National Fuel Reports Fourth Quarter and Full Year Fiscal 2019 Earnings


WILLIAMSVILLE, N.Y., Oct. 31, 2019 (GLOBE NEWSWIRE) -- National Fuel Gas Company (“National Fuel” or the “Company”) (NYSE:NFG) today announced consolidated results for the three months and fiscal year ended September 30, 2019.

FISCAL 2019 FOURTH QUARTER SUMMARY

  • GAAP earnings of $47.3 million, or $0.54 per share, compared to $38.0 million, or $0.44 per share, in the prior year
  • Adjusted operating results of $47.0 million, or $0.54 per share, compared to $42.5 million, or $0.49 per share, in the prior year (see non-GAAP reconciliation on page 2)
  • Adjusted EBITDA of $157.3 million compared to $148.2 million in the prior year (non-GAAP reconciliation on page 24)
  • E&P segment net production of 59.1 Bcfe, an increase of 25% from the prior year and 8% from the third quarter
  • Average natural gas prices, after the impact of hedging, of $2.26 per Mcf, down $0.19 per Mcf from the prior year
  • Average oil prices, after the impact of hedging, of $61.00 per Bbl, up $3.29 per Bbl from the prior year
  • Gathering segment revenues increased $6.7 million, or 24%, on higher throughput from Seneca

FISCAL 2019 HIGHLIGHTS

  • GAAP earnings of $304.3 million, or $3.51 per share, compared to $391.5 million, or $4.53 per share, in the prior year
  • Adjusted operating results of $299.3 million, or $3.45 per share, compared to $289.4 million, or $3.35 per share, in the prior year (see non-GAAP reconciliation on page 2)
  • Adjusted EBITDA of $785.4 million, an increase of $23.9 million over fiscal 2018 (non-GAAP reconciliation on page 24)
  • E&P segment net production of 211.8 Bcfe, an increase of 19% over fiscal 2018 and the highest output in Company history
  • Proved reserves at September 30, 2019, of 3.1 Tcfe, an increase of 23% from September 30, 2018
  • Gathering segment revenues increased $19.2 million, or 18%, on higher throughput from Seneca
  • Utility segment net income of $60.9 million, an increase of $9.7 million, or 19%, over fiscal 2018
  • Increased shareholder dividend for the 49th consecutive year to an annual rate of $1.74 per share

MANAGEMENT COMMENTS

David P. Bauer, President and Chief Executive Officer of National Fuel Gas Company, stated: “National Fuel capped off our 2019 fiscal year with an excellent fourth quarter, including operating results that were up approximately 10% from the prior year.  Despite a challenging commodity price environment, the Company also grew its earnings year over year, evidencing the value of our integrated business model.  The high degree of integration between our Exploration and Production and Gathering operations provided meaningful consolidated benefits, as Seneca’s record annual production drove a significant increase in our Gathering segment revenues this year, offsetting the impact of lower natural gas realizations.  Our regulated Downstream and Midstream operations continue to provide diversification and predictable cash flows.  The Utility segment delivered strong results in 2019, driven largely by modest customer growth and our ongoing investments in the modernization of our distribution network. These investments, which exceeded $74 million this fiscal year, further enhanced the safety and integrity of our pipeline systems, and contributed to earnings and rate base growth.”

RECONCILIATION OF GAAP EARNINGS TO ADJUSTED OPERATING RESULTS

         
  Three Months Ended Fiscal Year Ended
  September 30, September 30,
(in thousands except per share amounts) 2019 2018 2019 2018
Reported GAAP Earnings $47,281  $37,994  $304,290  $391,521 
Items impacting comparability        
Remeasurement of deferred income taxes under 2017 Tax Reform   3,516  (5,000) (103,484)
Mark-to-market adjustments due to hedge ineffectiveness (E&P) (1,313) 346  (2,096) 782 
Tax impact of mark-to-market adjustments due to hedge ineffectiveness 276  (85) 440  (192)
Unrealized (gain) loss on other investments (Corporate / All Other) 949    2,045   
Tax impact of unrealized (gain) loss on other investments (199)   (429)  
Premium paid on early redemption of debt (E&P)   962    962 
Tax impact of premium paid on early redemption of debt   (235)   (235)
Adjusted Operating Results $46,994  $42,498  $299,250  $289,354 
         
Reported GAAP Earnings per share $0.54  $0.44  $3.51  $4.53 
Items impacting comparability        
Remeasurement of deferred income taxes under 2017 Tax Reform   0.04  (0.06) (1.20)
Mark-to-market adjustments due to hedge ineffectiveness, net of tax (E&P) (0.01)   (0.02) 0.01 
Unrealized (gain) loss on other investments, net of tax (Corporate / All Other) 0.01    0.02   
Premium paid on early redemption of debt, net of tax (E&P)   0.01    0.01 
Adjusted Operating Results per share $0.54  $0.49  $3.45  $3.35 
                 

FISCAL 2020 GUIDANCE UPDATE

National Fuel is revising its fiscal 2020 earnings guidance to reflect updated forecast assumptions and projections, including the expected impact of the decline in near-term natural gas prices that has occurred since the Company’s preliminary guidance was announced in August 2019.  The Company is now projecting that earnings will be within the range of $3.00 to $3.30 per share, or $3.15 per share at the midpoint of the range. The decrease from the preliminary guidance is primarily due to lower expected price realizations on Seneca’s production, higher expected depreciation, depletion and amortization (“DD&A”) rates at Seneca, and higher expected pension and other post-retirement benefit expenses. The increase in Seneca’s projected DD&A rate is largely due to higher expected future plugging and abandonment costs in California. The increase in pension and other post-retirement benefit costs is being driven by changes in actuarial assumptions, primarily a lower discount rate resulting from the recent decline in interest rates.

The Company is now assuming that NYMEX natural gas prices will average $2.40 per MMBtu in fiscal 2020, a decrease of $0.15 per MMBtu from the $2.55 per MMBtu assumed in the preliminary guidance. For guidance purposes, the Company’s updated projections reflect the current NYMEX forward markets for natural gas and oil and consider the impact of local sales point differentials and new physical firm sales, transportation, or financial hedge contracts. During the fourth quarter, Seneca executed approximately 42 billion cubic feet (“Bcf”) of new NYMEX swap contracts. The Company currently has financial hedges and fixed price physical firm sales contracts in place on approximately 60% of Seneca’s expected fiscal 2020 production that, on average, lock-in a price realization of $2.30 per thousand cubic feet (“Mcf”).

The Exploration and Production segment’s fiscal 2020 net production forecast remains unchanged in the range of 235 to 245 billion cubic feet equivalent (“Bcfe”).  The Company’s fiscal 2020 consolidated and individual segment capital expenditures guidance also remains unchanged from the preliminary guidance. The Company announced in August that it plans to reduce Seneca’s development activity in Appalachia in response to the decline in near-term natural gas prices.  As planned, during the second quarter of fiscal 2020, Seneca expects to drop one of the three horizontal drilling rigs it is currently operating in Appalachia.  Because the Company owns a majority of its natural gas interests in fee, Seneca has the flexibility to further reduce its capital investments should market conditions continue to weaken in order to preserve the economics of its development program.

Mr. Bauer added: “As we look to the future, despite the headwind of natural gas prices in fiscal 2020, we are well-positioned to responsibly grow the Company in a manner that maintains the strength of our balance sheet and drives value for our shareholders.  With line of sight on new firm transportation capacity to premium markets, Seneca will maintain its focus on prudently developing its Utica Shale reserves in our Western Development Area, where we are able to utilize our existing infrastructure, including gathering facilities, to enhance our consolidated upstream and midstream returns.  Our Gathering business will continue to grow in lockstep with Seneca’s production, and is expected to see near-term annual revenue growth of approximately 10%.  Our Pipeline and Storage business is targeting the completion of multiple expansion projects by the close of calendar 2021, which we expect to collectively grow annual revenues by approximately $65 million.  And, our Utility business will continue to make investments to modernize its facilities, and to enhance the long-term reliability of our distribution systems, which we expect to modestly grow rate base and margin.  All told, National Fuel is poised for continuing long-term success.”

Additional details on the Company's updated forecast assumptions and business segment guidance for fiscal 2020 are outlined in the table on page 7.

DISCUSSION OF FOURTH QUARTER RESULTS BY SEGMENT

The following discussion of earnings of each operating segment for the quarter ended September 30, 2019, is summarized in a tabular form on pages 8 and 9 of this report (earnings drivers for the fiscal year ended September 30, 2019 are summarized on pages 10 and 11).  It may be helpful to refer to those tables while reviewing this discussion.  As of the quarter ended September 30, 2019, the Company is no longer reporting the Energy Marketing operations as a reportable segment.  The Energy Marketing operations have been included in the All Other category in the disclosures and tables that follow below.  Prior year segment information has been restated to reflect this change in presentation.

Note that management defines Adjusted Operating Results as reported GAAP earnings adjusted for items impacting comparability, and Adjusted EBITDA as reported GAAP earnings before the following items: interest expense, income taxes, depreciation, depletion and amortization, other income and deductions, impairments, and other items reflected in operating income that impact comparability.

