National Fuel Reports Third Quarter Earnings and Announces Preliminary Guidance for Fiscal 2022

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WILLIAMSVILLE, N.Y., Aug. 05, 2021 (GLOBE NEWSWIRE) -- National Fuel Gas Company (“National Fuel” or the “Company”) (NYSE:NFG) today announced consolidated results for the third quarter of its 2021 fiscal year and for the nine months ended June 30, 2021.

FISCAL 2021 THIRD QUARTER SUMMARY

  • GAAP net income of $86.5 million, or $0.94 per share, compared to $41.3 million, or $0.47 per share, in the prior year.

  • Adjusted operating results of $85.7 million, or $0.93 per share, compared to $50.0 million, or $0.57 per share, in the prior year (see non-GAAP reconciliation on page 2).

  • Adjusted EBITDA of $234.2 million, an increase of 36%, compared to $171.9 million in the prior year (see non-GAAP reconciliation on page 24).

  • Pipeline & Storage segment Adjusted EBITDA of $53.1 million, an increase of 5% from the prior year.

  • Gathering segment Adjusted EBITDA of $39.9 million, an increase of 43% from the prior year.

  • E&P segment Adjusted EBITDA of $116.1 million, an increase of 79% from the prior year.

  • E&P segment net production of 83.1 Bcfe, an increase of 27.1 Bcfe, or 48%, from the prior year.

  • E&P segment cash operating costs (combined G&A expenses, LOE expense, other operation and maintenance expense, and property, franchise, and other taxes), of $1.13 per Mcfe, a 5% decrease from the prior year.

  • Average realized natural gas prices of $2.20 per Mcf, an increase $0.28 per Mcf from the prior year.

  • Average realized oil prices of $59.22 per Bbl, an increase of $8.52 per Bbl from the prior year.

  • Company is increasing its fiscal 2021 earnings guidance to a range of $4.05 to $4.15 per share, an increase of $0.15 at the midpoint, excluding items impacting comparability (see Guidance Summary on page 8).

  • Company is initiating its fiscal 2022 earnings guidance with a range of $4.40 to $4.80 per share, an increase of 12% from the midpoint of the Company's updated fiscal 2021 guidance (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 third quarter, with adjusted operating results per share increasing more than 60% from the prior year. As we look to fiscal 2022, the Company is poised for continued earnings growth, as evidenced by our greater than 10% projected increase in earnings per share, driven by the significantly improved outlook for natural gas prices and the expected completion of our FM100 expansion and modernization project in late calendar 2021. Once complete, this project, in addition to providing long-term system integrity and reliability benefits for our existing pipeline transportation customers, puts National Fuel on a pathway to generating significant annual free cash flow across each of our major businesses, allowing the Company to maintain the strength of its balance sheet while continuing to return cash to shareholders in the years ahead.”

RECONCILIATION OF GAAP EARNINGS TO ADJUSTED OPERATING RESULTS

Three Months Ended

Nine Months Ended

June 30,

June 30,

(in thousands except per share amounts)

2021

2020

2021

2020

Reported GAAP Earnings

$

86,475

$

41,250

$

276,685

$

21,773

Items impacting comparability:

Impairment of oil and gas properties (E&P)

18,236

76,152

195,997

Tax impact of impairment of oil and gas properties

(4,986

)

(20,980

)

(53,489

)

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

Tax impact of premium paid on early redemption of debt

(4,321

)

Deferred tax valuation allowance

56,770

Unrealized (gain) loss on other investments (Corporate / All Other)

(1,025

)

(5,639

)

(575

)

794

Tax impact of unrealized (gain) loss on other investments

215

1,184

120

(167

)

Adjusted Operating Results

$

85,665

$

50,045

$

305,799

$

221,678

Reported GAAP Earnings Per Share

$

0.94

$

0.47

$

3.02

$

0.25

Items impacting comparability:

Impairment of oil and gas properties, net of tax (E&P)

0.15

0.60

1.63

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

Deferred tax valuation allowance

0.65

Unrealized (gain) loss on other investments, net of tax (Corporate / All Other)

(0.01

)

(0.05

)

0.01

Adjusted Operating Results Per Share

$

0.93

$

0.57

$

3.34

$

2.54

DISCUSSION OF GUIDANCE UPDATE

National Fuel is revising its fiscal 2021 earnings guidance to reflect the results of the third quarter, along with updated assumptions for the balance of the year, as detailed on page 8. The Company is now projecting that earnings, excluding items impacting comparability, will be within the range of $4.05 to $4.15 per share, an increase of $0.15 per share from the midpoint of the Company’s prior guidance range.

For the balance of fiscal 2021, Seneca currently has price certainty on approximately 79% of its expected remaining Appalachian production, utilizing a combination of physical firm sales contracts and financial hedges, including swaps, and floor protection on an additional approximately 9% of its expected remaining Appalachian production via no-cost collars. Additionally, Seneca has financial hedges in place for approximately 72% of its expected remaining oil production in fiscal 2021.

The Company is also initiating preliminary guidance for fiscal 2022 with earnings projected to be within a range of $4.40 to $4.80 per share, or $4.60 per share at the midpoint of the range, an increase of 12% from the midpoint of the fiscal 2021 guidance range. The anticipated increase in earnings is being driven largely by higher anticipated commodity price realizations and expected late calendar 2021 completion of the Company's FERC-regulated FM100 expansion and modernization project. This project is expected to generate approximately $50 million of annualized revenue and 330,000 Dekatherms per day of new firm transportation capacity. This incremental pipeline capacity provides a key outlet for Seneca’s natural gas production and is the primary driver behind the forecasted growth in natural gas production and the associated impact on Gathering revenues.

With this incremental transportation capacity, Seneca’s fiscal 2022 net production is increasing to an expected range of 335 to 365 Bcfe, an increase of 25 Bcfe versus fiscal 2021 at the midpoint of the respective guidance ranges. In addition, the Company anticipates its natural gas price realizations after hedging to increase by approximately $0.10 per Mcf from its estimated fiscal 2021 realizations, driven in large part by higher expected NYMEX and regional spot prices for natural gas. Overall, Seneca has firm sales contracts in place for approximately 93% of its expected fiscal 2022 Appalachian production at the midpoint of the Company's production guidance range. The Company is also well positioned with respect to potential swings in natural gas prices in fiscal 2022, with financial hedges on approximately 76% of Seneca’s projected fiscal 2022 Appalachian natural gas production.

