WILLIAMSVILLE, N.Y., May 7 /CNW/ - National Fuel Gas Company ("National Fuel" or the "Company") (NYSE:NFG) today announced results for the quarter and six months ended March 31, 2007.
HIGHLIGHTS
1 Reported GAAP earnings per share for the quarter of $0.92 increased $0.01 per share from the prior year's second quarter. Earnings were higher in the Utility segment, the Energy Marketing segment and the Timber segment. Lower earnings in the Exploration and Production segment and the Pipeline and Storage segment offset those increases. 2 Quarterly operating results before items impacting comparability were $0.89 per share, an increase of $0.04 from the prior year's second quarter. 3 The Company is increasing and narrowing its GAAP guidance range for fiscal 2007 earnings. The revised earnings guidance range is now $2.25 to $2.40 per share.(x) It had previously been $2.15 to $2.35 per share.(x) 4 A conference call is scheduled for Tuesday, May 8, 2007, at 11:00 am Eastern Time.
MANAGEMENT COMMENTS
Philip C. Ackerman, Chairman and Chief Executive Officer of National Fuel Gas Company stated: "We have just had another very solid quarter. In particular, extremes of weather with weekly temperatures ranging from 46% warmer than normal to 30% colder than normal emphasized the importance of storage capacity and the talents of our employees in meeting customer needs. An increase in gas production and an increase in realized oil prices were offset by a higher effective tax rate, but our Exploration and Production segment continues to make progress with increasing emphasis on Appalachia, the hiring of a new exploration and production manager and the possible sale of our Canadian operations."
SUMMARY OF RESULTS
National Fuel had consolidated earnings for the quarter ended March 31, 2007, of $78.4 million, a decrease of $0.2 million from the prior year's second quarter of $78.6 million. Consolidated earnings per share of $0.92 increased $0.01 due to a lower number of weighted average shares outstanding compared to the prior year. The decrease in weighted average shares outstanding is a result of the Company's share repurchase program (note: all references to earnings per share are to diluted earnings per share and all amounts are stated in U.S. dollars).
Consolidated earnings for the six months ended March 31, 2007, of $133.0 million or $1.57 per share decreased $3.0 million or $0.01 per share from the prior year's earnings. The Company's consolidated earnings per share would have been $0.02 per share lower if not for the fact that the weighted average shares outstanding have decreased compared to the prior year, mostly due to the share repurchase program.
Three Months Six Months
Ended March 31, Ended March 31,
(in thousands except per share
amounts) 2007 2006 2007 2006
--------- --------- --------- ---------
Reported GAAP earnings $ 78,447 $ 78,594 $132,967 $136,013
Items impacting
comparability:
Resolution of purchased
gas contingency(1) (2,344) (2,344)
Discontinuance of hedge
accounting(1) (1,888)
Income tax adjustment(1) (5,080) (5,080)
Out-of-period symmetrical
sharing adjustment(1) (2,551)
--------- --------- --------- ---------
Operating results $ 76,103 $ 73,514 $128,735 $128,382
--------- --------- --------- ---------
Reported GAAP earnings per
share $ 0.92 $ 0.91 $ 1.57 $ 1.58
Items impacting
comparability:
Resolution of purchased
gas contingency(1) (0.03) (0.03)
Discontinuance of hedge
accounting(1) (0.02)
Income tax adjustment(1) (0.06) (0.06)
Out-of-period symmetrical
sharing adjustment(1) (0.03)
--------- --------- --------- ---------
Operating results $ 0.89 $ 0.85 $ 1.52 $ 1.49
--------- --------- --------- ---------
(1) See discussion of these items 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 second quarter and six months ended March 31, 2007, to the comparable periods in fiscal 2006. Excluding these items, operating results for the current second quarter of $76.1 million or $0.89 per share increased $2.6 million or $0.04 per share. Excluding these items, operating results for the six months ended March 31, 2007, of $128.7 million or $1.52 per share increased $0.4 million or $0.03 per share. 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 $33.4 million or $0.39 per share, for the quarter ended March 31, 2007, increased $4.8 million or $0.06 per share compared to the prior year's second quarter. In the New York division, earnings decreased $1.3 million mainly due to higher operating expenses. In the Pennsylvania division, operating results increased $6.1 million due to the impact of weather that was 16.5 percent colder than the prior year and the increase in base rates taking effect early in this quarter. On January 1, 2007, Distribution implemented the Settlement Agreement approved by the Pennsylvania Public Utility Commission, which among other things provided for a $14.3 million (before tax) annual base rate increase. A lower effective tax rate also contributed to the increase in this segment's quarterly earnings.
The Utility segment's earnings of $50.6 million or $0.60 per share for the six months ended March 31, 2007, increased $0.2 million compared to the six months ended March 31, 2006. Earnings in Distribution's New York Division for the six months ended March 31, 2007, of $35.1 million decreased $5.6 million compared to the prior year. The comparability of the six month 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. Excluding this item, operating results decreased $3.1 million or $0.04 per share. This decrease is mainly due to higher bad debt and other operating expenses and higher property taxes.
For the six months ended March 31, 2007, earnings in Distribution's Pennsylvania Division of $15.5 million or $0.18 per share, increased $5.8 million, or $0.07 per share, compared to the prior year. Earnings increased primarily due to the impact of weather that was 5.8 percent colder than the prior year, the annual $14.3 million (before taxes) increase in base rates taking effect on January 1, 2007, and a lower effective tax rate. Partially offsetting the increase was higher intercompany interest expense.
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 $13.9 million, or $0.16 per share, for the quarter ended March 31, 2007, decreased $3.0 million, or $0.04 per share, when compared with the same period in the prior fiscal year. The decrease is primarily due to lower efficiency gas revenue resulting from lower retained volumes and lower natural gas prices compared to the prior year's quarter. The lower volumes of efficiency gas are part of a FERC approved settlement of a complaint filed by various parties against Supply Corporation under Sections 5(a) and 13 of the Natural Gas Act (the FERC settlement) effective December 1, 2006. The FERC settlement also lowered Supply Corporation's depreciation rates, which resulted in lower depreciation expense for the quarter. While the settlement increased Supply Corporation's expense for postretirement benefits, this increase was substantially offset by decreases in the depreciation expense and other operating expenses.
Earnings of $27.6 million, or $0.33 per share, for the six months ended March 31, 2007, decreased $5.1 million, or $0.05 per share, when compared with the six months ended March 31, 2006. The comparability of the results for the six months ended March 31, 2007, is impacted by a $1.9 million gain associated with the prepayment in the first quarter of 2007 of the project financing debt for the Empire State Pipeline. Upon the payment of that debt, the corresponding interest rate collar no longer qualified for hedge accounting, and gains and losses could no longer be deferred. Excluding that gain, operating results decreased $7.0 million for the six months ended March 31, 2007, mainly due to lower efficiency gas revenue resulting from both lower natural gas prices and lower retained volumes due to the FERC settlement discussed above. Higher throughput realized in the first quarter of the prior year caused by the hurricanes in the fall of 2005 did not recur this year. An increase in postretirement benefits expense, also due to the FERC settlement, and higher intercompany interest expense contributed to the decline in earnings. The decrease was partially offset by lower depreciation expense, resulting from the FERC settlement, and lower other operating expenses.
