WILLIAMSVILLE, N.Y., February 5 /CNW/ - National Fuel Gas Company ("National Fuel" or the "Company") (NYSE:NFG) today announced results for the first quarter of its 2007 fiscal year (the quarter ended December 31, 2006).
HIGHLIGHTS
-- Reported GAAP earnings per share for the quarter of $0.64 were down $0.03 per share from the prior year's first quarter. Earnings were $0.04 higher in the Exploration and Production segment due to higher production and higher realized crude oil prices and $0.03 higher in the Corporate and All Other category, but those increases were more than offset by lower earnings in the Utility, Pipeline and Storage, Energy Marketing, and Timber segments as a result of warmer weather and lower natural gas prices.
-- Quarterly operating results before items impacting comparability were $0.62 per share, down $0.02 from the prior year's first quarter.
-- Production of crude oil and natural gas volumes for the quarter increased 0.9 billion cubic feet equivalent ("Bcfe") to 12.0 Bcfe, in line with the Company's guidance. The Company's expected production for the entire 2007 fiscal year remains at the previously announced level of 47 to 52 Bcfe.(x)
-- The Company is increasing its earnings guidance range for fiscal 2007 by $0.05 per share. The revised guidance range for fiscal 2007 is $2.15 to $2.35 per share.(x)
-- A conference call is scheduled for Tuesday, February 6, 2007 at 11:00 am Eastern Standard Time.
MANAGEMENT COMMENTS
Philip C. Ackerman, Chairman and Chief Executive Officer of National Fuel Gas Company stated: "The unusually warm, wet weather we experienced in November and December negatively impacted all segments of our business. Lower demand for natural gas reduced Utility and Energy Marketing earnings; lower gas prices reduced the efficiency gas revenues of the Pipeline; and warm, wet, muddy conditions impeded our ability to harvest timber and to drill and complete wells in Pennsylvania. Despite experiencing the warmest weather our operating area has seen in the last five years, consolidated operating results declined only a modest $0.02 per share. We now are experiencing colder weather which should allow us to return to our normal timber harvesting rates and catch up on our Appalachian drilling program now that drilling locations can be accessed."(x)
SUMMARY OF RESULTS
National Fuel had consolidated earnings for the quarter ended December 31, 2006 of $54.5 million, or $0.64 per share, a decrease of $2.9 million, or $0.03 per share, from the prior year's first quarter of $57.4 million or $0.67 per share. (note: all references to earnings per share are to diluted earnings per share and all amounts are stated in U.S. dollars).
Three Months
Ended December 31,
2006 2005
---------- ----------
(in thousands except per share amounts)
Reported GAAP earnings $ 54,520 $ 57,419
Items impacting comparability:
Discontinuance of hedge accounting(1) (1,888)
Out-of-period symmetrical sharing
adjustment(1) (2,551)
---------- ----------
Operating results $ 52,632 $ 54,868
---------- ----------
Reported GAAP earnings per share $ 0.64 $ 0.67
Items impacting comparability:
Discontinuance of hedge accounting(1) (0.02)
Out-of-period symmetrical sharing
adjustment(1) (0.03)
---------- ----------
Operating results $ 0.62 $ 0.64
---------- ----------
(1) See discussion of this item below.
As outlined in the table above, certain items included in GAAP earnings impacted the comparability of the Company's operating results when comparing the first quarter of fiscal 2007 to the first quarter of fiscal 2006. Excluding these items, operating results for the current first quarter were $52.6 million, or $0.62 per share, a decrease of $2.2 million, or $0.02 per share, from the prior year's first quarter. Items impacting comparability will be discussed in more detail within the discussion of segment earnings below.
DISCUSSION OF RESULTS BY SEGMENT
The following discussion of the earnings of each segment is summarized in a tabular form in this report. It may be helpful to refer to those tables while reviewing this discussion.
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 approximately $17.2 million, or $0.20 per share, for the quarter ended December 31, 2006 decreased $4.6 million or $0.05 per share compared to the prior year's first quarter. The comparability of the results is impacted by a $2.6 million positive out-of-period adjustment recorded in the first quarter of fiscal 2006 to correct Distribution's calculation of the symmetrical sharing component of New York's gas adjustment rate. The remaining decrease is mainly due to lower usage per customer account during the quarter.
Pipeline and Storage Segment
The Pipeline and Storage segment operations are carried out by National Fuel Gas Supply Corporation ("Supply Corporation") and Empire State Pipeline ("Empire"). These companies provide 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 $13.7 million, or $0.16 per share, for the quarter ended December 31, 2006, decreased $2.2 million, or $0.03 per share, when compared with the same period in the prior fiscal year. The comparability of the results for the quarter is impacted by a $1.9 million gain associated with the prepayment this quarter of the project financing debt for the Empire State Pipeline. Upon the payment of that debt, the corresponding interest rate collar no longer qualifies for hedge accounting, and gains and losses are no longer deferred. Excluding that gain, operating results decreased $4.1 million mainly due to lower efficiency gas revenue resulting from lower natural gas prices. Also higher throughput realized in the prior year first quarter when Supply and Empire were able to generate additional earnings by utilizing a portion of their system capacity to provide alternate transportation options to customers whose normal natural gas transportation routes were impacted by the hurricanes in the fall of 2005 did not recur this year.
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, in the Gulf Coast region of Texas, Louisiana and Alabama, and in the western provinces of Canada.
