 | $ | 344 | $ | 3,688 | $ | 38,402 | ||||||||||||
| * | AFUDC = Allowance for Funds Used During Construction | |
| ** | Includes discontinued operations |
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NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS PER SHARE
QUARTER ENDED SEPTEMBER 30, 2010
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS PER SHARE
QUARTER ENDED SEPTEMBER 30, 2010
| Exploration & | Pipeline & | Energy | Corporate / | |||||||||||||||||||||
| Production | Storage | Utility | Marketing | All Other ** | Consolidated | |||||||||||||||||||
Fourth quarter 2009 GAAP earnings | $ | 0.34 | $ | 0.07 | $ | (0.02 | ) | $ | — | $ | (0.06 | ) | $ | 0.33 | ||||||||||
Items impacting comparability: | ||||||||||||||||||||||||
| Loss from discontinued operations | 0.04 | 0.04 | ||||||||||||||||||||||
Fourth quarter 2009 operating results | 0.34 | 0.07 | (0.02 | ) | — | (0.02 | ) | 0.37 | ||||||||||||||||
Drivers of operating results | ||||||||||||||||||||||||
| Higher (lower) crude oil prices | 0.02 | 0.02 | ||||||||||||||||||||||
| Higher (lower) natural gas prices | (0.02 | ) | (0.02 | ) | ||||||||||||||||||||
| Higher (lower) natural gas production | 0.11 | 0.11 | ||||||||||||||||||||||
| Higher (lower) crude oil production | (0.05 | ) | (0.05 | ) | ||||||||||||||||||||
| Higher (lower) processing plant revenues | — | — | ||||||||||||||||||||||
| Derivative mark to market adjustment | — | — | ||||||||||||||||||||||
| Lower (higher) lease operating expenses | (0.02 | ) | (0.02 | ) | ||||||||||||||||||||
| Lower (higher) depreciation / depletion | (0.03 | ) | — | (0.01 | ) | (0.04 | ) | |||||||||||||||||
| Higher (lower) transportation revenues | — | — | ||||||||||||||||||||||
| Higher (lower) efficiency gas revenues | — | — | ||||||||||||||||||||||
| Lower (higher) operating expenses | 0.02 | (0.01 | ) | 0.01 | (0.01 | ) | 0.01 | |||||||||||||||||
| Lower (higher) property, franchise and other taxes | — | — | ||||||||||||||||||||||
| Regulatory true-up adjustments | 0.02 | 0.02 | ||||||||||||||||||||||
| Higher (lower) margins | — | 0.01 | 0.01 | |||||||||||||||||||||
| Higher (lower) AFUDC* | — | — | ||||||||||||||||||||||
| (Higher) lower interest expense | 0.01 | 0.01 | ||||||||||||||||||||||
| Lower (higher) income tax expense / effective tax rate | (0.05 | ) | 0.03 | (0.01 | ) | — | — | (0.03 | ) | |||||||||||||||
| All other / rounding (including impact of higher weighted average shares) | 0.01 | (0.01 | ) | (0.01 | ) | 0.01 | — | |||||||||||||||||
Fourth quarter 2010 operating results | 0.33 | 0.08 | — | — | (0.02 | ) | 0.39 | |||||||||||||||||
Items impacting comparability: | ||||||||||||||||||||||||
| Gain on disposal of discontinued operations | 0.07 | 0.07 | ||||||||||||||||||||||
| Loss from discontinued operations | — | — | ||||||||||||||||||||||
Fourth quarter 2010 GAAP earnings | $ | 0.33 | $ | 0.08 | $ | — | $ | — | $ | 0.05 | $ | 0.46 | ||||||||||||
| * | AFUDC = Allowance for Funds Used During Construction | |
| ** | Includes discontinued operations |
Page 13
NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS
YEAR ENDED SEPTEMBER 30, 2010
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS
YEAR ENDED SEPTEMBER 30, 2010
| Exploration & | Pipeline & | Energy | Corporate / | |||||||||||||||||||||
| (Thousands of Dollars) | Production | Storage | Utility | Marketing | All Other ** | Consolidated | ||||||||||||||||||
Fiscal 2009 GAAP earnings | $ | (10,238 | ) | $ | 47,358 | $ | 58,664 | $ | 7,166 | $ | (2,242 | ) | $ | 100,708 | ||||||||||
Items impacting comparability: | ||||||||||||||||||||||||
| Loss from discontinued operations | 2,776 | 2,776 | ||||||||||||||||||||||
| Gain on life insurance policies | (2,312 | ) | (2,312 | ) | ||||||||||||||||||||
| Impairment of investment in partnership | 1,085 | 1,085 | ||||||||||||||||||||||
| Impairment of oil and gas properties | 108,207 | 108,207 | ||||||||||||||||||||||
Fiscal 2009 operating results | 97,969 | 47,358 | 58,664 | 7,166 | (693 | ) | 210,464 | |||||||||||||||||
Drivers of operating results | ||||||||||||||||||||||||
| Higher (lower) crude oil prices | 21,587 | 21,587 | ||||||||||||||||||||||
| Higher (lower) natural gas prices | (17,663 | ) | (17,663 | ) | ||||||||||||||||||||
| Higher (lower) natural gas production | 36,347 | 36,347 | ||||||||||||||||||||||
| Higher (lower) crude oil production | (6,470 | ) | (6,470 | ) | ||||||||||||||||||||
| Higher (lower) processing plant revenues | 1,872 | 1,872 | ||||||||||||||||||||||
| Lower (higher) lease operating expenses | (6,094 | ) | (6,094 | ) | ||||||||||||||||||||
| Lower (higher) depreciation / depletion | (9,988 | ) | (530 | ) | (2,407 | ) | (12,925 | ) | ||||||||||||||||
| Higher (lower) transportation revenues | (664 | ) | (664 | ) | ||||||||||||||||||||
| Higher (lower) efficiency gas revenues | 827 | 827 | ||||||||||||||||||||||
| Lower (higher) operating expenses | 1,187 | (4,475 | ) | 4,366 | (87 | ) | (971 | ) | 20 | |||||||||||||||
| Lower (higher) property, franchise and other taxes | (1,990 | ) | (1,990 | ) | ||||||||||||||||||||
| Higher (lower) usage | (2,086 | ) | (2,086 | ) | ||||||||||||||||||||
| Warmer weather in Pennsylvania | (816 | ) | (816 | ) | ||||||||||||||||||||
| Regulatory true-up adjustments | 1,215 | 1,215 | ||||||||||||||||||||||
| Higher (lower) late payment revenue | (1,159 | ) | (1,159 | ) | ||||||||||||||||||||
| Higher (lower) margins | 1,386 | 6,460 | 7,846 | |||||||||||||||||||||
| Higher (lower) AFUDC* | (2,252 | ) | (2,252 | ) | ||||||||||||||||||||
| Higher (lower) interest income | (943 | ) | 3,099 | 2,156 | ||||||||||||||||||||
| (Higher) lower interest expense | 1,634 | (3,086 | ) | (2,220 | ) | (3,826 | ) | (7,498 | ) | |||||||||||||||
| Lower (higher) income tax expense / effective tax rate | (7,180 | ) | 1,434 | 4,739 | 359 | (3,651 | ) | (4,299 | ) | |||||||||||||||
| All other | 273 | 81 | (230 | ) | (8 | ) | 599 | 715 | ||||||||||||||||
Fiscal 2010 operating results | 112,531 | 36,703 | 62,473 | 8,816 | (1,390 | ) | 219,133 | |||||||||||||||||
Items impacting comparability: | ||||||||||||||||||||||||
| Gain on disposal of discontinued operations | 6,310 | 6,310 | ||||||||||||||||||||||
| Earnings from discontinued operations | 470 | 470 | ||||||||||||||||||||||
Fiscal 2010 GAAP earnings | $ | 112,531 | $ | 36,703 | $ | 62,473 | $ | 8,816 | $ | 5,390 | $ | 225,913 | ||||||||||||
| * | AFUDC = Allowance for Funds Used During Construction | |
| ** | Includes discontinued operations |
