WILLIAMSVILLE, N.Y., July 20 /CNW/ - National Fuel Gas Company ("National
Fuel" or the "Company") (NYSE: NFG) today announced that the decline in market
prices for natural gas at June 30, 2006, will require Seneca Resources
Corporation ("Seneca"), the Company's wholly owned exploration and production
subsidiary, to record a non-cash charge to write-down the value of its
Canadian oil and natural gas producing properties.
Like many independent exploration and production companies, Seneca uses
the full cost method of accounting for determining the book value of its oil
and natural gas properties. This method requires that Seneca perform a
quarterly "ceiling test" to compare, on a country-by-country basis, the
present value of future revenues from its oil and natural gas reserves based
on current market prices (the "ceiling") with the book value of those reserves
at the balance sheet date. If the book value of the reserves in any country
exceeds the ceiling, a non-cash charge must be recorded to reduce the book
value of the reserves to the calculated ceiling.
As disclosed in National Fuel's second quarter earnings release, at March
31, 2006, the book value of Seneca's Canadian reserves (of which more than 80%
are natural gas) nearly equaled the ceiling. New York Mercantile Exchange
("NYMEX") natural gas prices were $7.21/MMBtu on March 31, but declined to
$6.10/MMBtu at June 30, 2006. The book value of Seneca's Canadian reserves is
now expected to exceed the ceiling calculated as of June 30, 2006. As a
result, Seneca is required to record an after-tax impairment charge which is
expected to be in the range of US$35 million to $40 million or $0.41 to $0.47
per diluted share.(x)
David F. Smith, President and Chief Operating Officer of National Fuel
Gas Company, stated: "The decline in natural gas prices since the end of March
required this write down of the value of Seneca's Canadian assets to reflect
market prices as of the end of June. We nonetheless expect to meet our fiscal
2006 production estimates of 46-51 Bcfe.(x) We are also currently reviewing our
capital budget and potential prospects in Canada for the remainder of this
fiscal year and for fiscal 2007."(x)
National Fuel is in the process of completing its quarter-end closing
procedures and will update its earnings guidance for the remainder of the
fiscal year in its third quarter earnings report, which is scheduled to be
released in the evening of August 3, 2006. Preliminary earnings guidance for
fiscal 2007 will also be provided in that release.
The Company will discuss its third quarter earnings release in a
financial analyst conference call on Friday August 4, 2006, at 11:00 a.m.
EDST. There are two ways to access this call. For those with Internet access,
the live webcast can be accessed via National Fuel's website,
www.nationalfuelgas.com at the "For Investors" link at the top of the
homepage. For those without Internet access, the call may be accessed by
dialing (toll-free) 1-866-825-3354 and using the passcode "12960669." 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 website
link and by phone at (toll-free) 1-888-286-8010 using passcode "44573014."
Both the webcast and telephonic replay will be available until the close of
business on Friday, August 11, 2006.
National Fuel is an integrated energy company with $3.9 billion in assets
comprised of the following five operating segments: Utility, Pipeline and
Storage, Exploration and Production, Energy Marketing, and Timber. Additional
information about National Fuel is available on its Internet Web site:
www.nationalfuelgas.com or through its investor information service at
1-800-334-2188.
Certain statements contained herein, including those which are designated
with an asterisk ("(x)") 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 laws and
regulations to which the Company is subject, including changes in tax,
environmental, safety and employment laws and regulations, and changes in laws
and regulations relating to repeal of the Public Utility Holding Company Act
of 1935; changes in economic conditions, including economic disruptions caused
by terrorist activities, acts of war or major accidents; changes in
demographic patterns and weather conditions, including the occurrence of
severe weather, such as hurricanes; changes in the availability and/or 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; impairments under the Securities and Exchange
Commission's full cost ceiling test for natural gas and oil reserves; changes
in the availability and/or price of derivative financial instruments; changes
in the price differentials between various types of oil; failure of the price
differential between heavy sour crude oil and light sweet crude oil to return
to its historical norm; 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 or plans; 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 or other investments 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; the cost and effects of legal and administrative claims against the
Company; 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.