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 second quarter of fiscal 2007 decreased $6.0 million or $0.07 per share to $19.8 million or $0.23 per share, when compared with the same period in the prior fiscal year. The comparability of the quarterly results is impacted by a positive tax adjustment of $5.1 million recorded in the second quarter of fiscal 2006. This benefit to earnings resulted from an adjustment to a deferred income tax balance. Under generally accepted accounting principles, a company may recognize the benefit of certain expected future income tax deductions as a deferred tax asset only if it anticipates sufficient future taxable income to utilize those deductions. As a result of changing circumstances, Seneca increased its forecast of future taxable income in the Canadian division and, consequently, recorded a deferred tax asset for certain costs related to capital expenditures that it now expects to deduct on future income tax returns. Excluding this item, operating results in the Exploration and Production segment decreased $1.0 million or $0.01 per share. The decrease was mainly due to a higher effective tax rate as a result of higher state income taxes. Partially offsetting this decrease was a 19.3 percent increase in oil prices realized after hedging that more than offset a drop in gas prices realized after hedging of 7.0 percent. For the quarter ended March 31, 2007, the weighted average oil price received by Seneca (after hedging) was $48.09/barrel ("Bbl"), an increase of $7.79/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) for the quarter ended March 31, 2007, was $6.87/thousand cubic feet ("Mcf"), a decrease of $0.52/Mcf from the prior year's quarter. Overall production for the quarter was 12.2 Bcfe, an increase of 0.1 Bcfe over the prior year's quarter. An increase in natural gas production more than offset a drop in crude oil production.
The Exploration and Production segment's earnings of $40.5 million, or $0.48 per share, for the six months ended March 31, 2007, decreased $2.8 million, or $0.02 per share, when compared with the six months ended March 31, 2006. The comparability of the six month results is impacted by a positive tax adjustment recorded in the second quarter of fiscal 2006 as described above. Excluding this item, operating results for the six months ended March 31, 2007, in the Exploration and Production segment increased $2.3 million, or $0.04 per share, from the prior year. This increase is mainly due to a nearly 1.0 Bcfe increase in production. A minor drop in oil production was more than offset by an increase in gas production while the drop in gas prices realized after hedging was more than offset by the increase in oil prices realized after hedging. For the six months ended March 31, 2007, the weighted average oil price received by Seneca (after hedging) was $45.90/Bbl, an increase of $9.20/Bbl from the prior year. 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 $6.90/Mcf, a decrease of $0.98/Mcf from the prior year. In addition a higher effective tax rate contributed to this decline.
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 ended March 31, 2007, of $6.7 million or $0.08 per share increased $2.8 million or $0.04 per share compared to the second quarter of last year. The comparability of the quarterly results is impacted by a $2.3 million reversal of an accrual for purchased gas expense for which a contingency was resolved during the quarter. Excluding this item earnings for the quarter increased $0.5 million primarily due to a 15 percent increase in sales throughput during the quarter.
Earnings for the six months ended March 31, 2007, in the Energy Marketing segment of $7.2 million, or $0.08 per share, increased $2.3 million, or $0.02 per share. The comparability of the quarterly results is impacted by a $2.3 million reversal of an accrual for purchased gas expense noted above. Excluding this item earnings for the six months ended March 31, 2007, were flat compared to the prior year.
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 earnings for the quarter ended March 31, 2007, of $3.2 million or $0.04 per share increased $1.0 million or $0.01 per share from the prior year's second quarter. Favorable weather conditions facilitated the harvesting of both veneer and saw logs during the quarter. Although the overall volume of log and lumber sales was down, most of the current quarter's harvest was from low or no basis Company-owned property thus resulting in an increase in gross margins from the prior year's quarter.
Earnings for the six months ended March 31, 2007, of $3.4 million decreased $0.3 million from the prior year's earnings. The decrease is due to unfavorable weather conditions in the first quarter that hindered the harvesting of both veneer and saw logs. This resulted in lower sales of both logs and lumber for the six months ended March 31, 2007. Harvesting from Company-owned property resulted in improved margins in the second quarter and offset some of the decline in earnings experienced in the first 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., a corporation that develops and owns independent electric generation facilities that are fueled by natural gas or landfill gas.
Earnings in the Corporate and All Other category for the quarter ended March 31, 2007, were $1.4 million, an increase of $0.3 million when compared to the prior year's second quarter earnings of $1.1 million. The increase is due to higher earnings in Horizon LFG, Inc. and higher intercompany interest income partially offset by higher operating costs and higher interest expense.
Earnings in the Corporate and All Other category for the six months ended March 31, 2007, were $3.6 million, an increase of $2.6 million when compared to the prior year's earnings. The increase is mainly due to higher earnings in Horizon LFG, Inc. and higher intercompany interest income partially offset by higher operating costs and higher interest expense.
EARNINGS GUIDANCE
The Company is increasing, and narrowing, its guidance range for fiscal 2007 earnings. The revised earnings guidance range is now $2.25 to $2.40 per share.(x) It had previously been $2.15 to $2.35 per share.(x) The narrowing of the range is possible because the most sensitivity to earnings variance in the Utility segment typically occurs during the first two fiscal quarters, which are now completed. The increase in the upper end of the guidance range is made possible primarily due to the certainty of pricing on planned gas sales in the Pipeline and Storage segment, which are now hedged. 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 on page 24 of this release.(x)
EARNINGS TELECONFERENCE
The Company will host a conference call on Tuesday, May 8, 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 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) 1-800-798-2796, and using the passcode "74463473." 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 "99121557." Both the webcast and telephonic replay will be available until the close of business on Tuesday, May 15, 2007.
National Fuel is an integrated energy company with $4.0 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: 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, and the ability to obtain necessary environmental permits; 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 MARCH 31, 2007
Pipeline &
(Thousands of Dollars) Utility Storage E&P
