National Fuel Reports Second Quarter Earnings


WILLIAMSVILLE, N.Y., May 05, 2022 (GLOBE NEWSWIRE) -- National Fuel Gas Company (“National Fuel” or the “Company”) (NYSE:NFG) today announced consolidated results for the second quarter of its 2022 fiscal year and for the six months ended March 31, 2022.

FISCAL 2022 SECOND QUARTER SUMMARY

  • GAAP net income of $167.3 million, or $1.82 per share, compared to GAAP net income of $112.4 million, or $1.23 per share, in the prior year, an increase of 48% per share.
  • Adjusted operating results of $154.4 million, or $1.68 per share, an increase of 25%, compared to $1.34 per share, in the prior year (see non-GAAP reconciliation on page 2).
  • Adjusted EBITDA of $337.6 million, an increase of 13%, compared to $298.4 million in the prior year (see non-GAAP reconciliation on page 24).
  • Published inaugural Climate Report in March 2022, which further aligns the Company's climate-risk disclosures with the Task Force on Climate-Related Financial Disclosures framework, and evaluates the resilience of our operations to potential risks associated with climate change, including a less than 2-degree Celsius scenario.
  • Achieved certification under Project Canary's TrustWell™ responsibly sourced gas program with Platinum or Gold ratings for all 121 wells included in pilot, which combined, produce approximately 300 million cubic feet per day, or approximately 30%, of the Company's Appalachian production. This accreditation is in addition to the prior certification of 100% of the Company's Appalachian production as responsibly sourced under Equitable Origin's EO100™ Standard for Responsible Energy Development.
  • Company is increasing its fiscal 2022 earnings guidance to a range of $5.70 to $6.00 per share, an increase of $0.50 per share at the midpoint, excluding items impacting comparability (see Guidance Summary on page 8).

MANAGEMENT COMMENTS

David P. Bauer, President and Chief Executive Officer of National Fuel Gas Company, stated: “National Fuel had a strong second quarter, with adjusted operating results increasing 25% compared to the prior year. Led by continued Appalachian natural gas production growth and higher commodity prices at our non-regulated businesses, earnings improved across all segments. With Supply Corporation’s FM100 project in service and Seneca fully utilizing its expanded firm transportation portfolio, we have reached an inflection point where we now anticipate generating meaningful free cash flow into the future. We expect to use that free cash flow to reduce leverage on our balance sheet and pursue shareholder value-enhancing opportunities to deploy capital across the system.”

DIVESTITURE OF CALIFORNIA PROPERTIES

On May 1, 2022, the Company entered into a purchase and sale agreement to sell Seneca’s California oil and gas assets to Sentinel Peak Resources California LLC for total consideration between $280 million and $310 million, depending on oil prices. This consideration consists of $280 million in cash at closing, plus up to three annual contingent payments between calendar 2023 and 2025 that can total $30 million in aggregate. The value of these contingent payments is $1 million for each dollar that Brent crude oil prices average over $95 per barrel in each respective year, with a maximum of $10 million in any given year. The transaction has an effective date of April 1, 2022 and is expected to close on June 30, 2022, subject to customary closing conditions (including waivers of certain transfer restrictions).

Mr. Bauer added: “Our California operations and the team supporting them have been a terrific asset to Seneca over the three-plus decades that we have owned them, generating substantial free cash that supported our significant investment in the Appalachian Basin. However, given the strength of commodity prices, and the continued growth of Seneca’s Appalachian position, the timing was right to pursue a sale. Proceeds from this transaction will help accelerate our deleveraging efforts and provide us additional financial flexibility in the near-term.”

Kirkland & Ellis LLP served as the legal advisor to National Fuel. Lazard Capital served as financial advisor in connection with the transaction.

RECONCILIATION OF GAAP EARNINGS TO ADJUSTED OPERATING RESULTS

         
  Three Months Ended Six Months Ended
  March 31, March 31,
(in thousands except per share amounts)  2022   2021   2022   2021 
Reported GAAP Earnings $167,328  $112,436  $299,720  $190,210 
Items impacting comparability:        
Reduction of other post-retirement regulatory liability (Utility)  (18,533)     (18,533)   
Tax impact of reduction of other post-retirement regulatory liability  3,892      3,892    
Impairment of oil and gas properties (E&P)           76,152 
Tax impact of impairment of oil and gas properties           (20,980)
Gain on sale of timber properties (Corporate / All Other)           (51,066)
Tax impact of gain on sale of timber properties           14,069 
Premium paid on early redemption of debt     15,715      15,715 
Tax impact of premium paid on early redemption of debt     (4,321)     (4,321)
Unrealized (gain) loss on other investments (Corporate / All Other)  2,170   (848)  6,659   450 
Tax impact of unrealized (gain) loss on other investments  (456)  178   (1,398)  (94)
Adjusted Operating Results $154,401  $123,160  $290,340  $220,135 
         
Reported GAAP Earnings Per Share $1.82  $1.23  $3.26  $2.08 
Items impacting comparability:        
Reduction of other post-retirement regulatory liability, net of tax (Utility)  (0.16)     (0.16)   
Impairment of oil and gas properties, net of tax (E&P)           0.60 
Gain on sale of timber properties, net of tax (Corporate / All Other)           (0.40)
Premium paid on early redemption of debt, net of tax     0.12      0.12 
Unrealized (gain) loss on other investments, net of tax (Corporate / All Other)  0.02   (0.01)  0.05    
Adjusted Operating Results Per Share $1.68  $1.34  $3.15  $2.40 

FISCAL 2022 GUIDANCE UPDATE

National Fuel is revising its fiscal 2022 earnings guidance range and is now projecting earnings, excluding items impacting comparability, will be within the range of $5.70 to $6.00 per share, an increase of $0.50 per share from the midpoint of the Company’s prior guidance range. This updated range reflects the results of the second quarter, along with updated assumptions for the balance of the year, which have been adjusted to exclude Seneca’s California operations as of June 30, 2022 in conjunction with the expected closing date of its divestiture.

The Company is now assuming that NYMEX natural gas prices will average $7.25 per MMBtu for the remainder of fiscal 2022, a $2.75 increase per MMBtu from the $4.50 per MMBtu assumed in the previous guidance. Additionally, the Company is now projecting that WTI oil prices will average $100.00 per Bbl for the remainder of the year, a $20.00 increase from the $80.00 per Bbl assumed in the previous guidance. For guidance purposes, the Company’s updated projections approximate 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, and financial hedge contracts.

The Exploration and Production segment’s fiscal 2022 net production is now expected to be in the range of 340 to 360 Bcfe, a 2.5 Bcfe reduction at the midpoint. However, this revised range reflects the loss of approximately 4 Bcfe of production related to the sale of Seneca’s California properties. Seneca currently has firm sales contracts in place for approximately 90% of its projected remaining fiscal 2022 Appalachian production, limiting its exposure to in-basin markets. Approximately 83% of expected remaining Appalachian production is either matched by a financial hedge or was entered into at a fixed price.

As a result of the expected divestiture of its California operations, Seneca has revised its unit costs to reflect the removal of higher cost oil production, when compared to its Appalachian operations. Lease Operating Expense (“LOE”) has been revised lower, now expected to be within the range of $0.78 to $0.80 per Mcfe. Depreciation, Depletion and Amortization (“DD&A”) was revised to a range of $0.58 to $0.60 per Mcfe. Also, General & Administrative ("G&A”) expense has been reduced to a range of $0.19 to $0.20 per Mcfe, which excludes any potential transaction costs associated with sale of the California operations.

The Company’s consolidated capital expenditures are now expected to be in the range of $725 to $870 million, a $60.0 million, or 8%, increase from the midpoint of previous guidance. The $50 million increase at the midpoint in the Exploration and Production segment is largely related to a planned acceleration of completions activity this summer, including utilizing our spot crew on two Tioga County Utica pads sooner than previously forecasted. Increased production resulting from this acceleration is expected to commence later this fiscal year and ramp up in the following quarters, maximizing production for the upcoming winter. Additionally, Seneca continues to experience modest inflation above previous expectations. Lastly, the Utility segment is expecting increased spending during the upcoming construction season as part of its ongoing modernization program focused on replacing aging infrastructure and reducing our emission profile.