Page 14
NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS PER SHARE
YEAR ENDED SEPTEMBER 30, 2010
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS PER SHARE
YEAR ENDED SEPTEMBER 30, 2010
| Exploration & | Pipeline & | Energy | Corporate / | |||||||||||||||||||||
| Production | Storage | Utility | Marketing | All Other ** | Consolidated | |||||||||||||||||||
Fiscal 2009 GAAP earnings | $ | (0.13 | ) | $ | 0.59 | $ | 0.73 | $ | 0.09 | $ | (0.03 | ) | $ | 1.25 | ||||||||||
Items impacting comparability: | ||||||||||||||||||||||||
| Loss from discontinued operations | 0.03 | 0.03 | ||||||||||||||||||||||
| Gain on life insurance policies | (0.03 | ) | (0.03 | ) | ||||||||||||||||||||
| Impairment of investment in partnership | 0.01 | 0.01 | ||||||||||||||||||||||
| Impairment of oil and gas properties | 1.34 | 1.34 | ||||||||||||||||||||||
Fiscal 2009 operating results | 1.21 | 0.59 | 0.73 | 0.09 | (0.02 | ) | 2.60 | |||||||||||||||||
Drivers of operating results | ||||||||||||||||||||||||
| Higher (lower) crude oil prices | 0.26 | 0.26 | ||||||||||||||||||||||
| Higher (lower) natural gas prices | (0.21 | ) | (0.21 | ) | ||||||||||||||||||||
| Higher (lower) natural gas production | 0.44 | 0.44 | ||||||||||||||||||||||
| Higher (lower) crude oil production | (0.08 | ) | (0.08 | ) | ||||||||||||||||||||
| Higher (lower) processing plant revenues | 0.02 | 0.02 | ||||||||||||||||||||||
| Lower (higher) lease operating expenses | (0.07 | ) | (0.07 | ) | ||||||||||||||||||||
| Lower (higher) depreciation / depletion | (0.12 | ) | (0.01 | ) | (0.03 | ) | (0.16 | ) | ||||||||||||||||
| Higher (lower) transportation revenues | (0.01 | ) | (0.01 | ) | ||||||||||||||||||||
| Higher (lower) efficiency gas revenues | 0.01 | 0.01 | ||||||||||||||||||||||
| Lower (higher) operating expenses | 0.01 | (0.05 | ) | 0.05 | — | (0.01 | ) | — | ||||||||||||||||
| Lower (higher) property, franchise and other taxes | (0.02 | ) | (0.02 | ) | ||||||||||||||||||||
| Higher (lower) usage | (0.03 | ) | (0.03 | ) | ||||||||||||||||||||
| Warmer weather in Pennsylvania | (0.01 | ) | (0.01 | ) | ||||||||||||||||||||
| Regulatory true-up adjustments | 0.01 | 0.01 | ||||||||||||||||||||||
| Higher (lower) late payment revenue | (0.01 | ) | (0.01 | ) | ||||||||||||||||||||
| Higher (lower) margins | 0.02 | 0.08 | 0.10 | |||||||||||||||||||||
| Higher (lower) AFUDC* | (0.03 | ) | (0.03 | ) | ||||||||||||||||||||
| Higher (lower) interest income | (0.01 | ) | 0.04 | 0.03 | ||||||||||||||||||||
| (Higher) lower interest expense | 0.02 | (0.04 | ) | (0.03 | ) | (0.05 | ) | (0.10 | ) | |||||||||||||||
| Lower (higher) income tax expense / effective tax rate | (0.09 | ) | 0.02 | 0.06 | — | (0.04 | ) | (0.05 | ) | |||||||||||||||
| All other / rounding (including impact of higher weighted average shares) | (0.02 | ) | (0.02 | ) | (0.01 | ) | — | 0.01 | (0.04 | ) | ||||||||||||||
Fiscal 2010 operating results | 1.36 | 0.44 | 0.76 | 0.11 | (0.02 | ) | 2.65 | |||||||||||||||||
Items impacting comparability: | ||||||||||||||||||||||||
| Gain on disposal of discontinued operations | 0.07 | 0.07 | ||||||||||||||||||||||
| Earnings from discontinued operations | 0.01 | 0.01 | ||||||||||||||||||||||
Fiscal 2010 GAAP earnings | $ | 1.36 | $ | 0.44 | $ | 0.76 | $ | 0.11 | $ | 0.06 | $ | 2.73 | ||||||||||||
| * | AFUDC = Allowance for Funds Used During Construction | |
| ** | Includes discontinued operations |
Page 15
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
AND SUBSIDIARIES
(Thousands of Dollars, except per share amounts)
| Three Months Ended | Twelve Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
SUMMARY OF OPERATIONS | ||||||||||||||||
| Operating Revenues | $ | 286,396 | $ | 276,796 | $ | 1,760,503 | $ | 2,051,543 | ||||||||
| Operating Expenses: | ||||||||||||||||
| Purchased Gas | 57,023 | 56,693 | 658,432 | 997,216 | ||||||||||||
| Operation and Maintenance | 87,945 | 92,202 | 394,569 | 401,200 | ||||||||||||
| Property, Franchise and Other Taxes | 18,168 | 15,444 | 75,852 | 72,102 | ||||||||||||
| Depreciation, Depletion and Amortization | 49,265 | 43,514 | 191,199 | 170,620 | ||||||||||||
| Impairment of Oil and Gas Producing Properties | — | — | — | 182,811 | ||||||||||||
| 212,401 | 207,853 | 1,320,052 | 1,823,949 | |||||||||||||
| Operating Income | 73,995 | 68,943 | 440,451 | 227,594 | ||||||||||||
| Other Income (Expense): | ||||||||||||||||
| Income from Unconsolidated Subsidiaries | 792 | 646 | 2,488 | 3,366 | ||||||||||||
| Impairment of Investment in Partnership | — | — | — | (1,804 | ) | |||||||||||
| Interest Income | 1,682 | 1,418 | 3,729 | 5,776 | ||||||||||||
| Other Income | 1,165 | 859 | 3,638 | 8,200 | ||||||||||||
| Interest Expense on Long-Term Debt | (21,951 | ) | (22,062 | ) | (87,190 | ) | (79,419 | ) | ||||||||
| Other Interest Expense | (1,513 | ) | (2,473 | ) | (6,756 | ) | (7,370 | ) | ||||||||
| Income Before Income Taxes | 54,170 | 47,331 | 356,360 | 156,343 | ||||||||||||
| Income Tax Expense | 21,777 | 17,388 | 137,227 | 52,859 | ||||||||||||
| Income from Continuing Operations | 32,393 | 29,943 | 219,133 | 103,484 | ||||||||||||
| Discontinued Operations: | ||||||||||||||||
| Income (Loss) from Operations, Net of Tax | (301 | ) | (2,945 | ) | 470 | (2,776 | ) | |||||||||
| Gain on Disposal, Net of Tax | 6,310 | — | 6,310 | — | ||||||||||||
| Income (Loss) from Discontinued Operations, Net of Tax | 6,009 | (2,945 | ) | 6,780 | (2,776 | ) | ||||||||||
Net Income Available for Common Stock | $ | 38,402 | $ | 26,998 | $ | 225,913 | $ | 100,708 | ||||||||
Earnings Per Common Share: | ||||||||||||||||
| Basic: | ||||||||||||||||
| Income from Continuing Operations | $ | 0.40 | $ | 0.37 | $ | 2.70 | $ | 1.29 | ||||||||
| Income (Loss) from Discontinued Operations | 0.07 | (0.03 | ) | 0.08 | (0.03 | ) | ||||||||||
| Net Income Available for Common Stock | $ | 0.47 | $ | 0.34 | $ | 2.78 | $ | 1.26 | ||||||||
| Diluted: | ||||||||||||||||
| Income from Continuing Operations | $ | 0.39 | $ | 0.37 | $ | 2.65 | $ | 1.28 | ||||||||
| Income (Loss) from Discontinued Operations | 0.07 | (0.04 | ) | 0.08 | (0.03 | ) | ||||||||||
| Net Income Available for Common Stock | $ | 0.46 | $ | 0.33 | $ | 2.73 | $ | 1.25 | ||||||||
Weighted Average Common Shares: | ||||||||||||||||
| Used in Basic Calculation | 81,981,133 | 80,240,861 | 81,380,434 | 79,649,965 | ||||||||||||
| Used in Diluted Calculation | 82,969,012 | 81,607,864 | 82,660,598 | 80,628,685 | ||||||||||||
Page 16