----------------------------
Second quarter 2006 GAAP earnings $28,654 $16,892 $25,845
Items impacting comparability:
Income tax adjustment (5,080)
----------------------------
Second quarter 2006 operating results 28,654 16,892 20,765
Drivers of operating results
Colder weather in Pennsylvania 1,843
Base rate increase in Pennsylvania 3,034
Lower efficiency gas revenues (3,170)
Higher operating costs (1,719) (516)
Lower depreciation / depletion 1,048
Higher crude oil prices 4,380
Lower natural gas prices (2,369)
Higher natural gas production 1,518
Lower crude oil production (914)
Lower (higher) effective tax rate 1,301 (3,829)
Higher margins
Higher interest income (expense) (900)
All other / rounding 331 582 250
----------------------------
Second quarter 2007 operating results 33,444 13,936 19,801
Items impacting comparability:
Resolution of a purchased gas contingency
----------------------------
Second quarter 2007 GAAP earnings $33,444 $13,936 $19,801
----------------------------
Energy Corporate /
(Thousands of Dollars) Marketing Timber All Other Consolidated
-------------------------------------------
Second quarter 2006 GAAP
earnings $ 3,877 $2,242 $ 1,084 $ 78,594
Items impacting
comparability:
Income tax adjustment (5,080)
-------------------------------------------
Second quarter 2006
operating results 3,877 2,242 1,084 73,514
Drivers of operating
results
Colder weather in
Pennsylvania 1,843
Base rate increase in
Pennsylvania 3,034
Lower efficiency gas
revenues (3,170)
Higher operating costs (542) (2,777)
Lower depreciation /
depletion 484 1,532
Higher crude oil prices 4,380
Lower natural gas prices (2,369)
Higher natural gas
production 1,518
Lower crude oil production (914)
Lower (higher) effective
tax rate (2,528)
Higher margins 752 629 274 1,655
Higher interest income
(expense) 1,038 138
All other / rounding (267) (155) (494) 247
-------------------------------------------
Second quarter 2007
operating results 4,362 3,200 1,360 76,103
Items impacting
comparability:
Resolution of a purchased
gas contingency 2,344 2,344
-------------------------------------------
Second quarter 2007 GAAP
earnings $ 6,706 $3,200 $ 1,360 $ 78,447
-------------------------------------------
NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS PER SHARE
QUARTER ENDED MARCH 31, 2007
Pipeline &
Utility Storage E&P
--------------------------
Second quarter 2006 GAAP earnings $ 0.33 $ 0.20 $ 0.30
Items impacting comparability:
Income tax adjustment (0.06)
--------------------------
Second quarter 2006 operating results 0.33 0.20 0.24
Drivers of operating results
Colder weather in Pennsylvania 0.02
Base rate increase in Pennsylvania 0.04
Lower efficiency gas revenues (0.04)
Higher operating costs (0.02) (0.01)
Lower depreciation / depletion 0.01
Higher crude oil prices 0.05
Lower natural gas prices (0.03)
Higher natural gas production 0.02
Lower crude oil production (0.01)
Lower (higher) effective tax rate 0.02 (0.04)
Higher margins
Higher interest income (expense) (0.01)
All other / rounding - 0.01 -
--------------------------
Second quarter 2007 operating results 0.39 0.16 0.23
Items impacting comparability:
Resolution of a purchased gas contingency
--------------------------
Second quarter 2007 GAAP earnings $ 0.39 $ 0.16 $ 0.23
--------------------------
Energy Corporate /
Marketing Timber All Other Consolidated
------------------------------------------
Second quarter 2006 GAAP
earnings $ 0.04 $0.03 $ 0.01 $ 0.91
Items impacting
comparability:
Income tax adjustment (0.06)
------------------------------------------
Second quarter 2006
operating results 0.04 0.03 0.01 0.85
Drivers of operating results
Colder weather in
Pennsylvania 0.02
Base rate increase in
Pennsylvania 0.04
Lower efficiency gas
revenues (0.04)
Higher operating costs (0.01) (0.04)
Lower depreciation /
depletion - 0.01
Higher crude oil prices 0.05
Lower natural gas prices (0.03)
Higher natural gas
production 0.02
Lower crude oil production (0.01)
Lower (higher) effective tax
rate (0.02)
Higher margins 0.01 0.01 - 0.02
Higher interest income
(expense) 0.01 -
All other / rounding - - 0.01 0.02
------------------------------------------
Second quarter 2007
operating results 0.05 0.04 0.02 0.89
Items impacting
comparability:
Resolution of a purchased
gas contingency 0.03 0.03
------------------------------------------
Second quarter 2007 GAAP
earnings $ 0.08 $0.04 $ 0.02 $ 0.92
------------------------------------------
NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS
SIX MONTHS ENDED MARCH 31, 2007
Pipeline &
(Thousands of Dollars) Utility Storage E&P
----------------------------
Six months ended March 31, 2006 GAAP
earnings $50,407 $ 32,742 $43,280
Items impacting comparability:
Out-of-period adjustment to symmetrical
sharing (2,551)
Income tax adjustment (5,080)
----------------------------
Six months ended March 31, 2006 operating
results 47,856 32,742 38,200
Drivers of operating results
Colder weather in Pennsylvania 2,111
Base rate increase in Pennsylvania 3,034
Higher operating costs (2,400)
Higher property taxes (554)
Lower transportation and storage revenues (1,025)
Lower efficiency gas revenues (5,823)
Lower depreciation / depletion 977
Higher crude oil prices 10,412
Lower natural gas prices (8,784)
Higher natural gas production 6,397
Lower crude oil production (1,137)
Lower (higher) effective tax rate 1,447 (4,090)
Higher (lower) margins
Higher interest income (expense) (677) (2,030)
All other / rounding (199) 895 (475)
----------------------------
Six months ended March 31, 2007 operating
results 50,618 25,736 40,523
Items impacting comparability:
Resolution of a purchased gas contingency
Discontinuance of hedge accounting 1,888
----------------------------
Six months ended March 31, 2007 GAAP
earnings $50,618 $ 27,624 $40,523
----------------------------
Energy Corporate /
(Thousands of Dollars) Marketing Timber All Other Consolidated
--------------------------------------------
Six months ended March 31,
2006 GAAP earnings $ 4,864 $ 3,706 $ 1,014 $ 136,013
Items impacting
comparability:
Out-of-period adjustment
to symmetrical sharing (2,551)
Income tax adjustment (5,080)
--------------------------------------------
Six months ended March 31,
2006 operating results 4,864 3,706 1,014 128,382
Drivers of operating
results
Colder weather in
Pennsylvania 2,111
Base rate increase in
Pennsylvania 3,034
Higher operating costs (421) (2,821)
Higher property taxes (554)
Lower transportation and
storage revenues (1,025)
Lower efficiency gas
revenues (5,823)
Lower depreciation /
depletion 902 1,879
Higher crude oil prices 10,412
Lower natural gas prices (8,784)
Higher natural gas
production 6,397
Lower crude oil production (1,137)
Lower (higher) effective
tax rate (2,643)
Higher (lower) margins 303 (1,035) 727 (5)
Higher interest income
(expense) 2,017 (690)
All other / rounding (313) (156) 250 2
--------------------------------------------
Six months ended March 31,
2007 operating results 4,854 3,417 3,587 128,735
Items impacting
comparability:
Resolution of a purchased
gas contingency 2,344 2,344
Discontinuance of hedge
accounting 1,888
--------------------------------------------
Six months ended March 31,
2007 GAAP earnings $ 7,198 $ 3,417 $ 3,587 $ 132,967
--------------------------------------------
NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS PER SHARE
SIX MONTHS ENDED MARCH 31, 2007
Pipeline &
Utility Storage E&P
------- ---------- -------