The Company’s consolidated capital expenditures in fiscal 2022 are expected to be in a range of $640 million to $760 million, a decrease of $90 million versus the midpoint of its fiscal 2021 guidance. The primary drivers are a significant decrease in Pipeline and Storage segment capital as a result of the expected completion of its FM100 project, partially offset by a higher average activity level in the Exploration and Production segment. The Company added a second drilling rig in the second quarter of fiscal 2021 and expects to maintain its current two-rig program for the entirety of fiscal 2022 along with elevated levels of completion activity designed to efficiently utilize the entirety of Seneca’s new transportation capacity over the course of the fiscal year.

Additional details on the Company's updated forecast assumptions and business segment guidance for fiscal 2021 and fiscal 2022 are outlined in the table on page 8.

DISCUSSION OF THIRD QUARTER RESULTS BY SEGMENT

The following earnings discussion of each operating segment for the quarter ended June 30, 2021 is summarized in a tabular form on pages 9 and 10 of this report (earnings drivers for the nine months ended June 30, 2021 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

June 30,

(in thousands)

2021

2020

Variance

GAAP Earnings

$

39,015

$

(6,434

)

$

45,449

Impairment of oil and gas properties, net of tax

13,250

(13,250

)

Adjusted Operating Results

$

39,015

$

6,816

$

32,199

Adjusted EBITDA

$

116,052

$

64,780

$

51,272

Seneca’s third quarter GAAP earnings increased $45.4 million versus the prior year, which includes the impact of a non-cash ceiling test impairment charge of $13.2 million (after-tax) recorded in the prior year's third quarter. Excluding this item, Seneca’s third quarter earnings increased $32.2 million primarily due to the positive impacts of higher natural gas production, higher realized natural gas and crude oil prices as well as lower per unit operating costs, partially offset by lower crude oil production and a higher effective income tax rate.

Seneca produced 83.1 Bcfe during the third quarter, an increase of 27.1 Bcfe, or 48%, from the prior year. The improvement was primarily from a 27.3 Bcf increase in natural gas production, largely related to the Company's fourth quarter fiscal 2020 acquisition of Appalachian upstream assets, as well as production growth from Seneca's other core development areas, partially offset by a 4% decrease, or 26 MBbls, of crude oil production in California largely due to natural declines. Approximately 21.6 Bcf of the natural gas production increase came from the Eastern Development Area ("EDA"), with the remainder attributable to Seneca’s Western Development Area ("WDA").

Seneca's average realized natural gas price, after the impact of hedging and transportation costs, was $2.20 per Mcf, an increase of $0.28 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 $59.22 per Bbl, an increase of $8.52 per Bbl compared to the prior year. The improvement in oil price realizations was primarily due to stronger commodity pricing.

Lease operating and transportation (“LOE”) expense increased $20.6 million primarily due to higher transportation costs in Appalachia from increased production, as well as higher well repairs, workover activity and steam fuel costs in California. LOE expense includes $48.1 million in intercompany expense for gathering and compression services used to connect Seneca’s Marcellus and Utica production to sales points along interstate pipelines. DD&A expense increased $6.5 million due largely to higher natural gas production, partially offset by the impact of ceiling test impairments recorded during fiscal 2020. Seneca's general and administrative ("G&A") expense increased $2.2 million due primarily to higher personnel costs and technology-related expenses. Other taxes increased $3.5 million primarily due to higher impact fee accruals in Pennsylvania, driven by higher expected NYMEX natural gas prices for calendar 2021. The increase in Seneca's effective income tax rate was primarily driven by a higher effective state income tax rate as a result of the Company's Appalachian acquisition that caused a change in the mix of earnings between state jurisdictions.

On a unit of production basis, Seneca's combined general and administrative ("G&A"), LOE, other operation and maintenance ("O&M") expense, and Property, Franchise, and Other Taxes decreased $0.06 per Mcfe, or 5%, during the quarter.

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

June 30,

(in thousands)

2021

2020

Variance

GAAP Earnings

$

21,948

$

22,623

$

(675

)

Adjusted EBITDA

$

53,086

$

50,511

$

2,575

The Pipeline and Storage segment’s third quarter GAAP earnings decreased $0.7 million versus the prior year as higher operating revenues were more than offset by the negative impacts of higher O&M expense, higher DD&A expense and higher interest expense. The increase in operating revenues of $6.3 million, or 8%, was largely due to new demand charges for transportation service from the Company's Empire North expansion project, which was placed in service near the end of the fourth quarter of fiscal 2020, combined with an increase in revenues from a surcharge for pipeline safety and greenhouse gas regulatory costs, which went into effect in November 2020 in accordance with Supply Corporation's fiscal 2020 rate case settlement. Additionally, the Company recognized increased revenue from a surcharge mechanism for power costs related to electric motor drive compression on the Empire North project, for which offsetting O&M expense was recognized during the quarter. These positive items were partially offset by a modest decrease in transportation revenue from miscellaneous contract revisions. O&M expense increased $3.7 million primarily due to higher pipeline integrity costs, higher compressor and facility maintenance costs, and higher personnel costs, as well as the aforementioned Empire power costs. The increase in DD&A expense of $1.3 million was primarily attributable to incremental depreciation from the Empire North expansion project. The increase in interest expense of $2.3 million was primarily driven by additional long-term borrowings from the Company's long-term debt issuance in June 2020.

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

June 30,

(in thousands)

2021

2020

Variance

GAAP Earnings

$

20,427

$

15,239

$

5,188

Adjusted EBITDA

$

39,929

$

27,844

$

12,085

The Gathering segment’s third quarter GAAP earnings increased $5.2 million versus the prior year. The earnings increase was primarily driven by higher operating revenues, which was partially offset by higher DD&A expense, higher O&M expense, higher interest expense and a higher effective income tax rate. Operating revenues increased $15.4 million, or 46%, primarily due to increased gathering throughput resulting from the Company's Appalachian acquisition in the fourth quarter of fiscal 2020 and from new Marcellus and Utica wells that were brought on-line. The increase in DD&A expense of $2.9 million was primarily attributable to incremental depreciation expense related to the Company's Appalachian acquisition, as well as higher average depreciable plant in service compared to the prior year. Compression leasing expenses, as well as higher facility, personnel and contractor costs, all associated with the Appalachian acquisition, were primarily responsible for the $3.3 million increase in O&M expense. Interest expense increased by $1.7 million from the prior year, primarily driven by additional long-term borrowings from the Company's long-term debt issuances in June 2020 and February 2021. The increase in the Gathering segment's effective income tax rate was primarily driven by a higher effective state income tax rate as a result of the Company's Appalachian acquisition that caused a change in the mix of earnings between state jurisdictions.