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
| September 30, | September 30, | |||||||
| (Thousands of Dollars) | 2010 | 2009 | ||||||
ASSETS | ||||||||
| Property, Plant and Equipment | $ | 5,637,498 | $ | 5,184,844 | ||||
| Less — Accumulated Depreciation, Depletion and Amortization | 2,187,269 | 2,051,482 | ||||||
| Net Property, Plant and Equipment | 3,450,229 | 3,133,362 | ||||||
| Current Assets: | ||||||||
| Cash and Temporary Cash Investments | 395,171 | 408,053 | ||||||
| Cash Held in Escrow | 2,000 | 2,000 | ||||||
| Hedging Collateral Deposits | 11,134 | 848 | ||||||
| Receivables — Net | 132,136 | 144,466 | ||||||
| Unbilled Utility Revenue | 20,920 | 18,884 | ||||||
| Gas Stored Underground | 48,584 | 55,862 | ||||||
| Materials and Supplies — at average cost | 24,987 | 24,520 | ||||||
| Other Current Assets | 115,969 | 68,474 | ||||||
| Deferred Income Taxes | 24,476 | 53,863 | ||||||
| Total Current Assets | 775,377 | 776,970 | ||||||
| Other Assets: | ||||||||
| Recoverable Future Taxes | 149,712 | 138,435 | ||||||
| Unamortized Debt Expense | 12,550 | 14,815 | ||||||
| Other Regulatory Assets | 542,801 | 530,913 | ||||||
| Deferred Charges | 9,646 | 2,737 | ||||||
| Other Investments | 77,839 | 78,503 | ||||||
| Investments in Unconsolidated Subsidiaries | 14,828 | 14,940 | ||||||
| Goodwill | 5,476 | 5,476 | ||||||
| Intangible Assets | 1,677 | 21,536 | ||||||
| Fair Value of Derivative Financial Instruments | 65,184 | 44,817 | ||||||
| Other | 306 | 6,625 | ||||||
| Total Other Assets | 880,019 | 858,797 | ||||||
| Total Assets | $ | 5,105,625 | $ | 4,769,129 | ||||
CAPITALIZATION AND LIABILITIES | ||||||||
| Capitalization: | ||||||||
| Comprehensive Shareholders’ Equity | ||||||||
| Common Stock, $1 Par Value Authorized - 200,000,000 Shares; Issued and Outstanding - 82,075,470 Shares and 80,499,915 Shares, Respectively | $ | 82,075 | $ | 80,500 | ||||
| Paid in Capital | 645,619 | 602,839 | ||||||
| Earnings Reinvested in the Business | 1,063,262 | 948,293 | ||||||
| Total Common Shareholders’ Equity Before | ||||||||
| Items of Other Comprehensive Loss | 1,790,956 | 1,631,632 | ||||||
| Accumulated Other Comprehensive Loss | (44,985 | ) | (42,396 | ) | ||||
| Total Comprehensive Shareholders’ Equity | 1,745,971 | 1,589,236 | ||||||
| Long-Term Debt, Net of Current Portion | 1,049,000 | 1,249,000 | ||||||
| Total Capitalization | 2,794,971 | 2,838,236 | ||||||
| Current and Accrued Liabilities: | ||||||||
| Notes Payable to Banks and Commercial Paper | — | — | ||||||
| Current Portion of Long-Term Debt | 200,000 | — | ||||||
| Accounts Payable | 145,223 | 90,723 | ||||||
| Amounts Payable to Customers | 38,109 | 105,778 | ||||||
| Dividends Payable | 28,316 | 26,967 | ||||||
| Interest Payable on Long-Term Debt | 30,512 | 32,031 | ||||||
| Customer Advances | 27,638 | 24,555 | ||||||
| Customer Security Deposits | 18,320 | 17,430 | ||||||
| Other Accruals and Current Liabilities | 16,046 | 18,875 | ||||||
| Fair Value of Derivative Financial Instruments | 20,160 | 2,148 | ||||||
| Total Current and Accrued Liabilities | 524,324 | 318,507 | ||||||
| Deferred Credits: | ||||||||
| Deferred Income Taxes | 800,758 | 663,876 | ||||||
| Taxes Refundable to Customers | 69,585 | 67,046 | ||||||
| Unamortized Investment Tax Credit | 3,288 | 3,989 | ||||||
| Cost of Removal Regulatory Liability | 124,032 | 105,546 | ||||||
| Other Regulatory Liabilities | 89,334 | 120,229 | ||||||
| Pension and Other Post-Retirement Liabilities | 446,082 | 415,888 | ||||||
| Asset Retirement Obligations | 101,618 | 91,373 | ||||||
| Other Deferred Credits | 151,633 | 144,439 | ||||||
| Total Deferred Credits | 1,786,330 | 1,612,386 | ||||||
| Commitments and Contingencies | — | — | ||||||
| Total Capitalization and Liabilities | $ | 5,105,625 | $ | 4,769,129 | ||||
Page 17
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Twelve Months Ended | ||||||||
| September 30, | ||||||||
| (Thousands of Dollars) | 2010 | 2009 | ||||||
| Operating Activities: | ||||||||
| Net Income Available for Common Stock | $ | 225,913 | $ | 100,708 | ||||
| Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: | ||||||||
| Gain on Sale of Discontinued Operations | (10,334 | ) | — | |||||
| Impairment of Oil and Gas Producing Properties | — | 182,811 | ||||||
| Depreciation, Depletion and Amortization | 191,809 | 173,410 | ||||||
| Deferred Income Taxes | 134,679 | (2,521 | ) | |||||
| Income from Unconsolidated Subsidiaries, Net of Cash Distributions | 112 | (466 | ) | |||||
| Impairment of Investment in Partnership | — | 1,804 | ||||||
| Excess Tax Benefits Associated with Stock-Based Compensation Awards | (13,207 | ) | (5,927 | ) | ||||
| Other | 9,108 | 19,829 | ||||||
| Change in: | ||||||||
| Hedging Collateral Deposits | (10,286 | ) | (847 | ) | ||||
| Receivables and Unbilled Utility Revenue | 10,262 | 47,658 | ||||||
| Gas Stored Underground and Materials and Supplies | 6,546 | 43,598 | ||||||
| Unrecovered Purchased Gas Costs | — | 37,708 | ||||||
| Prepayments and Other Current Assets | (34,288 | ) | 2,921 | |||||
| Accounts Payable | 8,047 | (61,149 | ) | |||||
| Amounts Payable to Customers | (67,669 | ) | 103,025 | |||||
| Customer Advances | 3,083 | (8,462 | ) | |||||
| Customer Security Deposits | 890 | 3,383 | ||||||
| Other Accruals and Current Liabilities | (3,649 | ) | 13,676 | |||||
| Other Assets | 7,237 | (35,140 | ) | |||||
| Other Liabilities | 1,442 | (4,201 | ) | |||||
| Net Cash Provided by Operating Activities | $ | 459,695 | $ | 611,818 | ||||
| Investing Activities: | ||||||||
| Capital Expenditures | ($455,764 | ) | ($313,633 | ) | ||||
| Investment in Subsidiary, Net of Cash Acquired | — | (34,933 | ) | |||||
| Net Proceeds from Sale of Timber Mill and Related Assets | 15,770 | — | ||||||
| Net Proceeds from Sale of Landfill Gas Pipeline Assets | 38,000 | — | ||||||
| Cash Held in Escrow | — | (2,000 | ) | |||||
| Net Proceeds from Sale of Oil and Gas Producing Properties | — | 3,643 | ||||||
| Other | (251 | ) | (2,806 | ) | ||||
| Net Cash Used in Investing Activities | ($402,245 | ) | ($349,729 | ) | ||||
| Financing Activities: | ||||||||
| Excess Tax Benefits Associated with Stock-Based Compensation Awards | $ | 13,207 | $ | 5,927 | ||||
| Net Proceeds from Issuance of Long-Term Debt | — | 247,780 | ||||||
| Reduction of Long-Term Debt | — | (100,000 | ) | |||||
| Dividends Paid on Common Stock | (109,596 | ) | (104,158 | ) | ||||
| Net Proceeds From Issuance of Common Stock | 26,057 | 28,176 | ||||||