Additional details on the Company's updated forecast assumptions and business segment guidance for fiscal 2022 are outlined in the table on page 8.

DISCUSSION OF SECOND QUARTER RESULTS BY SEGMENT

The following earnings discussion of each operating segment for the quarter ended March 31, 2022 is summarized in a tabular form on pages 9 and 10 of this report (earnings drivers for the six months ended March 31, 2022 are summarized on pages 11 and 12). It may be helpful to refer to those tables while reviewing this discussion.

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
 March 31,
(in thousands) 2022  2021 Variance
GAAP Earnings$71,121 $36,822 $34,299 
Premium paid on early redemption of debt, net of tax   10,710  (10,710)
Adjusted Operating Results$71,121 $47,532 $23,589 
      
Adjusted EBITDA$158,450 $127,146 $31,304 

Seneca’s second quarter GAAP earnings increased $34.3 million versus the prior year. Excluding a $10.7 million (after-tax) loss on the early redemption of long-term debt recorded in the prior year's second quarter, Seneca’s earnings increased $23.6 million primarily due to higher realized natural gas and crude oil prices and higher natural gas production, as well as higher other operating revenues and lower interest expense, partially offset by higher operating expenses.

Seneca produced 87.1 Bcfe during the second quarter, an increase of 1.9 Bcfe, or 2%, from the prior year. This is a result of a 2.1 Bcf increase in natural gas production primarily due to growth from Seneca's two-rig development program in Appalachia. Seneca's crude oil production in California decreased 39 MBbls, or 7%, versus the prior year due to natural production declines.

Seneca's average realized natural gas price, after the impact of hedging and transportation costs, was $2.60 per Mcf, an increase of $0.32 per Mcf from the prior year. This increase was primarily due to higher NYMEX prices and higher spot prices at local sales points in Pennsylvania. Seneca's average realized oil price, after the impact of hedging, was $70.45 per Bbl, an increase of $13.34 per Bbl compared to the prior year.

Seneca’s increase in other operating revenues of $4.7 million was primarily attributable to a temporary release of capacity on Leidy South through March 2022.

Lease operating and transportation (“LOE”) expense increased $5.5 million primarily due to higher steam fuel costs as a result of higher natural gas prices, along with higher well repairs and workover activity in California. Depreciation, depletion and amortization ("DD&A") expense increased $4.4 million due to higher natural gas production and a higher per unit DD&A rate, which was driven by an increase in capitalized costs in Seneca's full cost pool. Seneca's other operating expenses increased $2.1 million due primarily to higher consulting and technology-related expenses, and an increase in operating costs from additional water treatment plants acquired in September 2021. As a result of the recent increase in natural gas prices, other taxes increased $2.4 million primarily due to a higher expected Impact Fee in Pennsylvania (the Impact Fees are calculated annually based on calendar year NYMEX natural gas prices).

Excluding the premium paid on the early redemption of debt noted above, interest expense decreased $3.2 million due primarily to a decrease in outstanding principal balances associated with Seneca's long-term intercompany borrowings coupled with a lower weighted average interest rate as a result of the Company's issuance of a 2.95% coupon 10-year note in February 2021, which re-financed a 4.9% coupon 10-year note that was redeemed in March 2021.

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
 March 31,
(in thousands)2022 2021 Variance
GAAP Earnings$25,470 $24,928 $542
      
Adjusted EBITDA$61,371 $58,570 $2,801

The Pipeline and Storage segment’s second quarter GAAP earnings increased $0.5 million versus the prior year primarily due to an increase in operating revenues, partially offset by higher operation and maintenance ("O&M") expense and higher DD&A expense. The increase in operating revenues of $8.7 million was primarily attributable to higher transportation revenues from new demand charges for service on the expansion component of Supply Corporation's FM100 Project, which was placed in service in December 2021. O&M expense increased $4.7 million primarily due to the non-recurrence of a $3.9 million favorable adjustment to the reserve for project development costs recorded in last year's second quarter. Higher pipeline integrity and vehicle fuel costs also contributed to the increase in O&M expense. The increase in DD&A expense of $1.6 million was primarily attributable to incremental depreciation expense from the FM100 Project.

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 primarily delivers Seneca’s gross Appalachian production to the interstate pipeline system.

 Three Months Ended
 March 31,
(in thousands)2022 2021 Variance
GAAP Earnings$22,092 $20,700 $1,392 
Premium paid on early redemption of debt, net of tax   684  (684)
Adjusted Operating Results$22,092 $21,384 $708 
      
Adjusted EBITDA$43,056 $41,424 $1,632 

The Gathering segment’s second quarter GAAP earnings increased $1.4 million versus the prior year. Excluding a $0.7 million (after-tax) loss on the early redemption of long-term debt recorded in the prior year's second quarter, the Gathering segment's earnings increased $0.7 million. The earnings increase was primarily driven by higher operating revenues, which was partially offset by higher O&M expense. Operating revenues increased $2.3 million, or 5%, primarily driven by an 8.6 Bcf increase in gathered volumes for a non-affiliated natural gas producer in Appalachia. The increase in O&M expense of $0.7 million was primarily due to higher compressor station operating and preventative maintenance activity during the quarter.

Downstream Business

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
 March 31,
(in thousands)2022 2021 Variance
GAAP Earnings$53,048  $32,044 $21,004 
Reduction of other post-retirement regulatory liability, net of tax (14,641)    (14,641)
Adjusted Operating Results$38,407  $32,044 $6,363 
      
Adjusted EBITDA$77,529  $73,885 $3,644 

The Utility segment’s second quarter GAAP earnings increased $21.0 million versus the prior year. In February 2022, the Pennsylvania Public Utilities Commission concluded a regulatory proceeding that addressed Distribution’s recovery of other post-employment benefit (“OPEB”) expenses. As a result of that proceeding, Distribution recorded an adjustment to an OPEB-related regulatory liability that benefitted earnings by $18.5 million ($14.6 million after-tax) and agreed to reduce its base rates in Pennsylvania to eliminate the recovery of OPEB expenses effective October 1, 2021.

Excluding the impact of the reduction in the OPEB regulatory liability, the Utility segment's second quarter earnings increased $6.4 million primarily due to higher customer margin (operating revenues less purchased gas sold) and a decrease in non-service post-retirement benefit costs recorded in other income (deductions). The increase in customer margin was due primarily to increased customer usage, largely attributable to colder weather in Distribution's Pennsylvania territory (Pennsylvania was 8% colder on average than last year), combined with higher revenues from the Company's system modernization tracking mechanism in its New York service territory. These factors were partially offset by the aforementioned reduction in base rates in Pennsylvania. The impact of weather variations on earnings in Distribution's New York service territory is largely mitigated by that jurisdiction's weather normalization clause. With the elimination of OPEB expenses in customer rates, there was a decrease in non-service post-retirement benefit costs recorded in other income (deductions). Distribution’s Pennsylvania service territory recognized OPEB income during the second quarter of fiscal 2022 whereas in the prior year’s second quarter it recognized OPEB expenses to match against the OPEB amounts collected in base rates.

Corporate and All Other

The Company’s operations that are included in Corporate and All Other generated a combined net loss of $4.4 million in the current year second quarter, which was a $2.3 million higher than the combined net loss of $2.1 million in the prior-year second quarter. The increase in net loss was primarily driven by unrealized losses on investment securities recognized in the current quarter compared to unrealized gains on investment securities in the prior-year second quarter.

EARNINGS TELECONFERENCE

The Company will host a conference call on Friday, May 6, 2022, at 11 a.m. Eastern Time to discuss this announcement. Pre-registration is required to access the teleconference by phone in a listen-only mode by following this link: http://www.directeventreg.com/registration/event/4564187. To access the webcast, visit the Events Calendar under the News & Events page on the NFG Investor Relations website at investor.nationalfuelgas.com. A replay of the conference call will be available approximately two hours following the teleconference at the same website link and by phone at 416-621-4642 or 800-585-8367 using conference ID number “4564187”. Both the webcast and conference call replay will be available until the close of business on Friday, May 13, 2022.

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.