Six months ended March 31, 2006 GAAP
earnings $ 0.58 $ 0.38 $ 0.50
Items impacting comparability:
Out-of-period adjustment to symmetrical
sharing (0.03)
Income tax adjustment (0.06)
------- ---------- -------
Six months ended March 31, 2006 operating
results 0.55 0.38 0.44
Drivers of operating results
Colder weather in Pennsylvania 0.02
Base rate increase in Pennsylvania 0.04
Higher operating costs (0.03)
Higher property taxes (0.01)
Lower transportation and storage revenues (0.01)
Lower efficiency gas revenues (0.07)
Lower depreciation / depletion 0.01
Higher crude oil prices 0.12
Lower natural gas prices (0.10)
Higher natural gas production 0.07
Lower crude oil production (0.01)
Lower (higher) effective tax rate 0.02 (0.05)
Higher (lower) margins
Higher interest income (expense) (0.01) (0.02)
All other / rounding / impact of lower
shares outstanding 0.02 0.02 0.01
------- ---------- -------
Six months ended March 31, 2007 operating
results 0.60 0.31 0.48
Items impacting comparability:
Resolution of a purchased gas contingency
Discontinuance of hedge accounting 0.02
------- ---------- -------
Six months ended March 31, 2007 GAAP
earnings $ 0.60 $ 0.33 $ 0.48
------- ---------- -------
Energy Corporate /
Marketing Timber All Other Consolidated
--------- ------- ----------- ------------
Six months ended March 31,
2006 GAAP earnings $ 0.06 $ 0.04 $ 0.02 $ 1.58
Items impacting
comparability:
Out-of-period adjustment to
symmetrical sharing (0.03)
Income tax adjustment (0.06)
--------- ------- ----------- ------------
Six months ended March 31,
2006 operating results 0.06 0.04 0.02 1.49
Drivers of operating
results
Colder weather in
Pennsylvania 0.02
Base rate increase in
Pennsylvania 0.04
Higher operating costs - (0.03)
Higher property taxes (0.01)
Lower transportation and
storage revenues (0.01)
Lower efficiency gas
revenues (0.07)
Lower depreciation /
depletion 0.01 0.02
Higher crude oil prices 0.12
Lower natural gas prices (0.10)
Higher natural gas
production 0.07
Lower crude oil production (0.01)
Lower (higher) effective
tax rate (0.03)
Higher (lower) margins - (0.01) 0.01 -
Higher interest income
(expense) 0.02 (0.01)
All other / rounding /
impact of lower shares
outstanding (0.01) - (0.01) 0.03
--------- ------- ----------- ------------
Six months ended March 31,
2007 operating results 0.05 0.04 0.04 1.52
Items impacting
comparability:
Resolution of a purchased
gas contingency 0.03 0.03
Discontinuance of hedge
accounting 0.02
--------- ------- ----------- ------------
Six months ended March 31,
2007 GAAP earnings $ 0.08 $ 0.04 $ 0.04 $ 1.57
--------- ------- ----------- ------------
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
(Thousands of
Dollars, except
per share
amounts)
Three Months Ended Six Months Ended
March 31, March 31,
(Unaudited) (Unaudited)
------------------------- -------------------------
SUMMARY OF
OPERATIONS 2007 2006 2007 2006
------------------ ------------ ------------ ------------ ------------
Operating Revenues $ 812,156 $ 890,981 $ 1,316,396 $ 1,601,737
------------ ------------ ------------ ------------
Operating
Expenses:
Purchased Gas 476,904 566,540 719,843 1,003,317
Operation and
Maintenance 125,539 121,076 224,913 224,704
Property,
Franchise and
Other Taxes 20,233 20,120 37,345 37,302
Depreciation,
Depletion and
Amortization 42,061 44,278 84,886 87,324
------------ ------------ ------------ ------------
664,737 752,014 1,066,987 1,352,647
Operating Income 147,419 138,967 249,409 249,090
Other Income
(Expense):
Income from
Unconsolidated
Subsidiaries 942 720 2,173 1,985
Interest Income 885 965 2,248 2,098
Other Income 2,526 248 3,241 989
Interest Expense
on Long-Term Debt (17,888) (18,149) (33,931) (36,367)
Other Interest
Expense (1,516) (1,465) (3,366) (3,240)
------------ ------------ ------------ ------------
Income Before
Income Taxes 132,368 121,286 219,774 214,555
Income Tax Expense 53,921 42,692 86,807 78,542
------------ ------------ ------------ ------------
Net Income
Available for
Common Stock $ 78,447 $ 78,594 $ 132,967 $ 136,013
------------ ------------ ------------ ------------
Earnings Per
Common Share:
Basic $ 0.95 $ 0.93 $ 1.61 $ 1.61
------------ ------------ ------------ ------------
Diluted $ 0.92 $ 0.91 $ 1.57 $ 1.58
------------ ------------ ------------ ------------
Weighted Average
Common Shares:
Used in Basic
Calculation 82,895,087 84,346,733 82,786,027 84,385,140
------------ ------------ ------------ ------------
Used in Diluted
Calculation 85,033,127 86,253,597 84,891,742 86,256,515
------------ ------------ ------------ ------------
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, September 30,
(Thousands of Dollars) 2007 2006
----------------------------------------------------------------------
ASSETS
Property, Plant and Equipment $4,820,700 $4,703,040
Less - Accumulated Depreciation, Depletion
and Amortization 1,893,449 1,825,314
------------------------------------------ ---------------------------
Net Property, Plant and Equipment 2,927,251 2,877,726
------------------------------------------ ---------------------------
Current Assets:
Cash and Temporary Cash Investments 121,809 69,611
Hedging Collateral Deposits 2,034 19,676
Receivables - Net 335,666 144,254
Unbilled Utility Revenue 58,850 25,538
Gas Stored Underground 17,021 59,461
Materials and Supplies - at average cost 31,853 36,693
Unrecovered Purchased Gas Costs 13,962 12,970
Prepaid Pension and Post-Retirement
Benefit Costs 68,483 64,125
Other Current Assets 30,700 63,723
Deferred Income Taxes 23,951 23,402
------------------------------------------ ---------------------------
Total Current Assets 704,329 519,453
------------------------------------------ ---------------------------
Other Assets:
Recoverable Future Taxes 79,177 79,511
Unamortized Debt Expense 14,482 15,492
Other Regulatory Assets 85,427 76,917
Deferred Charges 5,234 3,558
Other Investments 80,866 88,414
Investments in Unconsolidated Subsidiaries 15,850 11,590
Goodwill 5,476 5,476
Intangible Assets 30,423 31,498
Fair Value of Derivative Financial
Instruments 1,866 11,305
Deferred Income Taxes 4,627 9,003
Other 6,010 4,388
------------------------------------------ ---------------------------
Total Other Assets 329,438 337,152
------------------------------------------ ---------------------------
Total Assets $3,961,018 $3,734,331
------------------------------------------ ---------------------------
CAPITALIZATION AND LIABILITIES
Capitalization:
Comprehensive Shareholders' Equity
Common Stock, $1 Par Value Authorized -
200,000,000 Shares; Issued and
Outstanding - 83,132,149 Shares and
83,402,670 Shares, Respectively $83,132 $83,403
Paid in Capital 565,809 543,730
Earnings Reinvested in the Business 834,902 786,013
------------------------------------------ ---------------------------
Total Common Shareholder Equity Before
Items of Other Comprehensive Income 1,483,843 1,413,146
Accumulated Other Comprehensive Income 21,733 30,416
------------------------------------------ ---------------------------
Total Comprehensive Shareholders' Equity 1,505,576 1,443,562
Long-Term Debt, Net of Current Portion 999,000 1,095,675
------------------------------------------ ---------------------------
Total Capitalization 2,504,576 2,539,237
------------------------------------------ ---------------------------
Current and Accrued Liabilities:
Notes Payable to Banks and Commercial
Paper - -
Current Portion of Long-Term Debt 96,393 22,925