| Net Cash Provided by (Used In) Financing Activities | ($70,332 | ) | $ | 77,725 | ||||
| Net Increase / (Decrease) in Cash and Temporary Cash Investments | (12,882 | ) | 339,814 | |||||
| Cash and Temporary Cash Investments at Beginning of Period | 408,053 | 68,239 | ||||||
| Cash and Temporary Cash Investments at September 30 | $ | 395,171 | $ | 408,053 | ||||
Page 18
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
AND SUBSIDIARIES
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
(UNAUDITED)
| Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||
| (Thousands of Dollars, except per share amounts) | September 30, | September 30, | ||||||||||||||||||||||
| EXPLORATION AND PRODUCTION SEGMENT | 2010 | 2009 | Variance | 2010 | 2009 | Variance | ||||||||||||||||||
| Operating Revenues | $ | 109,716 | $ | 101,349 | $ | 8,367 | $ | 438,028 | $ | 382,758 | $ | 55,270 | ||||||||||||
| Operating Expenses: | ||||||||||||||||||||||||
| Operation and Maintenance: | ||||||||||||||||||||||||
| General and Administrative Expense | 6,279 | 6,910 | (631 | ) | 31,980 | 29,374 | 2,606 | |||||||||||||||||
| Lease Operating Expense | 17,503 | 17,013 | 490 | 61,398 | 53,957 | 7,441 | ||||||||||||||||||
| All Other Operation and Maintenance Expense | (136 | ) | 2,460 | (2,596 | ) | 6,597 | 11,059 | (4,462 | ) | |||||||||||||||
| Property, Franchise and Other Taxes | 2,710 | 935 | 1,775 | 10,592 | 8,657 | 1,935 | ||||||||||||||||||
| Depreciation, Depletion and Amortization | 27,421 | 23,658 | 3,763 | 106,182 | 90,816 | 15,366 | ||||||||||||||||||
| Impairment of Oil and Gas Producing Properties | — | — | — | — | 182,811 | (182,811 | ) | |||||||||||||||||
| 53,777 | 50,976 | 2,801 | 216,749 | 376,674 | (159,925 | ) | ||||||||||||||||||
| Operating Income | 55,939 | 50,373 | 5,566 | 221,279 | 6,084 | 215,195 | ||||||||||||||||||
| Other Income (Expense): | ||||||||||||||||||||||||
| Interest Income | 480 | 244 | 236 | 980 | 2,430 | (1,450 | ) | |||||||||||||||||
| Other Income | — | — | — | — | — | — | ||||||||||||||||||
| Other Interest Expense | (7,840 | ) | (7,915 | ) | 75 | (30,853 | ) | (33,368 | ) | 2,515 | ||||||||||||||
| Income (Loss) Before Income Taxes | 48,579 | 42,702 | 5,877 | 191,406 | (24,854 | ) | 216,260 | |||||||||||||||||
| Income Tax Expense (Benefit) | 21,094 | 14,574 | 6,520 | 78,875 | (14,616 | ) | 93,491 | |||||||||||||||||
| Net Income (Loss) | $ | 27,485 | $ | 28,128 | $ | (643 | ) | $ | 112,531 | $ | (10,238 | ) | $ | 122,769 | ||||||||||
| Net Income (Loss) Per Share (Diluted) | $ | 0.33 | $ | 0.34 | $ | (0.01 | ) | $ | 1.36 | $ | (0.13 | ) | $ | 1.49 | ||||||||||
| Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||
| PIPELINE AND STORAGE SEGMENT | 2010 | 2009 | Variance | 2010 | 2009 | Variance | ||||||||||||||||||
| Revenues from External Customers | $ | 31,344 | $ | 31,573 | $ | (229 | ) | $ | 138,905 | $ | 137,478 | $ | 1,427 | |||||||||||
| Intersegment Revenues | 19,689 | 19,770 | (81 | ) | 79,978 | 81,795 | (1,817 | ) | ||||||||||||||||
| Total Operating Revenues | 51,033 | 51,343 | (310 | ) | 218,883 | 219,273 | (390 | ) | ||||||||||||||||
| Operating Expenses: | ||||||||||||||||||||||||
| Purchased Gas | (345 | ) | (5 | ) | (340 | ) | (205 | ) | 132 | (337 | ) | |||||||||||||
| Operation and Maintenance | 22,132 | 20,268 | 1,864 | 77,698 | 70,814 | 6,884 | ||||||||||||||||||
| Property, Franchise and Other Taxes | 5,316 | 4,681 | 635 | 20,532 | 17,470 | 3,062 | ||||||||||||||||||
| Depreciation, Depletion and Amortization | 9,313 | 8,699 | 614 | 35,930 | 35,115 | 815 | ||||||||||||||||||
| 36,416 | 33,643 | 2,773 | 133,955 | 123,531 | 10,424 | |||||||||||||||||||
| Operating Income | 14,617 | 17,700 | (3,083 | ) | 84,928 | 95,742 | (10,814 | ) | ||||||||||||||||
| Other Income (Expense): | ||||||||||||||||||||||||
| Interest Income | 82 | 52 | 30 | 199 | 995 | (796 | ) | |||||||||||||||||
| Other Income | 174 | (411 | ) | 585 | 538 | 2,780 | (2,242 | ) | ||||||||||||||||
| Other Interest Expense | (6,644 | ) | (6,821 | ) | 177 | (26,328 | ) | (21,580 | ) | (4,748 | ) | |||||||||||||
| Income Before Income Taxes | 8,229 | 10,520 | (2,291 | ) | 59,337 | 77,937 | (18,600 | ) | ||||||||||||||||
| Income Tax Expense | 1,562 | 4,744 | (3,182 | ) | 22,634 | 30,579 | (7,945 | ) | ||||||||||||||||
| Net Income | $ | 6,667 | $ | 5,776 | $ | 891 | $ | 36,703 | $ | 47,358 | $ | (10,655 | ) | |||||||||||
| Net Income Per Share (Diluted) | $ | 0.08 | $ | 0.07 | $ | 0.01 | $ | 0.44 | $ | 0.59 | $ | (0.15 | ) | |||||||||||
Page 19
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
AND SUBSIDIARIES
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
(UNAUDITED)
| Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||
| (Thousands of Dollars, except per share amounts) | September 30, | September 30, | ||||||||||||||||||||||
| UTILITY SEGMENT | 2010 | 2009 | Variance | 2010 | 2009 | Variance | ||||||||||||||||||
| Revenues from External Customers | $ | 97,143 | $ | 87,587 | $ | 9,556 | $ | 804,466 | $ | 1,097,550 | $ | (293,084 | ) | |||||||||||
| Intersegment Revenues | 2,009 | 2,135 | (126 | ) | 15,324 | 15,474 | (150 | ) | ||||||||||||||||
| Total Operating Revenues | 99,152 | 89,722 | 9,430 | 819,790 | 1,113,024 | (293,234 | ) | |||||||||||||||||
| Operating Expenses: | ||||||||||||||||||||||||
| Purchased Gas | 38,384 | 31,185 | 7,199 | 428,376 | 713,174 | (284,798 | ) | |||||||||||||||||
| Operation and Maintenance | 34,988 | 36,104 | (1,116 | ) | 181,313 | 191,192 | (9,879 | ) | ||||||||||||||||
| Property, Franchise and Other Taxes | 9,630 | 9,392 | 238 | 42,772 | 44,215 | (1,443 | ) | |||||||||||||||||
| Depreciation, Depletion and Amortization | 10,244 | 10,005 | 239 | 40,370 | 39,675 | 695 | ||||||||||||||||||
| 93,246 | 86,686 | 6,560 | 692,831 | 988,256 | (295,425 | ) | ||||||||||||||||||
| Operating Income | 5,906 | 3,036 | 2,870 | 126,959 | 124,768 | 2,191 | ||||||||||||||||||
| Other Income (Expense): | ||||||||||||||||||||||||
| Interest Income | 1,127 | 1,138 | (11 | ) | 2,144 | 2,486 | (342 | ) | ||||||||||||||||
| Other Income | 278 | 161 | 117 | 1,059 | 924 | 135 | ||||||||||||||||||
| Other Interest Expense | (8,779 | ) | (9,597 | ) | 818 | (35,831 | ) | (32,417 | ) | (3,414 | ) | |||||||||||||
| Income (Loss) Before Income Taxes | (1,468 | ) | (5,262 | ) | 3,794 | 94,331 | 95,761 | (1,430 | ) | |||||||||||||||
| Income Tax Expense (Benefit) | (1,686 | ) | (3,623 | ) | 1,937 | 31,858 | 37,097 | (5,239 | ) | |||||||||||||||