Upstream Business

Exploration and Production Segment

The Exploration and Production segment operations are carried out by Seneca Resources Company, LLC ("Seneca").  Seneca explores for, develops and produces natural gas and oil reserves, primarily in Pennsylvania and California.

 Three Months Ended
 September 30,
(in thousands)2019 2018 Variance
GAAP Earnings$25,208  $19,580  $5,628 
Remeasurement of deferred taxes under 2017 Tax Reform  2,804  (2,804)
Mark-to-market adjustments due to hedge ineffectiveness, net of tax(1,037) 261  (1,298)
Premium paid on early redemption of debt, net of tax  727  (727)
Adjusted Operating Results$24,171  $23,372  $799 
      
Adjusted EBITDA$89,509  $81,194  $8,315 
            

Seneca’s fourth quarter GAAP earnings increased $5.6 million versus the prior year, which includes the net impact of non-cash mark-to-market adjustments recorded during the current and prior year relating to hedge ineffectiveness and certain items that impacted earnings in the prior year that did not recur in the current year (see table above).  Excluding these items, Seneca’s fourth quarter earnings increased $0.8 million as the positive impacts of higher production and better realized crude oil prices on operating revenues, along with a lower effective income tax rate, were mostly offset by the negative impacts of lower realized natural gas prices on operating revenues and higher operating expenses.

Seneca produced 59.1 Bcfe during the fourth quarter, an increase of 11.8 Bcfe, or 25%, from the prior year. Natural gas production increased 11.7 billion cubic feet (“Bcf”), or 27%, due primarily to production from new Marcellus and Utica wells completed and connected to sales in Appalachia. Net production in Seneca’s Eastern Development Area increased 7.7 Bcf to 30.7 Bcf due largely to increased Utica development in the EDA-Tioga area and Marcellus development in the EDA-Lycoming area. Net gas production increased 4.0 Bcf to 24.1 Bcf in the WDA-Clermont area, where Seneca continues to experience stronger production and shallower declines from its Utica development program. Seneca’s oil production for the fourth quarter increased 14 thousand barrels ("Mbbl") from the prior year due to new wells coming online in the Pioneer development area in California.

Seneca's average realized natural gas price, after the impact of hedging and transportation costs, was $2.26 per Mcf, a decrease of $0.19 per Mcf from the prior year. This decline was largely due to lower NYMEX prices and lower spot pricing at local sales points in Pennsylvania. Seneca's average realized oil price, after the impact of hedging, was $61.00 per barrel ("Bbl"), an increase of $3.29 per Bbl over the prior year.  The improvement in oil price realizations was due primarily to stronger price differentials at local sales points in California relative to West Texas Intermediate (WTI) prices.

The $22.3 million increase in Seneca’s total operating expenses was largely due to the higher production during the quarter.  On a unit of production basis, operating expenses excluding DD&A expense declined $0.07 per thousand cubic feet equivalent (“Mcfe”), or 5%, to $1.25 per Mcfe from the $1.32 per Mcfe realized in the prior year. Lease operating and transportation (“LOE”) expense, which increased $8.8 million, includes the fees paid to the Company’s Gathering segment for gathering and compression services used to connect Seneca’s Marcellus and Utica production to sales points along interstate pipelines. The $10.6 million increase in DD&A expense was also due to a higher DD&A rate, which was driven by an increase in capitalized costs in Seneca’s full cost pool. The decline in Seneca’s effective tax rate was largely driven by the positive impact of the 2017 Tax Reform Act, a higher Enhanced Oil Recovery credit, and lower state taxes in the current year.

Proved Reserves Year-End Update

Seneca’s total proved natural gas and crude oil reserves at September 30, 2019 were 3,099 Bcfe, an increase of 575 Bcfe, or 23%, from the proved reserves reported at September 30, 2018.  Seneca’s proved developed reserves at the end of fiscal 2019 were 2,081 Bcfe, representing 67% of total proved reserves. The proved reserves base is approximately 95% natural gas and 5% oil.  In fiscal 2019, Seneca recorded 691 Bcfe of proved reserve extensions and discoveries, due primarily to Utica and Marcellus locations in Appalachia, and 96 Bcfe of net positive revisions due largely to improvements in well performance and Seneca’s shift towards drilling wells with longer laterals. As a result, Seneca replaced 372% of its fiscal 2019 production.  Seneca’s three-year average finding and development cost at the end of fiscal 2019 was $0.56 per Mcfe, down $0.18 per Mcfe from the three-year average of $0.74 per Mcfe at the end of fiscal 2018.

Midstream Businesses

Pipeline and Storage Segment

The Pipeline and Storage segment’s operations are carried out by National Fuel Gas Supply Corporation (“Supply Corporation”) and Empire Pipeline, Inc. (“Empire”).  The Pipeline and Storage segment provides natural gas transportation and storage services to affiliated and non-affiliated companies through an integrated system of pipelines and underground natural gas storage fields in western New York and Pennsylvania.

 Three Months Ended
 September 30,
(in thousands)2019 2018 Variance
GAAP Earnings$15,368  $15,337  $31 
      
Adjusted EBITDA$35,747  $37,699  $(1,952)

The Pipeline and Storage segment’s fourth quarter GAAP earnings were largely unchanged versus the prior year, as lower operating revenues were offset by lower operation and maintenance (“O&M”) and interest expenses.  The $4.5 million decrease in operating revenues was due largely to the expiration of a significant firm transportation contract on the Empire system in December 2018.  The impact of the contract expiration was partially offset by an increase in Empire’s transportation rates following the settlement of Empire’s rate case that became effective in January 2019.  O&M expense decreased $2.7 million due primarily to lower compressor and facility maintenance costs.  Interest expense decreased $0.8 million due primarily to lower borrowing rates.

Gathering Segment

The Gathering segment’s operations are carried out by National Fuel Gas Midstream Company, LLC’s limited liability companies. The Gathering segment constructs, owns and operates natural gas gathering pipelines and compression facilities in the Appalachian region, which currently delivers Seneca’s gross Appalachian production to the interstate pipeline system.

 Three Months Ended
 September 30,
(in thousands)2019 2018 Variance
GAAP Earnings$16,902  $14,783  $2,119 
Remeasurement of deferred taxes under 2017 Tax Reform  12  (12)
Adjusted Operating Results$16,902  $14,795  $2,107 
      
Adjusted EBITDA$29,895  $23,814  $6,081 

The Gathering segment’s fourth quarter GAAP earnings increased $2.1 million over the prior year.  The increase was driven primarily by higher operating revenues, which were partially offset by modest increases in O&M expense and DD&A expense and the impact of a higher effective tax rate.  Operating revenues increased $6.7 million, or 24%, due primarily to a 12.7 Bcf increase in gathered volume from Seneca’s Appalachian natural gas production. The $0.6 million increase in O&M expense was due to an increase in compressor station operating and preventative maintenance activity as a result of higher throughput during the quarter. The $0.6 million increase in DD&A expense was due primarily to a $46 million increase in average plant assets in-service versus the prior year.

The increase in the Gathering segment’s effective tax rate was largely due to a deferred state tax adjustment that lowered prior year income tax expense. This nonrecurring item was partially offset by the impact of the 2017 Tax Reform Act, which lowered the Company’s statutory federal income tax rate from a blended 24.5% in fiscal 2018 to 21% in fiscal 2019.

Downstream Businesses

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.

 Three Months Ended
 September 30,
(in thousands)2019 2018 Variance
GAAP Earnings$(7,728) $(7,067) $(661)
      
Adjusted EBITDA$6,714  $10,514  $(3,800)

The $0.7 million increase in the Utility segment’s fourth quarter net loss was due largely to lower margin (operating revenues less purchased gas sold), partially offset by lower interest expense.  A number of items contributed to the decrease in customer margin, including warmer weather and the net impact of revenue adjustments related to regulatory rate mechanisms.  These items were offset partially by an increase in revenues relating to a system modernization tracking mechanism that became effective in December 2018.  Interest expense decreased $1.0 million due primarily to lower borrowing rates following the Company’s early refinancing of an 8.75% coupon 10-year note at the end of the prior year.

Corporate and All Other

The Company’s operations that are included in Corporate and All Other, which now include the Company’s energy marketing business, generated a combined net loss of $2.5 million in the current year fourth quarter, which was $2.1 million lower than the loss of $4.6 million in the prior-year fourth quarter.  The reduction in the net loss was driven primarily by lower interest expense and lower income tax expense. The lower income tax expense was due, in part, to the impact of the 2017 Tax Reform Act, which resulted in a remeasurement of deferred taxes that increased income tax expense in the prior year.

EARNINGS TELECONFERENCE

The Company will host a conference call on Friday, November 1, 2019, at 11 a.m. Eastern Time to discuss this announcement.  There are two ways to access this call.  For those with Internet access, visit the NFG Investor Relations News & Events page at National Fuel’s website at investor.nationalfuelgas.com.  For those without Internet access, audio access is also provided by dialing (toll-free) 833-287-0795, using conference ID number “4581569”.  For those unable to listen to the live conference call, an audio replay will be available approximately two hours following the teleconference at the same website link and by phone at (toll-free) 800-585-8367 using conference ID number “4581569”.  Both the webcast and a telephonic replay will be available until the close of business on Friday, November 8, 2019.