The Exploration and Production segment's earnings in the first quarter of fiscal 2007 increased $3.3 million or $0.04 per share to $20.7 million or $0.24 per share on a 0.855 Bcfe or 7.6 percent increase in production to 12 Bcfe. A minor drop in oil production was more than offset by an increase in gas production while the drop in natural gas prices was more than offset by the increase in oil prices realized after hedging. While much of the year over year increase in Gulf Coast production is attributable to the resumption of production after last year's hurricane shut-ins, the 18.5 percent increase in Appalachia production is organic growth attributable to the ramp-up in drilling activity over the past two years and production from those newer wells. For the quarter ended December 31, 2006, the weighted average oil price received by Seneca (after hedging) was $43.74/barrel ("Bbl"), an increase of $10.67/Bbl from the prior year's quarter. This increase in the weighted average oil price was mainly due to the expiration of older hedges. The weighted average natural gas price received by Seneca (after hedging) was $6.93 per thousand cubic feet ("Mcf"), a decrease of $1.51/Mcf from the prior year's quarter.
Energy Marketing
National Fuel Resources, Inc. ("NFR") comprises the Company's Energy Marketing segment. NFR markets natural gas to industrial, commercial, public authority and residential customers in western and central New York and northwestern Pennsylvania, offering competitively priced energy and energy management services to its customers.
The Energy Marketing segment's earnings for the quarter of $0.5 million compare to earnings of $1.0 million in the first quarter last year. An increase of 11 percent in sales throughput helped offset the impact of fewer spot sales and other operational opportunities when compared to the prior year's first quarter. Margins were lower due to these reduced opportunities together with higher quarterly operating expenses.
Timber Segment
The Timber segment operations are carried out by Highland Forest Resources, Inc. ("Highland") and Seneca's Northeast Division. This segment markets high quality hardwoods from its New York and Pennsylvania land holdings and owns two sawmill/dry kiln operations in northwestern Pennsylvania.
The Timber segment's first quarter earnings of $0.2 million compare to $1.5 million in the prior year's first quarter. Unfavorable weather conditions hindered the harvesting of both veneer and saw logs. This resulted in lower sales of both logs and lumber during the quarter.
Corporate and All Other
Other direct, wholly-owned subsidiaries of the Company include Horizon Energy Development, Inc., a corporation formerly engaged in the development of international power projects, Horizon LFG, Inc., a corporation engaged, through subsidiaries, in the purchase, processing, transportation and sale of landfill gas, and Horizon Power, Inc. ("Horizon Power"), a corporation that develops and owns independent electric generation facilities which are fueled by natural gas or landfill gas.
Earnings in the Corporate and All Other category were $2.2 million, an increase of $2.3 million or $0.03 per share when compared to the prior year's first quarter loss of $0.1 million. The increase is due to higher intercompany interest income on higher cash balances that the companies in this category made available to other segments for their working capital needs.
SHARE REPURCHASES
During the quarter, the Company repurchased in the open market 1,183,928 shares of its common stock pursuant to the authorization of the Company's Board of Directors to repurchase up to 8,000,000 shares of its common stock. Through December 31, 2006, the Company has repurchased 3,710,478 shares pursuant to this authorization. For the quarter ended December 31, 2006, the Company estimates that the calculated diluted earnings per share were increased by $0.007 per share as a result of the share repurchases during the quarter.
With respect to the earnings guidance discussed below, the Company has not incorporated any additional share repurchases into its earnings per share guidance. The Company continues to view share repurchases as an appropriate use of its cash, and will continue to consider repurchasing shares up to the full 8,000,000 repurchase authorization of its Board of Directors.(x) The Company cannot predict with any certainty the timing of those repurchases or the impact of those repurchases on the calculation of earnings per share.
EARNINGS GUIDANCE
The Company is increasing its consolidated earnings guidance for fiscal 2007 by $0.05 per share to the range of $2.15 to $2.35 per share.(x) This increase results primarily from a decrease in the depreciation, depletion and amortization ("DD&A") expense expected to be incurred in the Exploration and Production segment during the fiscal year. This guidance is still based on the September 21, 2006 commodity pricing incorporated in the Company's original guidance. To the extent that actual pricing during the remainder of the fiscal year varies from those September 21, 2006 prices, the fiscal year earnings will be affected as detailed in the earnings sensitivity table in this release.
EARNINGS TELECONFERENCE
The Company will host a conference call on Tuesday, February 6, 2007, at 11 a.m. (Eastern Standard Time) to discuss this announcement. There are two ways to access this call. For those with Internet access, visit National Fuel's Web site at http://www.nationalfuelgas.com and click on the "For Investors" link at the top of the homepage. For those without Internet access, access is also provided by dialing (toll-free) 1-866-700-6067, and using the passcode "79640993." For those unable to listen to the live conference call, a replay will be available approximately one hour after the conclusion of the call at the same Web site link and by phone at (toll free) 888-286-8010 using passcode "82459115." Both the webcast and telephonic replay will be available until the close of business on Tuesday, February 13, 2006.