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; governmental/regulatory actions, initiatives and proceedings, including those involving rate cases (which address, among other things, target rates of return, rate design, retained natural gas and system modernization), environmental/safety requirements, affiliate relationships, industry structure, and franchise renewal; the Company’s ability to estimate accurately the time and resources necessary to meet emissions targets; governmental/regulatory actions and/or market pressures to reduce or eliminate reliance on natural gas; the length and severity of the ongoing COVID-19 pandemic, including its impacts across our businesses on demand, operations, global supply chains and liquidity; changes in economic conditions, including inflationary pressures and global, national or regional recessions, and their effect on the demand for, and customers’ ability to pay for, the Company’s products and services; changes in the price of natural gas or oil; the creditworthiness or performance of the Company’s key suppliers, customers and counterparties; 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; impairments under the SEC’s full cost ceiling test for natural gas and oil reserves; increased costs or delays or changes in plans with respect to Company projects or related projects of other companies, including disruptions due to the COVID-19 pandemic, as well as difficulties or delays in obtaining necessary governmental approvals, permits or orders or in obtaining the cooperation of interconnecting facility operators; the Company's ability to complete planned strategic transactions; the Company's ability to successfully integrate acquired assets and achieve expected cost synergies; 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; the impact of information technology disruptions, cybersecurity or data security breaches; 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; 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; negotiations with the collective bargaining units representing the Company's workforce, including potential work stoppages during negotiations; 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; 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 page 2, the Company is revising its earnings guidance for fiscal 2022. Additional details on the Company's forecast assumptions and business segment guidance are outlined in the table below.

The revised earnings guidance range does not include the impact of certain items that impacted the comparability of earnings during the six months ended March 31, 2022, including: (1) the after-tax reduction of an other post-retirement regulatory liability, which increased earnings by $0.16 per share; and (2) after-tax unrealized losses on other investments, which reduced earnings by $0.05 per share. While the Company expects to record certain adjustments to unrealized gain or loss on investments during the six months ending September 30, 2022, the amounts of these and other potential adjustments are not reasonably determinable at this time. As such, the Company is unable to provide earnings guidance other than on a non-GAAP basis.

 Updated FY 2022 Guidance Previous FY 2022 Guidance
Consolidated Earnings per Share, excluding items impacting comparability$5.70 to $6.00 $5.20 to $5.50
Consolidated Effective Tax Rate~ 25-26% ~ 25-26%
    
Capital Expenditures(Millions)   
Exploration and Production$475 - $550 $425 - $500
Pipeline and Storage$100 - $150 $100 - $150
Gathering$50 - $60 $50 - $60
Utility$100 - $110 $90 - $100
Consolidated Capital Expenditures$725 - $870 $665 - $810
    
Exploration & Production Segment Guidance*   
    
Commodity Price Assumptions   
NYMEX natural gas price$7.25 /MMBtu $4.50 /MMBtu
Appalachian basin spot price$6.25 /MMBtu $3.65 /MMBtu
NYMEX (WTI) crude oil price$100.00 /Bbl $80.00 /Bbl
California oil price premium (% of WTI)99% 97%
    
Production (Bcfe)340 to 360 340 to 365
    
E&P Operating Costs($/Mcfe)   
LOE$0.78 - $0.80 $0.81 - $0.84
G&A$0.19 - $0.20 $0.19 - $0.21
DD&A$0.58 - $0.60 $0.59 - $0.62
    
Other Business Segment Guidance(Millions)   
Gathering Segment Revenues$205 - $225 $200 - $225
Pipeline and Storage Segment Revenues$360 - $380 $360 - $380

* Commodity price assumptions are for the remaining 6 months of the fiscal year.

 
 
NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS
QUARTER ENDED MARCH 31, 2022
(Unaudited)
            
 Upstream Midstream Downstream    
            
 Exploration & Pipeline &     Corporate /  
(Thousands of Dollars)Production Storage Gathering Utility All Other Consolidated*
            
Second quarter 2021 GAAP earnings$36,822  $24,928  $20,700  $32,044  $(2,058) $112,436 
Items impacting comparability:           
Premium paid on early redemption of debt 14,772     943       15,715 
Tax impact of premium paid on early redemption of debt (4,062)    (259)      (4,321)
Unrealized (gain) loss on other investments         (848)  (848)
Tax impact of unrealized (gain) loss on other investments         178   178 
Second quarter 2021 adjusted operating results 47,532   24,928   21,384   32,044   (2,728)  123,160 
Drivers of adjusted operating results**           
Upstream Revenues           
Higher (lower) natural gas production 3,758           3,758 
Higher (lower) crude oil production (1,755)          (1,755)
Higher (lower) realized natural gas prices, after hedging 21,487           21,487 
Higher (lower) realized crude oil prices, after hedging 5,508           5,508 
Higher (lower) other operating revenues 3,713           3,713 
Midstream Revenues           
Higher (lower) operating revenues   6,257   1,850       8,107 
Downstream Margins***           
Impact of usage and weather       3,014     3,014 
Impact of new rates       (3,055)    (3,055)
System modernization tracker revenues       1,594     1,594 
Operating Expenses           
Lower (higher) lease operating and transportation expenses (4,377)          (4,377)
Lower (higher) operating expenses (1,690)  (3,729)  (567)      (5,986)
Lower (higher) property, franchise and other taxes (1,913)  (315)        (2,228)
Lower (higher) depreciation / depletion (3,482)  (1,236)        (4,718)
Other Income (Expense)           
(Higher) lower other deductions       5,197   (968)  4,229 
(Higher) lower interest expense 2,563           2,563 
Income Taxes           
Lower (higher) income tax expense / effective tax rate (307)  (171)  (508)  (1,164)  1,201   (949)
All other / rounding 84   (264)  (67)  777   (194)  336 
Second quarter 2022 adjusted operating results 71,121   25,470   22,092   38,407   (2,689)  154,401 
Items impacting comparability:           
Reduction of other post-retirement regulatory liability       18,533     18,533 
Tax impact of reduction of other post-retirement regulatory liability       (3,892)    (3,892)
Unrealized gain (loss) on other investments         (2,170)  (2,170)
Tax impact of unrealized gain (loss) on other investments         456   456 
Second quarter 2022 GAAP earnings$71,121  $25,470  $22,092  $53,048  $(4,403) $167,328 
            
* Amounts do not reflect intercompany eliminations.           
** Drivers of adjusted operating results have been calculated using the 21% federal statutory rate.
*** 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 MARCH 31, 2022
(Unaudited)
            
 Upstream Midstream Downstream    
            
 Exploration & Pipeline &     Corporate /  
 Production Storage Gathering Utility All Other Consolidated*
            
Second quarter 2021 GAAP earnings per share$0.40  $0.27  $0.23  $0.35  $(0.02) $1.23 
Items impacting comparability:           
Premium paid on early redemption of debt, net of tax 0.12            0.12 
Unrealized (gain) loss on other investments, net of tax         (0.01)  (0.01)
Second quarter 2021 adjusted operating results per share 0.52   0.27   0.23   0.35   (0.03)  1.34 
Drivers of adjusted operating results**           
Upstream Revenues           
Higher (lower) natural gas production 0.04           0.04 
Higher (lower) crude oil production (0.02)          (0.02)
Higher (lower) realized natural gas prices, after hedging 0.23           0.23 
Higher (lower) realized crude oil prices, after hedging 0.06           0.06 
Higher (lower) other operating revenues 0.04           0.04 
Midstream Revenues           
Higher (lower) operating revenues   0.07   0.02       0.09 
Downstream Margins***           
Impact of usage and weather       0.03     0.03 
Impact of new rates       (0.03)    (0.03)
System modernization tracker revenues       0.02     0.02 
Operating Expenses           
Lower (higher) lease operating and transportation expenses (0.05)          (0.05)
Lower (higher) operating expenses (0.02)  (0.04)  (0.01)      (0.07)
Lower (higher) property, franchise and other taxes (0.02)           (0.02)
Lower (higher) depreciation / depletion (0.04)  (0.01)        (0.05)
Other Income (Expense)           
(Higher) lower other deductions       0.06   (0.01)  0.05 
(Higher) lower interest expense 0.03           0.03 
Income Taxes           
Lower (higher) income tax expense / effective tax rate       (0.01)  (0.01)  0.01   (0.01)
All other / rounding    (0.01)  0.01          
Second quarter 2022 adjusted operating results per share 0.77   0.28   0.24   0.42   (0.03)  1.68 
Items impacting comparability:           
Reduction of other post-retirement regulatory liability, net of tax       0.16     0.16 
Unrealized gain (loss) on other investments, net of tax         (0.02)  (0.02)
Second quarter 2022 GAAP earnings per share$0.77  $0.28  $0.24  $0.58  $(0.05) $1.82 
            
* Amounts do not reflect intercompany eliminations.           
** Drivers of adjusted operating results have been calculated using the 21% federal statutory rate.
*** Downstream margin defined as operating revenues less purchased gas expense.


