Company to Report 4th Quarter and Fiscal Year Earnings on November 9,
2006
WILLIAMSVILLE, N.Y., November 1 /CNW/ - National Fuel Gas Company
("National Fuel" or the "Company") (NYSE: NFG) today announced that due to a
further decline in market prices for natural gas at September 30, 2006, Seneca
Resources Corporation ("Seneca"), the Company's wholly owned exploration and
production subsidiary, will record a non-cash charge to write-down the value
of its Canadian oil and natural gas producing properties. This charge is
similar to the charge that was required in the Company's third fiscal quarter.
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 upon period-end spot 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.
Following the June 30, 2006 Canadian ceiling test impairment, the book
value of Seneca's Canadian reserves equaled the ceiling. Since that date,
Canadian spot natural gas prices have declined from approximately CDN
$5.50/MMBtu to approximately CDN $3.70/MMBtu at September 30, 2006. As a
result, the book value of Seneca's Canadian reserves would again exceed the
ceiling calculated as of September 30, 2006. Consequently, Seneca will record
an after-tax impairment charge in the range of US $28 million to US $30
million, which would result in a decrease in earnings of $0.33 to $0.35 per
diluted share.(x) At October 30, 2006, Canadian spot prices had rebounded to
approximately CDN $7.50/MMBtu. If that pricing were used to calculate the
ceiling, no write-down charge would be required this quarter and no write-down
charge would have been required last quarter. While the September 30, 2006
valuation of Seneca's U.S. properties was also lower than at the end of June,
due to a similar decline in U.S. spot crude oil and natural gas prices, there
was still a ceiling test cushion of approximately $200 million related to
Seneca's U.S. properties.
David F. Smith, President and Chief Operating Officer of National Fuel
stated: "The continued volatility in commodity prices, especially at the
quarter's end, clouds the overall performance in our Exploration and
Production operation. During the fiscal year, Seneca drilled 277 wells,
throughout all divisions, and successfully completed 267 or 96 percent of
them. We are still completing our year-end accounting entries, but we expect
that Seneca's production will be in line with our expectations and the
guidance provided."(x)
Smith added: "Although our successful wells did not completely replace
all the oil and gas that was produced during the year, we plan to drill wells
in the Gulf of Mexico and Canada which we believe offer high reserve
potential.(x) Additionally, Seneca expects to continue to increase its drilling
program in Appalachia.(x) We drilled 152 wells in Appalachia this year with a 99
percent success rate, compared to 80 successful wells last year, and we are
looking forward to growing our exploration and production program in
Appalachia."(x)
Joint Exploration and Production Program in the Appalachian Basin is
Announced
Seneca has selected EOG Resources, Inc. ("EOG") to jointly explore
approximately 770,000 acres of Seneca's mineral holdings and 130,000 acres of
EOG's mineral holdings in Pennsylvania and New York. The primary exploration
targets are the Devonian black shales, which have similar characteristics to
the prolific Barnett Shale that is actively producing natural gas in the Fort
Worth Basin. The two companies also plan to explore other horizons on acreage
held by Seneca and EOG.
After evaluating several candidates, Seneca selected EOG for this venture
to explore for natural gas in the Appalachian Basin. EOG has demonstrated
technical expertise, experience in the Appalachian region and proven success
in the Barnett Shale in Texas.
Seneca and EOG are in the process of completing the agreements for this
venture. Exploration activities, including the acquisition of seismic data,
will soon commence and initial exploratory drilling is anticipated in 2007.(x)
Smith noted: "We are looking forward to working with EOG, a well-respected and
highly-qualified industry partner. Recent technological advances and strong
natural gas prices have made it feasible to initiate exploration and
production activities in unconventional areas such as the Devonian black
shales. Seneca's ownership of considerable mineral holdings in the Appalachian
Basin provides significant opportunity for ongoing exploration."
Operational Update
Seneca also recently participated in the drilling of an exploratory test
well located in 37 feet of water on the High Island Block 24L, Texas State
Waters Offshore in the Gulf of Mexico. The well was drilled to 14,988 feet
measured depth and true vertical depth and penetrated more than 250 feet of
pay in Lower Miocene Lentic Jeff sands. The well will be tested following
current completion operations. Seneca has a thirty-five percent working
interest in the well. Seneca and its partners were also the successful bidders
at the State of Texas Lease Sale held on October 3, 2006 on three additional
offshore tracts that are contiguous to the discovery tract. Seneca now holds a
thirty five percent interest in 2,880 acres around the discovery well.
Drilling also continues on another well in the Sukunka Project region in
Northeast British Columbia. Seneca has a 20 percent working interest in the
prospect, which is operated by Talisman.
As previously disclosed, Seneca expects production in Fiscal 2007 to be
in the range of 47 to 52 BCFE.(x)
Company to Issue 4th Quarter and Fiscal Year Results on November 9, 2006
National Fuel Gas Company plans to release its 4th Quarter and Fiscal
Year earnings report after the market closes on Thursday, November 9, 2006.
Updated earnings guidance for Fiscal 2007 will also be provided at that time.
The Company will discuss its annual earnings report during a financial analyst
conference call on Friday November 10, 2006, at 11:00 a.m. EST. There are two
ways to access that 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) 1-866-578-5771 and using the
passcode "93603463". 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 "91885312." Both the webcast and telephonic replay will be available
until the close of business on Friday, November 17, 2006.
National Fuel is an integrated energy company 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.
(x)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; 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; 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.