National Fuel is an integrated energy company with $3.8 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: http://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; 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, including changes in the plans of the sponsors of the proposed Millennium Pipeline with respect to that project; the nature and projected profitability of pending and potential projects and other investments; occurrences affecting the Company's ability to obtain funds from operations or from issuances of debt or equity securities 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; changes in actuarial assumptions and the return on assets with respect to the Company's retirement plan and post retirement benefit plans; increasing health care costs and the resulting effect on health insurance premiums and on the obligation to provide post retirement benefits; or increasing costs of insurance, changes in coverage and the ability to obtain insurance. The Company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS
QUARTER ENDED DECEMBER 31, 2006
Pipeline & Energy
(Thousands of Dollars) Utility Storage E&P Marketing
--------------------------------------
First quarter 2006 GAAP
earnings $21,753 $ 15,850 $17,435 $ 987
Items impacting comparability:
Out-of-period adjustment to
symmetrical sharing (2,551)
--------------------------------------
First quarter 2006 operating
results 19,202 15,850 17,435 987
Drivers of operating results
Lower normalized usage per
account (1,218)
Lower transportation and
storage revenues (1,190)
Lower efficiency gas revenues (2,652)
Higher crude oil prices 6,077
Lower natural gas prices (6,656)
Higher natural gas production 5,118
Lower crude oil production (274)
Lower per unit margins (449)
Lower volumes
Lower depletion
Higher interest income
All other / rounding (810) (208) (977) (46)
--------------------------------------
First quarter 2007 operating
results 17,174 11,800 20,723 492
Items impacting comparability:
Discontinuance of hedge
accounting 1,888
--------------------------------------
First quarter 2007 GAAP
earnings $17,174 $ 13,688 $20,723 $ 492
--------------------------------------
Corporate /
(Thousands of Dollars) Timber All Other Consolidated
----------------------------------
First quarter 2006 GAAP earnings $ 1,464 $ (70) $ 57,419
Items impacting comparability:
Out-of-period adjustment to
symmetrical sharing (2,551)
----------------------------------
First quarter 2006 operating
results 1,464 (70) 54,868
Drivers of operating results
Lower normalized usage per account (1,218)
Lower transportation and storage
revenues (1,190)
Lower efficiency gas revenues (2,652)
Higher crude oil prices 6,077
Lower natural gas prices (6,656)
Higher natural gas production 5,118
Lower crude oil production (274)
Lower per unit margins (449)
Lower volumes (1,662) (1,662)
Lower depletion 418 418
Higher interest income 1,432 1,432
All other / rounding (3) 864 (1,180)
----------------------------------
First quarter 2007 operating
results 217 2,226 52,632
Items impacting comparability:
Discontinuance of hedge accounting 1,888
----------------------------------
First quarter 2007 GAAP earnings $ 217 $ 2,226 $ 54,520
----------------------------------
NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS PER SHARE
QUARTER ENDED DECEMBER 31, 2006
Pipeline & Energy
Utility Storage E&P Marketing
------------------------------------
First quarter 2006 GAAP earnings $ 0.25 $ 0.19 $ 0.20 $ 0.01
Items impacting comparability:
Out-of-period adjustment to
symmetrical sharing (0.03)
------------------------------------
First quarter 2006 operating
results 0.22 0.19 0.20 0.01
Drivers of operating results
Lower normalized usage per
account (0.01)
Lower transportation and storage
revenues (0.01)
Lower efficiency gas revenues (0.03)
Higher crude oil prices 0.07
Lower natural gas prices (0.08)
Higher natural gas production 0.06
Lower crude oil production -
Lower per unit margins -
Lower volumes
Lower depletion
Higher interest income
All other / rounding (0.01) (0.01) (0.01) -
------------------------------------
First quarter 2007 operating
results 0.20 0.14 0.24 0.01
Items impacting comparability:
Discontinuance of hedge
accounting 0.02
------------------------------------
First quarter 2007 GAAP earnings $ 0.20 $ 0.16 $ 0.24 $ 0.01
------------------------------------
Corporate /
Timber All Other Consolidated
---------------------------------
First quarter 2006 GAAP earnings $ 0.02 $ - $ 0.67
Items impacting comparability:
Out-of-period adjustment to
symmetrical sharing (0.03)
---------------------------------
First quarter 2006 operating results 0.02 - 0.64
Drivers of operating results
Lower normalized usage per account (0.01)
Lower transportation and storage
revenues (0.01)
Lower efficiency gas revenues (0.03)
Higher crude oil prices 0.07
Lower natural gas prices (0.08)
Higher natural gas production 0.06
Lower crude oil production -
Lower per unit margins -
Lower volumes (0.02) (0.02)
Lower depletion - -
Higher interest income 0.02 0.02
All other / rounding - 0.01 (0.02)
---------------------------------
First quarter 2007 operating results - 0.03 0.62
Items impacting comparability:
Discontinuance of hedge accounting 0.02
---------------------------------
First quarter 2007 GAAP earnings $ - $ 0.03 $ 0.64