National Fuel is an integrated energy company reporting financial results for four operating segments: Exploration and Production, Pipeline and Storage, Gathering, and Utility.  Additional information about National Fuel is available at www.nationalfuelgas.com.

Analyst Contact:Kenneth E. Webster716-857-7067
Media Contact:Karen L. Merkel716-857-7654
   

Certain statements contained herein, including statements identified by the use of the words “anticipates,” “estimates,” “expects,” “forecasts,” “intends,” “plans,” “predicts,” “projects,” “believes,” “seeks,” “will,” “may” and similar expressions, and statements which are other than statements of historical facts, 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, regulations or judicial interpretations to which the Company is subject, including those involving derivatives, taxes, safety, employment, climate change, other environmental matters, real property, and exploration and production activities such as hydraulic fracturing; delays or changes in costs or plans with respect to Company projects or related projects of other companies, including difficulties or delays in obtaining necessary governmental approvals, permits or orders or in obtaining the cooperation of interconnecting facility operators; governmental/regulatory actions, initiatives and proceedings, including those involving rate cases (which address, among other things, target rates of return, rate design and retained natural gas), environmental/safety requirements, affiliate relationships, industry structure, and franchise renewal; changes in the price of natural gas or oil; impairments under the SEC’s full cost ceiling test for natural gas and oil reserves; financial and economic conditions, including the availability of credit, and occurrences affecting the Company’s ability to obtain financing on acceptable terms for working capital, capital expenditures and other investments, including any downgrades in the Company’s credit ratings and changes in interest rates and other capital market conditions; factors affecting the Company’s ability to successfully identify, drill for and produce economically viable natural gas and oil reserves, including among others geology, lease availability, title disputes, weather conditions, shortages, delays or unavailability of equipment and services required in drilling operations, insufficient gathering, processing and transportation capacity, the need to obtain governmental approvals and permits, and compliance with environmental laws and regulations; increasing health care costs and the resulting effect on health insurance premiums and on the obligation to provide other post-retirement benefits; changes in price differentials between similar quantities of natural gas or oil sold at different geographic locations, and the effect of such changes on commodity production, revenues and demand for pipeline transportation capacity to or from such locations; other changes in price differentials between similar quantities of natural gas or oil having different quality, heating value, hydrocarbon mix or delivery date; the cost and effects of legal and administrative claims against the Company or activist shareholder campaigns to effect changes at the Company; uncertainty of oil and gas reserve estimates; significant differences between the Company’s projected and actual production levels for natural gas or oil; changes in demographic patterns and weather conditions; changes in the availability, price or accounting treatment of derivative financial instruments; changes in laws, actuarial assumptions, the interest rate environment and the return on plan/trust assets related to the Company’s pension and other post-retirement benefits, which can affect future funding obligations and costs and plan liabilities; changes in economic conditions, including global, national or regional recessions, and their effect on the demand for, and customers’ ability to pay for, the Company’s products and services; the creditworthiness or performance of the Company’s key suppliers, customers and counterparties; the impact of  information technology, cybersecurity or data security breaches; economic disruptions or uninsured losses resulting from major accidents, fires, severe weather, natural disasters, terrorist activities or acts of war; significant differences between the Company’s projected and actual capital expenditures and operating expenses; 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 thereof.


NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES

GUIDANCE SUMMARY

As discussed on pages 2 and 3, the Company is revising its earnings guidance for fiscal 2020.  Additional details on the Company's forecast assumptions and business segment guidance are outlined in the table below.

 Preliminary FY 2020 Guidance Updated FY 2020 Guidance
Consolidated Earnings per Share$3.25 to $3.55 $3.00 to $3.30
    
Consolidated Effective Tax Rate~ 25% ~ 25%
    
Capital Expenditures (Millions)   
Exploration and Production$415 - $455 $415 - $455
Pipeline and Storage$180 - $215 $180 - $215
Gathering$40 - $50 $40 - $50
Utility$90 - $100 $90 - $100
Consolidated Capital Expenditures$725 - $820 $725 - $820
    
Exploration & Production Segment Guidance   
    
Commodity Price Assumptions   
NYMEX natural gas price$2.55 /MMBtu $2.40 /MMBtu
Appalachian basin spot price (winter | summer)$2.20 /MMBtu | $2.00 /MMBtu $2.20 /MMBtu | $2.00 /MMBtu
NYMEX (WTI) crude oil price$55.00 /Bbl $55.00 /Bbl
California oil price premium (% of WTI)108% 106%
    
Production (Bcfe)   
East Division - Appalachia219 to 229 219 to 229
West Division - California~ 16 ~ 16
Total Production235 to 245 235 to 245
    
E&P Operating Costs ($/Mcfe)   
LOE$0.85 - $0.90 $0.85 - $0.89
G&A$0.25 - $0.30 $0.27 - $0.30
DD&A$0.70 - $0.75 $0.73 - $0.77
    
Other Business Segment Guidance (Millions)   
Gathering Segment Revenues$135 - $145 $135 - $145
Pipeline and Storage Segment Revenues$290 - $295 $290 - $295


NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS
QUARTER ENDED SEPTEMBER 30, 2019
(Unaudited)
            
 Upstream Midstream Downstream    
            
 Exploration & Pipeline &     Corporate /  
(Thousands of Dollars)Production Storage Gathering Utility All Other Consolidated*
            
Fourth quarter 2018 GAAP earnings$19,580  $15,337  $14,783  $(7,067) $(4,639) $37,994 
            
Items impacting comparability:           
Remeasurement of deferred taxes under 2017 Tax Reform2,804    12    700  3,516 
Mark-to-market adjustments due to hedge ineffectiveness346          346 
Tax impact of mark-to-market adjustments due to hedge ineffectiveness(85)         (85)
Premium paid on early redemption of debt962          962 
Tax impact of premium paid on early redemption of debt(235)         (235)
Fourth quarter 2018 adjusted operating results23,372  15,337  14,795  (7,067) (3,939) 42,498 
            
Drivers of adjusted operating results**           
            
Upstream Revenues           
Higher (lower) natural gas production21,591          21,591 
Higher (lower) crude oil production593          593 
Higher (lower) realized natural gas prices, after hedging(7,923)         (7,923)
Higher (lower) realized crude oil prices, after hedging1,521          1,521 
            
Midstream Revenues           
Higher (lower) operating revenues  (3,404) 5,051      1,647 
            
Downstream Margins***           
Impact of usage and weather      (1,131)   (1,131)
System modernization tracker revenues      484    484 
Regulatory revenue adjustments      (757)   (757)
            
Operating Expenses           
Lower (higher) lease operating and transportation expenses(6,619)         (6,619)
Lower (higher) operating expenses(1,862) 2,043  (464) (815)   (1,098)
Lower (higher) depreciation / depletion(7,983)   (489)     (8,472)
            
Other Income (Expense)           
(Higher) lower other deductions  860    1,394    2,254 
(Higher) lower interest expense(672) 629  (140) 751  736  1,304 
            
Income Taxes           
Impact of tax rate reduction due to 2017 Tax Reform1,543  675  547  (562) (23) 2,180 
Lower (higher) income tax expense / effective tax rate1,551  (473) (2,408) 895  726  291 
            
All other / rounding(941) (299) 10  (920) 781  (1,369)
Fourth quarter 2019 adjusted operating results24,171  15,368  16,902  (7,728) (1,719) 46,994 
            
Items impacting comparability:           
Mark-to-market adjustments due to hedge ineffectiveness1,313          1,313 
Tax impact of mark-to-market adjustments due to hedge ineffectiveness(276)         (276)
Unrealized gain (loss) on other investments        (949) (949)
Tax impact of unrealized gain (loss) on other investments        199  199 
Fourth quarter 2019 GAAP earnings$25,208  $15,368  $16,902  $(7,728) $(2,469) $47,281 
            
* Amounts do not reflect intercompany eliminations
** Operating results have been calculated using the 24.5% federal statutory rate effective for the 2018 fiscal year. The impact of the change to a 21% federal statutory rate for the 2019 fiscal year is broken out separately under the caption "Income Taxes".
*** Downstream margin defined as operating revenues less purchased gas expense.


NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS PER SHARE
QUARTER ENDED SEPTEMBER 30, 2019
(Unaudited)
            
 Upstream Midstream Downstream    
            
 Exploration & Pipeline &     Corporate /  
 Production Storage Gathering Utility All Other Consolidated*
            
Fourth quarter 2018 GAAP earnings per share$0.23  $0.18  $0.17  $(0.08) $(0.06) $0.44 
Items impacting comparability:           
Remeasurement of deferred taxes under 2017 Tax Reform0.03        0.01  0.04 
Mark-to-market adjustments due to hedge ineffectiveness, net of tax           
Premium paid on early redemption of debt, net of tax0.01          0.01 
Fourth quarter 2018 adjusted operating results per share0.27  0.18  0.17  (0.08) (0.05) 0.49 
            
Drivers of adjusted operating results**           
            
Upstream Revenues           
Higher (lower) natural gas production0.25          0.25 
Higher (lower) crude oil production0.01          0.01 
Higher (lower) realized natural gas prices, after hedging(0.09)         (0.09)
Higher (lower) realized crude oil prices, after hedging0.02          0.02 
            
Midstream Revenues           
Higher (lower) operating revenues  (0.04) 0.06      0.02 
            
Downstream Margins***           
Impact of usage and weather      (0.01)   (0.01)
System modernization tracker revenues      0.01    0.01 
Regulatory revenue adjustments      (0.01)   (0.01)
            
Operating Expenses           
Lower (higher) lease operating and transportation expenses(0.08)         (0.08)
Lower (higher) operating expenses(0.02) 0.02  (0.01) (0.01)   (0.02)
Lower (higher) depreciation / depletion(0.09)   (0.01)     (0.10)
            
Other Income (Expense)           
(Higher) lower other deductions  0.01    0.02    0.03 
(Higher) lower interest expense(0.01) 0.01    0.01  0.01  0.02 
            
Income Taxes           
Impact of tax rate reduction due to 2017 Tax Reform0.02  0.01  0.01  (0.01)   0.03 
Lower (higher) income tax expense / effective tax rate0.02  (0.01) (0.03) 0.01  0.01   
            
All other / rounding(0.02)     (0.02) 0.01  (0.03)
Fourth quarter 2019 adjusted operating results per share0.28  0.18  0.19  (0.09) (0.02) 0.54 
            
Items impacting comparability:           
Mark-to-market adjustments due to hedge ineffectiveness, net of tax0.01          0.01 
Unrealized gain (loss) on other investments, net of tax        (0.01) (0.01)
Fourth quarter 2019 GAAP earnings per share$0.29  $0.18  $0.19  $(0.09) $(0.03) $0.54 
            
* Amounts do not reflect intercompany eliminations
** Operating results have been calculated using the 24.5% federal statutory rate effective for the 2018 fiscal year. The impact of the change to a 21% federal statutory rate for the 2019 fiscal year is broken out separately under the caption "Income Taxes".
*** Downstream margin defined as operating revenues less purchased gas expense.


NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS
TWELVE MONTHS ENDED SEPTEMBER 30, 2019
(Unaudited)
            
 Upstream Midstream Downstream    
            
 Exploration & Pipeline &     Corporate /  
(Thousands of Dollars)Production Storage Gathering Utility All Other Consolidated*
            
Fiscal 2018 GAAP earnings$180,632  $97,246  $83,519  $51,217  $(21,093) $391,521 
            
Items impacting comparability:           
Remeasurement of deferred taxes under 2017 Tax Reform(73,706) (14,100) (34,488)   18,810  (103,484)
Mark-to-market adjustments due to hedge ineffectiveness782          782 
Tax impact of mark-to-market adjustments due to hedge ineffectiveness(192)         (192)
Premium paid on early redemption of debt962          962 
Tax impact of premium paid on early redemption of debt(235)         (235)
Fiscal 2018 adjusted operating results108,243  83,146  49,031  51,217  (2,283) 289,354 
            
Drivers of adjusted operating results**           
            
Upstream Revenues           
Higher (lower) natural gas production66,573          66,573 
Higher (lower) crude oil production(9,372)         (9,372)
Higher (lower) realized natural gas prices, after hedging(12,350)         (12,350)
Higher (lower) realized crude oil prices, after hedging5,243          5,243 
            
Midstream Revenues           
Higher (lower) operating revenues  (9,092) 14,479      5,387 
            
Downstream Margins***           
Impact of usage and weather      2,554    2,554 
System modernization tracker revenues      3,085    3,085 
Lower (higher) refund provision on tax rate change      (3,783)   (3,783)
Regulatory revenue adjustments      416    416 
Higher (lower) energy marketing margins        (3,841) (3,841)
            
Operating Expenses           
Lower (higher) lease operating and transportation expenses(18,048)         (18,048)
Lower (higher) operating expenses(3,497) (5,914) (2,144) (1,710)   (13,265)
Lower (higher) property, franchise and other taxes(2,511) (1,055)       (3,566)
Lower (higher) depreciation / depletion(23,035) (1,120) (2,057)     (26,212)
            
Other Income (Expense)           
(Higher) lower other deductions  2,439    3,814    6,253 
(Higher) lower interest expense(1,096) 1,692  116  2,501  1,925  5,138 
            
Income Taxes           
Impact of tax rate reduction due to 2017 Tax Reform5,099  2,895  2,516  2,251  (315) 12,446 
Lower (higher) income tax expense / effective tax rate(5,825) 1,411  (3,801) 1,089  1,792  (5,334)
            
All other / rounding(263) (391) (227) (563) 16  (1,428)
Fiscal 2019 adjusted operating results109,161  74,011  57,913  60,871  (2,706) 299,250 
            
Items impacting comparability:           
Remeasurement of deferred taxes under 2017 Tax Reform990    500    3,510  5,000 
Mark-to-market adjustments due to hedge ineffectiveness2,096          2,096 
Tax impact of mark-to-market adjustments due to hedge ineffectiveness(440)         (440)
Unrealized gain (loss) on other investments        (2,045) (2,045)
Tax impact of unrealized gain (loss) on other investments        429  429 
Fiscal 2019 GAAP earnings$111,807  $74,011  $58,413  $60,871  $(812) $304,290 
            
* Amounts do not reflect intercompany eliminations           
** Operating results have been calculated using the 24.5% federal statutory rate effective for the 2018 fiscal year. The impact of the change to a 21% federal statutory rate for the 2019 fiscal year is broken out separately under the caption "Income Taxes".
*** Downstream margin defined as operating revenues less purchased gas expense.


NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS PER SHARE
TWELVE MONTHS ENDED SEPTEMBER 30, 2019
(Unaudited)
            
 Upstream Midstream Downstream    
            
 Exploration & Pipeline &     Corporate /  
 Production Storage Gathering Utility All Other Consolidated*
Fiscal 2018 GAAP earnings per share$2.09  $1.13  $0.97  $0.59  $(0.25) $4.53 
Items impacting comparability:           
Remeasurement of deferred taxes under 2017 Tax Reform(0.85) (0.16) (0.40)   0.21  (1.20)
Mark-to-market adjustments due to hedge ineffectiveness, net of tax0.01          0.01 
Premium paid on early redemption of debt, net of tax0.01          0.01 
Rounding(0.01) (0.01)     0.02   
Fiscal 2018 adjusted operating results per share1.25  0.96  0.57  0.59  (0.02) 3.35 
            
Drivers of adjusted operating results**           
            
Upstream Revenues           
Higher (lower) natural gas production0.77          0.77 
Higher (lower) crude oil production(0.11)         (0.11)
Higher (lower) realized natural gas prices, after hedging(0.14)         (0.14)
Higher (lower) realized crude oil prices, after hedging0.06          0.06 
            
Midstream Revenues           
Higher (lower) operating revenues  (0.10) 0.17      0.07 
            
Downstream Margins***           
Impact of usage and weather      0.03    0.03 
System modernization tracker revenues      0.04    0.04 
Lower (higher) refund provision on tax rate change      (0.04)   (0.04)
Regulatory revenue adjustments           
Higher (lower) energy marketing margins        (0.04) (0.04)
            
Operating Expenses           
Lower (higher) lease operating and transportation expenses(0.21)         (0.21)
Lower (higher) operating expenses(0.04) (0.07) (0.02) (0.02)   (0.15)
Lower (higher) property, franchise and other taxes(0.03) (0.01)       (0.04)
Lower (higher) depreciation / depletion(0.27) (0.01) (0.02)     (0.30)
            
Other Income (Expense)           
(Higher) lower other deductions  0.03    0.04    0.07 
(Higher) lower interest expense(0.01) 0.02    0.03  0.02  0.06 
            
Income Taxes           
Impact of tax rate reduction due to 2017 Tax Reform0.06  0.03  0.03  0.03    0.15 
Lower (higher) income tax expense / effective tax rate(0.07) 0.02  (0.04) 0.01  0.02  (0.06)
            
All other / rounding  (0.02) (0.02) (0.01) (0.01) (0.06)
Fiscal 2019 adjusted operating results per share1.26  0.85  0.67  0.70  (0.03) 3.45 
            
Items impacting comparability:           
Remeasurement of deferred taxes under 2017 Tax Reform0.01    0.01    0.04  0.06 
Mark-to-market adjustments due to hedge ineffectiveness, net of tax0.02          0.02 
Unrealized gain (loss) on other investments, net of tax        (0.02) (0.02)
Rounding    (0.01)   0.01   
Fiscal 2019 GAAP earnings per share$1.29  $0.85  $0.67  $0.70  $  $3.51 
            
* Amounts do not reflect intercompany eliminations
** Operating results have been calculated using the 24.5% federal statutory rate effective for the 2018 fiscal year. The impact of the change to a 21% federal statutory rate for the 2019 fiscal year is broken out separately under the caption "Income Taxes".
*** Downstream margin defined as operating revenues less purchased gas expense.