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

June 30,

(in thousands)

2021

2020

Variance

GAAP Earnings

$

4,841

$

6,254

$

(1,413

)

Adjusted EBITDA

$

29,431

$

30,214

$

(783

)

The Utility segment’s third quarter GAAP earnings decreased $1.4 million versus the prior year primarily due to lower customer margins (operating revenues less purchased gas sold) and higher DD&A expense. The decline in customer margin was due primarily to warmer weather in Distribution's Pennsylvania service territory that resulted in a decrease in customer usage, partially offset by higher revenues earned through the Company's system modernization tracking mechanism in its New York service territory. Weather in Distribution's Pennsylvania service territory was 20% warmer on average than last year. The impact of weather variations on earnings for the quarter in Distribution's New York service territory is largely mitigated by that jurisdiction's weather normalization clause. The $0.6 million increase in DD&A expense was primarily attributable to higher average depreciable plant in service compared to the prior year.

Corporate and All Other

The Company’s operations that are included in Corporate and All Other generated combined earnings of $0.2 million in the current year third quarter, which was $3.4 million lower than the combined earnings of $3.6 million in the prior-year third quarter. The decrease in earnings was primarily driven by lower unrealized gains on investment securities quarter over quarter.

EARNINGS TELECONFERENCE

The Company will host a conference call on Friday, August 6, 2021, 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/1368175. 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 (toll-free) at 800-585-8367 using conference ID number “1368175”. Both the webcast and conference call replay will be available until the close of business on Friday, August 13, 2021.

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. Webster

716-857-7067

Media Contact:

Karen L. Merkel

716-857-7654

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; 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; 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 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; impairments under the SEC’s full cost ceiling test for natural gas and oil reserves; 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; delays or changes in costs or 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; 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 2021 and initiating preliminary guidance for fiscal 2022. Additional details on the Company's forecast assumptions and business segment guidance for fiscal 2021 and fiscal 2022 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 nine months ended June 30, 2021, including: (1) the after-tax impairment of oil and gas properties, which reduced earnings by $0.60 per share; (2) the after-tax gain on sale of timber properties, which increased earnings by $0.40 per share; and (3) the after-tax premium paid on early redemption of debt, which reduced earnings by $0.12 per share. While the Company expects to record certain adjustments to unrealized gain or loss on investments during the three months ending September 30, 2021, 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 2021 Guidance

Preliminary FY 2022 Guidance

Consolidated Earnings per Share, excluding items impacting comparability

$4.05 to $4.15

$4.40 to $4.80

Consolidated Effective Tax Rate

~ 26%

~ 25-26%

Capital Expenditures (Millions)

Exploration and Production

$370 - $390

$400 - $450

Pipeline and Storage

$250 - $300

$100 - $150

Gathering

$35 - $45

$50 - $60

Utility

$90 - $100

$90 - $100

Consolidated Capital Expenditures

$745 - $835

$640 - $760

Exploration & Production Segment Guidance*

Commodity Price Assumptions

NYMEX natural gas price

$3.75 /MMBtu

$3.50 /MMBtu

Appalachian basin spot price (winter | summer)

$2.75 /MMBtu

$2.85 /MMBtu | $2.25 /MMBtu

NYMEX (WTI) crude oil price

$70.00 /Bbl

$65.00 /Bbl

California oil price premium (% of WTI)

96%

96%

Production (Bcfe)

320 to 330

335 to 365

E&P Operating Costs ($/Mcfe)

LOE

$0.81 - $0.83

$0.82 - $0.85

G&A

$0.20 - $0.22

$0.19 - $0.21

DD&A

$0.55 - $0.57

$0.59 - $0.62

Other Business Segment Guidance (Millions)

Gathering Segment Revenues

$190 - $195

$200 - $225

Pipeline and Storage Segment Revenues

$340 - $345

$360 - $380

* Fiscal 2021 commodity price assumptions are for the remaining 3 months of the fiscal year.

NATIONAL FUEL GAS COMPANY

RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS

QUARTER ENDED JUNE 30, 2021

(Unaudited)

Upstream

Midstream

Downstream

Exploration &

Pipeline &

Corporate /

(Thousands of Dollars)

Production

Storage

Gathering

Utility

All Other

Consolidated*

Third quarter 2020 GAAP earnings

$

(6,434

)

$

22,623

$

15,239

$

6,254

$

3,568

$

41,250

Items impacting comparability:

Impairment of oil and gas properties

18,236

18,236

Tax impact of impairment of oil and gas properties

(4,986

)

(4,986

)

Unrealized (gain) loss on other investments

(5,639

)

(5,639

)

Tax impact of unrealized (gain) loss on other investments

1,184

1,184

Third quarter 2020 adjusted operating results

6,816

22,623

15,239

6,254

(887

)

50,045

Drivers of adjusted operating results**

Upstream Revenues

Higher (lower) natural gas production

41,361

41,361

Higher (lower) crude oil production

(1,042

)

(1,042

)

Higher (lower) realized natural gas prices, after hedging

17,437

17,437

Higher (lower) realized crude oil prices, after hedging

3,760

3,760

Midstream and All Other Revenues

Higher (lower) operating revenues

4,938

12,132

(801

)

16,269

Downstream Margins***

Impact of usage and weather

(796

)

(796

)

System modernization tracker revenues

369

369

Regulatory revenue adjustments

(149

)

(149

)

Higher (lower) energy marketing margins

(1,246

)

(1,246

)

Operating Expenses

Lower (higher) lease operating and transportation expenses

(16,235

)

(16,235

)

Lower (higher) operating expenses

(2,372

)

(2,888

)

(2,585

)

(7,845

)

Lower (higher) property, franchise and other taxes

(2,751

)

(2,751

)

Lower (higher) depreciation / depletion

(5,146

)

(993

)

(2,286

)

(510

)

(8,935

)

Other Income (Expense)

(Higher) lower other deductions

(573

)

719

146

(Higher) lower interest expense

1,829

(1,815

)

(1,358

)

(554

)

(1,898

)

Income Taxes

Lower (higher) income tax expense / effective tax rate

(4,975

)

177

(693

)

501

2,054

(2,936

)

All other / rounding

333

(94

)

(22

)

(255

)

149

111

Third quarter 2021 adjusted operating results

39,015

21,948

20,427

4,841

(566

)

85,665

Items impacting comparability:

Unrealized gain (loss) on other investments

1,025

1,025

Tax impact of unrealized gain (loss) on other investments

(215

)

(215

)

Third quarter 2021 GAAP earnings

$

39,015

$

21,948

$

20,427

$

4,841

$

244

$

86,475

* 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 JUNE 30, 2021

(Unaudited)

Upstream

Midstream

Downstream

Exploration &

Pipeline &

Corporate /

Production

Storage

Gathering

Utility

All Other

Consolidated*

Third quarter 2020 GAAP earnings per share

$

(0.07

)

$

0.26

$

0.17

$

0.07

$

0.04

$

0.47

Items impacting comparability:

Impairment of oil and gas properties, net of tax

0.15

0.15

Unrealized (gain) loss on other investments, net of tax

(0.05

)

(0.05

)

Third quarter 2020 adjusted operating results per share

0.08

0.26

0.17

0.07

(0.01

)

0.57

Drivers of adjusted operating results**

Upstream Revenues

Higher (lower) natural gas production

0.45

0.45

Higher (lower) crude oil production

(0.01

)

(0.01

)

Higher (lower) realized natural gas prices, after hedging

0.19

0.19

Higher (lower) realized crude oil prices, after hedging

0.04

0.04

Midstream and All Other Revenues

Higher (lower) operating revenues

0.05

0.13

(0.01

)

0.17

Downstream Margins***

Impact of usage and weather

(0.01

)

(0.01

)

System modernization tracker revenues

Regulatory revenue adjustments

Higher (lower) energy marketing margins

(0.01

)

(0.01

)

Operating Expenses

Lower (higher) lease operating and transportation expenses

(0.18

)

(0.18

)

Lower (higher) operating expenses

(0.03

)

(0.03

)

(0.03

)

(0.09

)

Lower (higher) property, franchise and other taxes

(0.03

)

(0.03

)

Lower (higher) depreciation / depletion

(0.06

)

(0.01

)

(0.02

)

(0.01

)

(0.10

)

Other Income (Expense)

(Higher) lower other deductions

(0.01

)

0.01

(Higher) lower interest expense

0.02

(0.02

)

(0.01

)

(0.01

)

(0.02

)

Income Taxes

Lower (higher) income tax expense / effective tax rate

(0.05

)

(0.01

)

0.01

0.02

(0.03

)

Impact of additional shares

(0.01

)

(0.01

)

(0.02

)

All other / rounding

0.01

0.01

Third quarter 2021 adjusted operating results per share

0.43

0.24

0.22

0.05

(0.01

)

0.93

Items impacting comparability:

Unrealized gain (loss) on other investments, net of tax

0.01

0.01

Third quarter 2021 GAAP earnings per share

$

0.43

$

0.24

$

0.22

$

0.05

$

$

0.94

* 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

NINE MONTHS ENDED JUNE 30, 2021

(Unaudited)

Upstream

Midstream

Downstream

Exploration &

Pipeline &

Corporate /

(Thousands of Dollars)

Production

Storage

Gathering

Utility

All Other

Consolidated*

Nine months ended June 30, 2020 GAAP earnings

$

(157,733

)

$

62,815

$

51,081

$

64,335

$

1,275

$

21,773

Items impacting comparability:

Impairment of oil and gas properties

195,997

195,997

Tax impact of impairment of oil and gas properties

(53,489

)

(53,489

)

Deferred tax valuation allowance

60,463

(3,769

)

76

56,770

Unrealized (gain) loss on other investments

794

794

Tax impact of unrealized (gain) loss on other investments

(167

)

(167

)

Nine months ended June 30, 2020 adjusted operating results

45,238

62,815

47,312

64,335

1,978

221,678

Drivers of adjusted operating results**

Upstream Revenues

Higher (lower) natural gas production

124,819

124,819

Higher (lower) crude oil production

(4,923

)

(4,923

)

Higher (lower) realized natural gas prices, after hedging

15,081

15,081

Higher (lower) realized crude oil prices, after hedging

(2,590

)

(2,590

)

Midstream and All Other Revenues

Higher (lower) operating revenues

23,111

33,632

(1,925

)

54,818

Downstream Margins***

Impact of usage and weather

(476

)

(476

)

System modernization tracker revenues

2,851

2,851

Regulatory revenue adjustments

(1,167

)

(1,167

)

Higher (lower) energy marketing margins

(5,914

)

(5,914

)

Operating Expenses

Lower (higher) lease operating and transportation expenses

(39,981

)

(39,981

)

Lower (higher) operating expenses

(4,891

)

(1,266

)

(6,528

)

(3,201

)

1,902

(13,984

)

Lower (higher) property, franchise and other taxes

(3,456

)

(3,456

)

Lower (higher) depreciation / depletion

(6,873

)

(5,919

)

(6,697

)

(1,240

)

529

(20,200

)

Other Income (Expense)

(Higher) lower other deductions

(1,038

)

(446

)

2,289

805

(Higher) lower interest expense

(7,360

)

(4,482

)

(1,621

)

(13,463

)

Income Taxes

Lower (higher) income tax expense / effective tax rate

(10,584

)

634

(927

)

(665

)

3,287

(8,255

)

All other / rounding

255

83

51

(69

)

(164

)

156

Nine months ended June 30, 2021 adjusted operating results

112,095

71,060

62,361

59,922

361

305,799

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

575

575

Tax impact of unrealized gain (loss) on other investments

(120

)

(120

)

Nine months ended June 30, 2021 GAAP earnings

$

46,213

$

71,060

$

61,677

$

59,922

$

37,813

$

276,685

* 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

NINE MONTHS ENDED JUNE 30, 2021

(Unaudited)

Upstream

Midstream

Downstream

Exploration &

Pipeline &

Corporate /

Production

Storage

Gathering

Utility

All Other

Consolidated*

Nine months ended June 30, 2020 GAAP earnings per share

$

(1.81

)

$

0.72

$

0.58

$

0.74

$

0.02

$

0.25

Items impacting comparability:

Impairment of oil and gas properties, net of tax

1.63

1.63

Deferred tax valuation allowance

0.69

(0.04

)

0.65

Unrealized (gain) loss on other investments, net of tax

0.01

0.01

Rounding

0.01

(0.01

)

Nine months ended June 30, 2020 adjusted operating results per share

0.52

0.72

0.54

0.74

0.02

2.54

Drivers of adjusted operating results**

Upstream Revenues

Higher (lower) natural gas production

1.36

1.36

Higher (lower) crude oil production

(0.05

)

(0.05

)

Higher (lower) realized natural gas prices, after hedging

0.16

0.16

Higher (lower) realized crude oil prices, after hedging

(0.03

)

(0.03

)

Midstream and All Other Revenues

Higher (lower) operating revenues

0.25

0.37

(0.02

)

0.60

Downstream Margins***

Impact of usage and weather

(0.01

)

(0.01

)

System modernization tracker revenues

0.03

0.03

Regulatory revenue adjustments

(0.01

)

(0.01

)

Higher (lower) energy marketing margins

(0.06

)

(0.06

)

Operating Expenses

Lower (higher) lease operating and transportation expenses

(0.44

)

(0.44

)

Lower (higher) operating expenses

(0.05

)

(0.01

)

(0.07

)

(0.03

)

0.02

(0.14

)

Lower (higher) property, franchise and other taxes

(0.04

)