Accounts Payable 166,990 133,034
Amounts Payable to Customers 10,596 23,935
Dividends Payable 24,927 25,008
Interest Payable on Long-Term Debt 18,419 18,420
Other Accruals and Current Liabilities 176,307 27,040
Fair Value of Derivative Financial
Instruments 32,122 39,983
------------------------------------------ ---------------------------
Total Current and Accrued Liabilities 525,754 290,345
------------------------------------------ ---------------------------
Deferred Credits:
Deferred Income Taxes 556,115 544,502
Taxes Refundable to Customers 10,433 10,426
Unamortized Investment Tax Credit 5,743 6,094
Cost of Removal Regulatory Liability 87,986 85,076
Other Regulatory Liabilities 70,842 75,456
Post-Retirement Liabilities 26,953 32,918
Asset Retirement Obligations 79,609 77,392
Other Deferred Credits 93,007 72,885
------------------------------------------ ---------------------------
Total Deferred Credits 930,688 904,749
------------------------------------------ ---------------------------
Commitments and Contingencies - -
------------------------------------------ ---------------------------
Total Capitalization and Liabilities $3,961,018 $3,734,331
------------------------------------------ ---------------------------
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
March 31,
(Thousands of Dollars) 2007 2006
----------------------------------------------------------------------
Operating Activities:
Net Income Available for Common Stock $132,967 $136,013
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation, Depletion and
Amortization 84,886 87,324
Deferred Income Taxes 21,803 (1,435)
Income from Unconsolidated
Subsidiaries, Net of Cash
Distributions (960) 1,166
Excess Tax Benefits Associated with
Stock-Based Compensation Awards (13,689) (6,515)
Other 3,818 (5,297)
Change in:
Hedging Collateral Deposits 17,642 60,894
Receivables and Unbilled Utility
Revenue (225,511) (249,466)
Gas Stored Underground and Materials
and Supplies 47,243 33,486
Unrecovered Purchased Gas Costs (992) 14,817
Prepayments and Other Current Assets 28,659 24,372
Accounts Payable 34,417 (9,951)
Amounts Payable to Customers (13,339) 11,492
Other Accruals and Current Liabilities 163,928 139,020
Other Assets (3,765) (11,837)
Other Liabilities (2,434) 19,107
----------------------------------------------------------------------
Net Cash Provided by Operating
Activities $274,673 $243,190
----------------------------------------------------------------------
Investing Activities:
Capital Expenditures ($132,313) ($134,961)
Investment in Partnership (3,300) -
Net Proceeds from Sale of Oil and Gas Producing
Properties 2,330 4
Other (339) (1,396)
----------------------------------------------------------------------
Net Cash Used in Investing
Activities ($133,622) ($136,353)
----------------------------------------------------------------------
Financing Activities:
Excess Tax Benefits Associated with Stock-Based
Compensation Awards $13,689 $6,515
Shares Repurchased under Repurchase Plan (43,344) (26,577)
Reduction of Long-Term Debt (23,207) (4,529)
Dividends Paid on Common Stock (49,808) (48,933)
Proceeds From Issuance of Common Stock 14,604 7,164
----------------------------------------------------------------------
Net Cash Used In Financing
Activities ($88,066) ($66,360)
----------------------------------------------------------------------
Effect of Exchange Rates on Cash (787) 15
----------------------------------------------------------------------
Net Increase in Cash and Temporary
Cash Investments $52,198 $40,492
Cash and Temporary Cash Investments
at Beginning of Period 69,611 57,607
----------------------------------------------------------------------
Cash and Temporary Cash Investments
at March 31 $121,809 $98,099
----------------------------------------------------------------------
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
(Thousands of
Dollars,
except per
share Three Months Ended Six Months Ended
amounts) March 31, March 31,
--------------------------- ----------------------------
UTILITY
SEGMENT 2007 2006 Variance 2007 2006 Variance
----------------------------------------- ----------------------------
Revenues from
External
Customers $501,473 $536,235 $(34,762) $790,256 $967,714 $(177,458)
Intersegment
Revenues 5,941 5,681 260 9,970 9,803 167
--------------------------- ----------------------------
Total
Operating
Revenues 507,414 541,916 (34,502) 800,226 977,517 (177,291)
--------------------------- ----------------------------
Operating
Expenses:
Purchased Gas 352,864 394,803 (41,939) 539,225 715,360 (176,135)
Operation and
Maintenance 67,448 65,496 1,952 118,215 117,209 1,006
Property,
Franchise
and Other
Taxes 14,107 14,259 (152) 25,298 25,773 (475)
Depreciation,
Depletion
and
Amortization 10,321 10,027 294 20,100 20,004 96
--------------------------- ----------------------------
444,740 484,585 (39,845) 702,838 878,346 (175,508)
--------------------------- ----------------------------
Operating
Income 62,674 57,331 5,343 97,388 99,171 (1,783)
Other Income
(Expense):
Interest
Income 177 179 (2) 462 380 82
Other Income 368 192 176 653 404 249
Other
Interest
Expense (7,269) (6,880) (389) (14,646) (13,603) (1,043)
--------------------------- ----------------------------
Income Before
Income Taxes 55,950 50,822 5,128 83,857 86,352 (2,495)
Income Tax
Expense 22,506 22,168 338 33,239 35,945 (2,706)
--------------------------- ----------------------------
Net Income $ 33,444 $ 28,654 $ 4,790 $ 50,618 $ 50,407 $ 211
--------------------------- ----------------------------
Net Income Per
Share
(Diluted) $ 0.39 $ 0.33 $ 0.06 $ 0.60 $ 0.58 $ 0.02
--------------------------- ----------------------------
Three Months Ended Six Months Ended
March 31, March 31,
--------------------------- ----------------------------
PIPELINE AND
STORAGE
SEGMENT 2007 2006 Variance 2007 2006 Variance
----------------------------------------- ----------------------------
Revenues from
External
Customers $ 34,952 $ 39,346 $ (4,394) $ 64,761 $ 74,085 $ (9,324)
Intersegment
Revenues 20,884 19,711 1,173 41,252 41,006 246
--------------------------- ----------------------------
Total
Operating
Revenues 55,836 59,057 (3,221) 106,013 115,091 (9,078)
--------------------------- ----------------------------
Operating
Expenses:
Purchased Gas 2 78 (76) (11) 62 (73)
Operation and
Maintenance 17,744 16,949 795 32,647 32,265 382
Property,
Franchise
and Other
Taxes 4,335 4,010 325 8,613 7,966 647
Depreciation,
Depletion
and
Amortization 7,563 9,176 (1,613) 16,855 18,359 (1,504)
--------------------------- ----------------------------
29,644 30,213 (569) 58,104 58,652 (548)
--------------------------- ----------------------------
Operating
Income 26,192 28,844 (2,652) 47,909 56,439 (8,530)
Other Income
(Expense):
Interest
Income 39 144 (105) 123 196 (73)
Other Income 80 60 20 264 268 (4)
Interest
Expense on
Long-Term
Debt (10) (274) 264 1,829 (592) 2,421
Other
Interest
Expense (2,741) (1,093) (1,648) (5,028) (2,389) (2,639)
--------------------------- ----------------------------
Income Before
Income Taxes 23,560 27,681 (4,121) 45,097 53,922 (8,825)
Income Tax
Expense 9,624 10,789 (1,165) 17,473 21,180 (3,707)
--------------------------- ----------------------------
Net Income $ 13,936 $ 16,892 $ (2,956) $ 27,624 $ 32,742 $ (5,118)
--------------------------- ----------------------------
Net Income Per
Share
(Diluted) $ 0.16 $ 0.20 $ (0.04) $ 0.33 $ 0.38 $ (0.05)