 
NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS
SIX MONTHS ENDED MARCH 31, 2022
(Unaudited)
            
 Upstream Midstream Downstream    
            
 Exploration & Pipeline &     Corporate /  
(Thousands of Dollars)Production Storage Gathering Utility All Other Consolidated*
            
Six months ended March 31, 2021 GAAP earnings$7,199  $49,112  $41,250  $55,081  $37,568  $190,210 
Items impacting comparability:           
Impairment of oil and gas properties 76,152           76,152 
Tax impact of impairment of oil and gas properties (20,980)          (20,980)
Gain on sale of timber properties         (51,066)  (51,066)
Tax impact of gain on sale of timber properties         14,069   14,069 
Premium paid on early redemption of debt 14,772     943       15,715 
Tax impact of premium paid on early redemption of debt (4,062)    (259)      (4,321)
Unrealized (gain) loss on other investments         450   450 
Tax impact of unrealized (gain) loss on other investments         (94)  (94)
Six months ended March 31, 2021 adjusted operating results 73,081   49,112   41,934   55,081   927   220,135 
Drivers of adjusted operating results**           
Upstream Revenues           
Higher (lower) natural gas production 13,570           13,570 
Higher (lower) crude oil production (2,303)          (2,303)
Higher (lower) realized natural gas prices, after hedging 45,877           45,877 
Higher (lower) realized crude oil prices, after hedging 11,664           11,664 
Higher (lower) other operating revenues 5,618           5,618 
Midstream Revenues           
Higher (lower) operating revenues   6,375   5,972       12,347 
Downstream Margins***           
Impact of usage and weather       2,962     2,962 
Impact of new rates       (4,840)    (4,840)
System modernization tracker revenues       2,375     2,375 
Regulatory revenue adjustments       (804)    (804)
Higher (lower) energy marketing margins         1,298   1,298 
Operating Expenses           
Lower (higher) lease operating and transportation expenses (7,186)          (7,186)
Lower (higher) operating expenses (3,035)  (4,519)  (1,346)  (1,913)    (10,813)
Lower (higher) property, franchise and other taxes (2,931)  (424)        (3,355)
Lower (higher) depreciation / depletion (6,781)  (1,499)  (594)    311   (8,563)
Other Income (Expense)           
(Higher) lower other deductions   949     6,891     7,840 
(Higher) lower interest expense 5,216   421       (869)  4,768 
Income Taxes           
Lower (higher) income tax expense / effective tax rate 565   222   (703)  855   (1,226)  (287)
All other / rounding 135      (34)  (70)  6   37 
Six months ended March 31, 2022 adjusted operating results 133,490   50,637   45,229   60,537   447   290,340 
Items impacting comparability:           
Reduction of other post-retirement regulatory liability       18,533     18,533 
Tax impact of reduction of other post-retirement regulatory liability       (3,892)    (3,892)
Unrealized gain (loss) on other investments         (6,659)  (6,659)
Tax impact of unrealized gain (loss) on other investments         1,398   1,398 
Six months ended March 31, 2022 GAAP earnings$133,490  $50,637  $45,229  $75,178  $(4,814) $299,720 
            
* Amounts do not reflect intercompany eliminations.           
** Drivers of adjusted operating results have been calculated using the 21% federal statutory rate.
*** Downstream margin defined as operating revenues less purchased gas expense.


NATIONAL FUEL GAS COMPANY
RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS PER SHARE
SIX MONTHS ENDED MARCH 31, 2022
(Unaudited)
            
 Upstream Midstream Downstream    
            
 Exploration & Pipeline &     Corporate /  
 Production Storage Gathering Utility All Other Consolidated*
Six months ended March 31, 2021 GAAP earnings per share$0.08  $0.54  $0.45  $0.60  $0.41  $2.08 
Items impacting comparability:           
Impairment of oil and gas properties, net of tax 0.60           0.60 
Gain on sale of timber properties, net of tax         (0.40)  (0.40)
Premium paid on early redemption of debt, net of tax 0.12            0.12 
Unrealized (gain) loss on other investments, net of tax             
Six months ended March 31, 2021 adjusted operating results per share 0.80   0.54   0.45   0.60   0.01   2.40 
Drivers of adjusted operating results**           
Upstream Revenues           
Higher (lower) natural gas production 0.15           0.15 
Higher (lower) crude oil production (0.03)          (0.03)
Higher (lower) realized natural gas prices, after hedging 0.50           0.50 
Higher (lower) realized crude oil prices, after hedging 0.13           0.13 
Higher (lower) other operating revenues 0.06           0.06 
Midstream Revenues           
Higher (lower) operating revenues   0.07   0.06       0.13 
Downstream Margins***           
Impact of usage and weather       0.03     0.03 
Impact of new rates       (0.05)    (0.05)
System modernization tracker revenues       0.03     0.03 
Regulatory revenue adjustments       (0.01)    (0.01)
Higher (lower) energy marketing margins         0.01   0.01 
Operating Expenses           
Lower (higher) lease operating and transportation expenses (0.08)          (0.08)
Lower (higher) operating expenses (0.03)  (0.05)  (0.01)  (0.02)    (0.11)
Lower (higher) property, franchise and other taxes (0.03)           (0.03)
Lower (higher) depreciation / depletion (0.07)  (0.02)  (0.01)       (0.10)
Other Income (Expense)           
(Higher) lower other deductions   0.01     0.07     0.08 
(Higher) lower interest expense 0.06          (0.01)  0.05 
Income Taxes           
Lower (higher) income tax expense / effective tax rate 0.01      (0.01)  0.01   (0.01)   
All other / rounding (0.02)     0.01         (0.01)
Six months ended March 31, 2022 adjusted operating results per share 1.45   0.55   0.49   0.66      3.15 
Items impacting comparability:           
Reduction of other post-retirement regulatory liability, net of tax       0.16     0.16 
Unrealized gain (loss) on other investments, net of tax         (0.05)  (0.05)
Six months ended March 31, 2022 GAAP earnings per share$1.45  $0.55  $0.49  $0.82  $(0.05) $3.26 
            
* Amounts do not reflect intercompany eliminations.           
** Drivers of adjusted operating results have been calculated using the 21% federal statutory rate.
*** 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 Six Months Ended
 March 31, March 31,
 (Unaudited) (Unaudited)
SUMMARY OF OPERATIONS 2022   2021   2022   2021 
Operating Revenues:       
Utility and Energy Marketing Revenues$369,092  $270,849  $605,776  $460,315 
Exploration and Production and Other Revenues 261,676   220,281   505,957   412,316 
Pipeline and Storage and Gathering Revenues 70,952   59,985   136,544   119,644 
  701,720   551,115   1,248,277   992,275 
Operating Expenses:       
Purchased Gas 199,592   106,661   301,219   158,280 
Operation and Maintenance:       
Utility and Energy Marketing 53,476   52,058   100,120   96,944 
Exploration and Production and Other 49,806   41,895   95,425   83,922 
Pipeline and Storage and Gathering 33,518   28,133   63,446   56,231 
Property, Franchise and Other Taxes 27,717   23,987   52,219   46,768 
Depreciation, Depletion and Amortization 91,245   84,342   179,823   167,462 
Impairment of Oil and Gas Producing Properties          76,152 
  455,354   337,076   792,252   685,759 
Gain on Sale of Timber Properties          51,066 
Operating Income 246,366   214,039   456,025   357,582 
        