        
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
        
(Thousands of Dollars, except per share amounts)       
 Three Months Ended Twelve Months Ended
 September 30, September 30,
 (Unaudited) (Unaudited)
SUMMARY OF OPERATIONS2019 2018 2019 2018
Operating Revenues:       
Utility and Energy Marketing Revenues$79,925  $93,240  $860,985  $812,474 
Exploration and Production and Other Revenues166,262  143,998  636,528  569,808 
Pipeline and Storage and Gathering Revenues47,153  51,958  195,819  210,386 
 293,340  289,196  1,693,332  1,592,668 
Operating Expenses:       
Purchased Gas4,728  14,968  386,265  337,822 
Operation and Maintenance:       
Utility and Energy Marketing39,390  38,537  171,472  168,885 
Exploration and Production and Other38,847  34,656  147,457  139,546 
Pipeline and Storage and Gathering30,926  33,067  111,783  101,338 
Property, Franchise and Other Taxes20,839  20,148  88,886  84,393 
Depreciation, Depletion and Amortization74,670  63,159  275,660  240,961 
 209,400  204,535  1,181,523  1,072,945 
        
Operating Income83,940  84,661  511,809  519,723 
        
Other Income (Expense):       
Other Income (Deductions)1,435  (968) (15,542) (21,174)
Interest Expense on Long-Term Debt(25,598) (28,534) (101,614) (110,946)
Other Interest Expense(1,081) (834) (5,142) (3,576)
        
Income Before Income Taxes58,696  54,325  389,511  384,027 
        
Income Tax Expense (Benefit)11,415  16,331  85,221  (7,494)
        
Net Income Available for Common Stock$47,281  $37,994  $304,290  $391,521 
        
Earnings Per Common Share       
Basic$0.55  $0.44  $3.53  $4.56 
Diluted$0.54  $0.44  $3.51  $4.53 
        
Weighted Average Common Shares:       
Used in Basic Calculation86,315,038 85,953,204 86,235,550 85,830,597
Used in Diluted Calculation86,807,821 86,650,677 86,773,259 86,439,698


 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
  
 September 30, September 30,
(Thousands of Dollars)2019 2018
    
ASSETS   
Property, Plant and Equipment$11,204,838  $10,439,839 
Less - Accumulated Depreciation, Depletion and Amortization 5,695,328   5,462,696 
Net Property, Plant and Equipment 5,509,510   4,977,143 
    
Current Assets:   
Cash and Temporary Cash Investments 20,428   229,606 
Hedging Collateral Deposits 6,832   3,441 
Receivables - Net 139,956   141,498 
Unbilled Revenue 18,758   24,182 
Gas Stored Underground 36,632   37,813 
Materials and Supplies - at average cost 40,717   35,823 
Unrecovered Purchased Gas Costs 2,246   4,204 
Other Current Assets 97,054   68,024 
Total Current Assets 362,623   544,591 
    
Other Assets:   
Recoverable Future Taxes 115,197   115,460 
Unamortized Debt Expense 14,005   15,975 
Other Regulatory Assets 167,320   112,918 
Deferred Charges 33,843   40,025 
Other Investments 144,917   132,545 
Goodwill 5,476   5,476 
Prepaid Post-Retirement Benefit Costs 60,517   82,733 
Fair Value of Derivative Financial Instruments 48,669   9,518 
Other 80   102 
Total Other Assets 590,024   514,752 
Total Assets$6,462,157  $6,036,486 
    
CAPITALIZATION AND LIABILITIES   
Capitalization:   
Comprehensive Shareholders' Equity   
Common Stock, $1 Par Value Authorized - 200,000,000 Shares; Issued and   
Outstanding - 86,315,287 Shares and 85,956,814 Shares, Respectively$86,315  $85,957 
Paid in Capital 832,264   820,223 
Earnings Reinvested in the Business 1,272,601   1,098,900 
Accumulated Other Comprehensive Loss (52,155)  (67,750)
Total Comprehensive Shareholders' Equity 2,139,025   1,937,330 
Long-Term Debt, Net of Current Portion and Unamortized Discount and Debt Issuance Costs 2,133,718   2,131,365 
Total Capitalization 4,272,743   4,068,695 
    
Current and Accrued Liabilities:   
Notes Payable to Banks and Commercial Paper 55,200    
Current Portion of Long-Term Debt     
Accounts Payable 132,208   160,031 
Amounts Payable to Customers 7,445   3,394 
Dividends Payable 37,547   36,532 
Interest Payable on Long-Term Debt 18,508   19,062 
Customer Advances 13,044   13,609 
Customer Security Deposits 16,210   25,703 
Other Accruals and Current Liabilities 139,600   132,693 
Fair Value of Derivative Financial Instruments 5,574   49,036 
Total Current and Accrued Liabilities 425,336   440,060 
    
Deferred Credits:   
Deferred Income Taxes 653,382   512,686 
Taxes Refundable to Customers 366,503   370,628 
Cost of Removal Regulatory Liability 221,699   212,311 
Other Regulatory Liabilities 138,939   146,743 
Pension and Other Post-Retirement Liabilities 133,729   66,103 
Asset Retirement Obligations 127,458   108,235 
Other Deferred Credits 122,368   111,025 
Total Deferred Credits 1,764,078   1,527,731 
Commitments and Contingencies     
Total Capitalization and Liabilities$6,462,157  $6,036,486 


    
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 Twelve Months Ended
 September 30,
(Thousands of Dollars)2019 2018
    
Operating Activities:   
Net Income Available for Common Stock$304,290  $391,521 
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:   
Depreciation, Depletion and Amortization275,660  240,961 
Deferred Income Taxes122,265  (18,153)
Stock-Based Compensation21,186  15,762 
Other8,608  16,133 
Change in:   
Receivables and Unbilled Revenue6,379  (30,882)
Gas Stored Underground and Materials and Supplies(3,713) (4,021)
Unrecovered Purchased Gas Costs1,958  419 
Other Current Assets(29,030) (16,519)
Accounts Payable(24,770) 17,962 
Amounts Payable to Customers4,051  3,394 
Customer Advances(565) (2,092)
Customer Security Deposits(9,493) 5,331 
Other Accruals and Current Liabilities10,992  3,865 
Other Assets5,115  (9,556)
Other Liabilities1,550  1,178 
Net Cash Provided by Operating Activities$694,483  $615,303 
    
Investing Activities:   
Capital Expenditures$(788,938) $(584,004)
Net Proceeds from Sale of Oil and Gas Producing Properties  55,506 
Other(10,237) (389)
Net Cash Used in Investing Activities$(799,175) $(528,887)
    
Financing Activities:   
Changes in Notes Payable to Banks and Commercial Paper$55,200  $ 
Reduction of Long-Term Debt  (566,512)
Dividends Paid on Common Stock(147,418) (143,258)
Net Proceeds From Issuance of Long-Term Debt  295,020 
Net Proceeds from Issuance (Repurchase) of Common Stock(8,877) 4,110 
Net Cash Used in Financing Activities$(101,095) $(410,640)
    
Net Decrease in Cash, Cash Equivalents, and Restricted Cash(205,787) (324,224)
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period233,047  557,271 
Cash, Cash Equivalents, and Restricted Cash at September 30$27,260  $233,047 


          
          
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
          
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
          
UPSTREAM BUSINESS
          
          
 Three Months Ended Twelve Months Ended
(Thousands of Dollars, except per share amounts)September 30, September 30,
EXPLORATION AND PRODUCTION SEGMENT2019 2018 Variance 20192018Variance
Total Operating Revenues$164,887  $143,167  $21,720  $632,740 $564,547 $68,193 
          
Operating Expenses:         
Operation and Maintenance:         
General and Administrative Expense16,063  14,127  1,936  64,003 59,424 4,579 
Lease Operating and Transportation Expense50,409  41,642  8,767  186,626 162,721 23,905 
All Other Operation and Maintenance Expense3,425  2,895  530  11,130 11,077 53 
Property, Franchise and Other Taxes4,168  3,655  513  17,726 14,400 3,326 
Depreciation, Depletion and Amortization44,141  33,567  10,574  154,784 124,274 30,510 
 118,206  95,886  22,320  434,269 371,896 62,373 
          
Operating Income46,681  47,281 (600) 198,471 192,6515,820 
          
Other Income (Expense):         
Non-Service Pension and Post-Retirement Benefit Costs(4) (293) 289  (16)(1,172)1,156 
Interest and Other Income273  392  (119) 1,107 1,479 (372)
Interest Expense on Long-Term Debt  (962) 962   (962)962 
Other Interest Expense(14,216) (13,326) (890) (54,777)(53,326)(1,451)
          
Income Before Income Taxes32,734  33,092  (358) 144,785 138,670 6,115 
Income Tax Expense (Benefit)7,526  13,512  (5,986) 32,978 (41,962)74,940 
Net Income$25,208  $19,580  $5,628  $111,807 $180,632 $(68,825)
          