--------------------------- ----------------------------
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
(Thousands of Dollars, except per share Three Months Ended
amounts) March 31,
---------------------------
EXPLORATION AND PRODUCTION SEGMENT 2007 2006 Variance
------------------------------------------ ---------------------------
Operating Revenues $ 92,610 $ 88,719 $ 3,891
---------------------------
Operating Expenses:
Purchased Gas - 4 (4)
Operation and Maintenance:
General and Administrative Expense 5,949 6,381 (432)
Lease Operating Expense 14,945 13,155 1,790
All Other Operation and Maintenance
Expense 2,070 2,021 49
Property, Franchise and Other Taxes
(Lease Operating Expense) 1,241 1,528 (287)
Depreciation, Depletion and Amortization 22,914 23,118 (204)
---------------------------
47,119 46,207 912
---------------------------
Operating Income 45,491 42,512 2,979
Other Income (Expense):
Interest Income 2,644 1,940 704
Other Interest Expense (12,949) (12,521) (428)
---------------------------
Income Before Income Taxes 35,186 31,931 3,255
Income Tax Expense 15,385 6,086 9,299
---------------------------
Net Income $ 19,801 $ 25,845 $ (6,044)
---------------------------
Net Income Per Share (Diluted) $ 0.23 $ 0.30 $ (0.07)
---------------------------
Three Months Ended
March 31,
---------------------------
ENERGY MARKETING SEGMENT 2007 2006 Variance
------------------------------------------ ---------------------------
Operating Revenues $163,338 $206,061 $(42,723)
---------------------------
Operating Expenses:
Purchased Gas 151,027 198,562 (47,535)
Operation and Maintenance 1,218 1,259 (41)
Property, Franchise and Other Taxes 24 (249) 273
Depreciation, Depletion and Amortization 7 16 (9)
---------------------------
152,276 199,588 (47,312)
---------------------------
Operating Income 11,062 6,473 4,589
Other Income (Expense):
Interest Income 78 43 35
Other Income 181 121 60
Other Interest Expense (125) (129) 4
---------------------------
Income Before Income Taxes 11,196 6,508 4,688
Income Tax Expense 4,490 2,631 1,859
---------------------------
Net Income $ 6,706 $ 3,877 $ 2,829
---------------------------
Net Income Per Share (Diluted) $ 0.08 $ 0.04 $ 0.04
---------------------------
(Thousands of Dollars, except per share Six Months Ended
amounts) March 31,
----------------------------
EXPLORATION AND PRODUCTION SEGMENT 2007 2006 Variance
----------------------------------------- ----------------------------
Operating Revenues $181,318 $170,806 $ 10,512
----------------------------
Operating Expenses:
Purchased Gas - 98 (98)
Operation and Maintenance:
General and Administrative Expense 11,520 12,682 (1,162)
Lease Operating Expense 28,401 26,694 1,707
All Other Operation and Maintenance
Expense 4,711 3,992 719
Property, Franchise and Other Taxes
(Lease Operating Expense) 2,391 2,736 (345)
Depreciation, Depletion and Amortization 44,922 44,658 264
----------------------------
91,945 90,860 1,085
----------------------------
Operating Income 89,373 79,946 9,427
Other Income (Expense):
Interest Income 5,188 3,781 1,407
Other Interest Expense (25,897) (24,950) (947)
----------------------------
Income Before Income Taxes 68,664 58,777 9,887
Income Tax Expense 28,141 15,497 12,644
----------------------------
Net Income $ 40,523 $ 43,280 $ (2,757)
----------------------------
Net Income Per Share (Diluted) $ 0.48 $ 0.50 $ (0.02)
----------------------------
Six Months Ended
March 31,
----------------------------
ENERGY MARKETING SEGMENT 2007 2006 Variance
----------------------------------------- ----------------------------
Operating Revenues $246,656 $351,620 $(104,964)
----------------------------
Operating Expenses:
Purchased Gas 232,282 341,391 (109,109)
Operation and Maintenance 2,512 2,489 23
Property, Franchise and Other Taxes 35 (240) 275
Depreciation, Depletion and Amortization 14 37 (23)
----------------------------
234,843 343,677 (108,834)
----------------------------
Operating Income 11,813 7,943 3,870
Other Income (Expense):
Interest Income 140 169 (29)
Other Income 317 219 98
Other Interest Expense (252) (191) (61)
----------------------------
Income Before Income Taxes 12,018 8,140 3,878
Income Tax Expense 4,820 3,276 1,544
----------------------------
Net Income $ 7,198 $ 4,864 $ 2,334
----------------------------
Net Income Per Share (Diluted) $ 0.08 $ 0.06 $ 0.02
----------------------------
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
(Thousands of
Dollars, except per Three Months Ended Six Months Ended
share amounts) March 31, March 31,
------------------------ ------------------------
TIMBER SEGMENT 2007 2006 Variance 2007 2006 Variance
-------------------- ------------------------ ------------------------
Revenues from
External Customers $18,184 $19,157 $ (973) $29,947 $36,066 $(6,119)
Intersegment
Revenues - (23) 23 - - -
------------------------ ------------------------
Total Operating
Revenues 18,184 19,134 (950) 29,947 36,066 (6,119)
------------------------ ------------------------
Operating Expenses:
Operation and
Maintenance 10,969 12,746 (1,777) 20,111 24,430 (4,319)
Property,
Franchise and
Other Taxes 426 478 (52) 819 859 (40)
Depreciation,
Depletion and
Amortization 883 1,627 (744) 2,251 3,638 (1,387)
------------------------ ------------------------
12,278 14,851 (2,573) 23,181 28,927 (5,746)
------------------------ ------------------------
Operating Income 5,906 4,283 1,623 6,766 7,139 (373)
Other Income
(Expense):
Interest Income 296 164 132 612 301 311
Other Income - 35 (35) 21 52 (31)
Other Interest
Expense (791) (758) (33) (1,594) (1,521) (73)
------------------------ ------------------------
Income Before Income
Taxes 5,411 3,724 1,687 5,805 5,971 (166)
Income Tax Expense 2,211 1,482 729 2,388 2,265 123
------------------------ ------------------------
Net Income $ 3,200 $ 2,242 $ 958 $ 3,417 $ 3,706 $ (289)
------------------------ ------------------------
Net Income Per Share
(Diluted) $ 0.04 $ 0.03 $ 0.01 $ 0.04 $ 0.04 $ -
------------------------ ------------------------
Three Months Ended Six Months Ended
March 31, March 31,
------------------------ ------------------------
ALL OTHER 2007 2006 Variance 2007 2006 Variance
-------------------- ------------------------ ------------------------
Revenues from
External Customers $ 1,403 $ 1,075 $ 328 $ 3,079 $ 1,058 $ 2,021
Intersegment
Revenues 2,090 2,057 33 4,287 6,584 (2,297)
------------------------ ------------------------
Total Operating
Revenues 3,493 3,132 361 7,366 7,642 (276)
------------------------ ------------------------
Operating Expenses:
Purchased Gas 1,822 1,866 (44) 3,650 4,972 (1,322)
Operation and
Maintenance 950 922 28 1,755 1,795 (40)
Property,
Franchise and
Other Taxes 28 23 5 48 42 6
Depreciation,
Depletion and
Amortization 197 197 - 393 397 (4)
------------------------ ------------------------
2,997 3,008 (11) 5,846 7,206 (1,360)
------------------------ ------------------------
Operating Income 496 124 372 1,520 436 1,084
Other Income
(Expense):
Income from
Unconsolidated
Subsidiaries 942 720 222 2,173 1,985 188
Interest Income 4 7 (3) 7 13 (6)
Other Income 12 14 (2) 25 16 9
Other Interest
Expense (667) (616) (51) (1,337) (1,206) (131)
------------------------ ------------------------
Income Before Income
Taxes 787 249 538 2,388 1,244 1,144
Income Tax Expense 320 203 117 935 628 307
------------------------ ------------------------
Net Income $ 467 $ 46 $ 421 $ 1,453 $ 616 $ 837