(0.04

)

Lower (higher) depreciation / depletion

(0.07

)

(0.06

)

(0.07

)

(0.01

)

0.01

(0.20

)

Other Income (Expense)

(Higher) lower other deductions

(0.01

)

0.02

0.01

(Higher) lower interest expense

(0.08

)

(0.05

)

(0.02

)

(0.15

)

Income Taxes

Lower (higher) income tax expense / effective tax rate

(0.12

)

0.01

(0.01

)

(0.01

)

0.04

(0.09

)

Impact of additional shares

(0.02

)

(0.03

)

(0.03

)

(0.04

)

(0.12

)

All other / rounding

(0.01

)

(0.01

)

(0.02

)

Nine months ended June 30, 2021 adjusted operating results per share

1.22

0.78

0.68

0.65

0.01

3.34

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

Rounding

(0.01

)

0.01

Nine months ended June 30, 2021 GAAP earnings per share

$

0.50

$

0.78

$

0.67

$

0.65

$

0.42

$

3.02

* 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

Nine Months Ended

June 30,

June 30,

(Unaudited)

(Unaudited)

SUMMARY OF OPERATIONS

2021

2020

2021

2020

Operating Revenues:

Utility and Energy Marketing Revenues

$

126,933

$

139,661

$

587,247

$

650,320

Exploration and Production and Other Revenues

209,618

132,338

621,933

456,073

Pipeline and Storage and Gathering Revenues

57,846

51,020

177,491

151,908

394,397

323,019

1,386,671

1,258,301

Operating Expenses:

Purchased Gas

18,737

29,121

177,018

239,663

Operation and Maintenance:

Utility and Energy Marketing

42,577

43,950

139,521

138,931

Exploration and Production and Other

43,112

32,404

127,033

109,056

Pipeline and Storage and Gathering

31,239

24,298

87,471

77,488

Property, Franchise and Other Taxes

24,492

21,381

71,259

67,268

Depreciation, Depletion and Amortization

84,170

73,232

251,632

226,062

Impairment of Oil and Gas Producing Properties

18,236

76,152

195,997

244,327

242,622

930,086

1,054,465

Gain on Sale of Timber Properties

51,066

Operating Income

150,070

80,397

507,651

203,836

Other Income (Expense):

Other Income (Deductions)

(2,028

)

2,547

(15,078

)

(17,971

)

Interest Expense on Long-Term Debt

(30,220

)

(27,140

)

(111,296

)

(77,853

)

Other Interest Expense

(1,012

)

(1,420

)

(4,630

)

(4,863

)

Income Before Income Taxes

116,810

54,384

376,647

103,149

Income Tax Expense

30,335

13,134

99,962

81,376

Net Income Available for Common Stock

$

86,475

$

41,250

$

276,685

$

21,773

Earnings Per Common Share

Basic

$

0.95

$

0.47

$

3.04

$

0.25

Diluted

$

0.94

$

0.47

$

3.02

$

0.25

Weighted Average Common Shares:

Used in Basic Calculation

91,172,683

87,966,289

91,113,973

86,966,448

Used in Diluted Calculation

91,762,898

88,323,699

91,642,849

87,346,362


NATIONAL FUEL GAS COMPANY

AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

June 30,

September 30,

(Thousands of Dollars)

2021

2020

ASSETS

Property, Plant and Equipment

$

12,834,695

$

12,351,852

Less - Accumulated Depreciation, Depletion and Amortization

6,649,038

6,353,785

Net Property, Plant and Equipment

6,185,657

5,998,067

Assets Held for Sale, Net

53,424

Current Assets:

Cash and Temporary Cash Investments

118,012

20,541

Hedging Collateral Deposits

1,710

Receivables - Net

188,863

143,583

Unbilled Revenue

12,812

17,302

Gas Stored Underground

12,451

33,338

Materials, Supplies and Emission Allowances

53,740

51,877

Other Current Assets

51,969

47,557

Total Current Assets

439,557

314,198

Other Assets:

Recoverable Future Taxes

118,883

118,310

Unamortized Debt Expense

11,016

12,297

Other Regulatory Assets

145,632

156,106

Deferred Charges

58,807

67,131

Other Investments

149,250

154,502

Goodwill

5,476

5,476

Prepaid Post-Retirement Benefit Costs

93,627

76,035

Fair Value of Derivative Financial Instruments

770

9,308

Other

81

Total Other Assets

583,461

599,246

Total Assets

$

7,208,675

$

6,964,935

CAPITALIZATION AND LIABILITIES

Capitalization:

Comprehensive Shareholders' Equity

Common Stock, $1 Par Value Authorized - 200,000,000 Shares; Issued and

Outstanding - 91,172,701 Shares and 90,954,696 Shares, Respectively

$

91,173

$

90,955

Paid in Capital

1,012,703

1,004,158

Earnings Reinvested in the Business

1,145,700

991,630

Accumulated Other Comprehensive Loss

(238,462

)

(114,757

)

Total Comprehensive Shareholders' Equity

2,011,114

1,971,986

Long-Term Debt, Net of Current Portion and Unamortized Discount and Debt Issuance Costs

2,627,860

2,629,576

Total Capitalization

4,638,974

4,601,562

Current and Accrued Liabilities:

Notes Payable to Banks and Commercial Paper

30,000

Accounts Payable

113,470

134,126

Amounts Payable to Customers

7,193

10,788

Dividends Payable

41,484

40,475

Interest Payable on Long-Term Debt

45,304

27,521

Customer Advances

15,319

Customer Security Deposits

19,272

17,199

Other Accruals and Current Liabilities

168,378

140,176

Fair Value of Derivative Financial Instruments

205,501

43,969

Total Current and Accrued Liabilities

600,602

459,573

Deferred Credits:

Deferred Income Taxes

742,638

696,054

Taxes Refundable to Customers

353,736

357,508

Cost of Removal Regulatory Liability

241,377

230,079

Other Regulatory Liabilities

182,430

161,573

Pension and Other Post-Retirement Liabilities

117,291

127,181

Asset Retirement Obligations

191,853

192,228

Other Deferred Credits

139,774

139,177

Total Deferred Credits

1,969,099

1,903,800

Commitments and Contingencies

Total Capitalization and Liabilities

$

7,208,675

$

6,964,935


NATIONAL FUEL GAS COMPANY

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Nine Months Ended

June 30,

(Thousands of Dollars)

2021

2020

Operating Activities:

Net Income Available for Common Stock

$

276,685

$

21,773

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

195,997

Depreciation, Depletion and Amortization

251,632

226,062

Deferred Income Taxes

89,277

116,332

Premium Paid on Early Redemption of Debt

15,715

Stock-Based Compensation

12,296

9,716

Other

7,795

5,645

Change in:

Receivables and Unbilled Revenue

(40,733

)

4,045

Gas Stored Underground and Materials, Supplies and Emission Allowances

19,024

11,597

Unrecovered Purchased Gas Costs

2,246

Other Current Assets

(4,282

)

49,312

Accounts Payable

7,474

(13,166

)

Amounts Payable to Customers

(3,595

)

14,755

Customer Advances

(15,319

)

(12,483

)

Customer Security Deposits

2,073

(984

)

Other Accruals and Current Liabilities

23,154

6,774

Other Assets

5,839

(18,215

)

Other Liabilities

(311

)

4,464

Net Cash Provided by Operating Activities

$

671,810

$

623,870

Investing Activities:

Capital Expenditures

$

(512,775

)

$

(551,004

)

Net Proceeds from Sale of Timber Properties

104,582

Acquisition of Upstream Assets and Midstream Gathering Assets

(27,050

)

Other

11,223

4,126

Net Cash Used in Investing Activities

$

(396,970

)

$

(573,928

)

Financing Activities:

Changes in Notes Payable to Banks and Commercial Paper

$

(30,000

)

$

(55,200

)

Reduction of Long-Term Debt

(515,715

)

Dividends Paid on Common Stock

(121,606

)

(112,851

)

Net Proceeds From Issuance of Long-Term Debt

495,267

493,108

Net Proceeds from Issuance (Repurchase) of Common Stock

(3,605

)

161,704

Net Cash Provided by (Used in) Financing Activities

$

(175,659

)

$

486,761

Net Increase in Cash, Cash Equivalents, and Restricted Cash

99,181

536,703

Cash, Cash Equivalents, and Restricted Cash at Beginning of Period

20,541

27,260

Cash, Cash Equivalents, and Restricted Cash at June 30

$

119,722

$

563,963


NATIONAL FUEL GAS COMPANY

AND SUBSIDIARIES

SEGMENT OPERATING RESULTS AND STATISTICS

(UNAUDITED)

UPSTREAM BUSINESS

Three Months Ended

Nine Months Ended

(Thousands of Dollars, except per share amounts)

June 30,

June 30,

EXPLORATION AND PRODUCTION SEGMENT

2021

2020

Variance

2021

2020

Variance

Total Operating Revenues

$

209,535

$

131,228

$

78,307

$

621,116

$

452,728

$

168,388

Operating Expenses:

Operation and Maintenance:

General and Administrative Expense

16,165

13,968

2,197

51,017

46,777

4,240

Lease Operating and Transportation Expense

66,708

46,157

20,551

199,296

148,687

50,609

All Other Operation and Maintenance Expense

3,757

2,952

805

10,944

8,994

1,950

Property, Franchise and Other Taxes

6,853

3,371

3,482

15,918

11,543

4,375

Depreciation, Depletion and Amortization

45,886

39,372

6,514

137,356

128,656

8,700

Impairment of Oil and Gas Producing Properties

18,236

(18,236

)

76,152

195,997

(119,845

)

139,369

124,056

15,313

490,683

540,654

(49,971

)

Operating Income (Loss)

70,166

7,172

62,994

130,433

(87,926

)

218,359

Other Income (Expense):

Non-Service Pension and Post-Retirement Benefit Costs

(289

)

(395

)

106

(860

)

(1,185

)

325

Interest and Other Income

18

142

(124

)

176

583

(407

)

Interest Expense on Long-Term Debt

(15,119

)

(15,119

)

Interest Expense

(12,008

)

(14,323

)

2,315

(42,601

)

(42,543

)

(58

)

Income (Loss) Before Income Taxes

57,887

(7,404

)

65,291

72,029

(131,071

)

203,100

Income Tax Expense (Benefit)

18,872

(970

)

19,842

25,816

26,662

(846

)

Net Income (Loss)

$

39,015

$

(6,434

)

$

45,449

$

46,213

$

(157,733

)

$

203,946

Net Income (Loss) Per Share (Diluted)

$

0.43

$

(0.07

)

$

0.50

$

0.50

$

(1.81

)

$

2.31


NATIONAL FUEL GAS COMPANY

AND SUBSIDIARIES

SEGMENT OPERATING RESULTS AND STATISTICS

(UNAUDITED)

MIDSTREAM BUSINESSES

Three Months Ended

Nine Months Ended

(Thousands of Dollars, except per share amounts)

June 30,

June 30,

PIPELINE AND STORAGE SEGMENT

2021

2020

Variance

2021

2020

Variance

Revenues from External Customers

$

57,258

$

51,020

$

6,238

$

175,881

$

151,908

$

23,973

Intersegment Revenues

26,805

26,793

12

82,651

77,370

5,281

Total Operating Revenues

84,063

77,813

6,250

258,532

229,278

29,254

Operating Expenses:

Purchased Gas

(11

)

11

(22

)

219

1

218

Operation and Maintenance

22,918

19,262

3,656

63,809

62,207

1,602

Property, Franchise and Other Taxes

8,070

8,029

41

24,713

24,515

198

Depreciation, Depletion and Amortization

15,609

14,352

1,257

46,806

39,313

7,493

46,586

41,654

4,932

135,547

126,036

9,511

Operating Income

37,477

36,159

1,318

122,985

103,242

19,743

Other Income (Expense):

Non-Service Pension and Post-Retirement Benefit (Costs) Credit

125

(174

)

299

376

(523

)

899

Interest and Other Income

1,364

1,763

(399

)

3,159

4,851

(1,692

)

Interest Expense

(10,070

)

(7,773

)

(2,297

)

(31,353

)

(22,037

)

(9,316

)

Income Before Income Taxes

28,896

29,975

(1,079

)

95,167

85,533

9,634

Income Tax Expense

6,948

7,352

(404

)

24,107

22,718

1,389

Net Income

$

21,948

$

22,623

$

(675

)

$

71,060

$

62,815

$

8,245

Net Income Per Share (Diluted)

$

0.24

$

0.26

$

(0.02

)

$

0.78

$

0.72

$

0.06

Three Months Ended

Nine Months Ended

June 30,

June 30,

GATHERING SEGMENT

2021

2020

Variance

2021

2020

Variance

Revenues from External Customers

$

588

$

$

588

$

1,610

$

$

1,610

Intersegment Revenues

48,068

33,299

14,769

144,317

103,355

40,962

Total Operating Revenues

48,656

33,299

15,357

145,927

103,355

42,572

Operating Expenses:

Operation and Maintenance

8,715

5,443

3,272

24,750

16,487

8,263

Property, Franchise and Other Taxes

12

12

30

50

(20

)