Net Income Per Share (Diluted)$0.29  $0.23  $0.06  $1.29 $2.09 $(0.80)
          


          
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
          
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
          
MIDSTREAM BUSINESSES
          
          
 Three Months Ended Twelve Months Ended
(Thousands of Dollars, except per share amounts)September 30, September 30,
PIPELINE AND STORAGE SEGMENT2019 2018 Variance 20192018Variance
Revenues from External Customers$47,143  $51,958  $(4,815) $195,808 $210,345 $(14,537)
Intersegment Revenues22,764  22,457  307  92,475 89,981 2,494 
Total Operating Revenues69,907  74,415  (4,508) 288,283 300,326 (12,043)
          
Operating Expenses:         
Purchased Gas241  341  (100) 1,124 607 517 
Operation and Maintenance26,099  28,805  (2,706) 94,710 86,877 7,833 
Property, Franchise and Other Taxes7,820  7,570  250  30,268 28,870 1,398 
Depreciation, Depletion and Amortization11,387  11,141  246  44,947 43,463 1,484 
 45,547  47,857  (2,310) 171,049 159,817 11,232 
          
Operating Income24,360  26,558  (2,198) 117,234 140,509 (23,275)
          
Other Income (Expense):         
Non-Service Pension and Post-Retirement Benefit Credit930  353  577  3,257 1,421 1,836 
Interest and Other Income1,882  1,320  562  5,900 4,505 1,395 
Interest Expense(7,132) (7,965) 833  (29,142)(31,383)2,241 
          
Income Before Income Taxes20,040  20,266  (226) 97,249 115,052 (17,803)
Income Tax Expense4,672  4,929  (257) 23,238 17,806 5,432 
Net Income$15,368  $15,337  $31  $74,011 $97,246 $(23,235)
          
Net Income Per Share (Diluted)$0.18  $0.18  $  $0.85 $1.13 $(0.28)
          
          
 Three Months Ended Twelve Months Ended
 September 30, September 30,
GATHERING SEGMENT2019 2018 Variance 20192018Variance
Revenues from External Customers$10  $  $10  $11 $41 $(30)
Intersegment Revenues35,132  28,452  6,680  127,064 107,856 19,208 
Total Operating Revenues35,142  28,452  6,690  127,075 107,897 19,178 
          
Operating Expenses:         
Operation and Maintenance5,229  4,615  614  18,702 15,862 2,840 
Property, Franchise and Other Taxes18  23  (5) 81 98 (17)
Depreciation, Depletion and Amortization5,202  4,554  648  20,038 17,313 2,725 
 10,449  9,192  1,257  38,821 33,273 5,548 
          
Operating Income24,693  19,260  5,433  88,254 74,624 13,630 
          
Other Income (Expense):         
Non-Service Pension and Post-Retirement Benefit Costs(1) (82) 81  (86)(328)242 
Interest and Other Income57  130  (73) 546 1,106 (560)
Interest Expense(2,397) (2,211) (186) (9,406)(9,560)154 
          
Income Before Income Taxes22,352  17,097  5,255  79,308 65,842 13,466 
Income Tax Expense (Benefit)5,450  2,314  3,136  20,895 (17,677)38,572 
Net Income$16,902  $14,783  $2,119  $58,413 $83,519 $(25,106)
          
Net Income Per Share (Diluted)$0.19  $0.17  $0.02  $0.67 $0.97 $(0.30)
          


          
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
          
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
          
DOWNSTREAM BUSINESS
          
          
 Three Months Ended Twelve Months Ended
(Thousands of Dollars, except per share amounts)September 30, September 30,
UTILITY SEGMENT2019 2018 Variance 20192018Variance
Revenues from External Customers$67,189  $75,231  $(8,042) $715,813 $674,726 $41,087 
Intersegment Revenues1,645  1,399  246  11,629 12,800 (1,171)
Total Operating Revenues68,834  76,630  (7,796) 727,442 687,526 39,916 
          
Operating Expenses:         
Purchased Gas14,712  19,683  (4,971) 342,832 306,130 36,702 
Operation and Maintenance38,845  37,798  1,047  168,684 165,858 2,826 
Property, Franchise and Other Taxes8,563  8,635  (72) 39,792 39,984 (192)
Depreciation, Depletion and Amortization13,630  13,272  358  53,832 53,253 579 
 75,750  79,388  (3,638) 605,140 565,225 39,915 
          
Operating Income (Loss)(6,916) (2,758) (4,158) 122,302 122,301 1 
          
Other Income (Expense):         
Non-Service Pension and Post-Retirement Benefit Costs(2,040) (3,722) 1,682  (27,600)(31,399)3,799 
Interest and Other Income870  705  165  3,579 2,326 1,253 
Interest Expense(5,492) (6,487) 995  (23,443)(26,753)3,310 
          
Income (Loss) Before Income Taxes(13,578) (12,262) (1,316) 74,838 66,475 8,363 
Income Tax Expense (Benefit)(5,850) (5,195) (655) 13,967 15,258 (1,291)
Net Income (Loss)$(7,728) $(7,067) $(661) $60,871 $51,217 $9,654 
          
Net Income (Loss) Per Share (Diluted)$(0.09) $(0.08) $(0.01) $0.70 $0.59 $0.11 
          


NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
          
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
          
 Three Months Ended Twelve Months Ended
(Thousands of Dollars, except per share amounts)September 30, September 30,
ALL OTHER2019 2018 Variance 20192018Variance
Revenues from External Customers$13,977  $18,785  $(4,808) $148,582 $142,349 $6,233 
Intersegment Revenues71  237  (166) 1,127 826 301 
Total Operating Revenues14,048  19,022  (4,974) 149,709 143,175 6,534 
Operating Expenses:         
Purchased Gas13,439  18,242  (4,803) 144,292 131,481 12,811 
Operation and Maintenance1,837  1,833  4  7,549 7,438 111 
Property, Franchise and Other Taxes141  140  1  540 565 (25)
Depreciation, Depletion and Amortization115  436  (321) 1,291 1,902 (611)
 15,532  20,651  (5,119) 153,672 141,386 12,286 
          
Operating Income (Loss)(1,484) (1,629) 145  (3,963)1,789 (5,752)
          
Other Income (Expense):         
Non-Service Pension and Post-Retirement Benefit Costs(11) (133) 122  (153)(535)382 
Interest and Other Income319  335  (16) 1,371 1,154 217 
Other Interest Expense(6) (5) (1) (21)(22)1 
          
Income (Loss) Before Income Taxes(1,182) (1,432) 250  (2,766)2,386 (5,152)
Income Tax Expense (Benefit)(316) (474) 158  (955)2,125 (3,080)
Net Income (Loss)$(866) $(958) $92  $(1,811)$261 $(2,072)
Net Income (Loss) Per Share (Diluted)$(0.01) $(0.01) $  $(0.02)$ $(0.02)
    
    
 Three Months Ended Twelve Months Ended
 September 30, September 30,
CORPORATE2019 2018 Variance 20192018Variance
Revenues from External Customers$134  $55  $79  $378 $660 $(282)
Intersegment Revenues1,144  1,047  97  4,638 4,045 593 
Total Operating Revenues1,278  1,102  176  5,016 4,705 311 
Operating Expenses:         
Operation and Maintenance4,348  4,839  (491) 14,258 15,624 (1,366)
Property, Franchise and Other Taxes129  125  4  479 476 3 
Depreciation, Depletion and Amortization195  189  6  768 756 12 
 4,672  5,153  (481) 15,505 16,856 (1,351)
          
Operating Loss(3,394) (4,051) 657  (10,489)(12,151)1,662 
          
Other Income (Expense):         
Non-Service Pension and Post-Retirement Benefit Costs(647) (156) (491) (2,679)(624)(2,055)
Interest and Other Income28,993  30,552  (1,559) 115,605 124,002 (8,397)
Interest Expense on Long-Term Debt(25,598) (27,572) 1,974  (101,614)(109,984)8,370 
Other Interest Expense(1,024) (1,209) 185  (4,726)(5,641)915 
          
Loss before Income Taxes(1,670) (2,436) 766  (3,903)(4,398)495 
Income Tax Expense (Benefit)(67) 1,245  (1,312) (4,902)16,956 (21,858)
Net Income (Loss)$(1,603) $(3,681) $2,078  $999 $(21,354)$22,353 
Net Income (Loss) Per Share (Diluted)$(0.02) $(0.05) $0.03  $0.02 $(0.25)$0.27 
          
          
 Three Months Ended Twelve Months Ended
 September 30, September 30,
INTERSEGMENT ELIMINATIONS2019 2018 Variance 20192018Variance
Intersegment Revenues$(60,756) $(53,592) $(7,164) $(236,933)$(215,508)$(21,425)
Operating Expenses:         
Purchased Gas(23,664) (23,298) (366) (101,983)(100,396)(1,587)
Operation and Maintenance(37,092) (30,294) (6,798) (134,950)(115,112)(19,838)
 (60,756) (53,592) (7,164) (236,933)(215,508)(21,425)
          