------------------------ ------------------------
Net Income Per Share
(Diluted) $ 0.01 $ - $ 0.01 $ 0.02 $ 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 Six Months Ended
amounts) March 31, March 31,
-------------------------- --------------------------
CORPORATE 2007 2006 Variance 2007 2006 Variance
---------------- -------------------------- --------------------------
Revenues from
External
Customers $ 196 $ 388 $ (192) $ 379 $ 388 $ (9)
Intersegment
Revenues 912 782 130 1,764 1,475 289
-------------------------- --------------------------
Total Operating
Revenues 1,108 1,170 (62) 2,143 1,863 280
-------------------------- --------------------------
Operating
Expenses:
Operation and
Maintenance 5,262 1,582 3,680 7,011 3,450 3,561
Property,
Franchise and
Other Taxes 72 71 1 141 166 (25)
Depreciation,
Depletion and
Amortization 176 117 59 351 231 120
-------------------------- --------------------------
5,510 1,770 3,740 7,503 3,847 3,656
-------------------------- --------------------------
Operating Loss (4,402) (600) (3,802) (5,360) (1,984) (3,376)
Other Income
(Expense):
Interest
Income 22,138 19,979 2,159 44,067 39,703 4,364
Other Income 1,885 (174) 2,059 1,961 30 1,931
Interest
Expense on
Long-Term
Debt (17,878) (17,875) (3) (35,760) (35,775) 15
Other Interest
Expense (1,465) (959) (506) (2,963) (1,825) (1,138)
-------------------------- --------------------------
Income Before
Income Taxes 278 371 (93) 1,945 149 1,796
Income Tax
Benefit (615) (667) 52 (189) (249) 60
-------------------------- --------------------------
Net Income $ 893 $ 1,038 $ (145) $ 2,134 $ 398 $ 1,736
-------------------------- --------------------------
Net Income Per
Share (Diluted) $ 0.01 $ 0.01 $ - $ 0.02 $ 0.01 $ 0.01
-------------------------- --------------------------
Three Months Ended Six Months Ended
March 31, March 31,
-------------------------- --------------------------
INTERSEGMENT
ELIMINATIONS 2007 2006 Variance 2007 2006 Variance
---------------- -------------------------- --------------------------
Intersegment
Revenues $(29,827)$(28,208)$(1,619) $(57,273)$(58,868)$ 1,595
-------------------------- --------------------------
Operating
Expenses:
Purchased Gas (28,811) (28,773) (38) (55,303) (58,566) 3,263
Operation and
Maintenance (1,016) 565 (1,581) (1,970) (302) (1,668)
-------------------------- --------------------------
(29,827) (28,208) (1,619) (57,273) (58,868) 1,595
-------------------------- --------------------------
Operating Income - - - - - -
Other Income
(Expense):
Interest
Income (24,491) (21,491) (3,000) (48,351) (42,445) (5,906)
Other Interest
Expense 24,491 21,491 3,000 48,351 42,445 5,906
-------------------------- --------------------------
Net Income $ - $ - $ - $ - $ - $ -
-------------------------- --------------------------
Net Income Per
Share (Diluted) $ - $ - $ - $ - $ - $ -
-------------------------- --------------------------
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
SEGMENT INFORMATION (Continued)
(Thousands of Dollars)
Three Months Ended
March 31,
(Unaudited)
------------------------------
Increase
2007 2006 (Decrease)
--------- --------- ----------
Capital Expenditures:
---------------------------
Utility $ 12,679 $ 13,006 $ (327)
Pipeline and Storage 5,201 4,165 1,036
Exploration and Production 49,277 45,401 3,876
Energy Marketing 8 1 7
Timber 401 257 144
--------- --------- ----------
Total Reportable Segments 67,566 62,830 4,736
All Other 55 56 (1)
Corporate (610) 1,707 (2,317)
--------- --------- ----------
Total Consolidated $ 67,011 $ 64,593 $ 2,418
--------- --------- ----------
Six Months Ended
March 31,
(Unaudited)
------------------------------
Increase
2007 2006 (Decrease)
--------- --------- ----------
Capital Expenditures:
---------------------------
Utility $ 25,558 $ 25,360 $ 198
Pipeline and Storage 10,153 10,328 (175)
Exploration and Production 95,866 96,324 (458)
Energy Marketing 17 6 11
Timber 1,207 752 455
--------- --------- ----------
Total Reportable Segments 132,801 132,770 31
All Other 84 56 28
Corporate (572) 2,135 (2,707)
--------- --------- ----------
Total Consolidated $132,313 $134,961 $ (2,648)
--------- --------- ----------
DEGREE DAYS
---------------------------
Percent Colder
(Warmer) Than:
Three Months Ended March 31 Normal 2007 2006 Normal Last Year
--------------------------- ------- ------- ------- -------- ---------
Buffalo, NY 3,327 3,327 2,875 - 15.7
Erie, PA 3,142 3,152 2,705 0.3 16.5
Six Months Ended March 31
---------------------------
Buffalo, NY 5,587 5,274 5,085 (5.6) 3.7
Erie, PA 5,223 5,030 4,753 (3.7) 5.8
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
EXPLORATION AND PRODUCTION INFORMATION
----------------------------------------------------------------------
Three Months Ended Six Months Ended
March 31, March 31,
-------------------------- --------------------------
Increase Increase
2007 2006 (Decrease) 2007 2006 (Decrease)
------- ------- ---------- ------- ------- ----------
Gas Production
/Prices:
----------------
Production
(MMcf)
Gulf Coast 2,893 2,752 141 5,616 4,419 1,197
West Coast 920 933 (13) 1,865 1,951 (86)
Appalachia 1,339 1,246 93 2,732 2,499 233
Canada 1,856 1,761 95 3,577 3,672 (95)
------- ------- ---------- ------- ------- ----------
7,008 6,692 316 13,790 12,541 1,249
------- ------- ---------- ------- ------- ----------
Average Prices
(Per Mcf)
Gulf Coast $ 6.42 $ 8.47 $ (2.05) $ 6.48 $ 9.33 $ (2.85)
West Coast 6.95 8.02 (1.07) 6.51 9.62 (3.11)
Appalachia 7.39 10.03 (2.64) 7.30 11.83 (4.53)
Canada 5.87 7.21 (1.34) 6.12 9.06 (2.94)
Weighted
Average 6.53 8.37 (1.84) 6.56 9.79 (3.23)
Weighted
Average
after
Hedging 6.87 7.39 (0.52) 6.90 7.88 (0.98)
Oil Production
/Prices:
----------------
Production
(Thousands of
Barrels)
Gulf Coast 174 181 (7) 376 288 88
West Coast 599 639 (40) 1,190 1,324 (134)
Appalachia 31 12 19 58 22 36
Canada 61 68 (7) 117 155 (38)
------- ------- ---------- ------- ------- ----------
865 900 (35) 1,741 1,789 (48)
------- ------- ---------- ------- ------- ----------
Average Prices
(Per Barrel)
Gulf Coast $57.21 $58.69 $ (1.48) $56.84 $58.39 $ (1.55)
West Coast 49.99 53.65 (3.66) 50.55 52.46 (1.91)
Appalachia 57.88 60.28 (2.40) 58.76 60.84 (2.08)
Canada 49.98 48.63 1.35 46.45 45.57 0.88
Weighted
Average 51.73 54.37 (2.64) 51.91 52.92 (1.01)
Weighted
Average
after
Hedging 48.09 40.30 7.79 45.90 36.70 9.20
Total Production
(Mmcfe) 12,198 12,092 106 24,236 23,275 961
---------------- ------- ------- ---------- ------- ------- ----------
Selected
Operating
Performance
Statistics:
----------------
General &
Administrative
Expense per
Mcfe (1) $ 0.49 $ 0.53 $ (0.04) $ 0.48 $ 0.54 $ (0.06)
Lease Operating
Expense per
Mcfe (1) $ 1.33 $ 1.21 $ 0.12 $ 1.27 $ 1.26 $ 0.01
Depreciation,
Depletion &
Amortization
per Mcfe (1) $ 1.88 $ 1.91 $ (0.03) $ 1.85 $ 1.92 $ (0.07)
(1) Refer to page 17 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 0.4 MMBBL $37.86 / BBL
Gas 6.3 BCF $7.38 / MCF
No-cost Collars Volume Floor Price Ceiling Price
------------------------------- ---------- ------------ -------------
Oil 0.1 MMBBL $70.00 / BBL $77.00 / BBL
Gas 2.5 BCF $7.42 / MCF $16.42 / MCF
Hedging Summary for Fiscal 2008
SWAPS Volume Average Hedge Price
------------------------------- ---------- --------------------------
Oil 0.6 MMBBL $52.45 / BBL
Gas 7.9 BCF $8.38 / MCF
No-cost Collars Volume Floor Price Ceiling Price
---------- ------------ -------------
Gas 1.4 BCF $8.83 / MCF $16.45 / MCF