| Net Income (Loss) | $ | 218 | $ | (1,639 | ) | $ | 1,857 | $ | 62,473 | $ | 58,664 | $ | 3,809 | |||||||||||
| Net Income (Loss) Per Share (Diluted) | $ | — | $ | (0.02 | ) | $ | 0.02 | $ | 0.76 | $ | 0.73 | $ | 0.03 | |||||||||||
| Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||
| ENERGY MARKETING SEGMENT | 2010 | 2009 | Variance | 2010 | 2009 | Variance | ||||||||||||||||||
| Revenues from External Customers | $ | 41,699 | $ | 47,318 | $ | (5,619 | ) | $ | 344,802 | $ | 397,763 | $ | (52,961 | ) | ||||||||||
| Intersegment Revenues | — | 558 | (558 | ) | — | 558 | (558 | ) | ||||||||||||||||
| Total Operating Revenues | 41,699 | 47,876 | (6,177 | ) | 344,802 | 398,321 | (53,519 | ) | ||||||||||||||||
| Operating Expenses: | ||||||||||||||||||||||||
| Purchased Gas | 40,554 | 47,292 | (6,738 | ) | 325,026 | 380,677 | (55,651 | ) | ||||||||||||||||
| Operation and Maintenance | 1,425 | 1,446 | (21 | ) | 6,148 | 6,014 | 134 | |||||||||||||||||
| Property, Franchise and Other Taxes | 31 | 19 | 12 | 55 | 41 | 14 | ||||||||||||||||||
| Depreciation, Depletion and Amortization | 10 | 11 | (1 | ) | 42 | 42 | — | |||||||||||||||||
| 42,020 | 48,768 | (6,748 | ) | 331,271 | 386,774 | (55,503 | ) | |||||||||||||||||
| Operating Income (Loss) | (321 | ) | (892 | ) | 571 | 13,531 | 11,547 | 1,984 | ||||||||||||||||
| Other Income (Expense): | ||||||||||||||||||||||||
| Interest Income | 17 | 12 | 5 | 44 | 79 | (35 | ) | |||||||||||||||||
| Other Income | 16 | 24 | (8 | ) | 74 | 225 | (151 | ) | ||||||||||||||||
| Other Interest Expense | (6 | ) | (6 | ) | — | (27 | ) | (215 | ) | 188 | ||||||||||||||
| Income (Loss) Before Income Taxes | (294 | ) | (862 | ) | 568 | 13,622 | 11,636 | 1,986 | ||||||||||||||||
| Income Tax Expense (Benefit) | (638 | ) | (519 | ) | (119 | ) | 4,806 | 4,470 | 336 | |||||||||||||||
| Net Income (Loss) | $ | 344 | $ | (343 | ) | $ | 687 | $ | 8,816 | $ | 7,166 | $ | 1,650 | |||||||||||
| Net Income (Loss) Per Share (Diluted) | $ | — | $ | — | $ | — | $ | 0.11 | $ | 0.09 | $ | 0.02 | ||||||||||||
Page 20
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
AND SUBSIDIARIES
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
(UNAUDITED)
| Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||
| ALL OTHER | 2010 | 2009 | Variance | 2010 | 2009 | Variance | ||||||||||||||||||
| Revenues from External Customers | $ | 6,272 | $ | 8,750 | $ | (2,478 | ) | $ | 33,428 | $ | 35,100 | $ | (1,672 | ) | ||||||||||
| Intersegment Revenues | 897 | — | 897 | 2,315 | — | 2,315 | ||||||||||||||||||
| Total Operating Revenues | 7,169 | 8,750 | (1,581 | ) | 35,743 | 35,100 | 643 | |||||||||||||||||
| Operating Expenses: | ||||||||||||||||||||||||
| Purchased Gas | (41 | ) | — | (41 | ) | (41 | ) | — | (41 | ) | ||||||||||||||
| Operation and Maintenance | 4,360 | 6,605 | (2,245 | ) | 22,775 | 32,259 | (9,484 | ) | ||||||||||||||||
| Property, Franchise and Other Taxes | 377 | 348 | 29 | 1,588 | 1,437 | 151 | ||||||||||||||||||
| Depreciation, Depletion and Amortization | 2,036 | 967 | 1,069 | 7,907 | 4,276 | 3,631 | ||||||||||||||||||
| 6,732 | 7,920 | (1,188 | ) | 32,229 | 37,972 | (5,743 | ) | |||||||||||||||||
| Operating Income (Loss) | 437 | 830 | (393 | ) | 3,514 | (2,872 | ) | 6,386 | ||||||||||||||||
| Other Income (Expense): | ||||||||||||||||||||||||
| Income from Unconsolidated Subsidiaries | 792 | 646 | 146 | 2,488 | 3,366 | (878 | ) | |||||||||||||||||
| Impairment of Investment in Partnership | — | — | — | — | (1,804 | ) | 1,804 | |||||||||||||||||
| Interest Income | 42 | 40 | 2 | 137 | 583 | (446 | ) | |||||||||||||||||
| Other Income | (160 | ) | 264 | (424 | ) | (127 | ) | 294 | (421 | ) | ||||||||||||||
| Other Interest Expense | (543 | ) | (540 | ) | (3 | ) | (2,152 | ) | (2,344 | ) | 192 | |||||||||||||
| Income (Loss) from Continuing Operations Before Income Taxes | 568 | 1,240 | (672 | ) | 3,860 | (2,777 | ) | 6,637 | ||||||||||||||||
| Income Tax Expense (Benefit) | (674 | ) | 320 | (994 | ) | 464 | (3,482 | ) | 3,946 | |||||||||||||||
| Income from Continuing Operations | 1,242 | 920 | 322 | 3,396 | 705 | 2,691 | ||||||||||||||||||
| Discontinued Operations: | ||||||||||||||||||||||||
| Income (Loss) from Operations, Net of Tax | (301 | ) | (2,945 | ) | 2,644 | 470 | (2,776 | ) | 3,246 | |||||||||||||||
| Gain on Disposal, Net of Tax | 6,310 | — | 6,310 | 6,310 | — | 6,310 | ||||||||||||||||||
| Income (Loss) from Discontinued Operations, Net of Tax | 6,009 | (2,945 | ) | 8,954 | 6,780 | (2,776 | ) | 9,556 | ||||||||||||||||
| Net Income (Loss) | $ | 7,251 | $ | (2,025 | ) | $ | 9,276 | $ | 10,176 | $ | (2,071 | ) | $ | 12,247 | ||||||||||
| Income from Continuing Operations Per Share (Diluted) | $ | 0.02 | $ | 0.02 | $ | — | $ | 0.04 | $ | — | $ | 0.04 | ||||||||||||
| Income (Loss) from Discontinued Operations, Net of Tax, Per Share (Diluted) | 0.07 | (0.04 | ) | 0.11 | 0.08 | (0.03 | ) | 0.11 | ||||||||||||||||
| Net Income (Loss) Per Share (Diluted) | $ | 0.09 | $ | (0.02 | ) | $ | 0.11 | $ | 0.12 | $ | (0.03 | ) | $ | 0.15 | ||||||||||
Page 21
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
AND SUBSIDIARIES
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
(UNAUDITED)
| Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||
| (Thousands of Dollars, except per share amounts) | September 30, | September 30, | ||||||||||||||||||||||
| CORPORATE | 2010 | 2009 | Variance | 2010 | 2009 | Variance | ||||||||||||||||||
| Revenues from External Customers | $ | 222 | $ | 219 | $ | 3 | $ | 874 | $ | 894 | $ | (20 | ) | |||||||||||
| Intersegment Revenues | 1,003 | 1,003 | — | 3,547 | 4,065 | (518 | ) | |||||||||||||||||
| Total Operating Revenues | 1,225 | 1,222 | 3 | 4,421 | 4,959 | (538 | ) | |||||||||||||||||
| Operating Expenses: | ||||||||||||||||||||||||
| Operation and Maintenance | 3,463 | 3,083 | 380 | 13,100 | 11,656 | 1,444 | ||||||||||||||||||
| Property, Franchise and Other Taxes | 104 | 69 | 35 | 313 | 282 | 31 | ||||||||||||||||||
| Depreciation, Depletion and Amortization | 241 | 174 | 67 | 768 | 696 | 72 | ||||||||||||||||||
| 3,808 | 3,326 | 482 | 14,181 | 12,634 | 1,547 | |||||||||||||||||||
| Operating Loss | (2,583 | ) | (2,104 | ) | (479 | ) | (9,760 | ) | (7,675 | ) | (2,085 | ) | ||||||||||||
| Other Income (Expense): | ||||||||||||||||||||||||
| Interest Income | 22,385 | 22,518 | (133 | ) | 89,973 | 84,761 | 5,212 | |||||||||||||||||
| Other Income | 857 | 821 | 36 | 2,094 | 3,977 | (1,883 | ) | |||||||||||||||||