---------------------------------
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
(Thousands of Dollars, except per share
amounts)
Three Months Ended
December 31,
(Unaudited)
-------------------------
SUMMARY OF OPERATIONS 2006 2005
-------------------------------------------- ------------ ------------
Operating Revenues $ 504,240 $ 710,756
------------ ------------
Operating Expenses:
Purchased Gas 242,939 436,778
Operation and Maintenance 99,374 103,628
Property, Franchise and Other Taxes 17,112 17,181
Depreciation, Depletion and Amortization 42,825 43,046
------------ ------------
402,250 600,633
Operating Income 101,990 110,123
Other Income (Expense):
Income from Unconsolidated Subsidiaries 1,231 1,264
Interest Income 1,363 1,134
Other Income 715 741
Interest Expense on Long-Term Debt (16,043) (18,218)
Other Interest Expense (1,849) (1,775)
------------ ------------
Income Before Income Taxes 87,407 93,269
Income Tax Expense 32,887 35,850
------------ ------------
Net Income Available for Common Stock $ 54,520 $ 57,419
------------ ------------
Earnings Per Common Share:
Basic $ 0.66 $ 0.68
------------ ------------
Diluted $ 0.64 $ 0.67
------------ ------------
Weighted Average Common Shares:
Used in Basic Calculation 82,679,343 84,422,717
------------ ------------
Used in Diluted Calculation 84,730,910 86,256,862
------------ ------------
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, September 30,
(Thousands of Dollars) 2006 2006
----------------------------------------------------------------------
ASSETS
Property, Plant and Equipment $4,742,029 $4,703,040
Less - Accumulated Depreciation, Depletion
and Amortization 1,846,665 1,825,314
----------------------------------------------------------------------
Net Property, Plant and Equipment 2,895,364 2,877,726
------------------------------------------- --------------------------
Current Assets:
Cash and Temporary Cash Investments 47,598 69,611
Hedging Collateral Deposits 9,760 19,676
Receivables - Net 192,608 144,254
Unbilled Utility Revenue 67,866 25,538
Gas Stored Underground 57,865 59,461
Materials and Supplies - at average cost 32,925 36,693
Unrecovered Purchased Gas Costs 23,991 12,970
Prepaid Pension and Post-Retirement Benefit
Costs 60,954 64,125
Other Current Assets 60,205 63,723
Deferred Income Taxes 16,533 23,402
------------------------------------------- --------------------------
Total Current Assets 570,305 519,453
------------------------------------------- --------------------------
Other Assets:
Recoverable Future Taxes 79,344 79,511
Unamortized Debt Expense 14,985 15,492
Other Regulatory Assets 76,890 76,917
Deferred Charges 2,068 3,558
Other Investments 90,282 88,414
Investments in Unconsolidated Subsidiaries 13,258 11,590
Goodwill 5,476 5,476
Intangible Assets 30,833 31,498
Fair Value of Derivative Financial
Instruments 10,295 11,305
Deferred Income Taxes 6,885 9,003
Other 3,368 4,388
------------------------------------------- --------------------------
Total Other Assets 333,684 337,152
------------------------------------------- --------------------------
Total Assets $3,799,353 $3,734,331
------------------------------------------- --------------------------
CAPITALIZATION AND LIABILITIES
Capitalization:
Comprehensive Shareholders' Equity
Common Stock, $1 Par Value Authorized -
200,000,000 Shares; Issued and Outstanding
- 82,624,576 Shares and 83,402,670 Shares,
Respectively $82,625 $83,403
Paid in Capital 557,504 543,730
Earnings Reinvested in the Business 781,728 786,013
------------------------------------------- --------------------------
Total Common Shareholder Equity Before
Items of Other Comprehensive Income 1,421,857 1,413,146
Accumulated Other Comprehensive Income 32,991 30,416
------------------------------------------- --------------------------
Total Comprehensive Shareholders' Equity 1,454,848 1,443,562
Long-Term Debt, Net of Current Portion 1,095,466 1,095,675
------------------------------------------- --------------------------
Total Capitalization 2,550,314 2,539,237
------------------------------------------- --------------------------
Current and Accrued Liabilities:
Notes Payable to Banks and Commercial Paper 71,600 -
Current Portion of Long-Term Debt 129 22,925
Accounts Payable 144,164 133,034
Amounts Payable to Customers 27,101 23,935
Dividends Payable 24,770 25,008
Interest Payable on Long-Term Debt 13,803 18,420
Other Accruals and Current Liabilities 31,071 27,040
Fair Value of Derivative Financial
Instruments 26,939 39,983
------------------------------------------- --------------------------
Total Current and Accrued Liabilities 339,577 290,345
------------------------------------------- --------------------------
Deferred Credits:
Deferred Income Taxes 551,589 544,502
Taxes Refundable to Customers 10,430 10,426
Unamortized Investment Tax Credit 5,919 6,094
Cost of Removal Regulatory Liability 86,907 85,076
Other Regulatory Liabilities 70,995 75,456
Post-Retirement Liabilities 31,512 32,918
Asset Retirement Obligations 78,464 77,392
Other Deferred Credits 73,646 72,885
------------------------------------------- --------------------------
Total Deferred Credits 909,462 904,749
------------------------------------------- --------------------------
Commitments and Contingencies - -