Depreciation, Depletion and Amortization

8,131

5,237

2,894

24,132

15,655

8,477

16,858

10,692

6,166

48,912

32,192

16,720

Operating Income

31,798

22,607

9,191

97,015

71,163

25,852

Other Income (Expense):

Non-Service Pension and Post-Retirement Benefit Costs

(68

)

(71

)

3

(203

)

(214

)

11

Interest and Other Income

10

41

(31

)

253

198

55

Interest Expense on Long-Term Debt

(965

)

(965

)

Interest Expense

(4,102

)

(2,383

)

(1,719

)

(12,435

)

(6,762

)

(5,673

)

Income Before Income Taxes

27,638

20,194

7,444

83,665

64,385

19,280

Income Tax Expense

7,211

4,955

2,256

21,988

13,304

8,684

Net Income

$

20,427

$

15,239

$

5,188

$

61,677

$

51,081

$

10,596

Net Income Per Share (Diluted)

$

0.22

$

0.17

$

0.05

$

0.67

$

0.58

$

0.09


NATIONAL FUEL GAS COMPANY

AND SUBSIDIARIES

SEGMENT OPERATING RESULTS AND STATISTICS

(UNAUDITED)

DOWNSTREAM BUSINESS

Three Months Ended

Nine Months Ended

(Thousands of Dollars, except per share amounts)

June 30,

June 30,

UTILITY SEGMENT

2021

2020

Variance

2021

2020

Variance

Revenues from External Customers

$

126,934

$

124,390

$

2,544

$

586,618

$

569,856

$

16,762

Intersegment Revenues

74

2,647

(2,573

)

271

8,499

(8,228

)

Total Operating Revenues

127,008

127,037

(29

)

586,889

578,355

8,534

Operating Expenses:

Purchased Gas

44,848

43,752

1,096

255,011

247,869

7,142

Operation and Maintenance

43,296

43,410

(114

)

141,412

137,323

4,089

Property, Franchise and Other Taxes

9,433

9,661

(228

)

30,181

30,295

(114

)

Depreciation, Depletion and Amortization

14,505

13,860

645

42,811

41,241

1,570

112,082

110,683

1,399

469,415

456,728

12,687

Operating Income

14,926

16,354

(1,428

)

117,474

121,627

(4,153

)

Other Income (Expense):

Non-Service Pension and Post-Retirement Benefit Costs

(5,747

)

(5,811

)

64

(24,674

)

(24,962

)

288

Interest and Other Income

960

1,749

(789

)

2,142

2,994

(852

)

Interest Expense

(5,510

)

(5,240

)

(270

)

(16,457

)

(16,430

)

(27

)

Income Before Income Taxes

4,629

7,052

(2,423

)

78,485

83,229

(4,744

)

Income Tax Expense (Benefit)

(212

)

798

(1,010

)

18,563

18,894

(331

)

Net Income

$

4,841

$

6,254

$

(1,413

)

$

59,922

$

64,335

$

(4,413

)

Net Income Per Share (Diluted)

$

0.05

$

0.07

$

(0.02

)

$

0.65

$

0.74

$

(0.09

)


NATIONAL FUEL GAS COMPANY

AND SUBSIDIARIES

SEGMENT OPERATING RESULTS AND STATISTICS

(UNAUDITED)

Three Months Ended

Nine Months Ended

(Thousands of Dollars, except per share amounts)

June 30,

June 30,

ALL OTHER

2021

2020

Variance

2021

2020

Variance

Revenues from External Customers

$

(1

)

$

16,286

$

(16,287

)

$

1,174

$

83,445

$

(82,271

)

Intersegment Revenues

2

341

(339

)

22

598

(576

)

Total Operating Revenues

1

16,627

(16,626

)

1,196

84,043

(82,847

)

Operating Expenses:

Purchased Gas

4

14,038

(14,034

)

2,297

75,222

(72,925

)

Operation and Maintenance

17

2,176

(2,159

)

701

5,754

(5,053

)

Property, Franchise and Other Taxes

202

(202

)

47

522

(475

)

Depreciation, Depletion and Amortization

245

(245

)

394

653

(259

)

21

16,661

(16,640

)

3,439

82,151

(78,712

)

Gain on Sale of Timber Properties

51,066

51,066

Operating Income (Loss)

(20

)

(34

)

14

48,823

1,892

46,931

Other Income (Expense):

Non-Service Pension and Post-Retirement Benefit Costs

(69

)

69

(7

)

(207

)

200

Interest and Other Income

3

202

(199

)

229

674

(445

)

Interest Expense

(10

)

10

(52

)

52

Income (Loss) before Income Taxes

(17

)

89

(106

)

49,045

2,307

46,738

Income Tax Expense (Benefit)

(1,056

)

98

(1,154

)

11,428

775

10,653

Net Income (Loss)

$

1,039

$

(9

)

$

1,048

$

37,617

$

1,532

$

36,085

Net Income (Loss) Per Share (Diluted)

$

0.01

$

$

0.01

$

0.41

$

0.02

$

0.39

Three Months Ended

Nine Months Ended

June 30,

June 30,

CORPORATE

2021

2020

Variance

2021

2020

Variance

Revenues from External Customers

$

83

$

95

$

(12

)

$

272

$

364

$

(92

)

Intersegment Revenues

1,027

1,094

(67

)

2,718

3,281

(563

)

Total Operating Revenues

1,110

1,189

(79

)

2,990

3,645

(655

)

Operating Expenses:

Operation and Maintenance

5,224

2,778

2,446

11,566

8,920

2,646

Property, Franchise and Other Taxes

124

106

18

370

343

27

Depreciation, Depletion and Amortization

39

166

(127

)

133

544

(411

)

5,387

3,050

2,337

12,069

9,807

2,262

Operating Loss

(4,277

)

(1,861

)

(2,416

)

(9,079

)

(6,162

)

(2,917

)

Other Income (Expense):

Non-Service Pension and Post-Retirement Benefit Costs

(923

)

(775

)

(148

)

(2,769

)

(2,326

)

(443

)

Interest and Other Income

33,433

35,919

(2,486

)

107,728

89,795

17,933

Interest Expense on Long-Term Debt

(30,220

)

(27,140

)

(3,080

)

(95,212

)

(77,853

)

(17,359

)

Other Interest Expense

(236

)

(1,665

)

1,429

(2,412

)

(4,688

)

2,276

Income (Loss) before Income Taxes

(2,223

)

4,478

(6,701

)

(1,744

)

(1,234

)

(510

)

Income Tax Expense (Benefit)

(1,428

)

901

(2,329

)

(1,940

)

(977

)

(963

)

Net Income (Loss)

$

(795

)

$

3,577

$

(4,372

)

$

196

$

(257

)

$

453

Net Income (Loss) Per Share (Diluted)

$

(0.01

)