| Interest Expense on Long-Term Debt | (21,951 | ) | (22,062 | ) | 111 | (87,190 | ) | (79,419 | ) | (7,771 | ) | |||||||||||||
| Other Interest Expense | (152 | ) | (180 | ) | 28 | (1,313 | ) | (3,004 | ) | 1,691 | ||||||||||||||
| Loss Before Income Taxes | (1,444 | ) | (1,007 | ) | (437 | ) | (6,196 | ) | (1,360 | ) | (4,836 | ) | ||||||||||||
| Income Tax Expense (Benefit) | 2,119 | 1,892 | 227 | (1,410 | ) | (1,189 | ) | (221 | ) | |||||||||||||||
| Net Loss | $ | (3,563 | ) | $ | (2,899 | ) | $ | (664 | ) | $ | (4,786 | ) | $ | (171 | ) | $ | (4,615 | ) | ||||||
| Net Loss Per Share (Diluted) | $ | (0.04 | ) | $ | (0.04 | ) | $ | — | $ | (0.06 | ) | $ | — | $ | (0.06 | ) | ||||||||
| Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||
| INTERSEGMENT ELIMINATIONS | 2010 | 2009 | Variance | 2010 | 2009 | Variance | ||||||||||||||||||
| Intersegment Revenues | $ | (23,598 | ) | $ | (23,466 | ) | $ | (132 | ) | $ | (101,164 | ) | $ | (101,892 | ) | $ | 728 | |||||||
| Operating Expenses: | ||||||||||||||||||||||||
| Purchased Gas | (21,529 | ) | (21,779 | ) | 250 | (94,724 | ) | (96,767 | ) | 2,043 | ||||||||||||||
| Operation and Maintenance | (2,069 | ) | (1,687 | ) | (382 | ) | (6,440 | ) | (5,125 | ) | (1,315 | ) | ||||||||||||
| (23,598 | ) | (23,466 | ) | (132 | ) | (101,164 | ) | (101,892 | ) | 728 | ||||||||||||||
| Operating Income | — | — | — | — | — | — | ||||||||||||||||||
| Other Income (Expense): | ||||||||||||||||||||||||
| Interest Income | (22,451 | ) | (22,586 | ) | 135 | (89,748 | ) | (85,558 | ) | (4,190 | ) | |||||||||||||
| Other Interest Expense | 22,451 | 22,586 | (135 | ) | 89,748 | 85,558 | 4,190 | |||||||||||||||||
| Net Income | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
| Net Income Per Share (Diluted) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
Page 22
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
AND SUBSIDIARIES
SEGMENT INFORMATION (Continued)
(Thousands of Dollars)
(Thousands of Dollars)
| Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||
| {(Unaudited) | (Unaudited) | |||||||||||||||||||||||
| Increase | Increase | |||||||||||||||||||||||
| 2010 | 2009 | (Decrease) | 2010 | 2009 | (Decrease) | |||||||||||||||||||
Capital Expenditures: | ||||||||||||||||||||||||
Exploration and Production | $ | 124,325 | (1) | $ | 36,612 | (2) | $ | 87,713 | $ | 398,174 | (1)(2) | $ | 188,290 | (2) | $ | 209,884 | ||||||||
| Pipeline and Storage | 15,651 | 15,264 | 387 | 37,894 | 52,504 | (3) | (14,610 | ) | ||||||||||||||||
| Utility | 18,460 | 15,798 | 2,662 | 57,973 | 56,178 | 1,795 | ||||||||||||||||||
| Energy Marketing | 168 | — | 168 | 407 | 25 | 382 | ||||||||||||||||||
| Total Reportable Segments | 158,604 | 67,674 | 90,930 | 494,448 | 296,997 | 197,451 | ||||||||||||||||||
| All Other | 828 | 5,868 | (2) | (5,040 | ) | 6,694 | (2) | 9,507 | (2) | (2,813 | ) | |||||||||||||
| Corporate | 8 | 148 | (140 | ) | 210 | 297 | (87 | ) | ||||||||||||||||
| Eliminations | — | — | — | — | (344 | ) | 344 | |||||||||||||||||
| Total Expenditures from | ||||||||||||||||||||||||
| Continuing Operations | 159,440 | 73,690 | 85,750 | 501,352 | 306,457 | 194,895 | ||||||||||||||||||
| Discontinued Operations | 28 | 50 | (22 | ) | 150 | 216 | (66 | ) | ||||||||||||||||
| Total Capital Expenditures | $ | 159,468 | $ | 73,740 | $ | 85,728 | $ | 501,502 | $ | 306,673 | $ | 194,829 | ||||||||||||
| (1) | Amount for the quarter and year ended September 30, 2010 includes $55.5 million of accrued capital expenditures, the majority of which was in the Appalachian region. This amount has been excluded from the Consolidated Statement of Cash Flows at September 30, 2010 since it represents a non-cash investing activity at that date. | |
| (2) | Capital expenditures for the Exploration and Production segment for the year ended September 30, 2010 exclude $9.1 million of capital expenditures, the majority of which was in the Appalachian region. Capital expenditures for All Other for the year ended September 30, 2010 exclude $0.7 million of capital expenditures related to the construction of the Midstream Covington Gathering System. Both of these amounts were accrued at September 30, 2009 and paid during the year ended September 30, 2010. These amounts were excluded from the Consolidated Statement of Cash Flows at September 30, 2009 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, 2010. | |
| (3) | Amount for the year ended September 30, 2009 excludes $16.8 million of capital expenditures related to the Empire Connector project accrued at September 30, 2008 and paid during the year ended September 30, 2009. This amount was excluded from the Consolidated Statement of Cash Flows at September 30, 2008 since it represented a non-cash investing activity at that date. The amount has been included in the Consolidated Statement of Cash Flows at September 30, 2009. |
DEGREE DAYS
| Percent Colder | ||||||||||||||||||||
| (Warmer) Than: | ||||||||||||||||||||
| Normal | 2010 | 2009 | Normal(1) | Last Year(1) | ||||||||||||||||
| Three Months Ended September 30 | ||||||||||||||||||||
| Buffalo, NY | 178 | 140 | 143 | (21.3 | ) | (2.1 | ) | |||||||||||||
| Erie, PA | 135 | 105 | 112 | (22.2 | ) | (6.3 | ) | |||||||||||||
| Twelve Months Ended September 30 | ||||||||||||||||||||
| Buffalo, NY | 6,692 | 6,292 | 6,701 | (6.0 | ) | (6.1 | ) | |||||||||||||
| Erie, PA | 6,243 | 5,947 | 6,176 | (4.7 | ) | (3.7 | ) | |||||||||||||
| (1) | Percents compare actual 2010 degree days to normal degree days and actual 2010 degree days to actual 2009 degree days. |
Page 23
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
AND SUBSIDIARIES
EXPLORATION AND PRODUCTION INFORMATION
| Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||
| Increase | Increase | |||||||||||||||||||||||
| 2010 | 2009 | (Decrease) | 2010 | 2009 | (Decrease) | |||||||||||||||||||
Gas Production/Prices: | ||||||||||||||||||||||||
| Production (MMcf) | ||||||||||||||||||||||||
| Gulf Coast | 2,225 | 2,767 | (542 | ) | 10,304 | 9,886 | 418 | |||||||||||||||||
| West Coast | 953 | 999 | (46 | ) | 3,819 | 4,063 | (244 | ) | ||||||||||||||||
| Appalachia | 5,137 | 2,271 | 2,866 | 16,222 | 8,335 | 7,887 | ||||||||||||||||||
| Total Production | 8,315 | 6,037 | 2,278 | 30,345 | 22,284 | 8,061 | ||||||||||||||||||
| Average Prices (Per Mcf) | ||||||||||||||||||||||||
| Gulf Coast | $ | 5.08 | $ | 3.61 | $ | 1.47 | $ | 5.22 | $ | 4.54 | $ | 0.68 | ||||||||||||