------------------------------------------- --------------------------
Total Capitalization and Liabilities $3,799,353 $3,734,331
------------------------------------------- --------------------------
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
December 31,
(Thousands of Dollars) 2006 2005
----------------------------------------------------------------------
Operating Activities:
Net Income Available for Common Stock $54,520 $57,419
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation, Depletion and Amortization 42,825 43,046
Deferred Income Taxes 11,198 16,653
(Income) Loss from Unconsolidated
Subsidiaries, Net of Cash Distributions (18) 1,887
Excess Tax Benefits Associated with Stock-
Based Compensation Awards (13,717) (6,439)
Other 5,728 3,159
Change in:
Hedging Collateral Deposits 9,916 39,093
Receivables and Unbilled Utility Revenue (91,341) (211,491)
Gas Stored Underground and Materials and
Supplies 5,324 5,692
Unrecovered Purchased Gas Costs (11,021) (13,735)
Prepayments and Other Current Assets 20,398 17,075
Accounts Payable 11,736 56,580
Amounts Payable to Customers 3,166 (127)
Other Accruals and Current Liabilities (756) (554)
Other Assets 1,883 (3,083)
Other Liabilities (6,810) 15,394
----------------------------------------------------------------------
Net Cash Provided by Operating Activities $43,031 $20,569
----------------------------------------------------------------------
Investing Activities:
Capital Expenditures ($65,302) ($70,368)
Investment in Partnership (1,650) -
Net Proceeds from Sale of Oil and Gas Producing
Properties 2,141 -
Other (316) (745)
----------------------------------------------------------------------
Net Cash Used in Investing Activities ($65,127) ($71,113)
----------------------------------------------------------------------
Financing Activities:
Change in Notes Payable to Banks and Commercial
Paper $71,600 $74,800
Excess Tax Benefits Associated with Stock-Based
Compensation Awards 13,717 6,439
Share Repurchases under Repurchase Plan (42,921) -
Reduction of Long-Term Debt (23,005) (2,110)
Dividends Paid on Common Stock (25,026) (24,445)
Proceeds From Issuance of Common Stock 6,743 2,570
----------------------------------------------------------------------
Net Cash Provided by Financing Activities $1,108 $57,254
----------------------------------------------------------------------
Effect of Exchange Rates on Cash (1,025) 147
----------------------------------------------------------------------
Net Increase (Decrease) in Cash and Temporary Cash
Investments (22,013) 6,857
Cash and Temporary Cash Investments at Beginning
of Period 69,611 57,607
----------------------------------------------------------------------
Cash and Temporary Cash Investments at December 31 $47,598 $64,464
----------------------------------------------------------------------
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
Three Months Ended
(Thousands of Dollars, except per share December 31,
amounts)
------------------------------
UTILITY SEGMENT 2006 2005 Variance
--------------------------------------- ------------------------------
Revenues from External Customers $288,782 $431,479 $(142,697)
Intersegment Revenues 4,029 4,121 (92)
------------------------------
Total Operating Revenues 292,811 435,600 (142,789)
------------------------------
Operating Expenses:
Purchased Gas 186,361 320,557 (134,196)
Operation and Maintenance 50,767 51,711 (944)
Property, Franchise and Other Taxes 11,191 11,514 (323)
Depreciation, Depletion and
Amortization 9,778 9,977 (199)
------------------------------
258,097 393,759 (135,662)
------------------------------
Operating Income 34,714 41,841 (7,127)
Other Income (Expense):
Interest Income 284 201 83
Other Income 286 212 74
Other Interest Expense (7,376) (6,723) (653)
------------------------------
Income Before Income Taxes 27,908 35,531 (7,623)
Income Tax Expense 10,734 13,778 (3,044)
------------------------------
Net Income $ 17,174 $ 21,753 $ (4,579)
------------------------------
Net Income Per Share (Diluted) $ 0.20 $ 0.25 $ (0.05)
------------------------------
Three Months Ended
December 31,
------------------------------
PIPELINE AND STORAGE SEGMENT 2006 2005 Variance
--------------------------------------- ------------------------------
Revenues from External Customers $ 29,809 $ 34,738 $ (4,929)
Intersegment Revenues 20,368 21,296 (928)
------------------------------
Total Operating Revenues 50,177 56,034 (5,857)
------------------------------
Operating Expenses:
Purchased Gas (13) (16) 3
Operation and Maintenance 14,903 15,316 (413)
Property, Franchise and Other Taxes 4,277 3,956 321
Depreciation, Depletion and
Amortization 9,293 9,183 110
------------------------------
28,460 28,439 21
------------------------------
Operating Income 21,717 27,595 (5,878)
Other Income (Expense):
Interest Income 84 52 32
Other Income 184 208 (24)
Interest Expense on Long-Term Debt 1,839 (318) 2,157
Other Interest Expense (2,287) (1,296) (991)
------------------------------
Income Before Income Taxes 21,537 26,241 (4,704)
Income Tax Expense 7,849 10,391 (2,542)
------------------------------
Net Income $ 13,688 $ 15,850 $ (2,162)
------------------------------
Net Income Per Share (Diluted) $ 0.16 $ 0.19 $ (0.03)
------------------------------
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