$

0.04

$

(0.05

)

$

0.01

$

$

0.01

Three Months Ended

Nine Months Ended

June 30,

June 30,

INTERSEGMENT ELIMINATIONS

2021

2020

Variance

2021

2020

Variance

Intersegment Revenues

$

(75,976

)

$

(64,174

)

$

(11,802

)

$

(229,979

)

$

(193,103

)

$

(36,876

)

Operating Expenses:

Purchased Gas

(26,104

)

(28,680

)

2,576

(80,509

)

(83,429

)

2,920

Operation and Maintenance

(49,872

)

(35,494

)

(14,378

)

(149,470

)

(109,674

)

(39,796

)

(75,976

)

(64,174

)

(11,802

)

(229,979

)

(193,103

)

(36,876

)

Operating Income

Other Income (Expense):

Interest and Other Deductions

(30,914

)

(29,974

)

(940

)

(100,628

)

(87,649

)

(12,979

)

Interest Expense

30,914

29,974

940

100,628

87,649

12,979

Net Income

$

$

$

$

$

$

Net Income Per Share (Diluted)

$

$

$

$

$

$


NATIONAL FUEL GAS COMPANY

AND SUBSIDIARIES

SEGMENT INFORMATION (Continued)

(Thousands of Dollars)

Three Months Ended

Nine Months Ended

June 30,

June 30,

(Unaudited)

(Unaudited)

Increase

Increase

2021

2020

(Decrease)

2021

2020

(Decrease)

Capital Expenditures:

Exploration and Production

$

94,152

(1)

$

65,647

(3)

$

28,505

$

263,763

(1)(2)

$

294,990

(3)(4)

$

(31,227

)

Pipeline and Storage

63,863

(1)

41,494

(3)

22,369

155,556

(1)(2)

124,131

(3)(4)

31,425

Gathering

6,209

(1)

21,289

(3)

(15,080

)

25,628

(1)(2)

46,200

(3)(4)

(20,572

)

Utility

24,866

(1)

25,616

(3)

(750

)

66,691

(1)(2)

62,238

(3)(4)

4,453

Total Reportable Segments

189,090

154,046

35,044

511,638

527,559

(15,921

)

All Other

16

(16

)

38

(38

)

Corporate

129

100

29

218

420

(202

)

Eliminations

(1,898

)

(1,898

)

(2,118

)

(2,118

)

Total Capital Expenditures

$

187,321

$

154,162

$

33,159

$

509,738

$

528,017

$

(18,279

)


(1)

Capital expenditures for the quarter and nine months ended June 30, 2021, include accounts payable and accrued liabilities related to capital expenditures of $49.7 million, $25.8 million, $0.9 million, and $5.1 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 June 30, 2021, since they represent non-cash investing activities at that date.

(2)

Capital expenditures for the nine months ended June 30, 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 nine months ended June 30, 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 June 30, 2021.

(3)

Capital expenditures for the quarter and nine months ended June 30, 2020, include accounts payable and accrued liabilities related to capital expenditures of $26.5 million, $16.4 million, $6.5 million, and $8.7 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 June 30, 2020, since they represent non-cash investing activities at that date.

(4)

Capital expenditures for the nine months ended June 30, 2020, exclude 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 were in accounts payable and accrued liabilities at September 30, 2019 and paid during the nine months ended June 30, 2020. These amounts were excluded from the Consolidated Statement of Cash Flows at September 30, 2019, since they represented non-cash investing activities at that date. These amounts have been included in the Consolidated Statement of Cash Flows at June 30, 2020.


DEGREE DAYS

Percent Colder

(Warmer) Than:

Three Months Ended June 30,

Normal

2021

2020

Normal (1)

Last Year (1)

Buffalo, NY

912

794

1,032

(12.9

)

(23.1

)

Erie, PA

871

741

920

(14.9

)

(19.5

)

Nine Months Ended June 30,

Buffalo, NY

6,455

5,693

6,002

(11.8

)

(5.1

)

Erie, PA

6,023

5,188

5,381

(13.9

)

(3.6

)

(1) Percents compare actual 2021 degree days to normal degree days and actual 2021 degree days to actual 2020 degree days.

NATIONAL FUEL GAS COMPANY

AND SUBSIDIARIES

EXPLORATION AND PRODUCTION INFORMATION

Three Months Ended

Nine Months Ended

June 30,

June 30,

Increase

Increase

2021

2020

(Decrease)

2021

2020

(Decrease)

Gas Production/Prices:

Production (MMcf)

Appalachia

79,314

52,043

27,271

236,429

161,965

74,464

West Coast

431

468

(37

)

1,300

1,434

(134

)

Total Production

79,745

52,511

27,234

237,729

163,399

74,330

Average Prices (Per Mcf)

Appalachia

$

2.29

$

1.45

$

0.84

$

2.25

$

1.80

$

0.45

West Coast

5.36

2.58

2.78

5.83

3.98

1.85

Weighted Average

2.31

1.46

0.85

2.27

1.82

0.45

Weighted Average after Hedging

2.20

1.92

0.28

2.21

2.13

0.08

Oil Production/Prices:

Production (Thousands of Barrels)

Appalachia

1

1

2

2

West Coast

557

584

(27

)

1,681

1,790

(109

)

Total Production

558

584

(26

)

1,683

1,792

(109

)

Average Prices (Per Barrel)

Appalachia

$

42.09

$

27.50

$

14.59

$

43.13

$

50.28

$

(7.15

)

West Coast

67.55

29.13

38.42

56.92

47.40

9.52

Weighted Average

67.52

29.12

38.40

56.90

47.41

9.49

Weighted Average after Hedging

59.22

50.70

8.52

55.40

57.35

(1.95

)

Total Production (MMcfe)

83,093

56,015

27,078

247,827

174,151

73,676

Selected Operating Performance Statistics:

General & Administrative Expense per Mcfe (1)

$

0.19

$

0.25

$

(0.06

)

$

0.21

$

0.27

$

(0.06

)

Lease Operating and Transportation Expense per Mcfe (1)(2)

$

0.80

$

0.82

$

(0.02

)

$

0.80

$

0.85

$

(0.05

)

Depreciation, Depletion & Amortization per Mcfe (1)

$

0.55

$

0.70

$

(0.15

)

$

0.55

$

0.74

$

(0.19

)


(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 $0.57 and $0.57 per Mcfe for the three months ended June 30, 2021 and June 30, 2020, respectively. Amounts include transportation expense of $0.57 and $0.57 per Mcfe for the nine months ended June 30, 2021 and June 30, 2020, respectively.


NATIONAL FUEL GAS COMPANY

AND SUBSIDIARIES

EXPLORATION AND PRODUCTION INFORMATION