Other Income (Expense):       
Other Income (Deductions) 10,018   (10,875)  8,940   (13,051)
Interest Expense on Long-Term Debt (30,079)  (48,820)  (60,209)  (81,076)
Other Interest Expense (1,519)  (1,698)  (2,680)  (3,618)
        
Income Before Income Taxes 224,786   152,646   402,076   259,837 
        
Income Tax Expense 57,458   40,210   102,356   69,627 
        
Net Income Available for Common Stock$167,328  $112,436  $299,720  $190,210 
        
Earnings Per Common Share       
Basic$1.83  $1.23  $3.28  $2.09 
Diluted$1.82  $1.23  $3.26  $2.08 
        
Weighted Average Common Shares:       
Used in Basic Calculation 91,444,638   91,163,291   91,354,488   91,084,620 
Used in Diluted Calculation 92,064,711   91,645,679   92,047,467   91,581,918 


 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
  
 March 31, September 30,
(Thousands of Dollars) 2022   2021 
ASSETS   
Property, Plant and Equipment$13,457,342  $13,103,639 
Less - Accumulated Depreciation, Depletion and Amortization 6,882,961   6,719,356 
Net Property, Plant and Equipment 6,574,381   6,384,283 
Current Assets:   
Cash and Temporary Cash Investments 52,569   31,528 
Hedging Collateral Deposits 102,370   88,610 
Receivables - Net 339,421   205,294 
Unbilled Revenue 49,551   17,000 
Gas Stored Underground 6,302   33,669 
Materials, Supplies and Emission Allowances 48,887   53,560 
Unrecovered Purchased Gas Costs 3,751   33,128 
Other Current Assets 68,265   59,660 
Total Current Assets 671,116   522,449 
Other Assets:   
Recoverable Future Taxes 123,709   121,992 
Unamortized Debt Expense 9,735   10,589 
Other Regulatory Assets 57,693   60,145 
Deferred Charges 81,646   59,939 
Other Investments 103,164   149,632 
Goodwill 5,476   5,476 
Prepaid Pension and Post-Retirement Benefit Costs 178,102   149,151 
Fair Value of Derivative Financial Instruments 1    
Other    1,169 
Total Other Assets 559,526   558,093 
Total Assets$7,805,023  $7,464,825 
CAPITALIZATION AND LIABILITIES   
Capitalization:   
Comprehensive Shareholders' Equity   
Common Stock, $1 Par Value Authorized - 200,000,000 Shares; Issued and   
Outstanding - 91,449,226 Shares and 91,181,549 Shares, Respectively$91,449  $91,182 
Paid in Capital 1,018,784   1,017,446 
Earnings Reinvested in the Business 1,407,683   1,191,175 
Accumulated Other Comprehensive Loss (654,254)  (513,597)
Total Comprehensive Shareholders' Equity 1,863,662   1,786,206 
Long-Term Debt, Net of Current Portion and Unamortized Discount and Debt Issuance Costs 2,081,529   2,628,687 
Total Capitalization 3,945,191   4,414,893 
Current and Accrued Liabilities:   
Notes Payable to Banks and Commercial Paper 218,000   158,500 
Current Portion of Long-Term Debt 549,000    
Accounts Payable 135,775   171,655 
Amounts Payable to Customers 3,422   21 
Dividends Payable 41,608   41,487 
Interest Payable on Long-Term Debt 17,376   17,376 
Customer Advances    17,223 
Customer Security Deposits 20,766   19,292 
Other Accruals and Current Liabilities 218,139   194,169 
Fair Value of Derivative Financial Instruments 802,076   616,410 
Total Current and Accrued Liabilities 2,006,162   1,236,133 
Other Liabilities:   
Deferred Income Taxes 709,598   660,420 
Taxes Refundable to Customers 348,480   354,089 
Cost of Removal Regulatory Liability 252,471   245,636 
Other Regulatory Liabilities 196,589   200,643 
Pension and Other Post-Retirement Liabilities 4,756   7,526 
Asset Retirement Obligations 207,047   209,639 
Other Liabilities 134,729   135,846 
Total Other Liabilities 1,853,670   1,813,799 
Commitments and Contingencies     
Total Capitalization and Liabilities$7,805,023  $7,464,825 


     
     
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
  Six Months Ended
  March 31,
(Thousands of Dollars)  2022   2021 
     
Operating Activities:    
Net Income Available for Common Stock $299,720  $190,210 
Adjustments to Reconcile Net Income to Net Cash
  Provided by Operating Activities:
    
Gain on Sale of Timber Properties     (51,066)
Impairment of Oil and Gas Producing Properties     76,152 
Depreciation, Depletion and Amortization  179,823   167,462 
Deferred Income Taxes  94,212   61,408 
Premium Paid on Early Redemption of Debt     15,715 
Stock-Based Compensation  10,631   8,657 
Reduction of Other Post-Retirement Regulatory Liability  (18,533)   
Other  14,494   6,742 
Change in:    
Receivables and Unbilled Revenue  (166,584)  (101,159)
Gas Stored Underground and Materials, Supplies and Emission Allowances  32,040   27,258 
Unrecovered Purchased Gas Costs  29,377   (479)
Other Current Assets  (8,605)  (8,447)
Accounts Payable  2,006   8,613 
Amounts Payable to Customers  3,401   8,980 
Customer Advances  (17,223)  (15,319)
Customer Security Deposits  1,474   2,304 
Other Accruals and Current Liabilities  11,164   9,058 
Other Assets  (32,659)  11,039 
Other Liabilities  (9,119)  5 
Net Cash Provided by Operating Activities $425,619  $417,133 
     
Investing Activities:    
Capital Expenditures $(415,415) $(338,867)
Net Proceeds from Sale of Oil and Gas Producing Properties  13,525    
Net Proceeds from Sale of Timber Properties     104,582 
Sale of Fixed Income Mutual Fund Shares in Grantor Trust  30,000    
Other  13,689   12,095 
Net Cash Used in Investing Activities $(358,201) $(222,190)
     
Financing Activities:    
Changes in Notes Payable to Banks and Commercial Paper $59,500  $(30,000)
Reduction of Long-Term Debt     (515,715)
Dividends Paid on Common Stock  (83,091)  (81,035)
Net Proceeds From Issuance of Long-Term Debt     495,267 
Net Repurchases of Common Stock  (9,026)  (3,534)
Net Cash Used in Financing Activities $(32,617) $(135,017)
     
Net Increase in Cash, Cash Equivalents, and Restricted Cash  34,801   59,926 
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period  120,138   20,541 
Cash, Cash Equivalents, and Restricted Cash at March 31 $154,939  $80,467 


          
          
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
          
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
          
UPSTREAM BUSINESS
          
          
 Three Months Ended Six Months Ended
(Thousands of Dollars, except per share amounts)March 31, March 31,
EXPLORATION AND PRODUCTION SEGMENT 2022   2021  Variance  2022  2021 Variance
Total Operating Revenues$261,593  $220,187  $41,406 $505,791 $411,582 $94,209 
Operating Expenses:         
Operation and Maintenance:         
General and Administrative Expense 18,798   17,899   899  36,553  34,852  1,701 
Lease Operating and Transportation Expense 72,548   67,008   5,540  141,684  132,588  9,096 
All Other Operation and Maintenance Expense 4,756   3,515   1,241  9,328  7,187  2,141 
Property, Franchise and Other Taxes 7,041   4,619   2,422  12,775  9,065  3,710 
Depreciation, Depletion and Amortization 50,547   46,139   4,408  100,054  91,471  8,583 
Impairment of Oil and Gas Producing Properties           76,152  (76,152)
  153,690   139,180   14,510  300,394  351,315  (50,921)
          
Operating Income 107,903   81,007   26,896  205,397  60,267  145,130 
          
Other Income (Expense):         
Non-Service Pension and Post-Retirement Benefit Costs (186)  (286)  100  (372) (570) 198 
Interest and Other Income 75   67   8  131  158  (27)
Interest Expense on Long-Term Debt    (15,119)  15,119    (15,119) 15,119 
Interest Expense (12,206)  (15,103)  2,897  (24,338) (30,594) 6,256 
Income Before Income Taxes 95,586   50,566   45,020  180,818  14,142  166,676 
Income Tax Expense 24,465   13,744   10,721  47,328  6,943  40,385 
Net Income$71,121  $36,822  $34,299 $133,490 $7,199 $126,291 
Net Income Per Share (Diluted)$0.77  $0.40  $0.37 $1.45 $0.08 $1.37 
          