(Thousands of Dollars, except per share Three Months Ended
amounts) December 31,
-----------------------------
EXPLORATION AND PRODUCTION SEGMENT 2006 2005 Variance
---------------------------------------- -----------------------------
Operating Revenues $ 88,709 $ 82,087 $ 6,622
-----------------------------
Operating Expenses:
Purchased Gas - 94 (94)
Operation and Maintenance:
General and Administrative Expense 5,571 6,300 (729)
Lease Operating Expense 13,456 13,539 (83)
All Other Operation and Maintenance
Expense 2,641 1,972 669
Property, Franchise and Other Taxes
(Lease Operating Expense) 1,150 1,208 (58)
Depreciation, Depletion and
Amortization 22,008 21,540 468
-----------------------------
44,826 44,653 173
-----------------------------
Operating Income 43,883 37,434 6,449
Other Income (Expense):
Interest Income 2,543 1,841 702
Other Interest Expense (12,947) (12,429) (518)
-----------------------------
Income Before Income Taxes 33,479 26,846 6,633
Income Tax Expense 12,756 9,411 3,345
-----------------------------
Net Income $ 20,723 $ 17,435 $ 3,288
-----------------------------
Net Income Per Share (Diluted) $ 0.24 $ 0.20 $ 0.04
-----------------------------
Three Months Ended
December 31,
-----------------------------
ENERGY MARKETING SEGMENT 2006 2005 Variance
---------------------------------------- -----------------------------
Operating Revenues $ 83,318 $145,560 $(62,242)
-----------------------------
Operating Expenses:
Purchased Gas 81,255 142,829 (61,574)
Operation and Maintenance 1,294 1,231 63
Property, Franchise and Other Taxes 11 10 1
Depreciation, Depletion and
Amortization 7 21 (14)
-----------------------------
82,567 144,091 (61,524)
-----------------------------
Operating Income 751 1,469 (718)
Other Income (Expense):
Interest Income 62 126 (64)
Other Income 136 99 37
Other Interest Expense (127) (62) (65)
-----------------------------
Income Before Income Taxes 822 1,632 (810)
Income Tax Expense 330 645 (315)
-----------------------------
Net Income $ 492 $ 987 $ (495)
-----------------------------
Net Income Per Share (Diluted) $ 0.01 $ 0.01 $ -
-----------------------------
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
Three Months Ended
(Thousands of Dollars, except per share December 31,
amounts)
--------------------------
TIMBER SEGMENT 2006 2005 Variance
------------------------------------------- --------------------------
Revenues from External Customers $11,763 $16,908 $(5,145)
Intersegment Revenues - 23 (23)
--------------------------
Total Operating Revenues 11,763 16,931 (5,168)
--------------------------
Operating Expenses:
Operation and Maintenance 9,143 11,684 (2,541)
Property, Franchise and Other Taxes 393 380 13
Depreciation, Depletion and Amortization 1,367 2,011 (644)
--------------------------
10,903 14,075 (3,172)
--------------------------
Operating Income 860 2,856 (1,996)
Other Income (Expense):
Interest Income 316 137 179
Other Income 21 17 4
Other Interest Expense (803) (763) (40)
--------------------------
Income Before Income Taxes 394 2,247 (1,853)
Income Tax Expense 177 783 (606)
--------------------------
Net Income $ 217 $ 1,464 $(1,247)
--------------------------
Net Income Per Share (Diluted) $ - $ 0.02 $ (0.02)
--------------------------
Three Months Ended
December 31,
--------------------------
ALL OTHER 2006 2005 Variance
------------------------------------------- --------------------------
Revenues from External Customers $ 1,676 $ (16) $ 1,692
Intersegment Revenues 2,198 4,527 (2,329)
--------------------------
Total Operating Revenues 3,874 4,511 (637)
--------------------------
Operating Expenses:
Purchased Gas 1,828 3,107 (1,279)
Operation and Maintenance 805 874 (69)
Property, Franchise and Other Taxes 20 19 1
Depreciation, Depletion and Amortization 197 199 (2)
--------------------------
2,850 4,199 (1,349)
--------------------------
Operating Income 1,024 312 712
Other Income (Expense):
Income from Unconsolidated Subsidiaries 1,231 1,264 (33)
Interest Income 3 6 (3)
Other Income 12 3 9
Other Interest Expense (670) (590) (80)
--------------------------
Income Before Income Taxes 1,600 995 605
Income Tax Expense 615 425 190
--------------------------
Net Income $ 985 $ 570 $ 415
--------------------------
Net Income Per Share (Diluted) $ 0.01 $ 0.01 $ -
--------------------------
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
(Thousands of Dollars, except per share Three Months Ended
amounts) December 31,
----------------------------
CORPORATE 2006 2005 Variance
----------------------------------------- ----------------------------
Revenues from External Customers $ 183 $ - $ 183
Intersegment Revenues 851 692 159
----------------------------
Total Operating Revenues $ 1,034 $ 692 $ 342
----------------------------
Operating Expenses:
Operation and Maintenance 1,748 1,867 (119)
Property, Franchise and Other Taxes 70 94 (24)
Depreciation, Depletion and
Amortization 175 115 60
----------------------------
1,993 2,076 (83)
----------------------------
Operating Income (959) (1,384) 425
Other Income (Expense):
Interest Income 21,930 19,725 2,205
Other Income 76 202 (126)
Interest Expense on Long-Term Debt (17,882) (17,900) 18
Other Interest Expense (1,498) (866) (632)
----------------------------
Income Before Income Taxes 1,667 (223) 1,890