| West Coast | 4.48 | 3.36 | 1.12 | 4.81 | 3.91 | 0.90 | ||||||||||||||||||
| Appalachia | 4.57 | 4.09 | 0.48 | 4.93 | 5.52 | (0.59 | ) | |||||||||||||||||
| Weighted Average | 4.70 | 3.75 | 0.95 | 5.01 | 4.79 | 0.22 | ||||||||||||||||||
| Weighted Average after Hedging | 5.72 | 6.00 | (0.28 | ) | 6.04 | 6.94 | (0.90 | ) | ||||||||||||||||
Oil Production/Prices: | ||||||||||||||||||||||||
| Production (Thousands of Barrels) | ||||||||||||||||||||||||
| Gulf Coast | 113 | 170 | (57 | ) | 502 | 640 | (138 | ) | ||||||||||||||||
| West Coast | 662 | 691 | (29 | ) | 2,669 | 2,674 | (5 | ) | ||||||||||||||||
| Appalachia | 15 | 17 | (2 | ) | 49 | 59 | (10 | ) | ||||||||||||||||
| Total Production | 790 | 878 | (88 | ) | 3,220 | 3,373 | (153 | ) | ||||||||||||||||
| Average Prices (Per Barrel) | ||||||||||||||||||||||||
| Gulf Coast | $ | 69.44 | $ | 65.50 | $ | 3.94 | $ | 76.57 | $ | 54.58 | $ | 21.99 | ||||||||||||
| West Coast | 71.53 | 62.56 | 8.97 | 71.72 | 50.90 | 20.82 | ||||||||||||||||||
| Appalachia | 71.47 | 59.08 | 12.39 | 75.81 | 56.15 | 19.66 | ||||||||||||||||||
| Weighted Average | 71.23 | 63.06 | 8.17 | 72.54 | 51.69 | 20.85 | ||||||||||||||||||
| Weighted Average after Hedging | 74.05 | 71.39 | 2.66 | 75.25 | 64.94 | 10.31 | ||||||||||||||||||
| Total Production (MMcfe) | 13,055 | 11,305 | 1,750 | 49,665 | 42,522 | 7,143 | ||||||||||||||||||
Selected Operating Performance Statistics: | ||||||||||||||||||||||||
General & Administrative Expense per Mcfe(1) | $ | 0.48 | $ | 0.61 | $ | (0.13 | ) | $ | 0.64 | $ | 0.69 | $ | (0.05 | ) | ||||||||||
Lease Operating Expense per Mcfe(1) | $ | 1.34 | $ | 1.50 | $ | (0.16 | ) | $ | 1.24 | $ | 1.27 | $ | (0.03 | ) | ||||||||||
Depreciation, Depletion & Amortization per Mcfe(1) | $ | 2.10 | $ | 2.09 | $ | 0.01 | $ | 2.14 | $ | 2.14 | $ | — | ||||||||||||
| (1) | Refer to page 18 for the General and Administrative Expense, Lease Operating Expense and Depreciation, Depletion, and Amortization Expense for the Exploration and Production segment. |
Page 24
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
AND SUBSIDIARIES
EXPLORATION AND PRODUCTION INFORMATION
Hedging Summary for Fiscal 2011
| SWAPS | Volume | Average Hedge Price | ||
| Oil | 1.6 MMBBL | $70.26 / BBL | ||
| Gas | 19.9 BCF | $6.76 / MCF |
Hedging Summary for Fiscal 2012
| SWAPS | Volume | Average Hedge Price | ||
| Oil | 1.1 MMBBL | $70.55 / BBL | ||
| Gas | 14.6 BCF | $7.03 / MCF |
Hedging Summary for Fiscal 2013
| SWAPS | Volume | Average Hedge Price | ||
| Oil | 0.3 MMBBL | $75.94 / BBL | ||
| Gas | 3.8 BCF | $6.65 / MCF |
Gross Wells in Process of Drilling
Twelve Months Ended September 30, 2010
Twelve Months Ended September 30, 2010
| East | ||||||||||||||||||||
| Marcellus | Upper | Total | ||||||||||||||||||
| Gulf | West | Shale | Devonian | Company | ||||||||||||||||
Wells in Process — Beginning of Period | ||||||||||||||||||||
| Exploratory | 0.00 | 0.00 | 16.00 | (1) (2) | 20.00 | (2) | 36.00 | |||||||||||||
| Developmental | 0.00 | 0.00 | 14.00 | (1) | 68.00 | 82.00 | ||||||||||||||
Wells Commenced | ||||||||||||||||||||
| Exploratory | 1.00 | 0.00 | 11.00 | 18.00 | 30.00 | |||||||||||||||
| Developmental | 1.00 | 44.00 | 51.00 | 68.00 | 164.00 | |||||||||||||||
Wells Completed | ||||||||||||||||||||
| Exploratory | 1.00 | 0.00 | 22.00 | 13.00 | 36.00 | |||||||||||||||
| Developmental | 0.00 | 44.00 | 25.00 | 114.00 | 183.00 | |||||||||||||||
Wells Plugged & Abandoned | ||||||||||||||||||||
| Exploratory | 0.00 | 0.00 | 1.00 | 1.00 | 2.00 | |||||||||||||||
| Developmental | 0.00 | 0.00 | 0.00 | 3.00 | 3.00 | |||||||||||||||
Wells Sold | ||||||||||||||||||||
| Exploratory | 0.00 | 0.00 | 0.00 | 1.00 | 1.00 | |||||||||||||||
| Developmental | 0.00 | 0.00 | 1.00 | 0.00 | 1.00 | |||||||||||||||
Wells in Process — End of Period | ||||||||||||||||||||
| Exploratory | 0.00 | 0.00 | 4.00 | 23.00 | 27.00 | |||||||||||||||
| Developmental | 1.00 | 0.00 | 39.00 | 19.00 | 59.00 | |||||||||||||||
| (1) | Gross exploratory wells were decreased by 11 and developmental wells were increased by 11. | |
| (2) | Marcellus Shale gross exploratory wells were increased by 2 and Upper Devonian gross exploratory wells were decreased by 2. |
Net Wells in Process of Drilling
Twelve Months Ended September 30, 2010
Twelve Months Ended September 30, 2010
| East | ||||||||||||||||||||
| Marcellus | Upper | Total | ||||||||||||||||||
| Gulf | West | Shale | Devonian | Company | ||||||||||||||||
Wells in Process — Beginning of Period | ||||||||||||||||||||
| Exploratory | 0.00 | 0.00 | 14.00 | (3) (4) | 19.00 | (4) | 33.00 | |||||||||||||
| Developmental | 0.00 | 0.00 | 8.50 | (3) | 67.00 | 75.50 | ||||||||||||||
Wells Commenced | ||||||||||||||||||||
| Exploratory | 0.29 | 0.00 | 11.00 | 18.00 | 29.29 | |||||||||||||||
| Developmental | 0.20 | 41.72 | 32.17 | 68.00 | 142.09 | |||||||||||||||
Wells Completed | ||||||||||||||||||||
| Exploratory | 0.29 | 0.00 | 20.00 | 13.00 | 33.29 | |||||||||||||||
| Developmental | 0.00 | 41.72 | 17.55 | 114.00 | 173.27 | |||||||||||||||
Wells Plugged & Abandoned | ||||||||||||||||||||
| Exploratory | 0.00 | 0.00 | 1.00 | 1.00 | 2.00 | |||||||||||||||
| Developmental | 0.00 | 0.00 | 0.00 | 3.00 | 3.00 | |||||||||||||||
Wells Sold | ||||||||||||||||||||
| Exploratory | 0.00 | 0.00 | 0.00 | 1.00 | 1.00 | |||||||||||||||
| Developmental | 0.00 | 0.00 | 0.50 | 0.00 | 0.50 | |||||||||||||||
Wells in Process — End of Period | ||||||||||||||||||||
| Exploratory | 0.00 | 0.00 | 4.00 | 22.00 | 26.00 | |||||||||||||||
| Developmental | 0.20 | 0.00 | 22.62 | 18.00 | 40.82 | |||||||||||||||
| (3) | Net exploratory wells were decreased by 6.50 and developmental wells were increased by 6.50. | |
| (4) | Marcellus Shale net exploratory wells were increased by 1 and Upper Devonian net exploratory wells were decreased by 1. |
Page 25
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
AND SUBSIDIARIES
EXPLORATION AND PRODUCTION INFORMATION
Reserve Quantity Information
| Gas MMcf | ||||||||||||||||
| U.S. | ||||||||||||||||
| Gulf Coast | West Coast | Appalachian | Total | |||||||||||||
| Region | Region | Region | Company | |||||||||||||
| Proved Developed and Undeveloped Reserves: | ||||||||||||||||
| September 30, 2009 | 26,167 | 72,959 | 149,828 | 248,954 | ||||||||||||
| Extensions and Discoveries | 2,881 | 269 | 189,979 | 193,129 | ||||||||||||
| Revisions of Previous Estimates | 6,683 | 2,315 | 7,677 | 16,675 | ||||||||||||
| Production | (10,304 | ) | (3,819 | ) | (16,222 | ) | (30,345 | ) | ||||||||