          
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
          
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
          
MIDSTREAM BUSINESSES
          
 Three Months Ended Six Months Ended
(Thousands of Dollars, except per share amounts)March 31, March 31,
PIPELINE AND STORAGE SEGMENT 2022   2021  Variance  2022  2021 Variance
Revenues from External Customers$67,795  $59,314  $8,481  $129,342 $118,623 $10,719 
Intersegment Revenues 27,602   27,390   212   54,405  55,846  (1,441)
Total Operating Revenues 95,397   86,704   8,693   183,747  174,469  9,278 
Operating Expenses:         
Purchased Gas 989   216   773   1,437  229  1,208 
Operation and Maintenance 24,438   19,718   4,720   46,611  40,891  5,720 
Property, Franchise and Other Taxes 8,599   8,200   399   17,180  16,643  537 
Depreciation, Depletion and Amortization 17,294   15,729   1,565   33,095  31,197  1,898 
  51,320   43,863   7,457   98,323  88,960  9,363 
          
Operating Income 44,077   42,841   1,236   85,424  85,509  (85)
          
Other Income (Expense):         
Non-Service Pension and Post-Retirement Benefit Credit 767   125   642   1,534  250  1,284 
Interest and Other Income 192   939   (747)  1,595  1,795  (200)
Interest Expense (10,618)  (10,552)  (66)  (20,750) (21,283) 533 
Income Before Income Taxes 34,418   33,353   1,065   67,803  66,271  1,532 
Income Tax Expense 8,948   8,425   523   17,166  17,159  7 
Net Income$25,470  $24,928  $542  $50,637 $49,112 $1,525 
Net Income Per Share (Diluted)$0.28  $0.27  $0.01  $0.55 $0.54 $0.01 
          
          
 Three Months Ended Six Months Ended
 March 31, March 31,
GATHERING SEGMENT 2022   2021  Variance  2022  2021 Variance
Revenues from External Customers$3,157  $671  $2,486  $7,202 $1,021 $6,181 
Intersegment Revenues 49,447   49,591   (144)  97,627  96,249  1,378 
Total Operating Revenues 52,604   50,262   2,342   104,829  97,270  7,559 
Operating Expenses:         
Operation and Maintenance 9,551   8,833   718   17,739  16,035  1,704 
Property, Franchise and Other Taxes (3)  5   (8)  2  18  (16)
Depreciation, Depletion and Amortization 8,362   8,096   266   16,753  16,001  752 
  17,910   16,934   976   34,494  32,054  2,440 
          
Operating Income 34,694   33,328   1,366   70,335  65,216  5,119 
          
Other Income (Expense):         
Non-Service Pension and Post-Retirement Benefit Costs (56)  (68)  12   (112) (135) 23 
Interest and Other Income 18   9   9   27  243  (216)
Interest Expense on Long-Term Debt    (965)  965     (965) 965 
Interest Expense (4,071)  (4,201)  130   (8,219) (8,332) 113 
Income Before Income Taxes 30,585   28,103   2,482   62,031  56,027  6,004 
Income Tax Expense 8,493   7,403   1,090   16,802  14,777  2,025 
Net Income$22,092  $20,700  $1,392  $45,229 $41,250 $3,979 
Net Income Per Share (Diluted)$0.24  $0.23  $0.01  $0.49 $0.45 $0.04 
          


          
          
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
          
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
          
DOWNSTREAM BUSINESS
          
          
 Three Months Ended Six Months Ended
(Thousands of Dollars, except per share amounts)March 31, March 31,
UTILITY SEGMENT 2022   2021  Variance  2022  2021 Variance
Revenues from External Customers$369,092  $270,784  $98,308  $605,776 $459,684 $146,092 
Intersegment Revenues 110   97   13   184  197  (13)
Total Operating Revenues 369,202   270,881   98,321   605,960  459,881  146,079 
Operating Expenses:         
Purchased Gas 225,469   133,132   92,337   352,680  210,164  142,516 
Operation and Maintenance 54,249   52,864   1,385   101,710  98,116  3,594 
Property, Franchise and Other Taxes 11,955   11,000   955   22,013  20,748  1,265 
Depreciation, Depletion and Amortization 14,997   14,311   686   29,827  28,305  1,522 
  306,670   211,307   95,363   506,230  357,333  148,897 
          
Operating Income 62,532   59,574   2,958   99,730  102,548  (2,818)
          
Other Income (Expense):         
Non-Service Pension and Post-Retirement Benefit Credit (Costs) 13,023   (12,243)  25,266   8,697  (18,927) 27,624 
Interest and Other Income 289   443   (154)  813  1,181  (368)
Interest Expense (5,504)  (5,495)  (9)  (11,028) (10,947) (81)
Income Before Income Taxes 70,340   42,279   28,061   98,212  73,855  24,357 
Income Tax Expense 17,292   10,235   7,057   23,034  18,774  4,260 
Net Income$53,048  $32,044  $21,004  $75,178 $55,081 $20,097 
Net Income Per Share (Diluted)$0.58  $0.35  $0.23  $0.82 $0.60 $0.22 
          


NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
          
SEGMENT OPERATING RESULTS AND STATISTICS
(UNAUDITED)
          
 Three Months Ended Six Months Ended
(Thousands of Dollars, except per share amounts)March 31, March 31,
ALL OTHER 2022   2021  Variance  2022  2021 Variance
Revenues from External Customers$  $64  $(64) $ $1,175 $(1,175)
Intersegment Revenues    1   (1)  6  20  (14)
Total Operating Revenues    65   (65)  6  1,195  (1,189)
Operating Expenses:         
Purchased Gas    6   (6)  6  2,293  (2,287)
Operation and Maintenance    (81)  81   5  683  (678)
Property, Franchise and Other Taxes    38   (38)    47  (47)
Depreciation, Depletion and Amortization    9   (9)    394  (394)
     (28)  28   11  3,417  (3,406)
Gain on Sale of Timber Properties            51,066  (51,066)
Operating Income (Loss)    93   (93)  (5) 48,844  (48,849)
Other Income (Expense):         
Non-Service Pension and Post-Retirement Benefit Costs    (3)  3     (7) 7 
Interest and Other Income    41   (41)  2  225  (223)
Income (Loss) before Income Taxes    131   (131)  (3) 49,062  (49,065)
Income Tax Expense    1,114   (1,114)  4  12,485  (12,481)
Net Income (Loss)$  $(983) $983  $(7)$36,577 $(36,584)
Net Income (Loss) Per Share (Diluted)$  $(0.01) $0.01  $ $0.40 $(0.40)
      
 Three Months Ended Six Months Ended
 March 31, March 31,
CORPORATE 2022   2021  Variance  2022  2021 Variance
Revenues from External Customers$83  $95  $(12) $166 $190 $(24)
Intersegment Revenues 1,082   1,027   55   2,165  1,691  474 
Total Operating Revenues 1,165   1,122   43   2,331  1,881  450 
Operating Expenses:         
Operation and Maintenance 3,835   3,743   92   6,844  6,342  502 
Property, Franchise and Other Taxes 125   125      249  247  2 
Depreciation, Depletion and Amortization 45   58   (13)  94  94   
  4,005   3,926   79   7,187  6,683  504 
          
Operating Loss (2,840)  (2,804)  (36)  (4,856) (4,802) (54)
Other Income (Expense):         
Non-Service Pension and Post-Retirement Benefit Costs (1,017)  (922)  (95)  (2,034) (1,846) (188)
Interest and Other Income 28,740   35,317   (6,577)  61,918  74,296  (12,378)
Interest Expense on Long-Term Debt (30,079)  (32,736)  2,657   (60,209) (64,992) 4,783 
Other Interest Expense (947)  (641)  (306)  (1,604) (2,176) 572 
Income (Loss) before Income Taxes (6,143)  (1,786)  (4,357)  (6,785) 480  (7,265)
Income Tax Expense (Benefit) (1,740)  (711)  (1,029)  (1,978) (511) (1,467)
Net Income (Loss)$(4,403) $(1,075) $(3,328) $(4,807)$991 $(5,798)
Net Income (Loss) Per Share (Diluted)$(0.05) $(0.01) $(0.04) $(0.05)$0.01 $(0.06)
          