Income Tax Expense 426 417 9
----------------------------
Net Income $ 1,241 $ (640) $ 1,881
----------------------------
Net Income Per Share (Diluted) $ 0.02 $ (0.01) $ 0.03
----------------------------
Three Months Ended
December 31,
----------------------------
INTERSEGMENT ELIMINATIONS 2006 2005 Variance
----------------------------------------- ----------------------------
Operating Revenues $(27,446) $(30,659) $ 3,213
----------------------------
Operating Expenses:
Purchased Gas (26,492) (29,793) 3,301
Operation and Maintenance (954) (866) (88)
----------------------------
(27,446) (30,659) 3,213
----------------------------
Operating Income - - -
Other Income (Expense):
Interest Income (23,859) (20,954) (2,905)
Other Interest Expense 23,859 20,954 2,905
----------------------------
Net Income $ - $ - $ -
----------------------------
Net Income Per Share (Diluted) $ - $ - $ -
----------------------------
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
SEGMENT INFORMATION (Continued)
(Thousands of Dollars)
Three Months Ended
December 31,
(Unaudited)
-------------------------------
Increase
2006 2005 (Decrease)
----------- -------- ----------
Capital
Expenditures:
-----------------
Utility $ 12,879 $12,354 $ 525
Pipeline and
Storage 4,952 6,163 (1,211)
Exploration and
Production 46,589 50,923 (4,334)
Energy Marketing 9 5 4
Timber 806 495 311
----------- -------- ----------
Total
Reportable
Segments 65,235 69,940 (4,705)
All Other 29 - 29
Corporate 38 428 (390)
----------- -------- ----------
Total
Consolidated $ 65,302 $70,368 $ (5,066)
----------- -------- ----------
DEGREE DAYS
------------------------------
Percent Colder
(Warmer) Than:
Three Months Ended December 31 Normal 2006 2005 Normal Last Year
------------------------------ ------- ------- ------ ------ ---------
Buffalo, NY 2,260 1,947 2,210 (13.8) (11.9)
Erie, PA 2,081 1,878 2,048 (9.8) (8.3)
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
EXPLORATION AND PRODUCTION INFORMATION
----------------------------------------------------------------------
Three Months Ended
December 31,
----------------------------
Increase
2006 2005 (Decrease)
-------- -------- ----------
Gas Production/Prices:
-----------------------------------------
Production (MMcf)
Gulf Coast 2,723 1,667 1,056
West Coast 944 1,018 (74)
Appalachia 1,394 1,253 141
Canada 1,721 1,911 (190)
-------- -------- ----------
6,782 5,849 933
-------- -------- ----------
Average Prices (Per Mcf)
Gulf Coast $ 6.55 $ 10.74 $ (4.19)
West Coast 6.09 11.08 (4.99)
Appalachia 7.22 13.62 (6.40)
Canada 6.39 10.76 (4.37)
Weighted Average 6.58 11.42 (4.84)
Weighted Average after Hedging 6.93 8.44 (1.51)
Oil Production/Prices:
-----------------------------------------
Production (Thousands of Barrels)
Gulf Coast 202 107 95
West Coast 591 685 (94)
Appalachia 27 10 17
Canada 56 87 (31)
-------- -------- ----------
876 889 (13)
-------- -------- ----------
Average Prices (Per Barrel)
Gulf Coast $ 56.51 $ 57.90 $ (1.39)
West Coast 51.11 51.34 (0.23)
Appalachia 59.78 61.53 (1.75)
Canada 42.58 43.18 (0.60)
Weighted Average 52.08 51.45 0.63
Weighted Average after Hedging 43.74 33.07 10.67
Total Production (Mmcfe) 12,038 11,183 855
----------------------------------------- -------- -------- ----------
Selected Operating Performance
Statistics:
-----------------------------------------
General & Administrative Expense per
Mcfe(1) $ 0.46 $ 0.56 $ (0.10)
Lease Operating Expense per Mcfe(1) $ 1.21 $ 1.32 $ (0.11)
Depreciation, Depletion & Amortization
per Mcfe(1) $ 1.83 $ 1.93 $ (0.10)
(1) Refer to table for the General and Administrative Expense, Lease
Operating Expense and Depreciation, Depletion, and Amortization
Expense for the Exploration and Production segment.
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
EXPLORATION AND PRODUCTION INFORMATION
----------------------------------------------------------------------
Hedging Summary for Fiscal 2007
SWAPS Volume Average Hedge Price
-------------------------------- ---------- --------------------------
Oil 0.5 MMBBL $37.86 / BBL
Gas 4.5 BCF $7.32 / MCF
No-cost Collars Volume Floor Price Ceiling Price
-------------------------------- ---------- ------------ -------------
Oil 0.1 MMBBL $70.00 / BBL $77.00 / BBL
Gas 4.1 BCF $7.93 / MCF $17.22 / MCF
Hedging Summary for Fiscal 2008
SWAPS Volume Average Hedge Price
-------------------------------- ---------- --------------------------
Oil 0.2 MMBBL $51.80 / BBL
Gas 5.1 BCF $8.31 / MCF
No-cost Collars Volume Floor Price Ceiling Price
-------------------------------- ---------- ------------ -------------
Gas 1.4 BCF $8.83 / MCF $16.45 / MCF
Gross Wells in Process of
Drilling
----------------------------
Quarter Ended December 31,
2006
----------------------------
Total Total
Gulf West East U.S. Canada Company
----- ------ ------ ------ ------ -------
Wells in Process - Beginning
Period
Exploratory 4.00 1.00 10.00 15.00 5.00 20.00
Developmental 1.00 5.00 44.00 50.00 0.00 50.00
Wells Commenced
Exploratory 1.00 0.00 3.00 4.00 4.00 8.00
Developmental 0.00 20.00 19.00 39.00 0.00 39.00
Wells Completed
Exploratory 1.00 1.00 0.00 2.00 3.00 5.00
Developmental 0.00 21.00 47.00 68.00 0.00 68.00
Wells Plugged & Abandoned
Exploratory 1.00 0.00 0.00 1.00 0.00 1.00
Developmental 0.00 0.00 1.00 1.00 0.00 1.00
Wells in Process - End of
Period