| September 30, 2010 | 25,427 | 71,724 | 331,262 | 428,413 | ||||||||||||
| Proved Developed Reserves: | ||||||||||||||||
| September 30, 2009 | 18,051 | 67,603 | 120,579 | 206,233 | ||||||||||||
| September 30, 2010 | 19,293 | 66,178 | 210,817 | 296,288 | ||||||||||||
| Oil Mbbl | ||||||||||||||||
| U.S. | ||||||||||||||||
| Gulf Coast | West Coast | Appalachian | Total | |||||||||||||
| Region | Region | Region | Company | |||||||||||||
| Proved Developed and Undeveloped Reserves: | ||||||||||||||||
| September 30, 2009 | 1,452 | 44,824 | 311 | 46,587 | ||||||||||||
| Extensions and Discoveries | 222 | 828 | 4 | 1,054 | ||||||||||||
| Revisions of Previous Estimates | 332 | 484 | 2 | 818 | ||||||||||||
| Production | (502 | ) | (2,669 | ) | (49 | ) | (3,220 | ) | ||||||||
| September 30, 2010 | 1,504 | 43,467 | 268 | 45,239 | ||||||||||||
| Proved Developed Reserves: | ||||||||||||||||
| September 30, 2009 | 1,194 | 37,711 | 285 | 39,190 | ||||||||||||
| September 30, 2010 | 1,066 | 36,353 | 263 | 37,682 | ||||||||||||
Page 26
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
AND SUBSIDIARIES
Pipeline & Storage Throughput- (millions of cubic feet — MMcf)
| Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||
| Increase | Increase | |||||||||||||||||||||||
| 2010 | 2009 | (Decrease) | 2010 | 2009 | (Decrease) | |||||||||||||||||||
| Firm Transportation — Affiliated | 10,249 | 10,473 | (224 | ) | 99,451 | 108,677 | (9,226 | ) | ||||||||||||||||
| Firm Transportation — Non-Affiliated | 41,425 | 41,298 | 127 | 197,456 | 239,617 | (42,161 | ) | |||||||||||||||||
| Interruptible Transportation | 884 | 512 | 372 | 4,459 | 3,888 | 571 | ||||||||||||||||||
| 52,558 | 52,283 | 275 | 301,366 | 352,182 | (50,816 | ) | ||||||||||||||||||
Utility Throughput — (MMcf)
| Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||
| Increase | Increase | |||||||||||||||||||||||
| 2010 | 2009 | (Decrease) | 2010 | 2009 | (Decrease) | |||||||||||||||||||
| Retail Sales: | ||||||||||||||||||||||||
| Residential Sales | 3,720 | 3,835 | (115 | ) | 54,012 | 58,835 | (4,823 | ) | ||||||||||||||||
| Commercial Sales | 537 | 567 | (30 | ) | 8,203 | 9,551 | (1,348 | ) | ||||||||||||||||
| Industrial Sales | 134 | 16 | 118 | 646 | 515 | 131 | ||||||||||||||||||
| 4,391 | 4,418 | (27 | ) | 62,861 | 68,901 | (6,040 | ) | |||||||||||||||||
| Off-System Sales | 1,865 | — | 1,865 | 5,899 | 513 | 5,386 | ||||||||||||||||||
| Transportation | 8,148 | 7,275 | 873 | 60,105 | 59,751 | 354 | ||||||||||||||||||
| 14,404 | 11,693 | 2,711 | 128,865 | 129,165 | (300 | ) | ||||||||||||||||||
Energy Marketing Volumes
| Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||
| Increase | Increase | |||||||||||||||||||||||
| 2010 | 2009 | (Decrease) | 2010 | 2009 | (Decrease) | |||||||||||||||||||
| Natural Gas (MMcf) | 7,155 | 10,400 | (3,245 | ) | 58,299 | 60,858 | (2,559 | ) | ||||||||||||||||
Page 27
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
FISCAL 2011 EARNINGS GUIDANCE AND SENSITIVITY
AND SUBSIDIARIES
FISCAL 2011 EARNINGS GUIDANCE AND SENSITIVITY
| Earnings per share sensitivity to changes | ||||||||||||||||||||||||
| Fiscal 2011 (Diluted earnings per share guidance*) | from prices used in guidance* ^ | |||||||||||||||||||||||
| $1 change per MMBtu gas | $5 change per Bbl oil | |||||||||||||||||||||||
| Earnings Range | Increase | Decrease | Increase | Decrease | ||||||||||||||||||||
| Consolidated Earnings | $ | 2.40 | - | $2.70 | + $0.19 | - $0.19 | + $0.05 | - $0.05 | ||||||||||||||||
| * | Please refer to forward looking statement footnote beginning at page 9 of this document. | |
| ^ | This sensitivity table is current as of November 4, 2010 and only considers revenue from the Exploration and Production segment’s crude oil and natural gas sales. This revenue is based upon pricing used in the Company’s earnings forecast. For its fiscal 2011 earnings forecast, the Company is utilizing flat NYMEX equivalent commodity pricing, exclusive of basis differential, of $4 per MMBtu for natural gas and $80 per Bbl for crude oil. The sensitivities will become obsolete with the passage of time, changes in Seneca’s production forecast, changes in basis differential, as additional hedging contracts are entered into, and with the settling of hedge contracts at their maturity. |
Page 28
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
AND SUBSIDIARIES
| 2010 | 2009 | |||||||
Quarter Ended September 30 (unaudited) | ||||||||
| Operating Revenues | $ | 286,396,000 | $ | 276,796,000 | ||||
| Income from Continuing Operations | $ | 32,393,000 | $ | 29,943,000 | ||||
| Income (Loss) from Discontinued Operations, Net of Tax | 6,009,000 | (2,945,000 | ) | |||||
| Net Income Available for Common Stock | $ | 38,402,000 | $ | 26,998,000 | ||||
| Earnings Per Common Share: | ||||||||
| Basic: | ||||||||
| Income from Continuing Operations | $ | 0.40 | $ | 0.37 | ||||
| Income (Loss) from Discontinued Operations | 0.07 | (0.03 | ) | |||||
| Net Income Available for Common Stock | $ | 0.47 | $ | 0.34 | ||||
| Diluted: | ||||||||
| Income from Continuing Operations | $ | 0.39 | $ | 0.37 | ||||
| Income (Loss) from Discontinued Operations | 0.07 | (0.04 | ) | |||||
| Net Income Available for Common Stock | $ | 0.46 | $ | 0.33 | ||||
| Weighted Average Common Shares: | ||||||||
| Used in Basic Calculation | 81,981,133 | 80,240,861 | ||||||
| Used in Diluted Calculation | 82,969,012 | 81,607,864 | ||||||
Twelve Months Ended September 30 (unaudited) | ||||||||
| Operating Revenues | $ | 1,760,503,000 | $ | 2,051,543,000 | ||||
| Income from Continuing Operations | $ | 219,133,000 | $ | 103,484,000 | ||||
| Income (Loss) from Discontinued Operations, Net of Tax | 6,780,000 | (2,776,000 | ) | |||||
| Net Income Available for Common Stock | $ | 225,913,000 | $ | 100,708,000 | ||||
| Earnings Per Common Share: | ||||||||
| Basic: | ||||||||
| Income from Continuing Operations | $ | 2.70 | $ | 1.29 | ||||
| Income (Loss) from Discontinued Operations | 0.08 | (0.03 | ) | |||||
| Net Income Available for Common Stock | $ | 2.78 | $ | 1.26 | ||||
| Diluted: | ||||||||
| Income from Continuing Operations | $ | 2.65 | $ | 1.28 | ||||
| Income (Loss) from Discontinued Operations | 0.08 | (0.03 | ) | |||||
| Net Income Available for Common Stock | $ | 2.73 | $ | 1.25 | ||||
| Weighted Average Common Shares: | ||||||||
| Used in Basic Calculation | 81,380,434 | 79,649,965 | ||||||
| Used in Diluted Calculation | 82,660,598 | 80,628,685 | ||||||