          
 Three Months Ended Six Months Ended
 March 31, March 31,
INTERSEGMENT ELIMINATIONS 2022   2021  Variance  2022  2021 Variance
Intersegment Revenues$(78,241) $(78,106) $(135) $(154,387)$(154,003)$(384)
Operating Expenses:         
Purchased Gas (26,866)  (26,693)  (173)  (52,904) (54,406) 1,502 
Operation and Maintenance (51,375)  (51,413)  38   (101,483) (99,597) (1,886)
  (78,241)  (78,106)  (135)  (154,387) (154,003) (384)
Operating Income               
Other Income (Expense):         
Interest and Other Deductions (31,827)  (34,294)  2,467   (63,259) (69,714) 6,455 
Interest Expense 31,827   34,294   (2,467)  63,259  69,714  (6,455)
Net Income$  $  $  $ $ $ 
Net Income Per Share (Diluted)$  $  $  $ $ $ 


            
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
            
SEGMENT INFORMATION (Continued)
(Thousands of Dollars)
            
            
 Three Months Ended Six Months Ended
 March 31, March 31,
 (Unaudited) (Unaudited)
     Increase     Increase
 2022 2021 (Decrease) 2022 2021 (Decrease)
            
Capital Expenditures:           
Exploration and Production$134,748(1)$88,271(3)$46,477  $273,960(1)(2)$169,610(3)(4)$104,350 
Pipeline and Storage 14,404(1) 47,970(3) (33,566)  38,465(1)(2) 91,693(3)(4) (53,228)
Gathering 11,055(1) 11,099(3) (44)  19,975(1)(2) 19,419(3)(4) 556 
Utility 23,925(1) 24,480(3) (555)  43,308(1)(2) 41,825(3)(4) 1,483 
Total Reportable Segments 184,132  171,820  12,312   375,708  322,547  53,161 
All Other             
Corporate 271  50  221   496  89  407 
Eliminations   (373) 373     (219) 219 
Total Capital Expenditures$184,403 $171,497 $12,906  $376,204 $322,417 $53,787 


(1) Capital expenditures for the quarter and six months ended March 31, 2022, include accounts payable and accrued liabilities related to capital expenditures of $52.5 million, $3.5 million, $3.4 million, and $4.1 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 March 31, 2022, since they represent non-cash investing activities at that date.
   
(2) Capital expenditures for the six months ended March 31, 2022, exclude capital expenditures of $47.9 million, $39.4 million, $4.8 million and $10.6 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, 2021 and paid during the six months ended March 31, 2022. These amounts were excluded from the Consolidated Statement of Cash Flows at September 30, 2021, since they represented non-cash investing activities at that date. These amounts have been included in the Consolidated Statement of Cash Flows at March 31, 2022.
   
(3) Capital expenditures for the quarter and six months ended March 31, 2021, include accounts payable and accrued liabilities related to capital expenditures of $44.5 million, $16.0 million, $2.9 million, and $4.7 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 March 31, 2021, since they represent non-cash investing activities at that date.
   
(4) Capital expenditures for the six months ended March 31, 2021, exclude capital expenditures of $45.8 million, $17.3 million, $13.5 million and $10.7 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, 2020 and paid during the six months ended March 31, 2021. These amounts were excluded from the Consolidated Statement of Cash Flows at September 30, 2020, since they represented non-cash investing activities at that date. These amounts have been included in the Consolidated Statement of Cash Flows at March 31, 2021.

 

          
DEGREE DAYS         
       Percent Colder
       (Warmer) Than:
Three Months Ended March 31,Normal 2022 2021 Normal(1) Last Year(1)
Buffalo, NY3,290 3,161 2,978 (3.9) 6.1 
Erie, PA3,108 2,973 2,750 (4.3) 8.1 
          
Six Months Ended March 31,         
Buffalo, NY5,543 4,865 4,899 (12.2) (0.7)
Erie, PA5,152 4,533 4,447 (12.0) 1.9 
          

(1)   Percents compare actual 2022 degree days to normal degree days and actual 2022 degree days to actual 2021 degree days.

             
             
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
             
EXPLORATION AND PRODUCTION INFORMATION
             
             
  Three Months Ended Six Months Ended
  March 31, March 31,
      Increase     Increase
  2022  2021 (Decrease) 2022 2021 (Decrease)
             
Gas Production/Prices:            
Production (MMcf)            
Appalachia  83,565  81,446  2,119   164,954  157,115  7,839 
West Coast  397  428  (31)  805  869  (64)
Total Production  83,962  81,874  2,088   165,759  157,984  7,775 
             
Average Prices (Per Mcf)            
Appalachia $3.97 $2.28 $1.69  $4.18 $2.23 $1.95 
West Coast  10.04  7.14  2.90   9.91  6.07  3.84 
Weighted Average  4.00  2.31  1.69   4.21  2.25  1.96 
Weighted Average after Hedging  2.60  2.28  0.32   2.56  2.21  0.35 
             
Oil Production/Prices:            
Production (Thousands of Barrels)            
Appalachia  1  1     1  1   
West Coast  522  561  (39)  1,070  1,124  (54)
Total Production  523  562  (39)  1,071  1,125  (54)
             
Average Prices (Per Barrel)            
Appalachia $78.32 $48.47 $29.85  $75.38 $43.83 $31.55 
West Coast  94.95  59.83  35.12   85.93  51.64  34.29 
Weighted Average  94.93  59.82  35.11   85.93  51.63  34.30 
Weighted Average after Hedging  70.45  57.11  13.34   67.30  53.50  13.80 
             
Total Production (MMcfe)  87,100  85,246  1,854   172,185  164,734  7,451 
             
Selected Operating Performance Statistics:            
General & Administrative Expense per Mcfe(1) $0.22 $0.21 $0.01  $0.21 $0.21 $ 
Lease Operating and Transportation Expense per Mcfe(1)(2) $0.83 $0.79 $0.04  $0.82 $0.80 $0.02 
Depreciation, Depletion & Amortization per Mcfe(1) $0.58 $0.54 $0.04  $0.58 $0.56 $0.02 


(1) Refer to page 16 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 $0.55 and $0.57 per Mcfe for the three months ended March 31, 2022 and March 31, 2021, respectively. Amounts include transportation expense of $0.56 and $0.57 per Mcfe for the six months ended March 31, 2022 and March 31, 2021, respectively.



 
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
         
EXPLORATION AND PRODUCTION INFORMATION
 
Hedging Summary for Remaining Six Months of Fiscal 2022 Volume   Average Hedge Price
Oil Swaps        
Brent 570,000 BBL $ 58.28 / BBL
NYMEX 78,000 BBL $ 51.00 / BBL
Total 648,000 BBL $ 57.40 / BBL
         
Gas Swaps        
NYMEX 107,160,000 MMBTU $ 2.76 / MMBTU
Fixed Price Physical Sales 38,061,033 MMBTU $ 2.65 / MMBTU
Total 145,221,033 MMBTU $ 2.73 / MMBTU
       
Hedging Summary for Fiscal 2023 Volume   Average Hedge Price
Oil Swaps        
Brent 480,000 BBL $ 58.48 / BBL
Total 480,000 BBL $ 58.48 / BBL
         
Gas Swaps        
NYMEX 116,200,000 MMBTU $ 2.79 / MMBTU
No Cost Collars 70,400,000 MMBTU $ 3.11 / MMBTU (Floor) / $3.64 / MMBTU (Ceiling)
Fixed Price Physical Sales 72,896,598 MMBTU $ 2.45 / MMBTU
Total 259,496,598 MMBTU    
       
Hedging Summary for Fiscal 2024 Volume   Average Hedge Price
Oil Swaps        
Brent 120,000 BBL $ 50.30 / BBL
Total 120,000 BBL $ 50.30 / BBL
         