Exploratory 3.00 0.00 13.00 16.00 6.00 22.00
Developmental 1.00 4.00 15.00 20.00 0.00 20.00
Net Wells in Process of
Drilling
----------------------------
Quarter Ended December 31,
2006
----------------------------
Total Total
Gulf West East U.S. Canada Company
----- ------ ------ ------ ------ -------
Wells in Process - Beginning
Period
Exploratory 2.02 0.50 10.00 12.52 2.13 14.65
Developmental 0.67 5.00 44.00 49.67 0.00 49.67
Wells Commenced
Exploratory 0.50 0.00 2.60 3.10 2.75 5.85
Developmental 0.00 20.00 19.00 39.00 0.00 39.00
Wells Completed
Exploratory 0.35 0.50 0.00 0.85 2.50 3.35
Developmental 0.00 21.00 47.00 68.00 0.00 68.00
Wells Plugged & Abandoned
Exploratory 0.37 0.00 0.00 0.37 0.00 0.37
Developmental 0.00 0.00 1.00 1.00 0.00 1.00
Wells in Process - End of
Period
Exploratory 1.80 0.00 12.60 14.40 2.38 16.78
Developmental 0.67 4.00 15.00 19.67 0.00 19.67
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
Utility Throughput - (millions of cubic
feet - MMcf)
Three Months Ended
December 31,
---------------------------
Increase
2006 2005 (Decrease)
------- -------- ----------
Retail Sales:
Residential Sales 16,678 19,524 (2,846)
Commercial Sales 2,868 3,443 (575)
Industrial Sales 192 327 (135)
------- -------- ----------
19,738 23,294 (3,556)
Transportation 15,853 14,342 1,511
------- -------- ----------
35,591 37,636 (2,045)
------- -------- ----------
Pipeline & Storage Throughput- (MMcf)
Three Months Ended
December 31,
---------------------------
Increase
2006 2005 (Decrease)
------- -------- ----------
Firm Transportation - Affiliated 29,730 33,225 (3,495)
Firm Transportation - Non-Affiliated 44,697 69,597 (24,900)
Interruptible Transportation 995 3,723 (2,728)
------- -------- ----------
75,422 106,545 (31,123)
------- -------- ----------
Energy Marketing Volumes
Three Months Ended
December 31,
---------------------------
Increase
2006 2005 (Decrease)
------- -------- ----------
Natural Gas (MMcf) 11,116 9,975 1,141
------- -------- ----------
Timber Board Feet (Thousands)
December 31,
---------------------------
Increase
2006 2005 (Decrease)
------- -------- ----------
Log Sales 1,709 2,491 (782)
Green Lumber Sales 1,530 1,974 (444)
Kiln Dry Lumber Sales 3,157 4,486 (1,329)
------- -------- ----------
6,396 8,951 (2,555)
------- -------- ----------
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
FISCAL 2007 EARNINGS GUIDANCE AND SENSITIVITIES
Fiscal 2007 (Diluted
earnings per share Earnings per share sensitivity to changes
guidance(x)) from NYMEX prices used in guidance(x) +
-------------------------- -----------------------------------------
$1 change per MMBtu $5 change per Bbl oil
gas
-----------------------------------------
Range Increase Decrease Increase Decrease
-------------- ------------------- ---------------------
Consolidated
Earnings $2.15 - $2.35 + $0.11 - $0.11 + $0.07 - $0.07
NYMEX Settlement Prices at September 21, 2006
----------------------------------------------------------------------
Natural Gas Oil
($ per MMBtu) ($ per Bbl)
------------- -----------
Jan-07 $7.881 $63.32
Feb-07 $7.921 $64.03
Mar-07 $7.746 $64.65
Apr-07 $7.166 $65.18
May-07 $7.126 $65.61
Jun-07 $7.221 $65.96
Jul-07 $7.311 $66.25
Aug-07 $7.391 $66.49
Sep-07 $7.476 $66.67
Average $7.471 $65.35
(x) Please refer to forward looking statement footnote in this document.
+ This sensitivity table is current as of February 1, 2007 and only
considers revenue from the Exploration and Production segment's crude
oil and natural gas sales. 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 NYMEX hedge contracts at their
maturity.
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
Quarter Ended December 31 (unaudited) 2006 2005
-------------------------------------- --------------- ---------------
Operating Revenues $ 504,240,000 $ 710,756,000
--------------- ---------------
Net Income Available for Common Stock $ 54,520,000 $ 57,419,000
--------------- ---------------
Earnings Per Common Share:
Basic $ 0.66 $ 0.68
--------------- ---------------
Diluted $ 0.64 $ 0.67
--------------- ---------------
Weighted Average Common Shares:
Used in Basic Calculation 82,679,343 84,422,717
--------------- ---------------
Used in Diluted Calculation 84,730,910 86,256,862
--------------- ---------------
Twelve Months Ended December 31
(unaudited)
--------------------------------------
Operating Revenues $2,105,143,000 $2,134,021,000
--------------- ---------------
Income from Continuing Operations $ 135,192,000 $ 166,104,000
Income from Discontinued Operations,
Net of Tax - 30,365,000
--------------- ---------------
Net Income Available for Common Stock $ 135,192,000 $ 196,469,000
--------------- ---------------
Earnings Per Common Share:
Basic:
Income from Continuing Operations $ 1.62 $ 1.98
Income from Discontinued
Operations - 0.36
--------------- ---------------
Net Income Available for Common
Stock $ 1.62 $ 2.34
--------------- ---------------
Diluted:
Income from Continuing Operations $ 1.58 $ 1.94
Income from Discontinued
Operations - 0.36
--------------- ---------------
Net Income Available for Common
Stock $ 1.58 $ 2.30
--------------- ---------------
Weighted Average Common Shares:
Used in Basic Calculation 83,590,690 83,862,052
--------------- ---------------
Used in Diluted Calculation 85,650,747 85,438,189
--------------- ---------------