Operating Income         
          
Other Income (Expense):         
Interest and Other Deductions(29,186) (30,369) 1,183  (116,373)(123,109)6,736 
Interest Expense29,186  30,369  (1,183) 116,373 123,109 (6,736)
Net Income (Loss)$  $  $  $ $ $ 
Net Income (Loss) Per Share (Diluted)$  $  $  $ $ $ 


            
            
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
            
SEGMENT INFORMATION (Continued)
(Thousands of Dollars)
            
            
 Three Months Ended Twelve Months Ended
 September 30, September 30,
 (Unaudited) (Unaudited)
     Increase     Increase
 2019 2018 (Decrease) 2019 2018 (Decrease)
            
Capital Expenditures:           
Exploration and Production$100,215 (1)$110,801 (2)$(10,586) $491,889 (1)(2)$380,677 (2)(3)$111,212 
Pipeline and Storage54,878 (1)39,476 (2)15,402  143,005 (1)(2)92,832 (2)(3)50,173 
Gathering10,254 (1)13,961 (2)(3,707) 49,650 (1)(2)61,728 (2)(3)(12,078)
Utility37,483 (1)33,621 (2)3,862  95,847 (1)(2)85,648 (2)(3)10,199 
Total Reportable Segments202,830  197,859  4,971  780,391  620,885  159,506 
All Other5  7  (2) 128  41  87 
Corporate358  131  227  727  181  546 
Eliminations  (583) 583    (20,505) 20,505 
Total Capital Expenditures$203,193  $197,414  $5,779  $781,246  $600,602  $180,644 

(1)  Capital expenditures for the quarter and year ended September 30, 2019, include accounts payable and accrued liabilities related to capital expenditures of $38.0 million, $23.8 million, $6.6 million, and $12.7 million in the Exploration and Production segment, Pipeline and Storage segment, Gathering segment and Utility segment, respectively.  These amounts have been excluded from the Consolidated Statement of Cash Flows at September 30, 2019, since they represent non-cash investing activities at that date.

(2)  Capital expenditures for the year ended September 30, 2019, exclude capital expenditures of $51.3 million, $21.9 million, $6.1 million and $9.5 million in the Exploration and Production segment, Pipeline and Storage segment, Gathering segment and Utility segment, respectively.  These amounts were in accounts payable and accrued liabilities at September 30, 2018 and paid during the year ended September 30, 2019.  These amounts were excluded from the Consolidated Statement of Cash Flows at September 30, 2018, since they represented non-cash investing activities at that date.  These amounts have been included in the Consolidated Statement of Cash Flows at September 30, 2019.

(3)  Capital expenditures for the year ended September 30, 2018, exclude capital expenditures of $36.5 million, $25.1 million, $3.9 million and $6.7 million in the Exploration and Production segment, Pipeline and Storage segment, Gathering segment and Utility segment, respectively.  These amounts were in accounts payable and accrued liabilities at September 30, 2017 and paid during the year ended September 30, 2018.  These amounts were excluded from the Consolidated Statement of Cash Flows at September 30, 2017, since they represented non-cash investing activities at that date.  These amounts have been included in the Consolidated Statement of Cash Flows at September 30, 2018.

          
DEGREE DAYS         
          
       Percent Colder
       (Warmer) Than:
Three Months Ended September 30Normal 2019 2018 Normal (1) Last Year (1)
          
Buffalo, NY162 45 83 (72.2) (45.8)
Erie, PA124 12 47 (90.3) (74.5)
          
Twelve Months Ended September 30         
            
Buffalo, NY6,617 6,699 6,391 1.2  4.8 
Erie, PA6,147 5,911 5,976 (3.8) (1.1)
          

(1)  Percents compare actual 2019 degree days to normal degree days and actual 2019 degree days to actual 2018 degree days.

             
             
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
             
EXPLORATION AND PRODUCTION INFORMATION
             
             
  Three Months Ended Twelve Months Ended
  September 30, September 30,
      Increase     Increase
  2019 2018 (Decrease) 2019 2018 (Decrease)
             
Gas Production/Prices:            
Production (MMcf)            
Appalachia 54,952  43,238  11,714  195,906  160,499  35,407 
West Coast 491  511  (20) 1,974  2,407  (433)
Total Production 55,443  43,749  11,694  197,880  162,906  34,974 
             
Average Prices (Per Mcf)            
Appalachia $1.95  $2.34  $(0.39) $2.40  $2.36  $0.04 
West Coast 3.94  5.73  (1.79) 5.15  4.86  0.29 
Weighted Average 1.97  2.38  (0.41) 2.43  2.40  0.03 
Weighted Average after Hedging 2.26  2.45  (0.19) 2.44  2.52  (0.08)
             
Oil Production/Prices:            
Production (Thousands of Barrels)            
Appalachia 1  1    3  4  (1)
West Coast 611  597  14  2,320  2,531  (211)
Total Production 612  598  14  2,323  2,535  (212)
             
Average Prices (Per Barrel)            
Appalachia $60.70  $66.97  $(6.27) $57.14  $57.76  $(0.62)
West Coast 61.85  71.91  (10.06) 64.18  66.39  (2.21)
Weighted Average 61.85  71.90  (10.05) 64.17  66.38  (2.21)
Weighted Average after Hedging 61.00  57.71  3.29  61.65  58.66  2.99 
             
Total Production (MMcfe) 59,115  47,337  11,778  211,818  178,116  33,702 
             
Selected Operating Performance Statistics:            
General & Administrative Expense per Mcfe (1) $0.27  $0.30  $(0.03) $0.30  $0.33  $(0.03)
Lease Operating and Transportation Expense per Mcfe (1)(2) $0.85  $0.88  $(0.03) $0.88  $0.91  $(0.03)
Depreciation, Depletion & Amortization per Mcfe (1) $0.75  $0.71  $0.04  $0.73  $0.70  $0.03 
             

(1)  Refer to page 15 for the General and Administrative Expense, Lease Operating and Transportation Expense and Depreciation, Depletion, and Amortization Expense for the Exploration and Production segment.

(2)  Amounts include transportation expense of $0.56 and $0.53 per Mcfe for the three months ended September 30, 2019 and September 30, 2018, respectively. Amounts include transportation expense of $0.56 and $0.54 per Mcfe for the twelve months ended September 30, 2019 and September 30, 2018, respectively.

NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
        
EXPLORATION AND PRODUCTION INFORMATION
 
Hedging Summary for Fiscal 2020 Volume   Average Hedge Price
Oil Swaps       
Brent 1,260,000 BBL $ 64.66 / BBL
NYMEX 324,000 BBL $ 50.52 / BBL
Total 1,584,000 BBL $ 61.77 / BBL
        
Gas Swaps       
NYMEX 84,630,000 MMBTU $ 2.72 / MMBTU
DAWN 7,200,000 MMBTU $ 3.00 / MMBTU
Fixed Price Physical Sales 48,281,386 MMBTU $ 2.38 / MMBTU
Total 140,111,386 MMBTU $ 2.62 / MMBTU
        
Hedging Summary for Fiscal 2021 Volume   Average Hedge Price
Oil Swaps       
Brent 576,000 BBL $ 64.48 / BBL
NYMEX 156,000 BBL $ 51.00 / BBL
Total 732,000 BBL $ 61.61 / BBL
        
Gas Swaps       
NYMEX 10,630,000 MMBTU $ 2.80 / MMBTU
DAWN 600,000 MMBTU $ 3.00 / MMBTU
Fixed Price Physical Sales 41,206,344 MMBTU $ 2.21 / MMBTU
Total 52,436,344 MMBTU $ 2.34 / MMBTU
        
Hedging Summary for Fiscal 2022 Volume   Average Hedge Price
Oil Swaps       
Brent 300,000 BBL $ 60.07 / BBL
NYMEX 156,000 BBL $ 51.00 / BBL
Total 456,000 BBL $ 56.97 / BBL
        
Fixed Price Physical Sales 40,242,536 MMBTU $ 2.23 / MMBTU
        
Hedging Summary for Fiscal 2023 Volume   Average Hedge Price
Fixed Price Physical Sales 36,807,532 MMBTU $ 2.25 / MMBTU
        
Hedging Summary for Fiscal 2024 Volume   Average Hedge Price
Fixed Price Physical Sales 20,801,194 MMBTU $ 2.25 / MMBTU
        
Hedging Summary for Fiscal 2025 Volume   Average Hedge Price
Fixed Price Physical Sales 2,293,200 MMBTU $ 2.18 / MMBTU


     
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
     
EXPLORATION AND PRODUCTION INFORMATION
     
Reserve Quantity Information
(Unaudited)
     
  Gas MMcf
  U.S.
  AppalachianWest CoastTotal
  RegionRegionCompany
Proved Developed and Undeveloped Reserves:    
September 30, 2018 2,320,502 36,840 2,357,342 
Extensions and Discoveries 686,549  686,549 
Revisions of Previous Estimates 104,741 (1,233)103,508 
Production (195,906)(1,974)(197,880)
September 30, 2019 2,915,886 33,633 2,949,519 
     