Gas Swaps        
NYMEX 61,080,000 MMBTU $ 2.72 / MMBTU
No Cost Collars 59,200,000 MMBTU $ 3.20 / MMBTU (Floor) / $3.78 / MMBTU (Ceiling)
Fixed Price Physical Sales 59,807,855 MMBTU $ 2.22 / MMBTU
Total 180,087,855 MMBTU    
       
Hedging Summary for Fiscal 2025 Volume   Average Hedge Price
Oil Swaps        
Brent 120,000 BBL $ 50.32 / BBL
Total 120,000 BBL $ 50.32 / BBL
         
Gas Swaps        
NYMEX 23,660,000 MMBTU $ 2.74 / MMBTU
No Cost Collars 22,400,000 MMBTU $ 3.24 / MMBTU (Floor) / $3.65 / MMBTU (Ceiling)
Fixed Price Physical Sales 56,366,847 MMBTU $ 2.21 / MMBTU
Total 102,426,847 MMBTU    
       
Hedging Summary for Fiscal 2026 Volume   Average Hedge Price
Gas Swaps        
NYMEX 1,720,000 MMBTU $ 2.75 / MMBTU
No Cost Collars 19,200,000 MMBTU $ 3.25 / MMBTU (Floor) / $3.61 / MMBTU (Ceiling)
Fixed Price Physical Sales 58,883,559 MMBTU $ 2.30 / MMBTU
Total 79,803,559 MMBTU    
       
Hedging Summary for Fiscal 2027 Volume   Average Hedge Price
No Cost Collars 1,600,000 MMBTU $ 3.25 / MMBTU (Floor) / $3.61 / MMBTU (Ceiling)
Fixed Price Physical Sales 43,434,257 MMBTU $ 2.35 / MMBTU
Total 45,034,257 MMBTU    
       
Hedging Summary for Fiscal 2028 Volume   Average Hedge Price
Fixed Price Physical Sales 11,850,451 MMBTU $ 2.48 / MMBTU
       
Hedging Summary for Fiscal 2029 Volume   Average Hedge Price
Fixed Price Physical Sales 766,673 MMBTU $ 2.54 / MMBTU


             
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
             
             
             
Pipeline & Storage Throughput - (millions of cubic feet - MMcf)    
             
  Three Months Ended Six Months Ended
  March 31, March 31,
      Increase     Increase
  2022 2021 (Decrease) 2022 2021 (Decrease)
Firm Transportation - Affiliated 46,459 43,124 3,335 74,656 73,088 1,568
Firm Transportation - Non-Affiliated 185,571 166,372 19,199 350,967 339,436 11,531
Interruptible Transportation 752 435 317 1,520 1,024 496
  232,782 209,931 22,851 427,143 413,548 13,595
             
Gathering Volume - (MMcf)            
  Three Months Ended Six Months Ended
  March 31, March 31,
      Increase     Increase
  2022 2021 (Decrease) 2022 2021 (Decrease)
Gathered Volume 103,736 95,121 8,615 204,829 183,466 21,363
             
             
Utility Throughput - (MMcf)            
  Three Months Ended Six Months Ended
  March 31, March 31,
      Increase     Increase
  2022 2021 (Decrease) 2022 2021 (Decrease)
Retail Sales:            
Residential Sales 32,026 29,052 2,974 49,521 47,465 2,056
Commercial Sales 4,923 4,309 614 7,466 6,836 630
Industrial Sales 268 223 45 392 376 16
  37,217 33,584 3,633 57,379 54,677 2,702
Transportation 25,745 24,584 1,161 43,338 42,518 820
  62,962 58,168 4,794 100,717 97,195 3,522



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, Adjusted EBITDA and free cash flow, 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 or liquidity 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 six months ended March 31, 2022 and 2021:

  Three Months Ended Six Months Ended
  March 31, March 31,
(in thousands except per share amounts)  2022   2021   2022   2021 
Reported GAAP Earnings $167,328  $112,436  $299,720  $190,210 
Items impacting comparability:        
Reduction of other post-retirement regulatory liability (Utility)  (18,533)     (18,533)   
Tax impact of reduction of other post-retirement regulatory liability  3,892      3,892    
Impairment of oil and gas properties (E&P)           76,152 
Tax impact of impairment of oil and gas properties           (20,980)
Gain on sale of timber properties (Corporate/All Other)           (51,066)
Tax impact of gain on sale of timber properties           14,069 
Premium paid on early redemption of debt     15,715      15,715 
Tax impact of premium paid on early redemption of debt     (4,321)     (4,321)
Unrealized (gain) loss on other investments (Corporate/All Other)  2,170   (848)  6,659   450 
Tax impact of unrealized (gain) loss on other investments  (456)  178   (1,398)  (94)
Adjusted Operating Results $154,401  $123,160  $290,340  $220,135 
         
Reported GAAP Earnings Per Share $1.82  $1.23  $3.26  $2.08 
Items impacting comparability:        
Reduction of other post-retirement regulatory liability, net of tax (Utility)  (0.16)     (0.16)   
Impairment of oil and gas properties, net of tax (E&P)           0.60 
Gain on sale of timber properties, net of tax (Corporate/All Other)           (0.40)
Premium paid on early redemption of debt, net of tax     0.12      0.12 
Unrealized (gain) loss on other investments, net of tax (Corporate/All Other)  0.02   (0.01)  0.05    
Adjusted Operating Results Per Share $1.68  $1.34  $3.15  $2.40 

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 six months ended March 31, 2022 and 2021:

  Three Months Ended Six Months Ended
  March 31, March 31,
(in thousands)  2022   2021   2022   2021 
Reported GAAP Earnings $167,328  $112,436  $299,720  $190,210 
Depreciation, Depletion and Amortization  91,245   84,342   179,823   167,462 
Other (Income) Deductions  (10,018)  10,875   (8,940)  13,051 
Interest Expense  31,598   50,518   62,889   84,694 
Income Taxes  57,458   40,210   102,356   69,627 
Impairment of Oil and Gas Producing Properties           76,152 
Gain on Sale of Timber Properties           (51,066)
Adjusted EBITDA $337,611  $298,381  $635,848  $550,130 
         
Adjusted EBITDA by Segment        
Pipeline and Storage Adjusted EBITDA $61,371  $58,570  $118,519  $116,706 
Gathering Adjusted EBITDA  43,056   41,424   87,088   81,217 
Total Midstream Businesses Adjusted EBITDA  104,427   99,994   205,607   197,923 
Exploration and Production Adjusted EBITDA  158,450   127,146   305,451   227,890 
Utility Adjusted EBITDA  77,529   73,885   129,557   130,853 
Corporate and All Other Adjusted EBITDA  (2,795)  (2,644)  (4,767)  (6,536)
Total Adjusted EBITDA $337,611  $298,381  $635,848  $550,130 



NATIONAL FUEL GAS COMPANY

AND SUBSIDIARIES
NON-GAAP FINANCIAL MEASURES
SEGMENT ADJUSTED EBITDA

  Three Months Ended Six Months Ended
  March 31, March 31,
(in thousands)  2022   2021   2022   2021 
Exploration and Production Segment        
Reported GAAP Earnings $71,121  $36,822  $133,490  $7,199 
Depreciation, Depletion and Amortization  50,547   46,139   100,054   91,471 
Other (Income) Deductions  111   219   241   412 
Interest Expense  12,206   30,222   24,338   45,713 
Income Taxes  24,465   13,744   47,328   6,943 
Impairment of Oil and Gas Producing Properties           76,152 
Adjusted EBITDA $158,450  $127,146  $305,451  $227,890 
         
Pipeline and Storage Segment        
Reported GAAP Earnings $25,470  $24,928  $50,637  $49,112 
Depreciation, Depletion and Amortization  17,294   15,729   33,095   31,197 
Other (Income) Deductions  (959)  (1,064)  (3,129)  (2,045)
Interest Expense  10,618   10,552   20,750   21,283 
Income Taxes  8,948   8,425   17,166   17,159 
Adjusted EBITDA $61,371  $58,570  $118,519  $116,706 
         
Gathering Segment        
Reported GAAP Earnings $22,092  $20,700  $45,229  $41,250 
Depreciation, Depletion and Amortization  8,362   8,096   16,753   16,001 
Other (Income) Deductions  38   59   85   (108)
Interest Expense