Hedging Summary for Fiscal 2009
SWAPS Volume Average Hedge Price
---------- --------------------------
Oil 0.2 MMBBL $54.70 / BBL
Gross Wells in Process of
Drilling
---------------------------
Six Months Ended March 31,
2007
---------------------------
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 4.00 0.00 9.00 13.00 6.00 19.00
Developmental 0.00 36.00 46.00 82.00 3.00 85.00
Wells Completed
Exploratory 1.00 1.00 2.00 4.00 4.00 8.00
Developmental 0.00 36.00 67.00 103.00 2.00 105.00
Wells Plugged & Abandoned
Exploratory 3.00 0.00 0.00 3.00 0.00 3.00
Developmental 0.00 0.00 1.00 1.00 0.00 1.00
Wells in Process - End of
Period
Exploratory 4.00 0.00 17.00 21.00 7.00 28.00
Developmental 1.00 5.00 22.00 28.00 1.00 29.00
Net Wells in Process of
Drilling
---------------------------
Six Months Ended March 31,
2007
---------------------------
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 1.90 0.00 8.10 10.00 3.95 13.95
Developmental 0.00 36.00 44.00 80.00 1.80 81.80
Wells Completed
Exploratory 0.35 0.50 1.60 2.45 2.75 5.20
Developmental 0.00 36.00 65.00 101.00 0.80 101.80
Wells Plugged & Abandoned
Exploratory 1.42 0.00 0.00 1.42 0.00 1.42
Developmental 0.00 0.00 1.00 1.00 0.00 1.00
Wells in Process - End of
Period
Exploratory 2.15 0.00 16.50 18.65 3.33 21.98
Developmental 0.67 5.00 22.00 27.67 1.00 28.67
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
Utility Throughput - (millions of cubic feet - MMcf)
Three Months Ended
March 31,
-----------------------------
Increase
2007 2006 (Decrease)
-------- -------- -----------
Retail Sales:
Residential Sales 29,372 26,807 2,565
Commercial Sales 5,428 5,038 390
Industrial Sales 323 459 (136)
-------- -------- -----------
35,123 32,304 2,819
Transportation 24,723 22,119 2,604
-------- -------- -----------
59,846 54,423 5,423
-------- -------- -----------
Pipeline & Storage Throughput - (MMcf)
Three Months Ended
March 31,
-----------------------------
Increase
2007 2006 (Decrease)
-------- -------- -----------
Firm Transportation - Affiliated 51,016 43,637 7,379
Firm Transportation - Non-Affiliated 69,615 71,191 (1,576)
Interruptible Transportation 932 1,831 (899)
-------- -------- -----------
121,563 116,659 4,904
-------- -------- -----------
Energy Marketing Volumes
Three Months Ended
March 31,
-----------------------------
Increase
2007 2006 (Decrease)
-------- -------- -----------
Natural Gas (MMcf) 19,935 17,332 2,603
-------- -------- -----------
Timber Board Feet (Thousands)
Three Months Ended
March 31,
-----------------------------
Increase
2007 2006 (Decrease)
-------- -------- -----------
Log Sales 3,025 3,282 (257)
Green Lumber Sales 2,380 2,982 (602)
Kiln Dry Lumber Sales 3,794 4,512 (718)
-------- -------- -----------
9,199 10,776 (1,577)
-------- -------- -----------
Utility Throughput - (millions of cubic feet - MMcf)
Six Months Ended
March 31,
----------------------------
Increase
2007 2006 (Decrease)
-------- -------- ----------
Retail Sales:
Residential Sales 46,050 46,331 (281)
Commercial Sales 8,296 8,481 (185)
Industrial Sales 514 786 (272)
-------- -------- ----------
54,860 55,598 (738)
Transportation 40,576 36,461 4,115
-------- -------- ----------
95,436 92,059 3,377
-------- -------- ----------
Pipeline & Storage Throughput - (MMcf)
Six Months Ended
March 31,
----------------------------
Increase
2007 2006 (Decrease)
-------- -------- ----------
Firm Transportation - Affiliated 80,746 76,862 3,884
Firm Transportation - Non-Affiliated 114,312 140,788 (26,476)
Interruptible Transportation 1,927 5,554 (3,627)
-------- -------- ----------
196,985 223,204 (26,219)
-------- -------- ----------
Energy Marketing Volumes
Six Months Ended
March 31,
----------------------------
Increase
2007 2006 (Decrease)
-------- -------- ----------
Natural Gas (MMcf) 31,049 27,306 3,743
-------- -------- ----------
Timber Board Feet (Thousands)
Six Months Ended
March 31,
----------------------------
Increase
2007 2006 (Decrease)
-------- -------- ----------
Log Sales 4,734 5,774 (1,040)
Green Lumber Sales 3,910 4,956 (1,046)
Kiln Dry Lumber Sales 6,952 8,998 (2,046)
-------- -------- ----------
15,596 19,728 (4,132)
-------- -------- ----------
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
FISCAL 2007 EARNINGS GUIDANCE AND SENSITIVITIES
Fiscal 2007 (Diluted earnings per share guidance(x))
----------------------------------------------------------------------
Range
--------------
Consolidated Earnings $2.25 - $2.40
Earnings per share sensitivity to changes
from NYMEX prices used in guidance(x) +
-----------------------------------------------------
$1 change per MMBtu gas $5 change per Bbl oil
-------------------------- --------------------------
Increase Decrease Increase Decrease
-------------------------- --------------------------
+ $0.06 - $0.05 + $0.05 - $0.05
NYMEX Settlement Prices at September 21, 2006
---------------------------------------------
Natural Gas Oil
($ per MMBtu) ($ per Bbl)
------------- -------------
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 $7.282 $66.03
(x) Please refer to forward looking statement footnote at page 8 of this document. + This sensitivity table is current as of May 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 March 31 (unaudited) 2007 2006
-------------------------------------- --------------- ---------------
Operating Revenues $ 812,156,000 $ 890,981,000
--------------- ---------------
Net Income Available for Common
Stock $ 78,447,000 $ 78,594,000
--------------- ---------------
Earnings Per Common Share:
Basic $ 0.95 $ 0.93
--------------- ---------------
Diluted $ 0.92 $ 0.91
--------------- ---------------
Weighted Average Common Shares:
Used in Basic Calculation 82,895,087 84,346,733
--------------- ---------------
Used in Diluted Calculation 85,033,127 86,253,597
--------------- ---------------
Six Months Ended March 31 (unaudited)
--------------------------------------
Operating Revenues $1,316,396,000 $1,601,737,000
--------------- ---------------
Net Income Available for Common
Stock $ 132,967,000 $ 136,013,000
--------------- ---------------
Earnings Per Common Share:
Basic $ 1.61 $ 1.61
--------------- ---------------
Diluted $ 1.57 $ 1.58
--------------- ---------------
Weighted Average Common Shares:
Used in Basic Calculation 82,786,027 84,385,140
--------------- ---------------
Used in Diluted Calculation 84,891,742 86,256,515
--------------- ---------------
Twelve Months Ended March 31
(unaudited)
--------------------------------------
Operating Revenues $2,026,317,000 $2,289,160,000
--------------- ---------------
Income from Continuing Operations $ 135,045,000 $ 180,717,000
Income from Discontinued Operations,
Net of Tax - 23,663,000
--------------- ---------------
Net Income Available for Common
Stock $ 135,045,000 $ 204,380,000
--------------- ---------------
Earnings Per Common Share:
Basic:
Income from Continuing Operations $ 1.62 $ 2.15
Income from Discontinued
Operations - 0.28
--------------- ---------------
Net Income Available for Common
Stock $ 1.62 $ 2.43
--------------- ---------------
Diluted:
Income from Continuing Operations $ 1.58 $ 2.11
Income from Discontinued
Operations - 0.27
--------------- ---------------
Net Income Available for Common
Stock $ 1.58 $ 2.38
--------------- ---------------
Weighted Average Common Shares:
Used in Basic Calculation 83,232,743 84,116,896
--------------- ---------------
Used in Diluted Calculation 85,352,796 85,810,270
--------------- ---------------