Proved Developed Reserves:    
     
September 30, 2018 1,569,692 36,840 1,606,532 
September 30, 2019 1,901,162 33,633 1,934,795 
     
     
  Oil Mbbl
  U.S.
  AppalachianWest CoastTotal
  RegionRegionCompany
Proved Developed and Undeveloped Reserves:    
September 30, 2018 14 27,649 27,663 
Extensions and Discoveries  787 787 
Revisions of Previous Estimates 2 (1,256)(1,254)
Production (3)(2,320)(2,323)
September 30, 2019 13 24,860 24,873 
     
Proved Developed Reserves:    
     
September 30, 2018 14 26,689 26,703 
September 30, 2019 13 24,246 24,259 
     


             
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
             
             
             
Pipeline & Storage Throughput - (millions of cubic feet - MMcf)    
             
  Three Months Ended Twelve Months Ended
  September 30, September 30,
      Increase     Increase
  2019 2018 (Decrease) 2019 2018 (Decrease)
Firm Transportation - Affiliated 14,194  15,058  (864) 121,618  119,164  2,454 
Firm Transportation - Non-Affiliated 153,838  165,809  (11,971) 596,676  645,156  (48,480)
Interruptible Transportation 189  393  (204) 2,163  3,546  (1,383)
  168,221  181,260  (13,039) 720,457  767,866  (47,409)
             
Gathering Volume - (MMcf)            
  Three Months Ended Twelve Months Ended
  September 30, September 30,
      Increase     Increase
  2019 2018 (Decrease) 2019 2018 (Decrease)
Gathered Volume - Affiliated 65,170  52,427  12,743  234,760  198,355  36,405 
             
             
Utility Throughput - (MMcf)            
  Three Months Ended Twelve Months Ended
  September 30, September 30,
      Increase     Increase
  2019 2018 (Decrease) 2019 2018 (Decrease)
Retail Sales:            
Residential Sales 3,247  3,707  (460) 63,828  60,174  3,654 
Commercial Sales 490  567  (77) 9,489  9,187  302 
Industrial Sales 63  63    702  623  79 
  3,800  4,337  (537) 74,019  69,984  4,035 
Off-System Sales         141  (141)
Transportation 10,115  10,430  (315) 76,028  76,828  (800)
  13,915  14,767  (852) 150,047  146,953  3,094 
             
             

NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES

NON-GAAP FINANCIAL MEASURES

In addition to financial measures calculated in accordance with generally accepted accounting principles (GAAP), this press release contains information regarding Adjusted Operating Results and Adjusted EBITDA, which are non-GAAP financial measures.  The Company believes that these non-GAAP financial measures are useful to investors because they provide an alternative method for assessing the Company's ongoing operating results and for comparing the Company’s financial performance to other companies.  The Company's management uses these non-GAAP financial measures for the same purpose, and for planning and forecasting purposes.  The presentation of non-GAAP financial measures is not meant to be a substitute for financial measures in accordance with GAAP.

Management defines Adjusted Operating Results as reported GAAP earnings before items impacting comparability.  The following table reconciles National Fuel's reported GAAP earnings to Adjusted Operating Results for the three and twelve months ended September 30, 2019 and 2018:

  Three Months Ended Twelve Months Ended
  September 30, September 30,
(in thousands except per share amounts) 2019 2018 2019 2018
Reported GAAP Earnings $47,281  $37,994  $304,290  $391,521 
Items impacting comparability        
Remeasurement of deferred income taxes under 2017 Tax Reform   3,516  (5,000) (103,484)
Mark-to-market adjustments due to hedge ineffectiveness (E&P) (1,313) 346  (2,096) 782 
Tax impact of mark-to-market adjustments due to hedge ineffectiveness 276  (85) 440  (192)
Unrealized (gain) loss on other investments (Corporate/All Other) 949    2,045   
Tax impact of unrealized (gain) loss on other investments (199)   (429)  
Premium paid on early redemption of debt (E&P)   962    962 
Tax impact of premium paid on early redemption of debt   (235)   (235)
Adjusted Operating Results $46,994  $42,498  $299,250  $289,354 
         
Reported GAAP Earnings per share $0.54  $0.44  $3.51  $4.53 
Items impacting comparability        
Remeasurement of deferred income taxes under 2017 Tax Reform   0.04  (0.06) (1.20)
Mark-to-market adjustments due to hedge ineffectiveness, net of tax (E&P) (0.01)   (0.02) 0.01 
Unrealized (gain) loss on other investments, net of tax (Corporate/All Other) 0.01    0.02   
Premium paid on early redemption of debt, net of tax (E&P)   0.01    0.01 
Adjusted Operating Results per share $0.54  $0.49  $3.45  $3.35 

Management defines Adjusted EBITDA as reported GAAP earnings before the following items:  interest expense, income taxes, depreciation, depletion and amortization, other income and deductions, impairments, and other items reflected in operating income that impact comparability.  The following tables reconcile National Fuel's reported GAAP earnings to Adjusted EBITDA for the three and twelve months ended September 30, 2019 and 2018:

  Three Months Ended Twelve Months Ended
  September 30, September 30,
(in thousands) 2019 2018 2019 2018
Reported GAAP Earnings $47,281  $37,994  $304,290  $391,521 
Depreciation, Depletion and Amortization 74,670  63,159  275,660  240,961 
Other (Income) Deductions (1,435) 968  15,542  21,174 
Interest Expense 26,679  29,368  106,756  114,522 
Income Taxes 11,415  16,331  85,221  (7,494)
Mark-to-Market Adjustments due to Hedge Ineffectiveness (1,313) 346  (2,096) 782 
Adjusted EBITDA $157,297  $148,166  $785,373  $761,466 
         
Adjusted EBITDA by Segment        
Pipeline and Storage Adjusted EBITDA $35,747  $37,699  $162,181  $183,972 
Gathering Adjusted EBITDA 29,895  23,814  108,292  91,937 
Total Midstream Businesses Adjusted EBITDA 65,642  61,513  270,473  275,909 
Exploration and Production Adjusted EBITDA 89,509  81,194  351,159  317,707 
Utility Adjusted EBITDA 6,714  10,514  176,134  175,554 
Corporate and All Other Adjusted EBITDA (4,568) (5,055) (12,393) (7,704)
Total Adjusted EBITDA $157,297  $148,166  $785,373  $761,466 
                 
                 

NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
NON-GAAP FINANCIAL MEASURES
 SEGMENT ADJUSTED EBITDA

  Three Months Ended Twelve Months Ended
  September 30, September 30,
(in thousands) 2019 2018 2019 2018
Exploration and Production Segment        
Reported GAAP Earnings $25,208  $19,580  $111,807  $180,632 
Depreciation, Depletion and Amortization 44,141  33,567  154,784  124,274 
Other (Income) Deductions (269) (99) (1,091) (307)
Interest Expense 14,216  14,288  54,777  54,288 
Income Taxes 7,526  13,512  32,978  (41,962)
Mark-to-Market Adjustments due to Hedge Ineffectiveness (1,313) 346  (2,096) 782 
Adjusted EBITDA $89,509  $81,194  $351,159  $317,707 
         
Pipeline and Storage Segment        
Reported GAAP Earnings $15,368  $15,337  $74,011  $97,246 
Depreciation, Depletion and Amortization 11,387  11,141  44,947  43,463 
Other (Income) Deductions (2,812) (1,673) (9,157) (5,926)
Interest Expense 7,132  7,965  29,142  31,383 
Income Taxes 4,672  4,929  23,238  17,806 
Adjusted EBITDA $35,747  $37,699  $162,181  $183,972 
         
Gathering Segment        
Reported GAAP Earnings $16,902  $14,783  $58,413  $83,519 
Depreciation, Depletion and Amortization 5,202  4,554  20,038  17,313 
Other (Income) Deductions (56) (48) (460) (778)
Interest Expense 2,397  2,211  9,406  9,560 
Income Taxes 5,450  2,314  20,895  (17,677)
Adjusted EBITDA $29,895  $23,814  $108,292  $91,937 
         
Utility Segment        
Reported GAAP Earnings $(7,728) $(7,067) $60,871  $51,217 
Depreciation, Depletion and Amortization 13,630  13,272  53,832  53,253 
Other (Income) Deductions 1,170  3,017  24,021  29,073 
Interest Expense 5,492  6,487  23,443  26,753 
Income Taxes (5,850) (5,195) 13,967  15,258 
Adjusted EBITDA $6,714  $10,514  $176,134  $175,554 
         
Corporate and All Other        
Reported GAAP Earnings $(2,469) $(4,639) $(812) $(21,093)
Depreciation, Depletion and Amortization 310  625  2,059  2,658 
Other (Income) Deductions 532  (229) 2,229  (888)
Interest Expense (2,558) (1,583) (10,012) (7,462)
Income Taxes (383) 771  (5,857) 19,081 
Adjusted EBITDA $(4,568) $(5,055) $(12,393) $(7,704)